/C O R R E C T I O N -- First Defiance Financial Corp./

In the news release, First Defiance Announces 2007 Fourth Quarter and
Annual Earnings, issued yesterday, Jan. 21, over PR Newswire, we are advised
by the company that the final two tables, both titled "Selected Quarterly
Information" were omitted from the release as originally issued. The
complete, corrected release follows.
First Defiance Announces 2007 Fourth Quarter and Annual Earnings
DEFIANCE, Ohio, Jan. 21 /PRNewswire-FirstCall/ -- First Defiance Financial
Corp. (Nasdaq: FDEF) today announced that net income for the fiscal year ended
December 31, 2007 totaled $13.9 million, or $1.94 per diluted share compared
to $15.6 million or $2.18 per diluted share for the year ended December 31,
2006. For the fourth quarter ended December 31, 2007, First Defiance earned
$3.6 million or $0.50 per diluted share compared to $4.0 million, or $0.55 per
diluted share for the fourth quarter of 2006.
"We're encouraged by the fourth quarter results," said William J. Small,
First Defiance's Chairman, President and Chief Executive Officer. "We saw
improvement in our reported earnings compared with this year's third quarter,
where we earned $0.44 per share; our margin, while nine basis points lower
than last year's fourth quarter, was up five basis points from last quarter in
a falling rate environment; our commercial loan balances and non-interest-
bearing deposit accounts both had large balance increases over the third
quarter; and our loan charge-offs were at their lowest level for a quarterly
period since the second quarter of 2005. Further, these results were achieved
in a quarter where we wrote down other real estate owned (OREO) properties by
$598,000 and where we recognized $364,000 of expense to repair damages to our
Ottawa and Findlay offices caused by the severe flooding in August of 2007."
Net Charge-Offs Low, Asset Quality Ratios Stable
"Given the current operating environment, we have been very cautious in
determining the appropriate levels for the allowance for loan losses and in
analyzing asset values," said Mr. Small. "Our non-accrual loans increased at
year-end, to $9.2 million from $8.5 million at the end of September, the
result of one large mortgage loan going 90-days delinquent. The allowance
against that loan, which we recorded in 2006, will be adequate to cover any
shortfall that occurs when that loan is resolved. We also recorded $598,000 of
expense in the 2007 fourth quarter to write down property in OREO to reflect
the general weakness in the real estate market. Our OREO balance at December
31, 2007 was $2.5 million. One property, which we are actively marketing,
comprises more than half of that balance."
Loan charge-offs recorded in the 2007 fourth quarter totaled $247,000 and
First Defiance realized recoveries of $107,000 for net charge-offs of
$140,000. As an annualized percentage of average loans, net charge-offs were
just 0.04%. By comparison, in the fourth quarter of 2006, First Defiance
charged off $1.1 million of loans and had recoveries of just $93,000, a net of
$1.0 million or 0.34% of average loans. First Defiance's allowance for loan
losses at December 31, 2007 was $13.89 million, which is 1.08% of loans and
150.7% of non-performing loans. First Defiance's provision for loan losses for
the 2007 fourth quarter was $603,000 compared to $318,000 in the 2006 fourth
quarter and $671,000 in the 2007 third quarter.
"I've stated it before but it's worth repeating that we have never been
involved in making or investing in sub-prime mortgage loans," said Mr. Small.
"Like all community banks, we have some exposure to falling property values,
especially in our residential mortgage and home equity portfolios, but we are
not aware of any specific weakness at this time that will result in higher
than normal charge-offs."
Net Interest Income Increased
Net interest income for the 2007 fourth quarter was $12.5 million, a 2.3%
increase from the 2006 fourth quarter, when the Company reported net interest
income of $12.2 million. The net interest margin declined between the 2006 and
2007 fourth quarters from 3.61% to 3.52% however average loan volumes
increased by $39.7 million between the two periods, resulting in the overall
increase in net interest income. The 2007 fourth quarter margin was a five
basis point improvement from the 3.47% margin reported for the 2007 third
quarter. On a tax equivalent basis, net interest income in the 2007 fourth
quarter increased by 4.1% from the 2007 third quarter.
"Our average non-interest bearing deposits for the 2007 fourth quarter
increased by 14.4% from last year's fourth quarter and were up by more than
10% from the 2007 third quarter," said Mr. Small. "Results like that are
critical to our success and demonstrate that strategically we are on the right
track. Also, during the just-completed quarter our loan balances increased by
$24.6 million as commercial real estate loans grew from $592.9 million at
September 30, 2007 to $601.9 million at December 31 and commercial loans grew
from $267.9 million to $283.1 million during that same period."
Non-Interest Income Up 7% for Fourth Quarter
Total non-interest income increased to $5.3 million in the 2007 fourth
quarter, from $4.9 million for the 2006 fourth quarter. The increase was
primarily in insurance commissions, the result of the acquisition in the first
quarter of 2007 of an insurance agency, and in income from bank-owned life
insurance, which included a $157,000 death benefit in the 2007 fourth quarter.
Non-Interest Expenses Increased by 8.5% in 2007 Fourth Quarter
Non-interest expenses increased to $12.2 million in the 2007 fourth
quarter, up from $11.2 million during the last three months of 2006.
Compensation and benefits were essentially flat between the two periods at
$5.9 million in the 2007 fourth quarter compared to $5.8 million in the same
period of 2006. Occupancy expenses increased by $466,000 in the 2007 fourth
quarter compared to 2006, however the 2007 amount included $364,000 of flood
repairs. Other significant expense increases in the quarter include franchise
tax expense (up $213,000), and expenses of writing down or maintaining OREO
properties (up $598,000). These increases were partially offset by a $131,000
decline in printing and office forms expense, a $93,000 decline in audit and
examination fees, an $85,000 reduction in postage and an $84,000 decline in
charitable contributions.
Year-end adjustments based on a detailed analysis of tax accounts resulted
in a drop in the effective tax rate to 29.3% for the 2007 fourth quarter.
Through three quarters, First Defiance recorded income taxes at a rate of
32.6%. The positive impact of these favorable adjustments for the quarter was
approximately $123,000. Overall for 2007 the effective tax rate was 31.8%.
Annual Results
On an annual basis, earnings for 2007 were $13.9 million, a decrease of
$1.7 million or 10.9% from 2006. Net interest income for 2007 totaled $48.7
million, a decline of $360,000 or 0.7% from 2006. For 2007, net interest
margin, stated on a tax equivalent basis, declined to 3.55% from 3.68% for the
year ended December 31, 2006. During that period the provision for loan losses
increased to $2.3 million in 2007 from $1.8 million in 2006.
Non-interest income increased by $2.5 million, or 12.8%, to $22.1 million
for the year ended December 31, 2007 from $19.6 million for 2006. Service
fees, primarily associated with overdraft privilege fees and debit card
revenue, increased by $1.5 million, insurance commissions increased by
$747,000, and mortgage banking income increased by $223,000. Also, income from
bank-owned life insurance increased by $396,000 due both to the fourth quarter
death benefit and an increase in overall investment. Other non-interest income
in 2006 also included a $400,000 gain from the sale of the credit card
portfolio. There were no items of that nature in the 2007 results.
Non-interest expense totaled $48.1 million for 2007 and $43.8 million for
2006, an increase of $4.3 million, or 9.7%. Compensation and benefits
increased by $1.4 million between 2006 and 2007, an increase of 6.0%, while
occupancy costs were up by $997,000. Total flood-related costs in occupancy in
2007 were $497,000, which included clean-up expenses, and the cost to repair
or replace computer equipment, heating and air conditioning units, drywall,
window coverings and carpeting. In addition to occupancy costs, $87,000 of
other costs associated with the flooding were recorded in 2007. Other
significant cost increases include advertising expense, which was up $399,000,
management consulting fees which increased by $113,000, fraud losses which
increased by $175,000 and fees for the overdraft privilege product, which
increased by $120,000 in 2007.
Assets End Year at $1.61 Billion
Total assets at December 31, 2007 totaled $1.61 billion compared with
$1.53 billion at December 31, 2006. At December 31, 2007, net loans totaled
$1.28 billion, deposits totaled $1.22 billion and stockholders equity was
$166.0 million. At December 31, 2006, net loans, deposits and equity were
$1.23 billion, $1.14 billion and $159.8 million, respectively. Goodwill and
other intangible assets were $40.4 million at December 31, 2007 compared to
$38.5 million at December 31, 2006.
First Defiance Gears for Acquisition
On October 2, 2007, First Defiance entered into an agreement to acquire
Pavilion Bancorp and its subsidiary, the Bank of Lenawee ($279 million in
assets), located in Adrian, Michigan. The Pavilion transaction, which is
scheduled to close late in the 2008 first quarter subject to customary
regulatory and shareholder approval, will add approximately $230 million in
loans and $200-$210 million in deposits.
"Factoring in our expected cost savings, which we believe will approximate
$3.0 to $3.5 million annually, this acquisition will be accretive to our
earnings in 2008," commented Mr. Small. "That is without any assumptions
regarding revenue enhancements and excludes the one-time impact of acquisition
related charges, which will be in the range of $3.5 to $3.8 million on a pre-
tax basis. We're optimistic about this opportunity. Staffs from both First
Defiance and Pavilion have been working very hard to prepare for a smooth
transition of the Bank of Lenawee customers to First Federal Bank and we
anticipate an efficient integration."
"The Michigan economy continues to struggle," continued Mr. Small. "For
much of that state including the markets we are acquiring, there are concerns
about loan collateral values, especially with residential real estate loans.
We are monitoring market conditions and working with Pavilion's management to
identify and address weaknesses in the Bank of Lenawee portfolio. Long-term we
are very excited about the opportunity to expand our franchise. This
acquisition adds the type of communities that have been very responsive to our
'Customer First' style of banking. In addition, Bank of Lenawee has a solid
reputation and a base of commercial and retail customers that is similar to
our existing franchise. We will continue with a local decision-making strategy
that the market is accustomed to and that has served us well in our other
markets."
Looking Ahead
"We expect to continue to grow in 2008," stated Mr. Small. "Our budget
reflects period-end net loans, including the Bank of Lenawee, of $1.65
billion. Most of our growth will be in commercial and commercial real estate
loans, which we are budgeting to grow by more than $120 million. We have
budgeted year-end deposits to total $1.56 billion, with $170 million of those
being non-interest bearing. Our margin for the year is budgeted to be in the
3.6% range in the first quarter, increasing to near 3.9% by year-end. Part of
that increase reflects the improved mix of deposits we'll have following the
acquisition. While a lower Fed Funds rate will probably negatively impact that
margin, we have thus far been able to offset loan rate decreases with
reductions to our deposit costs."
"Excluding the Bank of Lenawee, our non-interest income is expected to
grow by 5%," continued Mr. Small. "On the expense side, our compensation and
benefits will increase by 15% over 2007 levels, excluding compensation costs
associated with the Bank of Lenawee, primarily because of staffing increases
in centralized operation and support areas needed to handle the higher volume
of transactions. These costs were modeled as part of the acquisition's net
cost savings. Budgeted compensation costs related to Bank of Lenawee reflect
offsetting staffing reductions. Overall wages will increase by approximately
4% and we budgeted a 10% increase in group medical costs."
"We believe that 2008 will be a challenging year for most community
banks," said Mr. Small. "Asset quality issues will be everyone's focus and
with declining rates, net interest margin will continue to be a challenge.
Overall, I believe the environment will offer significant opportunities to
companies that stay disciplined in both loan underwriting and in loan and
deposit pricing. We plan to be a company that takes advantage of these
opportunities."
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m.
(EST) on Tuesday, January 22, 2008 to discuss the earnings results and
business trends. The conference call may be accessed by calling 800-860-2442.
Internet access to the call is also available (in listen-only mode) at the
following URL: http://www.talkpoint.com/viewer/starthere.asp?pres=120042.
The audio replay of the Internet Web cast will be available at
www.fdef.com until February 1, 2008.
About First Defiance Financial Corp.
First Defiance Financial Corp., headquartered in Defiance, Ohio, is the
holding company for First Federal Bank of the Midwest and First Insurance &
Investments. First Federal operates 27 full service branches and 36 ATM
locations in northwest Ohio and Fort Wayne, Indiana. First Insurance &
Investments, with offices in Defiance and Bowling Green, specializes in life
and group health insurance.
For more information, visit the company's Web site at www.fdef.com.
Safe Harbor Statement
This news release may contain certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21 B of the Securities Act of 1934, as amended, which are intended to
be safe harbors created thereby. Those statements may include, but are not
limited to, all statements regarding intent, beliefs, expectations,
projections, forecasts and plans of First Defiance Financial Corp. and its
management, and specifically include statements regarding: future movements of
interest rates and particularly 10-year Treasury notes, the production levels
of mortgage loan generation, the ability to continue to grow loans and
deposits, the ability to grow fee income, the ability to sustain credit
quality ratios at current or improved levels, continued strength in the market
area for First Federal Bank of the Midwest, and the ability of the Company to
grow in existing and adjacent markets. These forward-looking statements
involve numerous risks and uncertainties, including those inherent in general
and local banking, insurance and mortgage conditions, competitive factors
specific to markets in which the Company and its subsidiaries operate, future
interest rate levels, legislative and regulatory decisions or capital market
conditions and other risks and uncertainties detailed from time to time in the
Company's Securities and Exchange Commission (SEC) filings, including the
Company's Annual Report on Form 10-K for the year ended December 31, 2006. One
or more of these factors have affected or could in the future affect the
Company's business and financial results in future periods and could cause
actual results to differ materially from plans and projections. Therefore,
there can be no assurances that the forward-looking statements included in
this news release will prove to be accurate. In light of the significant
uncertainties in the forward-looking statements included herein, the inclusion
of such information should not be regarded as a representation by the Company
or any other persons, that the objectives and plans of the Company will be
achieved. All forward-looking statements made in this news release are based
on information presently available to the management of the Company. The
Company assumes no obligation to update any forward-looking statements.

Consolidated Balance Sheets
First Defiance Financial Corp.

December 31, December 31,
(in thousands) 2007 2006

Assets
Cash and cash equivalents
Cash and amounts due from depository
institutions $53,976 $47,668
Interest-bearing deposits 11,577 2,355
65,553 50,023
Securities
Available-for sale, carried at fair value 112,370 110,682
Held-to-maturity, carried at amortized cost 1,117 1,441
113,487 112,123

Loans 1,289,696 1,239,889
Allowance for loan losses (13,890) (13,579)
Loans, net 1,275,806 1,226,310
Loans held for sale 5,751 3,426
Mortgage servicing rights 5,973 5,529
Accrued interest receivable 6,755 6,984
Federal Home Loan Bank stock and other
interest-bearing assets 18,586 18,586
Bank Owned Life Insurance 28,423 25,326
Office properties and equipment 40,545 34,899
Real estate and other assets held for sale 2,460 2,392
Goodwill 36,820 35,090
Core deposit and other intangibles 3,551 3,397
Other assets 5,694 3,794
Total Assets $1,609,404 $1,527,879

Liabilities and Stockholders' Equity
Non-interest-bearing deposits $121,563 $106,328
Interest-bearing deposits 1,096,295 1,032,117
Total deposits 1,217,858 1,138,445
Advances from Federal Home Loan Bank 139,536 162,228
Notes payable and other interest-bearing
liabilities 30,055 30,424
Subordinated debentures 36,083 20,619
Advance payments by borrowers for tax and
insurance 762 667
Deferred taxes 1,462 1,295
Other liabilities 17,694 14,376
Total liabilities 1,443,450 1,368,054
Stockholders' Equity
Preferred stock - -
Common stock, net 117 117
Additional paid-in-capital 112,651 110,285
Stock acquired by ESOP (202) (628)
Accumulated other comprehensive income (415) (671)
Retained earnings 126,630 120,112
Treasury stock, at cost (72,827) (69,390)
Total stockholders' equity 165,954 159,825
Total liabilities and stockholders' equity $1,609,404 $1,527,879

Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.

Three Months Ended Twelve Months Ended
(in thousands, except per December 31, December 31,
share amounts) 2007 2006 2007 2006

Interest Income:
Loans $22,984 $22,608 $90,866 $86,213
Investment securities 1,447 1,405 5,735 5,645
Interest-bearing deposits 438 20 924 165
FHLB stock dividends 328 277 1,226 1,042
Total interest income 25,197 24,310 98,751 93,065
Interest Expense:
Deposits 10,227 9,438 40,356 33,273
FHLB advances and other 1,636 2,107 6,889 8,885
Subordinated debentures 596 346 2,115 1,308
Notes Payable 210 174 729 577
Total interest expense 12,669 12,065 50,089 44,043
Net interest income 12,528 12,245 48,662 49,022
Provision for loan losses 603 318 2,306 1,756
Net interest income after
provision for loan losses 11,925 11,927 46,356 47,266
Non-interest Income:
Service fees and other charges 2,790 2,645 10,788 9,303
Mortgage banking income 833 845 3,612 3,389
Gain on sale of non-mortgage
loans 22 26 226 526
Gain on sale of securities - (2) 21 (2)
Insurance and investment sales
commissions 1,034 888 5,278 4,531
Trust income 95 80 375 312
Income from Bank Owned Life
Insurance 446 249 1,375 979
Other non-interest income 48 191 455 586
Total Non-interest Income 5,268 4,922 22,130 19,624
Non-interest Expense:
Compensation and benefits 5,897 5,815 25,245 23,805
Occupancy 1,776 1,310 6,100 5,103
State franchise tax 506 293 1,579 1,288
Data processing 986 929 3,824 3,689
Amortization of intangibles 165 180 646 719
Other non-interest expense 2,831 2,683 10,719 9,235
Total Non-interest Expense 12,161 11,210 48,113 43,839
Income before income taxes 5,032 5,639 20,373 23,051
Income taxes 1,474 1,666 6,469 7,451
Net Income $3,558 $3,973 $13,904 $15,600

Earnings per share:
Basic $0.51 $0.56 $1.96 $2.22
Diluted $0.50 $0.55 $1.94 $2.18

Average Shares Outstanding:
Basic 7,037 7,051 7,085 7,028
Diluted 7,108 7,168 7,178 7,163

Financial Summary and Comparison
First Defiance Financial Corp.

Three Months Ended Twelve months ended
December 31, December 31,
(dollars in thousands, % %
except per share data) 2007 2006 change 2007 2006 change

Summary of Operations
Tax-equivalent
interest income (1) 25,383 24,484 3.7 99,477 93,661 6.2
Interest expense 12,669 12,065 5.0 50,089 44,043 13.7
Tax-equivalent net
interest income (1) 12,714 12,419 2.4 49,388 49,618 (0.5)
Provision for loan
losses 603 318 89.6 2,306 1,756 31.3
Tax-equivalent NII
after provision for
loan loss (1) 12,111 12,101 0.1 47,082 47,862 (1.6)
Securities gains - (2) NM 21 (2) NM
Non-interest income-
excluding securities
gains 5,268 4,924 7.0 22,109 19,626 12.7
Non-interest expense 12,161 11,210 8.5 48,113 43,839 9.7
Income taxes 1,474 1,666 (11.5) 6,469 7,451 (13.2)
Net Income 3,558 3,973 (10.4) 13,904 15,600 (10.9)
Tax equivalent
adjustment (1) 186 174 6.9 726 596 21.8
At Period End
Assets 1,609,404 1,527,879 5.3
Earning assets 1,439,097 1,376,379 4.6
Loans 1,289,696 1,239,889 4.0
Allowance for
loan losses 13,890 13,579 2.3
Deposits 1,217,858 1,138,445 7.0
Stockholders'
equity 165,954 159,825 3.8
Average Balances
Assets 1,589,264 1,516,709 4.8 1,544,369 1,495,761 3.2
Earning assets 1,432,061 1,364,064 5.0 1,391,140 1,347,625 3.2
Deposits and
interest-bearing
liabilities 1,404,065 1,340,179 4.8 1,361,920 1,324,398 2.8
Loans 1,265,307 1,225,567 3.2 1,241,817 1,209,498 2.7
Deposits 1,212,486 1,125,641 7.7 1,169,160 1,101,512 6.1
Stockholders'
equity 165,762 159,314 4.0 164,058 155,548 5.5
Stockholders'
equity / assets 10.43% 10.50% (0.7) 10.62% 10.40% 2.2
Per Common Share
Data
Net Income
Basic $0.51 $0.56 (8.9) $1.96 $2.22 (11.7)
Diluted 0.50 0.55 (9.1) $1.94 2.18 (11.0)
Dividends 0.26 0.25 4.0 1.01 0.97 4.1
Market Value:
High $26.93 $30.70 (12.3) $30.25 $30.70 (1.5)
Low 20.58 26.87 (23.4) 20.58 25.09 (18.0)
Close 22.02 30.25 (27.2) 22.02 30.25 (27.2)
Book Value 23.51 22.38 5.0 23.51 22.38 5.0
Tangible Book Value 17.79 16.99 4.7 17.79 16.99 4.7
Shares outstanding,
end of period (000) 7,059 7,142 (1.2) 7,059 7,142 (1.2)
Performance Ratios
(annualized)
Tax-equivalent net
interest margin (1) 3.52% 3.61% (2.4) 3.55% 3.68% (3.5)
Return on average
assets 0.89% 1.04% (14.6) 0.90% 1.04% (13.4)
Return on average
equity 8.52% 9.89% (13.9) 8.48% 10.03% (15.5)
Efficiency ratio (2) 67.63% 64.64% 4.6 67.29% 63.31% 6.3
Effective tax rate 29.29% 29.54% (0.8) 31.75% 32.32% (1.8)
Dividend payout
ratio (basic) 50.98% 44.64% 14.2 51.53% 43.69% 17.9

(1) Interest income on tax-exempt securities and loans has been adjusted
to a tax-equivalent basis using the statutory federal income tax rate
of 35%
(2) Efficiency ratio = Non-interest expense divided by sum of tax-
equivalent net interest income plus non-interest income, excluding
securities gains, net and asset sales gains, net.
NM Percentage change not meaningful

Income from Mortgage Banking

Revenue from sales and servicing of mortgage loans consisted of the
following:

Three months ended Twelve months ended
December 31, December 31,
(dollars in thousands) 2007 2006 2007 2006

Gain from sale of mortgage loans $598 $688 $2,590 $2,423
Mortgage loan servicing revenue
(expense):
Mortgage loan servicing revenue 440 405 1,706 1,576
Amortization of mortgage servicing
rights (167) (154) (648) (612)
Mortgage servicing rights valuation
adjustments (38) (16) (36) 2
235 235 1,022 966
Total revenue from sale and servicing
of mortgage loans $833 $923 $3,612 $3,389

Yield Analysis
First Defiance Financial Corp.

Three Months Ended December 31,
2007
Average Yield
Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $1,265,307 $22,997 7.21%
Securities 112,910 1,620 5.68%
Interest Bearing Deposits 35,259 438 4.93%
FHLB stock 18,585 328 7.00%
Total interest-earning assets 1,432,061 25,383 7.03%
Non-interest-earning assets 157,203
Total assets $1,589,264
Deposits and Interest-bearing
liabilities:
Interest bearing deposits $1,098,408 $10,227 3.69%
FHLB advances and other 128,677 1,636 5.04%
Other Borrowings 26,605 210 3.13%
Subordinated debentures 36,297 596 6.51%
Total interest-bearing liabilities 1,289,987 12,669 3.90%
Non-interest bearing deposits 114,078 - -
Total including non-interest-bearing
demand deposits 1,404,065 12,669 3.58%
Other non-interest-bearing liabilities 19,437
Total liabilities 1,423,502
Stockholders' equity 165,762
Total liabilities and stockholders'
equity $1,589,264
Net interest income; interest rate
spread $12,714 3.13%
Net interest margin (3) 3.52%
Average interest-earning assets to
average interest bearing liabilities 111%

Three Months Ended December 31,
2006
Average Yield
Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $1,225,567 $22,618 7.32%
Securities 118,227 1,569 5.27%
Interest Bearing Deposits 1,956 20 4.06%
FHLB stock 18,314 277 6.00%
Total interest-earning assets 1,364,064 24,484 7.12%
Non-interest-earning assets 152,645
Total assets $1,516,709
Deposits and Interest-bearing
liabilities:
Interest bearing deposits $1,025,941 $9,438 3.65%
FHLB advances and other 170,318 2,107 4.91%
Other Borrowings 23,601 174 2.92%
Subordinated debentures 20,619 346 6.66%
Total interest-bearing liabilities 1,240,479 12,065 3.86%
Non-interest bearing deposits 99,700 - -
Total including non-interest-bearing
demand deposits 1,340,179 12,065 3.57%
Other non-interest-bearing liabilities 17,216
Total liabilities 1,357,395
Stockholders' equity 159,314
Total liabilities and stockholders'
equity $1,516,709
Net interest income; interest rate
spread $12,419 3.26%
Net interest margin (3) 3.61%
Average interest-earning assets to
average interest bearing liabilities 110%

Twelve Months Ended December 31,
2007
Average Yield
Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $1,241,817 $90,913 7.32%
Securities 112,577 6,414 5.68%
Interest Bearing Deposits 18,161 924 5.09%
FHLB stock 18,585 1,226 6.60%
Total interest-earning assets 1,391,140 99,477 7.15%
Non-interest-earning assets 153,229
Total assets $1,544,369
Deposits and Interest-bearing
liabilities:
Interest bearing deposits $1,064,960 $40,356 3.79%
FHLB advances and other 136,484 6,889 5.05%
Other Borrowings 23,841 729 3.06%
Subordinated debentures 32,435 2,115 6.52%
Total interest-bearing liabilities 1,257,720 50,089 3.98%
Non-interest bearing deposits 104,200 - -
Total including non-interest-bearing
demand deposits 1,361,920 50,089 3.68%
Other non-interest-bearing liabilities 18,391
Total liabilities 1,380,311
Stockholders' equity 164,058
Total liabilities and stockholders'
equity $1,544,369
Net interest income; interest rate
spread $49,388 3.17%
Net interest margin (3) 3.55%
Average interest-earning assets to
average interest bearing liabilities 111%

Twelve Months Ended December 31,
2006
Average Yield
Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $1,209,498 $86,237 7.13%
Securities 116,718 6,217 5.30%
Interest Bearing Deposits 3,483 165 4.74%
FHLB stock 17,926 1,042 5.81%
Total interest-earning assets 1,347,625 93,661 6.95%
Non-interest-earning assets 148,136
Total assets $1,495,761
Deposits and Interest-bearing
liabilities:
Interest bearing deposits $1,006,468 $33,273 3.31%
FHLB advances and other 181,869 8,885 4.89%
Other Borrowings 20,398 577 2.83%
Subordinated debentures 20,619 1,308 6.34%
Total interest-bearing liabilities 1,229,354 44,043 3.59%
Non-interest bearing deposits 95,044 - -
Total including non-interest-bearing
demand deposits 1,324,398 44,043 3.33%
Other non-interest-bearing liabilities 15,815
Total liabilities 1,340,213
Stockholders' equity 155,548
Total liabilities and stockholders'
equity $1,495,761
Net interest income; interest rate
spread $49,618 3.36%
Net interest margin (3) 3.68%
Average interest-earning assets to
average interest bearing liabilities 110%

(1) Interest on certain tax exempt loans and securities is not taxable for
Federal income tax purposes. In order to compare the tax-exempt yields
on these assets to taxable yields, the interest earned on these assets
is adjusted to a pre-tax equivalent amount based on the marginal
corporate federal income tax rate of 35%.
(2) Annualized
(3) Net interest margin is net interest income divided by average
interest-earning assets.

Selected Quarterly Information
First Defiance Financial Corp.

(dollars in thousands, except per 4th Qtr 3rd Qtr 2nd Qtr
share data) 2007 2007 2007
Summary of Operations
Tax-equivalent interest income (1) $25,383 $25,177 $24,709
Interest expense 12,669 12,962 12,410
Tax-equivalent net interest income (1) 12,714 12,215 12,299
Provision for loan losses 603 671 575
Tax-equivalent NII after provision for
loan losses (1) 12,111 11,544 11,724
Investment securities gains - 21 -
Non-interest income (excluding
securities gains/losses) 5,268 5,563 5,670
Non-interest expense 12,161 12,296 11,882
Income taxes 1,474 1,515 1,724
Net income 3,558 3,129 3,611
Tax equivalent adjustment (1) 186 188 177
At Period End
Total assets $1,609,404 $1,579,946 $1,540,675
Earning assets 1,439,097 1,432,735 1,385,803
Loans 1,289,696 1,264,872 1,245,027
Allowance for loan losses 13,890 13,427 13,417
Deposits 1,217,858 1,208,164 1,167,198
Stockholders' equity 165,954 164,706 164,657
Stockholders' equity / assets 10.31% 10.42% 10.69%
Goodwill 36,820 36,515 36,551
Average Balances
Total assets $1,589,264 $1,550,174 $1,527,863
Earning assets 1,432,061 1,397,521 1,376,030
Deposits and interest-bearing
liabilities 1,404,065 1,367,421 1,344,186
Loans 1,265,307 1,244,531 1,231,192
Deposits 1,212,486 1,177,594 1,157,793
Stockholders' equity 165,762 164,751 164,591
Stockholders' equity / assets 10.43% 10.63% 10.77%
Per Common Share Data
Net Income:
Basic $0.51 $0.44 $0.51
Diluted 0.50 0.44 0.50
Dividends 0.26 0.25 0.25
Market Value:
High $26.93 $29.64 $30.00
Low 20.58 23.99 26.71
Close 22.02 27.00 29.82
Book Value 23.51 23.21 22.94
Shares outstanding, end of period (in
thousands) 7,059 7,095 7,178
Performance Ratios (annualized)
Tax-equivalent net interest margin (1) 3.52% 3.47% 3.58%
Return on average assets 0.89% 0.80% 0.95%
Return on average equity 8.52% 7.53% 8.80%
Efficiency ratio (2) 67.63% 69.16% 66.12%
Effective tax rate 29.29% 32.62% 32.31%
Dividend payout ratio (basic) 50.98% 56.82% 49.02%

(dollars in thousands, except per 1st Qtr 4th Qtr
share data) 2007 2006
Summary of Operations
Tax-equivalent interest income (1) $24,207 $24,484
Interest expense 12,049 12,065
Tax-equivalent net interest income
(1) 12,158 12,419
Provision for loan losses 457 318
Tax-equivalent NII after provision
for loan losses (1) 11,701 12,101
Investment securities gains - (2)
Non-interest income (excluding
securities gains/losses) 5,607 4,924
Non-interest expense 11,771 11,210
Income taxes 1,757 1,666
Net income 3,606 3,973
Tax equivalent adjustment (1) 174 174
At Period End
Total assets $1,518,414 $1,527,879
Earning assets 1,372,475 1,376,379
Loans 1,237,072 1,239,889
Allowance for loan losses 13,752 13,579
Deposits 1,146,319 1,138,445
Stockholders' equity 164,540 159,825
Stockholders' equity / assets 10.84% 10.46%
Goodwill 36,464 35,090
Average Balances
Total assets $1,510,176 $1,516,709
Earning assets 1,358,948 1,364,064
Deposits and interest-bearing
liabilities 1,332,005 1,340,179
Loans 1,226,240 1,225,567
Deposits 1,128,765 1,125,641
Stockholders' equity 161,128 159,314
Stockholders' equity / assets 10.67% 10.50%
Per Common Share Data
Net Income:
Basic $0.51 $0.56
Diluted 0.50 0.55
Dividends 0.25 0.25
Market Value:
High $30.25 $30.70
Low 27.25 26.87
Close 28.70 30.25
Book Value 22.77 22.38
Shares outstanding, end of period (in
thousands) 7,227 7,142
Performance Ratios (annualized)
Tax-equivalent net interest margin
(1) 3.59% 3.61%
Return on average assets 0.97% 1.04%
Return on average equity 9.08% 9.89%
Efficiency ratio (2) 66.26% 64.64%
Effective tax rate 32.76% 29.54%
Dividend payout ratio (basic) 49.02% 44.64%

(1) Interest income on tax-exempt securities and loans has been
adjusted to a tax-equivalent basis using the statutory federal
income tax rate of 35%
(2) Efficiency ratio = Non-interest expense divided by sum of tax-
equivalent net interest income plus non-interest income, excluding
securities gains, net and asset sales gains, net.

Selected Quarterly Information
First Defiance Financial Corp.

(dollars in thousands, except per 4th Qtr 3rd Qtr 2nd Qtr
share data) 2007 2007 2007
Loan Portfolio Composition
One to four family residential real
estate $231,921 $230,075 $234,819
Construction 13,146 15,392 16,346
Commercial real estate 601,851 592,914 583,046
Commercial 283,072 267,897 255,022
Consumer finance 37,743 38,280 40,693
Home equity and improvement 128,080 127,641 123,936
Total loans 1,295,813 1,272,199 1,253,862
Less:
Loans in process 5,085 6,301 7,761
Deferred loan origination fees 1,032 1,026 1,074
Allowance for loan loss 13,890 13,427 13,417
Net Loans $1,275,806 $1,251,445 $1,231,610

Allowance for loan loss activity
Beginning allowance $13,427 $13,417 $13,752
Provision for loan losses 603 671 575
Credit loss charge-offs:
One to four family residential
real estate 33 128 10
Commercial real estate 135 586 936
Commercial 7 - 11
Consumer finance 42 25 23
Home equity and improvement 30 10 41
Total charge-offs 247 749 1,021
Total recoveries 107 88 111
Net charge-offs (recoveries) 140 661 910
Ending allowance $13,890 $13,427 $13,417

Credit Quality
Non-accrual loans $9,217 $8,523 $6,427
Loans over 90 days past due and still
accruing - - -
Total non-performing loans (1) 9,217 8,523 6,427
Real estate owned (REO) 2,460 3,392 3,324
Total non-performing assets (1) $11,677 $11,915 $9,751
Net charge-offs 140 661 910

Allowance for loan losses / loans 1.08% 1.06% 1.08%
Allowance for loan losses / non-
performing assets 118.95% 112.69% 137.60%
Allowance for loan losses / non-
performing loans 150.70% 157.54% 208.76%
Non-performing assets / loans plus REO 0.90% 0.94% 0.78%
Non-performing assets / total assets 0.73% 0.75% 0.63%
Net charge-offs / average loans
(annualized) 0.04% 0.21% 0.30%

Deposit Balances
Non-interest-bearing demand deposits $121,563 $109,128 $107,111
Interest-bearing demand deposits and
money market 342,367 330,168 314,923
Savings deposits 105,873 98,719 97,004
Retail time deposits less than
$100,000 509,720 524,347 504,301
Retail time deposits greater than
$100,000 137,927 142,645 136,319
National/Brokered time deposits 408 3,157 7,540
Total deposits $1,217,858 $1,208,164 $1,167,198

(dollars in thousands, except per 1st Qtr 4th Qtr
share data) 2007 2006
Loan Portfolio Composition
One to four family residential real
estate $243,632 $250,808
Construction 14,277 17,339
Commercial real estate 579,463 579,860
Commercial 242,543 232,914
Consumer finance 40,857 43,770
Home equity and improvement 123,404 122,789
Total loans 1,244,176 1,247,480
Less:
Loans in process 6,012 6,409
Deferred loan origination fees 1,092 1,182
Allowance for loan loss 13,752 13,579
Net Loans $1,223,320 $1,226,310

Allowance for loan loss activity
Beginning allowance $13,579 $14,298
Provision for loan losses 457 318
Credit loss charge-offs:
One to four family residential
real estate 85 244
Commercial real estate 146 664
Commercial 81 62
Consumer finance 71 95
Home equity and improvement - 65
Total charge-offs 383 1,130
Total recoveries 99 93
Net charge-offs (recoveries) 284 1,037
Ending allowance $13,752 $13,579

Credit Quality
Non-accrual loans $8,211 $7,283
Loans over 90 days past due and still
accruing - -
Total non-performing loans (1) 8,211 7,283
Real estate owned (REO) 2,581 2,392
Total non-performing assets (1) $10,792 $9,675
Net charge-offs 284 1,037

Allowance for loan losses / loans 1.11% 1.10%
Allowance for loan losses / non-
performing assets 127.43% 140.35%
Allowance for loan losses / non-
performing loans 167.48% 186.45%
Non-performing assets / loans plus
REO 0.87% 0.78%
Non-performing assets / total assets 0.71% 0.64%
Net charge-offs / average loans
(annualized) 0.09% 0.34%

Deposit Balances
Non-interest-bearing demand deposits $101,089 $106,328
Interest-bearing demand deposits and
money market 313,327 306,003
Savings deposits 88,345 74,491
Retail time deposits less than
$100,000 498,136 493,594
Retail time deposits greater than
$100,000 136,248 140,392
National/Brokered time deposits 9,174 17,637
Total deposits $1,146,319 $1,138,445

(1) Non-performing loans consist of non-accrual loans that are
contractually past due 90 days or more and loans that are deemed
impaired under the criteria of FASB Statement No. 114. Non-
performing assets are non-performing loans plus real estate and
other assets acquired by foreclosure or deed-in-lieu thereof.

SOURCE First Defiance Financial Corp.

William J. Small, Chairman, President and CEO, First Defiance Financial Corp.,
+1-419-782-5015, bsmall@first-fed.com