ý
|
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934. For the Quarterly Period Ended September 30,
2008
|
o
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 For the Transition Period from
___________to__________
|
Ohio
|
34-1803915
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
Number)
|
|
601 Clinton Street,
Defiance, Ohio
|
43512
|
|
(Address
or principal executive office)
|
(Zip
Code)
|
Large
accelerated filer o
|
Accelerated
filer ý
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
Page
Number
|
||
2
|
||
4
|
||
5
|
||
6
|
||
7
|
||
26
|
||
41
|
||
41
|
||
42
|
||
42
|
||
42
|
||
42
|
||
43
|
||
43
|
||
43
|
||
44
|
September
30,
2008
|
December
31,
2007
|
|||||||
(In
Thousands)
|
||||||||
Assets
|
||||||||
Cash
and cash equivalents:
|
||||||||
Cash and amounts due from
depository institutions
|
$ | 34,230 | $ | 53,976 | ||||
Interest-bearing
deposits
|
358 | 11,577 | ||||||
34,588 | 65,553 | |||||||
Securities:
|
||||||||
Available-for-sale, carried at
fair value
|
113,036 | 112,370 | ||||||
Held-to-maturity, carried at
amortized cost
|
||||||||
(fair value $1,010 and $1,161 at
September 30, 2008
|
||||||||
and December 31, 2007,
respectively)
|
978 | 1,117 | ||||||
114,014 | 113,487 | |||||||
Loans
held for sale
|
9,363 | 5,751 | ||||||
Loans
receivable, net of allowance of $23,445 at September
|
||||||||
30,
2008 and $13,890 at December 31, 2007, respectively
|
1,572,882 | 1,275,806 | ||||||
Accrued
interest receivable
|
8,672 | 6,755 | ||||||
Federal
Home Loan Bank stock
|
21,376 | 18,586 | ||||||
Bank
owned life insurance
|
29,174 | 28,423 | ||||||
Premises
and equipment
|
47,379 | 40,545 | ||||||
Real
estate and other assets held for sale
|
4,776 | 2,460 | ||||||
Goodwill
|
56,830 | 36,820 | ||||||
Core
deposit and other intangibles
|
8,771 | 3,551 | ||||||
Mortgage
servicing rights
|
9,335 | 5,973 | ||||||
Other
assets
|
4,866 | 5,694 | ||||||
Total
assets
|
$ | 1,922,026 | $ | 1,609,404 |
September
30,
2008
|
December
31,
2007
|
|||||||
(In
Thousands)
|
||||||||
Liabilities
and stockholders’ equity
|
||||||||
Liabilities:
|
||||||||
Deposits
|
$ | 1,435,804 | $ | 1,217,858 | ||||
Advances from the Federal Home
Loan Bank
|
173,581 | 139,536 | ||||||
Short term
borrowings
|
21,200 | − | ||||||
Securities sold under repurchase
agreements
|
49,038 | 30,055 | ||||||
Subordinated
debentures
|
36,083 | 36,083 | ||||||
Advance payments by
borrowers
|
496 | 762 | ||||||
Deferred taxes
|
1,469 | 1,306 | ||||||
Other liabilities
|
14,679 | 17,850 | ||||||
Total
liabilities
|
1,732,350 | 1,443,450 | ||||||
Stockholders’
equity:
|
||||||||
Preferred stock, no par value per
share:
|
||||||||
5,000 shares authorized; no
shares issued
|
− | − | ||||||
Common stock, $.01 par value per
share:
|
||||||||
25,000 shares authorized; 12,739
and 11,703 shares
|
||||||||
issued and 8,117 and 7,059 shares
outstanding, respectively
|
127 | 117 | ||||||
Additional paid-in
capital
|
140,360 | 112,651 | ||||||
Stock acquired by
ESOP
|
− | (202 | ) | |||||
Accumulated other comprehensive
income (loss), net of
|
||||||||
tax of ($2,657) and ($224),
respectively
|
(4,933 | ) | (415 | ) | ||||
Retained earnings
|
126,760 | 126,630 | ||||||
Treasury stock, at cost, 4,622 and
4,644 shares
Respectively
|
(72,638 | ) | (72,827 | ) | ||||
Total
stockholders’ equity
|
189,676 | 165,954 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 1,922,026 | $ | 1,609,404 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Interest
Income
|
||||||||||||||||
Loans
|
$ | 24,902 | $ | 22,983 | $ | 72,220 | $ | 67,882 | ||||||||
Investment
securities:
|
||||||||||||||||
Taxable
|
1,078 | 1,129 | 3,365 | 3,403 | ||||||||||||
Non-taxable
|
357 | 310 | 1,017 | 887 | ||||||||||||
Interest-bearing
deposits
|
5 | 262 | 119 | 483 | ||||||||||||
FHLB stock
dividends
|
301 | 305 | 797 | 898 | ||||||||||||
Total
interest income
|
26,643 | 24,989 | 77,518 | 73,553 | ||||||||||||
Interest
Expense
|
||||||||||||||||
Deposits
|
7,658 | 10,536 | 23,851 | 30,130 | ||||||||||||
FHLB advances and
other
|
1,603 | 1,636 | 4,803 | 5,253 | ||||||||||||
Subordinated
debentures
|
461 | 597 | 1,445 | 1,518 | ||||||||||||
Notes payable
|
555 | 193 | 1,217 | 519 | ||||||||||||
Total
interest expense
|
10,277 | 12,962 | 31,316 | 37,420 | ||||||||||||
Net
interest income
|
16,366 | 12,027 | 46,202 | 36,133 | ||||||||||||
Provision
for loan losses
|
4,907 | 671 | 8,761 | 1,704 | ||||||||||||
Net
interest income after provision for loan losses
|
11,459 | 11,356 | 37,441 | 34,429 | ||||||||||||
Non-interest
Income
|
||||||||||||||||
Service fees and other
charges
|
3,717 | 2,764 | 9,756 | 7,997 | ||||||||||||
Insurance commission
income
|
1,179 | 1,180 | 4,381 | 4,244 | ||||||||||||
Mortgage banking
income
|
1,011 | 921 | 3,627 | 2,780 | ||||||||||||
Gain on sale of non-mortgage
loans
|
134 | 138 | 177 | 204 | ||||||||||||
Gain (loss) on
securities
|
(2,051 | ) | 21 | (2,564 | ) | 21 | ||||||||||
Trust income
|
114 | 95 | 343 | 280 | ||||||||||||
Income from Bank Owned Life
Insurance
|
224 | 321 | 751 | 929 | ||||||||||||
Other non-interest
income
|
(188 | ) | 144 | (166 | ) | 407 | ||||||||||
Total
non-interest income
|
4,140 | 5,584 | 16,305 | 16,862 | ||||||||||||
Non-interest
Expense
|
||||||||||||||||
Compensation and
benefits
|
7,980 | 6,424 | 22,421 | 19,610 | ||||||||||||
Occupancy
|
1,949 | 1,516 | 5,562 | 4,324 | ||||||||||||
State franchise
tax
|
533 | 355 | 1,540 | 1,074 | ||||||||||||
Data processing
|
1,221 | 941 | 3,384 | 2,838 | ||||||||||||
Acquisition related
charges
|
20 | - | 1,032 | - | ||||||||||||
Amortization of
intangibles
|
424 | 167 | 1,035 | 481 | ||||||||||||
Other non-interest
expense
|
3,106 | 2,893 | 9,250 | 7,623 | ||||||||||||
Total
non-interest expense
|
15,233 | 12,296 | 44,224 | 35,950 | ||||||||||||
Income
before income taxes
|
366 | 4,644 | 9,522 | 15,341 | ||||||||||||
Federal
income taxes
|
44 | 1,515 | 3,046 | 4,995 | ||||||||||||
Net
Income
|
322 | 3,129 | 6,476 | 10,346 | ||||||||||||
Earnings
per share (Note 7)
|
||||||||||||||||
Basic
|
$ | 0.04 | $ | 0.44 | $ | 0.83 | $ | 1.46 | ||||||||
Diluted
|
$ | 0.04 | $ | 0.44 | $ | 0.83 | $ | 1.44 | ||||||||
Dividends
declared per share (Note 6)
|
$ | 0.26 | $ | 0.25 | $ | 0.78 | $ | 0.75 | ||||||||
Average
shares outstanding (Note 7)
|
||||||||||||||||
Basic
|
8,113 | 7,080 | 7,813 | 7,101 | ||||||||||||
Diluted
|
8,123 | 7,171 | 7,842 | 7,201 |
See
accompanying notes
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Balance
at beginning of period
|
$ | 193,800 | $ | 164,657 | $ | 165,954 | $ | 159,825 | ||||||||
Adjustment
to initially apply FIN 48
|
- | - | - | (200 | ) | |||||||||||
Balance
at beginning of period as adjusted
|
193,800 | 164,657 | 165,954 | 159,625 | ||||||||||||
Comprehensive
income:
|
||||||||||||||||
Net income
|
322 | 3,129 | 6,476 | 10,346 | ||||||||||||
Other comprehensive income
(loss)
|
(2,400 | ) | 483 | (4,518 | ) | (28 | ) | |||||||||
Total
comprehensive income
|
(2,078 | ) | 3,612 | 1,958 | 10,318 | |||||||||||
ESOP
shares released
|
- | 333 | 551 | 1,376 | ||||||||||||
Stock
option expense
|
65 | 72 | 181 | 202 | ||||||||||||
Tax
benefit of employee plans
|
- | - | 72 | 56 | ||||||||||||
Shares
issued under stock option plans
|
- | - | 768 | 462 | ||||||||||||
Treasury
shares repurchased
|
(10 | ) | (2,216 | ) | (635 | ) | (4,271 | ) | ||||||||
Acquisition
of Huber, Harger, Welt and Smith
|
- | - | - | 2,250 | ||||||||||||
Acquisition
of Pavilion Bancorp
|
- | - | 27,128 | - | ||||||||||||
Common
cash dividends declared (Note 6)
|
(2,101 | ) | (1,752 | ) | (6,301 | ) | (5,312 | ) | ||||||||
Balance
at end of period
|
$ | 189,676 | $ | 164,706 | $ | 189,676 | $ | 164,706 |
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
2008
|
2007
|
|||||||
Operating
Activities
|
||||||||
Net
cash provided by operating activities
|
$ | 13,360 | $ | 9,514 | ||||
Investing
Activities
|
||||||||
Proceeds
from maturities of held-to-maturity securities
|
138 | 204 | ||||||
Proceeds
from maturities of available-for-sale securities
|
24,787 | 17,355 | ||||||
Proceeds
from sale of securities of available-for-sale securities
|
− | 2,521 | ||||||
Proceeds
from sale of real estate and other assets held for sale
|
2,739 | 2,120 | ||||||
Proceeds
from sale of property, plant and equipment
|
− | 5 | ||||||
Net
cash received in acquisition of Huber, Harger, Welt and
Smith
|
− | 190 | ||||||
Net
cash paid for acquisition of Pavilion Bancorp, Inc.
|
(23,902 | ) | − | |||||
Proceeds
from sale of non-mortgage loans
|
10,707 | 11,320 | ||||||
Purchases
of available-for-sale securities
|
(25,970 | ) | (20,499 | ) | ||||
Investment
in bank owned life insurance
|
- | (2,060 | ) | |||||
Purchases
of office properties and equipment
|
(3,240 | ) | (5,664 | ) | ||||
Net
(increase) decrease in loans receivable
|
(88,327 | ) | (41,506 | ) | ||||
Net
cash (used in) provided by investing activities
|
(103,068 | ) | (36,014 | ) | ||||
Financing
Activities
|
||||||||
Net
increase (decrease) in deposits and advance payments by
borrowers
|
8,726 | 69,560 | ||||||
Repayment
of Federal Home Loan Bank long-term advances
|
(6,399 | ) | (653 | ) | ||||
Net
increase (decrease) in Federal Home Loan Bank short-term
advances
|
15,300 | (33,100 | ) | |||||
Proceeds
from issuance of subordinated debentures
|
− | 15,464 | ||||||
Proceeds
from Federal Home Loan Bank long-term advances
|
19,000 | − | ||||||
Increase
(decrease) in securities sold under repurchase agreements
|
16,737 | (5,779 | ) | |||||
Net
increase in short-term borrowings
|
11,200 | − | ||||||
Purchase
of common stock for treasury
|
(635 | ) | (4,271 | ) | ||||
Cash
dividends paid
|
(6,026 | ) | (5,325 | ) | ||||
Proceeds
from exercise of stock options
|
768 | 462 | ||||||
Excess
tax benefits from exercise of stock options
|
72 | 56 | ||||||
Net
cash provided by (used in) financing activities
|
58,743 | 36,414 | ||||||
Increase
(decrease) in cash and cash equivalents
|
(30,965 | ) | 9,914 | |||||
Cash
and cash equivalents at beginning of period
|
65,553 | 50,023 | ||||||
Cash
and cash equivalents at end of period
|
$ | 34,588 | $ | 59,937 | ||||
Supplemental
cash flow information:
|
||||||||
Interest
paid
|
$ | 32,125 | $ | 36,725 | ||||
Income
taxes paid
|
$ | 6,682 | $ | 4,520 | ||||
Transfers
from loans to other real estate owned and other
|
||||||||
assets held for
sale
|
$ | 3,648 | $ | 3,510 |
|
·
|
Level 1: Quoted prices
(unadjusted) in active markets for identical assets or liabilities that
the reporting entity has the ability to access at the measurement
date.
|
|
·
|
Level 2: Inputs other
than quoted prices included in Level 1 that are observable for the asset
or liability, either directly or indirectly. These might include quoted
prices for similar assets or liabilities in active markets, quoted prices
for identical or similar assets or liabilities in markets that are not
active, inputs other that quoted prices that are observable for the asset
or liability (such as interest rates, prepayment speeds, credit risks,
etc.) or inputs that are derived principally from or corroborated by
market data by a correlation or other
means.
|
|
·
|
Level 3: Unobservable
inputs for determining fair value of assets and liabilities that reflect
an entity’s own assumptions about the assumptions that market participants
would use in pricing the assets or
liabilities.
|
Level
1 Inputs
|
Level
2 Inputs
|
Level
3 Inputs
|
Total
Fair
Value
|
|||||||||||||
(In
Thousands)
|
||||||||||||||||
Available
for sale securities
|
$ | 152 | $ | 110,252 | $ | 2,632 | $ | 113,036 |
Fair
Value Measurements
Using
Significant Unobservable Inputs (Level 3)
|
||||||||
Three
Months Ended
September
30, 2008
|
Nine
Months Ended
September
30, 2008
|
|||||||
Balance
at beginning of period
|
$ | 5,562 | $ | 8,642 | ||||
Total
gains or losses (realized/unrealized)
|
||||||||
Included
in earnings
|
(150 | ) | (682 | ) | ||||
Included
in other comprehensive income
(presented
gross of taxes)
|
(2,774 | ) | (5,147 | ) | ||||
Purchases,
issuances, and settlements
|
(6 | ) | (181 | ) | ||||
Transfers
in and/or out of Level 3
|
- | - | ||||||
Balance
at September 30, 2008
|
$ | 2,632 | $ | 2,632 |
Level
1 Inputs
|
Level
2 Inputs
|
Level
3 Inputs
|
Total
Fair
Value
|
|||||||||||||
(In
Thousands)
|
||||||||||||||||
Impaired
loans
|
$ | - | $ | - | $ | 5,923 | $ | 5,923 | ||||||||
Mortgage
servicing rights
|
- | - | 9,335 | 9,335 |
Nine
months ended September 30,
|
||||||||||||||||
2008
|
2007
|
|||||||||||||||
Options
Outstanding
|
Weighted
Average
Option
Prices
|
Options
Outstanding
|
Weighted
Average
Option
Prices
|
|||||||||||||
Options
outstanding, beginning of period
|
418,339 | $ | 20.79 | 404,154 | $ | 19.36 | ||||||||||
Forfeited
or cancelled
|
(16,703 | ) | 23.73 | (2,550 | ) | 25.98 | ||||||||||
Exercised
|
(52,486 | ) | 14.64 | (32,922 | ) | 14.04 | ||||||||||
Granted
|
95,000 | 17.15 | 54,250 | 27.41 | ||||||||||||
Options
outstanding, end of period
|
444,150 | $ | 20.62 | 422,932 | $ | 20.76 | ||||||||||
Vested
or expected to vest at
period
end
|
423,154 | $ | 20.54 | |||||||||||||
Exercisable
at period end
|
252,550 | $ | 19.55 |
Nine
Months Ended September 30,
|
||||||||
2008
|
2007
|
|||||||
Cash
received from option exercises
|
$ | 768,355 | $ | 462,076 | ||||
Tax
benefit realized from option exercises
|
72,310 | 55,414 | ||||||
Intrinsic
value of options exercised
|
289,655 | 475,048 |
Nine
Months Ended September 30,
|
||||||||
2008
|
2007
|
|||||||
Expected
average risk-free rate
|
4.26 | % | 4.86 | % | ||||
Expected
average life
|
6.46
|
years |
6.63
|
years | ||||
Expected
volatility
|
22.50 | % | 21.80 | % | ||||
Expected
dividend yield
|
6.08 | % | 3.64 | % |
Acquisition
Date
|
||||
March
14, 2008
|
||||
(In
Thousands)
|
||||
Assets
|
||||
Cash
and cash equivalents
|
$ | 4,514 | ||
Investment
securities
|
9,136 | |||
Loans,
net of allowance for loan losses
|
232,639 | |||
Premises
and equipment
|
6,992 | |||
Federal
Home Loan Bank stock
|
2,036 | |||
Goodwill
and other intangibles
|
26,265 | |||
Other
assets
|
6,680 | |||
Total
Assets
|
288,262 | |||
Liabilities
|
||||
Deposits
|
209,385 | |||
Borrowings
|
18,403 | |||
Other
liabilities
|
4,929 | |||
Total
Liabilities
|
232,717 | |||
Net
assets acquired
|
$ | 55,545 | ||
Acquisition
Date
|
||||
March
14, 2008
|
||||
(In
Thousands)
|
||||
Purchase
price
|
$ | 55,545 | ||
Pavilion’s
carrying value of net assets acquired
|
(28,268 | ) | ||
Excess
purchase price over Pavilion’s carrying
|
||||
Value
of net assets acquired
|
27,277 | |||
Purchase
accounting adjustments
|
||||
Portfolio
loans
|
(7,886 | ) | ||
Premises
and equipment
|
2,579 | |||
Mortgage
servicing rights
|
(1,010 | ) | ||
Deposits
|
752 | |||
Deferred
tax liabilities
|
4,553 | |||
Total
net tangible assets
|
(1,012 | ) | ||
Core
deposit and other intangibles
|
(6,255 | ) | ||
Goodwill
|
$ | 20,010 |
Three
months ended
September
30,
|
Nine
months ended
September
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Numerator
for basic and diluted
earnings
per share – Net income
|
$ | 322 | $ | 3,129 | $ | 6,476 | $ | 10,346 | ||||||||
Denominator:
|
||||||||||||||||
Denominator for basic
earnings
per share – weighted average
shares
|
8,113 | 7,080 | 7,813 | 7,101 | ||||||||||||
Effect of dilutive
securities:
|
||||||||||||||||
Employee stock
options
|
10 | 91 | 29 | 100 | ||||||||||||
Denominator
for diluted earnings per
share
– adjusted weighted average
shares
and assumed conversions
|
8,123 | 7,171 | 7,842 | 7,201 | ||||||||||||
Basic
earnings per share from net income
|
$ | 0.04 | $ | 0.44 | $ | 0.83 | $ | 1.46 | ||||||||
Diluted
earnings per share from
net
income
|
$ | 0.04 | $ | 0.44 | $ | 0.83 | $ | 1.44 |
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
At
September 30, 2008
|
||||||||||||||||
Available-for-Sale
Securities:
|
||||||||||||||||
U.S. Treasury securities and
obligations
of U.S. Government
corporations and
agencies
|
$ | 15,577 | $ | 236 | $ | (61 | ) | $ | 15,752 | |||||||
Mortgage-backed
securities
|
35,519 | 183 | (174 | ) | 35,528 | |||||||||||
REMICs
|
3,064 | 20 | - | 3,084 | ||||||||||||
Collateralized mortgage
obligations
|
21,810 | 170 | (101 | ) | 21,879 | |||||||||||
Preferred stock
|
8,663 | - | (5,879 | ) | 2,784 | |||||||||||
Obligations of state and political
subdivisions
|
34,793 | 249 | (1,033 | ) | 34,009 | |||||||||||
Totals
|
$ | 119,426 | $ | 858 | $ | (7,248 | ) | $ | 113,036 | |||||||
Held-to-Maturity
Securities:
|
||||||||||||||||
FHLMC
certificates
|
$ | 153 | $ | 6 | $ | - | $ | 159 | ||||||||
FNMA certificates
|
395 | 2 | (2 | ) | 395 | |||||||||||
GNMA certificates
|
130 | 2 | - | 132 | ||||||||||||
Obligations of state and
political subdivisions
|
300 | 24 | - | 324 | ||||||||||||
Totals
|
$ | 978 | $ | 34 | $ | (2 | ) | $ | 1,010 |
At
December 31, 2007
|
||||||||||||||||
Available-for-Sale
Securities:
|
||||||||||||||||
U.S. Treasury securities and
obligations
of U.S. Government
corporations and
agencies
|
$ | 24,565 | $ | 354 | $ | (1 | ) | $ | 24,918 | |||||||
Mortgage-backed
securities
|
26,453 | 289 | (55 | ) | 26,687 | |||||||||||
REMICs
|
3,064 | 41 | - | 3,105 | ||||||||||||
Collateralized mortgage
obligations
|
20,103 | 173 | (77 | ) | 20,199 | |||||||||||
Preferred stock
|
9,374 | 29 | (761 | ) | 8,642 | |||||||||||
Obligations of state and
political subdivisions
|
28,251 | 568 | - | 28,819 | ||||||||||||
Totals
|
$ | 111,810 | $ | 1,454 | $ | (894 | ) | $ | 112,370 | |||||||
Held-to-Maturity
Securities:
|
||||||||||||||||
FHLMC
certificates
|
$ | 195 | $ | 6 | $ | - | $ | 201 | ||||||||
FNMA certificates
|
472 | 4 | (1 | ) | 475 | |||||||||||
GNMA certificates
|
150 | 2 | - | 152 | ||||||||||||
Obligations of state and
political
Subdivisions
|
300 | 33 | - | 333 | ||||||||||||
Totals
|
$ | 1,117 | $ | 45 | $ | (1 | ) | $ | 1,161 |
Duration
of Unrealized Loss Position
|
||||||||||||||||||||||||
Less
than 12 Months
|
12
Month or Longer
|
Total
|
||||||||||||||||||||||
Gross
|
Gross
|
|||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
Value
|
Loss
|
Value
|
Loss
|
Value
|
Losses
|
|||||||||||||||||||
(In
Thousands)
|
||||||||||||||||||||||||
At
September 30, 2008
|
||||||||||||||||||||||||
Available-for-sale
securities:
|
||||||||||||||||||||||||
U.S.
treasury securities and obligations of U.S. government
corporations
and
agencies
|
$ | 6,198 | $ | (61 | ) | $ | - | $ | - | $ | 6,198 | $ | (61 | ) | ||||||||||
Mortgage-backed
securities
|
19,062 | (151 | ) | 1,512 | (23 | ) | 20,574 | (174 | ) | |||||||||||||||
Collateralized
mortgage obligations and REMICs
|
8,039 | (97 | ) | 367 | (4 | ) | 8,406 | (101 | ) | |||||||||||||||
Preferred
stock
|
633 | (1,060 | ) | 2,000 | (4,819 | ) | 2,633 | (5,879 | ) | |||||||||||||||
Obligations
of state and political subdivisions
|
19,306 | (1,002 | ) | 396 | (31 | ) | 19,702 | (1,033 | ) | |||||||||||||||
Held
to maturity securities:
|
||||||||||||||||||||||||
Mortgage-backed
securities
|
135 | (2 | ) | 81 | - | 216 | (2 | ) | ||||||||||||||||
Total
temporarily
impaired
securities
|
$ | 53,373 | $ | (2,373 | ) | $ | 4,356 | $ | (4,877 | ) | $ | 57,729 | $ | (7,250 | ) |
September
30,
2008
|
December
31,
2007
|
|||||||
Real
Estate:
|
||||||||
One-to-four family
residential
|
$ | 250,244 | $ | 229,588 | ||||
Construction
|
75,822 | 56,698 | ||||||
Non-residential and
multi-family
|
746,676 | 580,621 | ||||||
1,072,742 | 866,907 | |||||||
Other
Loans:
|
||||||||
Commercial
|
353,453 | 283,072 | ||||||
Consumer finance
|
41,964 | 37,743 | ||||||
Home equity and
improvement
|
158,992 | 128,080 | ||||||
554,409 | 448,895 | |||||||
Total
real estate and other loans
|
1,627,151 | 1,315,802 | ||||||
Deduct:
|
||||||||
Loans in process
|
29,794 | 25,074 | ||||||
Net deferred loan origination
fees and costs
|
1,030 | 1,032 | ||||||
Allowance for loan
loss
|
23,445 | 13,890 | ||||||
Totals
|
$ | 1,572,882 | $ | 1,275,806 |
Three
Months ended
September
30,
|
Nine
Months ended
September
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Balance
at beginning of period
|
$ | 20,578 | $ | 13,417 | $ | 13,890 | $ | 13,579 | ||||||||
Provision
for loan losses
|
4,907 | 671 | 8,761 | 1,704 | ||||||||||||
Reserve
acquired from Pavilion
|
121 | - | 4,258 | - | ||||||||||||
Charge-offs:
|
||||||||||||||||
One-to-four family residential
real estate
|
478 | 128 | 816 | 223 | ||||||||||||
Non-residential and multi-family
real estate
|
1,495 | 586 | 2,277 | 1,669 | ||||||||||||
Commercial
|
- | - | 220 | 92 | ||||||||||||
Home equity and
improvement
|
216 | 10 | 306 | 51 | ||||||||||||
Consumer finance
|
73 | 25 | 156 | 119 | ||||||||||||
Total
charge-offs
|
2,262 | 749 | 3,775 | 2,154 | ||||||||||||
Recoveries
|
101 | 88 | 311 | 298 | ||||||||||||
Net
charge-offs
|
2,161 | 661 | 3,464 | 1,856 | ||||||||||||
Ending
allowance
|
$ | 23,445 | $ | 13,427 | $ | 23,445 | $ | 13,427 |
September
30,
2008
|
December
31,
2007
|
|||||||
(in
thousands)
|
||||||||
Non-accrual
loans
|
$ | 24,630 | $ | 9,217 | ||||
Restructured
loans, accruing
|
905 | - | ||||||
Total
non-performing loans
|
25,535 | $ | 9,217 | |||||
Real
estate and other assets held for sale
|
4,776 | 2,460 | ||||||
Total
non-performing assets
|
$ | 30,311 | $ | 11,677 |
September
30,
2008
|
December
31,
2007
|
|||||||
Non-interest-bearing
checking accounts
|
$ | 158,139 | $ | 121,563 | ||||
Interest-bearing
checking and money market accounts
|
365,251 | 342,367 | ||||||
Savings
accounts
|
145,019 | 105,873 | ||||||
Retail
certificates of deposit less than $100,000
|
557,643 | 509,720 | ||||||
Retail
certificates of deposit greater than $100,000
|
177,848 | 137,927 | ||||||
Brokered
or national certificates of deposit
|
31,904 | 408 | ||||||
$ | 1,435,804 | $ | 1,217,858 |
September
30,
2008
|
December
31,
2007
|
|||||||
(in
thousands)
|
||||||||
FHLB
Advances:
|
||||||||
Overnight
borrowings
|
$ | 26,600 | $ | 11,300 | ||||
Single
maturity fixed rate advances
|
10,000 | 10,000 | ||||||
Single
maturity LIBOR based advances
|
45,000 | 45,000 | ||||||
Putable
advances
|
64,000 | 45,000 | ||||||
Strike-rate
advances
|
27,000 | 27,000 | ||||||
Amortizable
mortgage advances
|
981 | 1,236 | ||||||
Total
|
$ | 173,581 | $ | 139,536 | ||||
Borrowings
on Bank Line of Credit
|
$ | 20,000 | $ | - | ||||
Federal
funds borrowed
|
$ | 1,200 | $ | - | ||||
Junior
subordinated debentures owed to
unconsolidated
subsidiary trusts
|
$ | 36,083 | $ | 36,083 |
September
30,
2008
|
December
31,
2007
|
|||||||
First
Defiance Statutory Trust I due December 2035
|
$ | 20,619 | $ | 20,619 | ||||
First
Defiance Statutory Trust II due June 2037
|
15,464 | 15,464 | ||||||
Total
junior subordinated debentures owed to unconsolidated subsidiary
Trusts
|
$ | 36,083 | $ | 36,083 |
September
30,
2008
|
December
31,
2007
|
|||||||
(In
Thousands)
|
||||||||
Loan
commitments
|
$ | 367,192 | $ | 280,152 | ||||
Standby
Letters of Credit
|
19,385 | 9,147 | ||||||
Total
|
$ | 386,577 | $ | 289,299 |
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(In
Thousands)
|
||||||||||||||||
Service
cost-benefits attributable
to service during the
period
|
$ | 13 | $ | 12 | $ | 39 | $ | 37 | ||||||||
Interest
cost on accumulated post-
retirement benefit
obligation
|
37 | 31 | 110 | 94 | ||||||||||||
Net
amortization and deferral
|
15 | 11 | 46 | 32 | ||||||||||||
Net
periodic postretirement benefit cost
|
$ | 65 | $ | 54 | $ | 195 | $ | 163 |
Three Months Ended September
30,
|
||||||||||||||||||||||||
2008
|
2007
|
|||||||||||||||||||||||
Average
|
Yield/
|
Average
|
Yield/
|
|||||||||||||||||||||
Balance
|
Interest(1)
|
Rate(2)
|
Balance
|
Interest(1)
|
Rate(2)
|
|||||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||||
Loans
receivable
|
$ | 1,585,489 | $ | 24,934 | 6.26 | % | $ | 1,244,531 | $ | 22,995 | 7.33 | % | ||||||||||||
Securities
|
118,502 | 1,636 | 5.31 | 112,645 | 1,615 | 5.66 | ||||||||||||||||||
Interest-earning
deposits
|
2,231 | 5 | 0.89 | 21,760 | 262 | 4.78 | ||||||||||||||||||
FHLB
stock and other
|
21,121 | 301 | 5.67 | 18,585 | 305 | 6.51 | ||||||||||||||||||
Total
interest-earning assets
|
1,727,343 | 26,876 | 6.18 | 1,397,521 | 25,177 | 7.14 | ||||||||||||||||||
Non-interest-earning
assets
|
201,644 | 152,653 | ||||||||||||||||||||||
Total
assets
|
$ | 1,928,987 | $ | 1,550,174 | ||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||
Deposits
|
$ | 1,268,016 | $ | 7,658 | 2.40 | % | $ | 1,074,413 | $ | 10,536 | 3.89 | % | ||||||||||||
FHLB
advances and other
|
174,343 | 1,603 | 3.66 | 128,597 | 1,636 | 5.05 | ||||||||||||||||||
Notes
payable
|
64,368 | 555 | 3.43 | 24,935 | 193 | 3.07 | ||||||||||||||||||
Subordinated
debentures
|
36,228 | 461 | 5.06 | 36,295 | 597 | 6.53 | ||||||||||||||||||
Total
interest-bearing liabilities
|
1,542,955 | 10,277 | 2.65 | 1,264,240 | 12,962 | 4.07 | ||||||||||||||||||
Non-interest
bearing deposits
|
169,257 | - | 103,181 | - | ||||||||||||||||||||
Total
including non-interest bearing
|
||||||||||||||||||||||||
demand
deposits
|
1,712,212 | 10,277 | 2.39 | 1,367,421 | 12,962 | 3.76 | ||||||||||||||||||
Other
non-interest-bearing liabilities
|
22,323 | 18,002 | ||||||||||||||||||||||
Total
liabilities
|
1,734,535 | 1,385,423 | ||||||||||||||||||||||
Stockholders'
equity
|
194,452 | 164,751 | ||||||||||||||||||||||
Total
liabilities and stock-
|
||||||||||||||||||||||||
holders'
equity
|
$ | 1,928,987 | $ | 1,550,174 | ||||||||||||||||||||
Net
interest income; interest
|
||||||||||||||||||||||||
rate
spread
|
$ | 16,599 | 3.53 | % | $ | 12,215 | 3.07 | % | ||||||||||||||||
Net
interest margin (3)
|
3.81 | % | 3.47 | % | ||||||||||||||||||||
Average
interest-earning assets
|
||||||||||||||||||||||||
to
average interest-bearing
|
||||||||||||||||||||||||
liabilities
|
112 | % | 111 | % |
(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)
|
Net
interest margin is net interest income divided by average interest-earning
assets.
|
Nine Months Ended September
30,
|
||||||||||||||||||||||||
2008
|
2007
|
|||||||||||||||||||||||
Average
|
Yield/
|
Average
|
Yield/
|
|||||||||||||||||||||
Balance
|
Interest(1)
|
Rate(2)
|
Balance
|
Interest(1)
|
Rate(2)
|
|||||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||||
Loans
receivable
|
$ | 1,485,455 | $ | 72,297 | 6.50 | % | $ | 1,233,987 | $ | 67,916 | 7.36 | % | ||||||||||||
Securities
|
118,908 | 4,959 | 5.50 | 112,466 | 4,795 | 5.68 | ||||||||||||||||||
Interest-earning
deposits
|
6,311 | 119 | 2.52 | 12,461 | 483 | 5.18 | ||||||||||||||||||
FHLB
stock and other
|
20,199 | 797 | 5.27 | 18,585 | 898 | 6.46 | ||||||||||||||||||
Total
interest-earning assets
|
1,630,873 | 78,172 | 6.40 | 1,377,499 | 74,092 | 7.19 | ||||||||||||||||||
Non-interest-earning
assets
|
193,324 | 151,905 | ||||||||||||||||||||||
Total
assets
|
$ | 1,824,197 | $ | 1,529,404 | ||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||
Deposits
|
$ | 1,210,631 | $ | 23,851 | 2.63 | % | $ | 1,053,810 | $ | 30,130 | 3.82 | % | ||||||||||||
FHLB
advances and other
|
161,891 | 4,803 | 3.96 | 139,087 | 5,253 | 5.05 | ||||||||||||||||||
Notes
payable
|
48,018 | 1,217 | 3.39 | 22,920 | 519 | 3.03 | ||||||||||||||||||
Subordinated
debentures
|
36,245 | 1,445 | 5.33 | 31,147 | 1,518 | 6.52 | ||||||||||||||||||
Total
interest-bearing liabilities
|
1,456,785 | 31,316 | 2.87 | 1,246,964 | 37,420 | 4.01 | ||||||||||||||||||
Non-interest
bearing deposits
|
155,000 | - | 100,908 | - | ||||||||||||||||||||
Total
including non-interest bearing
|
||||||||||||||||||||||||
demand
deposits
|
1,611,785 | 31,316 | 2.60 | 1,347,872 | 37,420 | 3.71 | ||||||||||||||||||
Other
non-interest-bearing liabilities
|
25,082 | 18,042 | ||||||||||||||||||||||
Total
liabilities
|
1,636,867 | 1,365,914 | ||||||||||||||||||||||
Stockholders'
equity
|
187,330 | 163,490 | ||||||||||||||||||||||
Total
liabilities and stock-
|
||||||||||||||||||||||||
holders'
equity
|
$ | 1,824,197 | $ | 1,529,404 | ||||||||||||||||||||
Net
interest income; interest
|
||||||||||||||||||||||||
rate
spread
|
$ | 46,856 | 3.53 | % | $ | 36,672 | 3.18 | % | ||||||||||||||||
Net
interest margin (3)
|
3.83 | % | 3.56 | % | ||||||||||||||||||||
Average
interest-earning assets
|
||||||||||||||||||||||||
to
average interest-bearing
|
||||||||||||||||||||||||
liabilities
|
112 | % | 110 | % |
(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)
|
Net
interest margin is net interest income divided by average interest-earning
assets.
|
September
30,
2008
|
December
31,
2007
|
|||||||
(in
thousands)
|
||||||||
Non-accrual
loans
|
$ | 24,630 | $ | 9,217 | ||||
Restructured
loans, accruing
|
905 | - | ||||||
Total
non-performing loans
|
$ | 25,535 | $ | 9,217 | ||||
Real
estate and other assets held for sale
|
4,776 | 2,460 | ||||||
Total
non-performing assets
|
$ | 30,311 | $ | 11,677 | ||||
Allowance
for loans losses as a percentage of total loans
|
1.47 | % | 1.08 | % | ||||
Allowance
for loan losses as a percentage of non-
performing
assets
|
77.35 | % | 118.95 | % | ||||
Allowance
for loan losses as a percentage of non-
performing
loans
|
91.82 | % | 150.70 | % | ||||
Total
non-performing assets as a percentage of total assets
|
1.58 | % | 0.73 | % | ||||
Total
non-performing loans as a percentage of total loans
|
1.60 | % | 0.71 | % |
Core
Capital
|
Risk-Based
Capital
|
|||||||||||||||
Adequately
Capitalized |
Well
Capitalized |
Adequately
Capitalized |
Well
Capitalized |
|||||||||||||
Regulatory
capital
|
$ | 185,346 | $ | 185,346 | $ | 201,706 | $ | 201,706 | ||||||||
Minimum
required regulatory capital
|
74,540 | 93,175 | 134,050 | 167,563 | ||||||||||||
Excess
regulatory capital
|
$ | 110,806 | $ | 92,171 | $ | 67,656 | $ | 34,143 | ||||||||
Regulatory
capital as a percentage of assets (1)
|
9.95 | % | 9.95 | % | 12.04 | % | 12.04 | % | ||||||||
Minimum
capital required as a percentage
of
assets
|
4.00 | % | 5.00 | % | 8.00 | % | 10.00 | % | ||||||||
Excess
regulatory capital as a percentage of assets
|
5.95 | % | 4.95 | % | 4.04 | % | 2.04 | % |
(1)
|
Core
capital is computed as a percentage of adjusted total assets of $1.86
billion. Risk-based capital is computed as a percentage of total
risk-weighted assets of $1.68
billion.
|
Item
1.
|
Legal
Proceedings
|
First
Defiance is not engaged in any legal proceedings of a material
nature.
|
|
Item 1A.
|
Risk
Factors
|
There
were no material changes to the risk factors as presented in First
Defiance Financial Corp.’s annual report on Form 10-K for the year ended
December 31, 2007.
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
Period
|
Total
Number
of
Shares
Purchased
|
Average
Price
Paid
Per
Share
|
Total
Number of
Shares
Purchased
as
Part of
Publicly
Announced
Plans
or
Programs
|
Maximum
Number
of Shares
that
May Yet Be
Purchased
Under
the
Plans or
Programs
(1)
|
July1,
2008 –
July
31, 2008
|
215
|
$15.34
|
215
|
93,579
|
August
1, 2008 –
August
31, 2008
|
240
|
$14.86
|
240
|
93,339
|
September
1, 2008 –
September
30, 2008
|
215
|
$16.10
|
215
|
93,124
|
Total
for 2008
Third
Quarter
|
670
|
$15.41
|
670
|
93,124
|
Item 3.
|
Defaults
upon Senior Securities
|
Not
applicable.
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
|
Not
applicable.
|
||
Item 5.
|
Other
Information
|
|
Not
applicable.
|
||
Item 6.
|
Exhibits
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
|
||
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
|
||
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act
|
||
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act
|
||
First
Defiance Financial Corp.
|
||
(Registrant)
|
||
Date: November 10,
2008
|
By:
|
/s/ William J.
Small
|
William
J. Small
|
||
Chairman,
President and
|
||
Chief
Executive Officer
|
||
Date: November 10,
2008
|
By:
|
/s/ Donald P.
Hileman
|
Donald
P. Hileman
|
||
Interim
Chief
|
||
Financial
Officer
|