First Quarter 2020
Highlights
- Completed strategic merger with UCFC on January 31, 2020
- Quarterly dividend of $0.22 per share, up 15.8% from 2019 first
quarter
- Organic loan growth of $36.6 million, or 5.3% annualized
growth
- Organic deposit growth of $41.2 million, or 5.7% annualized
growth
- Earnings per share of ($0.71), or $0.24 excluding
merger-related expenses, compared to $0.57 for 2019 first
quarter
- Pre-tax pre-provision income of $15.7 million, or $27.2 million
excluding merger-related costs, compared to $14.2 million for 2019
first quarter
- Pre-tax pre-provision ROAA of 1.18%, or 2.04% excluding
merger-related costs, compared to 1.81% for 2019 first quarter
First Defiance Financial Corp.
(NASDAQ: FDEF) (“First Defiance”) announced today a solid first
quarter including the completion of its strategic merger with UCFC,
solid core profitability and a 15.8% increase in its year-over-year
dividend. On a GAAP basis, net earnings for the first quarter of
2020 were a loss of $22.5 million, or $0.71 per diluted common
share, compared to income of $11.5 million, or $0.57 per diluted
common share, for the first quarter of 2019. The year-over-year
comparison is substantially impacted by the current year’s loan
loss provision expense of $43.8 million, which included an expected
$25.9 million related to acquisition accounting for an after-tax
cost of $20.5 million, or $0.65 per diluted common share. The first
quarter of 2019 included a provision for loan losses expense of
$212,000, which had an after-tax cost of $168,000, or $0.01 per
diluted common share, and no acquisition impact. Additionally, the
current year’s results include the impact of $11.5 million of
acquisition-related charges, which had an after-tax cost of $9.5
million, or $0.30 per diluted common share. Excluding the impact of
acquisition-related provision and charges, earnings for the first
quarter of 2020 were $7.5 million, or $0.24 per diluted common
share.
“The great momentum we had
through most of the first quarter started to slow with the effects
of COVID-19,” said Donald P. Hileman, Chief Executive Officer of
First Defiance. “The pandemic has caused a severe disruption on the
global and regional economic outlooks as well as the markets in
which we operate. We have shifted focus to servicing the immediate
needs of our clients and the health and well-being of our employees
while supporting the communities we serve. We have been working
extremely hard to assist clients by executing the Small Business
Administration Paycheck Protection Program enacted as part of the
CARES Act stimulus plan, and by helping them navigate additional
relief programs.”
UCFC Merger
On January 31, 2020, First Defiance and United Community
Financial Corp. (“UCFC”) completed the previously announced merger
under which UCFC merged into First Defiance in a stock-for-stock
transaction. Under the terms of the merger agreement, shareholders
of UCFC received 0.3715 First Defiance common shares for each UCFC
common share. The merger combined two complementary banking
companies, and First Defiance and UCFC consider this partnership an
ideal strategic, financial and operational fit, particularly given
their individual strong and consistent performance over time. The
combined company leverages the respective strengths of each
institution in commercial banking, residential lending, retail
banking, insurance and wealth management, and better positions the
combined company to serve the geographies of Ohio, Michigan,
Indiana, Pennsylvania and West Virginia with increased scale and
expanded product offerings.
At the closing of the merger, First Defiance issued 17.9 million
common shares, which represented a transaction value of
approximately $527 million based on its closing stock price of
$29.39 on January 31, 2020. The transaction value has been
preliminarily allocated to assets acquired and liabilities assumed
including $2.3 billion in net loans, $459 million in other tangible
assets, $2.1 billion in deposits, $441 million in other
liabilities, and $250 million in goodwill and other intangible
assets. Prior to closing, UCFC incurred $13.9 million of
merger-related costs. The year-over-year comparison of First
Defiance results is impacted by the UCFC merger, with 2020
including two months of operations from UCFC compared to none in
the prior year.
Coinciding with the upcoming integration of the First Federal
Bank and Home Savings Bank systems scheduled for July, our combined
77 branches will be brought together under the new name and brand
of Premier Bank. The Premier Bank name represents and honors the
commitment both banks have made to our customers and communities by
providing the best in financial partnerships for over a decade.
This name change will bring additional consistency throughout our
footprint and an elevated promise to deliver a community banking
experience that sets us apart.
“We are very pleased to have completed the merger of our two
companies in the quarter and to have recently announced the new
name Premier Bank for our banking franchise,” said Gary M. Small,
President of First Defiance. “The Premier Bank name and brand are
reflections of our commitment to helping customers, employees and
our communities achieve their best.”
Net interest income up compared to first quarter 2019
Net interest income of $45.5 million in the first quarter of
2020 was up from $28.3 million in the first quarter of 2019. The
increase over the prior year’s first quarter was attributable to
organic growth and two months of income from UCFC compared to none
in 2019. Net interest margin was 3.78% for the first quarter of
2020, down from 3.80% in the fourth quarter of 2019, and down from
4.03% in the first quarter of 2019. Yield on interest earning
assets decreased to 4.54% in the first quarter of 2020, down 13
basis points from 4.67% in the fourth quarter of 2019. The cost of
interest-bearing liabilities decreased 14 basis points in the first
quarter of 2020 to 1.01% from 1.15% in the fourth quarter of 2019.
The first quarter 2020 results include the impact of acquisition
marks and related accretion. Interest income includes $312,000 of
accretion and interest expense includes $1,025,000 of accretion,
which combined added 10 basis points of net interest margin.
Excluding these amounts, net interest margin would be 3.68% for
first quarter of 2020.
“We are satisfied with our net
interest margin, which contracted less than expected quarter over
quarter,” said Hileman. “We are proud of the efforts of our teams
that were able to generate organic growth of over 5% annualized for
both loans and deposits in the first quarter despite the economic
headwinds.”
Non-interest income up from first quarter 2019
First Defiance’s non-interest income in the first quarter of
2020 was $14.0 million compared with $10.8 million in the first
quarter of 2019. Results for the first quarter 2020 included two
months of income from UCFC compared to none in 2019.
Mortgage banking income decreased to $0.8 million in the first
quarter of 2020 from $1.8 million in the first quarter of 2019.
Gains from the sale of mortgage loans increased to $4.9 million in
the first quarter of 2020 from $1.3 million in the first quarter of
2019. Mortgage loan servicing revenue increased to $1.6 million in
the first quarter of 2020 from $0.9 million in the first quarter of
2019. Amortization of mortgage servicing rights increased to $1.2
million in the first quarter 2020 from $286,000 in the first
quarter 2019. First Defiance had a negative change in the valuation
adjustment in mortgage servicing assets of $4.5 million in the
first quarter of 2020 compared with a negative adjustment of
$113,000 in the first quarter of 2019. The year-over-year change is
primarily due to the significant decline in rates with the 10-year
treasury declining 122 basis points during the first quarter of
2020 compared to a 28 basis point decline in the first quarter of
2019.
For the first quarter 2020, service fees and other charges were
$5.2 million, up from $3.0 million in the first quarter of 2019.
Commissions from the sale of insurance products were $5.2 million,
up from $4.1 million in the first quarter of 2019. The first
quarter typically includes contingent revenues, bonuses paid by
insurance carriers when the Company achieves certain loss ratios or
growth targets. In the first quarter of 2020, First Defiance’s
insurance subsidiary, First Insurance Group, earned $1.3 million of
contingent income, compared to $0.9 million during the first
quarter of 2019. Trust income was $838,000 in the first quarter of
2020, up from $523,000 in the first quarter of 2019. Other
non-interest income for the first quarter was $960,000 compared to
$846,000 in 2019. Other non-interest income for the first quarter
2020 includes $1.1 million for reversal of an earnout accrual that
was not achieved related to a prior acquisition.
“This was a quarter that
highlighted the importance of diverse revenue sources as
non-interest income represented over 23% of total revenues despite
the significant hit to mortgage servicing rights valuation,” said
Hileman. “Non-interest income remains an important element to our
earnings growth goals and we continue to seek ways to improve these
revenue streams.”
Non-interest expenses up from first quarter 2019
Total non-interest expense was $43.8 million in the first
quarter of 2020, or $32.3 million excluding $11.5 million of
acquisition related charges, up from $24.9 million in the first
quarter of 2019. Results for the first quarter 2020 included two
months of expenses from UCFC compared to none in 2019. Compensation
and benefits increased to $17.6 million in the first quarter of
2020, compared to $14.1 million in the first quarter of 2019.
Occupancy expense was $3.7 million in the first quarter of 2020, up
from $2.2 million in the first quarter of 2019. Data processing
cost was $3.0 million in the first quarter of 2020, up from $2.3
million in the first quarter of 2019. Amortization of intangibles
was $1.2 million in the first quarter of 2020, up from $299,000 in
the first quarter of 2019. Other non-interest expense was $5.4
million in the first quarter of 2020, up from $5.1 million in the
first quarter of 2019.
Credit quality
Non-performing loans totaled $32.6 million at March 31, 2020, an
increase from $13.5 million at December 31, 2019, and an increase
from $17.6 million at March 31, 2019, due to the UCFC merger. In
addition, First Defiance had $0.5 million of OREO at March 31,
2020, compared to $0.9 million at March 31, 2019. Accruing troubled
debt restructured loans were $7.5 million at March 31, 2020,
compared with $11.9 million at March 31, 2019.
On January 1, 2020, First Defiance adopted the Current Expected
Credit Loss (“CECL”) model of accounting for credit losses. This
new GAAP model, which replaces the former incurred loss model,
requires entities to estimate credit losses over the life of an
asset or off-balance sheet exposure. At adoption, First Defiance
recorded a $2.4 million increase to its allowance for loan losses
and a $0.9 million increase to its reserve for off-balance sheet
commitments for a combined $3.2 million, of which $2.6 million was
recorded as a reduction to retained earnings with remainder to
deferred taxes. In connection with the UCFC merger on January 31,
2020, First Defiance recorded a $33.6 million increase to its
allowance for loan losses, which was comprised of $25.9 million
required to be recorded as a provision for loan losses related to
non-purchased credit deteriorated loans and $7.7 million required
to be recorded as a reduction of loan balances for purchased credit
deteriorated loans.
Excluding the merger impact noted above, the first quarter 2020
results include net recoveries of $778,000 and a provision expense
for loan losses of $17.8 million compared with net charge-offs of
$379,000 and a provision expense of $212,000 for the same period in
2019. The allowance for loan loss as a percentage of total loans
was 1.68% at March 31, 2020, compared with 1.10% at March 31, 2019.
The increase in the provision expense and allowance percentage is
primarily attributable to the impact of the economic deterioration
that began in the first quarter 2020 as a result of the COVID-19
pandemic.
“While the adoption of CECL in
a period of economic downturn dramatically increased our provision,
we believe our enhanced allowance will serve us well as we support
our customers during this challenging time,” said Paul D.
Nungester, Chief Financial Officer of First Defiance. “Our strong
capital levels and allowance coverage ratios provide a solid base
in the current uncertain environment.”
Total assets at $6.54 billion
Total assets at March 31, 2020, were $6.54 billion compared to
$3.47 billion at December 31, 2019, and $3.22 billion at March 31,
2019. Gross loans receivable (excluding loans held for sale) were
$5.11 billion at March 31, 2020, compared to $2.78 billion at
December 31, 2019, and $2.55 billion at March 31, 2019. At March
31, 2020, gross loans receivable grew $2.56 billion, or 101% from a
year ago, including $2.30 billion from the UCFC merger and $277.0
million organically. Also, at March 31, 2020, goodwill and other
intangible assets totaled $353.1 million compared to $103.8 million
at December 31, 2019, and $102.7 million at March 31, 2019, with
the increase attributable to the UCFC merger.
Total deposits at March 31, 2020, were $4.99 billion compared
with $2.87 billion at December 31, 2019, and $2.69 billion at March
31, 2019. At March 31, 2020, total deposits grew $2.31 billion, or
86% from a year ago, including $2.08 billion from the UCFC merger
and $225.8 million organically.
Total stockholders’ equity was $916.4 million at March 31, 2020,
compared to $426.2 million at December 31, 2019, and $395.8 million
at March 31, 2019. The increase in stockholders’ equity from
year-end 2019 was due to the UCFC merger, offset partially by the
company’s repurchase of 430,000 common shares for $10.1 million
during the first quarter of 2020. At March 31, 2020, 570,000 common
shares remained available for repurchase under its existing
authorization.
Dividend to be paid May 22
The Board of Directors declared a quarterly cash dividend of
$0.22 per common share payable May 22, 2020, to shareholders of
record at the close of business on May 15, 2020. The dividend
represents an annual dividend of 5.97 percent based on the First
Defiance common stock closing price on April 24, 2020. First
Defiance has approximately 37,285,730 common shares
outstanding.
Business Client Support Efforts
As a part of the CARES Act, the Payment Protection Program
(“PPP”) was created as a loan program at the Small Business
Administration (“SBA”) designed to provide a direct incentive for
small businesses to keep their workers on the payroll. First
Federal Bank is actively participating in the PPP program for
clients and, through April 27, 2020, it has approved and the SBA
has authorized approximately 2,200 loan requests for approximately
$400 million under this program. First Federal Bank has also been
approved to participate in the Federal Reserve Board’s Payment
Protection Program Liquidity Facility and intends to utilize that
to fund PPP loans. Separately, First Federal Bank has partnered
with JobsOhio on a loan program designed to support existing Ohio
small business clients with maintaining operations and payroll
during the COVID-19 pandemic. The partnership enables First Federal
Bank to provide additional financing on favorable terms for local
Ohio business customers in good standing that would otherwise not
be able to access this credit on such terms due to the COVID-19
crisis.
Conference call
First Defiance Financial Corp. will host a conference call at
11:00 a.m. ET on Wednesday, April 29, 2020, 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 https://services.choruscall.com/links/fdef200429.html. The
replay of the conference call will be available at www.fdef.com
until April 28, 2021, at 9:00 a.m. ET.
First Defiance Financial Corp.
First Defiance Financial Corp. (Nasdaq: FDEF), headquartered in
Defiance, Ohio, is the holding company for First Federal Bank of
the Midwest and First Insurance Group. United Community Financial
Corp. merged with First Defiance Financial Corp. on January 31,
2020. The combined organization operates 77 branches, 12 loan
offices and 3 wealth offices in Ohio, Michigan, Indiana,
Pennsylvania, and West Virginia. Currently, 33 branches, 3 wealth
offices and 11 loan production offices continue to operate as Home
Savings Bank. First Insurance Group is a full-service insurance
agency with ten offices in Ohio including James & Sons
Insurance in Youngstown, 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 Exchange Act of 1934,
as amended. 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 ability to benefit from a changing interest rate
environment; the production levels of mortgage loan generation; the
ability to continue to grow loans and deposits; the ability to
sustain credit quality ratios at current or improved levels;
continued strength in the market area for First Federal Bank of the
Midwest; the ability to sell real estate owned properties; and the
ability to grow in existing and adjacent markets. These
forward-looking statements involve numerous risks and
uncertainties, including: impacts from the novel coronavirus
(COVID-19) pandemic on our business, operations, customers and
capital position; higher default rates on loans made to our
customers related to COVID-19 and its impact on our customers’
operations and financial condition; the impact of COVID-19 on
local, national and global economic conditions; unexpected changes
in interest rates or disruptions in the mortgage market related to
COVID-19 or responses to the health crisis; the effects of various
governmental responses to the COVID-19 pandemic; 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, 2019.
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 and speak only as of the date on which
they are made. We assume no obligation to update any
forward-looking statements, whether as a result of new information,
future developments or otherwise, except as may be required by law.
As required by U.S. GAAP, First Defiance will evaluate the impact
of subsequent events through the issuance date of its December 31,
2019, 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.
Non-GAAP Reporting Measures
We believe that net income, as defined by U.S. GAAP, is the most
appropriate earnings measurement. However, we consider core net
income and core pre-tax pre-provision income to be useful
supplemental measures of our operating performance. We define core
net income as net income excluding the after-tax impact of
acquisition related charges. We define core pre-tax pre-provision
income as pre-tax pre-provision income excluding the pre-tax impact
of acquisition related charges. We believe that these metrics are
useful supplemental measures of operating performance because
investors and equity analysts may use these measures to compare the
operating performance of the Company between periods or as compared
to other financial institutions or other companies on a consistent
basis without having to account for one-time acquisition related
charges. Our supplemental reporting measures and similarly entitled
financial measures are widely used by investors, equity and debt
analysts and ratings agencies in the valuation, comparison, rating
and investment recommendations of companies. Our management uses
these financial measures to facilitate internal and external
comparisons to historical operating results and in making operating
decisions. Additionally, they are utilized by the Board of
Directors to evaluate management. The supplemental reporting
measures do not represent net income or cash flow provided from
operating activities as determined in accordance with U.S. GAAP and
should not be considered as alternative measures of profitability
or liquidity. Finally, the supplemental reporting measures, as
defined by us, may not be comparable to similarly entitled items
reported by other financial institutions or other companies. Please
see the exhibits for reconciliations of our supplemental reporting
measures.
Consolidated Balance Sheets (Unaudited) First Defiance
Financial Corp.
March 31,
December 31,
(in thousands)
2020
2019
Assets Cash and cash equivalents Cash and amounts due from
depository institutions
$
79,491
$
46,254
Interest-bearing deposits
66,217
85,000
145,708
131,254
Securities available-for sale, carried at fair value
534,206
283,448
Loans
5,113,917
2,777,564
Allowance for loan losses
(85,859
)
(31,243
)
Loans, net
5,028,058
2,746,321
Loans held for sale
85,594
18,008
Mortgage servicing rights
15,742
10,267
Accrued interest receivable
19,048
10,244
Federal Home Loan Bank stock
89,252
11,915
Bank Owned Life Insurance
142,259
75,544
Office properties and equipment
59,870
39,563
Real estate and other assets held for sale
548
100
Goodwill
317,520
100,069
Core deposit and other intangibles
35,540
3,772
Other assets
67,541
38,487
Total Assets
$
6,540,886
$
3,468,992
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits
$
1,041,315
$
630,359
Interest-bearing deposits
3,952,833
2,239,966
Total deposits
4,994,148
2,870,325
Advances from Federal Home Loan Bank
486,000
85,063
Notes payable and other interest-bearing liabilities
1,961
2,999
Subordinated debentures
36,083
36,083
Advance payments by borrowers for tax and insurance
8,702
5,491
Deferred taxes
6,268
905
Other liabilities
91,365
41,959
Total Liabilities
5,624,527
3,042,825
Stockholders’ Equity Preferred stock
-
-
Common stock, net
306
127
Additional paid-in-capital
684,441
161,955
Accumulated other comprehensive income (loss)
12,068
4,595
Retained earnings
299,297
329,175
Treasury stock, at cost
(79,753
)
(69,685
)
Total stockholders’ equity
916,359
426,167
Total Liabilities and Stockholders’ Equity
$
6,540,886
$
3,468,992
Consolidated Statements of Income (Unaudited) First
Defiance Financial Corp.
Three Months Ended
March
31,
(in thousands, except per share amounts)
2020
2019
Interest Income: Loans
$
51,460
$
31,214
Investment securities
2,717
2,205
Interest-bearing deposits
230
285
FHLB stock dividends
115
215
Total interest income
54,522
33,919
Interest Expense: Deposits
7,771
5,005
FHLB advances and other
1,006
276
Subordinated debentures
273
364
Notes Payable
9
4
Total interest expense
9,059
5,649
Net interest income
45,463
28,270
Provision for loan losses
43,786
212
Net interest income after provision for loan losses
1,677
28,058
Non-interest Income: Service fees and other charges
5,183
3,007
Mortgage banking income
848
1,841
Gain on sale of non-mortgage loans
234
89
Gain on sale of securities
-
-
Insurance commissions
5,155
4,115
Trust income
838
523
Income from Bank Owned Life Insurance
781
392
Other non-interest income
960
846
Total Non-interest Income
13,999
10,813
Non-interest Expense: Compensation and benefits
17,585
14,085
Occupancy
3,731
2,241
FDIC insurance premium
492
273
Financial institutions tax
834
556
Data processing
3,040
2,297
Amortization of intangibles
1,245
299
Acquisition related charges
11,486
-
Other non-interest expense
5,355
5,115
Total Non-interest Expense
43,768
24,866
Income (loss) before income taxes
(28,092
)
14,005
Income tax expense (benefit)
(5,610
)
2,523
Net Income (Loss)
$
(22,482
)
$
11,482
Earnings per common share: Basic
$
(0.71
)
$
0.57
Diluted
$
(0.71
)
$
0.57
Average Shares Outstanding: Basic
31,642
20,014
Diluted
31,642
20,095
Financial Summary and Comparison (Unaudited) First
Defiance Financial Corp. Three Months Ended
March 31, (dollars in
thousands, except per share data)
2020
2019
% change
Summary of Operations Tax-equivalent interest income
(2)
$
54,773
$
34,166
60.3
%
Interest expense
9,059
5,649
60.4
Tax-equivalent net interest income (2)
45,714
28,517
60.3
Provision for loan losses
43,786
212
20,553.8
Core provision for loan losses (4)
17,837
212
8,313.7
Investment securities gains
-
-
-
Non-interest income (excluding securities gains/losses)
13,999
10,813
29.5
Non-interest expense
43,768
24,866
76.0
Core non-interest expense (4)
32,282
24,866
29.8
Income tax expense (benefit)
(5,610
)
2,523
(322.4
)
Net income (loss)
(22,482
)
11,482
(295.8
)
Core net income (4)
7,470
11,482
(34.9
)
Tax equivalent adjustment (2)
251
247
1.6
At Period End Assets
6,540,886
3,221,249
103.1
Earning assets
5,889,186
2,934,860
100.7
Loans
5,113,917
2,548,968
100.6
Allowance for loan losses
85,859
28,164
204.9
Deposits
4,994,148
2,685,792
85.9
Stockholders’ equity
916,359
395,789
131.5
Average Balances Assets
5,357,598
3,183,012
68.3
Earning assets
4,862,532
2,871,340
69.3
Loans
4,317,857
2,517,283
71.5
Deposits and interest-bearing liabilities
4,488,003
2,742,626
63.6
Deposits
4,240,053
2,642,158
60.5
Stockholders’ equity
787,519
395,138
99.3
Stockholders’ equity / assets
14.70
%
12.41
%
18.4
Per Common Share Data Net Income (Loss) Basic
$
(0.71
)
$
0.57
(224.6
)
Diluted
(0.71
)
0.57
(224.6
)
Core diluted (4)
0.24
0.57
(57.9
)
Dividends
0.22
0.19
15.8
Market Value: High
$
32.05
$
31.30
2.4
Low
10.98
24.12
(54.5
)
Close
14.74
28.74
(48.7
)
Common Book Value
24.58
20.08
22.4
Tangible Common Book Value (1)
15.11
14.87
1.6
Shares outstanding, end of period (000)
37,288
19,713
89.2
Performance Ratios (annualized) Tax-equivalent net interest
margin (2)
3.78
%
4.03
%
(6.1
)
Return on average assets
-1.69
%
1.46
%
(215.4
)
Core return on average assets (4)
0.56
%
1.46
%
(61.7
)
Return on average equity
-11.48
%
11.78
%
(197.4
)
Core return on average equity (4)
3.82
%
11.78
%
(67.6
)
Efficiency ratio (3)
73.30
%
63.22
%
15.9
Core efficiency ratio (4)
54.06
%
63.22
%
(14.5
)
Effective tax rate
19.97
%
18.01
%
10.9
Dividend payout ratio (core)
91.67
%
33.33
%
175.0
(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 21%.
(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.
(4)
Core items exclude the impact of acquisition related charges and
provision. See non-GAAP reconciliations. NM Percentage change not
meaningful
Mortgage Banking
Three Months Ended
March
31,
(dollars in thousands)
2020
2019
Revenue from sales and servicing of mortgage loans: Gain from sale
of mortgage loans
$
4,902
$
1,301
Mortgage loan servicing revenue (expense): Mortgage loan servicing
revenue
1,594
939
Amortization of mortgage servicing rights
(1,163
)
(286
)
Mortgage servicing rights valuation adjustments
(4,485
)
(113
)
(4,054
)
540
Total revenue from sale and servicing of mortgage loans
$
848
$
1,841
Mortgage servicing rights: Balance at beginning of period
$
10,801
$
10,419
Loans sold, servicing retained
1,376
278
Mortgage servicing rights acquired
9,747
-
Amortization
(1,163
)
(286
)
Carrying value before valuation allowance at end of period
20,761
10,411
Valuation allowance: Balance at beginning of period
(534
)
(300
)
Impairment recovery (charges)
(4,485
)
(113
)
Balance at end of period
(5,019
)
(413
)
Net carrying value at end of period
$
15,742
$
9,998
Goodwill and Purchase Price Accounting Deal
Value: Shares issued (000s)
17,927
1/31/20 Price
$
29.39
Stock value
526,875
Cash in lieu of fractional shares
132
Total value
$
527,007
Allocation: Cash and cash equivalents
$
52,580
Securities available-for sale
262,753
(1)
Net loans, including loans held for sale and allowance
2,340,701
(2)
Federal Home Loan Bank stock
12,753
Office properties and equipment
21,216
(3)
Core deposit and other intangibles
33,014
(4)
Bank Owned Life Insurance
65,934
Mortgage servicing rights
9,747
(5)
Other assets
34,452
Non-interest-bearing deposits
(430,921
)
Interest-bearing deposits
(1,651,669
)
(6)
Advances from Federal Home Loan Bank
(381,000
)
Other liabilities
(60,004
)
Net assets
309,556
Goodwill
217,451
Total value
$
527,007
(1) Includes $13.8 million of accumulated losses to be amortized
against interest income over ~7 years. (2) Includes $27.2 million
non-PCD credit mark down to be accreted into interest income over
~5 years, $8.8 million total rate mark up to be amortized against
interest income over ~5 years, $19.1 million elimination of
allowance and $7.7 million PCD credit mark addition to allowance.
(3) Includes $1.1 million mark down that reduces future
depreciation. (4) Includes $29.3 million of core deposit intangible
to be amortized to expense using sum-of-the-years digits over 10
years and $3.7 million of insurance/trust/wealth intangibles to be
amortized to expense over ~10 years. (5) Includes $3.0 million mark
up to be amortized against mortgage banking income over ~8.5 years.
(6) Includes $7.1 million rate mark up on time-based deposits to be
accreted against interest expense over ~2 years based on
maturities.
Yield Analysis First Defiance Financial
Corp. Three Months Ended March 31, (dollars in
thousands)
2020
2019
Average Yield Average Yield Balance Interest(1) Rate(2) Balance
Interest(1) Rate(2)
Interest-earning assets: Loans
receivable
$
4,317,857
$
51,485
4.80
%
$
2,517,283
$
31,238
5.03
%
Securities
449,744
2,943
2.69
%
(3
)
295,824
2,428
3.31
%
(3
)
Interest Bearing Deposits
68,980
230
1.34
%
44,752
285
2.58
%
FHLB stock
25,951
115
1.78
%
13,481
215
6.47
%
Total interest-earning assets
4,862,532
54,773
4.54
%
2,871,340
34,166
4.82
%
Non-interest-earning assets
495,066
311,672
Total assets
$
5,357,598
$
3,183,012
Deposits and Interest-bearing liabilities: Interest bearing
deposits
$
3,343,833
$
7,771
0.93
%
$
2,061,023
$
5,005
0.98
%
FHLB advances and other
209,508
1,006
1.93
%
58,954
276
1.90
%
Subordinated debentures
36,083
273
3.04
%
36,083
364
4.09
%
Notes payable
2,359
9
1.53
%
5,431
4
0.30
%
Total interest-bearing liabilities
3,591,783
9,059
1.01
%
2,161,491
5,649
1.06
%
Non-interest bearing deposits
896,220
-
-
581,135
-
-
Total including non-interest-bearing demand deposits
4,488,003
9,059
0.81
%
2,742,626
5,649
0.84
%
Other non-interest-bearing liabilities
82,076
45,248
Total liabilities
4,570,079
2,787,874
Stockholders' equity
787,519
395,138
Total liabilities and stockholders' equity
$
5,357,598
$
3,183,012
Net interest income; interest rate spread
$
45,714
3.53
%
$
28,517
3.76
%
Net interest margin (4)
3.78
%
4.03
%
Average interest-earning assets to average interest bearing
liabilities
135
%
133
%
(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 21%.
(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 tax
equivalent net interest income divided by average interest-earning
assets.
Selected Quarterly Information First Defiance Financial
Corp. (dollars in thousands, except per share data)
1st Qtr 2020 4th Qtr 2019 3rd Qtr 2019 2nd Qtr 2019 1st Qtr
2019
Summary of Operations Tax-equivalent interest income
(1)
$
54,773
$
36,473
$
35,922
$
35,490
$
34,166
Interest expense
9,059
6,743
6,791
6,252
5,649
Tax-equivalent net interest income (1)
45,714
29,730
29,131
29,238
28,517
Provision for loan losses
43,786
1,084
1,327
282
212
Core provision for loan losses (3)
17,837
1,084
1,327
282
212
Investment securities gains, net of impairment
-
13
11
-
-
Non-interest income (excluding securities gains/losses)
13,999
11,803
11,831
10,486
10,813
Non-interest expense
43,768
24,760
23,203
24,235
24,866
Core non-interest expense (3)
32,282
23,878
22,663
24,235
24,866
Income tax expense (benefit)
(5,610
)
2,953
3,033
2,759
2,523
Net income (loss)
(22,482
)
12,517
13,171
12,199
11,482
Core net income (3)
7,470
13,214
13,598
12,199
11,482
Tax equivalent adjustment (1)
251
232
239
249
247
At Period End Total assets
$
6,540,886
$
3,468,992
$
3,350,724
$
3,277,552
$
3,221,249
Earning assets
5,889,186
3,175,935
3,045,659
2,980,243
2,934,860
Loans
5,113,917
2,777,564
2,665,300
2,624,219
2,548,968
Allowance for loan losses
85,859
31,243
30,250
28,934
28,164
Deposits
4,994,148
2,870,325
2,760,615
2,680,637
2,685,792
Stockholders’ equity
916,359
426,167
418,046
407,216
395,789
Stockholders’ equity / assets
14.01
%
12.29
%
12.48
%
12.42
%
12.29
%
Goodwill
317,520
100,069
100,069
98,569
98,569
Average Balances Total assets
$
5,357,598
$
3,425,097
$
3,303,013
$
3,223,997
$
3,183,012
Earning assets
4,862,532
3,107,224
2,985,498
2,914,587
2,871,340
Loans
4,317,857
2,688,519
2,624,314
2,561,341
2,517,283
Deposits and interest-bearing liabilities
4,488,003
2,954,049
2,843,079
2,781,216
2,742,626
Deposits
4,240,053
2,830,043
2,718,632
2,678,060
2,642,158
Stockholders’ equity
787,519
420,352
411,041
398,612
395,138
Stockholders’ equity / assets
14.70
%
12.27
%
12.44
%
12.36
%
12.41
%
Per Common Share Data Net Income (Loss): Basic
$
(0.71
)
$
0.63
$
0.67
$
0.62
$
0.57
Diluted
(0.71
)
0.63
0.66
0.61
0.57
Core diluted (3)
0.24
0.66
0.68
0.61
0.57
Dividends
0.22
0.22
0.19
0.19
0.19
Market Value: High
$
32.05
$
32.39
$
29.44
$
30.44
$
31.30
Low
10.98
27.77
25.50
26.59
24.12
Close
14.74
31.32
28.97
28.57
28.74
Common Book Value
24.58
21.60
21.19
20.65
20.08
Shares outstanding, end of period (in thousands)
37,288
19,730
19,729
19,723
19,713
Performance Ratios (annualized) Tax-equivalent net interest
margin (1)
3.78
%
3.80
%
3.88
%
4.03
%
4.03
%
Return on average assets
-1.69
%
1.45
%
1.58
%
1.52
%
1.46
%
Core return on average assets (3)
0.56
%
1.53
%
1.63
%
1.52
%
1.46
%
Return on average equity
-11.48
%
11.81
%
12.71
%
12.28
%
11.78
%
Core return on average equity (3)
3.82
%
12.47
%
13.12
%
12.28
%
11.78
%
Efficiency ratio (2)
73.30
%
59.62
%
56.65
%
61.01
%
63.22
%
Core efficiency ratio (3)
54.06
%
57.49
%
55.33
%
61.01
%
63.22
%
Effective tax rate
19.97
%
19.09
%
18.72
%
18.44
%
18.01
%
Common dividend payout ratio (core)
91.67
%
34.92
%
28.36
%
30.65
%
33.33
%
(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 21%.
(2)
Efficiency ratio = Non-interest expense divided by sum of
tax-equivalent net interest income plus non-interest income,
excluding securities gains, net.
(3)
Core items exclude the impact of acquisition related charges and
provision. See non-GAAP reconciliations.
Selected Quarterly
Information First Defiance Financial Corp.
(dollars in thousands, except per share data)
1st Qtr 2020
4th Qtr 2019 3rd Qtr 2019 2nd Qtr 2019 1st Qtr 2019
Loan
Portfolio Composition One to four family residential real
estate
$
1,265,901
$
324,773
$
330,369
$
322,123
$
321,644
Construction
521,442
305,305
308,061
335,847
304,241
Commercial real estate
2,200,266
1,506,026
1,430,919
1,411,463
1,394,500
Commercial
897,865
578,071
537,806
530,528
509,627
Consumer finance
137,679
37,649
36,644
35,350
34,262
Home equity and improvement
301,146
122,864
123,871
125,860
124,450
Total loans
5,324,299
2,874,688
2,767,670
2,761,171
2,688,724
Less: Undisbursed loan funds
206,236
94,865
100,260
134,794
137,742
Deferred loan origination fees
4,146
2,259
2,110
2,158
2,014
Allowance for loan loss
85,859
31,243
30,250
28,934
28,164
Net Loans
$
5,028,058
$
2,746,321
$
2,635,050
$
2,595,285
$
2,520,804
Allowance for loan loss activity Beginning allowance
$
31,243
$
30,250
$
28,934
$
28,164
$
28,331
CECL adoption
2,354
Acquisition related allowance/provision (non PCD)
25,949
Acquisition related allowance/goodwill (PCD)
7,698
Provision for loan losses excluding acquisition amounts
17,837
1,084
1,327
282
212
Net recoveries (charge-offs)
778
(91
)
(11
)
488
(379
)
Ending allowance
$
85,859
$
31,243
$
30,250
$
28,934
$
28,164
Credit Quality Total non-performing loans (1)
$
32,593
$
13,459
$
14,677
$
15,334
$
17,645
Real estate owned (REO)
548
100
-
-
941
Total non-performing assets (2)
$
33,141
$
13,559
$
14,677
$
15,334
$
18,586
Net charge-offs (recoveries)
(778
)
91
11
(488
)
379
Restructured loans, accruing (3)
7,474
8,427
10,334
10,308
11,908
Allowance for loan losses / loans
1.68
%
1.12
%
1.13
%
1.10
%
1.10
%
Allowance for loan losses / non-performing assets
259.07
%
230.42
%
206.10
%
188.69
%
151.53
%
Allowance for loan losses / non-performing loans
263.43
%
232.13
%
206.10
%
188.69
%
159.61
%
Non-performing assets / loans plus REO
0.65
%
0.49
%
0.55
%
0.58
%
0.73
%
Non-performing assets / total assets
0.51
%
0.39
%
0.44
%
0.47
%
0.58
%
Net charge-offs / average loans (annualized)
-0.07
%
0.01
%
0.00
%
-0.08
%
0.06
%
Deposit Balances Non-interest-bearing demand deposits
$
1,041,315
$
630,359
$
604,129
$
584,735
$
586,033
Interest-bearing demand deposits and money market
2,069,723
1,198,012
1,124,208
1,088,694
1,107,511
Savings deposits
606,508
303,166
294,594
304,051
300,244
Retail time deposits less than $250,000
1,091,038
631,253
634,737
610,345
601,012
Retail time deposits greater than $250,000
185,564
107,535
102,947
92,812
90,992
Total deposits
$
4,994,148
$
2,870,325
$
2,760,615
$
2,680,637
$
2,685,792
(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 loan.
Loan Delinquency Information
First Defiance Financial Corp. (dollars in thousands)
Total Balance Current 30 to 89 dayspast due
Non AccrualLoans March 31, 2020 One to four family
residential real estate
$
1,265,901
$
1,253,304
$
5,890
$
6,707
Construction
521,442
521,442
-
-
Commercial real estate
2,200,266
2,180,660
220
19,386
Commercial
897,865
893,605
299
3,961
Consumer finance
137,679
135,727
712
1,240
Home equity and improvement
301,146
296,330
3,517
1,299
Total loans
$
5,324,299
$
5,281,068
$
10,638
$
32,593
December 31, 2019
One to four family residential real estate
$
324,773
$
321,058
$
1,298
$
2,417
Construction
305,305
305,305
-
-
Commercial real estate
1,506,026
1,497,845
546
7,635
Commercial
578,071
574,593
519
2,959
Consumer finance
37,649
37,444
205
-
Home equity and improvement
122,864
121,211
1,205
448
Total loans
$
2,874,688
$
2,857,456
$
3,773
$
13,459
March 31, 2019
One to four family residential real estate
$
321,644
$
317,684
$
776
$
3,184
Construction
304,241
304,241
-
-
Commercial real estate
1,394,500
1,384,815
225
9,460
Commercial
509,627
504,722
547
4,358
Consumer finance
34,262
34,076
148
38
Home equity and improvement
124,450
123,694
151
605
Total loans
$
2,688,724
$
2,669,232
$
1,847
$
17,645
Non-GAAP Reconciliations First Defiance Financial
Corp. (In thousands, except per share and ratio data)
1st Qtr 2020 4th Qtr 2019 3rd Qtr 2019 2nd Qtr 2019 1st Qtr
2019 Acquisition related charges (pre-tax)
$
11,486
$
882
$
540
$
-
$
-
Less: Tax benefit of acquisition related charges
2,034
185
113
-
-
Acquisition related charges (after-tax)
$
9,452
$
697
$
427
$
-
$
-
Total non-interest expenses
$
43,768
$
24,760
$
23,203
$
24,235
$
24,866
Less: Acquisition related charges (pre-tax)
11,486
882
540
-
-
Core non-interest expenses
$
32,282
$
23,878
$
22,663
$
24,235
$
24,866
Acquisition related provision (pre-tax)
$
25,949
$
-
$
-
$
-
$
-
Less: Tax benefit of acquisition related provision
5,449
-
-
-
-
Acquisition related provision (after-tax)
$
20,500
$
-
$
-
$
-
$
-
Provision for loan losses
$
43,786
$
1,084
$
1,327
$
282
$
212
Less: Acquisition related provision (pre-tax)
25,949
-
-
-
-
Core provision for loan losses
$
17,837
$
1,084
$
1,327
$
282
$
212
Tax-equivalent net interest income
$
45,714
$
29,730
$
29,131
$
29,238
$
28,517
Non-interest income (excluding securities gains/losses)
13,999
11,803
11,831
10,486
10,813
Total revenues
59,713
41,533
40,962
39,724
39,330
Core non-interest expenses
$
32,282
$
23,878
$
22,663
$
24,235
$
24,866
Core efficiency ratio
54.06
%
57.49
%
55.33
%
61.01
%
63.22
%
Income (loss) before income taxes
$
(28,092
)
$
15,470
$
16,204
$
14,958
$
14,005
Add: Provision for loan losses
43,786
1,084
1,327
282
212
Pre-tax pre-provision income
15,694
16,554
17,531
15,240
14,217
Add: Acquisition related charges (pre-tax)
11,486
882
540
-
-
Core pre-tax pre-provision income
$
27,180
$
17,436
$
18,071
$
15,240
$
14,217
Average total assets
$
5,357,598
$
3,425,097
$
3,303,013
$
3,223,997
$
3,183,012
Core pre-tax pre-provision return on average assets
2.04
%
2.02
%
2.17
%
1.90
%
1.81
%
Net income (loss)
$
(22,482
)
$
12,517
$
13,171
$
12,199
$
11,482
Add: Acquisition related provision (after-tax)
20,500
-
-
-
-
Add: Acquisition related charges (after-tax)
9,452
697
427
-
-
Core net income
$
7,470
$
13,214
$
13,598
$
12,199
$
11,482
Diluted shares - Reported
31,642
19,895
19,875
19,860
20,095
Add: Dilutive shares for core net income
121
-
-
-
-
Diluted shares - Core
31,763
19,895
19,875
19,860
20,095
Core diluted EPS
$
0.24
$
0.66
$
0.68
$
0.61
$
0.57
Average total assets
$
5,357,598
$
3,425,097
$
3,303,013
$
3,223,997
$
3,183,012
Core return on average assets
0.56
%
1.53
%
1.63
%
1.52
%
1.46
%
Average total equity
$
787,519
$
420,352
$
411,041
$
398,612
$
395,138
Core return on average equity
3.82
%
12.47
%
13.12
%
12.28
%
11.78
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200428005979/en/
Paul Nungester EVP and CFO (419) 785-8700
pnungester@first-fed.com
First Defiance Financial (NASDAQ:FDEF)
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First Defiance Financial (NASDAQ:FDEF)
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부터 11월(11) 2023 으로 11월(11) 2024
