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First Defiance Financial's CEO Discusses Q1 2012 Results - Earnings Call Transcript

And now, I’ll turn the call over to Mr. Small for his comments.

Bill Small

Thank you Terra. Good morning and thank you for joining us for the First Defiance Financial Corp conference call to review the 2012 first quarter. Last night we issued our earnings release reporting the first quarter 2012 results and this morning we would like to discuss that release and look forward at the balance of 2012. At the conclusion of our presentation we will answer any questions you might have.

Joining me on the call this morning to give more detail on the financial performance for the first quarter is Executive Vice President and CFO, Don Hileman. Also with us this morning to answer questions is Jim Rohrs, President and CEO of First Federal Bank.

First quarter 2012 net income on a GAAP basis was $4.2 million or $0.37 per diluted common share. This compares to net income of $2.7 million and $0.25 per diluted common share in the 2011 first quarter. The 2012 first quarter earnings results are an encouraging start to the year but still demonstrate the challenges of the last several years. Among the strong positives in the quarter was our non-interest income which was driven by very solid mortgage production throughout the quarter and we held the line on expenses.

However while we see improvement in the overall credit quality at the bank continuing we still saw asset issues negatively impacting earnings. Margin compression also worked as a deterrent to higher earnings as the historically low interest rate environment drags on.

Credit quality has been the most significant factor impacting earnings over the past couple of years and while we are still seeing a degree of stress on certain credits overall we saw marked improvement in several key metrics.

Reduction in classified loans and lower delinquencies are both strong indicators of the overall improvement of the credit quality however increases in non-performing loans, primarily driven by additional loans placed on non-accrual and another quarter of high levels of charge offs continue to show the late period effects of the recent economic recession.

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