10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the Quarterly Period Ended March 31, 2017

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the Transition Period from ___________to__________

Commission file number 0-26850

First Defiance Financial Corp.

(Exact name of registrant as specified in its charter)

Ohio	34-1803915
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
601 Clinton Street, Defiance, Ohio	43512
(Address of principal executive office)	(Zip Code)

Registrant's telephone number, including area code: (419) 782-5015

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.01 Par Value – 10,145,890 shares outstanding at April 28, 2017.

FIRST DEFIANCE FINANCIAL CORP.

INDEX

		Page Number
PART I.-FINANCIAL INFORMATION
Item 1.	Consolidated Condensed Financial Statements (Unaudited):
	Consolidated Condensed Statements of Financial Condition – March 31, 2017 and December 31, 2016	2
	Consolidated Condensed Statements of Income - Three months ended March 31, 2017 and 2016	4
	Consolidated Condensed Statements of Comprehensive Income – Three months ended March 31, 2017 and 2016	5
	Consolidated Condensed Statements of Changes in Stockholders’ Equity – Three months ended March 31, 2017 and 2016	6
	Consolidated Condensed Statements of Cash Flows - Three months ended March 31, 2017 and 2016 7	7
	Notes to Consolidated Condensed Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	52
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	73
Item 4.	Controls and Procedures	75
PART II-OTHER INFORMATION:
Item 1.	Legal Proceedings	76
Item 1A.	Risk Factors	76
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	77
Item 6.	Exhibits	77
	Signatures	78

1

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Financial Condition

(UNAUDITED)

(Amounts in Thousands, except share and per share data)

	March 31, 2017		December 31, 2016
Assets
Cash and cash equivalents:
Cash and amounts due from depository institutions	$	53,998	$	53,003
Federal funds sold		116,000		46,000
		169,998		99,003
Securities:
Available-for-sale, carried at fair value		260,601		250,992
Held-to-maturity, carried at amortized cost (fair value $773 and $187 at March 31, 2017 and December 31, 2016, respectively)		771		184
		261,372		251,176
Loans held for sale		7,955		9,607
Loans receivable, net of allowance of $25,749 at March 31, 2017 and $25,884 at December 31, 2016, respectively		2,212,257		1,914,603
Mortgage servicing rights		9,672		9,595
Accrued interest receivable		8,872		6,760
Federal Home Loan Bank stock		15,992		13,798
Bank owned life insurance		64,968		52,817
Premises and equipment		42,824		36,958
Real estate and other assets held for sale		705		455
Goodwill		90,768		61,798
Core deposit and other intangibles		6,004		1,336
Deferred Taxes		1,219		2,212
Other assets		36,091		17,479
Total assets	$	2,928,697	$	2,477,597

(continued)

2

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Financial Condition

(UNAUDITED)

(Amounts in Thousands, except share and per share data)

	March 31, 2017			December 31, 2016
Liabilities and stockholders’ equity
Liabilities:
Deposits	$	2,373,789		$	1,981,628
Advances from the Federal Home Loan Bank		105,104			103,943
Subordinated debentures		36,083			36,083
Securities sold under repurchase agreements		24,891			31,816
Advance payments by borrowers		1,840			2,650
Other liabilities		32,799			28,459
Total liabilities		2,574,506			2,184,579
Stockholders’ equity:
Preferred stock, $.01 par value per share: 37,000 shares authorized; no shares issued		-			-
Preferred stock, $.01 par value per share: 4,963,000 shares authorized; no shares issued		-			-
Common stock, $.01 par value per share: 25,000,000 shares authorized; 12,713,385 and 12,720,347 shares issued and 10,143,052 and 8,983,206 shares outstanding, respectively		127			127
Additional paid-in capital		160,397			126,390
Accumulated other comprehensive income, net of tax of $670 and $117, respectively		1,242			215
Retained earnings		243,446			240,592
Treasury stock, at cost, 2,570,333 and 3,737,141 shares respectively		(51,021	)		(74,306	)
Total stockholders’ equity		354,191			293,018
Total liabilities and stockholders’ equity	$	2,928,697		$	2,477,597

See accompanying notes

3

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Income

(UNAUDITED)

(Amounts in Thousands, except share and per share data)

	Three Months Ended
	March 31,
	2017		2016
Interest Income
Loans	$	21,969	$	19,312
Investment securities:
Taxable		979		843
Non-taxable		777		787
Interest-bearing deposits		145		49
FHLB stock dividends		166		139
Total interest income		24,036		21,130
Interest Expense
Deposits		1,796		1,433
FHLB advances and other		366		297
Subordinated debentures		215		175
Securities sold under repurchase agreements		14		37
Total interest expense		2,391		1,942
Net interest income		21,645		19,188
Provision for loan losses		55		364
Net interest income after provision for loan losses		21,590		18,824
Non-interest Income
Service fees and other charges		2,760		2,644
Insurance commission income		3,457		3,136
Mortgage banking income		1,738		1,539
Gain on sale of non-mortgage loans		-		45
Gain on sale of securities		-		131
Trust income		450		427
Income from Bank Owned Life Insurance		1,823		231
Other non-interest income		321		483
Total non-interest income		10,549		8,636
Non-interest Expense
Compensation and benefits		14,335		10,185
Occupancy		1,837		1,785
FDIC insurance premium		290		327
Financial institutions tax		480		446
Data processing		1,939		1,460
Amortization of intangibles		232		157
Other non-interest expense		4,029		2,914
Total non-interest expense		23,142		17,274
Income before income taxes		8,997		10,186
Federal income taxes		3,857		3,017
Net Income	$	5,140	$	7,169
Earnings per common share (Note 6)
Basic	$	0.54	$	0.80
Diluted	$	0.54	$	0.79
Dividends declared per share (Note 5)	$	0.25	$	0.22
Average common shares outstanding (Note 6)
Basic		9,441		8,994
Diluted		9,497		9,064

See accompanying notes

4

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Comprehensive Income

(UNAUDITED)

(Amounts in Thousands)

	Three Months Ended  March 31,
	2017			2016
Net income	$	5,140		$	7,169
Other comprehensive income:
Unrealized gains on securities available for sale		1,580			1,450
Reclassification adjustments for security (gains) losses included in net income(1)		-			(131	)
Income tax expense		(553	)		(462	)
Other comprehensive income		1,027			857
Comprehensive income	$	6,167		$	8,026

(1) Amounts are included in gains on sale or call of securities on the Consolidated Condensed Statements of Income. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the three months ended March 31, 2017 and 2016 was $0 and $46, respectively.

5

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Statement of Changes in Stockholders’ Equity

(UNAUDITED)

(Amounts in Thousands, except share data)

											Accumulated
			Common					Additional			Other								Total
	Preferred		Stock			Common		Paid-In			Comprehensive		Retained			Treasury			Stockholders’
	Stock		Shares			Stock		Capital			Income		Earnings			Stock			Equity
Balance at January 1, 2017	$	-		8,983,206		$	127	$	126,390		$	215	$	240,591		$	(74,306	)	$	293,017
Net income														5,140						5,140
Other comprehensive income												1,027								1,027
Stock based compensation expenses									45											45
Shares issued under stock option plan,  net of 6,962 repurchased and retired				588					22					(39	)		151			134
Capital stock issuance				1,139,502					33,792								22,740			56,532
Restricted share activity under stock incentive plans				19,416					138								387			525
Shares issued from direct stock sales				340					10								7			17
Common stock dividends declared														(2,246	)					(2,246	)
Balance at March 31, 2017	$	-		10,143,052		$	127	$	160,397		$	1,242	$	243,446		$	(51,021	)	$	354,191
Balance at January 1, 2016	$	-		9,102,831		$	127	$	125,734		$	3,622	$	219,737		$	(69,023	)	$	280,197
Net income														7,169						7,169
Other comprehensive income												857								857
Stock based compensation expenses									119											119
Shares issued under stock option plan,  net of 900 repurchased and retired				16,770					(91	)							353			262
Restricted share activity under stock incentive plans				9,033					(124	)							188			64
Shares issued from direct stock sales				233					4								5			9
Shares repurchased				(167,746	)												(6,293	)		(6,293	)
Common stock dividends declared														(1,966	)					(1,966	)
Balance at March 31, 2016	$	-		8,961,121		$	127	$	125,642		$	4,479	$	224,940		$	(74,770	)	$	280,418

6

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Cash Flows

(UNAUDITED)

(Amounts in Thousands)

	Three Months Ended
	March 31,
	2017			2016
Operating Activities
Net income	$	5,140		$	7,169
Items not requiring (providing) cash
Provision for loan losses		55			364
Depreciation		867			818
Amortization of mortgage servicing rights, net of impairment recoveries		279			332
Amortization of core deposit and other intangible assets		232			157
Net amortization of premiums and discounts on loans and deposits		27			88
Amortization of premiums and discounts on securities		240			193
Change in deferred taxes		777			264
Proceeds from the sale of loans held for sale		48,356			40,341
Originations of loans held for sale		(45,977	)		(42,444	)
Gain from sale of loans		(1,083	)		(1,039	)
Gain from sale or call of securities		-			(131	)
(Gain) loss on sale / write-down of real estate and other assets held for sale		-			(265	)
Stock option expense		45			119
Restricted stock expense		525			64
Income from bank owned life insurance		(1,823	)		(231	)
Excess tax benefit (expense) on stock compensation plans		(162	)		(99	)
Changes in:
Accrued interest receivable		(790	)		(730	)
Other assets		(1,801	)		(793	)
Other liabilities		3,364			672
Net cash provided by operating activities		8,271			4,849
Investing Activities
Proceeds from maturities of held-to-maturity securities		5			8
Proceeds from maturities, calls and pay-downs of available-for-sale securities		5,960			7,903
Proceeds from sale of real estate and other assets held for sale		9			884
Proceeds from the sale of available-for-sale securities		-			5,360
Proceeds from sale of non-mortgage loans		9,880			2,828
Purchases of available-for-sale securities		(8,815	)		(2,875	)
Proceeds from Federal Home Loan stock redemption		-			1
Net cash received in acquisition		25,840			-
Investment in bank owned life insurance		(20,000	)		-
Purchase of portfolio mortgage loans		(10,133	)		-
Purchases of premises and equipment, net		(1,278	)		(562	)
Net increase in loans receivable		(12,851	)		(26,127	)
Net cash used by investing activities		(11,383	)		(12,580	)
Financing Activities
Net increase in deposits and advance payments by borrowers		83,369			34,124
Repayment of Federal Home Loan Bank advances		(242	)		(238	)
Proceeds from Federal Home Loan Bank advances		-			25,000
Increase in securities sold under repurchase agreements		(6,925	)		797
Proceeds from exercise of stock options		134			314
Proceeds from treasury stock sales		17			9
Net cash paid for repurchase of common stock		-			(6,293	)
Cash dividends paid on common stock		(2,246	)		(1,966	)
Net cash provided by financing activities		74,107			51,747
Increase (decrease) in cash and cash equivalents		70,995			44,016
Cash and cash equivalents at beginning of period		99,003			79,769
Cash and cash equivalents at end of period	$	169,998		$	123,785
Supplemental cash flow information:
Interest paid	$	2,308		$	1,889
Income taxes paid	$	-		$	300
Transfers from loans to real estate and other assets held for sale	$	259		$	409
Securities purchased but not yet settled	$	1,668		$	529
Sale of bank owned life insurance not yet settled	$	17,840		$	-

See accompanying notes.

7

FIRST DEFIANCE FINANCIAL CORP.

Notes to Consolidated Condensed Financial Statements (UNAUDITED)

March 31, 2017 and 2016

1. Basis of Presentation

First Defiance Financial Corp. (“First Defiance” or the “Company”) is a unitary thrift holding company that conducts business through its three wholly owned subsidiaries, First Federal Bank of the Midwest (“First Federal”), First Insurance Group of the Midwest, Inc. (“First Insurance”), and First Defiance Risk Management Inc. (“First Defiance Risk Management”). All significant intercompany transactions and balances are eliminated in consolidation.

First Federal is primarily engaged in attracting deposits from the general public through its offices and using those and other available sources of funds to originate loans primarily in the counties in which its offices are located. First Federal’s traditional banking activities include originating and servicing residential, non-residential real estate, commercial, home improvement and home equity and consumer loans and providing a broad range of depository, trust and wealth management services. In addition, First Federal invests in U.S. Treasury and federal government agency obligations, obligations of the State of Ohio and its political subdivisions, mortgage-backed securities that are issued by federal agencies, including real estate mortgage investment conduits (“REMICs”) and collateralized mortgage obligations (“CMOs”), and corporate bonds. First Insurance is an insurance agency that conducts business through offices located in the Defiance, Maumee, Oregon, Bryan, Lima and Bowling Green, Ohio areas. First Insurance offers property and casualty insurance, life insurance and group health insurance. First Defiance Risk Management is a wholly-owned insurance company subsidiary of the Company that insures the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. First Defiance Risk Management pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves.

The consolidated condensed statement of financial condition at December 31, 2016 has been derived from the audited financial statements at that date, which were included in First Defiance’s Annual Report on Form 10-K for the year ended December 31,2016.

The accompanying consolidated condensed financial statements as of March 31, 2017 and for the three month periods ended March 31, 2017 and 2016 have been prepared by First Defiance without audit and do not include information or footnotes necessary for the complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States. These consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in First Defiance's 2016 Annual Report on Form 10-K for the year ended December 31, 2016. However, in the opinion of management, all adjustments, consisting of only normal recurring items, necessary for the fair presentation of the financial statements have been made. The results for the three month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the entire year.

8

2. Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for the calculation. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options, restricted stock awards and stock grants.

Goodwill and Other Intangibles

Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected November 30 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on First Defiance’s balance sheet.

Other intangible assets consist of core deposit and acquired customer relationship intangible assets arising from whole bank, insurance and branch acquisitions. They are initially recorded at fair value and then amortized on an accelerated basis over their estimated lives, which range from five years for non-compete agreements to 10 to 20 years for core deposit and customer relationship intangibles.

Newly Issued Accounting Standards

In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2017-08, “Premium Amortization on Purchased Callable Debt Securities.” This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the provisions of ASU No. 2017-08 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

9

In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” Under the new guidance, employers will present the service cost component of the net periodic benefit cost in the same income statement line item (e.g., Salaries and Benefits) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components separately (e.g., Other Noninterest Expense) from the line item that includes the service cost. ASU No. 2017-07 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, however, the Company has decided not to early adopt. Employers will apply the guidance on the presentation of the components of net periodic benefit cost in the income statement retrospectively. The guidance limiting the capitalization of net periodic benefit cost in assets to the service cost component will be applied prospectively. The Company expects to utilize the ASU’s practical expedient allowing entities to estimate amounts for comparative periods using the information previously disclosed in their pension and other postretirement benefit plan footnote. ASU No. 2017-07 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment.” The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. ASU No. 2017-04 is effective for interim and annual reporting periods beginning after December 15, 2019, applied prospectively. Early adoption is permitted for any impairment tests performed after January 1, 2017. The Company expects to early adopt upon the next goodwill impairment test in 2017. ASU No. 2017-04 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company has begun its implementation efforts by establishing a Company-wide implementation committee. The committee’s initial review indicates the Company has maintained sufficient historical loan data to support the requirement of this pronouncement and is currently evaluating the various loss methodologies to determine their correlations to the Company’s loan segments historical performance.

10

In February 2016, the FASB issued ASU No. 2016-02 — Leases (Topic 842). The objective of the update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this standard will have on its financial position and results of operations, though the Company expects that its real estate leases will be recognized on the consolidated balance sheet.

In January 2016, the FASB issued ASU No. 2016-01 — Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2017, and requires a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Early adoption is not permitted. The Company is currently evaluating the impact of adopting the new guidance on the consolidated financial statements. Management’s preliminary finding is that the new pronouncement will not have a significant impact on its results of operations. The pronouncement will require some revision to the Company’s disclosures within the consolidated financial statements and is currently evaluating the impact.

In May 2014, the FASB and the International Accounting Standards Board (the “IASB”) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP and International Financial Reporting Standards (“IFRS”). Previous revenue recognition guidance in GAAP consisted of broad revenue recognition concepts together with numerous revenue requirements for particular industries or transactions, which sometimes resulted in different accounting for economically similar transactions. In contrast, IFRS provided limited revenue recognition guidance and, consequently, could be difficult to apply to complex transactions. Accordingly, the FASB and the IASB initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would: (1) remove inconsistencies and weaknesses in revenue requirements; (2) provide a more robust framework for addressing revenue issues; (3) improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (4) provide more useful information to users of financial statements through improved disclosure requirements; and (5) simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. To meet those objectives, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard was initially effective for public entities for interim and annual reporting periods beginning after December 15, 2016; early adoption was not permitted. However, in August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers - Deferral of the Effective Date” which deferred the effective date by one year (i.e., interim and annual reporting periods beginning after December 15, 2017). For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. In addition, the FASB has begun to issue targeted updates to clarify specific implementation issues of ASU 2014-09. These updates include ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” ASU No. 2016-12, “Narrow-Scope Improvements and Practical Expedients,” and ASU No. 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” Since the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, the Company does not expect the new guidance to have a material impact on revenue most closely associated with financial instruments, including interest income and expense. The Company is currently performing an overall assessment of revenue streams and reviewing contracts potentially affected by the ASU including trust and asset management fees, deposit related fees, interchange fees, and insurance commission income, to determine the potential impact the new guidance is expected to have on the Company’s Consolidated Financial Statements. The Company plans to adopt ASU No. 2014-09 on January 1, 2018 utilizing the modified retrospective approach.

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3. Fair Value

FASB ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

FASB ASC Topic 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on the best information available. In that regard, FASB ASC Topic 820 established a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

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· 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 than 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.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Available for sale securities - Securities classified as available for sale are generally reported at fair value utilizing Level 2 inputs where the Company obtains fair value measurements from an independent pricing service that uses matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows and the bonds’ terms and conditions, among other things. Securities in Level 1 include federal agency preferred stock securities. Securities in Level 2 include U.S. Government agencies, mortgage-backed securities, corporate bonds and municipal securities.

Impaired loans - Fair values for impaired collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure.  Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach.  The cost method bases value on the cost to replace the current property.  Value of market comparison approach evaluates the sales price of similar properties in the same market area.  The income approach considers net operating income generated by the property and an investors required return.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Comparable sales adjustments are based on known sales prices of similar type and similar use properties and duration of time that the property has been on the market to sell.  Such adjustments made in the appraisal process are typically significant and result in a Level 3 classification of the inputs for determining fair value.

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Real Estate held for sale - Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are then reviewed monthly by members of the asset review committee for valuation changes and are accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which may utilize a single valuation approach or a combination of approaches including cost, comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  Once received, a member of the Company’s asset quality or collections department reviews the assumptions and approaches utilized in the appraisal.  Appraisal values are discounted from 0% to 20% to account for other factors that may impact the value of collateral. In determining the value of impaired collateral dependent loans and other real estate owned, significant unobservable inputs may be used, which include:  physical condition of comparable properties sold, net operating income generated by the property and investor rates of return.

Mortgage servicing rights – On a quarterly basis, mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value. Fair value is determined at a tranche level based on a model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and are validated against available market data (Level 2).

Mortgage banking derivative - The fair value of mortgage banking derivatives are evaluated monthly based on derivative valuation models using quoted prices for similar assets adjusted for specific attributes of the commitments and other observable market data at the valuation date (Level 2).

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The following table summarizes the financial assets measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Recurring Basis

March 31, 2017	Level 1 Inputs		Level 2 Inputs		Level 3  Inputs		Total Fair Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	3,954	$	-	$	3,954
Mortgage-backed - residential		-		80,872		-		80,872
REMICs		-		1,260		-		1,260
Collateralized mortgage obligations- residential		-		66,291		-		66,291
Preferred stock		1		-		-		1
Corporate bonds				13,083		-		13,083
Obligations of state and political subdivisions		-		95,140		-		95,140
Mortgage banking derivative - asset		-		598		-		598
Mortgage banking derivative - liability		-		42		-		42
December 31, 2016	Level 1 Inputs		Level 2 Inputs		Level 3  Inputs		Total Fair Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. Government corporations and agencies	$	-	$	3,915	$	-	$	3,915
Mortgage-backed - residential		-		81,707		-		81,707
REMICs		-		1,307		-		1,307
Collateralized mortgage obligations-residential		-		63,005		-		63,005
Preferred stock		2		-		-		2
Corporate bonds		-		13,013		-		13,013
Obligations of state and political subdivisions		-		88,043				88,043
Mortgage banking derivative - asset		-		491		-		491

The following table summarizes the financial assets measured at fair value on a non-recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

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Assets and Liabilities Measured on a Non-Recurring Basis

March 31, 2017	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Impaired loans
Commercial Real Estate	$	-	$	-	$	1,252	$	1,252
Total Impaired loans		-		-		1,252		1,252
Mortgage servicing rights		-		1,131				1,131
December 31, 2016	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair  Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	316	$	316
Multi Family Residential		-		-		-		-
Commercial Real Estate		-		-		848		848
Commercial						332		332
Home Equity and Improvement		-		-		-		-
Total impaired loans		-		-		1,496		1,496
Mortgage servicing rights		-		657		-		657
Real estate held for sale
Residential		-		-		-		-
Commercial Real Estate		-		-		377		377
Total Real Estate held for sale		-		-		377		377

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of March 31, 2017, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs			Weighted Average
			(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	1,252	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		10	%		10	%

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of December 31, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

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	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs		Weighted Average
			(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	1,496	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions	10-30	%		11	%
Real estate held for sale – Applies to all classes	$	377	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions	0-20	%		7	%

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a fair value of $1.3 million, with no valuation allowance and a fair value of $1.5 million, with a $1,000 valuation allowance at March 31, 2017 and December 31, 2016, respectively. A provision expense of $208,000 for the three months ended March 31, 2017 and a provision recovery of $119,000 for the three months ended March 31, 2016 was included in earnings.

Mortgage servicing rights which are carried at the lower of cost or fair value, had a fair value of $1.1 million with a valuation allowance of $489,000 and a fair value of $657,000 with a valuation allowance of $522,000 at March 31, 2017 and December 31, 2016, respectively. A recovery of $33,000 and a charge of $21,000 for the three months ended March 31, 2017 and March 31, 2016, respectively, were included in earnings.

Real estate held for sale is determined using Level 3 inputs which include appraisals and are adjusted for estimated costs to sell. The impact to earnings of the change in fair value of real estate held for sale was not material for the three months ended March 31, 2017. The change in fair value of real estate held for sale was $53,000 for the three months ended March 31, 2016, which was recorded directly as an adjustment to current earnings through non-interest expense.

In accordance with FASB ASC Topic 825, the Fair Value Measurements tables are a comparative condensed consolidated statement of financial condition based on carrying amount and estimated fair values of financial instruments as of March 31, 2017 and December 31, 2016. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of First Defiance.

Much of the information used to arrive at “fair value” is highly subjective and judgmental in nature and therefore the results may not be precise. Subjective factors include, among other things, estimated cash flows, risk characteristics and interest rates, all of which are subject to change. With the exception of investment securities, the Company’s financial instruments are not readily marketable and market prices do not exist. Since negotiated prices for the instruments, which are not readily marketable depend greatly on the motivation of the buyer and seller, the amounts that will actually be realized or paid per settlement or maturity of these instruments could be significantly different.

The carrying amount of cash and cash equivalents, term notes payable and advance payments by borrowers for taxes and insurance, as a result of their short-term nature, is considered to be equal to fair value and are classified as Level 1.

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It was not practicable to determine the fair value of Federal Home Loan Bank (“FHLB”) stock due to restrictions placed on its transferability.

The fair value of loans that reprice within 90 days is equal to their carrying amount. For other loans, the estimated fair value is calculated based on discounted cash flow analysis, using interest rates currently being offered for loans with similar terms, resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as previously described. The allowance for loan losses is considered to be a reasonable adjustment for credit risk. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. The fair value of loans held for sale is estimated based on binding contracts and quotes from third party investors resulting in a Level 2 classification.

The fair value of accrued interest receivable is equal to the carrying amounts resulting in a Level 2 or Level 3 classification which is consistent with its underlying value.

The fair value of non-interest bearing deposits are considered equal to the amount payable on demand at the reporting date (i.e. carrying value) and are classified as Level 1. The fair value of savings, NOW and certain money market accounts are equal to their carrying amounts and are a Level 2 classification. Fair values of fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

The fair values of securities sold under repurchase agreements are equal to their carrying amounts resulting in a Level 2 classification. The carrying value of subordinated debentures and deposits with fixed maturities is estimated based discounted cash flow analyses based on interest rates currently being offered on instruments with similar characteristics and maturities resulting in a Level 3 classification.

FHLB advances with maturities greater than 90 days are valued based on discounted cash flow analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 2 classification. The cost or value of any call or put options is based on the estimated cost to settle the option at March 31, 2017.

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			Fair Value Measurements at March 31, 2017 (In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	169,998	$	169,998	$	169,998	$	-	$	-
Investment securities		261,372		261,374		1		261,373		-
Federal Home Loan Bank Stock		15,992		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		2,221,070		2,207,503		-		8,425		2,199,078
Accrued interest receivable		8,872		8,872		5		1,465		7,402
Financial Liabilities:
Deposits	$	2,373,789	$	2,380,541	$	579,943	$	1,800,598	$	-
Advances from Federal Home Loan Bank		105,104		104,500		-		104,500		-
Securities sold under repurchase agreements		24,891		24,891		-		24,891		-
Subordinated debentures		36,083		34,735		-		-		34,735
			Fair Value Measurements at December 31, 2016 (In Thousands)
	Carrying  Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	99,003	$	99,003	$	99,003	$	-	$	-
Investment securities		251,176		251,179		2		251,177		-
Federal Home Loan Bank Stock		13,798		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,924,210		1,911,280		-		9,917		1,901,363
Accrued interest receivable		6,760		6,760		9		867		5,884
Financial Liabilities:
Deposits	$	1,981,628	$	1,987,723	$	487,663	$	1,500,060	$	-
Advances from Federal Home Loan Bank		103,943		103,019		-		103,019		-
Securities sold under repurchase agreements		31,816		31,816		-		31,816		-
Subordinated debentures		36,083		34,718		-		-		34,718

4. Stock Compensation Plans

First Defiance has established equity based compensation plans for its directors and employees. On March 15, 2010, the Board adopted, and the shareholders approved at the 2010 Annual Shareholders Meeting, the First Defiance Financial Corp. 2010 Equity Incentive Plan (the “2010 Equity Plan”). The 2010 Equity Plan replaced all existing plans. All awards currently outstanding under prior plans will remain in effect in accordance with their respective terms. Any new awards will be made under the 2010 Equity Plan. The 2010 Equity Plan allows for issuance of up to 350,000 common shares through the award of options, stock grants, restricted stock units (“RSU”), stock appreciation rights or other stock-based awards.

As of March 31, 2017, 47,200 options had been granted and remain outstanding at option prices based on the market value of the underlying shares on the date the options were granted. Options granted under all plans vest 20% per year except for the 2009 grant to the Company’s executive officers, which vested 40% in 2011 and then 20% annually. All options expire ten years from the date of grant. Vested options of retirees expire on the earlier of the scheduled expiration date or three months after the retirement date.

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In each of the years 2016-2017, the Company approved a Short-Term (“STIP”) Equity Incentive Plan and a Long-Term (“LTIP”) Equity Incentive Plan for selected members of management.

Under the 2016 and 2017 STIPs, the participants could earn up to 10% to 45% of their salary for potential payout based on the achievement of certain corporate performance targets during the calendar year. The final amount of benefits under the STIPs is determined as of December 31 of the same year and paid out in cash in the first quarter of the following year. The participants are required to be employed on the day of payout in order to receive such payment.

Under each LTIP, the participants may earn up to 20% to 45% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three-year period. The Company granted 24,526 and 20,657 RSU’s to the participants in the 2016 and 2017 LTIPs, respectively, effective January 1 in the year the award was made, which represents the maximum target award. The amount of benefit under each LTIP will be determined individually at the end of the 36 month performance period ending December 31. The benefits earned under each LTIP will be paid out in equity in the first quarter following the end of the performance period. The participants are required to be employed on the day of payout in order to receive such payment.

A total of 19,219 RSU’s were issued to the participants of the 2014 LTIP in the first quarter of 2017 for the three year performance period ended December 31, 2016.

In the three months ended March 31, 2017, the Company also granted to employees 2,924 restricted shares, of which 2,727 were restricted stock units and 197 were restricted stock grants. All of these have a three year vesting period. The fair value of all granted restricted shares was determined by the stock price at the date of the grant.

The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

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The fair value of stock options granted during the three months ended March 31, 2016 was determined at the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:

	Three Months ended
	March 31, 2017		March 31, 2016
Expected average risk-free rate		-		2.24	%
Expected average life		-		10.00 years
Expected volatility		-		41.00	%
Expected dividend yield		-		2.33	%

There were no options granted during the three months ended March 31, 2017. The weighted-average fair value of options granted was $13.95 for the three months ended March 31, 2016.

Following is stock option activity under the plans during the three months ended March 31, 2017:

	Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s)
Options outstanding, January 1, 2017		54,750		$	22.21
Forfeited or cancelled		-			-
Exercised		(7,550	)		22.89
Granted		-			-
Options outstanding, March 31, 2017		47,200		$	22.12		3.65	$	1,300
Vested or expected to vest at March 31, 2017		47,200		$	22.12		3.65	$	1,300
Exercisable at March 31, 2017		35,100		$	18.50		2.22	$	1,096

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows (in thousand’s):

	Three Months Ended March 31,
	2017		2016
Proceeds of options exercised	$	134	$	314
Related tax benefit recognized		44		75
Intrinsic value of options exercised		200		326

As of March 31, 2017, there was $143,000 of total unrecognized compensation cost related to unvested stock options granted under the Company’s equity plans. The cost is expected to be recognized over a weighted-average period of 2.93 years.

At March 31, 2017, 72,660 RSU’s and 4,569 stock grants were outstanding. Compensation expense is recognized over the performance period based on the achievements of targets as established under the plan documents. A total expense of $849,000 was recorded during the three months ended March 31, 2017 compared to an expense of $261,000 for the same period in 2016. The increase in expense is attributable to the Company’s better performance in comparison to its targets. There was approximately $188,000 included within other liabilities at March 31, 2017 related to the STIP.

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	Restricted Stock Units					Stock Grants
				Weighted-Average					Weighted-Average
				Grant Date					Grant Date
Unvested Shares	Shares			Fair Value		Shares			Fair Value
Unvested at January 1, 2017		75,468		$	32.31		11,161		$	32.30
Granted		23,384			50.56		19,416			26.02
Vested		(19,219	)		25.77		(24,986	)		25.82
Forfeited		(6,973	)		25.77		(1,022	)		37.02
Unvested at March 31, 2017		72,660		$	40.54		4,569		$	40.01

The maximum amount of compensation expense that may be recorded for the 2017 STIP and the 2015, 2016 and 2017 LTIPs at March 31, 2017 is approximately $3.8 million. However, the estimated expense expected to be recorded as of March 31, 2017 based on the performance measures in the plans, is $3.5 million of which $2.2 million is unrecognized at March 31, 2017 and will be recognized over the remaining performance periods.

5. Dividends on Common Stock

First Defiance declared and paid a $0.25 per common stock dividend in the first quarter of 2017 and declared and paid a $0.22 per common stock dividend in the first quarter of 2016.

6. Earnings Per Common Share

Basic earnings per share are calculated using the two-class method. The two-class method is an earnings allocation formula under which earnings per share is calculated from common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings distributed and undistributed, are allocated to participating securities and common shares based on their respective rights to receive dividends. Unvested share-based payment awards that contain non-forfeitable rights to dividends are considered participating securities (i.e. unvested restricted stock), not subject to performance based measures.

The following table sets forth the computation of basic and diluted earnings per common share:

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	Three Months Ended March 31,
	2017		2016
	(In Thousands, except per share data)
Basic Earnings Per Share:
Net income available to common shareholders	$	5,140	$	7,169
Less: Income allocated to participating securities		1		3
Net income allocated to common shareholders		5,139		7,166
Weighted average common shares outstanding Including participating securities		9,446		9,006
Less: Participating securities		5		12
Average common shares		9,441		8,994
Basic earnings per common share	$	0.54	$	0.80
Diluted Earnings Per Share:
Net income allocated to common shareholders	$	5,139	$	7,166
Weighted average common shares outstanding for basic earnings per common share		9,441		8,994
Add: Dilutive effects of stock options		56		70
Average shares and dilutive potential common shares		9,497		9,064
Diluted earnings per common share	$	0.54	$	0.79

Shares subject to issue upon exercise of options of 4,569 in 2017 and 12,550 in 2016 were excluded from the diluted earnings per common share calculation as they were anti-dilutive.

7. Investment Securities

The following is a summary of available-for-sale and held-to-maturity securities:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In Thousands)
At March 31, 2017
Available-for-Sale Securities:
Obligations of U.S. government corporations and agencies	$	4,000	$	-	$	(46	)	$	3,954
Mortgage-backed securities – residential		81,016		587		(731	)		80,872
REMICs		1,258		2		-			1,260
Collateralized mortgage obligations		66,263		497		(469	)		66,291
Trust preferred securities and preferred stock		-		1		-			1
Corporate bonds		12,917		171		(5	)		13,083
Obligations of state and political subdivisions		92,791		2,800		(451	)		95,140
Totals	$	258,245	$	4,058	$	(1,702	)	$	260,601

23

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-Maturity Securities*:
FHLMC certificates	$	11	$	-	$	-	$	11
FNMA certificates		54		1		-		55
GNMA certificates		21		1		-		22
Obligations of state and political subdivisions		685		-		-		685
Totals	$	771	$	2	$	-	$	773

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
At December 31, 2016
Available-for-sale
Obligations of U.S. government corporations and agencies	$	4,000	$	-	$	(85	)	$	3,915
Mortgage-backed securities - residential		82,619		390		(1,302	)		81,707
REMICs		1,309		-		(2	)		1,307
Collateralized mortgage obligations		63,204		422		(621	)		63,005
Preferred stock		-		2		-			2
Corporate bonds		12,919		97		(3	)		13,013
Obligations of state and political subdivisions		86,165		2,491		(613	)		88,043
Total Available-for-Sale	$	250,216	$	3,402	$	(2,626	)	$	250,992

			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Held-to-Maturity
FHLMC certificates	$	12	$	-	$	-	$	12
FNMA certificates		56		2		-		58
GNMA certificates		23		1		-		24
Obligations of states and political subdivisions		93		-		-		93
Total Held-to-Maturity	$	184	$	3	$	-	$	187

* FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

The amortized cost and fair value of the investment securities portfolio at March 31, 2017 are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMO”) and REMICs, which are not due at a single maturity date, have not been allocated over the maturity groupings. These securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

24

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Due in one year or less	$	1,457	$	1,463	$	-	$	-
Due after one year through five years		22,620		22,993		93		93
Due after five years through ten years		43,015		44,719		592		592
Due after ten years		42,616		43,003		-		-
MBS/CMO/REMIC		148,537		148,423		86		88
	$	258,245	$	260,601	$	771	$	773

Investment securities with a carrying amount of $160.6 million at March 31, 2017 were pledged as collateral on public deposits, securities sold under repurchase agreements and the Federal Reserve discount window.

As of March 31, 2017, the Company’s investment portfolio consisted of 445 securities, 101 of which were in an unrealized loss position.

The following tables summarize First Defiance’s securities that were in an unrealized loss position at March 31, 2017 and December 31, 2016:

	Duration of Unrealized Loss Position
	Less than 12 Months					12 Months or Longer					Total
			Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loses
	(In Thousands)
At March 31, 2017
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	3,954	$	(46	)	$	-	$	-		$	3,954	$	(46	)
Mortgage-backed securities-residential		38,918		(731	)		-		-			38,918		(731	)
Collateralized mortgage obligations		26,997		(422	)	$	1,187	$	(47	)		28,184		(469	)
Obligations of state and political subdivisions		13,501		(451	)		-		-			13,501		(451	)
Corporate bonds		-		-			995		(5	)		995		(5	)
Total temporarily impaired securities	$	83,370	$	(1,650	)	$	2,182	$	(52	)	$	85,552	$	(1,702	)

25

	Duration of Unrealized Loss Position
	Less than 12 Months					12 Months or Longer					Total
			Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loses
	(In Thousands)
At December 31, 2016
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	3,915	$	(85	)	$	-	$	-		$	3,915	$	(85	)
Mortgage-backed securities-residential		63,736		(1,302	)		-		-			63,736		(1,302	)
REMICs		1,308		(2	)		-		-			1,308		(2	)
Collateralized mortgage obligations		28,882		(566	)		1,227		(55	)		30,110		(621	)
Corporate bonds		-		-			997		(3	)		997		(3	)
Obligations of state and political subdivisions		19,172		(613	)		-		-			19,172		(613	)
Total temporarily impaired securities	$	117,013	$	(2,568	)	$	2,224	$	(58	)	$	119,238	$	(2,626	)

There were no realized gains from the sales and calls of investment securities in the first quarter of 2017, while there were realized gains of $131,000 ($92,000 after tax) in the first quarter of 2016.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least quarterly, and more frequently when economic or market conditions warrant such an evaluation. The investment portfolio is evaluated for OTTI by segregating the portfolio into two general segments. Investment securities classified as available-for-sale or held-to-maturity are generally evaluated for OTTI under FASB ASC Topic 320. Certain collateralized debt obligations (“CDOs”) are evaluated for OTTI under FASB ASC Topic 325, Investment – Other.

When OTTI occurs under either model, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected compared to the book value of the security and is recognized in earnings. The amount of OTTI related to other factors shall be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings shall become the new amortized cost basis of the investment.

26

With the exception of corporate bonds, the above securities all have fixed interest rates, and all securities have defined maturities. Their fair value is sensitive to movements in market interest rates. First Defiance has the ability and intent to hold these investments for a time necessary to recover the amortized cost without impacting its liquidity position and it is not more than likely that the Company will be required to sell the investments before anticipated recovery.

In the first quarter of 2017 and 2016, management determined there was no OTTI.

The proceeds from the sales and calls of securities and the associated gains and losses are listed below:

	Three Months Ended March 31,
	2017		2016
	(In Thousands)
Proceeds	$	-	$	5,360
Gross realized gains		-		131
Gross realized losses		-		-

27

8. Loans

Loans receivable consist of the following:

	March 31, 2017			December 31, 2016
	(In Thousands)
Real Estate:
Secured by 1-4 family residential	$	276,761		$	207,550
Secured by multi-family residential		211,546			196,983
Secured by commercial real estate		981,698			843,579
Construction		199,724			182,886
		1,669,729			1,430,998
Other Loans:
Commercial		504,340			469,055
Home equity and improvement		132,965			118,429
Consumer finance		27,696			16,680
		665,001			604,164
Total loans		2,334,730			2,035,162
Deduct:
Undisbursed loan funds		(95,460	)		(93,355	)
Net deferred loan origination fees and costs		(1,264	)		(1,320	)
Allowance for loan loss		(25,749	)		(25,884	)
Totals	$	2,212,257		$	1,914,603

The table above includes loans acquired during 2017 totaling $284.9 million as of February 24, 2017, which is net of purchase discount on the acquired loans of $6.0 million. The recorded investment of these loans as of March 31, 2107 was $281.8 million, net of the purchase discount of $5.9 million.

Loan segments have been identified by evaluating the portfolio based on collateral and credit risk characteristics.

28

The following table discloses allowance for loan loss activity for the quarters ended March 31, 2017 and 2016 by portfolio segment (In Thousands):

Quarter Ended March 31, 2017	1-4 Family Residential Real Estate			Multi- Family Residential Real Estate			Commercial Real Estate			Construction		Commercial		Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	2,627		$	2,228		$	10,625		$	450	$	7,361	$	2,386		$	207		$	25,884
Charge-Offs		(49	)		0			(290	)		0		0		(54	)		(71	)		(464	)
Recoveries		56			32			34			0		115		33			4			274
Provisions		(13	)		(138	)		(159	)		8		333		(65	)		89			55
Ending Allowance	$	2,621		$	2,122		$	10,210		$	458	$	7,809	$	2,300		$	229		$	25,749

Quarter Ended March 31, 2016	1-4 Family Residential Real Estate			Multi- Family Residential Real Estate		Commercial Real Estate			Construction			Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	3,212		$	2,151	$	11,772		$	517		$	5,255		$	2,304		$	171		$	25,382
Charge-Offs		(55	)		0		(13	)		0			(336	)		(30	)		0			(434	)
Recoveries		86			0		177			0			19			39			35			356
Provisions		(134	)		99		(292	)		(28	)		882			(81	)		(82	)		364
Ending Allowance	$	3,109		$	2,250	$	11,644		$	489		$	5,820		$	2,232		$	124		$	25,668

29

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2017 (In Thousands):

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	196	$	4	$	170	$	-	$	101	$	300	$	1	$	772
Collectively evaluated for impairment		2,425		2,118		10,040		458		7,708		2,000		228		24,977
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,621	$	2,122	$	10,210	$	458	$	7,809	$	2,300	$	229	$	25,749
Loans:
Loans individually evaluated for impairment	$	6,725	$	3,340	$	13,162	$	-	$	4,111	$	1,202	$	70	$	28,610
Loans collectively evaluated for impairment		269,194		208,437		969,583		104,036		501,349		132,404		27,662		2,212,665
Loans acquired with deteriorated credit quality		1,247		-		2,253		-		632		-		-		4,132
Total ending loans balance	$	277,166	$	211,777	$	984,998	$	104,036	$	506,092	$	133,606	$	27,732	$	2,245,407

30

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2016 (In Thousands): 

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	202	$	4	$	255	$	-	$	35	$	313	$	-	$	809
Collectively evaluated for impairment		2,425		2,224		10,370		450		7,326		2,073		207		25,075
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,627	$	2,228	$	10,625	$	450	$	7,361	$	2,386	$	207	$	25,884
Loans:
Loans individually evaluated for impairment	$	6,898	$	3,483	$	13,570	$	-	$	2,154	$	1,269	$	59	$	27,433
Loans collectively evaluated for impairment		200,907		193,714		832,446		89,244		468,246		117,744		16,625		1,918,926
Loans acquired with deteriorated credit quality		-		-		-		-		11		-		-		11
Total ending loans balance	$	207,805	$	197,197	$	846,016	$	89,244	$	470,411	$	119,013	$	16,684	$	1,946,370

31

The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans (In Thousands):

	Three Months Ended March 31, 2017
	Average Balance		Interest  Income  Recognized		Cash Basis  Income Recognized
Residential Owner Occupied	$	2,820	$	28	$	28
Residential Non Owner Occupied		3,891		36		36
Total Residential Real Estate		6,711		64		64
Multi-Family		3,374		10		10
CRE Owner Occupied		4,614		22		22
CRE Non Owner Occupied		4,499		42		39
Agriculture Land		2,707		47		19
Other CRE		1,668		13		12
Total Commercial Real Estate		13,488		124		92
Construction		-		-		-
Commercial Working Capital		2,372		19		19
Commercial Other		1,722		21		16
Total Commercial		4,094		40		35
Home Equity and Home Improvement		1,254		10		10
Consumer Finance		74		1		1
Total Impaired Loans	$	28,995	$	249	$	212

32

The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans (In Thousands):

	Three Months Ended March 31, 2016
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	4,025	$	39	$	39
Residential Non Owner Occupied		3,557		35		34
Total Residential Real Estate		7,582		74		73
Multi-Family		4,593		30		30
CRE Owner Occupied		9,090		62		48
CRE Non Owner Occupied		4,418		53		49
Agriculture Land		3,593		35		12
Other CRE		1,422		4		4
Total Commercial Real Estate		18,523		154		113
Construction		-		-		-
Commercial Working Capital		1,513		15		15
Commercial Other		4,245		19		18
Total Commercial		5,758		34		33
Home Equity and Home Improvement		1,749		15		15
Consumer Finance		73		1		1
Total Impaired Loans	$	38,278	$	308	$	265

33

The following table presents loans individually evaluated for impairment by class of loans (In Thousands):

	March 31, 2017						December 31, 2016
	Unpaid Principal Balance*		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance*		Recorded Investment		Allowance for Loan Losses Allocated
With no allowance recorded:
Residential Owner Occupied	$	1,906	$	1,760	$	-	$	1,912	$	1,765	$	-
Residential Non Owner Occupied		1,769		1,762		-		1,691		1,683		-
Total 1-4 Family Residential Real Estate		3,675		3,522		-		3,603		3,448		-
Multi-Family Residential Real Estate		3,288		3,288		-		3,578		3,430		-
CRE Owner Occupied		3,048		2,611		-		2,652		2,353		-
CRE Non Owner Occupied		4,114		3,896		-		4,372		4,240		-
Agriculture Land		2,617		2,649		-		1,695		1,722		-
Other CRE		1,020		950		-		1,225		1,115		-
Total Commercial Real Estate		10,799		10,106		-		9,944		9,430		-
Construction		-		-		-		-		-		-
Commercial Working Capital		2,228		2,183		-		838		786		-
Commercial Other		1,782		1,620		-		1,179		967		-
Total Commercial		4,010		3,803		-		2,017		1,753		-
												-
Home Equity and Home Improvement		621		575		-		631		585		-
Consumer Finance		53		53		-		55		55	$	-
Total loans with no allowance recorded	$	22,446	$	21,347	$	-	$	19,828	$	8,701
With an allowance recorded:
Residential Owner Occupied	$	2,159	$	2,132	$	157	$	2,348	$	2,319	$	157
Residential Non Owner Occupied		1,078		1,071		39		1,137		1,131		45
Total 1-4 Family Residential Real Estate		3,237		3,203		196		3,485		3,450		202
Multi-Family Residential Real Estate		51		52		4		53		53		4
CRE Owner Occupied		2,291		1,831		96		2,362		1,894		102
CRE Non Owner Occupied		414		417		25		1,618		1,479		108
Agriculture Land		109		110		5		45		45		3
Other CRE		1,116		698		44		1,144		722		42
Total Commercial Real Estate		3,930		3,056		170		5,169		4,140		255
Construction		-		-		-		-		-		-
Commercial Working Capital		180		181		94		230		231		24
Commercial Other		124		127		7		167		170		11
Total Commercial		304		308		101		397		401		35
Home Equity and Home Improvement		631		627		300		688		684		313
Consumer Finance		18		17		1		4		4		-
Total loans with an allowance recorded	$	8,171	$	7,263	$	772	$	9,796	$	8,732	$	809

* Presented gross of charge offs

34

The following table presents the current balance of the aggregate amounts of non-performing assets, comprised of non-performing loans and real estate owned on the dates indicated:

	March 31, 2017		December 31,  2016
	(In Thousands)
Non-accrual loans	$	15,057	$	14,348
Loans over 90 days past due and still accruing		-		-
Total non-performing loans		15,057		14,348
Real estate and other assets held for sale		705		455
Total non-performing assets	$	15,762	$	14,803
Troubled debt restructuring, still accruing	$	9,771	$	10,544

The following table presents the aging of the recorded investment in past due and non- accrual loans as of March 31, 2017 by class of loans (In Thousands):

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non- Accrual
Residential Owner Occupied	$	175,631	$	95	$	866	$	333	$	1,294	$	1,579
Residential Non Owner Occupied		99,595		50		284		312		646		1,175
Total 1-4 Family Residential Real Estate		275,226		145		1,150		645		1,940		2,754
Multi-Family Residential Real Estate		211,777		-		-		-		-		2,576
CRE Owner Occupied		384,192		710		45		1,337		2,092		3,172
CRE Non Owner Occupied		395,410		328		-		442		770		1,626
Agriculture Land		135,544		210		-		855		1,065		1,582
Other Commercial Real Estate		65,925		-		-		-		-		866
Total Commercial Real Estate		981,071		1,248		45		2,634		3,927		7,246
Construction		104,036		-		-		-		-		-
Commercial Working Capital		225,276		55		49		-		104		1,005
Commercial Other		278,789		1,455		142		326		1,923		497
Total Commercial		504,065		1,510		191		326		2,027		1,502
Home Equity/Home Improvement		132,993		173		42		398		613		875
Consumer Finance		27,417		108		130		77		315		101
Total Loans	$	2,236,585	$	3,184	$	1,558	$	4,080	$	8,822	$	15,054
Loans acquired with deteriorated credit quality (included in the totals above)	$	3,830	$	110	$	45	$	147	$	302	$	472
Loans acquired in current year (included in totals above)	$	279,502	$	820	$	341	$	1,130	$	2,291	$	1,476

35

The following table presents the aging of the recorded investment in past due and non-accrual loans as of December 31, 2016 by class of loans (In Thousands):

	Current		30-59 days		60-89 days		90+ days		Total Past  Due		Total Non- Accrual
Residential Owner Occupied	$	139,015	$	56	$	842	$	544	$	1,442	$	1,931
Residential Non Owner Occupied		66,811		166		308		63		537		992
Total 1-4 Family Residential Real Estate		205,826		222		1,150		607		1,979		2,923
Multi-Family Residential Real Estate		197,197		-		-		-		-		2,637
CRE Owner Occupied		340,233		79		-		1,396		1,475		3,098
CRE Non Owner Occupied		338,724		81		16		426		523		1,808
Agriculture Land		102,397		-		-		-		-		755
Other Commercial Real Estate		62,415		-		-		249		249		1,292
Total Commercial Real Estate		843,769		160		16		2,071		2,247		6,953
Construction		89,244		-		-		-		-		-
Commercial Working Capital		202,786		-		10		38		48		435
Commercial Other		267,189		23		-		365		388		577
Total Commercial		469,975		23		10		403		436		1,012
Home Equity and Home Improvement		117,458		1,125		176		254		1,555		730
Consumer Finance		16,452		85		69		78		232		91
Total Loans	$	1,939,921	$	1,615	$	1,421	$	3,413	$	6,449	$	14,346

Troubled Debt Restructurings

As of March 31, 2017 and December 31, 2016, the Company had a recorded investment in troubled debt restructurings (“TDRs”) of $15.5 million and $16.8 million, respectively. The Company allocated $688,000 and $809,000 of specific reserves to those loans at March 31, 2017 and December 31, 2016, and has committed to lend additional amounts totaling up to $19,000 and $20,000 at March 31, 2017 and December 31, 2016, respectively.

The Company offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted. Each TDR is uniquely designed to meet the specific needs of the borrower. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral or an additional guarantor is often requested when granting a concession. Commercial mortgage loans modified in a TDR often involve temporary interest-only payments, re-amortization of remaining debt in order to lower payments, and sometimes reducing the interest rate lower than the current market rate. Residential mortgage loans modified in a TDR are comprised of loans where monthly payments are lowered, either through interest rate reductions or principal only payments for a period of time, to accommodate the borrowers’ financial needs, interest is capitalized into principal, or the term and amortization are extended. Home equity modifications are made infrequently and usually involve providing an interest rate that is lower than the borrower would be able to obtain due to credit issues. All retail loans where the borrower is in bankruptcy are classified as TDRs regardless of whether or not a concession is made.

36

Of the loans modified in a TDR, $5.7 million are on non-accrual status and partial charge-offs have in some cases been taken against the outstanding balance. Loans modified as a TDR may have the financial effect of increasing the allowance associated with the loan. If the loan is determined to be collateral dependent, the estimated fair value of the collateral, less any selling costs is used to determine if there is a need for a specific allowance or charge-off. If the loan is determined to be cash flow dependent, the allowance is measured based on the present value of expected future cash flows discounted at the loan’s pre-modification effective interest rate.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three month periods ending March 31, 2017 and March 31, 2016:

	Loans Modified as a TDR for the Three Months Ended March 31, 2017 ($ in thousands)			Loans Modified as a TDR for the Three Months Ended March 31, 2016 ($ in thousands)
Troubled Debt Restructurings	Number of Loans	Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
1-4 Family Owner Occupied	4	$	100		1	$	9
1-4 Family Non Owner Occupied	2		84		2		127
CRE Owner Occupied	1		119		0		-
CRE Non Owner Occupied	0		-		0		-
Agriculture Land	0		-		0		-
Other CRE	0		-		0		-
Commercial Working Capital	0		-		0		-
Commercial Other	1		46		0		-
Home Equity and Improvement	1		25		5		297
Consumer Finance	2		15		2		5
Total	11	$	389		10	$	438

The loans described above decreased the ALLL by $19,000 in the three month period ending March 31, 2017 and increased the ALLL by $15,000 in the three month period ending March 31, 2016.

Of the 2017 modifications, 4 were made TDRs due to the fact that the borrower is in bankruptcy, 4 were made TDR due to terming out lines of credit, 2 were made TDR due to advancing money to a watch list credit, and 1 was made a TDR because the current debt was refinanced for payment relief.

There were no loans modified as TDRs for which there was a payment default within twelve months following the modification during the quarters ending March 31, 2017 and March 31, 2016.

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In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed on the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

Credit Quality Indicators

Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are analyzed individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans, such as commercial and commercial real estate loans and certain homogenous mortgage, home equity and consumer loans. This analysis is performed on a quarterly basis. First Defiance uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Not Graded. Loans classified as not graded are generally smaller balance residential real estate, home equity and consumer installment loans which are originated primarily by using an automated underwriting system. These loans are monitored based on their delinquency status and are evaluated individually only if they are seriously delinquent.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of March 31, 2017, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (In Thousands):

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Class	Pass		Special Mention		Substandard		Doubtful		Not Graded		Total
1-4 Family Owner Occupied	$	7,502	$	483	$	1,943	$	-	$	166,998	$	176,926
1-4 Family Non Owner Occupied		89,432		2,287		3,575		-		4,946		100,240
Total 1-4 Family Real Estate		96,934		2,770		5,518		-		171,944		277,166
Multi-Family Residential Real Estate		207,071		837		3,756		-		113		211,777
CRE Owner Occupied		360,693		20,388		4,890		-		314		386,285
CRE Non Owner Occupied		386,323		3,390		6,467		-		-		396,180
Agriculture Land		128,428		2,731		5,450		-		-		136,609
Other CRE		62,997		59		2,063		-		805		65,924
Total Commercial Real Estate		938,441		26,568		18,870		-		1,119		984,998
Construction		82,950		1,198		-		-		19,888		104,036
Commercial Working Capital		215,129		7,139		3,112		-		-		225,380
Commercial Other		269,535		8,458		2,719		-		-		280,712
Total Commercial		484,664		15,597		5,831		-		-		506,092
Home Equity and Home Improvement		-		-		852		-		132,754		133,606
Consumer Finance		-		-		177		-		27,555		27,732
Total Loans	$	1,810,060	$	46,970	$	35,004	$	-	$	353,373	$	2,245,407
Loans acquired with deteriorated credit quality (included in the totals above)	$	9	$	1,173	$	2,946		-	$	4	$	4,132
Loans acquired in current year (included in totals above)	$	223,594	$	1,711	$	5,393		-	$	51,095	$	281,793

As of December 31, 2016, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (In Thousands):

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Class	Pass		Special Mention		Substandard		Doubtful		Not Graded		Total
Residential Owner Occupied	$	5,980	$	402	$	1,824	$	-	$	132,250	$	140,456
Residential Non Owner Occupied		58,041		1,394		3,480		-		4,434		67,349
Total 1-4 Family Real Estate		64,021		1,796		5,304		-		136,684		207,805
Multi-Family Residential Real Estate		192,369		862		3,852		-		114		197,197
CRE Owner Occupied		316,335		20,559		4,430		-		384		341,708
CRE Non Owner Occupied		332,196		1,617		5,435		-		-		339,248
Agriculture Land		98,039		2,355		2,002		-		-		102,396
Other CRE		59,561		60		2,297		-		746		62,664
Total Commercial Real Estate		806,131		24,591		14,164		-		1,130		846,016
Construction		67,751		706		-		-		20,787		89,244
Commercial Working Capital		193,043		8,301		1,490		-		-		202,834
Commercial Other		262,076		3,749		1,752		-		-		267,577
Total Commercial		455,119		12,050		3,242		-		-		470,411
Home Equity and Home Improvement		-		-		696		-		118,317		119,013
Consumer Finance		-		-		90		-		16,594		16,684
Total Loans	$	1,585,391	$	40,005	$	27,348	$	-	$	293,626	$	1,946,370

The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The outstanding balance of those loans is as follows (In Thousands):

	March 31, 2017
1-4 Family Residential Real Estate	$	1,541
Commercial Real Estate Loans		3,837
Commercial		742
Consumer		3
Total Outstanding Balance	$	6,123
Recorded Investment, net of allowance of $0	$	4,132

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Accretable yield, or income expected to be collected, is as follows

	2017
Balance at January 1	$	-
New Loans Purchased		1,034
Accretion of Income		-
Reclassifications from Non-accretable Difference Charge-off of Accretable Yield		-
Balance at March 31	$	1,034

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during the three months ended March 31, 2017. No allowances for loan losses were reversed during the same period.

Contractually required payments receivable of loans purchased with evidence of credit deterioration during the period ended March 31, 2017 are included in the table below. There were no such loans purchased during the year ended December 31, 2016. (In Thousands)

1-4 Family Residential Real Estate	$	1,720
Commercial Real Estate		3,781
Commercial		785
Consumer		4
Total	$	6,290

Cash Flows Expected to be Collected at Acquisition	$	5,157
Fair Value of Acquired Loans at Acquisition	$	4,123

Foreclosure Proceedings

Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $226,000 as of March 31, 2017.

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9. Mortgage Banking

Net revenues from the sales and servicing of mortgage loans consisted of the following:

	Three Months Ended March 31,
	2017			2016
	(In Thousands)
Gain from sale of mortgage loans	$	1,083		$	994
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue		934			877
Amortization of mortgage servicing rights		(312	)		(311	)
Mortgage servicing rights valuation adjustments		33			(21	)
		655			545
Net revenue from sale and servicing of mortgage loans	$	1,738		$	1,539

The unpaid principal balance of residential mortgage loans serviced for third parties was $1.38 billion at March 31, 2017 and $1.37 billion at December 31, 2016.

Activity for capitalized mortgage servicing rights and the related valuation allowance follows for the three months ended March 31, 2017 and 2016:

	March 31, 2017			March 31, 2016
	(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	10,117		$	9,893
Loans sold, servicing retained		356			297
Amortization		(312	)		(311	)
Carrying value before valuation allowance at end of period		10,161			9,879
Valuation allowance:
Balance at beginning of period		(522	)		(645	)
Impairment (expense) recovery		33			(21	)
Balance at end of period		(489	)		(666	)
Net carrying value of MSRs at end of period	$	9,672		$	9,213
Fair value of MSRs at end of period	$	10,013		$	9,463

Amortization of mortgage servicing rights is computed based on payments and payoffs of the related mortgage loans serviced. Estimates of future amortization expense are not easily estimable.

The Company established an accrual for secondary market buy-back activity, a liability of $51,000 and $79,000 was accrued at March 31, 2017 and December 31, 2016, respectively. Expense (credit) recognized related to the accrual was ($28,000) and ($59,000) in the first quarter of 2017 and 2016, respectively. The reversals are mainly due to no actual losses being recorded in the first quarter of 2017 and 2016, respectively.

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10. Deposits

A summary of deposit balances is as follows:

	March 31, 2017		December 31, 2016
	(In Thousands)
Non-interest-bearing checking accounts	$	579,943	$	487,663
Interest-bearing checking and money market accounts		973,459		816,665
Savings deposits		288,498		243,369
Retail certificates of deposit less than $250,000		490,953		400,080
Retail certificates of deposit greater than $250,000		40,936		33,851
	$	2,373,789	$	1,981,628

11. Borrowings

First Defiance’s debt, FHLB advances and junior subordinated debentures owed to unconsolidated subsidiary trusts are comprised of the following:

	March 31, 2017		December 31, 2016
	(In Thousands)
FHLB Advances:
Single maturity fixed rate advances	$	92,000	$	92,000
Putable advances		5,000		5,000
Amortizable mortgage advances		8,104		6,943
Total	$	105,104	$	103,943
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$	36,083	$	36,083

The putable advance can be put back to the Company at the option of the FHLB on a quarterly basis. A $5.0 million putable advance with a weighted average rate of 2.35% was not yet callable by the FHLB at March 31, 2017. The call date for this advance is June 12, 2017 and the maturity date is March 12, 2018. Putable advances are callable at the option of the FHLB on a quarterly basis.

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In March 2007, the Company sponsored an affiliated trust, First Defiance Statutory Trust II (Trust Affiliate II) that issued $15 million of Guaranteed Capital Trust Securities (Trust Preferred Securities). In connection with this transaction, the Company issued $15.5 million of Junior Subordinated Deferrable Interest Debentures (Subordinated Debentures) to Trust Affiliate II. The Company formed Trust Affiliate II for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Subordinated Debentures held by Trust Affiliate II are the sole assets of that trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.Distributions on the Trust Preferred Securities issued by Trust Affiliate II are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.5%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate II was 2.65% as of March 31, 2017 and 2.46% as of December 31, 2016.

The Trust Preferred Securities issued by Trust Affiliate II are subject to mandatory redemption, in whole or part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on June 15, 2037, but can be redeemed at the Company’s option at any time now.

The Company also sponsored an affiliated trust, First Defiance Statutory Trust I (Trust Affiliate I), that issued $20 million of Trust Preferred Securities in 2005. In connection with this transaction, the Company issued $20.6 million of Subordinated Debentures to Trust Affiliate I. Trust Affiliate I was formed for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Junior Debentures held by Trust Affiliate I are the sole assets of the trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.Distributions on the Trust Preferred Securities issued by Trust Affiliate I are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.38%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate I was 2.53% and 2.34% on March 31, 2017 and December 31, 2016 respectively.

The Trust Preferred Securities issued by Trust Affiliate I are subject to mandatory redemption, in whole or in part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on December 15, 2035, but can be redeemed at the Company’s option at any time now.

The subordinated debentures may be included in Tier 1 capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

Interest on both issues of Trust Preferred Securities may be deferred for a period of up to five years at the option of the issuer.

Repurchase Agreements. We utilize securities sold under agreements to repurchase to facilitate the needs of our customers and to facilitate secured short-term funding needs. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. We monitor levels on a continuous basis. We may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agent.

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The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of March 31, 2017 and December 31, 2016 is presented in the following tables.

	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
			(In Thousands)
At March 31, 2017
Repurchase agreements:
Mortgage-backed securities – residential	$	16,624	$	-	$	-	$	-	$	16,624
Collateralized mortgage obligations		8,267		-		-		-		8,267
Total borrowings	$	24,891	$	-	$	-	$	-	$	24,891
Gross amount of recognized liabilities for repurchase agreements									$	24,891

	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
			(In Thousands)
At December 31, 2016
Repurchase agreements:
Mortgage-backed securities – residential	$	21,222	$	-	$	-	$	-	$	21,222
Collateralized mortgage obligations		10,594		-		-		-		10,594
Total borrowings	$	31,816	$	-	$	-	$	-	$	31,816
Gross amount of recognized liabilities for repurchase agreements									$	31,816

12. Commitments, Guarantees and Contingent Liabilities

Loan commitments are made to accommodate the financial needs of First Federal’s customers; however, there are no long-term, fixed-rate loan commitments that result in market risk. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. They primarily are issued to facilitate customers’ trade transactions.

Both arrangements have credit risk, essentially the same as that involved in extending loans to customers, and are subject to the Company’s normal credit policies. Collateral (e.g., securities, receivables, inventory and equipment) is obtained based on Management’s credit assessment of the customer.

The Company’s maximum obligation to extend credit for loan commitments (unfunded loans and unused lines of credit) and standby letters of credit outstanding as of the periods stated below were as follows (In Thousands):

	March 31, 2017				December 31, 2016
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	49,810	$	125,148	$	34,432	$	106,356
Unused lines of credit		25,487		420,597		14,384		400,542
Standby letters of credit		-		6,719		-		9,668
Total	$	75,297	$	552,464	$	48,816	$	516,566

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Commitments to make loans are generally made for periods of 60 days or less.

In addition to the above commitments, First Defiance had commitments to sell $24.0 million and $22.5 million of loans to Freddie Mac, Fannie Mae, Federal Home Loan Bank of Cincinnati or BB&T Mortgage at March 31, 2017 and December 31, 2016, respectively.

13. Income Taxes

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in the state of Indiana. The Company is no longer subject to examination by taxing authorities for years before 2012. The Company currently operates primarily in the states of Ohio and Michigan, which tax financial institutions based on their equity rather than their income.

14. Derivative Financial Instruments

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships. First Federal had approximately $18.9 million and $14.1 million of interest rate lock commitments at March 31, 2017 and December 31, 2016, respectively. There were $24.0 million and $22.5 million of forward commitments for the future delivery of residential mortgage loans at March 31, 2017 and December 31, 2016, respectively.

The fair value of these mortgage banking derivatives are reflected by a derivative asset recorded in other assets in the Consolidated Statements of Condition. The table below provides data about the carrying values of these derivative instruments:

March 31, 2017

December 31, 2016

Assets

(Liabilities)

Assets

(Liabilities)

Derivative

Derivative

Carrying

Carrying

Net Carrying

Carrying

Carrying

Net Carrying

Value

Value

Value

Value

Value

Value

(In Thousands)

Derivatives not designated as hedging instruments

Mortgage Banking Derivatives

$

598

$

(42

)

$

556

$

491

$

-

$

491

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The table below provides data about the amount of gains and losses recognized in income on derivative instruments not designated as hedging instruments:

	Three Months Ended March 31,
	2017		2016
	(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	65	$	438

The above amounts are included in mortgage banking income with gain on sale of mortgage loans.

15. Other Comprehensive Income (Loss)

The before and after tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below. Reclassification adjustments related to securities available for sale are included in gains on sale or call of securities in the accompanying consolidated condensed statements of income.

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
	(In Thousands)
Three months ended March 31, 2017:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	1,580		$	(553	)	$	1,027
Reclassification adjustment for net gains included in net income		-			-			-
Total other comprehensive loss	$	1,580		$	(553	)	$	1,027
Three months ended March 31, 2016:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	1,450		$	(508	)	$	942
Reclassification adjustment for net gains included in net income		(131	)		46			(85	)
Total other comprehensive loss	$	1,319		$	(462	)	$	857

Activity in accumulated other comprehensive income (loss), net of tax, was as follows:

							Accumulated
	Securities			Post-			Other
	Available			retirement			Comprehensive
	For Sale			Benefit			Income
	(In Thousands)
Balance January 1, 2017	$	504		$	(289	)	$	215
Other comprehensive income before reclassifications		1,027			-			1,027
Amounts reclassified from accumulated other comprehensive income		-			-			-
Net other comprehensive income during period		1,027			-			1,027
Balance March 31, 2017	$	1,531		$	(289	)	$	1,242
Balance January 1, 2016	$	4,042		$	(420	)	$	3,622
Other comprehensive income before reclassifications		942			-			942
Amounts reclassified from accumulated other comprehensive income		(85	)		-			(85	)
Net other comprehensive income during period		857			-			857
Balance March 31, 2016	$	4,899		$	(420	)	$	4,479

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16. Affordable Housing Projects Tax Credit Partnership

The Company makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (“LIHTC”) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.

The Company is a limited partner in each LIHTC Partnership. A separate unrelated third party is the general partner. Each limited partnership is managed by the general partner, who exercises full control over the affairs of the limited partnership. The general partner has all the rights, powers and authority granted or permitted to be granted to a general partner of a limited partnership. Duties entrusted to the general partner of each limited partnership include, but are not limited to: investment in operating companies, company expenditures, investment of excess funds, borrowing funds, employment of agents, disposition of fund property, prepayment and refinancing of liabilities, votes and consents, contract authority, disbursement of funds, accounting methods, tax elections, bank accounts, insurance, litigation, cash reserve, and use of working capital reserve funds. Except for limited rights granted to consent to certain transactions, the limited partner(s) may not participate in the operation, management, or control of the limited partnership’s business, transact any business in the limited partnership’s name or have any power to sign documents for or otherwise bind the limited partnership. In addition, the general partner may only be removed by the limited partner(s) in the event the general partner fails to comply with the terms of the agreement or is negligent in performing its duties.

The general partner of each limited partnership has both the power to direct the activities which most significantly affect the performance of each partnership and the obligation to absorb losses or the right to receive benefits that could be significant to the entities. Therefore, the Company has determined that it is not the primary beneficiary of any LIHTC partnership. In January of 2014, the FASB issued ASU 2014-01 “Accounting for Investments in Qualified Affordable Housing Projects.” The pronouncement permitted reporting entities to make an accounting policy election to account for these investments using the proportional amortization method if certain conditions exist. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received, and will recognize the net investment performance in the income statement as a component of income tax expense (benefit). The Company utilized the proportional amortization method for all of its instruments. As of March 31, 2017 and December 31, 2016 the Company had $6.6 million and $6.8 million in qualified investments recorded in other assets and $4.3 million and $4.3 million in unfunded commitments recorded in other liabilities, respectively.

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Unfunded Commitments

As of March 31, 2017, the expected payments for unfunded affordable housing commitments were as follows:

(dollars in thousands)	Amount
2017	$	1,897
2018		1,137
2019		307
2020		179
2021		160
Thereafter		615
Total Unfunded Commitments	$	4,295

The following table presents tax credits and other tax benefits recognized and amortization expense related to affordable housing for the three months ended March 31, 2017 and 2016.

	Three Months Ended March 31,
(dollars in thousands)	2017		2016
Proportional Amortization Method
Tax credits and other tax benefits recognized	$	211	$	157
Amortization expense in federal income taxes		165		119

There were no impairment losses of LIHTC investments for the three months ended March 31, 2017 and 2016.

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17. Business Combinations

Effective February 24, 2017, the Company acquired Commercial Bancshares, Inc. (“Commercial Bancshares”) and its subsidiary, The Commercial Savings Bank (“CSB”), pursuant to an Agreement and Plan of Merger (“merger agreement”), dated August 23, 2016. The acquisition was accomplished by the merger of Commercial Bancshares into First Defiance, immediately followed by the merger of CSB into First Defiance’s banking subsidiary, First Federal. CSB operated 7 full-service banking offices in northwest and north central, Ohio and 1 commercial loan production office in central Ohio. Commercial Bancshares’ consolidated assets and equity (unaudited) as of February 24, 2017 totaled $348.4 million and $37.5 million, respectively. The Company accounted for the transaction under the acquisition method of accounting which means that the acquired assets and liabilities were recorded at fair value at the date of acquisition. The fair value estimates included in these financial statements are based on preliminary valuations. The Company does not expect material variances from these estimates and expects that final valuation estimates will be completed during the year ending December 31, 2017.

In accordance with ASC 805, the Company expensed approximately $3.6 million of direct acquisition costs, of which $2.8 million was to settle employment and benefit agreements and for personnel expenses related to operating the new Commercial Bancshare locations. The Company recorded $29.0 million of goodwill and $4.9 million of intangible assets in the first quarter of 2017. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. The acquisition was consistent with the Company’s strategy to enhance and expand its presence in northwestern and north central Ohio. The acquisition offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded market area. The intangible assets are related to core deposits and are being amortized over 10 years on an accelerated basis. For tax purposes, goodwill totaling $29.0 million is non-deductible but will be evaluated annually for impairment. The following table summarizes the fair value of the total consideration transferred as part of the Commercial Bancshares acquisition as well as the fair value of identifiable assets and liabilities assumed as of the effective date of the transaction.

	February 24, 2017
	(In Thousands)
Cash Consideration	$	12,340
Equity – Dollar Value of Issued Shares		56,532
Fair Value of Total Consideration Transferred		68,872
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
Cash and Cash Equivalents		35,411
Federal Funds Sold		2,769
Securities		4,338
Loans		284,867
FHLB Stock of Cincinnati and Other Stock		2,194
Office Properties and Equipment		5,455
Intangible Assets		4,900
Bank-Owned Life Insurance		8,168
Accrued Interest Receivable and Other Assets		(3,606	)
Deposits – Non-Interest Bearing		(56,061	)
Deposits – Interest Bearing		(251,931	)
Advances from FHLB		(1,403	)
Accrued Interest Payable and Other Liabilities		(2,411	)
Total Identifiable Net Assets		39,902
Goodwill	$	28,970

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Under the terms of the merger agreement, Commercial Bancshares common shareholders had the opportunity to elect to receive 1.1808 shares of common stock of the Company or cash in the amount of $51.00 for each share of Commercial Bancshares common stock, subject to adjustment as provided for in the merger agreement. Total consideration for Commercial Bancshares common shares outstanding was paid 80% in Company stock and 20% in cash. The Company issued 1,139,502 shares of its common stock and paid $12.3 million in cash to the former shareholders of Commercial Bancshares.

The following table presents unaudited pro forma information as if the acquisition had occurred on January 1, 2016 after giving effect to certain adjustments. The unaudited pro forma information for the three months ended March 31, 2017 and March 31, 2016 includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, interest expense on deposits and borrowings acquired, and the related income tax effects. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed date.

	Pro Forma Three		Pro Forma Three
	Months Ended		Months Ended
	March 31, 2017		March 31, 2016
	(In Thousands)
Net Interest Income	$	23,837	$	22,798
Provision for Loan Losses		55		386
Non-Interest Income		10,828		9,121
Non-Interest Expense		21,234		20,103
Income Before Income Taxes		13,376		11,430
Income Tax Expense		5,141		3,413
Net Income	$	8,235	$	8,017
Diluted Earnings Per Share	$	0.81	$	0.79

The above pro forma financial information includes approximately $123,000 of net income related to the operations of Commercial Bancshares during the first quarter of 2017. The above pro forma financial information related to 2017 excludes non-recurring merger costs that totaled $3.6 million on a pre-tax basis. Under acquisition accounting treatment, loans are recorded at fair value which includes a credit risk component, and therefore the provision for loan losses recognized during the first quarter of 2016 was presumed to not be necessary.

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Subsequent Event

On April 13, 2017, First Defiance and Corporate One Benefits Agency, Inc. (“Corporate One”) jointly announced the acquisition of Corporate One’s business by First Defiance. The total purchase price paid in cash is made up of the following: $6.5 million was paid at closing, $500,000 is due in July 2018, and $2.3 million at the end of a three-year earn-out based on performance of the operations of Corporate One, for a total estimated purchase price of $9.3 million. The fair value estimates are currently being evaluated and will be completed during the second quarter of 2017. Corporate One will be part of First Insurance. Corporate One is a full-service employee benefits consulting organization founded in 1996 with offices located in Archbold, Findlay, Fostoria and Tiffin, Ohio. Corporate One consults employers to better manage their employee benefit programs to effectively lead them into the future. It is anticipated that the transaction will enhance employee benefit offerings and expand First Insurance’s presence into adjacent markets in northwest Ohio.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

Certain statements contained in this quarterly report are not statements of historical facts, including but not limited to statements that can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “anticipate”, or “continue” or the negative thereof or other variations thereon or comparable terminology are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those indicated in such statements due to risks, uncertainties and changes with respect to a variety of market and other factors. The Company assumes no obligation to update any forward-looking statements.

Non-GAAP Financial Measures

This document contains GAAP financial measures and certain non-GAAP financial measures which are presented as management believes they are helpful in understanding the Company’s results of operations or financial position. Fully taxable-equivalent (“FTE”) is an adjustment to net interest income to reflect tax-exempt income on an equivalent before-tax basis. The following tables present a reconciliation of non-GAAP measures to their respective GAAP measures at March 31, 2017 and 2016.

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Non-GAAP Financial Measures – Net Interest Income on an FTE basis, Net Interest Margin and Efficiency Ratio
($ in Thousands)	March 31, 2017			March 31, 2016
Net interest income (GAAP)	$	21,645		$	19,188
Add:  FTE adjustment		469			475
Net interest income on a FTE basis (1)	$	22,114		$	19,663
Noninterest income – less securities gains/losses (2)	$	10,549		$	8,505
Noninterest expense (3)		23,142			17,274
Average interest-earning assets net of average unrealized gains/losses on securities(4)		2,353,930			2,080,914
Average interest-earning assets		2,355,544			2,088,582
Average unrealized gains/losses on securities		1,614			7,668
Ratios:
Net interest margin (1) / (4)		3.81	%		3.80	%
Efficiency ratio (3) / (1) + (2)		70.85	%		61.32	%

Critical Accounting Policies

First Defiance has established various accounting policies which govern the application of accounting principles generally accepted in the United States in the preparation of its financial statements. The significant accounting policies of First Defiance are described in the footnotes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K. Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies. Those policies which are identified and discussed in detail in the Company’s Annual Report on Form 10-K include the Allowance for Loan Losses, Goodwill, and the Valuation of Mortgage Servicing Rights. There have been no material changes in assumptions or judgments relative to those critical policies during the first three months of 2017.

General

First Defiance is a unitary thrift holding company that conducts business through its wholly owned subsidiaries, First Federal, First Insurance and First Defiance Risk Management.

First Federal is a federally chartered stock savings bank that provides financial services to communities based in northwest and central Ohio, northeast Indiana, and southeastern Michigan where it operates 43 full service banking centers. First Federal operates one loan production office in central Ohio.

First Federal provides a broad range of financial services including checking accounts, savings accounts, certificates of deposit, real estate mortgage loans, commercial loans, consumer loans, home equity loans and trust and wealth management services through its extensive branch network.

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First Insurance sells a variety of property and casualty, group health and life and individual health and life insurance products. First Insurance is an insurance agency that does business in the Defiance, Bryan, Bowling Green, Lima, Maumee and Oregon, Ohio areas. On April 13, 2017, First Defiance acquired the business of Corporate One. Corporate One will be part of First Insurance. Corporate One is a full-service employee benefits consulting organization founded in 1996 with offices located in Archbold, Findlay, Fostoria and Tiffin, Ohio. Corporate One consults employers to better manage their employee benefit programs to effectively lead them into the future. The transaction is expected to enhance employee benefit offerings and expand First Insurance’s presence into adjacent markets in northwest Ohio.

First Defiance Risk Management is a wholly owned insurance company subsidiary of the Company that insures the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. First Defiance Risk Management pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves.

Regulation - First Defiance and First Federal are subject to regulation, examination and oversight by the Office of the Comptroller of the Currency (“OCC”) and the Federal Reserve Board (“Federal Reserve”). Because the FDIC insures First Federal’s deposits, First Federal is also subject to examination and regulation by the FDIC. In addition, First Federal is subject to regulation and examination by the Consumer Financial Protection Bureau (the “CFPB”) established by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). First Defiance and First Federal must file periodic reports with the Federal Reserve and the OCC and examinations are conducted periodically by the Federal Reserve, OCC and the FDIC to determine whether First Defiance and First Federal are in compliance with various regulatory requirements and are operating in a safe and sound manner. First Federal is subject to various consumer protection and fair lending laws. These laws govern, among other things, truth-in-lending disclosure, equal credit opportunity, and, in the case of First Federal, fair credit reporting and community reinvestment. Failure to abide by federal laws and regulations governing community reinvestment could limit the ability of First Federal to open a new branch or engage in a merger transaction. Community reinvestment regulations evaluate how well and to what extent First Federal lends and invests in its designated service area, with particular emphasis on low-to-moderate income communities and borrowers in such areas.

First Defiance is also subject to various Ohio laws which restrict takeover bids, tender offers and control-share acquisitions involving public companies which have significant ties to Ohio.

Regulatory Capital Requirements – The federal banking regulators have adopted risk-based capital guidelines for financial institutions and their holding companies, designed to absorb losses. The guidelines provide a systematic analytical framework, which makes regulatory capital requirements sensitive to differences in risk profiles among banking organizations, takes off-balance sheet exposures expressly into account in evaluating capital adequacy and minimizes disincentives to holding liquid, low-risk assets. Capital levels as measured by these standards are also used to categorize financial institutions for purposes of certain prompt corrective action regulatory provisions.

In July 2013, the United States banking regulators issued final new capital rules applicable to smaller banking organizations which also implement certain provisions of the Dodd-Frank Act. The new minimum capital requirements became effective on January 1, 2015, and include a new capital conservation buffer and deductions from common equity capital phase in from January 1, 2016, through January 1, 2019.

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The new rules include (a) a new common equity tier 1 (“CET1”) capital ratio of at least 4.5%, (b) a Tier 1 capital ratio of at least 6.0%, rather than the former 4.0%, (c) a minimum total capital ratio that remains at 8.0%, and (d) a minimum leverage ratio of 4%.

Common equity for the common equity tier 1 capital ratio includes common stock (plus related surplus) and retained earnings, plus limited amounts of minority interests in the form of common stock, less the majority of certain regulatory deductions.

Tier 1 capital includes common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus and trust preferred securities that have been grandfathered (but which are not permitted going forward), and limited amounts of minority interests in the form of additional Tier 1 capital instruments, less certain deductions.

Tier 2 capital, which can be included in the total capital ratio, includes certain capital instruments (such as subordinated debt) and limited amounts of the allowance for loan and lease losses, subject to new eligibility criteria, less applicable deductions.

The deductions from common equity tier 1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization’s own capital instruments and investments in the capital of unconsolidated financial institutions (above certain levels). .

Under the guidelines, capital is compared to the relative risk related to the balance sheet. To derive the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The new rules also place restrictions on the payment of capital distributions, including dividends, and certain discretionary bonus payments to executive officers if the company does not hold a capital conservation buffer of greater than 2.5% composed of common equity tier 1 capital above its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% at the beginning of the quarter. The capital conservation buffer phases in from January 1, 2016 until January 1, 2019. It was 1.25% at January 1, 2017.

Deposit Insurance - Substantially all of the deposits of First Federal are insured up to applicable limits by the Deposit Insurance Fund of the FDIC, and First Federal is assessed deposit insurance premiums to maintain the Deposit Insurance Fund. Insurance premiums for each insured institution are determined based upon the institution’s capital level and supervisory rating provided to the FDIC by the institution’s primary federal regulator and other information deemed by the FDIC to be relevant to the risk posed to the Deposit Insurance Fund by the institution. The assessment rate is then applied to the amount of the institution’s deposits to determine the institution’s insurance premium.

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The deposit insurance assessment base is average assets less average tangible equity. The FDIC set a target size for the Deposit Insurance Fund at 2% of insured deposits and a lower assessment rate schedule when the fund reaches 1.15% and, in lieu of dividends, the FDIC rule provides for a lower rate schedule when the reserve ratio reaches 2% and 2.5%. On June 30, 2016, the Deposit Insurance Fund surpassed its target of 1.15%, decreasing the assessment base based on the final rules approved by the FDIC Board of Directors on February 7, 2011, and April 26, 2016. The change to the assessment base and assessment rates, as well as the Deposit Insurance Fund restoration time frame, has lowered First Defiance’s deposit insurance assessment.

In addition, the FDIC has proposed changing the deposit insurance premium assessment method for banks with less than $10 billion in assets that have been insured by the FDIC for at least five years. The proposed changes would revise the financial ratios method so that it would be based on a statistical model estimating the probability of failure of a bank over three years; update the financial measures used in the financial ratios method consistent with the statistical model; and eliminate risk categories for established small banks and using the financial ratios method to determine assessment rates for all such banks (subject to minimum or maximum initial assessment rates based upon a bank’s composite examination rating).

As insurer, the FDIC is authorized to conduct examinations of, and to require reporting by, federally-insured institutions. It also may prohibit any federally-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious threat to the Deposit Insurance Fund. The FDIC also has the authority to take enforcement actions against insured institutions. Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged or is engaging in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or written agreement entered into with the FDIC. The management of First Federal does not know of any practice, condition or violation that might lead to termination of deposit insurance.

Business Strategy - First Defiance’s primary objective is to be a high-performing community banking organization, well regarded in its market areas. First Defiance accomplishes this through emphasis on local decision making and empowering its employees with tools and knowledge to serve its customers’ needs. First Defiance believes in a “Customer First” philosophy that is strengthened by its Trusted Advisor initiative. First Defiance also has a tagline of “Better Together” as an indication of its commitment to local, responsive, personalized service. First Defiance believes this strategy results in greater customer loyalty and profitability through core relationships. First Defiance is focused on diversification of revenue sources and increased market penetration in areas where the growth potential exists for a balance between acquisition and organic growth. The primary elements of First Defiance’s business strategy are commercial banking, consumer banking, including the origination and sale of single-family residential loans, enhancement of fee income, wealth management and insurance sales, each united by a strong customer service culture throughout the organization.

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Commercial and Commercial Real Estate Lending - Commercial and commercial real estate lending have been an ongoing focus and a major component of First Federal’s success. First Federal provides primarily commercial real estate and commercial business loans with an emphasis on owner- occupied commercial real estate and commercial business lending, including a focus on the deposit balances that accompany these relationships. First Federal’s client base tends to be small to middle market customers with annual gross revenues generally between $1 million and $50 million. First Federal’s focus is also on securing multiple guarantors in addition to collateral where possible. These customers require First Federal to have a high degree of knowledge and understanding of their business in order to provide them with solutions to their financial needs. First Federal’s “Customer First” philosophy and culture complements this need of its clients. First Federal believes this personal service model differentiates First Federal from its competitors, particularly the larger regional institutions. First Federal offers a wide variety of products to support commercial clients including remote deposit capture and other cash management services. First Federal also believes that the small business customer is a strong market for First Federal. First Federal participates in many of the Small Business Administration lending programs and implemented a program targeting the small business customer. Maintaining a diversified portfolio with an emphasis on monitoring industry concentrations and reacting to changes in the credit characteristics of industries is an ongoing focus.

Consumer Banking - First Federal offers customers a full range of deposit and investment products including demand, checking, money market, certificates of deposits, Certificate of Deposit Account Registry Service (“CDARS”) and savings accounts. First Federal offers a full range of investment products through the wealth management department and a wide variety of consumer loan products, including residential mortgage loans, home equity loans, and installment loans. First Federal also offers online banking services, which include mobile banking and online bill pay.

Fee Income Development - Generation of fee income and the diversification of revenue sources are accomplished through the mortgage banking operation, First Insurance and the wealth management department as First Defiance seeks to reduce reliance on retail transaction fee income.

Deposit Growth - First Federal’s focus has been to grow core deposits with an emphasis on total relationship banking with both our retail and commercial customers. First Federal has initiated a pricing strategy that considers the whole relationship of the customer. First Federal will continue to focus on increasing its market share in the communities it serves by providing quality products with extraordinary customer service, business development strategies and branch expansion. First Federal will look to grow its footprint in areas believed to further complement its overall market share and complement its strategy of being a high-performing community bank.

Asset Quality - Maintaining a strong credit culture is of the utmost importance to First Federal. First Federal has maintained a strong credit approval and review process that has allowed the Company to maintain a credit quality standard that balances the return with the risks of industry concentrations and loan types. First Federal is primarily a collateral lender with an emphasis on cash flow performance, while obtaining additional support from personal guarantees and secondary sources of repayment. First Federal has directed its attention to loan types and markets that it knows well and in which it has historically been successful. First Federal strives to have loan relationships that are well diversified in both size and industry, and monitors the overall trends in the portfolio to maintain its industry and loan type concentration targets. First Federal maintains a problem loan remediation process that focuses on detection and resolution. First Federal maintains a strong process of internal control that subjects the loan portfolio to periodic internal reviews as well as independent third-party loan review.

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Expansion Opportunities - First Defiance believes it is well positioned to take advantage of acquisitions or other business opportunities in its market areas. First Defiance believes it has a track record of successfully accomplishing both acquisitions and de novo branching in its market area. This track record puts the Company in a solid position to enter or expand its business. First Defiance will continue to be disciplined as well as opportunistic in its approach to future acquisitions and de novo branching with a focus on its primary geographic market area, which it knows well, and has been competing in for a long period of time, as well as surrounding market areas.

Investments - First Defiance invests in U.S. Treasury and federal government agency obligations, obligations of municipal and other political subdivisions, mortgage-backed securities which are issued by federal agencies, corporate bonds, and collateralized mortgage obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"). Management determines the appropriate classification of all such securities at the time of purchase in accordance with FASB ASC Topic 320.

Securities are classified as held-to-maturity when First Defiance has the positive intent and ability to hold the security to maturity. Held-to-maturity securities are stated at amortized cost and had a recorded value of $771,000 at March 31, 2017. Securities not classified as held-to-maturity are classified as available-for-sale, which are stated at fair value and had a recorded value of $260.6 million at March 31, 2017. The available-for-sale portfolio consists of obligations of U.S. Government corporations and agencies ($4.0 million), certain municipal obligations ($95.1 million), CMOs/REMICs ($67.5 million), corporate bonds ($13.1 million), and mortgage backed securities ($80.9 million).

In accordance with ASC Topic 320, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income.

Lending - In order to properly assess the collateral dependent loans included in its loan portfolio, the Company has established policies regarding the monitoring of the collateral underlying such loans. The Company requires an appraisal that is less than one year old for all new collateral dependent real estate loans, and all renewed collateral dependent real estate loans where significant new money is extended. The appraisal process is handled by the Credit Department, which selects the appraiser and orders the appraisal. First Defiance’s loan policy prohibits the account officer from talking or communicating with the appraiser to insure that the appraiser is not influenced by the account officer in any way in making their determination of value.

First Federal generally does not require updated appraisals for performing loans unless significant new money is requested by the borrower.

When a collateral dependent loan is downgraded to classified status, First Federal reviews the most current appraisal on file and, if necessary, based on First Federal’s assessment of the appraisal, such as age, market, etc, First Federal will discount this amount to a more appropriate current value based on inputs from lenders and realtors. This amount may then be discounted further by First Federal’s estimation of the carrying and selling costs. In most instances, if the appraisal is more than twelve to fifteen months old, we may require a new appraisal. Finally, First Federal assesses whether there is any collateral short fall, taking into consideration guarantor support and liquidity, and determines if a charge off is necessary.

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When a collateral dependent loan moves to non-performing status, First Federal generally gets a new third party appraisal and charges the loan down appropriately based upon the new appraisal and an estimate of costs to liquidate the collateral. All properties that are moved into the Other Real Estate Owned (“OREO”) category are supported by current appraisals, and the OREO is carried at the lower of cost or fair value, which is determined based on appraised value less First Federal’s estimate of the liquidation costs.

First Federal does not adjust any appraisals upward without written documentation of this valuation change from the appraiser. When setting reserves and charge offs on classified loans, appraisal values may be discounted downward based upon First Federal’s experience with liquidating similar properties.

All loans over 90 days past due and/or on non-accrual are classified as non-performing loans. Non-performing status automatically occurs in the month in which the 90 day delinquency occurs.

As stated above, once a collateral dependent loan is identified as non-performing, First Federal generally gets an appraisal.

Appraisals are received within approximately 60 days after they are requested. The First Federal Loan Loss Reserve Committee reviews the amount of each new appraisal and makes any necessary charge off decisions at its meeting prior to the end of each quarter.

Any partially charged-off collateral dependent loans are considered non-performing, and as such, would need to show an extended period of time with satisfactory payment performance as well as cash flow coverage capability supported by current financial statements before First Federal will consider an upgrade to performing status. First Federal may consider moving the loan to accruing status after approximately six months of satisfactory payment performance.

For loans where First Federal determines that an updated appraisal is not necessary, other means are used to verify the value of the real estate, such as recent sales of similar properties on which First Federal had loans as well as calls to appraisers, brokers, realtors and investors. First Federal monitors and tracks its loan to value quarterly to determine accuracy and any necessary charge offs. Based on these results, changes may occur in the processes used.

Loan modifications constitute a TDR if First Federal for economic or legal reasons related to the borrower’s financial difficulties grants a concession to the borrower that it would not otherwise consider. For loans that are considered TDRs, First Federal either computes the present value of expected future cash flows discounted at the original loan’s effective interest rate or it may measure impairment based on the fair value of the collateral. For those loans measured for impairment utilizing the present value of future cash flows method, any discount is carried as a reserve in the allowance for loan and lease losses. For those loans measured for impairment utilizing the fair value of the collateral, any shortfall is charged off.

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Earnings - The profitability of First Defiance is primarily dependent on its net interest income and non-interest income. Net interest income is the difference between interest income on interest-earning assets, principally loans and securities, and interest expense on interest-bearing deposits, FHLB advances, and other borrowings. The Company’s non-interest income is mainly derived from service fees and other charges, mortgage banking income, and insurance commissions. First Defiance's earnings also depend on the provision for loan losses and non-interest expenses, such as employee compensation and benefits, occupancy and equipment expense, deposit insurance premiums, and miscellaneous other expenses, as well as federal income tax expense.

Changes in Financial Condition

At March 31, 2017, First Defiance's total assets, deposits and stockholders' equity amounted to $2.93 billion, $2.37 billion and $354.2 million, respectively, compared to $2.48 billion, $1.98 billion and $293.0 million, respectively, at December 31, 2016. Total assets increased $368.3 million, deposits increased $307.9 million and stockholders equity increased $56.5 million due to the acquisition of Commercial Bancshares. See Note 17 – Business Combinations for further details regarding the Commercial Bancshares acquisition and the impact to the individual categories.

Net loans receivable (excluding loans held for sale) increased $298.5 million to $2.21 billion. The variance in loans receivable between March 31, 2017 and December 31, 2016 includes an increase of $153.3 million in commercial real estate loans , a $69.4 million increase in residential real estate loans ,a $35.3 million increase in commercials loans, a $14.5 million increase in home equity loans , a $14.3 million increase in construction loans and a $11.0 million increase in consumer loans. The net loan amounts acquired from Commercial Bancshares at the acquisition date of February 24, 2017 resulted in a $159.2 million increase in commercial real estate loans a $58.4 million increase in residential real estate loans, a $35.1 million increase in commercial loans, a $15.7 million increase in home equity loans, a $5.6 million increase in construction loans and a $10.9 million increase in consumer loans.,

The investment securities portfolio increased $10.2 million to $261.3 million at March 31, 2017 from $251.2 million at December 31, 2016. There was an unrealized gain in the investment portfolio of $4.1 million at March 31, 2017 compared to an unrealized gain of $3.4 million at December 31, 2016.

Goodwill and core deposit and other intangibles increased $29.0 million and $4.7 million, respectively to $90.8 million and $6.0 million, respectively due to the acquisition of Commercial Bancshares.

Deposits increased from $1.98 billion at December 31, 2016 to $2.37 billion as of March 31, 2017. Non-interest bearing demand deposits increased $92.3 million to $579.9 million, interest bearing demand and money market deposits increased $156.8 million to $973.5 billion, and savings deposits increased $45.1 million to $288.5 million. Retail time deposits increased $98.0 million to $531.9 million. The net deposit amounts acquired from Commercial Bancshares at the acquisition date of February 24, 2107 resulted in a $56.1 million increase in Non-interest bearing demand deposits, a $122.0 million increase in interest bearing demand and money market deposits, a $31.6 million increase in savings deposits and a $98.2 million increase in retail time deposits.

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Stockholders’ equity increased from $293.0 million at December 31, 2016 to $354.2 million at March 31, 2017. The increase in stockholders’ equity was the result of recording net income of $5.1 million, an increase in other comprehensive income of $1.0 million and an increase due to the acquisition of Commercial Bancshares of $56.5 million as a result of issuing 1.1 million shares of common stock. This was offset by $2.2 million of common stock dividends being paid in the first quarter of 2017.

Average Balances, Net Interest Income and Yields Earned and Rates Paid

The following table presents for the periods indicated the total dollar amount of interest from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in thousands of dollars and rates, and the net interest margin. The table reports interest income from tax-exempt loans and investment on a tax-equivalent basis. All average balances are based upon daily balances (dollars in thousands).

	Three Months Ended March 31,
	2017							2016
	Average				Yield/			Average				Yield/
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	2,026,067	$	22,020		4.41	%	$	1,796,200	$	19,363		4.34	%
Securities		254,842		2,174		3.48	(3)		233,815		2,054		3.65	(3)
Interest bearing deposits		60,083		145		0.98			44,766		49		0.44
FHLB stock		14,552		166		4.63			13,801		139		4.05
Total interest-earning assets		2,355,544		24,505		4.22			2,088,582		21,605		4.18
Non-interest-earning assets		266,858							225,621
Total assets	$	2,622,402						$	2,314,203
Interest-bearing liabilities:
Deposits	$	1,626,742	$	1,796		0.45	%	$	1,420,479	$	1,433		0.41	%
FHLB advances and other		104,277		366		1.42			78,670		297		1.52
Subordinated debentures		36,150		215		2.41			36,137		175		1.95
Securities sold under repurchase agreements		25,660		14		0.22			55,243		37		0.27
Total interest-bearing liabilities		1,792,829		2,391		0.54			1,590,529		1,942		0.49
Non-interest bearing deposits		482,895		-					414,866		-
Total including non-interest bearing demand deposits		2,275,724		2,391		0.43			2,005,395		1,942		0.39
Other non-interest-bearing liabilities		32,236							29,757
Total liabilities		2,307,960							2,035,152
Stockholders' equity		314,442							279,051
Total liabilities and stock- holders' equity	$	2,622,402						$	2,314,203
Net interest income; interest rate spread			$	22,114		3.68	%			$	19,663		3.69	%
Net interest margin (4)						3.81	%						3.80	%
Average interest-earning assets to average interest-bearing liabilities						131	%						131	%

(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.

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Results of Operations

Three Months Ended March 31, 2017 and 2016

On a consolidated basis, First Defiance’s net income for the quarter ended March 31, 2017 was $5.1 million compared to net income of $7.2 million for the comparable period in 2016. On a per share basis, basic and diluted earnings per common share for the three months ended March 31, 2017 were $0.54 and $0.54, respectively, compared to basic and diluted earnings per common share of $0.80 and $0.79, respectively, for the quarter ended March 31, 2016.

Net Interest Income

First Defiance’s net interest income is determined by its interest rate spread (i.e. the difference between the yields on its interest-earning assets and the rates paid on its interest-bearing liabilities) and the relative amounts of interest-earning assets and interest-bearing liabilities.

Net interest income was $21.6 million for the quarter ended March 31, 2017, up from $19.2 million for the same period in 2016. The tax-equivalent net interest margin was 3.81% for the quarter ended March 31, 2017, a slight increase from 3.80% for the same period in 2016. The increase in margin between the 2017 and 2016 first quarters was due to a slight increase in interest-earning asset yields, which increased to 4.22% for the quarter ended March 31, 2017, up 4 basis points from 4.18% for the same period in 2016. The cost of interest-bearing liabilities between the two periods increased 5 basis points to 0.54% in the first quarter of 2017 from 0.49% in the same period in 2016. The acquisition of CSB’s earning asset mix and low cost deposits along with the rise in interest rates contributed to the increase in net interest income.

Total interest income increased $2.9 million to $24.0 million for the quarter ended March 31, 2017 from $21.1 million for the quarter ended March 31, 2016. This is due to continued loan growth and a more profitable earning asset mix. Income from loans increased to $22.0 million for the quarter ended March 31, 2017 compared to $19.3 million for the same period in 2016 due to average loan growth of $140.4 million due to the acquisition. The increase in the loan portfolio yield to 4.41% at March 31, 2017 was due to increasing interest rates and the acquisition of CSB as the weighted average yield at the acquisition date was 4.59%. The investment interest income increased $126,000 in the first quarter of 2017 to $1.8 million; however, the yield dropped 17 basis points to 3.48% at March 31, 2017 compared to 3.65% at March 31, 2016. The decline in investment yield is primarily attributable to the reinvestment of matured securities at lower yields. Income from interest bearing deposits and FHLB stock were $145,000 and $165,000 respectively in the first quarter of 2017 compared to $49,000 and $139,000 for the same period in 2016 due to increased interest rates.

Interest expense increased by $449,000 in the first quarter of 2017 compared to the same period in 2016, to $2.4 million from $1.9 million. The cost of interest bearing liabilities increased 5 basis points from 0.49% at March 31, 2016 to 0.54% at March 31, 2017. Interest expense related to interest-bearing deposits was $1.8 million in the first quarter of 2017 compared to $1.4 million for the same period in 2016. Interest expense recognized by the Company related to FHLB advances was $366,000 in the first quarter of 2017 compared to $297,000 for the same period in 2016 due to increased volumes in lower cost advances. Expenses on subordinated debentures and securities sold under repurchase agreements were $215,000 and $14,000 respectively in the first quarter of 2017 compared to $175,000 and $37,000 respectively for the same period in 2016.

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Allowance for Loan Losses

The allowance for loan losses represents management’s assessment of the estimated probable incurred credit losses in the loan portfolio at each balance sheet date. Management analyzes the adequacy of the allowance for loan losses regularly through reviews of the loan portfolio. Consideration is given to economic conditions, changes in interest rates and the effect of such changes on collateral values and borrower’s ability to pay, changes in the composition of the loan portfolio and trends in past due and non-performing loan balances. The allowance for loan losses is a material estimate that is susceptible to significant fluctuation and is established through a provision for loan losses based on management’s evaluation of the inherent risk in the loan portfolio. In addition to extensive in-house loan monitoring procedures, the Company utilizes an outside party to conduct an independent loan review of commercial loan and commercial real estate loan relationships. The goal is to have approximately 55% to 60% of the portfolio reviewed annually. This includes all relationships over $5.0 million with new exposure greater than $2.0 million and a sample of other relationships greater than $5.0 million; loan relationships between $1.0 million and $5.0 million with new exposure greater than $750,000 and a sample of other relationships between $1.0 million and $5.0 million; and a sample of relationships less than $1.0 million. Management utilizes the results of this outside loan review to assess the effectiveness of its internal loan grading system as well as to assist in the assessment of the overall adequacy of the allowance for loan losses associated with these types of loans.

The allowance for loan loss is made up of two basic components. The first component of the allowance for loan loss is the specific reserve in which the Company sets aside reserves based on the analysis of individual impaired credits. In establishing specific reserves, the Company analyzes all substandard, doubtful and loss graded loans quarterly and makes judgments about the risk of loss based on the cash flow of the borrower, the value of any collateral and the financial strength of any guarantors. If the loan is impaired and cash flow dependent, then a specific reserve is established for the discount on the net present value of expected future cash flows. If the loan is impaired and collateral dependent, then any shortfall is usually charged off. The Company also considers the impacts of any Small Business Association or Farm Service Agency guarantees. The specific reserve portion of the allowance for loan losses was $772,000 at March 31, 2017 and $809,000 at December 31, 2016.

The second component is a general reserve, which is used to record loan loss reserves for groups of homogenous loans in which the Company estimates the losses incurred in the portfolio based on quantitative and qualitative factors. For purposes of the general reserve analysis, the loan portfolio is stratified into nine different loan pools based on loan type to allocate historic loss experience. The loss experience factor is then applied to the non-impaired loan portfolio. The Company has refined the methodology to its allowance for loan loss calculation pertaining to the general reserve component for non-impaired loans. There was no change to the calculation of the component for reserves on impaired loans. Within the general reserve, the determination of the historical loss component was modified from using a three-year average annual loss rate to a loss migration measurement. The loss migration measurement implemented June 30, 2015, utilized an average of four (4) four-year loss migration periods for each loan portfolio segment with differentiation between loan risk grades. Prior to June 30, 2015, the approach to this component quantified the historical loss by calculating a rolling twelve quarter average annual loss rate for each portfolio segment, without differentiation between loan risk grades. Beginning December 31, 2016 the historical loss calculation was changed from using a an average of four (4) four-year loss migration periods to using an average of all four-year loss migration periods to the present beginning with data from the second quarter 2011. Management believes this enhancement is consistent with the rationale of the previous measurement but provides a more precise calculation of historical losses by incorporating more data points for the average loss ratio and including periods that provide a more complete coverage of the full business cycle. Management believes that capturing the risk grade changes and cumulative losses over the life cycle of a loan more accurately depicts management’s estimate of historical losses as well as being more reflective of the ongoing risks in the loan portfolio. These modifications resulted in a change in the general reserves between the loan portfolio segments but did not have a material impact on the overall allowance for loan losses.

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The quantitative general allowance increased $300,000 to $9.0 million at March 31, 2017 from $8.7 million at December 31, 2016 primarily due to an increase in the balance of criticized loans.

In addition to the quantitative analysis, a qualitative analysis is performed each quarter to provide additional general reserves on the non-impaired loan portfolio for various factors. The overall qualitative factors are based on nine sub-factors. The nine sub-factors have been aggregated into three qualitative factors: economic, environment and risk.

ECONOMIC

1) Changes in international, national and local economic business conditions and developments, including the condition of various market segments.

2) Changes in the value of underlying collateral for collateral dependent loans.

ENVIRONMENT

3) Changes in the nature and volume in the loan portfolio.

4) The existence and effect of any concentrations of credit and changes in the level of such concentrations.

5) Changes in lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices.

6) Changes in the quality and breadth of the loan review process.

7) Changes in the experience, ability and depth of lending management and staff.

RISK

8) Changes in the trends of the volume and severity of delinquent and classified loans, and changes in the volume of non-accrual loans, trouble debt restructuring, and other loan modifications.

9) Changes in the political and regulatory environment.

The qualitative analysis at March 31, 2017 indicated a general reserve of $15.9 million compared with $16.4 million at December 31, 2016. Management reviewed the overall economic, environmental and risk factors and determined that it was appropriate to make adjustments to these sub-factors based on that review.

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The economic factors for all commercial and commercial loan segments were reduced in the first quarter of 2017 due to stability in the U.S. economy and forecasts for continued strengthening of the labor market.

The environmental factors were decreased slightly in the first quarter of 2017 in all loan segments due to newer loan volume having a stricter adherence to loan policy, stability in the lending staff and the maturation of the process of centralized problem loan workout.

The risk factors for commercial, construction, home equity and residential loans were decreased in the first quarter of 2017 while the risk factors for commercial real estate and commercial loans were increased due to trends in the levels of non-performing loans and classified assets.

First Defiance’s general reserve percentages for main loan segments not otherwise classified ranged from 0.46% for construction loans to 1.72% for home equity and improvement loans at March 31, 2017.

As a result of the quantitative and qualitative analyses, along with the change in specific reserves, the Company’s provision for loan losses for the first quarter of 2017 was $55,000, compared to $364,000 for the same period in 2016. The allowance for loan losses was $25.7 million and $25.9 million and represented 1.15% of loans (1.32% excluding acquired loans), net of undisbursed loan funds and deferred fees and costs, at March 31, 2017 and 1.33% at December 31, 2016. The loans acquired from CSB were recorded at fair value and have no allowance for loan loss attributed to them. The provision of $55,000 was offset by charge offs of $464,000 and recoveries of $274,000, resulting in an decrease to the overall allowance for loan loss of $135,000 for the first quarter of 2017. In management’s opinion, the overall allowance for loan losses of $25.7 million as of March 31, 2017 is adequate.

Management also assesses the value of real estate owned as of the end of each accounting period and recognizes write-downs to the value of that real estate in the income statement if conditions dictate. In the three month period ended March 31, 2017, there were no write-downs of real estate held for sale. Management believes that the values recorded at March 31, 2017 for real estate owned and repossessed assets represent the realizable value of such assets.

Total classified loans increased to $35.5 million at March 31, 2017, compared to $27.5 million at December 31, 2016. Classified loans acquired from CSB represent $6.0 million of the increase.

First Defiance’s ratio of allowance for loan losses to non-performing loans was 170.8% at March 31, 2017 compared with 180.4% at December 31, 2016. Management monitors collateral values of all loans included on the watch list that are collateral dependent and believes that allowances for those loans at March 31, 2017 are appropriate. Of the $15.1 million in non-accrual loans at March 31, 2017, $11.0 million or 73.0% are less than 90 days past due.

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At March 31, 2017, First Defiance had total non-performing assets of $15.8 million, compared to $14.8 million at December 31, 2016. Non-performing assets include loans that are on non-accrual, real estate owned and other assets held for sale. Non-performing assets at March 31, 2017 and December 31, 2016 by category were as follows:

Table 1 – Nonperforming Asset

	March 31,			December 31,
	2017			2016
	(In Thousands)
Non-performing loans:
One to four family residential real estate	$	2,759		$	2,928
Non-residential and multi-family residential real estate		9,823			9,592
Commercial		1,498			1,007
Construction		-			-
Home equity and improvement		875			730
Consumer Finance		102			91
Total non-performing loans		15,057			14,348
Real estate owned		705			455
Other repossessed assets		-			-
Total repossessed assets	$	705			455
Total Nonperforming assets	$	15,762		$	14,803
Restructured loans, accruing	$	9,771		$	10,544
Total nonperforming assets as a percentage of total assets		0.54	%		0.60	%
Total nonperforming loans as a percentage of total loans*		0.67	%		0.74	%
Total nonperforming assets as a percentage of total loans plus REO*		0.70	%		0.76	%
Allowance for loan losses as a percent of total nonperforming assets		163.19	%		174.86	%

* Total loans are net of undisbursed loan funds and deferred fees and costs.

Non-performing loans in the commercial loan category represented 0.30% of the total loans in that category at March 31, 2017 compared to 0.21% for the same category at December 31, 2016. Non-performing loans in the commercial real estate loan category were 0.82% of the total loans in this category at March 31, 2017 compared to 0.92% at December 31, 2016. Non-performing loans in the residential loan category represented 1.00% of the total loans in that category at March 31, 2017 compared to 1.41% for the same category at December 31, 2016.

First Federal’s Asset Review Committee meets monthly to review the status of work-out strategies for all criticized relationships, which include all non-accrual loans. Based on such factors as anticipated collateral values in liquidation scenarios, cash flow projections, assessment of net worth of guarantors and all other factors which may mitigate risk of loss, the Asset Review Committee makes recommendations regarding proposed charge-offs which are approved by the Senior Loan Committee or the Loan Loss Reserve Committee.

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The following table details net charge-offs and nonaccrual loans by loan type.

Table 2 – Net Charge-offs and Non-accruals by Loan Type

	For the Three Months Ended March 31, 2017						As of March 31, 2017
	Net Charge-offs (Recovery)			% of Total Net Charge-offs			Nonaccrual Loans		% of Total Non-Accrual Loans
	(In Thousands)						(In Thousands)
Residential	$	(7	)		(3.68	)%	$	2,759		18.32	%
Construction		-			0.00	%		-		0.00	%
Commercial real estate		224			117.89	%		9,823		65.24	%
Commercial		(115	)		(60.53	)%		1,498		9.95	%
Consumer		67			35.27	%		102		0.68	%
Home equity and improvement		21			11.05	%		875		5.81	%
Total	$	190			100.00	%	$	15,074		100.00	%

	For the Three Months Ended March 31, 2016						As of March 31, 2016
	Net Charge-offs (Recovery)			% of Total Net Charge-offs			Nonaccrual Loans		% of Total Non-Accrual Loans
	(In Thousands)						(In Thousands)
Residential	$	(31	)		(39.74	)%	$	3,130		17.68	%
Construction		-			0.00	%		-		0.00	%
Commercial real estate		(164	)		(210.26	)%		10,344		58.42	%
Commercial		317			406.41	%		3,551		20.05	%
Consumer		(35	)		(44.87	)%		9		0.05	%
Home equity and improvement		(9	)		(11.54	)%		673		3.80	%
Total	$	78			100.00	%	$	17,707		100.00	%

Table 3 – Allowance for Loan Loss Activity

	For the Quarter Ended
	1st 2017		4th 2016			3rd 2016		2nd 2016			1st 2016
	(In Thousands)
Allowance at beginning of period	$	25,884	$	25,923		$	25,948	$	25,668		$	25,382
Provision for credit losses		55		(149	)		15		53			364
Charge-offs:
Residential		49		147			111		37			55
Commercial real estate		290		-			79		-			13
Commercial		-		234			26		18			336
Consumer finance		71		53			24		18			-
Home equity and improvement		54		98			74		66			30
Total charge-offs		464		532			314		139			434
Recoveries		274		642			274		366			356
Net charge-offs		190		(110	)		40		(227	)		78
Ending allowance	$	25,749	$	25,884		$	25,923	$	25,948		$	25,668

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The following table sets forth information concerning the allocation of First Federal’s allowance for loan losses by loan categories at the dates indicated.

Table 4 – Allowance for Loan Loss Allocation by Loan Category

	March 31, 2017					December 31, 2016					September 30, 2016					June 30, 2016					March 31, 2016
			Percent of					Percent of					Percent of					Percent of					Percent of
			total loans					total loans					total loans					total loans					total loans
	Amount		by category			Amount		by category			Amount		by category			Amount		by category			Amount		by category
	(Dollars In Thousands)
Residential	$	2,621		11.86	%	$	2,627		10.20	%	$	2,432		10.34	%	$	2,839		10.71	%	$	3,109		11.05	%
Construction		458		8.55	%		450		8.99	%		412		8.76	%		633		8.35	%		489		7.71	%
Commercial real estate		12,332		51.12	%		12,853		51.13	%		12,787		51.64	%		13,269		51.84	%		13,894		52.37	%
Commercial		7,809		21.59	%		7,361		23.05	%		7,879		22.56	%		6,740		22.19	%		5,820		21.85	%
Consumer		229		1.19	%		207		0.82	%		216		0.85	%		189		0.86	%		124		0.83	%
Home equity and improvement		2,300		5.69	%		2,386		5.81	%		2,197		5.85	%		2,278		6.05	%		2,232		6.19	%
	$	25,749		100.00	%	$	25,884		100.00	%	$	25,923		100.00	%	$	25,948		100.00	%	$	25,668		100.00	%

Key Asset Quality Ratio Trends

Table 5 – Key Asset Quality Ratio Trends

	1st Qtr 2017			4th Qtr 2016			3rd Qtr 2016			2nd Qtr 2016			1st Qtr 2016
Allowance for loan losses / loans*		1.15	%		1.33	%		1.35	%		1.39	%		1.41	%
Allowance for loan losses / non-performing assets		163.19	%		174.86	%		137.14	%		148.26	%		136.40	%
Allowance for loan losses / non-performing loans		170.82	%		180.40	%		142.45	%		158.00	%		144.96	%
Non-performing assets / loans plus REO*		0.70	%		0.76	%		0.98	%		0.94	%		1.03	%
Non-performing assets / total assets		0.54	%		0.60	%		0.77	%		0.73	%		0.80	%
Net charge-offs / average loans (annualized)		0.04	%		-0.02	%		0.01	%		-0.05	%		0.02	%

* Total loans are net of undisbursed funds and deferred fees and costs.

Non-Interest Income.

Total non-interest income increased $1.9 million in the first quarter of 2017 to $10.5 million from $8.6 million for the same period in 2016.

Service Fees. Service fees and other charges increased by $116,000 or 4.5% in the first quarter of 2017 compared to the same period in 2016 mainly due to increased deposit accounts and balances.

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First Federal’s overdraft privilege program generally provides for the automatic payment of modest overdraft limits on all accounts deemed to be in good standing when the account is accessed using paper-based check processing, a teller withdrawal, a point-of-sale terminal, an ACH transaction, an online banking or voice-response transfer, or an ATM. To be in good standing, an account must be brought to a positive balance within a 30-day period and have not excessively used the overdraft privilege program. Overdraft limits are established for all customers without discrimination using a risk assessment approach for each account classification. The approach includes a systematic review and evaluation of the normal deposit flows made to each account classification to establish reasonable and prudent negative balance limits that would be routinely repaid by normal, expected and reoccurring deposits. The risk assessment by portfolio approach assumes a minimal degree of undetermined credit risk associated with unidentified individual accounts that are overdrawn for 30 or more days. Consumer accounts overdrawn for more than 60 days are automatically charged off. Fees are charged as a one-time fee per occurrence, up to five charges per day, and the fee charged for an item that is paid is equal to the fee charged for a non-sufficient fund item that is returned.

Overdrawn balances, net of allowance for losses, are reflected as loans on First Defiance’s balance sheet. The fees charged for this service are established based both on the return of processing costs plus a profit, and on the level of fees charged by competitors in the Company’s market area for similar services. These fees are considered to be compensation for providing a service to the customer and therefore deemed to be noninterest income rather than interest income. Fee income recorded for the quarters ending March 31, 2017 and 2016 related to the overdraft privilege product, net of adjustments to the allowance for uncollectible overdrafts, were $569,000 and $657,000, respectively. Accounts charged off are included in noninterest expense. The allowance for uncollectible overdrafts was $12,000 at March 31, 2017, $14,000 at December 31, 2016 and $15,000 at March 31, 2016.

Mortgage Banking Activity. Total revenue from the sale and servicing of mortgage loans increased $199,000 to $1.7 million for the first quarter of 2017 compared to $1.5 million for the same period of 2016 mostly due to higher mortgage volumes in the first quarter 2017. Gains realized from the sale of mortgage loans increased in the first quarter of 2017 to $1.1 million from $994,000 in the first quarter of 2016. The mortgage loan servicing revenue increased $57,000 to $934,000 in the first quarter of 2017 compared to $877,000 in the same period in 2016. The Company recorded a positive valuation adjustment of $33,000 on mortgage servicing rights in the first quarter of 2017 compared to a negative valuation adjustment of $21,000 in the first quarter of 2016.

Insurance Commission Income. Income from the sale of insurance and investment products was $3.5 million in the first quarter of 2017, an increase of $321,000 from $3.1 million in the first quarter of 2016. First Defiance’s insurance subsidiary, First Insurance, typically recognizes contingent revenues during the first quarter. These revenues are bonuses paid by insurance carriers when the Company achieves certain loss ratios or growth targets. In the first quarter of 2017, First Insurance earned $1.2 million of contingent income compared to $799,000 for the first quarter of 2016.

Bank-Owned Life Insurance. Income from bank-owned life insurance was $1.8 million in the first quarter of 2017, an increase of $1.6 million from $231,000 in the first quarter of 2016. In February 2017, the Company surrendered an underperforming BOLI policy and recorded a tax penalty of $1.7 million (recorded in income tax expense) and purchased a new BOLI policy receiving a $1.5 million enhancement value gain.

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Non-Interest Expense.

Non-interest expense increased to $23.1 million for the first quarter of 2017 compared to $17.3 million for the same period in 2016. Included in the first quarter of 2017 are $3.6 million of merger and conversion related costs associated with the acquisition of CSB.

Compensation and Benefits. Compensation and benefits increased to $14.3 million for the quarter ended March 31, 2017 from $10.2 million for the same period in 2016. The increase is mainly attributable to merger costs to settle employment and benefit agreements and for personnel expenses related to operating the new CSB locations.

Other Non-Interest Expenses. Other non-interest expenses increased $1.1 to $4.0 million for the quarter ended March 31, 2017 from $2.9 million for the same period in 2016. The increase in other non-interest expense is primarily due to CSB merger and conversion related costs of $667,000.

The efficiency ratio, considering tax equivalent interest income and excluding securities gains and losses, for the first quarter of 2017 was 70.85% compared to 61.32% for the first quarter of 2016. The first quarter of 2017 was negatively impacted by the aforementioned merger and conversion related costs.

Income Taxes.

First Defiance computes federal income tax expense in accordance with ASC Topic 740, Subtopic 942, which resulted in an effective tax rate of 42.9% for the quarter ended March 31, 2017 compared to 29.6% for the same period in 2016. The tax rate for 2017 is higher than the statutory 35% tax rate due to the $1.7 million tax penalty related to the surrender of a BOLI policy. The tax rate for 2016 is lower than the statutory 35% tax rate for the Company mainly because of investments in tax-exempt securities. The earnings on tax-exempt securities are not subject to federal income tax.

Liquidity

As a regulated financial institution, First Federal is required to maintain appropriate levels of "liquid" assets to meet short-term funding requirements.

First Defiance had $8.3 million of cash provided by operating activities during the first three months of 2017. The Company's cash provided by operating activities resulted from the origination of loans held for sale and net income mostly offset by the proceeds on the sale of loans.

At March 31, 2017, First Federal had $75.3 million in outstanding loan commitments and loans in process to be funded generally within the next six months and an additional $552.5 million committed under existing consumer and commercial lines of credit and standby letters of credit. Also at that date, First Federal had commitments to sell $24.0 million of loans held-for-sale. First Defiance believes that it has adequate resources to fund commitments as they arise and that it can adjust the rate on savings certificates to retain deposits in changing interest rate environments. If First Defiance requires funds beyond its internal funding capabilities, advances from the FHLB of Cincinnati and other financial institutions are available.

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Liquidity risk arises from the possibility that the Company may not be able to meet its financial obligations and operating cash needs or may become overly reliant upon external funding sources. In order to manage this risk, the Company’s Board of Directors has established a Liquidity Policy that identifies primary sources of liquidity, establishes procedures for monitoring and measuring liquidity and quantifies minimum liquidity requirements. This policy designates First Federal’s Asset/Liability Committee (“ALCO”) as the body responsible for meeting these objectives. The ALCO reviews liquidity on a monthly basis and approves significant changes in strategies that affect balance sheet or cash flow positions. Liquidity is centrally managed on a daily basis by the Company’s Chief Financial Officer and Controller.

Capital Resources

Capital is managed at First Federal and on a consolidated basis. Capital levels are maintained based on regulatory capital requirements and the economic capital required to support credit, market, liquidity and operational risks inherent in our business, as well as flexibility needed for future growth and new business opportunities.

In July 2013, the federal banking agencies approved the final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (commonly known as Basel III). Under the final rules, which began for the Company and the Bank on January 1, 2016 and are subject to a phase-in period through January 1, 2019, minimum requirements increased for both quantity and quality of capital held by the Company and the Bank. The rules include a new minimum common equity Tier 1 capital to risk-weighted assets ratio (“CET1”) of 4.5% and a capital conservation buffer of 0.625% of risk-weighted assets during 2016 and 1.25% during the year 2017, and increasing each year until fully phased-in during 2019 at 2.50%, effectively resulting in a minimum CET1 ratio of 7.0%. Basel III raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% (which, with the capital conservation buffer, effectively results in a minimum Tier 1 capital ratio of 8.5% when fully phased-in), which effectively results in a minimum total capital to risk-weighted assets ratio of 10.5% (with the capital conservation buffer fully phased-in), and requires a minimum leverage ratio of 4.0%. Basel III also makes changes to risk weights for certain assets and off-balance sheet exposures.

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The Company met each of the well capitalized ratio guidelines at March 31, 2017. The following table indicates the capital ratios for First Defiance and First Federal at March 31, 2017 and December 31, 2016. (In Thousands):

March 31, 2017
	Actual					Minimum Required for Adequately Capitalized					Minimum Required for Well Capitalized
	Amount		Ratio			Amount		Ratio(1)			Amount		Ratio
CET1 Capital (to Risk-Weighted Assets) (2)
Consolidated	$	262,067		10.13	%	$	116,445		4.5	%		N/A		N/A
First Federal	$	284,119		10.98	%	$	116,464		4.5	%	$	168,226		6.5	%
Tier 1 Capital (1)
Consolidated	$	297,067		10.35	%	$	114,845		4.0	%		N/A		N/A
First Federal	$	284,119		9.91	%	$	114,660		4.0	%	$	143,325		5.0	%
Tier 1 Capital (to Risk Weighted Assets) (1)
Consolidated	$	297,067		11.48	%	$	155,260		6.0	%		N/A		N/A
First Federal	$	284,119		10.98	%	$	155,286		6.0	%	$	207,048		8.0	%
Total Capital (to Risk Weighted Assets) (1)
Consolidated	$	322,816		12.48	%	$	207,014		8.0	%		N/A		N/A
First Federal	$	309,868		11.97	%	$	207,048		8.0	%	$	258,809		10.0	%

(1) Excludes capital conservation buffer of 1.25% as of March 31, 2017

(2) Core capital is computed as a percentage of adjusted total assets of $2.87 billion for consolidated and the Bank, respectively. Risk-based capital is computed as a percentage of total risk-weighted assets of $2.59 billion for consolidated and the Bank, respectively.

December 31, 2016
	Actual					Minimum Required for Adequately Capitalized					Minimum Required for Well Capitalized
	Amount		Ratio			Amount		Ratio(1)			Amount		Ratio
CET1 Capital (to Risk-Weighted Assets) (2)
Consolidated	$	234,809		10.45	%	$	101,108		4.5	%		N/A		N/A
First Federal	$	242,928		10.81	%	$	101,116		4.5	%	$	146,057		6.5	%
Tier 1 Capital (1)
Consolidated	$	269,809		11.24	%	$	95,975		4.0	%		N/A		N/A
First Federal	$	242,928		10.14	%	$	95,791		4.0	%	$	119,739		5.0	%
Tier 1 Capital (to Risk Weighted Assets) (1)
Consolidated	$	269,809		12.01	%	$	134,811		6.0	%		N/A		N/A
First Federal	$	242,928		10.81	%	$	134,822		6.0	%	$	179,763		8.0	%
Total Capital (to Risk Weighted Assets) (1)
Consolidated	$	295,693		13.16	%	$	179,748		8.0	%		N/A		N/A
First Federal	$	268,812		11.96	%	$	179,763		8.0	%	$	224,703		10.0	%

(1) Excludes capital conservation buffer of 0.625% as of December 31, 2016

(2) Core capital is computed as a percentage of adjusted total assets of $2.40 billion for consolidated and $2.39 billion for the Bank. Risk-based capital is computed as a percentage of total risk-weighted assets of $2.25 billion for consolidated and the Bank.

72

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As discussed in detail in the Annual Report on Form 10-K for the year ended December 31, 2016, First Defiance’s ability to maximize net income is dependent on management’s ability to plan and control net interest income through management of the pricing and mix of assets and liabilities. Because a large portion of assets and liabilities of First Defiance are monetary in nature, changes in interest rates and monetary or fiscal policy affect its financial condition and can have significant impact on the net income of the Company. First Defiance does not use off-balance sheet derivatives to enhance its risk management, nor does it engage in trading activities beyond the sale of mortgage loans.

First Defiance monitors its exposure to interest rate risk on a monthly basis through simulation analysis that measures the impact changes in interest rates can have on net interest income. The simulation technique analyzes the effect of a presumed 100 basis point shift in interest rates (which is consistent with management’s estimate of the range of potential interest rate fluctuations) and takes into account prepayment speeds on amortizing financial instruments, loan and deposit volumes and rates, non-maturity deposit assumptions and capital requirements.

The table below presents, for the twelve months subsequent to March 31, 2017 and December 31, 2016, an estimate of the change in net interest income that would result from a gradual (ramp) and immediate (shock) change in interest rates, moving in a parallel fashion over the entire yield curve, relative to the measured base case scenario. Based on our net interest income simulation as of March 31, 2017, net interest income sensitivity to changes in interest rates for the twelve months subsequent to March 31, 2017 was mainly neutral for the ramp and shock compared to the sensitivity profile for the twelve months subsequent to December 31, 2016.

Net Interest Income Sensitivity Profile
	Impact on Future Annual Net Interest Income
(dollars in thousands)	March 31, 2017					December 31, 2016
Gradual Change in Interest Rates
+200	$	2,395		2.38	%	$	1,970		2.32	%
+100		1,172		1.16	%		972		1.14	%
-100		(3,290	)	-3.27	%		(2,201	)	-2.59	%
Immediate Change in Interest Rates
+200	$	4,590		4.56	%	$	4,236		4.99	%
+100		2,111		2.10	%		2,131		2.51	%
-100		(6,401	)	-6.36	%		(4,132	)	-4.87	%

To analyze the impact of changes in interest rates in a more realistic manner, non-parallel interest rate scenarios are also simulated. These non-parallel interest rate scenarios indicate that net interest income may decrease from the base case scenario should the yield curve flatten. Conversely, if the yield curve should steepen or become inverted, net interest income may increase.

73

The results of all the simulation scenarios are within the board mandated guidelines as of March 31, 2017 except for the down 100 basis points over the first twelve months in a static and dynamic-shock balance sheet as well as in the down 100 basis points for a cumulative twenty-four months in a static and dynamic ramp balance sheet. Management is reviewing the board policy limits in all scenarios to determine if they are adequate and if so, any measures to be taken to bring the current results back into alignment with board guidelines.

In addition to the simulation analysis, First Defiance also uses an economic value of equity (“EVE”) analysis to measure risk in the balance sheet incorporating all cash flows over the estimated remaining life of all balance sheet positions. The EVE analysis generally calculates the net present value of First Federal’s assets and liabilities in rate shock environments that range from -400 basis points to +400 basis points. However, the likelihood of a decrease in rates beyond 100 basis points as of March 31, 2017 was considered to be unlikely given the current interest rate environment and, therefore, was not included in this analysis. The results of this analysis are reflected in the following tables for the three months ended March 31, 2017 and the year-ended December 31, 2016.

March 31, 2017
Economic Value of Equity
Change in Rates	$ Amount		$ Change			% Change
	(Dollars in Thousands)
+400 bp		696,836		109,870			18.72	%
+ 300 bp		675,346		88,380			15.06	%
+ 200 bp		650,486		63,520			10.82	%
+ 100 bp		621,338		34,372			5.86	%
0 bp		586,966		-			-
- 100 bp		544,503		(42,463	)		(7.23	)%

December 31, 2016
Economic Value of Equity
Change in Rates	$ Amount		$ Change			% Change
	(Dollars in Thousands)
+400 bp		569,397		85,791			17.74	%
+ 300 bp		553,285		69,679			14.41	%
+ 200 bp		534,478		50,873			10.52	%
+ 100 bp		512,132		28,526			5.90	%
0 bp		483,606		-			-
- 100 bp		429,266		(34,339	)		(7.10	)%

74

Item 4. Controls and Procedures

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), Including those disclosure controls and procedures designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

An evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, 2017. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

No changes occurred in the Company’s internal controls over financial reporting during the quarter ended March 31, 2017 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

75

FIRST DEFIANCE FINANCIAL CORP.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings

Neither First Defiance nor any of its subsidiaries is engaged in any legal proceedings of a material nature.

Item 1A. Risk Factors

There are no material changes from the risk factors set forth under Part I, Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company has no unregistered sales of equity securities during the quarter ended March 31, 2017.

The following table provides information regarding First Defiance’s purchases of its common stock during the three-month period ended March 31, 2017:

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 (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs(1)
Beginning Balance, December 31, 2016								377,500
January 1 – January 31, 2017		-	$	-		-		377,500
February 1 – February 28, 2017		-		-		-		377,500
March 1 – March 31, 2017		-		-		-		377,500
Total		-	$	-		-		377,500

(1) On January 29, 2016, the Company announced that its Board of Directors authorized another program for the repurchase of up to 5% of the outstanding common shares or 450,000 shares. There is no expiration date for the new repurchase program.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

76

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Exhibit 2.1	Agreement and plan of merger, dated August 23, 2016, by and between First Defiance and Commercial Bancshares, Inc. (1)
Exhibit 2.2	Amendment to Agreement and Plan of Merger, dated October 31, 2016, by and between First Defiance and Commercial Bancshares, Inc. (2)
Exhibit 3.1	Articles of Incorporation of First Defiance (3)
Exhibit 3.2	Code of Regulations of First Defiance (3)
Exhibit 3.3	Certificate of Amendment to the Articles of Incorporation of First Defiance (4)
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101	The following financial information from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 is formatted in eXtensible Business Reporting Language (“XBRL”): (i) Unaudited Consolidated Condensed Statements of Financial Condition at March 31, 2017 and December 31, 2016, (ii) Unaudited Consolidated Condensed Statements of Income for the Three Months ended March 31, 2017 and 2016 (iii) Unaudited Consolidated Condensed Statements of Comprehensive Income for the Three Months ended March 31, 2017 and 2016, (iv) Unaudited Consolidated Condensed Statements of Changes in Stockholders’ Equity for the Three Months ended March 31, 2017 and 2016, (v) Unaudited Consolidated Condensed Statements of Cash Flows for the Three Months ended March 31, 2017 and 2016 and (vi) Notes to Unaudited Consolidated Condensed Financial Statements.

(1) Incorporated herein by reference to the like numbered exhibit in Form 8-K filed August 24, 2016 (Film No. 161848221).

(2) Incorporated herein by reference to the like numbered exhibit in Form 10-K for the year ended December 31, 2016 (Film No. 17645447).

(3) Incorporated herein by reference to the like numbered exhibit in the Registrant’s Form S-1 (File No. 33-93354), filed on June 9, 1995.

(4) Incorporated herein by reference to exhibit 3 in Form 8-K filed on December 8, 2008 (Film No. 081236105).

77

FIRST DEFIANCE FINANCIAL CORP.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	First Defiance Financial Corp.
	(Registrant)
Date: May 10, 2017	By:	/s/ Donald P. Hileman
		Donald P. Hileman
		President and
		Chief Executive Officer
Date: May 10, 2017	By:	/s/ Kevin T. Thompson
		Kevin T. Thompson
		Executive Vice President and
		Chief Financial Officer

78

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Donald P. Hileman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of First Defiance Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 10, 2017	/s/ Donald P. Hileman
	Donald P. Hileman
	President and
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Kevin T. Thompson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of First Defiance Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 10, 2017	/s/ Kevin T. Thompson
	Kevin T. Thompson
	Executive Vice President and
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Defiance Financial Corp. (the "Company") on Form 10-Q for the period ending March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Donald P. Hileman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this quarterly report on Form 10-Q that:

1. The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Report fairly presents, in all material respects, the Company's financial condition and results of operations.

Date: May 10, 2017	/s/ Donald P. Hileman
	Donald P. Hileman
	Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Defiance Financial Corp. (the "Company") on Form 10-Q for the period ending March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kevin T. Thompson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this quarterly report on Form 10-Q that:

1. The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Report fairly presents, in all material respects, the Company's financial condition and results of operations.

Date: May 10, 2017	/s/ Kevin T. Thompson
	Kevin T. Thompson
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Apr. 28, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Entity Registrant Name	FIRST DEFIANCE FINANCIAL CORP
Entity Central Index Key	0000946647
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Trading Symbol	FDEF
Entity Common Stock, Shares Outstanding		10,145,890

XML

Consolidated Condensed Statements of Financial Condition - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Cash and cash equivalents:
Cash and amounts due from depository institutions	$ 53,998	$ 53,003
Federal funds sold	116,000	46,000
Cash and cash equivalents at beginning of year	169,998	99,003
Securities available-for-sale, carried at fair value	260,601	250,992
Securities held-to-maturity, carried at amortized cost (fair value $773 and $187 at March 31, 2017 and December 31, 2016, respectively)	771	184
Marketable Securities, Total	261,372	251,176
Securities:
Loans held for sale	7,955	9,607
Loans receivable, net of allowance of $25,749 at March 31, 2017 and $25,884 at December 31, 2016, respectively	2,212,257	1,914,603
Mortgage servicing rights	9,672	9,595
Accrued interest receivable	8,872	6,760
Federal Home Loan Bank stock	15,992	13,798
Bank owned life insurance	64,968	52,817
Premises and equipment	42,824	36,958
Real estate and other assets held for sale	705	455
Goodwill	90,768	61,798
Core deposit and other intangibles	6,004	1,336
Deferred Taxes	1,219	2,212
Other assets	36,091	17,479
Total assets	2,928,697	2,477,597
Liabilities:
Deposits	2,373,789	1,981,628
Advances from the Federal Home Loan Bank	105,104	103,943
Subordinated debentures	36,083	36,083
Securities sold under repurchase agreements	24,891	31,816
Advance payments by borrowers	1,840	2,650
Other liabilities	32,799	28,459
Total liabilities	2,574,506	2,184,579
Stockholders’ equity:
Preferred stock, $.01 par value per share: 37,000 shares authorized; no shares issued	0	0
Preferred stock, $.01 par value per share: 4,963,000 shares authorized; no shares issued	0	0
Common stock, $.01 par value per share: 25,000,000 shares authorized; 12,713,385 and 12,720,347 shares issued and 10,143,052 and 8,983,206 shares outstanding, respectively	127	127
Additional paid-in capital	160,397	126,390
Accumulated other comprehensive income, net of tax of $670 and $117, respectively	1,242	215
Retained earnings	243,446	240,592
Treasury stock, at cost, 2,570,333 and 3,737,141 shares respectively	(51,021)	(74,306)
Total stockholders’ equity	354,191	293,018
Total liabilities and stockholders’ equity	$ 2,928,697	$ 2,477,597

XML

Consolidated Condensed Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2017		Dec. 31, 2016
Held-to-maturity, fair value (in dollars)	$ 773	[1]	$ 187
Loans receivable, allowance (in dollars)	$ 25,749		$ 25,884
Common stock, par value (in dollars per share)	$ 0.01		$ 0.01
Common stock, shares authorized	25,000,000		25,000,000
Common Stock, Shares Issued	12,713,385		12,720,347
Common stock, shares outstanding	10,143,052		8,983,206
Accumulated other comprehensive income, tax effect (in dollars)	$ 670		$ 117
Treasury stock, shares	2,570,333		3,737,141
Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.01		$ 0.01
Preferred stock, shares authorized	4,963,000		4,963,000
Preferred stock, shares issued	0		0
Cumulative Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.01		$ 0.01
Preferred stock, shares authorized	37,000		37,000
Preferred stock, shares issued	0		0

[1] FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

XML

Consolidated Condensed Statements of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Interest Income
Loans	$ 21,969	$ 19,312
Investment securities:
Taxable	979	843
Non-taxable	777	787
Interest-bearing deposits	145	49
FHLB stock dividends	166	139
Total interest income	24,036	21,130
Interest Expense
Deposits	1,796	1,433
FHLB advances and other	366	297
Subordinated debentures	215	175
Securities sold under repurchase agreements	14	37
Total interest expense	2,391	1,942
Net interest income	21,645	19,188
Provision for loan losses	55	364
Net interest income after provision for loan losses	21,590	18,824
Non-interest Income
Service fees and other charges	2,760	2,644
Insurance commission income	3,457	3,136
Mortgage banking income	1,738	1,539
Gain on sale of non-mortgage loans	0	45
Gain on sale of securities	0	131
Trust income	450	427
Income from Bank Owned Life Insurance	1,823	231
Other non-interest income	321	483
Total non-interest income	10,549	8,636
Non-interest Expense
Compensation and benefits	14,335	10,185
Occupancy	1,837	1,785
FDIC insurance premium	290	327
Financial institutions tax	480	446
Data processing	1,939	1,460
Amortization of intangibles	232	157
Other non-interest expense	4,029	2,914
Total non-interest expense	23,142	17,274
Income before income taxes	8,997	10,186
Federal income taxes	3,857	3,017
Net Income	$ 5,140	$ 7,169
Earnings per common share (Note 6)
Basic	$ 0.54	$ 0.8
Diluted	0.54	0.79
Dividends declared per share (Note 5)	$ 0.25	$ 0.22
Average common shares outstanding (Note 6)
Basic	9,441	8,994
Diluted	9,497	9,064

XML

Consolidated Condensed Statements of Comprehensive Income - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Net income		$ 5,140	$ 7,169
Other comprehensive income:
Unrealized gains on securities available for sale		1,580	1,450
Reclassification adjustments for security (gains) losses included in net income	[1]	0	(131)
Income tax expense		(553)	(462)
Change in unrealized gain/(loss) on postretirement benefit:
Other comprehensive income		1,027	857
Comprehensive income		$ 6,167	$ 8,026

[1] Amounts are included in gains on sale or call of securities on the Consolidated Condensed Statements of Income. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the three months ended March 31, 2017 and 2016 was $0 and $46, respectively.

XML

Consolidated Condensed Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Condensed Statement of Income Captions [Line Items]
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax	$ 0	$ 46

XML

Consolidated Statement of Changes in Stockholders’ Equity - USD ($) $ in Thousands	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income [Member]	Retained Earnings [Member]	Treasury Stock [Member]
Balance at Dec. 31, 2015	$ 280,197	$ 0	$ 127	$ 125,734	$ 3,622	$ 219,737	$ (69,023)
Balance (in shares) at Dec. 31, 2015			9,102,831
Net income	7,169					7,169
Other comprehensive income	857				857
Stock based compensation expenses	119			119
Shares issued under stock option plan	262			(91)			353
Shares issued under stock option plan (in shares)			16,770
Restricted share activity under stock incentive plans	64			(124)		0	188
Restricted share activity under stock incentive plans (in shares)			9,033
Shares issued from direct stock sales	9			4			5
Shares issued from direct stock sales (in shares)			233
Shares repurchased	(6,293)						(6,293)
Shares repurchased (in shares)			(167,746)
Common stock dividends declared	(1,966)					(1,966)
Balance at Mar. 31, 2016	280,418	0	$ 127	125,642	4,479	224,940	(74,770)
Balance (in shares) at Mar. 31, 2016			8,961,121
Balance at Dec. 31, 2016	293,018	0	$ 127	126,390	215	240,591	(74,306)
Balance (in shares) at Dec. 31, 2016			8,983,206
Net income	5,140					5,140
Other comprehensive income	1,027				1,027
Stock based compensation expenses	45			45
Shares issued under stock option plan	134			22		(39)	151
Shares issued under stock option plan (in shares)			588
Capital stock issuance	56,532			33,792			22,740
Capital stock issuance (in shares)			1,139,502
Restricted share activity under stock incentive plans	525			138			387
Restricted share activity under stock incentive plans (in shares)			19,416
Shares issued from direct stock sales	17			10			7
Shares issued from direct stock sales (in shares)			340
Common stock dividends declared	(2,246)					(2,246)
Balance at Mar. 31, 2017	$ 354,191	$ 0	$ 127	$ 160,397	$ 1,242	$ 243,446	$ (51,021)
Balance (in shares) at Mar. 31, 2017			10,143,052

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Consolidated Statement of Changes in Stockholders’ Equity (Parenthetical) - shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Stock Repurchased and Retired (in shares)	6,962	900

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Operating Activities
Net income	$ 5,140	$ 7,169
Items not requiring (providing) cash
Provision for loan losses	55	364
Depreciation	867	818
Amortization of mortgage servicing rights, net of impairment recoveries	279	332
Amortization of core deposit and other intangible assets	232	157
Net amortization of premiums and discounts on loans and deposits	27	88
Amortization of premiums and discounts on securities	240	193
Change in deferred taxes	777	264
Proceeds from sale of loans held for sale	48,356	40,341
Originations of loans held for sale	(45,977)	(42,444)
Gain on sale of loans	(1,083)	(1,039)
Gain from sale or call of securities	0	(131)
(Gain) loss on sale / write-down of real estate and other assets held for sale	0	(265)
Stock option expense	45	119
Restricted stock expense	525	64
Income from bank owned life insurance	(1,823)	(231)
Excess tax benefit (expense) on stock compensation plans	(162)	(99)
Changes in:
Accrued interest receivable	(790)	(730)
Other assets	(1,801)	(793)
Other liabilities	3,364	672
Net cash provided by operating activities	8,271	4,849
Investing Activities
Proceeds from maturities of held-to-maturity securities	5	8
Proceeds from maturities, calls and pay-downs of available-for-sale securities	5,960	7,903
Proceeds from sale of real estate and other assets held for sale	9	884
Proceeds from the sale of available-for-sale securities	0	5,360
Proceeds from sale of non-mortgage loans	9,880	2,828
Purchases of available-for-sale securities	(8,815)	(2,875)
Proceeds from Federal Home Loan stock redemption	0	1
Net cash received in acquisition	25,840	0
Investment in bank owned life insurance	(20,000)	0
Purchase of portfolio mortgage loans	(10,133)	0
Purchases of premises and equipment, net	(1,278)	(562)
Net increase in loans receivable	(12,851)	(26,127)
Net cash used by investing activities	(11,383)	(12,580)
Financing Activities
Net increase in deposits and advance payments by borrowers	83,369	34,124
Repayment of Federal Home Loan Bank advances	(242)	(238)
Proceeds from Federal Home Loan Bank advances	0	25,000
Increase in securities sold under repurchase agreements	(6,925)	797
Proceeds from exercise of stock options	134	314
Proceeds from treasury stock sales	17	9
Net cash paid for repurchase of common stock	0	(6,293)
Cash dividends paid on common stock	(2,246)	(1,966)
Net cash paid for repurchase of common stock	74,107	51,747
Increase (decrease) in cash and cash equivalents	70,995	44,016
Cash and cash equivalents at beginning of period	99,003	79,769
Cash and cash equivalents at end of period	169,998	123,785
Supplemental cash flow information:
Interest paid	2,308	1,889
Income taxes paid	0	300
Transfers from loans to real estate and other assets held for sale	259	409
Securities purchased but not yet settled	1,668	529
Sale of bank owned life insurance not yet settled	$ 17,840	$ 0

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Basis of Presentation

3 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Basis of Presentation

 

First Defiance Financial Corp. (“First Defiance” or the “Company”) is a unitary thrift holding company that conducts business through its three wholly owned subsidiaries, First Federal Bank of the Midwest (“First Federal”), First Insurance Group of the Midwest, Inc. (“First Insurance”), and First Defiance Risk Management Inc. (“First Defiance Risk Management”). All significant intercompany transactions and balances are eliminated in consolidation.

First Federal is primarily engaged in attracting deposits from the general public through its offices and using those and other available sources of funds to originate loans primarily in the counties in which its offices are located. First Federal’s traditional banking activities include originating and servicing residential, non-residential real estate, commercial, home improvement and home equity and consumer loans and providing a broad range of depository, trust and wealth management services. In addition, First Federal invests in U.S. Treasury and federal government agency obligations, obligations of the State of Ohio and its political subdivisions, mortgage-backed securities that are issued by federal agencies, including real estate mortgage investment conduits (“REMICs”) and collateralized mortgage obligations (“CMOs”), and corporate bonds. First Insurance is an insurance agency that conducts business through offices located in the Defiance, Maumee, Oregon, Bryan, Lima and Bowling Green, Ohio areas. First Insurance offers property and casualty insurance, life insurance and group health insurance. First Defiance Risk Management is a wholly-owned insurance company subsidiary of the Company that insures the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. First Defiance Risk Management pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves.

The consolidated condensed statement of financial condition at December 31, 2016 has been derived from the audited financial statements at that date, which were included in First Defiance’s Annual Report on Form 10-K for the year ended December 31,2016.

The accompanying consolidated condensed financial statements as of March 31, 2017 and for the three month periods ended March 31, 2017 and 2016 have been prepared by First Defiance without audit and do not include information or footnotes necessary for the complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States. These consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in First Defiance's 2016 Annual Report on Form 10-K for the year ended December 31, 2016. However, in the opinion of management, all adjustments, consisting of only normal recurring items, necessary for the fair presentation of the financial statements have been made. The results for the three month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the entire year.

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2. Significant Accounting Policies

 

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for the calculation. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options, restricted stock awards and stock grants.

Goodwill and Other Intangibles

Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected November 30 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on First Defiance’s balance sheet.

Other intangible assets consist of core deposit and acquired customer relationship intangible assets arising from whole bank, insurance and branch acquisitions. They are initially recorded at fair value and then amortized on an accelerated basis over their estimated lives, which range from five years for non-compete agreements to 10 to 20 years for core deposit and customer relationship intangibles.

 

Newly Issued Accounting Standards

In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2017-08, “Premium Amortization on Purchased Callable Debt Securities.” This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the provisions of ASU No. 2017-08 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” Under the new guidance, employers will present the service cost component of the net periodic benefit cost in the same income statement line item (e.g., Salaries and Benefits) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components separately (e.g., Other Noninterest Expense) from the line item that includes the service cost. ASU No. 2017-07 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, however, the Company has decided not to early adopt. Employers will apply the guidance on the presentation of the components of net periodic benefit cost in the income statement retrospectively. The guidance limiting the capitalization of net periodic benefit cost in assets to the service cost component will be applied prospectively. The Company expects to utilize the ASU’s practical expedient allowing entities to estimate amounts for comparative periods using the information previously disclosed in their pension and other postretirement benefit plan footnote. ASU No. 2017-07 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment.” The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. ASU No. 2017-04 is effective for interim and annual reporting periods beginning after December 15, 2019, applied prospectively. Early adoption is permitted for any impairment tests performed after January 1, 2017. The Company expects to early adopt upon the next goodwill impairment test in 2017. ASU No. 2017-04 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company has begun its implementation efforts by establishing a Company-wide implementation committee. The committee’s initial review indicates the Company has maintained sufficient historical loan data to support the requirement of this pronouncement and is currently evaluating the various loss methodologies to determine their correlations to the Company’s loan segments historical performance.

In February 2016, the FASB issued ASU No. 2016-02 — Leases (Topic 842). The objective of the update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this standard will have on its financial position and results of operations, though the Company expects that its real estate leases will be recognized on the consolidated balance sheet.

In January 2016, the FASB issued ASU No. 2016-01 — Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2017, and requires a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Early adoption is not permitted. The Company is currently evaluating the impact of adopting the new guidance on the consolidated financial statements. Management’s preliminary finding is that the new pronouncement will not have a significant impact on its results of operations. The pronouncement will require some revision to the Company’s disclosures within the consolidated financial statements and is currently evaluating the impact.

In May 2014, the FASB and the International Accounting Standards Board (the “IASB”) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP and International Financial Reporting Standards (“IFRS”). Previous revenue recognition guidance in GAAP consisted of broad revenue recognition concepts together with numerous revenue requirements for particular industries or transactions, which sometimes resulted in different accounting for economically similar transactions. In contrast, IFRS provided limited revenue recognition guidance and, consequently, could be difficult to apply to complex transactions. Accordingly, the FASB and the IASB initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would: (1) remove inconsistencies and weaknesses in revenue requirements; (2) provide a more robust framework for addressing revenue issues; (3) improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (4) provide more useful information to users of financial statements through improved disclosure requirements; and (5) simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. To meet those objectives, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard was initially effective for public entities for interim and annual reporting periods beginning after December 15, 2016; early adoption was not permitted. However, in August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers - Deferral of the Effective Date” which deferred the effective date by one year (i.e., interim and annual reporting periods beginning after December 15, 2017). For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. In addition, the FASB has begun to issue targeted updates to clarify specific implementation issues of ASU 2014-09. These updates include ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” ASU No. 2016-12, “Narrow-Scope Improvements and Practical Expedients,” and ASU No. 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” Since the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, the Company does not expect the new guidance to have a material impact on revenue most closely associated with financial instruments, including interest income and expense. The Company is currently performing an overall assessment of revenue streams and reviewing contracts potentially affected by the ASU including trust and asset management fees, deposit related fees, interchange fees, and insurance commission income, to determine the potential impact the new guidance is expected to have on the Company’s Consolidated Financial Statements. The Company plans to adopt ASU No. 2014-09 on January 1, 2018 utilizing the modified retrospective approach.

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Fair Value

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value, Measurement Inputs, Disclosure [Text Block]

3. Fair Value

 

FASB ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

FASB ASC Topic 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on the best information available. In that regard, FASB ASC Topic 820 established a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

⋅ 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 than 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.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Available for sale securities - Securities classified as available for sale are generally reported at fair value utilizing Level 2 inputs where the Company obtains fair value measurements from an independent pricing service that uses matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows and the bonds’ terms and conditions, among other things. Securities in Level 1 include federal agency preferred stock securities. Securities in Level 2 include U.S. Government agencies, mortgage-backed securities, corporate bonds and municipal securities.

Impaired loans - Fair values for impaired collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure.  Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach.  The cost method bases value on the cost to replace the current property.  Value of market comparison approach evaluates the sales price of similar properties in the same market area.  The income approach considers net operating income generated by the property and an investors required return.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Comparable sales adjustments are based on known sales prices of similar type and similar use properties and duration of time that the property has been on the market to sell.  Such adjustments made in the appraisal process are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Real Estate held for sale - Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are then reviewed monthly by members of the asset review committee for valuation changes and are accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which may utilize a single valuation approach or a combination of approaches including cost, comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  Once received, a member of the Company’s asset quality or collections department reviews the assumptions and approaches utilized in the appraisal.  Appraisal values are discounted from 0% to 20% to account for other factors that may impact the value of collateral. In determining the value of impaired collateral dependent loans and other real estate owned, significant unobservable inputs may be used, which include:  physical condition of comparable properties sold, net operating income generated by the property and investor rates of return.

Mortgage servicing rights – On a quarterly basis, mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value. Fair value is determined at a tranche level based on a model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and are validated against available market data (Level 2).

Mortgage banking derivative - The fair value of mortgage banking derivatives are evaluated monthly based on derivative valuation models using quoted prices for similar assets adjusted for specific attributes of the commitments and other observable market data at the valuation date (Level 2).

The following table summarizes the financial assets measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Recurring Basis

	Level 1		Level 2		Level 3		Total Fair
March 31, 2017	Inputs		Inputs		Inputs		Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	3,954	$	-	$	3,954
Mortgage-backed - residential		-		80,872		-		80,872
REMICs		-		1,260		-		1,260
Collateralized mortgage obligations- residential		-		66,291		-		66,291
Preferred stock		1		-		-		1
Corporate bonds				13,083		-		13,083
Obligations of state and political  subdivisions		-		95,140		-		95,140
Mortgage banking derivative - asset		-		598		-		598
Mortgage banking derivative - liability		-		42		-		42

	Level 1		Level 2		Level 3		Total Fair
December 31, 2016	Inputs		Inputs		Inputs		Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. Government  corporations and agencies	$	-	$	3,915	$	-	$	3,915
Mortgage-backed - residential		-		81,707		-		81,707
REMICs		-		1,307		-		1,307
Collateralized mortgage obligations-residential		-		63,005		-		63,005
Preferred stock		2		-		-		2
Corporate bonds		-		13,013		-		13,013
Obligations of state and political subdivisions		-		88,043				88,043
Mortgage banking derivative - asset		-		491		-		491

The following table summarizes the financial assets measured at fair value on a non-recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Non-Recurring Basis

							Total Fair
March 31, 2017	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Value
	(In Thousands)
Impaired loans
Commercial Real Estate	$	-	$	-	$	1,252	$	1,252
Total Impaired loans		-		-		1,252		1,252
Mortgage servicing rights		-		1,131				1,131

							Total Fair
December 31, 2016	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	316	$	316
Multi Family Residential		-		-		-		-
Commercial Real Estate		-		-		848		848
Commercial						332		332
Home Equity and Improvement		-		-		-		-
Total impaired loans		-		-		1,496		1,496
Mortgage servicing rights		-		657		-		657
Real estate held for sale
Residential		-		-		-		-
Commercial Real Estate		-		-		377		377
Total Real Estate held for sale		-		-		377		377

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of March 31, 2017, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair				Range of			Weighted
	Value		Valuation Technique	Unobservable Inputs	Inputs			Average
			(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	1,252	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		10	%		10	%

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of December 31, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair				Range of			Weighted
	Value		Valuation Technique	Unobservable Inputs	Inputs			Average
			(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	1,496	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		10-30	%		11	%
Real estate held for sale – Applies to all classes	$	377	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions		0-20	%		7	%

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a fair value of $1.3 million, with no valuation allowance and a fair value of $1.5 million, with a $1,000 valuation allowance at March 31, 2017 and December 31, 2016, respectively. A provision expense of $208,000 for the three months ended March 31, 2017 and a provision recovery of $119,000 for the three months ended March 31, 2016 was included in earnings.

Mortgage servicing rights which are carried at the lower of cost or fair value, had a fair value of $1.1 million with a valuation allowance of $489,000 and a fair value of $657,000 with a valuation allowance of $522,000 at March 31, 2017 and December 31, 2016, respectively. A recovery of $33,000 and a charge of $21,000 for the three months ended March 31, 2017 and March 31, 2016, respectively, were included in earnings.

Real estate held for sale is determined using Level 3 inputs which include appraisals and are adjusted for estimated costs to sell. The impact to earnings of the change in fair value of real estate held for sale was not material for the three months ended March 31, 2017. The change in fair value of real estate held for sale was $53,000 for the three months ended March 31, 2016, which was recorded directly as an adjustment to current earnings through non-interest expense.

In accordance with FASB ASC Topic 825, the Fair Value Measurements tables are a comparative condensed consolidated statement of financial condition based on carrying amount and estimated fair values of financial instruments as of March 31, 2017 and December 31, 2016. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of First Defiance.

Much of the information used to arrive at “fair value” is highly subjective and judgmental in nature and therefore the results may not be precise. Subjective factors include, among other things, estimated cash flows, risk characteristics and interest rates, all of which are subject to change. With the exception of investment securities, the Company’s financial instruments are not readily marketable and market prices do not exist. Since negotiated prices for the instruments, which are not readily marketable depend greatly on the motivation of the buyer and seller, the amounts that will actually be realized or paid per settlement or maturity of these instruments could be significantly different.

The carrying amount of cash and cash equivalents, term notes payable and advance payments by borrowers for taxes and insurance, as a result of their short-term nature, is considered to be equal to fair value and are classified as Level 1.

It was not practicable to determine the fair value of Federal Home Loan Bank (“FHLB”) stock due to restrictions placed on its transferability.

The fair value of loans that reprice within 90 days is equal to their carrying amount. For other loans, the estimated fair value is calculated based on discounted cash flow analysis, using interest rates currently being offered for loans with similar terms, resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as previously described. The allowance for loan losses is considered to be a reasonable adjustment for credit risk. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. The fair value of loans held for sale is estimated based on binding contracts and quotes from third party investors resulting in a Level 2 classification.

The fair value of accrued interest receivable is equal to the carrying amounts resulting in a Level 2 or Level 3 classification which is consistent with its underlying value.

The fair value of non-interest bearing deposits are considered equal to the amount payable on demand at the reporting date (i.e. carrying value) and are classified as Level 1. The fair value of savings, NOW and certain money market accounts are equal to their carrying amounts and are a Level 2 classification. Fair values of fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

The fair values of securities sold under repurchase agreements are equal to their carrying amounts resulting in a Level 2 classification. The carrying value of subordinated debentures and deposits with fixed maturities is estimated based discounted cash flow analyses based on interest rates currently being offered on instruments with similar characteristics and maturities resulting in a Level 3 classification.

FHLB advances with maturities greater than 90 days are valued based on discounted cash flow analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 2 classification. The cost or value of any call or put options is based on the estimated cost to settle the option at March 31, 2017.

			Fair Value Measurements at March 31, 2017
			(In Thousands)
	Carrying
	Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	169,998	$	169,998	$	169,998	$	-	$	-
Investment securities		261,372		261,374		1		261,373		-
Federal Home Loan Bank Stock		15,992		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		2,221,070		2,207,503		-		8,425		2,199,078
Accrued interest receivable		8,872		8,872		5		1,465		7,402
Financial Liabilities:
Deposits	$	2,373,789	$	2,380,541	$	579,943	$	1,800,598	$	-
Advances from Federal Home Loan Bank		105,104		104,500		-		104,500		-
Securities sold under repurchase agreements		24,891		24,891		-		24,891		-
Subordinated debentures		36,083		34,735		-		-		34,735

			Fair Value Measurements at December 31, 2016
			(In Thousands)
	Carrying
	Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	99,003	$	99,003	$	99,003	$	-	$	-
Investment securities		251,176		251,179		2		251,177		-
Federal Home Loan Bank Stock		13,798		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,924,210		1,911,280		-		9,917		1,901,363
Accrued interest receivable		6,760		6,760		9		867		5,884
Financial Liabilities:
Deposits	$	1,981,628	$	1,987,723	$	487,663	$	1,500,060	$	-
Advances from Federal Home Loan Bank		103,943		103,019		-		103,019		-
Securities sold under repurchase agreements		31,816		31,816		-		31,816		-
Subordinated debentures		36,083		34,718		-		-		34,718

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Stock Compensation Plans

3 Months Ended

Mar. 31, 2017

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

4. Stock Compensation Plans

 

First Defiance has established equity based compensation plans for its directors and employees. On March 15, 2010, the Board adopted, and the shareholders approved at the 2010 Annual Shareholders Meeting, the First Defiance Financial Corp. 2010 Equity Incentive Plan (the “2010 Equity Plan”). The 2010 Equity Plan replaced all existing plans. All awards currently outstanding under prior plans will remain in effect in accordance with their respective terms. Any new awards will be made under the 2010 Equity Plan. The 2010 Equity Plan allows for issuance of up to 350,000 common shares through the award of options, stock grants, restricted stock units (“RSU”), stock appreciation rights or other stock-based awards.

As of March 31, 2017, 47,200 options had been granted and remain outstanding at option prices based on the market value of the underlying shares on the date the options were granted. Options granted under all plans vest 20% per year except for the 2009 grant to the Company’s executive officers, which vested 40% in 2011 and then 20% annually. All options expire ten years from the date of grant. Vested options of retirees expire on the earlier of the scheduled expiration date or three months after the retirement date.

In each of the years 2016-2017, the Company approved a Short-Term (“STIP”) Equity Incentive Plan and a Long-Term (“LTIP”) Equity Incentive Plan for selected members of management.

Under the 2016 and 2017 STIPs, the participants could earn up to 10% to 45% of their salary for potential payout based on the achievement of certain corporate performance targets during the calendar year. The final amount of benefits under the STIPs is determined as of December 31 of the same year and paid out in cash in the first quarter of the following year. The participants are required to be employed on the day of payout in order to receive such payment.

Under each LTIP, the participants may earn up to 20% to 45% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three-year period. The Company granted 24,526 and 20,657 RSU’s to the participants in the 2016 and 2017 LTIPs, respectively, effective January 1 in the year the award was made, which represents the maximum target award. The amount of benefit under each LTIP will be determined individually at the end of the 36 month performance period ending December 31. The benefits earned under each LTIP will be paid out in equity in the first quarter following the end of the performance period. The participants are required to be employed on the day of payout in order to receive such payment.

A total of 19,219 RSU’s were issued to the participants of the 2014 LTIP in the first quarter of 2017 for the three year performance period ended December 31, 2016.

In the three months ended March 31, 2017, the Company also granted to employees 2,924 restricted shares, of which 2,727 were restricted stock units and 197 were restricted stock grants. All of these have a three year vesting period. The fair value of all granted restricted shares was determined by the stock price at the date of the grant.

The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

The fair value of stock options granted during the three months ended March 31, 2016 was determined at the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:

	Three Months ended
	March 31, 2017		March 31, 2016
Expected average risk-free rate		-		2.24	%
Expected average life		-		10.00 years
Expected volatility		-		41.00	%
Expected dividend yield		-		2.33	%

There were no options granted during the three months ended March 31, 2017. The weighted-average fair value of options granted was $13.95 for the three months ended March 31, 2016.

Following is stock option activity under the plans during the three months ended March 31, 2017:

					Weighted
					Average		Aggregate
			Weighted		Remaining		Intrinsic
	Options		Average		Contractual Term		Value
	Outstanding		Exercise Price		(in years)		(in 000’s)
Options outstanding, January 1, 2017		54,750	$	22.21
Forfeited or cancelled		-		-
Exercised		(7,550)		22.89
Granted		-		-
Options outstanding, March 31, 2017		47,200	$	22.12		3.65	$	1,300
Vested or expected to vest at March 31, 2017		47,200	$	22.12		3.65	$	1,300
Exercisable at March 31, 2017		35,100	$	18.50		2.22	$	1,096

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows (in thousand’s):

	Three Months Ended March 31,
	2017		2016
Proceeds of options exercised	$	134	$	314
Related tax benefit recognized		44		75
Intrinsic value of options exercised		200		326

As of March 31, 2017, there was $143,000 of total unrecognized compensation cost related to unvested stock options granted under the Company’s equity plans. The cost is expected to be recognized over a weighted-average period of 2.93 years.

At March 31, 2017, 72,660 RSU’s and 4,569 stock grants were outstanding. Compensation expense is recognized over the performance period based on the achievements of targets as established under the plan documents. A total expense of $849,000 was recorded during the three months ended March 31, 2017 compared to an expense of $261,000 for the same period in 2016. The increase in expense is attributable to the Company’s better performance in comparison to its targets. There was approximately $188,000 included within other liabilities at March 31, 2017 related to the STIP.

	Restricted Stock Units				Stock Grants
			Weighted-Average				Weighted-Average
			Grant Date				Grant Date
Unvested Shares	Shares		Fair Value		Shares		Fair Value
Unvested at January 1, 2017		75,468	$	32.31		11,161	$	32.30
Granted		23,384		50.56		19,416		26.02
Vested		(19,219)		25.77		(24,986)		25.82
Forfeited		(6,973)		25.77		(1,022)		37.02
Unvested at March 31, 2017		72,660	$	40.54		4,569	$	40.01

The maximum amount of compensation expense that may be recorded for the 2017 STIP and the 2015, 2016 and 2017 LTIPs at March 31, 2017 is approximately $3.8 million. However, the estimated expense expected to be recorded as of March 31, 2017 based on the performance measures in the plans, is $3.5 million of which $2.2 million is unrecognized at March 31, 2017 and will be recognized over the remaining performance periods.

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Dividends on Common Stock

3 Months Ended

Mar. 31, 2017

Dividends, Common Stock [Abstract]

Dividend on Common Stock [Text Block]

5.       Dividends on Common Stock

 

First Defiance declared and paid a $0.25 per common stock dividend in the first quarter of 2017 and declared and paid a $0.22 per common stock dividend in the first quarter of 2016.

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

6.       Earnings Per Common Share

 

Basic earnings per share are calculated using the two-class method. The two-class method is an earnings allocation formula under which earnings per share is calculated from common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings distributed and undistributed, are allocated to participating securities and common shares based on their respective rights to receive dividends. Unvested share-based payment awards that contain non-forfeitable rights to dividends are considered participating securities (i.e. unvested restricted stock), not subject to performance based measures.

The following table sets forth the computation of basic and diluted earnings per common share:

	Three Months Ended March 31,
	2017		2016
	(In Thousands, except per share data)
Basic Earnings Per Share:
Net income available to common shareholders	$	5,140	$	7,169
Less: Income allocated to participating securities		1		3
Net income allocated to common shareholders		5,139		7,166
Weighted average common shares outstanding Including participating securities		9,446		9,006
Less: Participating securities		5		12
Average common shares		9,441		8,994
Basic earnings per common share	$	0.54	$	0.80
Diluted Earnings Per Share:
Net income allocated to common shareholders	$	5,139	$	7,166
Weighted average common shares outstanding for basic earnings per common share		9,441		8,994
Add: Dilutive effects of stock options		56		70
Average shares and dilutive potential common shares		9,497		9,064
Diluted earnings per common share	$	0.54	$	0.79

Shares subject to issue upon exercise of options of 4,569 in 2017 and 12,550 in 2016 were excluded from the diluted earnings per common share calculation as they were anti-dilutive.

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Investment Securities

3 Months Ended

Mar. 31, 2017

Marketable Securities [Abstract]

Investment [Text Block]

7. Investment Securities

The following is a summary of available-for-sale and held-to-maturity securities:

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In Thousands)
At March 31, 2017
Available-for-Sale Securities:
Obligations of U.S. government corporations and agencies	$	4,000	$	-	$	(46)	$	3,954
Mortgage-backed securities – residential		81,016		587		(731)		80,872
REMICs		1,258		2		-		1,260
Collateralized mortgage obligations		66,263		497		(469)		66,291
Trust preferred securities and preferred stock		-		1		-		1
Corporate bonds		12,917		171		(5)		13,083
Obligations of state and political subdivisions		92,791		2,800		(451)		95,140
Totals	$	258,245	$	4,058	$	(1,702)	$	260,601

	Amortized		Gross		Gross		Fair Value
	Cost		Unrecognized		Unrecognized
			Gains		Losses
	(In Thousands)
Held-to-Maturity Securities*:
FHLMC certificates	$	11	$	-	$	-	$	11
FNMA certificates		54		1		-		55
GNMA certificates		21		1		-		22
Obligations of state and political subdivisions		685		-		-		685
Totals	$	771	$	2	$	-	$	773

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
At December 31, 2016
Available-for-sale
Obligations of U.S. government corporations and agencies	$	4,000	$	-	$	(85)	$	3,915
Mortgage-backed securities - residential		82,619		390		(1,302)		81,707
REMICs		1,309		-		(2)		1,307
Collateralized mortgage obligations		63,204		422		(621)		63,005
Preferred stock		-		2		-		2
Corporate bonds		12,919		97		(3)		13,013
Obligations of state and political subdivisions		86,165		2,491		(613)		88,043
Total Available-for-Sale	$	250,216	$	3,402	$	(2,626)	$	250,992

			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Held-to-Maturity
FHLMC certificates	$	12	$	-	$	-	$	12
FNMA certificates		56		2		-		58
GNMA certificates		23		1		-		24
Obligations of states and political subdivisions		93		-		-		93
Total Held-to-Maturity	$	184	$	3	$	-	$	187

* FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

The amortized cost and fair value of the investment securities portfolio at March 31, 2017 are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMO”) and REMICs, which are not due at a single maturity date, have not been allocated over the maturity groupings. These securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Due in one year or less	$	1,457	$	1,463	$	-	$	-
Due after one year through five years		22,620		22,993		93		93
Due after five years through ten years		43,015		44,719		592		592
Due after ten years		42,616		43,003		-		-
MBS/CMO/REMIC		148,537		148,423		86		88
	$	258,245	$	260,601	$	771	$	773

Investment securities with a carrying amount of $160.6 million at March 31, 2017 were pledged as collateral on public deposits, securities sold under repurchase agreements and the Federal Reserve discount window.

As of March 31, 2017, the Company’s investment portfolio consisted of 445 securities, 101 of which were in an unrealized loss position.

The following tables summarize First Defiance’s securities that were in an unrealized loss position at March 31, 2017 and December 31, 2016:

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At March 31, 2017
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	3,954	$	(46)	$	-	$	-	$	3,954	$	(46)
Mortgage-backed securities-residential		38,918		(731)		-		-		38,918		(731)
Collateralized mortgage obligations		26,997		(422)	$	1,187	$	(47)		28,184		(469)
Obligations of state and political subdivisions		13,501		(451)		-		-		13,501		(451)
Corporate bonds		-		-		995		(5)		995		(5)
Total temporarily impaired securities	$	83,370	$	(1,650)	$	2,182	$	(52)	$	85,552	$	(1,702)

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At December 31, 2016
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	3,915	$	(85)	$	-	$	-	$	3,915	$	(85)
Mortgage-backed securities-residential		63,736		(1,302)		-		-		63,736		(1,302)
REMICs		1,308		(2)		-		-		1,308		(2)
Collateralized mortgage obligations		28,882		(566)		1,227		(55)		30,110		(621)
Corporate bonds		-		-		997		(3)		997		(3)
Obligations of state and political subdivisions		19,172		(613)		-		-		19,172		(613)
Total temporarily impaired securities	$	117,013	$	(2,568)	$	2,224	$	(58)	$	119,238	$	(2,626)

There were no realized gains from the sales and calls of investment securities in the first quarter of 2017, while there were realized gains of $131,000 ($92,000 after tax) in the first quarter of 2016.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least quarterly, and more frequently when economic or market conditions warrant such an evaluation. The investment portfolio is evaluated for OTTI by segregating the portfolio into two general segments. Investment securities classified as available-for-sale or held-to-maturity are generally evaluated for OTTI under FASB ASC Topic 320. Certain collateralized debt obligations (“CDOs”) are evaluated for OTTI under FASB ASC Topic 325, Investment – Other.

When OTTI occurs under either model, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected compared to the book value of the security and is recognized in earnings. The amount of OTTI related to other factors shall be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings shall become the new amortized cost basis of the investment.

With the exception of corporate bonds, the above securities all have fixed interest rates, and all securities have defined maturities. Their fair value is sensitive to movements in market interest rates. First Defiance has the ability and intent to hold these investments for a time necessary to recover the amortized cost without impacting its liquidity position and it is not more than likely that the Company will be required to sell the investments before anticipated recovery.

In the first quarter of 2017 and 2016, management determined there was no OTTI.

The proceeds from the sales and calls of securities and the associated gains and losses are listed below:

	Three Months Ended
	March 31,
	2017		2016
	(In Thousands)
Proceeds	$	-	$	5,360
Gross realized gains		-		131
Gross realized losses		-		-

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Loans

3 Months Ended

Mar. 31, 2017

Loans Receivable, Net [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

8. Loans

 

Loans receivable consist of the following:

	March 31,		December 31,
	2017		2016
	(In Thousands)
Real Estate:
Secured by 1-4 family residential	$	276,761	$	207,550
Secured by multi-family residential		211,546		196,983
Secured by commercial real estate		981,698		843,579
Construction		199,724		182,886
		1,669,729		1,430,998
Other Loans:
Commercial		504,340		469,055
Home equity and improvement		132,965		118,429
Consumer finance		27,696		16,680
		665,001		604,164
Total loans		2,334,730		2,035,162
Deduct:
Undisbursed loan funds		(95,460)		(93,355)
Net deferred loan origination fees and costs		(1,264)		(1,320)
Allowance for loan loss		(25,749)		(25,884)
Totals	$	2,212,257	$	1,914,603

The table above includes loans acquired during 2017 totaling $284.9 million as of February 24, 2017, which is net of purchase discount on the acquired loans of $6.0 million. The recorded investment of these loans as of March 31, 2107 was $281.8 million, net of the purchase discount of $5.9 million.

Loan segments have been identified by evaluating the portfolio based on collateral and credit risk characteristics.

The following table discloses allowance for loan loss activity for the quarters ended March 31, 2017 and 2016 by portfolio segment (In Thousands):

			Multi-
	1-4 Family		Family								Home Equity
Quarter Ended	Residential		Residential		Commercial						and		Consumer
March 31, 2017	Real Estate		Real Estate		Real Estate		Construction		Commercial		Improvement		Finance		Total
Beginning Allowance	$	2,627	$	2,228	$	10,625	$	450	$	7,361	$	2,386	$	207	$	25,884
Charge-Offs		(49)		0		(290)		0		0		(54)		(71)		(464)
Recoveries		56		32		34		0		115		33		4		274
Provisions		(13)		(138)		(159)		8		333		(65)		89		55
Ending Allowance	$	2,621	$	2,122	$	10,210	$	458	$	7,809	$	2,300	$	229	$	25,749

			Multi-
	1-4 Family		Family								Home Equity
Quarter Ended	Residential		Residential		Commercial						and		Consumer
March 31, 2016	Real Estate		Real Estate		Real Estate		Construction		Commercial		Improvement		Finance		Total
Beginning Allowance	$	3,212	$	2,151	$	11,772	$	517	$	5,255	$	2,304	$	171	$	25,382
Charge-Offs		(55)		0		(13)		0		(336)		(30)		0		(434)
Recoveries		86		0		177		0		19		39		35		356
Provisions		(134)		99		(292)		(28)		882		(81)		(82)		364
Ending Allowance	$	3,109	$	2,250	$	11,644	$	489	$	5,820	$	2,232	$	124	$	25,668

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2017 (In Thousands):

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	196	$	4	$	170	$	-	$	101	$	300	$	1	$	772
Collectively evaluated for impairment		2,425		2,118		10,040		458		7,708		2,000		228		24,977
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,621	$	2,122	$	10,210	$	458	$	7,809	$	2,300	$	229	$	25,749
Loans:
Loans individually evaluated for impairment	$	6,725	$	3,340	$	13,162	$	-	$	4,111	$	1,202	$	70	$	28,610
Loans collectively evaluated for impairment		269,194		208,437		969,583		104,036		501,349		132,404		27,662		2,212,665
Loans acquired with deteriorated credit quality		1,247		-		2,253		-		632		-		-		4,132
Total ending loans balance	$	277,166	$	211,777	$	984,998	$	104,036	$	506,092	$	133,606	$	27,732	$	2,245,407

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2016 (In Thousands):

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	202	$	4	$	255	$	-	$	35	$	313	$	-	$	809
Collectively evaluated for impairment		2,425		2,224		10,370		450		7,326		2,073		207		25,075
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,627	$	2,228	$	10,625	$	450	$	7,361	$	2,386	$	207	$	25,884
Loans:
Loans individually evaluated for impairment	$	6,898	$	3,483	$	13,570	$	-	$	2,154	$	1,269	$	59	$	27,433
Loans collectively evaluated for impairment		200,907		193,714		832,446		89,244		468,246		117,744		16,625		1,918,926
Loans acquired with deteriorated credit quality		-		-		-		-		11		-		-		11
Total ending loans balance	$	207,805	$	197,197	$	846,016	$	89,244	$	470,411	$	119,013	$	16,684	$	1,946,370

The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans (In Thousands):

	Three Months Ended March 31, 2017
			Interest		Cash Basis
	Average		Income		Income
	Balance		Recognized		Recognized
Residential Owner Occupied	$	2,820	$	28	$	28
Residential Non Owner Occupied		3,891		36		36
Total Residential Real Estate		6,711		64		64
Multi-Family		3,374		10		10
CRE Owner Occupied		4,614		22		22
CRE Non Owner Occupied		4,499		42		39
Agriculture Land		2,707		47		19
Other CRE		1,668		13		12
Total Commercial Real Estate		13,488		124		92
Construction		-		-		-
Commercial Working Capital		2,372		19		19
Commercial Other		1,722		21		16
Total Commercial		4,094		40		35
Home Equity and Home Improvement		1,254		10		10
Consumer Finance		74		1		1
Total Impaired Loans	$	28,995	$	249	$	212

The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans (In Thousands):

	Three Months Ended March 31, 2016
			Interest		Cash Basis
	Average		Income		Income
	Balance		Recognized		Recognized
Residential Owner Occupied	$	4,025	$	39	$	39
Residential Non Owner Occupied		3,557		35		34
Total Residential Real Estate		7,582		74		73
Multi-Family		4,593		30		30
CRE Owner Occupied		9,090		62		48
CRE Non Owner Occupied		4,418		53		49
Agriculture Land		3,593		35		12
Other CRE		1,422		4		4
Total Commercial Real Estate		18,523		154		113
Construction		-		-		-
Commercial Working Capital		1,513		15		15
Commercial Other		4,245		19		18
Total Commercial		5,758		34		33
Home Equity and Home Improvement		1,749		15		15
Consumer Finance		73		1		1
Total Impaired Loans	$	38,278	$	308	$	265

The following table presents loans individually evaluated for impairment by class of loans (In Thousands):

	March 31, 2017						December 31, 2016
					Allowance						Allowance
	Unpaid				for Loan		Unpaid				for Loan
	Principal		Recorded		Losses		Principal		Recorded		Losses
	Balance*		Investment		Allocated		Balance*		Investment		Allocated
With no allowance recorded:
Residential Owner Occupied	$	1,906	$	1,760	$	-	$	1,912	$	1,765	$	-
Residential Non Owner Occupied		1,769		1,762		-		1,691		1,683		-
Total 1-4 Family Residential Real Estate		3,675		3,522		-		3,603		3,448		-
Multi-Family Residential Real Estate		3,288		3,288		-		3,578		3,430		-
CRE Owner Occupied		3,048		2,611		-		2,652		2,353		-
CRE Non Owner Occupied		4,114		3,896		-		4,372		4,240		-
Agriculture Land		2,617		2,649		-		1,695		1,722		-
Other CRE		1,020		950		-		1,225		1,115		-
Total Commercial Real Estate		10,799		10,106		-		9,944		9,430		-
Construction		-		-		-		-		-		-
Commercial Working Capital		2,228		2,183		-		838		786		-
Commercial Other		1,782		1,620		-		1,179		967		-
Total Commercial		4,010		3,803		-		2,017		1,753		-
												-
Home Equity and Home Improvement		621		575		-		631		585		-
Consumer Finance		53		53		-		55		55	$	-
Total loans with no allowance recorded	$	22,446	$	21,347	$	-	$	19,828	$	8,701
With an allowance recorded:
Residential Owner Occupied	$	2,159	$	2,132	$	157	$	2,348	$	2,319	$	157
Residential Non Owner Occupied		1,078		1,071		39		1,137		1,131		45
Total 1-4 Family Residential Real Estate		3,237		3,203		196		3,485		3,450		202
Multi-Family Residential Real Estate		51		52		4		53		53		4
CRE Owner Occupied		2,291		1,831		96		2,362		1,894		102
CRE Non Owner Occupied		414		417		25		1,618		1,479		108
Agriculture Land		109		110		5		45		45		3
Other CRE		1,116		698		44		1,144		722		42
Total Commercial Real Estate		3,930		3,056		170		5,169		4,140		255
Construction		-		-		-		-		-		-
Commercial Working Capital		180		181		94		230		231		24
Commercial Other		124		127		7		167		170		11
Total Commercial		304		308		101		397		401		35
Home Equity and Home Improvement		631		627		300		688		684		313
Consumer Finance		18		17		1		4		4		-
Total loans with an allowance recorded	$	8,171	$	7,263	$	772	$	9,796	$	8,732	$	809

* Presented gross of charge offs

The following table presents the current balance of the aggregate amounts of non-performing assets, comprised of non-performing loans and real estate owned on the dates indicated: 

	March 31,		December 31,
	2017		2016
	(In Thousands)
Non-accrual loans	$	15,057	$	14,348
Loans over 90 days past due and still accruing		-		-
Total non-performing loans		15,057		14,348
Real estate and other assets held for sale		705		455
Total non-performing assets	$	15,762	$	14,803
Troubled debt restructuring, still accruing	$	9,771	$	10,544

The following table presents the aging of the recorded investment in past due and non-accrual loans as of March 31, 2017 by class of loans (In Thousands):

									Total Past		Total Non
	Current		30-59 days		60-89 days		90+ days		Due		Accrual
Residential Owner Occupied	$	175,631	$	95	$	866	$	333	$	1,294	$	1,579
Residential Non Owner Occupied		99,595		50		284		312		646		1,175
Total 1-4 Family Residential Real Estate		275,226		145		1,150		645		1,940		2,754
Multi-Family Residential Real Estate		211,777		-		-		-		-		2,576
CRE Owner Occupied		384,192		710		45		1,337		2,092		3,172
CRE Non Owner Occupied		395,410		328		-		442		770		1,626
Agriculture Land		135,544		210		-		855		1,065		1,582
Other Commercial Real Estate		65,925		-		-		-		-		866
Total Commercial Real Estate		981,071		1,248		45		2,634		3,927		7,246
Construction		104,036		-		-		-		-		-
Commercial Working Capital		225,276		55		49		-		104		1,005
Commercial Other		278,789		1,455		142		326		1,923		497
Total Commercial		504,065		1,510		191		326		2,027		1,502
Home Equity/Home Improvement		132,993		173		42		398		613		875
Consumer Finance		27,417		108		130		77		315		101
Total Loans	$	2,236,585	$	3,184	$	1,558	$	4,080	$	8,822	$	15,054
Loans acquired with deteriorated credit quality (included in the totals above)	$	3,830	$	110	$	45	$	147	$	302	$	472
Loans acquired in current year (included in totals above)	$	279,502	$	820	$	341	$	1,130	$	2,291	$	1,476

The following table presents the aging of the recorded investment in past due and non-accrual loans as of December 31, 2016 by class of loans (In Thousands):

									Total Past		Total Non
	Current		30-59 days		60-89 days		90+ days		Due		Accrual
Residential Owner Occupied	$	139,015	$	56	$	842	$	544	$	1,442	$	1,931
Residential Non Owner Occupied		66,811		166		308		63		537		992
Total 1-4 Family Residential Real Estate		205,826		222		1,150		607		1,979		2,923
Multi-Family Residential Real Estate		197,197		-		-		-		-		2,637
CRE Owner Occupied		340,233		79		-		1,396		1,475		3,098
CRE Non Owner Occupied		338,724		81		16		426		523		1,808
Agriculture Land		102,397		-		-		-		-		755
Other Commercial Real Estate		62,415		-		-		249		249		1,292
Total Commercial Real Estate		843,769		160		16		2,071		2,247		6,953
Construction		89,244		-		-		-		-		-
Commercial Working Capital		202,786		-		10		38		48		435
Commercial Other		267,189		23		-		365		388		577
Total Commercial		469,975		23		10		403		436		1,012
Home Equity and Home Improvement		117,458		1,125		176		254		1,555		730
Consumer Finance		16,452		85		69		78		232		91
Total Loans	$	1,939,921	$	1,615	$	1,421	$	3,413	$	6,449	$	14,346

Troubled Debt Restructurings

As of March 31, 2017 and December 31, 2016, the Company had a recorded investment in troubled debt restructurings (“TDRs”) of $15.5 million and $16.8 million, respectively. The Company allocated $688,000 and $809,000 of specific reserves to those loans at March 31, 2017 and December 31, 2016, and has committed to lend additional amounts totaling up to $19,000 and $20,000 at March 31, 2017 and December 31, 2016, respectively.

The Company offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted. Each TDR is uniquely designed to meet the specific needs of the borrower. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral or an additional guarantor is often requested when granting a concession. Commercial mortgage loans modified in a TDR often involve temporary interest-only payments, re-amortization of remaining debt in order to lower payments, and sometimes reducing the interest rate lower than the current market rate. Residential mortgage loans modified in a TDR are comprised of loans where monthly payments are lowered, either through interest rate reductions or principal only payments for a period of time, to accommodate the borrowers’ financial needs, interest is capitalized into principal, or the term and amortization are extended. Home equity modifications are made infrequently and usually involve providing an interest rate that is lower than the borrower would be able to obtain due to credit issues. All retail loans where the borrower is in bankruptcy are classified as TDRs regardless of whether or not a concession is made.

Of the loans modified in a TDR, $5.7 million are on non-accrual status and partial charge-offs have in some cases been taken against the outstanding balance. Loans modified as a TDR may have the financial effect of increasing the allowance associated with the loan. If the loan is determined to be collateral dependent, the estimated fair value of the collateral, less any selling costs is used to determine if there is a need for a specific allowance or charge-off. If the loan is determined to be cash flow dependent, the allowance is measured based on the present value of expected future cash flows discounted at the loan’s pre-modification effective interest rate.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three month periods ending March 31, 2017 and March 31, 2016:

	Loans Modified as a TDR for the				Loans Modified as a TDR for the
	Three Months Ended March 31, 2017				Three Months Ended March 31, 2016
	($ in thousands)				($ in thousands)
Troubled Debt	Number of		Recorded Investment (as of		Number of		Recorded Investment (as of
Restructurings	Loans		period end)		Loans		period end)
1-4 Family Owner Occupied		4	$	100		1	$	9
1-4 Family Non Owner Occupied		2		84		2		127
CRE Owner Occupied		1		119		0		-
CRE Non Owner Occupied		0		-		0		-
Agriculture Land		0		-		0		-
Other CRE		0		-		0		-
Commercial Working Capital		0		-		0		-
Commercial Other		1		46		0		-
Home Equity and Improvement		1		25		5		297
Consumer Finance		2		15		2		5
Total		11	$	389		10	$	438

The loans described above decreased the ALLL by $19,000 in the three month period ending March 31, 2017 and increased the ALLL by $15,000 in the three month period ending March 31, 2016.

Of the 2017 modifications, 4 were made TDRs due to the fact that the borrower is in bankruptcy, 4 were made TDR due to terming out lines of credit, 2 were made TDR due to advancing money to a watch list credit, and 1 was made a TDR because the current debt was refinanced for payment relief.

There were no loans modified as TDRs for which there was a payment default within twelve months following the modification during the quarters ending March 31, 2017 and March 31, 2016.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed on the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

Credit Quality Indicators

Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are analyzed individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans, such as commercial and commercial real estate loans and certain homogenous mortgage, home equity and consumer loans. This analysis is performed on a quarterly basis. First Defiance uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Not Graded. Loans classified as not graded are generally smaller balance residential real estate, home equity and consumer installment loans which are originated primarily by using an automated underwriting system. These loans are monitored based on their delinquency status and are evaluated individually only if they are seriously delinquent.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of March 31, 2017, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (In Thousands):

			Special						Not
Class	Pass		Mention		Substandard		Doubtful		Graded		Total
1-4 Family Owner Occupied	$	7,502	$	483	$	1,943	$	-	$	166,998	$	176,926
1-4 Family Non Owner Occupied		89,432		2,287		3,575		-		4,946		100,240
Total 1-4 Family Real Estate		96,934		2,770		5,518		-		171,944		277,166
Multi-Family Residential Real Estate		207,071		837		3,756		-		113		211,777
CRE Owner Occupied		360,693		20,388		4,890		-		314		386,285
CRE Non Owner Occupied		386,323		3,390		6,467		-		-		396,180
Agriculture Land		128,428		2,731		5,450		-		-		136,609
Other CRE		62,997		59		2,063		-		805		65,924
Total Commercial Real Estate		938,441		26,568		18,870		-		1,119		984,998
Construction		82,950		1,198		-		-		19,888		104,036
Commercial Working Capital		215,129		7,139		3,112		-		-		225,380
Commercial Other		269,535		8,458		2,719		-		-		280,712
Total Commercial		484,664		15,597		5,831		-		-		506,092
Home Equity and Home Improvement		-		-		852		-		132,754		133,606
Consumer Finance		-		-		177		-		27,555		27,732
Total Loans	$	1,810,060	$	46,970	$	35,004	$	-	$	353,373	$	2,245,407
Loans acquired with deteriorated credit quality (included in the totals above)	$	9	$	1,173	$	2,946		-	$	4	$	4,132
Loans acquired in current year (included in totals above)	$	223,594	$	1,711	$	5,393		-	$	51,095	$	281,793

As of December 31, 2016, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (In Thousands):

			Special						Not
Class	Pass		Mention		Substandard		Doubtful		Graded		Total
Residential Owner Occupied	$	5,980	$	402	$	1,824	$	-	$	132,250	$	140,456
Residential Non Owner Occupied		58,041		1,394		3,480		-		4,434		67,349
Total 1-4 Family Real Estate		64,021		1,796		5,304		-		136,684		207,805
Multi-Family Residential Real Estate		192,369		862		3,852		-		114		197,197
CRE Owner Occupied		316,335		20,559		4,430		-		384		341,708
CRE Non Owner Occupied		332,196		1,617		5,435		-		-		339,248
Agriculture Land		98,039		2,355		2,002		-		-		102,396
Other CRE		59,561		60		2,297		-		746		62,664
Total Commercial Real Estate		806,131		24,591		14,164		-		1,130		846,016
Construction		67,751		706		-		-		20,787		89,244
Commercial Working Capital		193,043		8,301		1,490		-		-		202,834
Commercial Other		262,076		3,749		1,752		-		-		267,577
Total Commercial		455,119		12,050		3,242		-		-		470,411
Home Equity and Home Improvement		-		-		696		-		118,317		119,013
Consumer Finance		-		-		90		-		16,594		16,684
Total Loans	$	1,585,391	$	40,005	$	27,348	$	-	$	293,626	$	1,946,370

The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The outstanding balance of those loans is as follows (In Thousands):

	March 31, 2017
1-4 Family Residential Real Estate	$	1,541
Commercial Real Estate Loans		3,837
Commercial		742
Consumer		3
Total Outstanding Balance	$	6,123
Recorded Investment, net of allowance of $0	$	4,132

Accretable yield, or income expected to be collected, is as follows 

	2017
Balance at January 1	$	-
New Loans Purchased		1,034
Accretion of Income		-
Reclassifications from Non-accretable Difference Charge-off of Accretable Yield		-
Balance at March 31	$	1,034

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during the three months ended March 31, 2017. No allowances for loan losses were reversed during the same period.

Contractually required payments receivable of loans purchased with evidence of credit deterioration during the period ended March 31, 2017 are included in the table below. There were no such loans purchased during the year ended December 31, 2016. (In Thousands)

1-4 Family Residential Real Estate	$	1,720
Commercial Real Estate		3,781
Commercial		785
Consumer		4
Total	$	6,290

Cash Flows Expected to be Collected at Acquisition	$	5,157
Fair Value of Acquired Loans at Acquisition	$	4,123

Foreclosure Proceedings

Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $226,000 as of March 31, 2017.

XML

Mortgage Banking

3 Months Ended

Mar. 31, 2017

Mortgage Banking [Abstract]

Mortgage Banking [Text Block]

9. Mortgage Banking

 

Net revenues from the sales and servicing of mortgage loans consisted of the following:

	Three Months Ended
	March 31,
	2017		2016
	(In Thousands)
Gain from sale of mortgage loans	$	1,083	$	994
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue		934		877
Amortization of mortgage servicing rights		(312)		(311)
Mortgage servicing rights valuation adjustments		33		(21)
		655		545
Net revenue from sale and servicing of mortgage loans	$	1,738	$	1,539

The unpaid principal balance of residential mortgage loans serviced for third parties was $1.38 billion at March 31, 2017 and $1.37 billion at December 31, 2016.

Activity for capitalized mortgage servicing rights and the related valuation allowance follows for the three months ended March 31, 2017 and 2016:

	March 31,		March 31,
	2017		2016
	(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	10,117	$	9,893
Loans sold, servicing retained		356		297
Amortization		(312)		(311)
Carrying value before valuation allowance at end of period		10,161		9,879
Valuation allowance:
Balance at beginning of period		(522)		(645)
Impairment (expense) recovery		33		(21)
Balance at end of period		(489)		(666)
Net carrying value of MSRs at end of period	$	9,672	$	9,213
Fair value of MSRs at end of period	$	10,013	$	9,463

Amortization of mortgage servicing rights is computed based on payments and payoffs of the related mortgage loans serviced. Estimates of future amortization expense are not easily estimable.

The Company established an accrual for secondary market buy-back activity, a liability of $51,000 and $79,000 was accrued at March 31, 2017 and December 31, 2016, respectively. Expense (credit) recognized related to the accrual was ($28,000) and ($59,000) in the first quarter of 2017 and 2016, respectively. The reversals are mainly due to no actual losses being recorded in the first quarter of 2017 and 2016, respectively.

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Deposits

3 Months Ended

Mar. 31, 2017

Deposits [Abstract]

Deposit Liabilities Disclosures [Text Block]

10. Deposits

A summary of deposit balances is as follows:

	March 31,		December 31,
	2017		2016
	(In Thousands)
Non-interest-bearing checking accounts	$	579,943	$	487,663
Interest-bearing checking and money market accounts		973,459		816,665
Savings deposits		288,498		243,369
Retail certificates of deposit less than $250,000		490,953		400,080
Retail certificates of deposit greater than $250,000		40,936		33,851
	$	2,373,789	$	1,981,628

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Borrowings

3 Months Ended

Mar. 31, 2017

Subordinated Borrowings [Abstract]

Subordinated Borrowings Disclosure [Text Block]

11. Borrowings

First Defiance’s debt, FHLB advances and junior subordinated debentures owed to unconsolidated subsidiary trusts are comprised of the following:

	March 31,		December 31,
	2017		2016
	(In Thousands)
FHLB Advances:
Single maturity fixed rate advances	$	92,000	$	92,000
Putable advances		5,000		5,000
Amortizable mortgage advances		8,104		6,943
Total	$	105,104	$	103,943
Junior subordinated debentures owed to  unconsolidated subsidiary trusts	$	36,083	$	36,083

The putable advance can be put back to the Company at the option of the FHLB on a quarterly basis. A $5.0 million putable advance with a weighted average rate of 2.35% was not yet callable by the FHLB at March 31, 2017. The call date for this advance is June 12, 2017 and the maturity date is March 12, 2018. Putable advances are callable at the option of the FHLB on a quarterly basis.

In March 2007, the Company sponsored an affiliated trust, First Defiance Statutory Trust II (Trust Affiliate II) that issued $15 million of Guaranteed Capital Trust Securities (Trust Preferred Securities). In connection with this transaction, the Company issued $15.5 million of Junior Subordinated Deferrable Interest Debentures (Subordinated Debentures) to Trust Affiliate II. The Company formed Trust Affiliate II for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Subordinated Debentures held by Trust Affiliate II are the sole assets of that trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. Distributions on the Trust Preferred Securities issued by Trust Affiliate II are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.5%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate II was 2.65% as of March 31, 2017 and 2.46% as of December 31, 2016.

The Trust Preferred Securities issued by Trust Affiliate II are subject to mandatory redemption, in whole or part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on June 15, 2037, but can be redeemed at the Company’s option at any time now.

The Company also sponsored an affiliated trust, First Defiance Statutory Trust I (Trust Affiliate I), that issued $20 million of Trust Preferred Securities in 2005. In connection with this transaction, the Company issued $20.6 million of Subordinated Debentures to Trust Affiliate I. Trust Affiliate I was formed for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Junior Debentures held by Trust Affiliate I are the sole assets of the trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. Distributions on the Trust Preferred Securities issued by Trust Affiliate I are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.38%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate I was 2.53% and 2.34% on March 31, 2017 and December 31, 2016 respectively.

The Trust Preferred Securities issued by Trust Affiliate I are subject to mandatory redemption, in whole or in part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on December 15, 2035, but can be redeemed at the Company’s option at any time now.

The subordinated debentures may be included in Tier 1 capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

Interest on both issues of Trust Preferred Securities may be deferred for a period of up to five years at the option of the issuer.

Repurchase Agreements. We utilize securities sold under agreements to repurchase to facilitate the needs of our customers and to facilitate secured short-term funding needs. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. We monitor levels on a continuous basis. We may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agent.

The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of March 31, 2017 and December 31, 2016 is presented in the following tables.

							Greater
	Overnight and		Up to 30				than 90
	Continuous		Days		30-90 Days		Days		Total
At March 31, 2017			(In Thousands)
Repurchase agreements:
Mortgage-backed securities – residential	$	16,624	$	-	$	-	$	-	$	16,624
Collateralized mortgage obligations		8,267		-		-		-		8,267
Total borrowings	$	24,891	$	-	$	-	$	-	$	24,891
Gross amount of recognized liabilities for repurchase agreements									$	24,891

							Greater
	Overnight and		Up to 30				than 90
	Continuous		Days		30-90 Days		Days		Total
At December 31, 2016			(In Thousands)
Repurchase agreements:
Mortgage-backed securities – residential	$	21,222	$	-	$	-	$	-	$	21,222
Collateralized mortgage obligations		10,594		-		-		-		10,594
Total borrowings	$	31,816	$	-	$	-	$	-	$	31,816
Gross amount of recognized liabilities for repurchase agreements									$	31,816

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Commitments, Guarantees and Contingent Liabilities

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments Contingencies and Guarantees [Text Block]

12. Commitments, Guarantees and Contingent Liabilities

Loan commitments are made to accommodate the financial needs of First Federal’s customers; however, there are no long-term, fixed-rate loan commitments that result in market risk. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. They primarily are issued to facilitate customers’ trade transactions.

Both arrangements have credit risk, essentially the same as that involved in extending loans to customers, and are subject to the Company’s normal credit policies. Collateral (e.g., securities, receivables, inventory and equipment) is obtained based on Management’s credit assessment of the customer.

The Company’s maximum obligation to extend credit for loan commitments (unfunded loans and unused lines of credit) and standby letters of credit outstanding as of the periods stated below were as follows (In Thousands):

	March 31, 2017				December 31, 2016
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	49,810	$	125,148	$	34,432	$	106,356
Unused lines of credit		25,487		420,597		14,384		400,542
Standby letters of credit		-		6,719		-		9,668
Total	$	75,297	$	552,464	$	48,816	$	516,566

Commitments to make loans are generally made for periods of 60 days or less.

In addition to the above commitments, First Defiance had commitments to sell $24.0 million and $22.5 million of loans to Freddie Mac, Fannie Mae, Federal Home Loan Bank of Cincinnati or BB&T Mortgage at March 31, 2017 and December 31, 2016, respectively.

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Income Taxes

3 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

13. Income Taxes

 

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in the state of Indiana. The Company is no longer subject to examination by taxing authorities for years before 2012. The Company currently operates primarily in the states of Ohio and Michigan, which tax financial institutions based on their equity rather than their income.

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

14. Derivative Financial Instruments

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships. First Federal had approximately $18.9 million and $14.1 million of interest rate lock commitments at March 31, 2017 and December 31, 2016, respectively. There were $24.0 million and $22.5 million of forward commitments for the future delivery of residential mortgage loans at March 31, 2017 and December 31, 2016, respectively.

The fair value of these mortgage banking derivatives are reflected by a derivative asset recorded in other assets in the Consolidated Statements of Condition. The table below provides data about the carrying values of these derivative instruments:

March 31, 2017

December 31, 2016

Assets

(Liabilities)

Assets

(Liabilities)

Derivative

Derivative

Carrying

Carrying

Net Carrying

Carrying

Carrying

Net Carrying

Value

Value

Value

Value

Value

Value

(In Thousands)

Derivatives not designated as hedging instruments

Mortgage Banking Derivatives

$

598

$

(42)

$

556

$

491

$

-

$

491

The table below provides data about the amount of gains and losses recognized in income on derivative instruments not designated as hedging instruments:

	Three Months Ended
	March 31,
	2017		2016
	(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	65	$	438

The above amounts are included in mortgage banking income with gain on sale of mortgage loans.

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Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2017

Other Comprehensive Income (Loss), Net Of Tax [Abstract]

Other Comprehensive Income Loss [Text Block]

15. Other Comprehensive Income (Loss)

The before and after tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below. Reclassification adjustments related to securities available for sale are included in gains on sale or call of securities in the accompanying consolidated condensed statements of income.

	Before Tax		Tax Expense		Net of Tax
	Amount		(Benefit)		Amount
	(In Thousands)
Three months ended March 31, 2017:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	1,580	$	(553)	$	1,027
Reclassification adjustment for net gains included in net income		-		-		-
Total other comprehensive loss	$	1,580	$	(553)	$	1,027
Three months ended March 31, 2016:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	1,450	$	(508)	$	942
Reclassification adjustment for net gains included in net income		(131)		46		(85)
Total other comprehensive loss	$	1,319	$	(462)	$	857

Activity in accumulated other comprehensive income (loss), net of tax, was as follows:

					Accumulated
	Securities		Post-		Other
	Available		retirement		Comprehensive
	For Sale		Benefit		Income
	(In Thousands)
Balance January 1, 2017	$	504	$	(289)	$	215
Other comprehensive income before reclassifications		1,027		-		1,027
Amounts reclassified from accumulated other comprehensive income		-		-		-
Net other comprehensive income during period		1,027		-		1,027
Balance March 31, 2017	$	1,531	$	(289)	$	1,242
Balance January 1, 2016	$	4,042	$	(420)	$	3,622
Other comprehensive income before reclassifications		942		-		942
Amounts reclassified from accumulated other comprehensive income		(85)		-		(85)
Net other comprehensive income during period		857		-		857
Balance March 31, 2016	$	4,899	$	(420)	$	4,479

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Affordable Housing Projects Tax Credit Partnership

3 Months Ended

Mar. 31, 2017

Affordable Housing Projects Tax Credit Partnership [Abstract]

Affordable Housing Program [Text Block]

16. Affordable Housing Projects Tax Credit Partnership

The Company makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (“LIHTC”) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.

The Company is a limited partner in each LIHTC Partnership. A separate unrelated third party is the general partner. Each limited partnership is managed by the general partner, who exercises full control over the affairs of the limited partnership. The general partner has all the rights, powers and authority granted or permitted to be granted to a general partner of a limited partnership. Duties entrusted to the general partner of each limited partnership include, but are not limited to: investment in operating companies, company expenditures, investment of excess funds, borrowing funds, employment of agents, disposition of fund property, prepayment and refinancing of liabilities, votes and consents, contract authority, disbursement of funds, accounting methods, tax elections, bank accounts, insurance, litigation, cash reserve, and use of working capital reserve funds. Except for limited rights granted to consent to certain transactions, the limited partner(s) may not participate in the operation, management, or control of the limited partnership’s business, transact any business in the limited partnership’s name or have any power to sign documents for or otherwise bind the limited partnership. In addition, the general partner may only be removed by the limited partner(s) in the event the general partner fails to comply with the terms of the agreement or is negligent in performing its duties.

The general partner of each limited partnership has both the power to direct the activities which most significantly affect the performance of each partnership and the obligation to absorb losses or the right to receive benefits that could be significant to the entities. Therefore, the Company has determined that it is not the primary beneficiary of any LIHTC partnership. In January of 2014, the FASB issued ASU 2014-01 “Accounting for Investments in Qualified Affordable Housing Projects.” The pronouncement permitted reporting entities to make an accounting policy election to account for these investments using the proportional amortization method if certain conditions exist. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received, and will recognize the net investment performance in the income statement as a component of income tax expense (benefit). The Company utilized the proportional amortization method for all of its instruments. As of March 31, 2017 and December 31, 2016 the Company had $6.6 million and $6.8 million in qualified investments recorded in other assets and $4.3 million and $4.3 million in unfunded commitments recorded in other liabilities, respectively.

Unfunded Commitments

As of March 31, 2017, the expected payments for unfunded affordable housing commitments were as follows:

(dollars in thousands)	Amount
2017	$	1,897
2018		1,137
2019		307
2020		179
2021		160
Thereafter		615
Total Unfunded Commitments	$	4,295

The following table presents tax credits and other tax benefits recognized and amortization expense related to affordable housing for the three months ended March 31, 2017 and 2016.

	Three Months Ended March
	31,
(dollars in thousands)	2017		2016
Proportional Amortization Method
Tax credits and other tax benefits recognized	$	211	$	157
Amortization expense in federal income taxes		165		119

There were no impairment losses of LIHTC investments for the three months ended March 31, 2017 and 2016.

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Business Combinations

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

17.

Business Combinations

 

Effective February 24, 2017, the Company acquired Commercial Bancshares, Inc. (“Commercial Bancshares”) and its subsidiary, The Commercial Savings Bank (“CSB”), pursuant to an Agreement and Plan of Merger (“merger agreement”), dated August 23, 2016. The acquisition was accomplished by the merger of Commercial Bancshares into First Defiance, immediately followed by the merger of CSB into First Defiance’s banking subsidiary, First Federal. CSB operated 7 full-service banking offices in northwest and north central, Ohio and 1 commercial loan production office in central Ohio. Commercial Bancshares’ consolidated assets and equity (unaudited) as of February 24, 2017 totaled $348.4 million and $37.5 million, respectively. The Company accounted for the transaction under the acquisition method of accounting which means that the acquired assets and liabilities were recorded at fair value at the date of acquisition. The fair value estimates included in these financial statements are based on preliminary valuations. The Company does not expect material variances from these estimates and expects that final valuation estimates will be completed during the year ending December 31, 2017.

In accordance with ASC 805, the Company expensed approximately $3.6 million of direct acquisition costs, of which $2.8 million was to settle employment and benefit agreements and for personnel expenses related to operating the new Commercial Bancshare locations. The Company recorded $29.0 million of goodwill and $4.9 million of intangible assets in the first quarter of 2017. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. The acquisition was consistent with the Company’s strategy to enhance and expand its presence in northwestern and north central Ohio. The acquisition offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded market area. The intangible assets are related to core deposits and are being amortized over 10 years on an accelerated basis. For tax purposes, goodwill totaling $29.0 million is non-deductible but will be evaluated annually for impairment. The following table summarizes the fair value of the total consideration transferred as part of the Commercial Bancshares acquisition as well as the fair value of identifiable assets and liabilities assumed as of the effective date of the transaction.

	February 24, 2017
	(In Thousands)
Cash Consideration	$	12,340
Equity – Dollar Value of Issued Shares		56,532
Fair Value of Total Consideration Transferred		68,872
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
Cash and Cash Equivalents		35,411
Federal Funds Sold		2,769
Securities		4,338
Loans		284,867
FHLB Stock of Cincinnati and Other Stock		2,194
Office Properties and Equipment		5,455
Intangible Assets		4,900
Bank-Owned Life Insurance		8,168
Accrued Interest Receivable and Other Assets		(3,606)
Deposits – Non-Interest Bearing		(56,061)
Deposits – Interest Bearing		(251,931)
Advances from FHLB		(1,403)
Accrued Interest Payable and Other Liabilities		(2,411)
Total Identifiable Net Assets		39,902
Goodwill	$	28,970

Under the terms of the merger agreement, Commercial Bancshares common shareholders had the opportunity to elect to receive 1.1808 shares of common stock of the Company or cash in the amount of $51.00 for each share of Commercial Bancshares common stock, subject to adjustment as provided for in the merger agreement. Total consideration for Commercial Bancshares common shares outstanding was paid 80% in Company stock and 20% in cash. The Company issued 1,139,502 shares of its common stock and paid $12.3 million in cash to the former shareholders of Commercial Bancshares.

The following table presents unaudited pro forma information as if the acquisition had occurred on January 1, 2016 after giving effect to certain adjustments. The unaudited pro forma information for the three months ended March 31, 2017 and March 31, 2016 includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, interest expense on deposits and borrowings acquired, and the related income tax effects. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed date.

	Pro Forma Three		Pro Forma Three
	Months Ended		Months Ended
	March 31, 2017		March 31, 2016
	(In Thousands)
Net Interest Income	$	23,837	$	22,798
Provision for Loan Losses		55		386
Non-Interest Income		10,828		9,121
Non-Interest Expense		21,234		20,103
Income Before Income Taxes		13,376		11,430
Income Tax Expense		5,141		3,413
Net Income	$	8,235	$	8,017
Diluted Earnings Per Share	$	0.81	$	0.79

The above pro forma financial information includes approximately $123,000 of net income related to the operations of Commercial Bancshares during the first quarter of 2017. The above pro forma financial information related to 2017 excludes non-recurring merger costs that totaled $3.6 million on a pre-tax basis. Under acquisition accounting treatment, loans are recorded at fair value which includes a credit risk component, and therefore the provision for loan losses recognized during the first quarter of 2016 was presumed to not be necessary.

Subsequent Event

On April 13, 2017, First Defiance and Corporate One Benefits Agency, Inc. (“Corporate One”) jointly announced the acquisition of Corporate One’s business by First Defiance. The total purchase price paid in cash is made up of the following: $6.5 million was paid at closing, $500,000 is due in July 2018, and $2.3 million at the end of a three-year earn-out based on performance of the operations of Corporate One, for a total estimated purchase price of $9.3 million. The fair value estimates are currently being evaluated and will be completed during the second quarter of 2017. Corporate One will be part of First Insurance. Corporate One is a full-service employee benefits consulting organization founded in 1996 with offices located in Archbold, Findlay, Fostoria and Tiffin, Ohio. Corporate One consults employers to better manage their employee benefit programs to effectively lead them into the future. It is anticipated that the transaction will enhance employee benefit offerings and expand First Insurance’s presence into adjacent markets in northwest Ohio.

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Earnings Per Share, Policy [Policy Text Block]

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for the calculation. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options, restricted stock awards and stock grants.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Other Intangibles

Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected November 30 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on First Defiance’s balance sheet.

Other intangible assets consist of core deposit and acquired customer relationship intangible assets arising from whole bank, insurance and branch acquisitions. They are initially recorded at fair value and then amortized on an accelerated basis over their estimated lives, which range from five years for non-compete agreements to 10 to 20 years for core deposit and customer relationship intangibles.

New Accounting Pronouncements, Policy [Policy Text Block]

Newly Issued Accounting Standards

In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2017-08, “Premium Amortization on Purchased Callable Debt Securities.” This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the provisions of ASU No. 2017-08 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” Under the new guidance, employers will present the service cost component of the net periodic benefit cost in the same income statement line item (e.g., Salaries and Benefits) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components separately (e.g., Other Noninterest Expense) from the line item that includes the service cost. ASU No. 2017-07 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, however, the Company has decided not to early adopt. Employers will apply the guidance on the presentation of the components of net periodic benefit cost in the income statement retrospectively. The guidance limiting the capitalization of net periodic benefit cost in assets to the service cost component will be applied prospectively. The Company expects to utilize the ASU’s practical expedient allowing entities to estimate amounts for comparative periods using the information previously disclosed in their pension and other postretirement benefit plan footnote. ASU No. 2017-07 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment.” The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. ASU No. 2017-04 is effective for interim and annual reporting periods beginning after December 15, 2019, applied prospectively. Early adoption is permitted for any impairment tests performed after January 1, 2017. The Company expects to early adopt upon the next goodwill impairment test in 2017. ASU No. 2017-04 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company has begun its implementation efforts by establishing a Company-wide implementation committee. The committee’s initial review indicates the Company has maintained sufficient historical loan data to support the requirement of this pronouncement and is currently evaluating the various loss methodologies to determine their correlations to the Company’s loan segments historical performance.

In February 2016, the FASB issued ASU No. 2016-02 — Leases (Topic 842). The objective of the update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this standard will have on its financial position and results of operations, though the Company expects that its real estate leases will be recognized on the consolidated balance sheet.

In January 2016, the FASB issued ASU No. 2016-01 — Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2017, and requires a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Early adoption is not permitted. The Company is currently evaluating the impact of adopting the new guidance on the consolidated financial statements. Management’s preliminary finding is that the new pronouncement will not have a significant impact on its results of operations. The pronouncement will require some revision to the Company’s disclosures within the consolidated financial statements and is currently evaluating the impact.

In May 2014, the FASB and the International Accounting Standards Board (the “IASB”) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP and International Financial Reporting Standards (“IFRS”). Previous revenue recognition guidance in GAAP consisted of broad revenue recognition concepts together with numerous revenue requirements for particular industries or transactions, which sometimes resulted in different accounting for economically similar transactions. In contrast, IFRS provided limited revenue recognition guidance and, consequently, could be difficult to apply to complex transactions. Accordingly, the FASB and the IASB initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would: (1) remove inconsistencies and weaknesses in revenue requirements; (2) provide a more robust framework for addressing revenue issues; (3) improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (4) provide more useful information to users of financial statements through improved disclosure requirements; and (5) simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. To meet those objectives, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard was initially effective for public entities for interim and annual reporting periods beginning after December 15, 2016; early adoption was not permitted. However, in August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers - Deferral of the Effective Date” which deferred the effective date by one year (i.e., interim and annual reporting periods beginning after December 15, 2017). For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. In addition, the FASB has begun to issue targeted updates to clarify specific implementation issues of ASU 2014-09. These updates include ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” ASU No. 2016-12, “Narrow-Scope Improvements and Practical Expedients,” and ASU No. 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” Since the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, the Company does not expect the new guidance to have a material impact on revenue most closely associated with financial instruments, including interest income and expense. The Company is currently performing an overall assessment of revenue streams and reviewing contracts potentially affected by the ASU including trust and asset management fees, deposit related fees, interchange fees, and insurance commission income, to determine the potential impact the new guidance is expected to have on the Company’s Consolidated Financial Statements. The Company plans to adopt ASU No. 2014-09 on January 1, 2018 utilizing the modified retrospective approach.

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Fair Value (Tables)

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following table summarizes the financial assets measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Recurring Basis

	Level 1		Level 2		Level 3		Total Fair
March 31, 2017	Inputs		Inputs		Inputs		Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	3,954	$	-	$	3,954
Mortgage-backed - residential		-		80,872		-		80,872
REMICs		-		1,260		-		1,260
Collateralized mortgage obligations- residential		-		66,291		-		66,291
Preferred stock		1		-		-		1
Corporate bonds				13,083		-		13,083
Obligations of state and political  subdivisions		-		95,140		-		95,140
Mortgage banking derivative - asset		-		598		-		598
Mortgage banking derivative - liability		-		42		-		42

	Level 1		Level 2		Level 3		Total Fair
December 31, 2016	Inputs		Inputs		Inputs		Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. Government  corporations and agencies	$	-	$	3,915	$	-	$	3,915
Mortgage-backed - residential		-		81,707		-		81,707
REMICs		-		1,307		-		1,307
Collateralized mortgage obligations-residential		-		63,005		-		63,005
Preferred stock		2		-		-		2
Corporate bonds		-		13,013		-		13,013
Obligations of state and political subdivisions		-		88,043				88,043
Mortgage banking derivative - asset		-		491		-		491

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following table summarizes the financial assets measured at fair value on a non-recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Non-Recurring Basis

							Total Fair
March 31, 2017	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Value
	(In Thousands)
Impaired loans
Commercial Real Estate	$	-	$	-	$	1,252	$	1,252
Total Impaired loans		-		-		1,252		1,252
Mortgage servicing rights		-		1,131				1,131

							Total Fair
December 31, 2016	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	316	$	316
Multi Family Residential		-		-		-		-
Commercial Real Estate		-		-		848		848
Commercial						332		332
Home Equity and Improvement		-		-		-		-
Total impaired loans		-		-		1,496		1,496
Mortgage servicing rights		-		657		-		657
Real estate held for sale
Residential		-		-		-		-
Commercial Real Estate		-		-		377		377
Total Real Estate held for sale		-		-		377		377

Schedule of Fair Value, Assets Measured on Non Recurring Basis [Table Text Block]

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of March 31, 2017, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair				Range of			Weighted
	Value		Valuation Technique	Unobservable Inputs	Inputs			Average
			(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	1,252	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		10	%		10	%

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of December 31, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair				Range of			Weighted
	Value		Valuation Technique	Unobservable Inputs	Inputs			Average
			(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	1,496	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		10-30	%		11	%
Real estate held for sale – Applies to all classes	$	377	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions		0-20	%		7	%

Fair Value, by Balance Sheet Grouping [Table Text Block]

FHLB advances with maturities greater than 90 days are valued based on discounted cash flow analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 2 classification. The cost or value of any call or put options is based on the estimated cost to settle the option at March 31, 2017.

			Fair Value Measurements at March 31, 2017
			(In Thousands)
	Carrying
	Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	169,998	$	169,998	$	169,998	$	-	$	-
Investment securities		261,372		261,374		1		261,373		-
Federal Home Loan Bank Stock		15,992		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		2,221,070		2,207,503		-		8,425		2,199,078
Accrued interest receivable		8,872		8,872		5		1,465		7,402
Financial Liabilities:
Deposits	$	2,373,789	$	2,380,541	$	579,943	$	1,800,598	$	-
Advances from Federal Home Loan Bank		105,104		104,500		-		104,500		-
Securities sold under repurchase agreements		24,891		24,891		-		24,891		-
Subordinated debentures		36,083		34,735		-		-		34,735

			Fair Value Measurements at December 31, 2016
			(In Thousands)
	Carrying
	Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	99,003	$	99,003	$	99,003	$	-	$	-
Investment securities		251,176		251,179		2		251,177		-
Federal Home Loan Bank Stock		13,798		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,924,210		1,911,280		-		9,917		1,901,363
Accrued interest receivable		6,760		6,760		9		867		5,884
Financial Liabilities:
Deposits	$	1,981,628	$	1,987,723	$	487,663	$	1,500,060	$	-
Advances from Federal Home Loan Bank		103,943		103,019		-		103,019		-
Securities sold under repurchase agreements		31,816		31,816		-		31,816		-
Subordinated debentures		36,083		34,718		-		-		34,718

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Stock Compensation Plans (Tables)

3 Months Ended

Mar. 31, 2017

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The fair value of stock options granted during the three months ended March 31, 2016 was determined at the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:

	Three Months ended
	March 31, 2017		March 31, 2016
Expected average risk-free rate		-		2.24	%
Expected average life		-		10.00 years
Expected volatility		-		41.00	%
Expected dividend yield		-		2.33	%

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

Following is stock option activity under the plans during the three months ended March 31, 2017:

					Weighted
					Average		Aggregate
			Weighted		Remaining		Intrinsic
	Options		Average		Contractual Term		Value
	Outstanding		Exercise Price		(in years)		(in 000’s)
Options outstanding, January 1, 2017		54,750	$	22.21
Forfeited or cancelled		-		-
Exercised		(7,550)		22.89
Granted		-		-
Options outstanding, March 31, 2017		47,200	$	22.12		3.65	$	1,300
Vested or expected to vest at March 31, 2017		47,200	$	22.12		3.65	$	1,300
Exercisable at March 31, 2017		35,100	$	18.50		2.22	$	1,096

Schedule Of Share Based Compensation Stock Options Plans [Table Text Block]

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows (in thousand’s):

	Three Months Ended March 31,
	2017		2016
Proceeds of options exercised	$	134	$	314
Related tax benefit recognized		44		75
Intrinsic value of options exercised		200		326

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

There was approximately $188,000 included within other liabilities at March 31, 2017 related to the STIP.

	Restricted Stock Units				Stock Grants
			Weighted-Average				Weighted-Average
			Grant Date				Grant Date
Unvested Shares	Shares		Fair Value		Shares		Fair Value
Unvested at January 1, 2017		75,468	$	32.31		11,161	$	32.30
Granted		23,384		50.56		19,416		26.02
Vested		(19,219)		25.77		(24,986)		25.82
Forfeited		(6,973)		25.77		(1,022)		37.02
Unvested at March 31, 2017		72,660	$	40.54		4,569	$	40.01

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following table sets forth the computation of basic and diluted earnings per common share:

	Three Months Ended March 31,
	2017		2016
	(In Thousands, except per share data)
Basic Earnings Per Share:
Net income available to common shareholders	$	5,140	$	7,169
Less: Income allocated to participating securities		1		3
Net income allocated to common shareholders		5,139		7,166
Weighted average common shares outstanding Including participating securities		9,446		9,006
Less: Participating securities		5		12
Average common shares		9,441		8,994
Basic earnings per common share	$	0.54	$	0.80
Diluted Earnings Per Share:
Net income allocated to common shareholders	$	5,139	$	7,166
Weighted average common shares outstanding for basic earnings per common share		9,441		8,994
Add: Dilutive effects of stock options		56		70
Average shares and dilutive potential common shares		9,497		9,064
Diluted earnings per common share	$	0.54	$	0.79

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2017

Marketable Securities [Abstract]

Schedule of Available-for-sale and Held to Maturity Securities [Table Text Block]

The following is a summary of available-for-sale and held-to-maturity securities:

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In Thousands)
At March 31, 2017
Available-for-Sale Securities:
Obligations of U.S. government corporations and agencies	$	4,000	$	-	$	(46)	$	3,954
Mortgage-backed securities – residential		81,016		587		(731)		80,872
REMICs		1,258		2		-		1,260
Collateralized mortgage obligations		66,263		497		(469)		66,291
Trust preferred securities and preferred stock		-		1		-		1
Corporate bonds		12,917		171		(5)		13,083
Obligations of state and political subdivisions		92,791		2,800		(451)		95,140
Totals	$	258,245	$	4,058	$	(1,702)	$	260,601

			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Held-to-Maturity Securities*:
FHLMC certificates	$	11	$	-	$	-	$	11
FNMA certificates		54		1		-		55
GNMA certificates		21		1		-		22
Obligations of state and political subdivisions		685		-		-		685
Totals	$	771	$	2	$	-	$	773

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
At December 31, 2016
Available-for-sale
Obligations of U.S. government corporations and agencies	$	4,000	$	-	$	(85)	$	3,915
Mortgage-backed securities - residential		82,619		390		(1,302)		81,707
REMICs		1,309		-		(2)		1,307
Collateralized mortgage obligations		63,204		422		(621)		63,005
Preferred stock		-		2		-		2
Corporate bonds		12,919		97		(3)		13,013
Obligations of state and political subdivisions		86,165		2,491		(613)		88,043
Total Available-for-Sale	$	250,216	$	3,402	$	(2,626)	$	250,992

			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Held-to-Maturity
FHLMC certificates	$	12	$	-	$	-	$	12
FNMA certificates		56		2		-		58
GNMA certificates		23		1		-		24
Obligations of states and political subdivisions		93		-		-		93
Total Held-to-Maturity	$	184	$	3	$	-	$	187

* FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

Investments Classified by Contractual Maturity Date [Table Text Block]

These securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Due in one year or less	$	1,457	$	1,463	$	-	$	-
Due after one year through five years		22,620		22,993		93		93
Due after five years through ten years		43,015		44,719		592		592
Due after ten years		42,616		43,003		-		-
MBS/CMO/REMIC		148,537		148,423		86		88
	$	258,245	$	260,601	$	771	$	773

Unrealized Gain (Loss) on Investments [Table Text Block]

The following tables summarize First Defiance’s securities that were in an unrealized loss position at March 31, 2017 and December 31, 2016:

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At March 31, 2017
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	3,954	$	(46)	$	-	$	-	$	3,954	$	(46)
Mortgage-backed securities-residential		38,918		(731)		-		-		38,918		(731)
Collateralized mortgage obligations		26,997		(422)	$	1,187	$	(47)		28,184		(469)
Obligations of state and political subdivisions		13,501		(451)		-		-		13,501		(451)
Corporate bonds		-		-		995		(5)		995		(5)
Total temporarily impaired securities	$	83,370	$	(1,650)	$	2,182	$	(52)	$	85,552	$	(1,702)

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At December 31, 2016
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	3,915	$	(85)	$	-	$	-	$	3,915	$	(85)
Mortgage-backed securities-residential		63,736		(1,302)		-		-		63,736		(1,302)
REMICs		1,308		(2)		-		-		1,308		(2)
Collateralized mortgage obligations		28,882		(566)		1,227		(55)		30,110		(621)
Corporate bonds		-		-		997		(3)		997		(3)
Obligations of state and political subdivisions		19,172		(613)		-		-		19,172		(613)
Total temporarily impaired securities	$	117,013	$	(2,568)	$	2,224	$	(58)	$	119,238	$	(2,626)

Marketable Securities [Table Text Block]

The proceeds from the sales and calls of securities and the associated gains and losses are listed below:

	Three Months Ended
	March 31,
	2017		2016
	(In Thousands)
Proceeds	$	-	$	5,360
Gross realized gains		-		131
Gross realized losses		-		-

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Loans (Tables)

3 Months Ended

Mar. 31, 2017

Loans Receivable, Net [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Loans receivable consist of the following:

	March 31,		December 31,
	2017		2016
	(In Thousands)
Real Estate:
Secured by 1-4 family residential	$	276,761	$	207,550
Secured by multi-family residential		211,546		196,983
Secured by commercial real estate		981,698		843,579
Construction		199,724		182,886
		1,669,729		1,430,998
Other Loans:
Commercial		504,340		469,055
Home equity and improvement		132,965		118,429
Consumer finance		27,696		16,680
		665,001		604,164
Total loans		2,334,730		2,035,162
Deduct:
Undisbursed loan funds		(95,460)		(93,355)
Net deferred loan origination fees and costs		(1,264)		(1,320)
Allowance for loan loss		(25,749)		(25,884)
Totals	$	2,212,257	$	1,914,603

Schedule of Valuation Allowance for Impairment of Recognized Servicing Assets [Table Text Block]

The following table discloses allowance for loan loss activity for the quarters ended March 31, 2017 and 2016 by portfolio segment (In Thousands):

			Multi-
	1-4 Family		Family								Home Equity
Quarter Ended	Residential		Residential		Commercial						and		Consumer
March 31, 2017	Real Estate		Real Estate		Real Estate		Construction		Commercial		Improvement		Finance		Total
Beginning Allowance	$	2,627	$	2,228	$	10,625	$	450	$	7,361	$	2,386	$	207	$	25,884
Charge-Offs		(49)		0		(290)		0		0		(54)		(71)		(464)
Recoveries		56		32		34		0		115		33		4		274
Provisions		(13)		(138)		(159)		8		333		(65)		89		55
Ending Allowance	$	2,621	$	2,122	$	10,210	$	458	$	7,809	$	2,300	$	229	$	25,749

			Multi-
	1-4 Family		Family								Home Equity
Quarter Ended	Residential		Residential		Commercial						and		Consumer
March 31, 2016	Real Estate		Real Estate		Real Estate		Construction		Commercial		Improvement		Finance		Total
Beginning Allowance	$	3,212	$	2,151	$	11,772	$	517	$	5,255	$	2,304	$	171	$	25,382
Charge-Offs		(55)		0		(13)		0		(336)		(30)		0		(434)
Recoveries		86		0		177		0		19		39		35		356
Provisions		(134)		99		(292)		(28)		882		(81)		(82)		364
Ending Allowance	$	3,109	$	2,250	$	11,644	$	489	$	5,820	$	2,232	$	124	$	25,668

Schedule of Allowance for Loan Losses and Recorded Investment in Portfolio Segment Based on Impairment [Table Text Block]

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2017 (In Thousands):

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	196	$	4	$	170	$	-	$	101	$	300	$	1	$	772
Collectively evaluated for impairment		2,425		2,118		10,040		458		7,708		2,000		228		24,977
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,621	$	2,122	$	10,210	$	458	$	7,809	$	2,300	$	229	$	25,749
Loans:
Loans individually evaluated for impairment	$	6,725	$	3,340	$	13,162	$	-	$	4,111	$	1,202	$	70	$	28,610
Loans collectively evaluated for impairment		269,194		208,437		969,583		104,036		501,349		132,404		27,662		2,212,665
Loans acquired with deteriorated credit quality		1,247		-		2,253		-		632		-		-		4,132
Total ending loans balance	$	277,166	$	211,777	$	984,998	$	104,036	$	506,092	$	133,606	$	27,732	$	2,245,407

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2016 (In Thousands):

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	202	$	4	$	255	$	-	$	35	$	313	$	-	$	809
Collectively evaluated for impairment		2,425		2,224		10,370		450		7,326		2,073		207		25,075
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,627	$	2,228	$	10,625	$	450	$	7,361	$	2,386	$	207	$	25,884
Loans:
Loans individually evaluated for impairment	$	6,898	$	3,483	$	13,570	$	-	$	2,154	$	1,269	$	59	$	27,433
Loans collectively evaluated for impairment		200,907		193,714		832,446		89,244		468,246		117,744		16,625		1,918,926
Loans acquired with deteriorated credit quality		-		-		-		-		11		-		-		11
Total ending loans balance	$	207,805	$	197,197	$	846,016	$	89,244	$	470,411	$	119,013	$	16,684	$	1,946,370

Loans Receivable, Impaired, Interest Income, Cash Basis Method [Table Text Block]

The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans (In Thousands):

	Three Months Ended March 31, 2017
			Interest		Cash Basis
	Average		Income		Income
	Balance		Recognized		Recognized
Residential Owner Occupied	$	2,820	$	28	$	28
Residential Non Owner Occupied		3,891		36		36
Total Residential Real Estate		6,711		64		64
Multi-Family		3,374		10		10
CRE Owner Occupied		4,614		22		22
CRE Non Owner Occupied		4,499		42		39
Agriculture Land		2,707		47		19
Other CRE		1,668		13		12
Total Commercial Real Estate		13,488		124		92
Construction		-		-		-
Commercial Working Capital		2,372		19		19
Commercial Other		1,722		21		16
Total Commercial		4,094		40		35
Home Equity and Home Improvement		1,254		10		10
Consumer Finance		74		1		1
Total Impaired Loans	$	28,995	$	249	$	212

The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans (In Thousands):

	Three Months Ended March 31, 2016
			Interest		Cash Basis
	Average		Income		Income
	Balance		Recognized		Recognized
Residential Owner Occupied	$	4,025	$	39	$	39
Residential Non Owner Occupied		3,557		35		34
Total Residential Real Estate		7,582		74		73
Multi-Family		4,593		30		30
CRE Owner Occupied		9,090		62		48
CRE Non Owner Occupied		4,418		53		49
Agriculture Land		3,593		35		12
Other CRE		1,422		4		4
Total Commercial Real Estate		18,523		154		113
Construction		-		-		-
Commercial Working Capital		1,513		15		15
Commercial Other		4,245		19		18
Total Commercial		5,758		34		33
Home Equity and Home Improvement		1,749		15		15
Consumer Finance		73		1		1
Total Impaired Loans	$	38,278	$	308	$	265

Impaired Financing Receivables [Table Text Block]

The following table presents loans individually evaluated for impairment by class of loans (In Thousands):

	March 31, 2017						December 31, 2016
					Allowance						Allowance
	Unpaid				for Loan		Unpaid				for Loan
	Principal		Recorded		Losses		Principal		Recorded		Losses
	Balance*		Investment		Allocated		Balance*		Investment		Allocated
With no allowance recorded:
Residential Owner Occupied	$	1,906	$	1,760	$	-	$	1,912	$	1,765	$	-
Residential Non Owner Occupied		1,769		1,762		-		1,691		1,683		-
Total 1-4 Family Residential Real Estate		3,675		3,522		-		3,603		3,448		-
Multi-Family Residential Real Estate		3,288		3,288		-		3,578		3,430		-
CRE Owner Occupied		3,048		2,611		-		2,652		2,353		-
CRE Non Owner Occupied		4,114		3,896		-		4,372		4,240		-
Agriculture Land		2,617		2,649		-		1,695		1,722		-
Other CRE		1,020		950		-		1,225		1,115		-
Total Commercial Real Estate		10,799		10,106		-		9,944		9,430		-
Construction		-		-		-		-		-		-
Commercial Working Capital		2,228		2,183		-		838		786		-
Commercial Other		1,782		1,620		-		1,179		967		-
Total Commercial		4,010		3,803		-		2,017		1,753		-
												-
Home Equity and Home Improvement		621		575		-		631		585		-
Consumer Finance		53		53		-		55		55	$	-
Total loans with no allowance recorded	$	22,446	$	21,347	$	-	$	19,828	$	8,701
With an allowance recorded:
Residential Owner Occupied	$	2,159	$	2,132	$	157	$	2,348	$	2,319	$	157
Residential Non Owner Occupied		1,078		1,071		39		1,137		1,131		45
Total 1-4 Family Residential Real Estate		3,237		3,203		196		3,485		3,450		202
Multi-Family Residential Real Estate		51		52		4		53		53		4
CRE Owner Occupied		2,291		1,831		96		2,362		1,894		102
CRE Non Owner Occupied		414		417		25		1,618		1,479		108
Agriculture Land		109		110		5		45		45		3
Other CRE		1,116		698		44		1,144		722		42
Total Commercial Real Estate		3,930		3,056		170		5,169		4,140		255
Construction		-		-		-		-		-		-
Commercial Working Capital		180		181		94		230		231		24
Commercial Other		124		127		7		167		170		11
Total Commercial		304		308		101		397		401		35
Home Equity and Home Improvement		631		627		300		688		684		313
Consumer Finance		18		17		1		4		4		-
Total loans with an allowance recorded	$	8,171	$	7,263	$	772	$	9,796	$	8,732	$	809

* Presented gross of charge offs

Schedule of Non-Performing Loans and Real Estate Owned [Table Text Block]

The following table presents the current balance of the aggregate amounts of non-performing assets, comprised of non-performing loans and real estate owned on the dates indicated: 

	March 31,		December 31,
	2017		2016
	(In Thousands)
Non-accrual loans	$	15,057	$	14,348
Loans over 90 days past due and still accruing		-		-
Total non-performing loans		15,057		14,348
Real estate and other assets held for sale		705		455
Total non-performing assets	$	15,762	$	14,803
Troubled debt restructuring, still accruing	$	9,771	$	10,544

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

The following table presents the aging of the recorded investment in past due and non-accrual loans as of March 31, 2017 by class of loans (In Thousands):

									Total Past		Total Non
	Current		30-59 days		60-89 days		90+ days		Due		Accrual
Residential Owner Occupied	$	175,631	$	95	$	866	$	333	$	1,294	$	1,579
Residential Non Owner Occupied		99,595		50		284		312		646		1,175
Total 1-4 Family Residential Real Estate		275,226		145		1,150		645		1,940		2,754
Multi-Family Residential Real Estate		211,777		-		-		-		-		2,576
CRE Owner Occupied		384,192		710		45		1,337		2,092		3,172
CRE Non Owner Occupied		395,410		328		-		442		770		1,626
Agriculture Land		135,544		210		-		855		1,065		1,582
Other Commercial Real Estate		65,925		-		-		-		-		866
Total Commercial Real Estate		981,071		1,248		45		2,634		3,927		7,246
Construction		104,036		-		-		-		-		-
Commercial Working Capital		225,276		55		49		-		104		1,005
Commercial Other		278,789		1,455		142		326		1,923		497
Total Commercial		504,065		1,510		191		326		2,027		1,502
Home Equity/Home Improvement		132,993		173		42		398		613		875
Consumer Finance		27,417		108		130		77		315		101
Total Loans	$	2,236,585	$	3,184	$	1,558	$	4,080	$	8,822	$	15,054
Loans acquired with deteriorated credit quality (included in the totals above)	$	3,830	$	110	$	45	$	147	$	302	$	472
Loans acquired in current year (included in totals above)	$	279,502	$	820	$	341	$	1,130	$	2,291	$	1,476

The following table presents the aging of the recorded investment in past due and non-accrual loans as of December 31, 2016 by class of loans (In Thousands):

									Total Past		Total Non
	Current		30-59 days		60-89 days		90+ days		Due		Accrual
Residential Owner Occupied	$	139,015	$	56	$	842	$	544	$	1,442	$	1,931
Residential Non Owner Occupied		66,811		166		308		63		537		992
Total 1-4 Family Residential Real Estate		205,826		222		1,150		607		1,979		2,923
Multi-Family Residential Real Estate		197,197		-		-		-		-		2,637
CRE Owner Occupied		340,233		79		-		1,396		1,475		3,098
CRE Non Owner Occupied		338,724		81		16		426		523		1,808
Agriculture Land		102,397		-		-		-		-		755
Other Commercial Real Estate		62,415		-		-		249		249		1,292
Total Commercial Real Estate		843,769		160		16		2,071		2,247		6,953
Construction		89,244		-		-		-		-		-
Commercial Working Capital		202,786		-		10		38		48		435
Commercial Other		267,189		23		-		365		388		577
Total Commercial		469,975		23		10		403		436		1,012
Home Equity and Home Improvement		117,458		1,125		176		254		1,555		730
Consumer Finance		16,452		85		69		78		232		91
Total Loans	$	1,939,921	$	1,615	$	1,421	$	3,413	$	6,449	$	14,346

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

The following table presents loans by class modified as troubled debt restructurings that occurred during the three month periods ending March 31, 2017 and March 31, 2016:

	Loans Modified as a TDR for the				Loans Modified as a TDR for the
	Three Months Ended March 31, 2017				Three Months Ended March 31, 2016
	($ in thousands)				($ in thousands)
Troubled Debt	Number of		Recorded Investment (as of		Number of		Recorded Investment (as of
Restructurings	Loans		period end)		Loans		period end)
1-4 Family Owner Occupied		4	$	100		1	$	9
1-4 Family Non Owner Occupied		2		84		2		127
CRE Owner Occupied		1		119		0		-
CRE Non Owner Occupied		0		-		0		-
Agriculture Land		0		-		0		-
Other CRE		0		-		0		-
Commercial Working Capital		0		-		0		-
Commercial Other		1		46		0		-
Home Equity and Improvement		1		25		5		297
Consumer Finance		2		15		2		5
Total		11	$	389		10	$	438

Financing Receivable Credit Quality Indicators [Table Text Block]

As of March 31, 2017, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (In Thousands):

			Special						Not
Class	Pass		Mention		Substandard		Doubtful		Graded		Total
1-4 Family Owner Occupied	$	7,502	$	483	$	1,943	$	-	$	166,998	$	176,926
1-4 Family Non Owner Occupied		89,432		2,287		3,575		-		4,946		100,240
Total 1-4 Family Real Estate		96,934		2,770		5,518		-		171,944		277,166
Multi-Family Residential Real Estate		207,071		837		3,756		-		113		211,777
CRE Owner Occupied		360,693		20,388		4,890		-		314		386,285
CRE Non Owner Occupied		386,323		3,390		6,467		-		-		396,180
Agriculture Land		128,428		2,731		5,450		-		-		136,609
Other CRE		62,997		59		2,063		-		805		65,924
Total Commercial Real Estate		938,441		26,568		18,870		-		1,119		984,998
Construction		82,950		1,198		-		-		19,888		104,036
Commercial Working Capital		215,129		7,139		3,112		-		-		225,380
Commercial Other		269,535		8,458		2,719		-		-		280,712
Total Commercial		484,664		15,597		5,831		-		-		506,092
Home Equity and Home Improvement		-		-		852		-		132,754		133,606
Consumer Finance		-		-		177		-		27,555		27,732
Total Loans	$	1,810,060	$	46,970	$	35,004	$	-	$	353,373	$	2,245,407
Loans acquired with deteriorated credit quality (included in the totals above)	$	9	$	1,173	$	2,946		-	$	4	$	4,132
Loans acquired in current year (included in totals above)	$	223,594	$	1,711	$	5,393		-	$	51,095	$	281,793

As of December 31, 2016, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (In Thousands):

			Special						Not
Class	Pass		Mention		Substandard		Doubtful		Graded		Total
Residential Owner Occupied	$	5,980	$	402	$	1,824	$	-	$	132,250	$	140,456
Residential Non Owner Occupied		58,041		1,394		3,480		-		4,434		67,349
Total 1-4 Family Real Estate		64,021		1,796		5,304		-		136,684		207,805
Multi-Family Residential Real Estate		192,369		862		3,852		-		114		197,197
CRE Owner Occupied		316,335		20,559		4,430		-		384		341,708
CRE Non Owner Occupied		332,196		1,617		5,435		-		-		339,248
Agriculture Land		98,039		2,355		2,002		-		-		102,396
Other CRE		59,561		60		2,297		-		746		62,664
Total Commercial Real Estate		806,131		24,591		14,164		-		1,130		846,016
Construction		67,751		706		-		-		20,787		89,244
Commercial Working Capital		193,043		8,301		1,490		-		-		202,834
Commercial Other		262,076		3,749		1,752		-		-		267,577
Total Commercial		455,119		12,050		3,242		-		-		470,411
Home Equity and Home Improvement		-		-		696		-		118,317		119,013
Consumer Finance		-		-		90		-		16,594		16,684
Total Loans	$	1,585,391	$	40,005	$	27,348	$	-	$	293,626	$	1,946,370

Certain Loans Acquired in Transfer Accounted for as Debt Securities, Acquired During Period, Contractually Required Payments [Table Text Block]

Accretable yield, or income expected to be collected, is as follows 

	2017
Balance at January 1	$	-
New Loans Purchased		1,034
Accretion of Income		-
Reclassifications from Non-accretable Difference Charge-off of Accretable Yield		-
Balance at March 31	$	1,034

Schedule of Contractually Required Payments Receivable of Loans Purchased with Evidence of Credit Deterioration [Table Text Block]

Contractually required payments receivable of loans purchased with evidence of credit deterioration during the period ended March 31, 2017 are included in the table below. There were no such loans purchased during the year ended December 31, 2016. (In Thousands)

1-4 Family Residential Real Estate	$	1,720
Commercial Real Estate		3,781
Commercial		785
Consumer		4
Total	$	6,290

Certain Loans Acquired in Transfer Accounted for as Debt Securities [Table Text Block]

Cash Flows Expected to be Collected at Acquisition	$	5,157
Fair Value of Acquired Loans at Acquisition	$	4,123

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Mortgage Banking (Tables)

3 Months Ended

Mar. 31, 2017

Mortgage Banking [Abstract]

Mortgage Loans [Table Text Block]

Net revenues from the sales and servicing of mortgage loans consisted of the following:

	Three Months Ended
	March 31,
	2017		2016
	(In Thousands)
Gain from sale of mortgage loans	$	1,083	$	994
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue		934		877
Amortization of mortgage servicing rights		(312)		(311)
Mortgage servicing rights valuation adjustments		33		(21)
		655		545
Net revenue from sale and servicing of mortgage loans	$	1,738	$	1,539

Capitalized Mortgage and Valuation Allowance [Table Text Block]

Activity for capitalized mortgage servicing rights and the related valuation allowance follows for the three months ended March 31, 2017 and 2016:

	March 31,		March 31,
	2017		2016
	(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	10,117	$	9,893
Loans sold, servicing retained		356		297
Amortization		(312)		(311)
Carrying value before valuation allowance at end of period		10,161		9,879
Valuation allowance:
Balance at beginning of period		(522)		(645)
Impairment (expense) recovery		33		(21)
Balance at end of period		(489)		(666)
Net carrying value of MSRs at end of period	$	9,672	$	9,213
Fair value of MSRs at end of period	$	10,013	$	9,463

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Deposits (Tables)

3 Months Ended

Mar. 31, 2017

Deposits [Abstract]

Deposits [Table Text Block]

A summary of deposit balances is as follows:

	March 31,		December 31,
	2017		2016
	(In Thousands)
Non-interest-bearing checking accounts	$	579,943	$	487,663
Interest-bearing checking and money market accounts		973,459		816,665
Savings deposits		288,498		243,369
Retail certificates of deposit less than $250,000		490,953		400,080
Retail certificates of deposit greater than $250,000		40,936		33,851
	$	2,373,789	$	1,981,628

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Borrowings (Tables)

3 Months Ended

Mar. 31, 2017

Subordinated Borrowings [Abstract]

Federal Home Loan Bank Advances Disclosure [Table Text Block]

First Defiance’s debt, FHLB advances and junior subordinated debentures owed to unconsolidated subsidiary trusts are comprised of the following:

	March 31,		December 31,
	2017		2016
	(In Thousands)
FHLB Advances:
Single maturity fixed rate advances	$	92,000	$	92,000
Putable advances		5,000		5,000
Amortizable mortgage advances		8,104		6,943
Total	$	105,104	$	103,943
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$	36,083	$	36,083

Schedule of Underlying Assets of Repurchase Agreements when Amount of Repurchase Agreements Exceeds 10 Percent of Assets [Table Text Block]

The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of March 31, 2017 and December 31, 2016 is presented in the following tables.

							Greater
	Overnight and		Up to 30				than 90
	Continuous		Days		30-90 Days		Days		Total
			(In Thousands)
At March 31, 2017
Repurchase agreements:
Mortgage-backed securities – residential	$	16,624	$	-	$	-	$	-	$	16,624
Collateralized mortgage obligations		8,267		-		-		-		8,267
Total borrowings	$	24,891	$	-	$	-	$	-	$	24,891
Gross amount of recognized liabilities for repurchase agreements									$	24,891

							Greater
	Overnight and		Up to 30				than 90
	Continuous		Days		30-90 Days		Days		Total
			(In Thousands)
At December 31, 2016
Repurchase agreements:
Mortgage-backed securities – residential	$	21,222	$	-	$	-	$	-	$	21,222
Collateralized mortgage obligations		10,594		-		-		-		10,594
Total borrowings	$	31,816	$	-	$	-	$	-	$	31,816
Gross amount of recognized liabilities for repurchase agreements									$	31,816

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Commitments, Guarantees and Contingent Liabilities (Tables)

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Schedule of Line of Credit Facilities [Table Text Block]

The Company’s maximum obligation to extend credit for loan commitments (unfunded loans and unused lines of credit) and standby letters of credit outstanding as of the periods stated below were as follows (In Thousands):

	March 31, 2017				December 31, 2016
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	49,810	$	125,148	$	34,432	$	106,356
Unused lines of credit		25,487		420,597		14,384		400,542
Standby letters of credit		-		6,719		-		9,668
Total	$	75,297	$	552,464	$	48,816	$	516,566

XML

Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position Carrying Value [Table Text Block]

The fair value of these mortgage banking derivatives are reflected by a derivative asset recorded in other assets in the Consolidated Statements of Condition. The table below provides data about the carrying values of these derivative instruments:

March 31, 2017

December 31, 2016

Assets

(Liabilities)

Assets

(Liabilities)

Derivative

Derivative

Carrying

Carrying

Net Carrying

Carrying

Carrying

Net Carrying

Value

Value

Value

Value

Value

Value

(In Thousands)

Derivatives not designated as hedging instruments

Mortgage Banking Derivatives

$

598

$

(42)

$

556

$

491

$

-

$

491

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block]

The table below provides data about the amount of gains and losses recognized in income on derivative instruments not designated as hedging instruments:

	Three Months Ended
	March 31,
	2017		2016
	(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	65	$	438

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Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2017

Other Comprehensive Income (Loss), Net Of Tax [Abstract]

Other Comprehensive Income Loss Reclassification Adjustments Related To Securities Available For Sale [Table Text Block]

The before and after tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below. Reclassification adjustments related to securities available for sale are included in gains on sale or call of securities in the accompanying consolidated condensed statements of income.

	Before Tax		Tax Expense		Net of Tax
	Amount		(Benefit)		Amount
	(In Thousands)
Three months ended March 31, 2017:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	1,580	$	(553)	$	1,027
Reclassification adjustment for net gains included in net income		-		-		-
Total other comprehensive loss	$	1,580	$	(553)	$	1,027
Three months ended March 31, 2016:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	1,450	$	(508)	$	942
Reclassification adjustment for net gains included in net income		(131)		46		(85)
Total other comprehensive loss	$	1,319	$	(462)	$	857

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

Activity in accumulated other comprehensive income (loss), net of tax, was as follows:

					Accumulated
	Securities		Post-		Other
	Available		retirement		Comprehensive
	For Sale		Benefit		Income
	(In Thousands)
Balance January 1, 2017	$	504	$	(289)	$	215
Other comprehensive income before reclassifications		1,027		-		1,027
Amounts reclassified from accumulated other comprehensive income		-		-		-
Net other comprehensive income during period		1,027		-		1,027
Balance March 31, 2017	$	1,531	$	(289)	$	1,242
Balance January 1, 2016	$	4,042	$	(420)	$	3,622
Other comprehensive income before reclassifications		942		-		942
Amounts reclassified from accumulated other comprehensive income		(85)		-		(85)
Net other comprehensive income during period		857		-		857
Balance March 31, 2016	$	4,899	$	(420)	$	4,479

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Affordable Housing Projects Tax Credit Partnership (Tables)

3 Months Ended

Mar. 31, 2017

Affordable Housing Projects Tax Credit Partnership [Abstract]

Other Commitments [Table Text Block]

As of March 31, 2017, the expected payments for unfunded affordable housing commitments were as follows:

(dollars in thousands)	Amount
2017	$	1,897
2018		1,137
2019		307
2020		179
2021		160
Thereafter		615
Total Unfunded Commitments	$	4,295

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

The following table presents tax credits and other tax benefits recognized and amortization expense related to affordable housing for the three months ended March 31, 2017 and 2016.

	Three Months Ended March
	31,
(dollars in thousands)	2017		2016
Proportional Amortization Method
Tax credits and other tax benefits recognized	$	211	$	157
Amortization expense in federal income taxes		165		119

XML

Business Combinations (Tables)

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

The following table summarizes the fair value of the total consideration transferred as part of the Commercial Bancshares acquisition as well as the fair value of identifiable assets and liabilities assumed as of the effective date of the transaction.

	February 24, 2017
	(In Thousands)
Cash Consideration	$	12,340
Equity – Dollar Value of Issued Shares		56,532
Fair Value of Total Consideration Transferred		68,872
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
Cash and Cash Equivalents		35,411
Federal Funds Sold		2,769
Securities		4,338
Loans		284,867
FHLB Stock of Cincinnati and Other Stock		2,194
Office Properties and Equipment		5,455
Intangible Assets		4,900
Bank-Owned Life Insurance		8,168
Accrued Interest Receivable and Other Assets		(3,606)
Deposits – Non-Interest Bearing		(56,061)
Deposits – Interest Bearing		(251,931)
Advances from FHLB		(1,403)
Accrued Interest Payable and Other Liabilities		(2,411)
Total Identifiable Net Assets		39,902
Goodwill	$	28,970

Business Acquisition, Pro Forma Information [Table Text Block]

	Pro Forma Three		Pro Forma Three
	Months Ended		Months Ended
	March 31, 2017		March 31, 2016
	(In Thousands)
Net Interest Income	$	23,837	$	22,798
Provision for Loan Losses		55		386
Non-Interest Income		10,828		9,121
Non-Interest Expense		21,234		20,103
Income Before Income Taxes		13,376		11,430
Income Tax Expense		5,141		3,413
Net Income	$	8,235	$	8,017
Diluted Earnings Per Share	$	0.81	$	0.79

XML

Significant Accounting Policies (Details Textual)	3 Months Ended
	Mar. 31, 2017
Noncompete Agreements [Member]
Property, Plant and Equipment [Line Items]
Finite-Lived Intangible Asset, Useful Life	5 years
Customer Contracts [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Finite-Lived Intangible Asset, Useful Life	20 years
Customer Contracts [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Finite-Lived Intangible Asset, Useful Life	10 years

XML

Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Available for sale securities:
Available for sale securities, Total Fair Value	$ 260,601	$ 250,992
Collateralized mortgage obligations- residential [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	66,291	63,005
Fair Value, Inputs, Level 1 [Member] | Collateralized mortgage obligations- residential [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Fair Value, Inputs, Level 2 [Member] | Collateralized mortgage obligations- residential [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	66,291	63,005
Fair Value, Inputs, Level 3 [Member] | Collateralized mortgage obligations- residential [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Obligations of U.S. Government corporations and agencies [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	3,954	3,915
Obligations of U.S. Government corporations and agencies [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Obligations of U.S. Government corporations and agencies [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	3,954	3,915
Obligations of U.S. Government corporations and agencies [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage-backed - residential [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	80,872	81,707
Mortgage-backed - residential [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage-backed - residential [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	80,872	81,707
Mortgage-backed - residential [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
REMIC [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	1,260	1,307
REMIC [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
REMIC [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	1,260	1,307
REMIC [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Preferred Stock [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	1	2
Preferred Stock [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	1	2
Preferred Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Preferred Stock [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Corporate bonds [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	13,083	13,013
Corporate bonds [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Corporate bonds [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	13,083	13,013
Corporate bonds [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Obligations of state and political subdivisions [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	95,140	88,043
Obligations of state and political subdivisions [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Obligations of state and political subdivisions [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	95,140	88,043
Obligations of state and political subdivisions [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0
Mortgage Banking Derivative Asset [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	598	491
Mortgage Banking Derivative Asset [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage Banking Derivative Asset [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	598	491
Mortgage Banking Derivative Asset [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	$ 0
Mortgage Banking Derivative Liability [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	42
Mortgage Banking Derivative Liability [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0
Mortgage Banking Derivative Liability [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	42
Mortgage Banking Derivative Liability [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	$ 0

XML

Fair Value (Details 1) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Impaired loans
Total impaired loans		$ 1,496
Mortgage servicing rights	$ 1,100	657
Real estate held for sale
Total real estate held for sale		377
One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	1,252	316
Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	1,252	0
Commercial Real Estate [Member]
Impaired loans
Total impaired loans	1,131	848
Real estate held for sale
Total real estate held for sale		377
Home Equity and Improvement [Member]
Impaired loans
Total impaired loans		0
Residential Mortgage [Member]
Real estate held for sale
Total real estate held for sale		0
Commercial Loan [Member]
Impaired loans
Total impaired loans		332
Fair Value, Inputs, Level 1 [Member]
Impaired loans
Total impaired loans		0
Mortgage servicing rights		0
Real estate held for sale
Total real estate held for sale		0
Fair Value, Inputs, Level 1 [Member] | One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 1 [Member] | Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 1 [Member] | Commercial Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Real estate held for sale
Total real estate held for sale		0
Fair Value, Inputs, Level 1 [Member] | Home Equity and Improvement [Member]
Impaired loans
Total impaired loans		0
Fair Value, Inputs, Level 1 [Member] | Residential Mortgage [Member]
Real estate held for sale
Total real estate held for sale		0
Fair Value, Inputs, Level 2 [Member]
Impaired loans
Total impaired loans		0
Mortgage servicing rights		657
Real estate held for sale
Total real estate held for sale		0
Fair Value, Inputs, Level 2 [Member] | One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 2 [Member] | Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 2 [Member] | Commercial Real Estate [Member]
Impaired loans
Total impaired loans	1,131	0
Real estate held for sale
Total real estate held for sale		0
Fair Value, Inputs, Level 2 [Member] | Home Equity and Improvement [Member]
Impaired loans
Total impaired loans	0
Fair Value, Inputs, Level 2 [Member] | Residential Mortgage [Member]
Real estate held for sale
Total real estate held for sale		0
Fair Value, Inputs, Level 3 [Member]
Impaired loans
Total impaired loans		1,496
Mortgage servicing rights		0
Real estate held for sale
Total real estate held for sale		377
Fair Value, Inputs, Level 3 [Member] | One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	1,252	316
Fair Value, Inputs, Level 3 [Member] | Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	1,252	0
Fair Value, Inputs, Level 3 [Member] | Commercial Real Estate [Member]
Impaired loans
Total impaired loans	$ 0	848
Real estate held for sale
Total real estate held for sale		377
Fair Value, Inputs, Level 3 [Member] | Home Equity and Improvement [Member]
Impaired loans
Total impaired loans		0
Fair Value, Inputs, Level 3 [Member] | Residential Mortgage [Member]
Real estate held for sale
Total real estate held for sale		0
Fair Value, Inputs, Level 3 [Member] | Commercial Loan [Member]
Impaired loans
Total impaired loans		$ 332

XML

Fair Value (Details 2) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Impaired Loans- Applies to all loan classes, Fair Value		$ 1,496
Real estate held for sale - Applies to all classes, Fair Value		377
Range of Input 30% [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Real estate held for sale - Applies to all classes, Fair Value		$ 377
Valuation Technique, Fair Value		Appraisals which utilize sales comparison, net income and cost approach
Unobservable Inputs, Fair Value		Discounts for changes in market conditions
Fair Value Measurement Weighted Average Range		7.00%
Range of Input 10-30% [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Impaired Loans- Applies to all loan classes, Fair Value		$ 1,496
Valuation Technique, Fair Value		Appraisals which utilize sales comparison, net income and cost approach
Unobservable Inputs, Fair Value		Discounts for collection issues and changes in market conditions
Fair Value, Range of Input, Minimum		10.00%
Fair Value, Range of Input, Maximum		30.00%
Fair Value Measurement Weighted Average Range		11.00%
Range Of Input 0-20% [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value, Range of Input, Minimum		0.00%
Fair Value, Range of Input, Maximum		20.00%
Range of Input 10% [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Impaired Loans- Applies to all loan classes, Fair Value	$ 1,252
Valuation Technique, Fair Value	Appraisals which utilize sales comparison, net income and cost approach
Unobservable Inputs, Fair Value	Discounts for collection issues and changes in market conditions
Fair Value Measurement Range Of Input	10.00%
Fair Value Measurement Weighted Average Range	10.00%

XML

Fair Value (Details 3) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Financial Assets, Carrying Value:
Cash and cash equivalents, Carrying Value	$ 169,998	$ 99,003	$ 123,785	$ 79,769
Investment securities, Carrying Value	261,372	251,176
Federal Home Loan Bank Stock, Carrying Value	15,992	13,798
Loans, net, including loans held for sale, Carrying Value	2,221,070	1,924,210
Accrued interest receivable, Carrying Value	8,872	6,760
Financial Liabilities, Carrying Value:
Deposits, Carrying Value	2,373,789	1,981,628
Advances from Federal Home Loan Bank, Carrying Value	105,104	103,943
Securities sold under repurchase agreements, Carrying Value	24,891	31,816
Subordinated debentures, Carrying Value	36,083	36,083
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	169,998	99,003
Investment securities, Fair Value	261,374	251,179
Loans, net, including loans held for sale, Fair Value	2,207,503	1,911,280
Accrued interest receivable, Fair Value	8,872	6,760
Financial Liabilities, Fair Value:
Deposits, Fair Value	2,380,541	1,987,723
Advances from Federal Home Loan Bank, Fair Value	104,500	103,019
Securities sold under repurchase agreements, Fair Value	24,891	31,816
Subordinated debentures, Fair Value	34,735	34,718
Fair Value, Inputs, Level 1 [Member]
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	169,998	99,003
Investment securities, Fair Value	1	2
Loans, net, including loans held for sale, Fair Value	0	0
Accrued interest receivable, Fair Value	5	9
Financial Liabilities, Fair Value:
Deposits, Fair Value	579,943	487,663
Advances from Federal Home Loan Bank, Fair Value	0	0
Securities sold under repurchase agreements, Fair Value	0	0
Subordinated debentures, Fair Value	0	0
Fair Value, Inputs, Level 2 [Member]
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	0	0
Investment securities, Fair Value	261,373	251,177
Loans, net, including loans held for sale, Fair Value	8,425	9,917
Accrued interest receivable, Fair Value	1,465	867
Financial Liabilities, Fair Value:
Deposits, Fair Value	1,800,598	1,500,060
Advances from Federal Home Loan Bank, Fair Value	104,500	103,019
Securities sold under repurchase agreements, Fair Value	24,891	31,816
Subordinated debentures, Fair Value	0	0
Fair Value, Inputs, Level 3 [Member]
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	0	0
Investment securities, Fair Value	0	0
Loans, net, including loans held for sale, Fair Value	2,199,078	1,901,363
Accrued interest receivable, Fair Value	7,402	5,884
Financial Liabilities, Fair Value:
Deposits, Fair Value	0	0
Advances from Federal Home Loan Bank, Fair Value	0	0
Securities sold under repurchase agreements, Fair Value	0	0
Subordinated debentures, Fair Value	$ 34,735	$ 34,718

XML

Fair Value (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]
Impaired Financing Receivable, Recorded Investment			$ 1,496,000
Impaired Financing Receivables, Provisional Expenses	$ 208,000	$ 119,000
Mortgage Servicing Rights at Fair Value	1,100,000		657,000
Valuation Allowance of Mortgage Servicing Rights	489,000		522,000
Proceeds from Collection of Loans Receivable	33,000	21,000
Real Estate Held-for-sale, Increase (Decrease) in Fair Value		$ 53,000
Impaired Financing Receivable, Related Allowance	772,000		809,000
Collateral Dependent Loan [Member]
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]
Impaired Financing Receivable, Recorded Investment	1,300,000		1,500,000
Impaired Financing Receivable, Related Allowance	$ 0		$ 1,000,000
Minimum [Member] | Real Estate held for sale [Member]
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]
Fair Value Inputs, Discount Rate	0.00%
Maximum [Member] | Real Estate held for sale [Member]
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]
Fair Value Inputs, Discount Rate	20.00%

XML

Stock Compensation Plans (Details)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Expected average risk-free rate	0.00%	2.24%
Expected average life	0 years	10 years
Expected volatility	0.00%	41.00%
Expected dividend yield	0.00%	2.33%

XML

Stock Compensation Plans (Details 1) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) $ / shares shares
Options Outstanding, January 1, 2017 | shares	54,750
Options Outstanding, Forfeited or cancelled | shares	0
Options Outstanding, Exercised | shares	(7,550)
Options Outstanding, Granted | shares	0
Options outstanding, March 31, 2017 | shares	47,200
Options Outstanding, Vested or expected to vest at March 31, 2017 | shares	47,200
Options Outstanding, Exercisable at March 31, 2017 | shares	35,100
Weighted Average Exercise Price, Outstanding, January 1, 2017 | $ / shares	$ 22.21
Weighted Average Exercise Price, Forfeited or cancelled | $ / shares	0
Weighted Average Exercise Price, Exercised | $ / shares	22.89
Weighted Average Exercise Price, Granted | $ / shares	0
Weighted Average Exercise Price, outstanding, March 31, 2017 | $ / shares	22.12
Weighted Average Exercise Price, Vested or expected to vest at March 31, 2017 | $ / shares	22.12
Weighted Average Exercise Price, Exercisable at March 31, 2017 | $ / shares	$ 18.5
Weighted Average Remaining Contractual Term (in years), outstanding, March 31, 2017	3 years 7 months 24 days
Weighted Average Remaining Contractual Term (in years), Vested or expected to vest at March 31, 2017	3 years 7 months 24 days
Weighted Average Remaining Contractual Term (in years), Exercisable at March 31, 2017	2 years 2 months 19 days
Aggregate Intrinsic Value, outstanding, March 31, 2017 | $	$ 1,300
Aggregate Intrinsic Value, Vested or expected to vest at March 31, 2017 | $	1,300
Aggregate Intrinsic Value, Exercisable at March 31, 2017 | $	$ 1,096

XML

Stock Compensation Plans (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Proceeds of options exercised	$ 134	$ 314
Related tax benefit recognized	44	75
Intrinsic value of options exercised	$ 200	$ 326

XML

Stock Compensation Plans (Details 3)	3 Months Ended
	Mar. 31, 2017 $ / shares shares
Restricted Stock Units (RSUs) [Member]
Shares, Unvested at January 1, 2017 | shares	75,468
Shares, Granted | shares	23,384
Shares, Vested | shares	(19,219)
Shares, Forfeited | shares	(6,973)
Shares, Unvested at March 31, 2017 | shares	72,660
Weighted-Average Grant Date Fair Value, Unvested at January 1, 2017 | $ / shares	$ 32.31
Weighted-Average Grant Date Fair Value, Granted | $ / shares	50.56
Weighted-Average Grant Date Fair Value, Vested | $ / shares	25.77
Weighted-Average Grant Date Fair Value, Forfeited | $ / shares	25.77
Weighted-Average Grant Date Fair Value, Unvested at March 31, 2017 | $ / shares	$ 40.54
Stock Grants [Member]
Shares, Unvested at January 1, 2017 | shares	11,161
Shares, Granted | shares	19,416
Shares, Vested | shares	(24,986)
Shares, Forfeited | shares	(1,022)
Shares, Unvested at March 31, 2017 | shares	4,569
Weighted-Average Grant Date Fair Value, Unvested at January 1, 2017 | $ / shares	$ 32.3
Weighted-Average Grant Date Fair Value, Granted | $ / shares	26.02
Weighted-Average Grant Date Fair Value, Vested | $ / shares	25.82
Weighted-Average Grant Date Fair Value, Forfeited | $ / shares	37.02
Weighted-Average Grant Date Fair Value, Unvested at March 31, 2017 | $ / shares	$ 40.01

XML

Stock Compensation Plans (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016	Mar. 15, 2010
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	47,200		54,750
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Stock Options	$ 143,000
Employee Service Share Based Compensation Nonvested Awards, Total Compensation Cost Not Yet Recognized, Period For Recognition (in years)	2 years 11 months 5 days
Allocated Share-based Compensation Expense	$ 849,000	$ 261,000
Compensation Expense, Maximum	3,800,000
Estimated Compensation Expense, Excepted	3,500,000
Unrecognized Compensation Expense	$ 2,200,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period 1	$ 13.95
Restricted Stock Units (Rsus) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	2,924
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	72,660
Share-Based Compensation Arrangement By Share-Based Payment Award, Equity Instruments Other Than Options, Grants In Period	4,569
Short-term Equity Incentive Plan 2013 [Member]
Stock Option Period, Description	All options expire ten years from the date of grant. Vested options of retirees expire on the earlier of the scheduled expiration date or three months after the retirement date.
Equity Plan 2010 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				350,000
Stock Option Grant, 2009 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Vested Percentage, Year	20.00%
Stock Option Grant, 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Vested Percentage, Year	40.00%
Stock Option Grant, Annual [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Vested Percentage, Year	20.00%
Long Term Equity Incentive Plan 2014 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	19,219
Long Term Equity Incentive Plan 2016 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	24,526
Long Term Equity Incentive Plan 2017 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	20,657
Long Term Equity Incentive Plan 2017 [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	45.00%
Long Term Equity Incentive Plan 2017 [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	20.00%
Short Term Equity Incentive Plan 2017 [Member]
Allocated Share-based Compensation Expense	$ 188,000
Short Term Equity Incentive Plan 2017 [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	45.00%
Short Term Equity Incentive Plan 2017 [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	10.00%

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Dividends on Common Stock (Details Textual) - $ / shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Common Stock, Dividends, Per Share, Cash Paid	$ 0.25
Common Stock, Dividends, Per Share, Declared	$ 0.25	$ 0.22

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Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Basic Earnings Per Share:
Net income available to common shareholders	$ 5,140	$ 7,169
Less: Income allocated to participating securities	1	3
Net income allocated to common shareholders	$ 5,139	$ 7,166
Weighted average common shares outstanding Including participating securities	9,446	9,006
Less: Participating securities	5	12
Average common shares	9,441	8,994
Basic earnings per common share	$ 0.54	$ 0.8
Diluted Earnings Per Share:
Net income allocated to common shareholders	$ 5,139	$ 7,166
Weighted average common shares outstanding for basic earnings per common share	9,441	8,994
Add: Dilutive effects of stock options	56	70
Average shares and dilutive potential common shares	9,497	9,064
Diluted earnings per common share	$ 0.54	$ 0.79

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Earnings Per Common Share (Details Textual) - shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	9,497	9,064

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Investment Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2017		Dec. 31, 2016
Available-for-sale
Available-for-Sale Securities, Amortized Cost	$ 258,245		$ 250,216
Available-for-Sale Securities, Gross Unrealized Gains	4,058		3,402
Available-for-Sale Securities, Gross Unrealized Losses	(1,702)		(2,626)
Available-for-Sale Securities, Fair Value	260,601		250,992
Held-to-Maturity
Held-to-Maturity Securities, Amortized Cost	771	[1]	184
Held-to-Maturity Securities, Gross Unrealized Gains	2	[1]	3
Held-to-Maturity Securities, Gross Unrealized Losses	0	[1]	0
Held-to-Maturity Securities, Fair Value	773	[1]	187
Obligations of U.S. government corporations and agencies [Member]
Available-for-sale
Available-for-Sale Securities, Amortized Cost	4,000		4,000
Available-for-Sale Securities, Gross Unrealized Gains	0		0
Available-for-Sale Securities, Gross Unrealized Losses	(46)		(85)
Available-for-Sale Securities, Fair Value	3,954		3,915
Mortgage-backed securities - residential [Member]
Available-for-sale
Available-for-Sale Securities, Amortized Cost	81,016		82,619
Available-for-Sale Securities, Gross Unrealized Gains	587		390
Available-for-Sale Securities, Gross Unrealized Losses	(731)		(1,302)
Available-for-Sale Securities, Fair Value	80,872		81,707
REMICs [Member]
Available-for-sale
Available-for-Sale Securities, Amortized Cost	1,258		1,309
Available-for-Sale Securities, Gross Unrealized Gains	2		0
Available-for-Sale Securities, Gross Unrealized Losses	0		(2)
Available-for-Sale Securities, Fair Value	1,260		1,307
Collateralized mortgage obligations [Member]
Available-for-sale
Available-for-Sale Securities, Amortized Cost	66,263		63,204
Available-for-Sale Securities, Gross Unrealized Gains	497		422
Available-for-Sale Securities, Gross Unrealized Losses	(469)		(621)
Available-for-Sale Securities, Fair Value	66,291		63,005
Preferred stock [Member]
Available-for-sale
Available-for-Sale Securities, Amortized Cost	0		0
Available-for-Sale Securities, Gross Unrealized Gains	1		2
Available-for-Sale Securities, Gross Unrealized Losses	0		0
Available-for-Sale Securities, Fair Value	1		2
Corporate bonds [Member]
Available-for-sale
Available-for-Sale Securities, Amortized Cost	12,917		12,919
Available-for-Sale Securities, Gross Unrealized Gains	171		97
Available-for-Sale Securities, Gross Unrealized Losses	(5)		(3)
Available-for-Sale Securities, Fair Value	13,083		13,013
Obligations of state and political subdivisions [Member]
Available-for-sale
Available-for-Sale Securities, Amortized Cost	92,791		86,165
Available-for-Sale Securities, Gross Unrealized Gains	2,800		2,491
Available-for-Sale Securities, Gross Unrealized Losses	(451)		(613)
Available-for-Sale Securities, Fair Value	95,140		88,043
Held-to-Maturity
Held-to-Maturity Securities, Amortized Cost	685	[1]	93
Held-to-Maturity Securities, Gross Unrealized Gains	0	[1]	0
Held-to-Maturity Securities, Gross Unrealized Losses	0	[1]	0
Held-to-Maturity Securities, Fair Value	685	[1]	93
FHLMC certificates [Member]
Held-to-Maturity
Held-to-Maturity Securities, Amortized Cost	11	[1]	12
Held-to-Maturity Securities, Gross Unrealized Gains	0	[1]	0
Held-to-Maturity Securities, Gross Unrealized Losses	0	[1]	0
Held-to-Maturity Securities, Fair Value	11	[1]	12
FNMA certificates [Member]
Held-to-Maturity
Held-to-Maturity Securities, Amortized Cost	54	[1]	56
Held-to-Maturity Securities, Gross Unrealized Gains	1	[1]	2
Held-to-Maturity Securities, Gross Unrealized Losses	0	[1]	0
Held-to-Maturity Securities, Fair Value	55	[1]	58
GNMA certificates [Member]
Held-to-Maturity
Held-to-Maturity Securities, Amortized Cost	21	[1]	23
Held-to-Maturity Securities, Gross Unrealized Gains	1	[1]	1
Held-to-Maturity Securities, Gross Unrealized Losses	0	[1]	0
Held-to-Maturity Securities, Fair Value	$ 22	[1]	$ 24

[1] FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

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Investment Securities (Details 1) - USD ($) $ in Thousands	Mar. 31, 2017		Dec. 31, 2016
Available-for-sale, Due in one year or less, Amortized Cost	$ 1,457
Available-for-sale, Due after one year through five years, Amortized Cost	22,620
Available-for-sale, Due after five years through ten years, Amortized Cost	43,015
Available-for-sale, Due after ten years, Amortized Cost	42,616
Available-for-sale, MBS/CMO/REMIC, Amortized Cost	148,537
Available-for-sale, Amortized Cost	258,245
Available-for-sale, Due in one year or less, Fair Value	1,463
Available-for-sale, Due after one year through five years, Fair Value	22,993
Available-for-sale, Due after five years through ten years, Fair Value	44,719
Available-for-sale, Due after ten years, Fair Value	43,003
Available-for-sale, MBS/CMO/REMIC, Fair Value	148,423
Available-for-sale, Fair Value	260,601		$ 250,992
Held-to-maturity Securities, Due in one year or less, Amortized Cost	0
Held-to-maturity Securities, Due after one year through five years, Amortized Cost	93
Held-to-maturity,Securities, Due after five years through ten years, Amortized Cost	592
Held-to-maturity Securities, Due after ten years,Amorized Cost	0
Held-to-maturity, MBS/CMO/REMIC, Amortized Cost	86
Held-to-maturity, Amortized Cost	771	[1]	184
Held-to-maturity Securities, Due in one year or less, Fair Value	0
Held-to-maturity Securities, Due after one year through five years, Fair Value	93
Held-to-maturity, Securites, Due after five years through ten years, Fair Value	592
Held-to-maturity Securities, Due after ten years, Fair Value	0
Held-to-maturity, MBS/CMO/REMIC, Fair Value	88
Held-to-maturity, Fair Value	$ 773	[1]	$ 187

[1] FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

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Investment Securities (Details 2) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Held to maturity securities:
Total temporarily impaired securities, Duration Unrealized Loss Position, Less Than Twelve Months, Fair Value	$ 83,370	$ 117,013
Total temporarily impaired securities, Duration of Unrealized Loss Position, Less Than 12 Months, Gross Unrealized Loss	(1,650)	(2,568)
Total temporarily impaired securities, Duration of Unrealized Loss Position, Twelve Months or Longer, Fair Value	2,182	2,224
Total temporarily impaired securities, Duration of Unrealized Loss Position, Twelve Months or Longer, Gross Unrealized Loss	(52)	(58)
Total temporarily impaired securities, Duration of Unrealized Loss Position, Fair Value	85,552	119,238
Total temporarily impaired securities, Duration of Unrealized Loss Position, Unrealized Loss	(1,702)	(2,626)
Collateralized mortgage obligations [Member]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	26,997	28,882
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	(422)	(566)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	1,187	1,227
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(47)	(55)
Available-for-sale securities, Total, Fair Value	28,184	30,110
Available-for-sale securities, Total, Unrealized Loss	(469)	(621)
Corporate bonds [Member]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	0	0
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	0	0
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	995	997
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(5)	(3)
Available-for-sale securities, Total, Fair Value	995	997
Available-for-sale securities, Total, Unrealized Loss	(5)	(3)
Obligations of state and political subdivisions [Member]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	13,501	19,172
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	(451)	(613)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	0	0
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	0	0
Available-for-sale securities, Total, Fair Value	13,501	19,172
Available-for-sale securities, Total, Unrealized Loss	(451)	(613)
Mortgage-backed securities - residential [Member]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	38,918	63,736
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	(731)	(1,302)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	0	0
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	0	0
Available-for-sale securities, Total, Fair Value	38,918	63,736
Available-for-sale securities, Total, Unrealized Loss	(731)	(1,302)
REMICs [Member]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value		1,308
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss		(2)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value		0
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss		0
Available-for-sale securities, Total, Fair Value		1,308
Available-for-sale securities, Total, Unrealized Loss		(2)
Obligations of U.S. government corporations and agencies [Member]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	3,954	3,915
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	(46)	(85)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	0	0
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	0	0
Available-for-sale securities, Total, Fair Value	3,954	3,915
Available-for-sale securities, Total, Unrealized Loss	$ (46)	$ (85)

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Investment Securities (Details 3) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Proceeds	$ 0	$ 5,360
Gross realized gains	0	131
Gross realized losses	$ 0	$ 0

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Investment Securities (Details Textual)	3 Months Ended
	Mar. 31, 2017 USD ($)
Security Owned and Pledged as Collateral Carrying Value	$ 160,600,000
Investment Portfolio, Number of Securities	445
Investment Portfolio, Number of Securities, Unrealized Loss	101
Realized Investment Gains (Losses)	$ 131,000
Realized Investment Gains Losses, Net of Tax	$ 92,000

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Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Real Estate:
Real Estate	$ 1,669,729	$ 1,430,998
Other Loans:
Total loans	2,334,730	2,035,162
Deduct:
Undisbursed loan funds	(95,460)	(93,355)
Net deferred loan origination fees and costs	(1,264)	(1,320)
Allowance for loan loss	(25,749)	(25,884)	$ (25,668)	$ (25,382)
Totals	2,212,257	1,914,603
Other Loan [Member]
Other Loans:
Total loans	665,001	604,164
One to Four Family Residential Real Estate [Member]
Real Estate:
Real Estate	276,761	207,550
Multi Family Residential [Member]
Real Estate:
Real Estate	211,546	196,983
Commercial Real Estate [Member]
Real Estate:
Real Estate	981,698	843,579
Construction Loans [Member]
Real Estate:
Real Estate	199,724	182,886
Commercial Loan [Member]
Other Loans:
Total loans	504,340	469,055
Home Equity and Home Improvement [Member]
Other Loans:
Total loans	132,965	118,429
Consumer finance [Member]
Other Loans:
Total loans	$ 27,696	$ 16,680

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Loans (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	$ 25,884	$ 25,382
Charge-Offs	(464)	(434)
Recoveries	274	356
Provisions	55	364
Ending Allowance	25,749	25,668
One to Four Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	2,627	3,212
Charge-Offs	(49)	(55)
Recoveries	56	86
Provisions	(13)	(134)
Ending Allowance	2,621	3,109
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	2,228	2,151
Charge-Offs	0	0
Recoveries	32	0
Provisions	(138)	99
Ending Allowance	2,122	2,250
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	10,625	11,772
Charge-Offs	(290)	(13)
Recoveries	34	177
Provisions	(159)	(292)
Ending Allowance	10,210	11,644
Construction Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	450	517
Charge-Offs	0	0
Recoveries	0	0
Provisions	8	(28)
Ending Allowance	458	489
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	7,361	5,255
Charge-Offs	0	(336)
Recoveries	115	19
Provisions	333	882
Ending Allowance	7,809	5,820
Home Equity and Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	2,386	2,304
Charge-Offs	(54)	(30)
Recoveries	33	39
Provisions	(65)	(81)
Ending Allowance	2,300	2,232
Consumer Finance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	207	171
Charge-Offs	(71)	0
Recoveries	4	35
Provisions	89	(82)
Ending Allowance	$ 229	$ 124

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Loans (Details 2) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$ 772	$ 809
Collectively evaluated for impairment	24,977	25,075
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	25,749	25,884
Loans:
Loans individually evaluated for impairment	28,610	27,433
Loans collectively evaluated for impairment	2,212,665	1,918,926
Loans acquired with deteriorated credit quality	4,132	11
Total ending loans balance	2,245,407	1,946,370
One to Four Family Residential Real Estate [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	196	202
Collectively evaluated for impairment	2,425	2,425
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	2,621	2,627
Loans:
Loans individually evaluated for impairment	6,725	6,898
Loans collectively evaluated for impairment	269,194	200,907
Loans acquired with deteriorated credit quality	1,247	0
Total ending loans balance	277,166	207,805
Multi Family Residential Real Estate [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	4	4
Collectively evaluated for impairment	2,118	2,224
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	2,122	2,228
Loans:
Loans individually evaluated for impairment	3,340	3,483
Loans collectively evaluated for impairment	208,437	193,714
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	211,777	197,197
Commercial Real Estate [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	170	255
Collectively evaluated for impairment	10,040	10,370
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	10,210	10,625
Loans:
Loans individually evaluated for impairment	13,162	13,570
Loans collectively evaluated for impairment	969,583	832,446
Loans acquired with deteriorated credit quality	2,253	0
Total ending loans balance	984,998	846,016
Construction Loans [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	458	450
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	458	450
Loans:
Loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	104,036	89,244
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	104,036	89,244
Commercial Loan [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	101	35
Collectively evaluated for impairment	7,708	7,326
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	7,809	7,361
Loans:
Loans individually evaluated for impairment	4,111	2,154
Loans collectively evaluated for impairment	501,349	468,246
Loans acquired with deteriorated credit quality	632	11
Total ending loans balance	506,092	470,411
Home Equity and Home Improvement [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	300	313
Collectively evaluated for impairment	2,000	2,073
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	2,300	2,386
Loans:
Loans individually evaluated for impairment	1,202	1,269
Loans collectively evaluated for impairment	132,404	117,744
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	133,606	119,013
Consumer Finance [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	1	0
Collectively evaluated for impairment	228	207
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	229	207
Loans:
Loans individually evaluated for impairment	70	59
Loans collectively evaluated for impairment	27,662	16,625
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	$ 27,732	$ 16,684

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Loans (Details 3) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	$ 28,995	$ 38,278
Interest Income Recognized	249	308
Cash Basis Income Recognized	212	265
Residential Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	2,820	4,025
Interest Income Recognized	28	39
Cash Basis Income Recognized	28	39
Residential Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	3,891	3,557
Interest Income Recognized	36	35
Cash Basis Income Recognized	36	34
Total Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	6,711	7,582
Interest Income Recognized	64	74
Cash Basis Income Recognized	64	73
Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	0	0
Interest Income Recognized	0	0
Cash Basis Income Recognized	0	0
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	3,374	4,593
Interest Income Recognized	10	30
Cash Basis Income Recognized	10	30
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	4,614	9,090
Interest Income Recognized	22	62
Cash Basis Income Recognized	22	48
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	4,499	4,418
Interest Income Recognized	42	53
Cash Basis Income Recognized	39	49
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	2,707	3,593
Interest Income Recognized	47	35
Cash Basis Income Recognized	19	12
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	1,668	1,422
Interest Income Recognized	13	4
Cash Basis Income Recognized	12	4
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	13,488	18,523
Interest Income Recognized	124	154
Cash Basis Income Recognized	92	113
Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	2,372	1,513
Interest Income Recognized	19	15
Cash Basis Income Recognized	19	15
Commercial Loans Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	1,722	4,245
Interest Income Recognized	21	19
Cash Basis Income Recognized	16	18
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	4,094	5,758
Interest Income Recognized	40	34
Cash Basis Income Recognized	35	33
Home Equity and Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	1,254	1,749
Interest Income Recognized	10	15
Cash Basis Income Recognized	10	15
Consumer Finance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	74	73
Interest Income Recognized	1	1
Cash Basis Income Recognized	$ 1	$ 1

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Loans (Details 4) - USD ($) $ in Thousands		Mar. 31, 2017	Dec. 31, 2016
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	$ 22,446	$ 19,828
Recorded Investment, With no allowance		21,347	8,701
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	8,171	9,796
Recorded Investment, With an Allowance		7,263	8,732
Allowance for Loan Losses Allocated, With an Allowance		772	809
Residential Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	1,906	1,912
Recorded Investment, With no allowance		1,760	1,765
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	2,159	2,348
Recorded Investment, With an Allowance		2,132	2,319
Allowance for Loan Losses Allocated, With an Allowance		157	157
Residential Non Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	1,769	1,691
Recorded Investment, With no allowance		1,762	1,683
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	1,078	1,137
Recorded Investment, With an Allowance		1,071	1,131
Allowance for Loan Losses Allocated, With an Allowance		39	45
One To Four Family Residential Real Estate [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	3,675	3,603
Recorded Investment, With no allowance		3,522	3,448
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	3,237	3,485
Recorded Investment, With an Allowance		3,203	3,450
Allowance for Loan Losses Allocated, With an Allowance		196	202
Multi Family Residential Real Estate [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	3,288	3,578
Recorded Investment, With no allowance		3,288	3,430
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	51	53
Recorded Investment, With an Allowance		52	53
Allowance for Loan Losses Allocated, With an Allowance		4	4
Commercial Real Estate Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	3,048	2,652
Recorded Investment, With no allowance		2,611	2,353
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	2,291	2,362
Recorded Investment, With an Allowance		1,831	1,894
Allowance for Loan Losses Allocated, With an Allowance		96	102
Commercial Real Estate Non Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	4,114	4,372
Recorded Investment, With no allowance		3,896	4,240
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	414	1,618
Recorded Investment, With an Allowance		417	1,479
Allowance for Loan Losses Allocated, With an Allowance		25	108
Agriculture Land [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	2,617	1,695
Recorded Investment, With no allowance		2,649	1,722
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	109	45
Recorded Investment, With an Allowance		110	45
Allowance for Loan Losses Allocated, With an Allowance		5	3
Commercial Real Estate Other Receivables [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	1,020	1,225
Recorded Investment, With no allowance		950	1,115
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	1,116	1,144
Recorded Investment, With an Allowance		698	722
Allowance for Loan Losses Allocated, With an Allowance		44	42
Commercial Real Estate [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	10,799	9,944
Recorded Investment, With no allowance		10,106	9,430
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	3,930	5,169
Recorded Investment, With an Allowance		3,056	4,140
Allowance for Loan Losses Allocated, With an Allowance		170	255
Construction [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	0	0
Recorded Investment, With no allowance		0	0
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	0	0
Recorded Investment, With an Allowance		0	0
Allowance for Loan Losses Allocated, With an Allowance		0	0
Commercial Working Capital [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	2,228	838
Recorded Investment, With no allowance		2,183	786
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	180	230
Recorded Investment, With an Allowance		181	231
Allowance for Loan Losses Allocated, With an Allowance		94	24
Commercial Loans Other [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	1,782	1,179
Recorded Investment, With no allowance		1,620	967
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	124	167
Recorded Investment, With an Allowance		127	170
Allowance for Loan Losses Allocated, With an Allowance		7	11
Commercial Loan [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	4,010	2,017
Recorded Investment, With no allowance		3,803	1,753
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	304	397
Recorded Investment, With an Allowance		308	401
Allowance for Loan Losses Allocated, With an Allowance		101	35
Home Equity and Improvement [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	621	631
Recorded Investment, With no allowance		575	585
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	631	688
Recorded Investment, With an Allowance		627	684
Allowance for Loan Losses Allocated, With an Allowance		300	313
Consumer Finance [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	53	55
Recorded Investment, With no allowance		53	55
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	18	4
Recorded Investment, With an Allowance		17	4
Allowance for Loan Losses Allocated, With an Allowance		$ 1	$ 0

[1] Presented gross of charge offs

XML

Loans (Details 5) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	$ 15,057	$ 14,348
Loans over 90 days past due and still accruing	0	0
Total non-performing loans	15,057	14,348
Real estate and other assets held for sale	705	455
Total non-performing assets	15,762	14,803
Troubled debt restructuring, still accruing	$ 9,771	$ 10,544

XML

Loans (Details 6) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	$ 2,236,585	$ 1,939,921
Total Past Due	8,822	6,449
Total Non Accrual	15,054	14,346
Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	3,830
Total Past Due	302
Total Non Accrual	472
Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	3,184	1,615
Financing Receivables, 30 to 59 Days Past Due [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	110
Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,558	1,421
Financing Receivables, 60 to 89 Days Past Due [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	45
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	4,080	3,413
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	147
Residential Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	175,631	139,015
Total Past Due	1,294	1,442
Total Non Accrual	1,579	1,931
Residential Owner Occupied [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	95	56
Residential Owner Occupied [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	866	842
Residential Owner Occupied [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	333	544
Residential Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	99,595	66,811
Total Past Due	646	537
Total Non Accrual	1,175	992
Residential Non Owner Occupied [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	50	166
Residential Non Owner Occupied [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	284	308
Residential Non Owner Occupied [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	312	63
One To Four Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	275,226	205,826
Total Past Due	1,940	1,979
Total Non Accrual	2,754	2,923
One To Four Family Residential Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	145	222
One To Four Family Residential Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,150	1,150
One To Four Family Residential Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	645	607
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	211,777	197,197
Total Past Due	0	0
Total Non Accrual	2,576	2,637
Multi Family Residential Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Multi Family Residential Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Multi Family Residential Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	384,192	340,233
Total Past Due	2,092	1,475
Total Non Accrual	3,172	3,098
Commercial Real Estate Owner Occupied [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	710	79
Commercial Real Estate Owner Occupied [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	45	0
Commercial Real Estate Owner Occupied [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,337	1,396
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	395,410	338,724
Total Past Due	770	523
Total Non Accrual	1,626	1,808
Commercial Real Estate Non Owner Occupied [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	328	81
Commercial Real Estate Non Owner Occupied [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	16
Commercial Real Estate Non Owner Occupied [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	442	426
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	135,544	102,397
Total Past Due	1,065	0
Total Non Accrual	1,582	755
Agriculture Land [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	210	0
Agriculture Land [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Agriculture Land [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	855	0
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	65,925	62,415
Total Past Due	0	249
Total Non Accrual	866	1,292
Commercial Real Estate Other Receivable [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Real Estate Other Receivable [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Real Estate Other Receivable [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	249
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	981,071	843,769
Total Past Due	3,927	2,247
Total Non Accrual	7,246	6,953
Commercial Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,248	160
Commercial Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	45	16
Commercial Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2,634	2,071
Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	104,036	89,244
Total Past Due	0	0
Total Non Accrual	0	0
Construction [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Construction [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Construction [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	225,276	202,786
Total Past Due	104	48
Total Non Accrual	1,005	435
Commercial Working Capital [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	55	0
Commercial Working Capital [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	49	10
Commercial Working Capital [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	38
Commercial Loans Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	278,789	267,189
Total Past Due	1,923	388
Total Non Accrual	497	577
Commercial Loans Other [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,455	23
Commercial Loans Other [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	142	0
Commercial Loans Other [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	326	365
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	504,065	469,975
Total Past Due	2,027	436
Total Non Accrual	1,502	1,012
Commercial Loan [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,510	23
Commercial Loan [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	191	10
Commercial Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	326	403
Consumer Finance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	27,417	16,452
Total Past Due	315	232
Total Non Accrual	101	91
Consumer Finance [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	108	85
Consumer Finance [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	130	69
Consumer Finance [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	77	78
Home Equity and Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	132,993	117,458
Total Past Due	613	1,555
Total Non Accrual	875	730
Home Equity and Improvement [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	173	1,125
Home Equity and Improvement [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	42	176
Home Equity and Improvement [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	398	$ 254
Receivables Acquired Current [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	279,502
Total Past Due	2,291
Total Non Accrual	1,476
Receivables Acquired Current [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	820
Receivables Acquired Current [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	341
Receivables Acquired Current [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 1,130

XML

Loans (Details 7) - TDRs [Member] $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) Number	Mar. 31, 2016 USD ($) Number
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans | Number	11	10
Troubled Debt Restructurings, Recorded Investment | $	$ 389	$ 438
1-4 Family Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans | Number	4	1
Troubled Debt Restructurings, Recorded Investment | $	$ 100	$ 9
1-4 Family Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans | Number	2	2
Troubled Debt Restructurings, Recorded Investment | $	$ 84	$ 127
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans | Number	1	0
Troubled Debt Restructurings, Recorded Investment | $	$ 119	$ 0
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans | Number	0	0
Troubled Debt Restructurings, Recorded Investment | $	$ 0	$ 0
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans | Number	0	0
Troubled Debt Restructurings, Recorded Investment | $	$ 0	$ 0
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans | Number	0	0
Troubled Debt Restructurings, Recorded Investment | $	$ 0	$ 0
Other Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans | Number	0	0
Troubled Debt Restructurings, Recorded Investment | $	$ 0	$ 0
Commercial Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans | Number	1	0
Troubled Debt Restructurings, Recorded Investment | $	$ 46	$ 0
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans | Number	1	5
Troubled Debt Restructurings, Recorded Investment | $	$ 25	$ 297
Consumer Finance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans | Number	2	2
Troubled Debt Restructurings, Recorded Investment | $	$ 15	$ 5

XML

Loans (Details 9) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	$ 2,245,407	$ 1,946,370
Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	4,132
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,810,060	1,585,391
Pass [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	9
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	46,970	40,005
Special Mention [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,173
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	35,004	27,348
Substandard [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,946
Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Doubtful [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0
Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	353,373	293,626
Not Graded [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	4
Residential Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	176,926	140,456
Residential Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	7,502	5,980
Residential Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	483	402
Residential Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,943	1,824
Residential Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Residential Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	166,998	132,250
Residential Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net		67,349
Residential Non Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net		58,041
Residential Non Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net		1,394
Residential Non Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net		3,480
Residential Non Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net		0
Residential Non Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net		4,434
One To Four Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	277,166	207,805
One To Four Family Residential Real Estate [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	96,934	64,021
One To Four Family Residential Real Estate [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,770	1,796
One To Four Family Residential Real Estate [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	5,518	5,304
One To Four Family Residential Real Estate [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
One To Four Family Residential Real Estate [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	171,944	136,684
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	211,777	197,197
Multi Family Residential Real Estate [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	207,071	192,369
Multi Family Residential Real Estate [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	837	862
Multi Family Residential Real Estate [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,756	3,852
Multi Family Residential Real Estate [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Multi Family Residential Real Estate [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	113	114
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	386,285	341,708
Commercial Real Estate Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	360,693	316,335
Commercial Real Estate Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	20,388	20,559
Commercial Real Estate Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	4,890	4,430
Commercial Real Estate Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	314	384
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	396,180	339,248
Commercial Real Estate Non Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	386,323	332,196
Commercial Real Estate Non Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,390	1,617
Commercial Real Estate Non Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	6,467	5,435
Commercial Real Estate Non Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Non Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	136,609	102,396
Agriculture Land [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	128,428	98,039
Agriculture Land [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,731	2,355
Agriculture Land [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	5,450	2,002
Agriculture Land [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Agriculture Land [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	65,924	62,664
Commercial Real Estate Other Receivable [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	62,997	59,561
Commercial Real Estate Other Receivable [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	59	60
Commercial Real Estate Other Receivable [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,063	2,297
Commercial Real Estate Other Receivable [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Other Receivable [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	805	746
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	984,998	846,016
Commercial Real Estate [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	938,441	806,131
Commercial Real Estate [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	26,568	24,591
Commercial Real Estate [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	18,870	14,164
Commercial Real Estate [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,119	1,130
Construction Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	104,036	89,244
Construction Loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	82,950	67,751
Construction Loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,198	706
Construction Loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Construction Loans [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Construction Loans [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	19,888	20,787
Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	225,380	202,834
Commercial Working Capital [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	215,129	193,043
Commercial Working Capital [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	7,139	8,301
Commercial Working Capital [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,112	1,490
Commercial Working Capital [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Working Capital [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loans Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	280,712	267,577
Commercial Loans Other [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	269,535	262,076
Commercial Loans Other [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	8,458	3,749
Commercial Loans Other [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,719	1,752
Commercial Loans Other [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loans Other [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	506,092	470,411
Commercial Loan [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	484,664	455,119
Commercial Loan [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	15,597	12,050
Commercial Loan [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	5,831	3,242
Commercial Loan [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loan [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	133,606	119,013
Home Equity and Home Improvement [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Home Equity and Home Improvement [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Home Equity and Home Improvement [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	852	696
Home Equity and Home Improvement [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Home Equity and Home Improvement [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	132,754	118,317
Consumer Finance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	27,732	16,684
Consumer Finance [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Consumer Finance [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Consumer Finance [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	177	90
Consumer Finance [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Consumer Finance [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	27,555	$ 16,594
One Four Family Non Owner Occupiad [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	100,240
One Four Family Non Owner Occupiad [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	89,432
One Four Family Non Owner Occupiad [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,287
One Four Family Non Owner Occupiad [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,575
One Four Family Non Owner Occupiad [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0
One Four Family Non Owner Occupiad [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	4,946
Receivables Acquired Current [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	281,793
Receivables Acquired Current [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	223,594
Receivables Acquired Current [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,711
Receivables Acquired Current [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	5,393
Receivables Acquired Current [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0
Receivables Acquired Current [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	$ 51,095

XML

Loans (Details 10) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Notes Receivable Net Acquired With Deteriorated Credit Quality	$ 4,132	$ 11
Notes Receivable Net Acquired With Recorded Investment Net Of Allowance	4,132
One To Four Family Residential Real Estate [Member]
Notes Receivable Net Acquired With Deteriorated Credit Quality	1,247	0
Commercial Real Estate [Member]
Notes Receivable Net Acquired With Deteriorated Credit Quality	2,253	0
Commercial Loan [Member]
Notes Receivable Net Acquired With Deteriorated Credit Quality	632	$ 11
Consumer [Member]
Notes Receivable Net Acquired With Deteriorated Credit Quality	$ 3

XML

Loans (Details 11) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)
Balance at January 1	$ 0
New Loans Purchased	1,034
Accretion of Income	0
Reclassifications from Non-accretable Difference Charge-off of Accretable Yield	0
Balance at March 31	$ 1,034

XML

Loans (Details 12) $ in Thousands	Mar. 31, 2017 USD ($)
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Acquired During Period, Contractually Required Payments Receivable at Acquisition	$ 6,290
One To Four Family Residential Real Estate [Member]
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Acquired During Period, Contractually Required Payments Receivable at Acquisition	1,720
Commercial Real Estate [Member]
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Acquired During Period, Contractually Required Payments Receivable at Acquisition	3,781
Commercial Loan [Member]
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Acquired During Period, Contractually Required Payments Receivable at Acquisition	785
Consumer [Member]
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Acquired During Period, Contractually Required Payments Receivable at Acquisition	$ 4

XML

Loans (Details 13) $ in Thousands	Mar. 31, 2017 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Cash Flows Expected to be Collected at Acquisition	$ 5,157
Fair Value of Acquired Loans at Acquisition	$ 4,123

XML

Loans (Details Textual) - USD ($)	1 Months Ended	3 Months Ended
	Feb. 24, 2017	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses, Period Increase (Increase)		$ 19,000	$ 15,000
Loans and Leases Receivable, Loans in Process		95,460,000		$ 93,355,000
Loans Receivable, Acquired During Period	$ 284,900,000
Purchase Discount on Acquired Loans		6,000,000
Loans Receivable Acquired, Recorded Investments		281,800,000
Loans Receivable Acquired, Purchase Discount		5,900,000
Consumer Portfolio Segment [Member]
Loans and Leases Receivable, Loans in Process		226,000
Troubled Debt Restructuring [Member]
Financing Receivable, Modifications, Recorded Investment		15,500,000		16,800,000
Specified Reserves, Provision for Troubled Debt Restructurings		688,000		809,000
Loans and Leases Receivable, Impaired, Commitment to Lend		19,000		$ 20,000
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down		$ 5,700,000

XML

Mortgage Banking (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items]
Gain from sale of mortgage loans	$ 1,083	$ 994
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue	934	877
Amortization of mortgage servicing rights	(312)	(311)
Mortgage servicing rights valuation adjustments	33	(21)
Mortgage loans servicing revenue (expense), Total	655	545
Net revenue from sale and servicing of mortgage loans	$ 1,738	$ 1,539

XML

Mortgage Banking (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Mortgage servicing assets:
Balance at beginning of period	$ 10,117	$ 9,893
Loans sold, servicing retained	356	297
Amortization	(312)	(311)
Carrying value before valuation allowance at end of period	10,161	9,879
Valuation allowance:
Balance at beginning of period	(522)	(645)
Impairment (expense) recovery	33	(21)
Balance at end of period	(489)	(666)
Net carrying value of MSRs at end of period	9,672	9,213
Fair value of MSRs at end of period	$ 10,013	$ 9,463

XML

Mortgage Banking (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items]
Residential Mortgage Loans, Unpaid Balance	$ 1,380,000,000		$ 1,370,000,000
Accrual For Estimated Secondary Market Buy Back Losses	(28,000)	$ (59,000)
Accrued Liabilities and Other Liabilities	$ 51,000		$ 79,000

XML

Deposits (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Deposits [Line Items]
Non-interest-bearing checking accounts	$ 579,943	$ 487,663
Interest-bearing checking and money market accounts	973,459	816,665
Savings deposits	288,498	243,369
Retail certificates of deposit less than $250,000	490,953	400,080
Retail certificates of deposit greater than $250,000	40,936	33,851
Total	$ 2,373,789	$ 1,981,628

XML

Borrowings (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
FHLB Advances:
Single maturity fixed rate advances	$ 92,000	$ 92,000
Putable advances	5,000	5,000
Amortizable mortgage advances	8,104	6,943
Total	105,104	103,943
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$ 36,083	$ 36,083

XML

Borrowings (Details 1) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Securities sold under agreement to repurchase
Amounts outstanding at year-end	$ 24,891	$ 31,816
Gross amount of recognized liabilities for repurchase agreements	24,891	31,816
Collateralized Mortgage Backed Securities [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	8,267	10,594
Mortgage Backed Securities, Other [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	16,624	21,222
Maturity Overnight [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	24,891	31,816
Maturity Overnight [Member] | Collateralized Mortgage Backed Securities [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	8,267	10,594
Maturity Overnight [Member] | Mortgage Backed Securities, Other [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	16,624	21,222
Maturity Less than 30 Days [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	0	0
Maturity Less than 30 Days [Member] | Collateralized Mortgage Backed Securities [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	0	0
Maturity Less than 30 Days [Member] | Mortgage Backed Securities, Other [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	0	0
Maturity 30 to 90 Days [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	0	0
Maturity 30 to 90 Days [Member] | Collateralized Mortgage Backed Securities [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	0	0
Maturity 30 to 90 Days [Member] | Mortgage Backed Securities, Other [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	0	0
Maturity Greater than 90 Days [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	0	0
Maturity Greater than 90 Days [Member] | Collateralized Mortgage Backed Securities [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	0	0
Maturity Greater than 90 Days [Member] | Mortgage Backed Securities, Other [Member]
Securities sold under agreement to repurchase
Amounts outstanding at year-end	$ 0	$ 0

XML

Borrowings (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Preferred Securities and Subordinated Debentures Maturity Date	Jun. 15, 2037
Putable Advances [Member]
Federal Home Loan Bank Advances Balance Amount Yet To Be Called Series1	$ 5.0
Federal home Loan Bank Advances Interest Rate On Balance Amount Yet To Be Called Series1	2.35%
Trust Affiliate I [Member]
Issuance Of Trust Preferred Securities	$ 20.0
Issuance Of Subordinated Debentures	$ 20.6
Coupon Rate On Preferred Securities, Period End	2.53%	2.34%
Preferred Securities Variable Interest Rate	LIBOR rate plus 1.38%.
Trust Affiliate II [Member]
Issuance Of Trust Preferred Securities	$ 15.0
Issuance Of Subordinated Debentures	$ 15.5
Coupon Rate On Preferred Securities, Period End	2.65%	2.46%
Preferred Securities Variable Interest Rate	LIBOR rate plus 1.5%
Trust Affiliate II [Member] | Strike Rate Advances [Member]
Federal Home Loan Bank Advances Branch of Fhlb Bank Last Due Date	March 12, 2018

XML

Commitments, Guarantees and Contingent Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fixed Rate, Commitments to make loans	$ 49,810	$ 34,432
Fixed Rate, Unused lines of credit	25,487	14,384
Fixed Rate, Standby letters of credit	0	0
Fixed Rate, Total	75,297	48,816
Variable Rate, Commitments to make loans	125,148	106,356
Variable Rate, Unused lines of credit	420,597	400,542
Variable Rate, Standby letters of credit	6,719	9,668
Variable Rate, Total	$ 552,464	$ 516,566

XML

Commitments, Guarantees and Contingent Liabilities (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Line of Credit Facility, Period	60 days
Commitments and Loans, Available to Sell	$ 24.0	$ 22.5

XML

Derivative Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives Assets, Carrying Value	$ 598	$ 491
Mortgage Banking Derivatives Liabilities, Carrying Value	(42)	0
Mortgage Banking Derivatives, Net Carrying Value	$ 556	$ 491

XML

Derivative Financial Instruments (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives - Gain (Loss)	$ 65	$ 438

XML

Derivative Financial Instruments (Details Textual) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Derivative Instruments, Gain (Loss) [Line Items]
Interest Rate Derivative Instruments Not Designated as Hedging Instruments at Fair Value, Net	$ 18.9	$ 14.1
Notional Amount of Interest Rate Derivative Instruments Not Designated as Hedging Instruments	$ 24.0	$ 22.5

XML

Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Securities available for sale and transferred securities: Before Tax Amount
Change in net unrealized gain/(loss) during the period		$ 1,580	$ 1,450
Reclassification adjustment for net gains included in net income	[1]	0	(131)
Total other comprehensive loss		1,580	1,319
Securities available for sale and transferred securities: Tax Expense (Benefit)
Change in net unrealized gain/(loss) during the period		(553)	(508)
Reclassification adjustment for net gains included in net income		0	46
Total other comprehensive income		(553)	(462)
Securities available for sale and transferred securities: Net of Tax Amount
Change in net unrealized gain/(loss) during the period		1,027	942
Reclassification adjustment for net gains included in net income		0	(85)
Other comprehensive income		$ 1,027	$ 857

[1] Amounts are included in gains on sale or call of securities on the Consolidated Condensed Statements of Income. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the three months ended March 31, 2017 and 2016 was $0 and $46, respectively.

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Other Comprehensive Income (Loss) (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Securities Available For Sale, Beginning balance	$ 504	$ 4,042
Securities Available For Sale, Other comprehensive income before reclassifications	1,027	942
Securities Available For Sale, Amounts reclassified from accumulated other comprehensive income	0	(85)
Securities Available For Sale, Net other comprehensive income during period	1,027	857
Securities Available For Sale, Ending balance	1,531	4,899
Post-retirement Benefit, Beginning balance	(289)	(420)
Post-retirement Benefit, Other comprehensive income before reclassifications	0	0
Post-retirement Benefit, Amounts reclassified from accumulated other comprehensive income	0	0
Post-retirement Benefit, Net other comprehensive income during period	0	0
Post-retirement Benefit, Ending balance	(289)	(420)
Accumulated Other Comprehensive Income, Beginning balance	215	3,622
Accumulated Other Comprehensive Income, Other comprehensive income before reclassifications	1,027	942
Accumulated Other Comprehensive Income, Amounts reclassified from accumulated other comprehensive income	0	(85)
Accumulated Other Comprehensive Income, Net other comprehensive income during period	1,027	857
Accumulated Other Comprehensive Income, Ending balance	$ 1,242	$ 4,479

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Affordable Housing Projects Tax Credit Partnership (Details) - Unfunded Commitments [Member] $ in Thousands	Mar. 31, 2017 USD ($)
Schedule of Equity Method Investments [Line Items]
2017	$ 1,897
2018	1,137
2019	307
2020	179
2021	160
Thereafter	615
Total Unfunded Commitments	$ 4,295

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Affordable Housing Projects Tax Credit Partnership (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Proportional Amortization Method
Tax credits and other tax benefits recognized	$ 211	$ 157
Amortization expense in federal income taxes	$ 165	$ 119

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Affordable Housing Projects Tax Credit Partnership (Details Textual) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Other Assets [Member]
Investments in Affordable Housing Projects [Abstract]
Amortization Method Qualified Affordable Housing Project Investments	$ 6,600	$ 6,800
Unfunded Commitments [Member]
Investments in Affordable Housing Projects [Abstract]
Qualified Affordable Housing Project Investments, Commitment	4,295
Unfunded Commitments [Member] | Other Liabilities [Member]
Investments in Affordable Housing Projects [Abstract]
Qualified Affordable Housing Project Investments, Commitment	$ 4,300	$ 4,300

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Business Combinations (Details) - USD ($) $ in Thousands	1 Months Ended
	Feb. 24, 2017	Mar. 31, 2017	Dec. 31, 2016
Cash Consideration	$ 12,340
Equity - Dollar Value of Issued Shares	56,532
Fair Value of Total Consideration Transferred	68,872
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
Cash and Cash Equivalents	35,411
Federal Funds Sold	2,769
Securities	4,338
Loans	284,867
FHLB Stock of Cincinnati and Other Stock	2,194
Office Properties and Equipment	5,455
Intangible Assets	4,900
Bank-Owned Life Insurance	8,168
Accrued Interest Receivable and Other Assets	(3,606)
Deposits - Non-Interest Bearing	(56,061)
Deposits - Interest Bearing	(251,931)
Advances from FHLB	(1,403)
Accrued Interest Payable and Other Liabilities	(2,411)
Total Identifiable Net Assets	39,902
Goodwill	$ 28,970	$ 90,768	$ 61,798

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Business Combinations (Details 1) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended
	Feb. 24, 2017	Mar. 31, 2017	Mar. 31, 2016
Net Interest Income		$ 24,036	$ 21,130
Provision for Loan Losses		55	364
Non-Interest Income		21,590	18,824
Non-Interest Expense		23,142	17,274
Income before income taxes		8,997	10,186
Income taxes		3,857	3,017
Net Income	$ 123,000
Pro Forma [Member]
Net Interest Income		23,837	22,798
Provision for Loan Losses		55	386
Non-Interest Income		10,828	9,121
Non-Interest Expense		21,234	20,103
Income before income taxes		13,376	11,430
Income taxes		5,141	3,413
Net Income		$ 8,235	$ 8,017
Diluted Earnings Per Share		$ 0.81	$ 0.79

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Business Combinations (Details Textual) $ / shares in Units, $ in Thousands		1 Months Ended	3 Months Ended
	Apr. 13, 2017 USD ($)	Feb. 24, 2017 USD ($) shares	Mar. 31, 2017 USD ($) $ / shares	Mar. 31, 2016 USD ($)	Dec. 31, 2016 USD ($)
Goodwill		$ 28,970	$ 90,768		$ 61,798
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill		$ 4,900
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life		10 years
Payments to Acquire Businesses, Gross		$ 12,340
Business Acquisition, Pro Forma Net Income (Loss)		123,000
Noncash Merger Related Costs		3,600
Business Combination, Consideration Transferred		68,872
Stockholders' Equity Note, Stock Split, Conversion Ratio			1.1808
Compensation and Benefits			$ 14,335	$ 10,185
Commercial Bancshares [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets		348,400
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities		37,500
Business Combination, Acquisition Related Costs		3,600
Goodwill		$ 29,000
Stock Issued During Period, Shares, Acquisitions | shares		1,139,502
Payments to Acquire Businesses, Gross		$ 12,300
Business Combination Consideration Transferred cash Per Shares | $ / shares			$ 51.00
Business Combinations Consideration Transferred In Shares Percentage | $ / shares			80
Business Combinations Consideration Transferred In CashPercentage | $ / shares			$ 20
Compensation and Benefits		$ 2,800
Corporate One Benefits Agency Inc [Member] | Subsequent Event [Member]
Business Combination, Consideration Transferred	$ 9,300
Corporate One Benefits Agency Inc [Member] | First Payment [Member] | Subsequent Event [Member]
Payments to Acquire Businesses, Gross	6,500
Corporate One Benefits Agency Inc [Member] | Second Paymemt [Member] | Subsequent Event [Member]
Payments to Acquire Businesses, Gross	500,000
Corporate One Benefits Agency Inc [Member] | Third Payment [Member] | Subsequent Event [Member]
Payments to Acquire Businesses, Gross	$ 2,300