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First Defiance Financial Corp.$26.46($.08)(.30%)

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 First Defiance Financial Corp. Reports Record Full Year Earnings of $3.19 Per Share for 2016, Up 13.1% from Full Year 2015
   Monday, January 23, 2017 5:30:01 PM ET

--Net income of $7.4 million for 2016 fourth quarter compared to $6.6 million in the fourth quarter of 2015

--Net interest margin of 3.76% for the 2016 fourth quarter, compared to 3.77% in the fourth quarter of 2015

--Loan growth $14.8 million during the 2016 fourth quarter

--Deposit growth $53.9 million during the 2016 fourth quarter

--Non-performing loans declined 11.8% from 2015 year end

First Defiance Financial Corp. (FDEF ) announced today that net income for the fiscal year ended December 31, 2016 totaled $28.8 million, or $3.19 per diluted common share, compared to $26.4 million or $2.82 per diluted common share for the year ended December 31, 2015.



For the fourth quarter 2016, First Defiance earned $7.4 million, or $0.81 per diluted common share compared to $6.6 million, or $0.71 per diluted common share for the fourth quarter of 2015.

"We are very pleased that our strong finish to 2016 allowed us to mark our fourth consecutive year of record earnings performance, with diluted earnings per share up 13.1% over last year. Also for the year, our return on assets was 1.20% on total assets that grew $178 million, or 7.7%," said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. "This notable performance in 2016 leaves us optimistic for overcoming potential challenges in 2017 and completing our upcoming merger with Commercial Bancshares, Inc. in February."

Net interest income up compared to fourth quarter 2015

Net interest income of $20.5 million in the fourth quarter of 2016 was up from $19.0 million in the fourth quarter of 2015. The growth in net interest income of $1.5 million included interest recoveries primarily from loan payoffs of $501,000 in the fourth quarter 2016 compared to $228,000 of interest recoveries in the fourth quarter 2015. Net interest margin was 3.76% for the fourth quarter of 2016, up from 3.69% in the third quarter 2016, but down slightly from 3.77% in the fourth quarter of 2015. Yield on interest earning assets increased by 4 basis points, to 4.16% in the fourth quarter of 2016 from 4.12% in the fourth quarter of 2015. The cost of interest-bearing liabilities increased by 7 basis points in the fourth quarter of 2016 to 0.53% from 0.46% in the fourth quarter of 2015.

"Our net interest income expansion in the fourth quarter was mainly driven by our continued balance sheet growth coupled with our steady net interest margin and further enhanced by recovered interest on loan payoffs," said Hileman. "In addition, we believe our interest rate risk is well balanced and positioned for prospective rate changes in 2017."

Non-interest income up from fourth quarter 2015

First Defiance’s non-interest income for the fourth quarter of 2016 was $8.3 million compared to $7.7 million in the fourth quarter of 2015. Mortgage banking income increased to $1.9 million in the fourth quarter of 2016, up from $1.5 million in the fourth quarter of 2015 due to higher volumes of both purchase and refinance loans throughout our market area. Gains from the sale of mortgage loans increased in the fourth quarter of 2016 to $1.2 million from $836,000 in the fourth quarter of 2015. Mortgage loan servicing revenue was $922,000 in the fourth quarter of 2016, up slightly from $910,000 in the fourth quarter of 2015. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $241,000 in the fourth quarter of 2016 compared to a positive adjustment of $75,000 in the fourth quarter of 2015.

For the fourth quarter 2016, service fees and other charges were $2.7 million, down $33,000 from $2.7 million in the fourth quarter of 2015; and commissions from the sale of insurance products were $2.3 million, up $45,000 from $2.3 million in the fourth quarter of 2015. Trust income was $445,000 in the fourth quarter of 2016, up from $367,000 in the fourth quarter of 2015.

"Total non-interest income in the fourth quarter grew $563,000, up 7.3% over the fourth quarter last year," said Hileman. "We were particularly pleased with our success in mortgage banking with fourth quarter loan origination levels up 38% from a year ago, and in trust income with revenues up 21% over the fourth quarter last year."

Non-interest expenses up from fourth quarter 2015

Total non-interest expense was $18.2 million in the fourth quarter of 2016, up from $17.3 million in the fourth quarter of 2015. The fourth quarter 2016 included expenses of $292,000 related to the pending merger of Commercial Bancshares, Inc. and $300,000 for a termination of a lease. Compensation and benefits in the fourth quarter of 2016 was $9.9 million, an increase of $64,000 compared to the fourth quarter of 2015. Increases in compensation for merit raises and staff additions for growth were mostly offset by lower costs for medical insurance and other benefits. Occupancy expense was $2.0 million in the fourth quarter 2016, up $147,000 from the fourth quarter 2015. Data processing cost was $1.6 million in the fourth quarter of 2016, up $213,000 from the fourth quarter of 2015. Other non-interest expense of $3.9 million in the fourth quarter of 2016, increased from $3.3 million in the fourth quarter of 2015 primarily due to merger related expenses and the lease termination.

Credit quality

Non-performing loans totaled $14.3 million at December 31, 2016, a decrease from $16.3 million at December 31, 2015. In addition, First Defiance had $455,000 of real estate owned at December 31, 2016, down from $1.3 million at December 31, 2015. Accruing troubled debt restructured loans were $10.5 million at December 31, 2016, a decrease from $11.2 million at December 31, 2015. For the fourth quarter of 2016, First Defiance recorded net recoveries of $110,000, compared to net recoveries of $129,000 in the fourth quarter of 2015. The allowance for loan loss as a percentage of total loans was 1.33% at December 31, 2016, compared to 1.41% at December 31, 2015.

The fourth quarter results included a credit provision for loan losses of $149,000 compared to an expense of $43,000 for the same period in 2015.

"Our fourth quarter results showed continued improvement in our asset quality as non-performing assets declined $4.1 million during the quarter to 0.60% of total assets," said Hileman. "This reduction, along with net recoveries on loans in the quarter, resulted in both a credit provision expense for the fourth quarter and an increase of our allowance for loan losses coverage of non-performing loans to 180% at year end."

Annual results

For the full year ended on December 31, 2016, net income totaled $28.8 million, or $3.19 per diluted common share, compared to $26.4 million or $2.82 per diluted common share for 2015.

Net interest income for 2016 totaled $78.9 million, compared with $74.1 million for 2015. Average interest-earning assets increased to $2.17 billion for 2016, compared to $2.00 billion in 2015. Net interest margin for 2016 was 3.74%, down 7 basis points from the 3.81% margin for 2015.

The provision for loan losses for 2016 was $283,000, compared to $136,000 in 2015, reflecting the continued strong credit quality throughout the year.

Non-interest income for the year 2016 was $34.0 million, compared to $31.8 million in 2015. Service fees and other charges were $10.9 million for 2016, up from $10.8 million in 2015. Mortgage banking income increased to $7.3 million for 2016, compared to $6.7 million in 2015. Gains on the sale of non-mortgage loans were $753,000 for 2016, compared to $824,000 during 2015. Insurance and investment sales revenues increased to $10.4 million for 2016, compared to $10.1 million for 2015. Non-interest income for 2016 included $509,000 of net securities gains compared to $22,000 of net securities gains for 2015.

Non-interest expense increased to $71.1 million for 2016 from $67.9 million in 2015. Compensation and benefits expense was $40.2 million for 2016 compared with $37.8 million for 2015. The $2.4 million increase in compensation and benefits over the prior year is mainly related to merit increases and new staff for growth strategies, higher incentive compensation accruals and higher medical insurance costs. Other expenses increased $603,000 mainly due to acquisition related costs for the pending acquisition of Commercial Bancshares, Inc. and the expense related to the lease termination. Occupancy expense also increased $221,000, and data processing expense increased $284,000. These increases were partially offset by decreases in FDIC insurance premiums of $155,000, amortization of intangibles of $165,000 and financial institutions taxes of $2,000.

Total assets at $2.5 billion

Total assets at December 31, 2016 were $2.48 billion compared to $2.30 billion at December 31, 2015. Net loans receivable (excluding loans held for sale) were $1.91 billion at December 31, 2016, compared to $1.78 billion at December 31, 2015. Total cash and cash equivalents were $99.0 million at December 31, 2016, compared to $79.8 million at December 31, 2015. Also, at December 31, 2016, goodwill and other intangible assets totaled $63.1 million compared to $63.7 million at December 31, 2015.

Total deposits at December 31, 2016 were $1.98 billion compared with $1.84 billion at December 31, 2015. Non-interest bearing deposits at December 31, 2016 were $487.7 million compared to $420.7 million at December 31, 2015. Total stockholders’ equity was $293.0 million at December 31, 2016, compared to $280.2 million at December 31, 2015.

Pending merger with Commercial Bancshares, Inc.

On August 23, 2016, First Defiance announced a definitive agreement to acquire Commercial Bancshares, Inc. and its wholly-owned subsidiary, Commercial Savings Bank ("CSB"). CSB, a $342 million commercial bank, operates 7 full-service branches in Wyandot, Marion and Hancock counties in Ohio. The merger is expected to close in the first quarter of 2017 and is subject to Commercial Bancshares’ shareholder approval and other conditions set forth in the merger agreement.

Dividend to be paid February 24

The Board of Directors declared a quarterly cash dividend of $0.25 per common share payable February 24, 2017 to shareholders of record at the close of business on February 17, 2017. The dividend represents an annual dividend of 2.09 percent based on the First Defiance common stock closing price on January 20, 2017. First Defiance has approximately 8,984,456 common shares outstanding.

Conference call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, January 24, 2017 to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-444-1726. In addition, a live webcast may be accessed at http://services.choruscall.com/links/fdef170124.html .

The replay of the conference call Webcast will be available at www.fdef.com until Wednesday, January 24, 2018 at 9:00 a.m. ET.

First Defiance Financial Corp.

First Defiance Financial Corp., headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance Group. First Federal Bank operates 35 full-service branches and numerous ATM locations in northwest Ohio, southeast Michigan and northeast Indiana and a loan production office in Columbus, Ohio. First Insurance Group is a full-service insurance agency with six offices throughout northwest Ohio.

For more information, visit the company’s website at www.fdef.com.

Financial Statements and Highlights Follow

Safe Harbor Statement

This news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Act of 1934, as amended, which are intended to be safe harbors created thereby. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of First Defiance Financial Corp. and its management, and specifically include statements regarding: changes in economic conditions, the nature, extent and timing of governmental actions and reforms, future movements of interest rates, the production levels of mortgage loan generation, the ability to continue to grow loans and deposits, the ability to benefit from a changing interest rate environment, the ability to sustain credit quality ratios at current or improved levels, the ability to sell real estate owned properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which First Defiance and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in our Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the year ended December 31, 2015. One or more of these factors have affected or could in the future affect First Defiance’s business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by First Defiance or any other persons, that our objectives and plans will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of First Defiance. We assume no obligation to update any forward-looking statements.

As required by U.S. GAAP, First Defiance will evaluate the impact of subsequent events through the issuance date of its December 31, 2016 consolidated financial statements as part of its Annual Report on Form 10-K to be filed with the SEC. Accordingly, subsequent events could occur that may cause First Defiance to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

                                                                                                                                     
Consolidated Balance Sheets (Unaudited)
First Defiance Financial Corp.
                                                                                                                                                                                                
                                                                                                                     December 31,                                                                                  December 31,
(in thousands)                                                                                        2016                                                    2015
--------------------------------------------------------------------------- -------------------- ------------------------------------------------------------------------ -------------------- ----------------------------------------------------
                                                                                                                                                                                                
Assets
Cash and cash equivalents
     Cash and amounts due from depository institutions                                                              $    53,003                                                                                   $    38,769
     Interest-bearing deposits                                                                        46,000                                                  41,000  
                                                                                                 -------------------- --------- --------------------                                           -------------------- --------- --------------------
                                                                                                                         99,003                                                                     79,769
Securities                                                                                                                                                                 
     Available-for sale, carried at fair value                                                                          250,992                                                                                       236,435
     Held-to-maturity, carried at amortized cost                                                         184                                                     243  
                                                                                                 -------------------- --------- --------------------                                           -------------------- --------- --------------------
                                                                                                                        251,176                                                                                       236,678
                                                                                                                                                                                                
Loans                                                                                                                 1,940,487                                                                                     1,802,217
Allowance for loan losses                                                                            (25,884 )                                                                  (25,382 )
                                                                                                 -------------------- --------- --------------------                                           -------------------- --------- --------------------
Loans, net                                                                                                            1,914,603                                                                                     1,776,835
Loans held for sale                                                                                                       9,607                                                                                         5,523
Mortgage servicing rights                                                                                                 9,595                                                                                         9,248
Accrued interest receivable                                                                                               6,760                                                                                         6,171
Federal Home Loan Bank stock                                                                                             13,798                                                                                        13,801
Bank Owned Life Insurance                                                                                                52,817                                                                                        51,908
Office properties and equipment                                                                                          36,958                                                                                        38,166
Real estate and other assets held for sale                                                                                  455                                                                                         1,321
Goodwill                                                                                                                 61,798                                                                                        61,798
Core deposit and other intangibles                                                                                        1,336                                                                                         1,871
Deferred Taxes                                                                                                              358                                                                                             -
Other assets                                                                                          17,479                                                  14,587  
                                                                                                 -------------------- --------- --------------------                                           -------------------- --------- --------------------
     Total Assets                                                                                                   $ 2,475,743                                                                $ 2,297,676  
                                                                                                 ==================== ========= ====================                                           ==================== ========= ====================
                                                                                                                                                                                                
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits                                                                                       $   487,663                                                                                   $   420,691
Interest-bearing deposits                                                                          1,493,965                                               1,415,446  
                                                                                                 -------------------- --------- --------------------                                           -------------------- --------- --------------------
      Total deposits                                                                                                  1,981,628                                                                                     1,836,137
Advances from Federal Home Loan Bank                                                                                    103,943                                                                                        59,902
Notes payable and other interest-bearing liabilities                                                                     31,816                                                                                        57,188
Subordinated debentures                                                                                                  36,083                                                                                        36,083
Advance payments by borrowers for tax and insurance                                                                       2,650                                                                                         2,674
Deferred taxes                                                                                                                -                                                                                           877
Other liabilities                                                                                     26,605                                                  24,618  
                                                                                                 -------------------- --------- --------------------                                           -------------------- --------- --------------------
      Total Liabilities                                                                                               2,182,725                                                                                     2,017,479
Stockholders’ Equity
      Preferred stock                                                                                                         -                                                                                             -
      Common stock, net                                                                                                     127                                                                                           127
      Additional paid-in-capital                                                                                        126,390                                                                                       125,734
      Accumulated other comprehensive income                                                                                215                                                                                         3,622
      Retained earnings                                                                                                 240,592                                                                                       219,737
      Treasury stock, at cost                                                                        (74,306 )                                                                  (69,023 )
                                                                                                 -------------------- --------- --------------------                                           -------------------- --------- --------------------
      Total stockholders’ equity                                          293,018                                                 280,197  
                                                                                                 -------------------- --------- --------------------                                           -------------------- --------- --------------------
      Total Liabilities and Stockholders’ Equity                                         $ 2,475,743                                                                $ 2,297,676  
                                                                                                 ==================== ========= ====================                                           ==================== ========= ====================
                                                                                                                                                                      
Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.
                                                                                                                 Three Months Ended                                                                                                                 Twelve Months Ended
                                                                                                                    December 31,                                                                                                                       December 31,
                                                                         --------------------------------------------------------------------------------------------------                                          ---------------------------------------------------------------------------------
(in thousands, except per share amounts)                                    2016                                     2015                                                                  2016                            2015
--------------------------------------------------- -------------------- --------------------------------------------------------------------- ----------------------------                                          ------------------------------------------------ --------------------------------
Interest Income:
     Loans                                                                                  $ 20,975                                                              $ 18,901                                                              $ 80,217                                         $     73,346
     Investment securities                                                                     1,576                                                                 1,680                                                                 6,247                                                6,769
     Interest-bearing deposits                                                                    80                                                                    56                                                                   367                                                  169
     FHLB stock dividends                                                     139                             139                                                552                               552
                                                                         -------------------- ------ --------------------                      -------------------- ------                                           -------------------- ------                      -------------------- ----------
Total interest income                                                                         22,770                                                                20,776                                                                87,383                                               80,836
Interest Expense:                                                                                                          
     Deposits                                                                                  1,648                                                                 1,394                                                                 6,261                                                5,341
     FHLB advances and other                                                                     348                                                                   214                                                                 1,288                                                  675
     Subordinated debentures                                                                     205                                                                   162                                                                   753                                                  613
     Notes Payable                                                             30                              39                                                138                               152
                                                                         -------------------- ------ --------------------                      -------------------- ------                                           -------------------- ------                      -------------------- ----------
Total interest expense                                                      2,231                           1,809                                              8,440                             6,781
                                                                         -------------------- ------ --------------------                      -------------------- ------                                           -------------------- ------                      -------------------- ----------
Net interest income                                                                           20,539                                                                18,967                                                                78,943                                               74,055
Provision for loan losses                                                    (149 )                                               43                                                283                               136
                                                                         -------------------- ------ --------------------                      -------------------- ------                                           -------------------- ------                      -------------------- ----------
Net interest income after provision for loan losses                                           20,688                                                                18,924                                                                78,660                                               73,919
Non-interest Income:
     Service fees and other charges                                                            2,701                                                                 2,734                                                                10,909                                               10,752
     Mortgage banking income                                                                   1,928                                                                 1,465                                                                 7,270                                                6,713
     Gain on sale of non-mortgage loans                                                          149                                                                    48                                                                   753                                                  824
     Gain on sale of securities                                                                    -                                                                    22                                                                   509                                                   22
     Insurance commissions                                                                     2,328                                                                 2,283                                                                10,441                                               10,076
     Trust income                                                                                445                                                                   367                                                                 1,701                                                1,462
     Income from Bank Owned Life Insurance                                                       223                                                                   237                                                                   909                                                  895
     Other non-interest income                                                519                             574                                              1,538                             1,059
                                                                         -------------------- ------ --------------------                      -------------------- ------                                           -------------------- ------                      -------------------- ----------
Total Non-interest Income                                                                      8,293                                                                 7,730                                                                34,030                                               31,803
Non-interest Expense:
     Compensation and benefits                                                                 9,937                                                                 9,873                                                                40,187                                               37,769
     Occupancy                                                                                 1,983                                                                 1,836                                                                 7,418                                                7,197
     FDIC insurance premium                                                                      161                                                                   325                                                                 1,169                                                1,324
     Financial institutions tax                                                                  442                                                                   443                                                                 1,781                                                1,783
     Data processing                                                                           1,644                                                                 1,431                                                                 6,367                                                6,083
     Amortization of intangibles                                                                 116                                                                   163                                                                   535                                                  699
     Other non-interest expense                                             3,897                           3,276                                             13,636                            13,034
                                                                         -------------------- ------ --------------------                      -------------------- ------                                           -------------------- ------                      -------------------- ----------
Total Non-interest Expense                                                 18,180                          17,347                                             71,093                            67,889
                                                                         -------------------- ------ --------------------                      -------------------- ------                                           -------------------- ------                      -------------------- ----------
Income before income taxes                                                                    10,801                                                                 9,307                                                                41,597                                               37,833
Income taxes                                                                3,436                           2,744                                             12,754                            11,410
                                                                         -------------------- ------ --------------------                      -------------------- ------                                           -------------------- ------                      -------------------- ----------
Net Income                                                                                  $  7,365                                           $  6,563                                                              $ 28,843                                         $     26,423
                                                                         ==================== ====== ====================                      ==================== ======                                           ==================== ======                      ==================== ==========
                                                                                                                                                                                                                                                                       
                                                                                                                                                                                                                                                                       
Earnings per common share:
    Basic                                                                                   $   0.82                                                              $   0.72                                                              $   3.21                                         $       2.87
    Diluted                                                                                 $   0.81                                                              $   0.71                                                              $   3.19                                         $       2.82
                                                                                                                                                                                                                                                                       
Average Shares Outstanding:
     Basic                                                                                     8,982                                                                 9,146                                                                 8,980                                                9,221
     Diluted                                                                                   9,060                                                                 9,235                                                                 9,053                                                9,383
                                                                                                                                                                                                                                                                                                              
Financial Summary and Comparison (Unaudited)
First Defiance Financial Corp.
                                                                                                                                                           Three Months Ended                                                                                                                                                                                  Twelve Months Ended
                                                                                                                                                              December 31,                                                                                                                                                                                        December 31,
                                                                              ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data)                                      2016                                                  2015                                   % change                                   2016                                                  2015                                      % change
-------------------------------------------------------- -------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ ---------------------------------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ --------------------------------
Summary of Operations
                                                                                                                                                                                                                                                                                                                                                                                                                                  
Tax-equivalent interest income (1)                                                               $    23,219                                                              $    21,256                                            9.2 %                                                            $    89,213                                                              $    82,741                                                  7.8 %
Interest expense                                                                                       2,231                                                                    1,809                                           23.3                                                                    8,440                                                                    6,781                                                 24.5
Tax-equivalent net interest income (1)                                                                20,988                                                                   19,447                                            7.9                                                                   80,773                                                                   75,960                                                  6.3
Provision for loan losses                                                                               (149 )                                                                     43                                             NM                                                                      283                                                                      136                                                108.1
Tax-equivalent NII after provision for loan loss (1)                                                  21,137                                                                   19,404                                            8.9                                                                   80,490                                                                   75,824                                                  6.2
Investment Securities gains                                                                                -                                                                       22                                             NM                                                                      509                                                                       22                                                   NM
Non-interest income (excluding securities gains/losses)                                                8,293                                                                    7,708                                            7.6                                                                   33,521                                                                   31,781                                                  5.5
Non-interest expense                                                                                  18,180                                                                   17,347                                            4.8                                                                   71,093                                                                   67,889                                                  4.7
Income taxes                                                                                           3,436                                                                    2,744                                           25.2                                                                   12,754                                                                   11,410                                                 11.8
Net Income                                                                                             7,365                                                                    6,563                                           12.2                                                                   28,843                                                                   26,423                                                  9.2
Tax equivalent adjustment (1)                                      449             480     (6.5 )                            1,830           1,905           (3.9 )
-------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- ---- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- ---------- --------------------
At Period End
Assets                                                                                             2,475,743                                                                2,297,676                                            7.7
Earning assets                                                                                     2,261,068                                                                2,099,219                                            7.7
Loans                                                                                              1,940,487                                                                1,802,217                                            7.7
Allowance for loan losses                                                                             25,884                                                                   25,382                                            2.0
Deposits                                                                                           1,981,628                                                                1,836,137                                            7.9
Stockholders’ equity                293,018         280,197      4.6                                                                            
-------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- ---- -------------------- -------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ --------------------------------
Average Balances
Assets                                                                                             2,458,952                                                                2,276,060                                            8.0                                                                2,397,439                                                                2,222,866                                                  7.9
Earning assets                                                                                     2,226,868                                                                2,051,331                                            8.6                                                                2,168,046                                                                2,000,477                                                  8.4
Loans                                                                                              1,908,731                                                                1,732,472                                           10.2                                                                1,853,419                                                                1,687,413                                                  9.8
Deposits and interest-bearing liabilities                                                          2,133,868                                                                1,967,199                                            8.5                                                                2,080,444                                                                1,916,758                                                  8.5
Deposits                                                                                           1,954,631                                                                1,823,396                                            7.2                                                                1,905,621                                                                1,787,876                                                  6.6
Stockholders’ equity                                                      292,301                                                                  279,192                                            4.7                                                                  285,634                                                                  277,645                                                  2.9
Stockholders’ equity / assets         11.89 %                            12.27 %                      (3.1 )                            11.91 %                            12.49 %                            (4.6 )
-------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- ---- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- ---------- --------------------
Per Common Share Data
Net Income
     Basic                                                                                       $      0.82                                                              $      0.72                                           13.9                                                              $      3.21                                                              $      2.87                                                 11.8
     Diluted                                                                                            0.81                                                                     0.71                                           14.1                                                                     3.19                                                                     2.82                                                 13.1
Dividends                                                                                               0.22                                                                     0.20                                           10.0                                                                     0.88                                                                    0.775                                                 13.5
Market Value:
     High                                                                                        $     52.31                                                              $     42.46                                           23.2                                                              $     52.31                                                              $     42.46                                                 23.2
     Low                                                                                               36.91                                                                    35.01                                            5.4                                                                    34.80                                                                    29.05                                                 19.8
     Close                                                                                             50.74                                                                    37.78                                           34.3                                                                    50.74                                                                    37.78                                                 34.3
Common Book Value                                                                                      32.62                                                                    30.78                                            6.0                                                                    32.62                                                                    30.78                                                  6.0
Tangible Common Book Value (1)                                                                         25.59                                                                    23.79                                            7.6                                                                    25.59                                                                    23.79                                                  7.6
Shares outstanding, end of period (000)                          8,983           9,102     (1.3 )                            8,983           9,102           (1.3 )
-------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- ---- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- ---------- --------------------
Performance Ratios (annualized)
Tax-equivalent net interest margin (2)                                                                  3.76 %                                                                   3.77 %                                         (0.4 )                                                                   3.74 %                                                                   3.81 %                                               (1.9 )
Return on average assets                                                                                1.19 %                                                                   1.14 %                                          4.2                                                                     1.20 %                                                                   1.19 %                                                1.2
Return on average equity                                                                               10.02 %                                                                   9.33 %                                          7.5                                                                    10.10 %                                                                   9.52 %                                                6.1
Efficiency ratio (3)                                                                                   62.09 %                                                                  63.88 %                                         (2.8 )                                                                  62.20 %                                                                  63.01 %                                               (1.3 )
Effective tax rate                                                                                     31.81 %                                                                  29.48 %                                          7.9                                                                    30.66 %                                                                  30.16 %                                                1.7
Dividend payout ratio (basic)                                    26.83 %                            27.78 %                      (3.4 )                            27.41 %                            27.00 %                             1.5  
-------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- ---- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- ---------- --------------------
(1)   Tangible common book value = total stockholders’ equity less the
                         sum of goodwill, core deposit and other intangibles, and preferred
                         stock divided by shares outstanding at the end of the period.
(2)                      Interest income on tax-exempt securities and loans has been
                         adjusted to a tax-equivalent basis using the statutory federal
                         income tax rate of 35%
(3)                      Efficiency ratio = Non-interest expense divided by sum of
                         tax-equivalent net interest income plus non-interest income,
                         excluding securities gains or losses, net.
NM                       Percentage change not meaningful
                                                                                                                                                                                                                                         
Income from Mortgage Banking
                                                                                                                                                                                                                                                                                                                                                             
Revenue from sales and servicing of mortgage loans consisted of the
following:
                                                                                                                              Three Months Ended                                                                                                                                                                                        Twelve Months Ended
                                                                                                                                 December 31,                                                                                                                                                                                              December 31,
                                                                             ---------------------------------------------------------------------------------------------------------------------                                                                                    -----------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                                          2016                                              2015                                                    2016                                               2015
------------------------------------------------------- -------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------------------------------------
                                                                                                                                                                                                                                                                                                                                                             
Gain from sale of mortgage loans                                                                $ 1,208                                                              $   836                                                                                                                             $  5,311                                                              $  4,564
Mortgage loan servicing revenue (expense):
  Mortgage loan servicing revenue                                                                   922                                                                  910                                                                                                                                3,560                                                                 3,503
  Amortization of mortgage servicing rights                                                        (443 )                                                               (356 )                                                                                                                             (1,724 )                                                              (1,620 )
  Mortgage servicing rights valuation adjustments                                241          75                                                                                            123          266  
                                                                             -------------------- ----- -------------------- -------------------- -------------------- ----- --------------------                                                                                     -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
                                                                                 720         629                                                                                          1,959        2,149  
                                                                             -------------------- ----- -------------------- -------------------- -------------------- ----- --------------------                                                                                     -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
Total revenue from sale and servicing of mortgage loans                                         $ 1,928                        $ 1,465                                                                                                          $  7,270                        $  6,713  
                                                                             ==================== ===== ==================== ==================== ==================== ===== ====================                                                                                     ==================== ====== ==================== ==================== ==================== ====== ====================
                                                                                                                                                                                                                               
Yield Analysis
First Defiance Financial Corp.
                                                                                                                                                                                                           Three Months Ended December 31,
                                                                                                                                                                                                               (dollars in thousands)
                                                                                 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                        2016                                                                                                                                                            2015
                                                                                 ------------------------------------------------------------------------------------------------------------------                                              ------------------------------------------------------------------------------------------------------------------
                                                                                             Average                                                                                        Yield                                                            Average                                                                                        Yield
                                                                                             Balance                                            Interest(1)                                Rate(2)                                                           Balance                                            Interest(1)                                Rate(2)
Interest-earning assets:
   Loans receivable                                                                                 $ 1,908,731                                         $     21,028                      4.38 %                                                                    $ 1,732,472                                         $     18,954                      4.34 %
   Securities                                                                                           243,456                                                1,972                      3.30 %                        (3)                                             236,361                                                2,107                      3.64 %                        (3)
   Interest Bearing Deposits                                                                             60,881                                                   80                      0.52 %                                                                         68,697                                                   56                      0.32 %
   FHLB stock                                                                         13,800                               139                      4.01 %                                                      13,801                               139                      4.00 %
                                                                                 -------------------- ---------                      -------------------- ----------                                                                             -------------------- ---------                      -------------------- ----------
   Total interest-earning assets                                                                      2,226,868                                               23,219                      4.16 %                                                                      2,051,331                                               21,256                      4.12 %
   Non-interest-earning assets                                                       232,084                                                                                                                                      224,729
                                                                                 -------------------- ---------                                                                                                                                  -------------------- ---------
Total assets                                                                                        $ 2,458,952                                                                                                                                                     $ 2,276,060
                                                                                 ==================== =========                                                                                                                                  ==================== =========
Deposits and Interest-bearing liabilities:
   Interest bearing deposits                                                                        $ 1,484,531                                         $      1,648                      0.44 %                                                                    $ 1,408,283                                         $      1,394                      0.39 %
   FHLB advances and other                                                                               95,631                                                  348                      1.45 %                                                                         50,419                                                  214                      1.68 %
   Subordinated debentures                                                                               36,146                                                  205                      2.26 %                                                                         36,128                                                  162                      1.78 %
   Notes payable                                                                      47,460                                30                      0.25 %                                                      57,256                                39                      0.27 %
                                                                                 -------------------- ---------                      -------------------- ----------                                                                             -------------------- ---------                      -------------------- ----------
   Total interest-bearing liabilities                                                                 1,663,768                                                2,231                      0.53 %                                                                      1,552,086                                                1,809                      0.46 %
   Non-interest bearing deposits                                                     470,100                                 -                         -                                                       415,113                                 -                         -
                                                                                 -------------------- ---------                      -------------------- ----------                                                                             -------------------- ---------                      -------------------- ----------
Total including non-interest-bearing demand deposits                                                  2,133,868                                                2,231                      0.42 %                                                                      1,967,199                                                1,809                      0.36 %
Other non-interest-bearing liabilities                                                32,783                                                                                                                                       29,669
                                                                                 -------------------- ---------                                                                                                                                  -------------------- ---------
Total liabilities                                                                                     2,166,651                                                                                                                                                       1,996,868
   Stockholders’ equity                                                              292,301                                                                                                                                      279,192
                                                                                 -------------------- ---------                                                                                                                                  -------------------- ---------
Total liabilities and stockholders’ equity                                                          $ 2,458,952                                                                                                                                  $ 2,276,060                       
                                                                                 ==================== =========                      --------------------------------                                                                            ==================== =========                      --------------------------------
Net interest income; interest rate spread                                                                                                               $     20,988                      3.63 %                                                                                                                        $     19,447                      3.66 %
                                                                                                                                     ==================== ==========                      ==== ===                                                                                                   ==================== ==========                      ==== ===
Net interest margin (4)                                                                                                                                                                   3.76 %                                                                                                                                                          3.77 %
                                                                                                                                                                                          ==== ===                                                                                                                                                        ==== ===
Average interest-earning assets to average interest bearing                                                                                                                                134 %                                                                                                                                                           132 %
liabilities
                                                                                                                                                                                          ==== ===                                                                                                                                                        ==== ===
                                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                          Twelve Months Ended December 31,
                                                                                 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                        2016                                                                                                                                                            2015
                                                                                 ------------------------------------------------------------------------------------------------------------------                                              ------------------------------------------------------------------------------------------------------------------
                                                                                             Average                                                                                        Yield                                                            Average                                                                                        Yield
                                                                                             Balance                                            Interest(1)                                 Rate                                                             Balance                                            Interest(1)                                 Rate
Interest-earning assets:
   Loans receivable                                                                                 $ 1,853,419                                         $     80,423                      4.34 %                                                                    $ 1,687,413                                         $     73,544                      4.36 %
   Securities                                                                                           233,407                                                7,871                      3.48 %                        (3)                                             239,852                                                8,476                      3.64 %                        (3)
   Interest Bearing Deposits                                                                             67,420                                                  367                      0.54 %                                                                         59,410                                                  169                      0.27 %
   FHLB stock                                                                         13,800                               552                      4.00 %                                                      13,802                               552                      4.00 %
                                                                                 -------------------- ---------                      -------------------- ----------                                                                             -------------------- ---------                      -------------------- ----------
   Total interest-earning assets                                                                      2,168,046                                               89,213                      4.13 %                                                                      2,000,477                                               82,741                      4.15 %
   Non-interest-earning assets                                                       229,393                                                                                                                                      222,389
                                                                                 -------------------- ---------                                                                                                                                  -------------------- ---------
Total assets                                                                                        $ 2,397,439                                                                                                                                                     $ 2,222,866
                                                                                 ==================== =========                                                                                                                                  ==================== =========
Deposits and Interest-bearing liabilities:
   Interest bearing deposits                                                                        $ 1,463,890                                         $      6,261                      0.43 %                                                                    $ 1,399,619                                         $      5,341                      0.38 %
   FHLB advances and other                                                                               85,856                                                1,288                      1.50 %                                                                         38,134                                                  675                      1.77 %
   Subordinated debentures                                                                               36,141                                                  753                      2.09 %                                                                         36,129                                                  613                      1.70 %
   Notes payable                                                                      52,826                               138                      0.26 %                                                      54,619                               152                      0.28 %
                                                                                 -------------------- ---------                      -------------------- ----------                                                                             -------------------- ---------                      -------------------- ----------
   Total interest-bearing liabilities                                                                 1,638,713                                                8,440                      0.52 %                                                                      1,528,501                                                6,781                      0.44 %
   Non-interest bearing deposits                                                     441,731                                 -                         -                                                       388,257                                 -                         -
                                                                                 -------------------- ---------                      -------------------- ----------                                                                             -------------------- ---------                      -------------------- ----------
Total including non-interest-bearing demand deposits                                                  2,080,444                                                8,440                      0.41 %                                                                      1,916,758                                                6,781                      0.35 %
Other non-interest-bearing liabilities                                                31,361                                                                                                                                       28,463
                                                                                 -------------------- ---------                                                                                                                                  -------------------- ---------
Total liabilities                                                                                     2,111,805                                                                                                                                                       1,945,221
   Stockholders’ equity                                                              285,634                                                                                                                                      277,645
                                                                                 -------------------- ---------                                                                                                                                  -------------------- ---------
Total liabilities and stockholders’ equity                                                          $ 2,397,439                                                                                                                                  $ 2,222,866                       
                                                                                 ==================== =========                      --------------------------------                                                                            ==================== =========                      --------------------------------
Net interest income; interest rate spread                                                                                                               $     80,773                      3.61 %                                                                                                                        $     75,960                      3.71 %
                                                                                                                                     ==================== ==========                      ==== ===                                                                                                   ==================== ==========                      ==== ===
Net interest margin (4)                                                                                                                                                                   3.74 %                                                                                                                                                          3.81 %
                                                                                                                                                                                          ==== ===                                                                                                                                                        ==== ===
Average interest-earning assets to average interest bearing                                                                                                                                132 %                                                                                                                                                           131 %
liabilities
                                                                                                                                                                                          ==== ===                                                                                                                                                        ==== ===
(1)   Interest on certain tax exempt loans and securities is not taxable
                         for Federal income tax purposes. In order to compare the
                         tax-exempt yields on these assets to taxable yields, the interest
                         earned on these assets is adjusted to a pre-tax equivalent amount
                         based on the marginal corporate federal income tax rate of 35%.
(2)                      Annualized
(3)                      Securities yield = annualized interest income divided by the
                         average balance of securities, excluding average unrealized
                         gains/losses.
(4)                      Net interest margin is net interest income divided by average
                         interest-earning assets.
                                                                                                                                                                                                                                                                                  
Selected Quarterly Information
First Defiance Financial Corp.
                                                                                                                                                                                                                                                                                                                                                                                   
(dollars in thousands, except per share data)                                  4th Qtr 2016                                          3rd Qtr 2016                                          2nd Qtr 2016                                          1st Qtr 2016                                          4th Qtr 2015
-------------------------------------------------------- -------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ----------------------------------------------------
Summary of Operations
Tax-equivalent interest income (1)                                                               $    23,219                                                              $    22,449                                                              $    21,940                                                              $    21,605                                                              $    21,256
Interest expense                                                                                       2,231                                                                    2,183                                                                    2,084                                                                    1,942                                                                    1,809
Tax-equivalent net interest income (1)                                                                20,988                                                                   20,266                                                                   19,856                                                                   19,663                                                                   19,447
Provision for loan losses                                                                               (149 )                                                                     15                                                                       53                                                                      364                                                                       43
Tax-equivalent NII after provision for loan losses (1)                                                21,137                                                                   20,251                                                                   19,803                                                                   19,299                                                                   19,404
Investment securities gains, net of impairment                                                             -                                                                      151                                                                      227                                                                      131                                                                       22
Non-interest income (excluding securities gains/losses)                                                8,293                                                                    8,375                                                                    8,348                                                                    8,505                                                                    7,708
Non-interest expense                                                                                  18,180                                                                   18,292                                                                   17,347                                                                   17,274                                                                   17,347
Income taxes                                                                                           3,436                                                                    2,994                                                                    3,307                                                                    3,017                                                                    2,744
Net income                                                                                             7,365                                                                    7,045                                                                    7,264                                                                    7,169                                                                    6,563
Tax equivalent adjustment (1)                                      449             446             460             475             480  
-------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
At Period End
Total assets                                                                                     $ 2,475,743                                                              $ 2,450,040                                                              $ 2,409,599                                                              $ 2,358,931                                                              $ 2,297,676
Earning assets                                                                                     2,261,068                                                                2,240,747                                                                2,200,517                                                                2,158,177                                                                2,099,219
Loans                                                                                              1,940,487                                                                1,925,694                                                                1,861,403                                                                1,824,986                                                                1,802,217
Allowance for loan losses                                                                             25,884                                                                   25,923                                                                   25,948                                                                   25,668                                                                   25,382
Deposits                                                                                           1,981,628                                                                1,927,686                                                                1,920,270                                                                1,871,157                                                                1,836,137
Stockholders’ equity                                                      293,018                                                                  292,138                                                                  286,616                                                                  280,418                                                                  280,197
Stockholders’ equity / assets                                               11.84 %                                                                  11.92 %                                                                  11.89 %                                                                  11.89 %                                                                  12.19 %
Goodwill                                                        61,798          61,798          61,798          61,798          61,798  
-------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Average Balances
Total assets                                                                                     $ 2,458,952                                                              $ 2,425,535                                                              $ 2,391,064                                                              $ 2,314,203                                                              $ 2,276,060
Earning assets                                                                                     2,226,868                                                                2,194,170                                                                2,162,574                                                                2,088,582                                                                2,051,331
Loans                                                                                              1,908,731                                                                1,879,760                                                                1,828,984                                                                1,796,200                                                                1,732,472
Deposits and interest-bearing liabilities                                                          2,133,868                                                                2,103,054                                                                2,079,442                                                                2,005,395                                                                1,967,199
Deposits                                                                                           1,954,631                                                                1,929,368                                                                1,903,139                                                                1,835,345                                                                1,823,396
Stockholders’ equity                                                      292,301                                                                  288,609                                                                  282,573                                                                  279,051                                                                  279,192
Stockholders’ equity / assets         11.89 %                            11.90 %                            11.82 %                            12.06 %                            12.27 %
-------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Per Common Share Data
Net Income:
 Basic                                                                                           $      0.82                                                              $      0.78                                                              $      0.81                                                              $      0.80                                                              $      0.72
 Diluted                                                                                                0.81                                                                     0.78                                                                     0.80                                                                     0.79                                                                     0.71
Dividends                                                                                               0.22                                                                     0.22                                                                     0.22                                                                     0.22                                                                     0.20
Market Value:
 High                                                                                            $     52.31                                                              $     46.83                                                              $     41.21                                                              $     40.98                                                              $     42.46
 Low                                                                                                   36.91                                                                    35.90                                                                    37.53                                                                    34.80                                                                    35.01
 Close                                                                                                 50.74                                                                    44.64                                                                    38.85                                                                    38.41                                                                    37.78
Common Book Value                                                                                      32.62                                                                    32.53                                                                    31.95                                                                    31.29                                                                    30.78
Shares outstanding, end of period (in thousands)                 8,983           8,980           8,971           8,961           9,102  
-------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)                                                                  3.76 %                                                                   3.69 %                                                                   3.71 %                                                                   3.80 %                                                                   3.77 %
Return on average assets                                                                                1.19 %                                                                   1.16 %                                                                   1.22 %                                                                   1.25 %                                                                   1.14 %
Return on average equity                                                                               10.02 %                                                                   9.71 %                                                                  10.34 %                                                                  10.33 %                                                                   9.33 %
Efficiency ratio (2)                                                                                   62.09 %                                                                  63.87 %                                                                  61.51 %                                                                  61.32 %                                                                  63.88 %
Effective tax rate                                                                                     31.81 %                                                                  29.82 %                                                                  31.28 %                                                                  29.62 %                                                                  29.48 %
Common dividend payout ratio (basic)                             26.83 %                            28.21 %                            27.16 %                            27.50 %                            27.78 %
-------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
(1)   Interest income on tax-exempt securities and loans has been
                         adjusted to a tax-equivalent basis using the statutory federal
                         income tax rate of 35%
(2)                      Efficiency ratio = Non-interest expense divided by sum of
                         tax-equivalent net interest income plus non-interest income,
                         excluding securities gains, net.
                                                                                                                                                                                                                                                                           
Selected Quarterly Information
First Defiance Financial Corp.
                                                                                                                                                                                                                                                                                                                                                                            
(dollars in thousands, except per share data)                           4th Qtr 2016                                          3rd Qtr 2016                                          2nd Qtr 2016                                          1st Qtr 2016                                          4th Qtr 2015
------------------------------------------------- -------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ----------------------------------------------------
Loan Portfolio Composition
One to four family residential real estate                                                $   207,550                                                              $   209,097                                                              $   206,861                                                              $   208,818                                                              $   205,330
Construction                                                                                  182,886                                                                  177,075                                                                  161,282                                                                  145,635                                                                  163,877
Commercial real estate                                                                      1,040,562                                                                1,043,820                                                                1,001,315                                                                  989,468                                                                  948,428
Commercial                                                                                    469,055                                                                  456,099                                                                  428,599                                                                  412,911                                                                  419,349
Consumer finance                                                                               16,680                                                                   17,251                                                                   16,690                                                                   15,679                                                                   16,281
Home equity and improvement                                                118,429         118,165         116,685         116,856         116,962  
                                                                       -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Total loans                                                                                 2,035,162                                                                2,021,507                                                                1,931,432                                                                1,889,367                                                                1,870,227
Less:
   Undisbursed loan funds                                                                      93,355                                                                   94,552                                                                   68,850                                                                   63,267                                                                   66,902
   Deferred loan origination fees                                                               1,320                                                                    1,261                                                                    1,179                                                                    1,114                                                                    1,108
   Allowance for loan loss                                                  25,884          25,923          25,948          25,668          25,382  
                                                                       -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Net Loans                                                                                 $ 1,914,603                        $ 1,899,771                        $ 1,835,455                        $ 1,799,318                        $ 1,776,835  
                                                                       ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ====================
                                                                                                                                                                              
------------------------------------------------- -------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ----------------------------------------------------
Allowance for loan loss activity
Beginning allowance                                                                       $    25,923                                                              $    25,948                                                              $    25,668                                                              $    25,382                                                              $    25,209
Provision for loan losses                                                                        (149 )                                                                     15                                                                       53                                                                      364                                                                       43
   Credit loss charge-offs:
     One to four family residential real estate                                                   147                                                                      111                                                                       37                                                                       55                                                                        8
     Commercial real estate                                                                         0                                                                       79                                                                        0                                                                       13                                                                      103
     Commercial                                                                                   234                                                                       26                                                                       18                                                                      336                                                                        0
     Consumer finance                                                                              53                                                                       24                                                                       18                                                                        0                                                                       32
     Home equity and improvement                                                98              74              66              30              10  
                                                                       -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Total charge-offs                                                                                 532                                                                      314                                                                      139                                                                      434                                                                      153
Total recoveries                                                               642             274             366             356             282  
                                                                       -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Net charge-offs (recoveries)                                                  (110 )                               40            (227 )                               78            (129 )
                                                                       -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Ending allowance                                                                          $    25,884                        $    25,923                        $    25,948                        $    25,668                        $    25,382  
                                                                       ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ====================
                                                                                                                                                                              
------------------------------------------------- -------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ----------------------------------------------------
Credit Quality
 Total non-performing loans (1)                                                           $    14,348                                                              $    18,198                                                              $    16,423                                                              $    17,707                                                              $    16,261
Real estate owned (REO)                                                        455             704           1,079           1,111           1,321  
                                                                       -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
 Total non-performing assets (2)                                                          $    14,803                        $    18,902                        $    17,502                        $    18,818                        $    17,582  
                                                                       ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ====================
Net charge-offs (recoveries)                                                                     (110 )                                                                     40                                                                     (227 )                                                                     78                                                                     (129 )
                                                                                                                                                                                                                                                                                                                                                                            
Restructured loans, accruing (3)                                                               10,544                                                                    9,113                                                                    9,648                                                                   11,284                                                                   11,178
                                                                                                                                                                                                                                                                                                                                                                            
Allowance for loan losses / loans                                                                1.33 %                                                                   1.35 %                                                                   1.39 %                                                                   1.41 %                                                                   1.41 %
Allowance for loan losses / non-performing assets                                              174.86 %                                                                 137.14 %                                                                 148.26 %                                                                 136.40 %                                                                 144.36 %
Allowance for loan losses / non-performing loans                                               180.40 %                                                                 142.45 %                                                                 158.00 %                                                                 144.96 %                                                                 156.09 %
Non-performing assets / loans plus REO                                                           0.76 %                                                                   0.98 %                                                                   0.94 %                                                                   1.03 %                                                                   0.97 %
Non-performing assets / total assets                                                             0.60 %                                                                   0.77 %                                                                   0.73 %                                                                   0.80 %                                                                   0.77 %
Net charge-offs / average loans (annualized)                                                    -0.02 %                                                                   0.01 %                                                                  -0.05 %                                                                   0.02 %                                                                  -0.03 %
                                                                                                                                                                              
------------------------------------------------- -------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ----------------------------------------------------
Deposit Balances
Non-interest-bearing demand deposits                                                      $   487,663                                                              $   443,321                                                              $   442,811                                                              $   426,053                                                              $   420,691
Interest-bearing demand deposits and money market                                             816,665                                                                  810,393                                                                  805,550                                                                  783,016                                                                  767,201
Savings deposits                                                                              243,369                                                                  241,016                                                                  240,316                                                                  233,546                                                                  219,655
Retail time deposits less than $250,000                                                       400,080                                                                  399,749                                                                  399,494                                                                  401,350                                                                  403,902
Retail time deposits greater than $250,000                                  33,851          33,207          32,099          27,192          24,688  
                                                                       -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Total deposits                                                                            $ 1,981,628                        $ 1,927,686                        $ 1,920,270                        $ 1,871,157                        $ 1,836,137  
                                                                       ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ====================
(1)   Non-performing loans consist of non-accrual loans.
(2)                      Non-performing assets are non-performing loans plus real estate
                         and other assets acquired by foreclosure or deed-in-lieu thereof.
(3)                      Accruing restructured loans are loans with known credit problems
                         that are not contractually past due and therefore are not included
                         in non-performing loans.
                                                                                                                                                  
Loan Delinquency Information
First Defiance Financial Corp.
                                                                                                                                                                                                                                
                                                                                                                                                                                    30 to 89 days                                         Non Accrual
(dollars in thousands)                                 Total Balance                        Current                          past due                            Loans
------------------------------------------ -------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- --------------------------------
                                                                                                                                                                                                                                
December 31, 2016                                                                          
------------------------------------------ -------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- --------------------------------
One to four family residential real estate                                         $    207,550                                         $    203,624                                         $        998                                         $      2,928
Construction                                                                            182,886                                              182,886                                                    -                                                    -
Commercial real estate                                                                1,040,562                                            1,030,833                                                  137                                                9,592
Commercial                                                                              469,055                                              468,038                                                   10                                                1,007
Consumer finance                                                                         16,680                                               16,438                                                  151                                                   91
Home equity and improvement                                          118,429        116,439          1,260            730
                                                                -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ----------
Total loans                                                                        $  2,035,162                      $  2,018,258                      $      2,556                      $     14,348
                                                                ==================== ========== ==================== ==================== ========== ==================== ==================== ========== ==================== ==================== ==========
                                                                                                                                                                                                                                
September 30, 2016                                                                         
------------------------------------------ -------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- --------------------------------
One to four family residential real estate                                         $    209,097                                         $    205,471                                         $        706                                         $      2,920
Construction                                                                            177,075                                              177,075                                                    -                                                    -
Commercial real estate                                                                1,043,820                                            1,032,260                                                  258                                               11,302
Commercial                                                                              456,099                                              452,669                                                  185                                                3,245
Consumer finance                                                                         17,251                                               17,048                                                  190                                                   13
Home equity and improvement                                          118,165        116,653            794            718
                                                                -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ----------
Total loans                                                                        $  2,021,507                      $  2,001,176                      $      2,133                      $     18,198
                                                                ==================== ========== ==================== ==================== ========== ==================== ==================== ========== ==================== ==================== ==========
                                                                                                                                                                                                                                
December 31, 2015                                                                          
------------------------------------------ -------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- --------------------------------
One to four family residential real estate                                         $    205,330                                         $    201,806                                         $        914                                         $      2,610
Construction                                                                            163,877                                              163,877                                                    -                                                    -
Commercial real estate                                                                  948,428                                              937,844                                                  736                                                9,848
Commercial                                                                              419,349                                              416,114                                                  157                                                3,078
Consumer finance                                                                         16,281                                               16,215                                                   30                                                   36
Home equity and improvement                                          116,962        115,465            808            689
                                                                -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ----------
Total loans                                                                        $  1,870,227                      $  1,851,321                      $      2,645                      $     16,261
                                                                ==================== ========== ==================== ==================== ========== ==================== ==================== ========== ==================== ==================== ==========

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170123006072r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170123006072/en/

SOURCE: First Defiance Financial Corp.

First Defiance Financial Corp. 
Donald P. Hileman, President and CEO, 419-782-5104 
dhileman@first-fed.com


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