First Defiance Financial Corp.'s CEO Discusses Q3 2011 Results - Earnings Call Transcript

However, within a month, we were facing that debt-ceiling crisis in Washington, followed shortly by the downgrade of U.S. Securities by Standard & Poor’s. These events on top of a still fragile housing market and elevated unemployment have again shaken the confidence of the American public. I do feel like we still have the offense on the field that is more of the grinded out at three yards and a cloud of dust rather than a wide opened attack. Even in its environment, we were encouraged by the core performance this quarter as we climbed back toward a more normalized run rate.

Credit quality and the ongoing steps of moving credit-suited process continues to play a major role on our financial performance. The increases in non-performings in the higher level of net charge-offs, both involve previously identified credits. That changes involving those credits during the period necessitated further action. We remained confident that we have done a good job of identifying and reserving for credit issues and this is reflected in the 40% drop in provision expense in the quarter year-over-year.

Loans over 30 day past due improved over the linked-quarter and the year-ago period, indicating improvement in the early term of the credit cycle. Another positive factor related to credit quality this quarter is significant improvement in credit and collection cost over last year. A portion of this is attributed to our ability to continue to reduce our other real estate-owned as we’ve owe a debt balance by over 20% to the linked quarter. Dan will be giving you more detail on all of this in his analysis.

As credit quality issues continue to be dealt with and moves through the system, we see the credit metrics reflecting these moves. The significant increase in net charge offs this quarter was mostly driven by dealing with previously identified problem credits. These credits have been properly reserved for prior to this period and that is the main driver and the slight decline in the allowance for loan loss at September 30^th 2011.

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