FIRST DEFIANCE FINANCIAL CORP (Form: 8-K, Received: 01/21/2020 08:01:29)

Date of Award

Target Number

of RSUs

Tranches Vesting at
Actual Performance

Tranches Vesting at
Target Performance

[_________], 2018

2018 Tranche

2019 Tranche

[_________], 2019

2020 Tranche

2021 Tranche

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 20, 2020

First Defiance Financial Corp.

(Exact name of registrant as specified in its charter)

OHIO

000-26850

34-1803915

(State or other jurisdiction

of incorporation)

(Commission

File No.)

(IRS Employer

I.D. No.)

601 Clinton Street, Defiance, Ohio 43512

(Address of principal executive offices) (Zip Code)

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

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, $0.01 par value

FDEF

The Nasdaq Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

Section 2 – Financial Information

Item 2.02

Results of Operations and Financial Condition.

On January 20, 2020, First Defiance Financial Corp. (“FDEF”) issued a press release regarding its earnings for the quarter ended December 31, 2019. A copy of the press release is attached as Exhibit 99.1.

Section 5 – Corporate Governance and Management

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

This Current Report on Form 8-K is being filed in connection with the previously announced proposed merger of equals transaction (the “Merger”) between FDEF and United Community Financial Corp., an Ohio corporation (“UCFC”). The Merger is expected to close on January 31, 2020, subject to the satisfaction of customary closing conditions.

Appointment and Resignation of Directors in connection with the Merger

On January 20, 2020, in accordance with the terms of the previously disclosed Agreement and Plan of Merger, dated September 9, 2019, between FDEF and UCFC (the “Merger Agreement”), the board of directors of FDEF (the “Board”) accepted the resignation of each of Robert E. Beach, Dr. Douglas A. Burgei, Thomas K. Herman, Barbara A. Mitzel, and Thomas A. Reineke from the Board and appointed six current UCFC directors designated by UCFC to the Board, in each case subject to and effective upon the closing of the Merger.

Accordingly, upon the closing of the Merger, the Board will be comprised of seven current members of the Board (consisting of Donald P. Hileman, John L. Bookmyer, Terri A. Bettinger, Jean A. Hubbard, Charles D. Niehaus, Mark A. Robison and Samuel S. Strausbaugh) and the six UCFC directors designated by UCFC (consisting of Gary M. Small, Richard J. Schiraldi, Marty E. Adams, Zahid Afzal, Louis M. Altman and Lee Burdman). As previously disclosed, Mr. Bookmyer will continue to serve as the Chairman of the Board, and Mr. Schiraldi will become and serve as the Vice Chairman of the Board upon the closing of the Merger.

John L. Bookmyer, Zahid Afzal, Louis M. Altman and Terri A. Bettinger will serve as Class I directors for a term expiring at the annual meeting of shareholders in 2022. Marty E. Adams, Donald P. Hileman, Gary M. Small and Samuel S. Strausbaugh will serve as Class II directors for a term expiring at the annual meeting of shareholders in 2021. Richard J. Schiraldi, Lee Burdman, Jean A. Hubbard, Charles D. Niehaus and Mark A. Robison will serve as Class III directors for a term expiring at the annual meeting of shareholders in 2020.

Individual appointments to the various committees of the Board, effective upon the closing of the Merger, are as follows:


Audit	Compensation	Nominating and Governance
Samuel S. Strausbaugh (Chair)	Marty E. Adams (Chair)	Richard J. Schiraldi (Chair)
Louis M. Altman	Terri A. Bettinger	Marty E. Adams
Mark A. Robison	Lee Burdman	Jean A. Hubbard
Richard J. Schiraldi	Jean A. Hubbard	Charles D. Niehaus

Executive	Risk
John L. Bookmyer (Chair)	Charles D. Niehaus (Chair)
Marty E. Adams	Zahid Afzal
Donald P. Hileman	Terri A. Bettinger
Richard J. Schiraldi	Lee Burdman
Gary M. Small	Donald P. Hileman
Samuel S. Strausbaugh	Gary M. Small

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The information relating to FDEF’s existing director compensation program set forth under the heading “Proposal 1 Election of Directors—Board and Board Committee Meetings—Director Compensation,” included in FDEF’s definitive proxy statement filed on March 8, 2019, is hereby incorporated by reference. In connection with the completion of the proposed Merger, FDEFs director compensation program may be modified in light of the increased size and complexity of the combined organization.

Appointment of President in connection with the Merger

On January 20, 2020, in accordance with the terms of the Merger Agreement, the Board appointed Gary M. Small as President of the Company and the Company’s banking subsidiary, First Federal Bank of the Midwest (the “Bank”), effective upon the closing of the Merger. Donald P. Hileman will continue to serve as Chief Executive Officer of the Company and the Bank after the Merger through the agreed-to transition period following the Merger, and Paul D. Nungester, Jr. will continue to serve as Chief Financial Officer of the Company and the Bank after the Merger.

Gary M. Small, age 59, is currently the President and Chief Executive Officer and a director of UCFC and UCFC’s subsidiary bank, Home Savings Bank, and he has held these positions since 2014. Prior to holding these positions, he served as Senior Executive Vice President and Chief Banking Officer for S&T Bank, located in Indiana, Pennsylvania, from January 2013 to March 2014, where he had responsibility for wealth management, retail banking and insurance business groups. He also held various senior executive officer positions with Jackson Hewitt Tax Services, including as Senior Vice President of Customer Operations from May 2011 to December 2012 and as Chief Operating Officer from January 2009 to May 2011. Previous positions also include Executive Vice President and Regional Banking Group President for Huntington National Bank and Executive Vice President and Head of Regional Banking for Sky Financial Group. He also has 20 years of experience in a number of senior operating and financial roles with National City Corporation and its predecessor Merchants National Corporation, including four years as Executive Vice President and Retail Network Executive with responsibility for over 200 branch locations across the Midwest.

The information related to the employment agreement Mr. Small entered into with FDEF in connection with the Merger included in FDEF’s Current Report on Form 8-K filed on September 10, 2019, is hereby incorporated by reference.

Amendment of Equity Plan Awards

As previously disclosed, pursuant to executive employment or change in control agreements with Messrs. Hileman, Nungester, John R. Reisner, Dennis E. Rose, Jr., and Gregory R. Allen, the Merger is a “change in control” for the purpose of their respective agreements and FDEF equity plans. Although Timothy K. Harris has no such agreement in place, to align treatment of UCFC and FDEF directors and employees, the Merger Agreement provides FDEF with discretion to deem the Merger a change in control under its equity plans and applicable award agreements with all FDEF employees and non-employee directors, including Mr. Harris.

In addition, as previously disclosed, FDEF executives and non-employee directors currently hold outstanding awards under the equity plans, including awards of performance-based and time-based restricted stock units. The Merger is anticipated to close during the performance periods set forth in applicable performance-based award agreements, and due to the effects of the Merger, performance measurements under the applicable award agreements for periods before and after the Merger will not be comparable and, therefore, not readily determinable.

On January 20, 2020, the compensation committee of the Board exercised discretion provided in the Merger Agreement to deem the Merger a change in control under FDEF equity plans, subject to consummation of the Merger, for those employees and directors who lack an employment or other agreement under which the Merger is a change in control. In addition, to align with the treatment by UCFC of performance-based awards under its equity plans, the committee approved amendments to the performance measurement and vesting conditions of outstanding awards, as follows. Performance for the 2018 and 2019 calendar year portions of the performance periods will be measured based on actual FDEF performance during such years, while performance for the 2020 and 2021 calendar year portions of the performance periods will be deemed to have been satisfied at the target level of performance. Time-based awards remain in full force and effect pursuant to the vesting terms and conditions originally provided therein. As with UCFC awards, all performance-based awards under FDEF equity plans, other than those held by Mr. Hileman, will vest as of the closing of the Merger and settle shortly thereafter.

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In response to feedback from shareholders, the committee and Mr. Hileman agreed that with respect to Mr. Hileman’s awards, the best interests of FDEF and its shareholders are served by conditioning vesting on his continued employment as Chief Executive Officer through the agreed-to transition period following the Merger. Therefore, as amended, Mr. Hileman’s awards will vest upon the earlier of his death, disability, retirement as Chief Executive Officer on the agreed to transition date, or June 30, 2021. In the event that Mr. Hileman voluntarily terminates his employment before the earlier of such dates, the awards will be forfeited. In addition, Mr. Hileman’s awards will not settle on an accelerated basis on account of his retirement and will settle on the dates provided in the original agreements.

The foregoing description of these amendments to FDEF equity plan award agreements is qualified in all respects by the full text of the forms of amendment agreements adopted by the committee, copies of which are attached as Exhibits 10.1 to 10.4 to this Current Report on Form 8-K, and which are incorporated herein by reference.

Section 7 – Regulation FD

Item 7.01

Regulation FD Disclosure.

On January 20, 2020, FDEF issued a press release that included announcement of a cash dividend. A copy of the press release is attached as Exhibit 99.1 and incorporated herein by reference.

Section 8 – Other Events

Item 8.01

Other Events.

On January 20, 2020, FDEF and UCFC jointly announced the receipt of all required regulatory approvals for the Merger. The Merger is expected to close on January 31, 2020, subject to the satisfaction of customary closing conditions. A copy of the press release is attached as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.

Cautionary Statements Regarding Forward-Looking Information

Certain statements contained in this report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, certain plans, expectations, goals, projections and benefits relating to the Merger between FDEF and UCFC, which are subject to numerous assumptions, risks and uncertainties. Words such as “may,” “believe,” “expect,” “anticipate,” “intend,” “will,” “should,” “plan,” “estimate,” “predict,” “continue” and “potential” or the negative of these terms or other comparable terminology, as well as similar expressions, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Please refer to each of FDEF’s and UCFC’s Annual Report on Form 10-K for the year ended December 31, 2018, as well as their other filings with the SEC, for a more detailed discussion of risks, uncertainties and factors that could cause actual results to differ from those discussed in the forward-looking statements.

Forward-looking statements are not historical facts but instead express only management’s beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of the management’s control. It is possible that actual results and outcomes may differ, possibly materially, from the anticipated results or outcomes indicated in these forward-looking statements. In addition to factors disclosed in reports filed by FDEF and UCFC with the SEC, risks and uncertainties for FDEF, UCFC and the combined company include, but are not limited to: the possibility that any of the anticipated benefits of the proposed Merger will not be realized or will not be realized within the expected time period; the risk that integration of UCFC’s operations with those of FDEF will be materially delayed or will be more costly or difficult than expected; the parties’ inability to meet expectations regarding the timing, completion and accounting and tax treatments of the Merger; the failure to satisfy

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conditions to completion of the Merger; the failure of the proposed Merger to close for any other reason; diversion of management’s attention from ongoing business operations and opportunities due to the Merger; the challenges of integrating and retaining key employees; the effect of the announcement of the Merger on FDEF’s, UCFC’s or the combined company’s respective customer and employee relationships and operating results; the possibility that the Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; dilution caused by FDEF’s issuance of additional shares of FDEF common stock in connection with the Merger; and general competitive, economic, political and market conditions and fluctuations. All forward-looking statements included in this filing are made as of the date hereof and are based on information available at the time of the filing. Except as required by law, neither FDEF nor UCFC assumes any obligation to update any forward-looking statement.

Section 9 — Financial Statements and Exhibits

Item 9.01

Financial Statements and Exhibits.

(d)

Exhibits.


10.1		Form of Amendment to Performance-Based Restricted Stock Unit Award Agreements by and between First Defiance Financial Corp. and Donald P. Hileman

10.2		Form of Amendment to Performance-Based Restricted Stock Unit Award Agreements – Long Term Growth by and between First Defiance Financial Corp. and Donald P. Hileman

10.3		Form of Amendment to Performance-Based Restricted Stock Unit Award Agreements

10.4		Form of Amendment to Performance-Based Restricted Stock Unit Award Agreements – Long Term Growth

99.1		Press Release dated January 20, 2020

99.2		Joint press release of First Defiance Financial Corp. and United Community Financial Corp., dated January 20, 2020

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SIGNATURES

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


				FIRST DEFIANCE FINANCIAL CORP.

				By: /s/ Donald P. Hileman
				Name: Donald P. Hileman
				Title: Chief Executive Officer
Date: January 21, 2020

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Exhibit 10.1

FIRST DEFIANCE FINANCIAL CORP.

2018 EQUITY INCENTIVE PLAN

AMENDMENT TO

PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENTS

This Amendment to Performance-Based Restricted Stock Unit Award Agreements (this “Amendment Agreement”) is made and entered into by and between First Defiance Financial Corp. (the “Company”) and Donald P. Hileman (the “Participant,” and together with the Company, the “Parties”).

RECITALS

A. The Company and the Participant are parties to certain Performance-Based Restricted Stock Unit Award Agreements set forth in Attachment A hereto (the “Awards”), under the First Defiance Financial Corp. 2018 Equity Incentive Plan (the “Plan”).

B. Under the Awards, the Participant holds a number of restricted stock units (the “RSUs”) which shall vest in an amount based upon Company performance during specified three-year performance periods (the “Performance Periods”) and other terms set forth therein.

C. The Company is a party to an Agreement and Plan of Merger between the Company and United Community Financial Corp. (“United Community”), dated as of September 9, 2019, under which United Community will merge with and into the Company (the “Merger”).

D. The Merger will occur during the Performance Periods, and due to the effects of the Merger, measurements of Company performance for periods before and after the Merger will not be comparable, and therefore, not readily determinable.

E. Without adjustment to the Awards to account for the effects of the Merger, the Merger may unintentionally impact the number of RSUs subject to the Awards in which the Participant will vest.

F. The Company and the Participant agree that adjustment of the Awards as specified in this Amendment Agreement will preserve the intent of the Company to incentivize and reward Participant’s contributions to the Company’s performance and will not impair the value of the Awards to the Participant.

G. The Company and the Participant are also parties to that certain Employment Agreement, dated as of September 9, 2019 (the “Employment Agreement”), pursuant to which the Participant has agreed to continue to serve as Chief Executive Officer of the Company during a transition period following the Merger, until a date defined therein upon which the Participant will retire as Chief Executive Officer (the “Succession Date”).

H. The Company believes it is in the best interest of the Company and its shareholders to incentivize the Participant’s continued service during such transition period by conditioning vesting of his Awards upon continued employment through the earlier of the Succession Date or June 30, 2021.

I. This Amendment Agreement is strictly conditioned upon and subject to the consummation of the Merger, and absent the consummation of the Merger, this Amendment Agreement shall be null and void, ab initio.

NOW, THEREFORE, in consideration of the foregoing and the mutual promises and covenants of the Parties set forth in this Amendment Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby expressly covenant, consent, and agree as follows:

1. Section 5 of each Award is amended by deleting the existing Section 5 in its entirety and replacing it with the following:

“Vesting: At the end of the Performance Period, the Participant shall vest in between 0% and 100% of the RSUs subject to the Target Award based on the achievement of the Performance Objectives set forth in attached Exhibit A during the Performance Period; provided, however, that the calculation of such Performance Objectives shall occur as specified in this Section 5.

For the purposes of determining the number of RSUs subject to the Target Award in which the Participant will vest, the Target Award shall be divided into three substantially equal tranches which correspond to the three calendar years in the applicable Performance Period. Notwithstanding anything in this Award Agreement or to the contrary, and as applicable, the Performance Objectives for the 2018 Tranche and 2019 Tranche, each as may be applicable, shall be based on actual Company performance during calendar years 2018 and 2019; and the Performance Objectives for the 2020 Tranche and 2021 Tranche, each as may be applicable, shall be deemed to have been satisfied at the target level for the Performance Objectives without respect to actual performance during calendar years 2020 and 2021. The Committee shall determine the number of RSUs vesting with respect to each Tranche based on the foregoing and any other factors that the Committee deems relevant. The Committee, in its sole discretion, may adjust the number of RSUs vesting.

For avoidance of doubt, and notwithstanding anything in this Section 5 to the contrary, the end of the Performance Period shall be the date provided in Section 2. The RSUs shall settle thereafter as provided in Section 8.”

2. Section 6 of each Award is amended by deleting the existing Section 6(a) in its entirety and replacing it with the following:

“Death; Disability; Retirement: If the Participant dies, becomes Disabled or Retires during any Performance Period, the Participant shall vest in a number of RSUs for that Performance Period as provided in Section 5, as if the Participant had remained in the employ of the Company through the end of the applicable Performance Period. Vested RSUs shall be settled in a lump sum within 60 days following the Participant’s death or Disability. If vesting occurs due to the Participant’s Retirement, vested RSUs shall be settled in accordance with Section 8 (as if the Participant was employed on such settlement date).

For the purposes of this Award Agreement, “Retires” means Participant’s retirement as Chief Executive Officer on the earlier of: (i) the “Succession Date,” as defined in the Employment Agreement between the Company and the Participant, dated as of September 9, 2019, or (ii) June 30, 2021.”

3. Section 6 of each Award is amended by deleting the existing Section 6(b) in its entirety and replacing it with the following:

“Change in Control: If a Change in Control occurs during a Performance Period and the Participant is terminated by the Company prior to the conclusion of the Performance Period other than for Cause, the Participant shall vest in the number of RSUs as provided in Section 5, as if the Participant had remained in the employ of the Company through the end of the applicable Performance Period. Such vested RSUs shall be settled in a lump sum within 60 days following the Participant’s termination.”

4. Solely for the purpose of Section 6(b) of each Award, as amended, the Company has determined that the consummation of the Merger shall be deemed to be a Change in Control.

5. In all other respects, the Awards shall remain unchanged and in full force and effect.

* * * *

IN WITNESS WHEREOF, the Company has caused this Amendment Agreement to be executed in its name and on its behalf as of the date first written below, and the Participant acknowledges acceptance of the terms and conditions of this Amendment Agreement.


PARTICIPANT

		Date:

FIRST DEFIANCE FINANCIAL CORP.

By:		Date:

Its:

Attachment A

Performance-Based Restricted Stock Unit Award Agreements

Exhibit 10.2

FIRST DEFIANCE FINANCIAL CORP.

2018 EQUITY INCENTIVE PLAN

AMENDMENT TO PERFORMANCE-BASED

RESTRICTED STOCK UNIT AWARD AGREEMENTS – LONG TERM GROWTH

This Amendment to Performance-Based Restricted Stock Unit Award Agreements – Long Term Growth (this “Amendment Agreement”) is made and entered into by and between First Defiance Financial Corp. (the “Company”) and Donald P. Hileman (the “Participant,” and together with the Company, the “Parties”).

RECITALS

A. The Company and the Participant are parties to that certain Performance-Based Restricted Stock Unit Award Agreement – Long Term Growth set forth in Attachment A hereto (the “Award”), under the First Defiance Financial Corp. 2018 Equity Incentive Plan (the “Plan”).

B. Under the Award, the Participant holds a number of restricted stock units (the “RSUs”) which shall vest in an amount based upon Company performance during a specified three-year performance period (the “Performance Period”) and other terms set forth therein.

D. The Merger will occur during the Performance Period, and due to the effects of the Merger, measurements of Company performance for periods before and after the Merger will not be comparable, and therefore, not readily determinable.

E. Without adjustment to the Award to account for the effects of the Merger, the Merger may unintentionally impact the number of RSUs subject to the Award in which the Participant will vest.

F. The Company and the Participant agree that adjustment of the Award as specified in this Amendment Agreement will preserve the intent of the Company to incentivize and reward Participant’s contributions to the Company’s performance and will not impair the value of the Award to the Participant.

1. Section 5 of the Award is amended by deleting the existing Section 5 in its entirety and replacing it with the following:

“Vesting: At the end of the Performance Period, the Participant shall vest in between 0% and 100% of the RSUs subject to the Maximum Award based on the achievement of the Performance Objectives set forth below during the Performance Period; provided, however, that the calculation of such Performance Objectives shall occur as specified in this Section 5.

For the purposes of determining the number of RSUs subject to the Maximum Award in which the Participant will vest, the Maximum Award shall be divided into three substantially equal tranches which correspond to the three calendar years in the applicable Performance Period. Notwithstanding anything in this Award Agreement or to the contrary, and as applicable, the Asset Growth for the 2018 and 2019 Tranche, each as may be applicable, shall be based on actual Company performance during calendar years 2018 and 2019; and the Asset Growth for the 2020 Tranche and 2021 Tranche, each as may be applicable, shall be deemed to have been at the level necessary to earn one hundred percent (100%) of the RSUs, without respect to actual performance during calendar years 2020 and 2021. The Committee shall determine the number of RSUs vesting with respect to each Tranche based on the foregoing and any other factors that the Committee deems relevant. The Committee, in its sole discretion, may adjust the number of RSUs vesting.

2. Section 6 of the Award is amended by deleting the existing Section 6(a) in its entirety and replacing it with the following:

3. Section 6 of the Award is amended by deleting the existing Section 6(b) in its entirety and replacing it with the following:

4. Solely for the purpose of Section 6(b) of the Award, as amended, the Company has determined that the consummation of the Merger shall be deemed to be a Change in Control.

5. In all other respects, the Award shall remain unchanged and in full force and effect.

* * * *


PARTICIPANT

		Date:

FIRST DEFIANCE FINANCIAL CORP.

By:		Date:

Its:

Attachment A

Performance-Based Restricted Stock Unit Award Agreements

Exhibit 10.3

FIRST DEFIANCE FINANCIAL CORP.

2018 EQUITY INCENTIVE PLAN

AMENDMENT TO

PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENTS

This Amendment to Performance-Based Restricted Stock Unit Award Agreements (this “Amendment Agreement”) is made and entered into by and between First Defiance Financial Corp. (the “Company”) and [_______________] (the “Participant,” and together with the Company, the “Parties”).

RECITALS

E. Without adjustment to the Awards to account for the effects of the Merger, the Merger may unintentionally impact the number of RSUs subject to the Awards in which the Participant will vest.

G. This Amendment Agreement is strictly conditioned upon and subject to the consummation of the Merger, and absent the consummation of the Merger, this Amendment Agreement shall be null and void, ab initio.

1. Section 5 of each Award is amended by deleting the existing Section 5 in its entirety and replacing it with the following:

Notwithstanding anything in Section 2 to the contrary, the end of the Performance Period for each Award outstanding as of the date hereof shall be the date of the closing of the merger, as defined in the Agreement and Plan of Merger between the Company and United Community Financial Corp., dated as of September 9, 2019. The RSUs shall settle thereafter as provided in Section 8.”

2. Section 6 of each Award is amended by deleting the existing Section 6(a) in its entirety and replacing it with the following:

3. Section 6 of each Award is amended by deleting the existing Section 6(b) in its entirety and replacing it with the following:

4. Solely for the purpose of Section 6(b) of each Award, as amended, the Company has determined that the consummation of the Merger shall be deemed to be a Change in Control.

5. In all other respects, the Awards shall remain unchanged and in full force and effect.

* * * *


PARTICIPANT

		Date:

FIRST DEFIANCE FINANCIAL CORP.

By:		Date:

Its:

Attachment A

Performance-Based Restricted Stock Unit Award Agreements

Exhibit 10.4

FIRST DEFIANCE FINANCIAL CORP.

2018 EQUITY INCENTIVE PLAN

AMENDMENT TO PERFORMANCE-BASED

RESTRICTED STOCK UNIT AWARD AGREEMENTS – LONG TERM GROWTH

This Amendment to Performance-Based Restricted Stock Unit Award Agreements – Long Term Growth (this “Amendment Agreement”) is made and entered into by and between First Defiance Financial Corp. (the “Company”) and [_______________] (the “Participant,” and together with the Company, the “Parties”).

RECITALS

E. Without adjustment to the Award to account for the effects of the Merger, the Merger may unintentionally impact the number of RSUs subject to the Award in which the Participant will vest.

1. Section 5 of the Award is amended by deleting the existing Section 5 in its entirety and replacing it with the following:

2. Section 6 of the Award is amended by deleting the existing Section 6(a) in its entirety and replacing it with the following:

3. Section 6 of the Award is amended by deleting the existing Section 6(b) in its entirety and replacing it with the following:

4. Solely for the purpose of Section 6(b) of the Award, as amended, the Company has determined that the consummation of the Merger shall be deemed to be a Change in Control.

5. In all other respects, the Award shall remain unchanged and in full force and effect.

* * * *


PARTICIPANT

		Date:

FIRST DEFIANCE FINANCIAL CORP.

By:		Date:

Its:

Attachment A

Performance-Based Restricted Stock Unit Award Agreements

Exhibit 99.1

LOGO

NEWS RELEASE

Contact:

Donald P. Hileman

President and CEO

(419) 782-5104

dhileman@first-fed.com

For Immediate Release

FIRST DEFIANCE FINANCIAL CORP. REPORTS

RECORD FULL YEAR EARNINGS OF $2.48 PER SHARE FOR 2019

•

Earnings per diluted share of $0.63 for 2019 fourth quarter, up from $0.59 per share in the 2018 fourth quarter

•

Net income of $12.5 million for 2019 fourth quarter, compared to $12.1 million in the 2018 fourth quarter

•

Loan growth of $112 million during the 2019 fourth quarter

•

Deposit growth of $110 million during the 2019 fourth quarter

•

Non-performing loans of $13.5 million for 2019 fourth quarter, compared to $19.0 million for the 2018 fourth quarter

DEFIANCE, OHIO (January 20, 2020) – First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the fiscal year ended December 31, 2019, totaled $49.4 million, or $2.48 per diluted common share, compared to $46.2 million, or $2.26 per diluted common share, for the year ended December 31, 2018. For the fourth quarter of 2019, First Defiance earned $12.5 million, or $0.63 per diluted common share, compared to $12.1 million, or $0.59 per diluted common share for the fourth quarter of 2018. The fourth quarter of 2018 results included an increase of $806,000 pre-tax ($636,000 after-tax), or $0.03 per diluted share, from an immaterial accounting correction related to the company’s deferred compensation plan. The year-over-year comparisons are impacted by merger-related costs in the current year’s results, which had an after-tax cost of $1.1 million, or $0.05 per diluted share, for the full year and $697,000, or $0.03 per diluted share, for the fourth quarter.

“With fourth quarter earnings per share up 12% over last year, excluding merger costs, we are proud to announce record earnings performance for our seventh consecutive year,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance. “Our balance sheet and earnings growth, along with continued asset quality improvement, allowed us to finish the year strong. We are pleased with our position as we start 2020 and prepared to close our strategic merger with United Community Financial Corp.”

Net interest income up compared to fourth quarter 2018

Net interest income of $29.5 million in the fourth quarter of 2019 was up from $28.5 million in the fourth quarter of 2018. The increase was primarily due to the growth in earning assets offset partly by compression in the net interest margin versus the fourth quarter last year. The net interest margin was 3.80% for the fourth quarter, down from 3.88% for the third quarter of 2019 and 4.02% in the fourth quarter of 2018. Yield on interest earning assets decreased by six basis points, to 4.67% in the fourth quarter of 2019 from 4.73% in the fourth quarter of 2018. The cost of interest-bearing liabilities increased by 20 basis points in the fourth quarter of 2019 to 1.15% from 0.95% in the fourth quarter of 2018.

“Our solid loan and core deposit growth helped generate an increase in net interest income despite margin compression,” said Hileman. “Annualized growth rates of 17% for loans and 16% for deposits in the fourth quarter provided the momentum we like to see as we begin a new year.”

Non-interest income up from fourth quarter 2018

First Defiance’s non-interest income for the fourth quarter of 2019 was $11.8 million compared to $8.4 million in the fourth quarter of 2018. Results for the fourth quarter of 2019 included a $324,000 increase in deferred compensation plan assets compared to a $690,000 decrease for the same period in 2018 due to stock market performance.

Mortgage banking income was $2.7 million in the fourth quarter of 2019, up from $1.4 million in the fourth quarter of 2018 due to higher volumes. Mortgage originations totaled $106.5 million in the fourth quarter of 2019 compared to $60.9 million in the same quarter last year. As a result of the higher volumes, gains from the sale of mortgage loans increased in the fourth quarter of 2019 to $2.0 million from $758,000 in the fourth quarter of 2018. Mortgage loan servicing revenue was $978,000 in the fourth quarter of 2019, consistent with $978,000 in the fourth quarter of 2018. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $223,000 in the fourth quarter of 2019 compared to a positive adjustment of $41,000 in the fourth quarter of 2018.

For the fourth quarter of 2019, service fees and other charges were $3.7 million, up from $3.3 million in the fourth quarter of 2018; and commissions from the sale of insurance products were $3.1 million, consistent with $3.1 million in the fourth quarter of 2018. Trust income was $746,000 in the fourth quarter of 2019, up from $503,000 in the fourth quarter of 2018. The fourth quarter of 2019 included gains of $13,000 from the sale of securities compared to gains of $97,000 in the fourth quarter of 2018.

Other non-interest income for the fourth quarter of 2019 was a positive $1.1 million compared to a negative $494,000 for the fourth quarter of 2018, primarily due to the change in deferred compensation plan assets described above. Excluding the impact of this item, other non-interest income for fourth quarter 2019 would be $767,000 compared to $196,000 in the fourth quarter of 2018.

Non-interest expenses up from fourth quarter 2018

Non-interest expense totaled $24.8 million in the fourth quarter of 2019 compared to $21.2 million in the fourth quarter of 2018. The comparison includes a one-time $806,000 reduction in expenses from the accounting correction to the company’s deferred compensation plan in the fourth quarter of 2018. Additionally, the fourth quarter of 2019 included a $321,000 increase in deferred compensation plan expense compared to a $1.3 million decrease in the fourth quarter of 2018 due to stock market performance in the relative periods.

Compensation and benefits in the fourth quarter of 2019 was $14.6 million, an increase of $1.1 million compared to the fourth quarter of 2018. Occupancy expense was $2.3 million in the fourth quarter of 2019, down $113,000 from the fourth quarter of 2018. Data processing cost was $1.8 million in the fourth quarter of 2019, down $443,000 from the fourth quarter of 2018. In addition, acquisition-related costs totaled $882,000 in the fourth quarter of 2019 compared to none in the prior year.

Other non-interest expense was $4.2 million in the fourth quarter of 2019 compared to $2.0 million (or $2.8 million excluding the benefit from the deferred compensation accounting correction) in the fourth quarter of 2018. Additionally, results for the fourth quarter of 2018 included a $1,052,000 decrease in deferred compensation plan liabilities compared to a $321,000 increase for the same period in 2019 due to stock market performance. Excluding the impact of these items, other non-interest expense for fourth quarter 2019 would be $3.9 million compared to $3.9 million in the fourth quarter of 2018.

Credit quality

Non-performing loans totaled $13.5 million at December 31, 2019, a decrease from $19.0 million at December 31, 2018. In addition, real estate owned totaled $100,000 at December 31, 2019, down from $1.2 million at December 31, 2018. Accruing troubled debt restructured loans were $8.4 million at December 31, 2019, a decrease from $11.6 million at December 31, 2018.

The fourth quarter of 2019 results include net charge-offs of $91,000 and a provision for loan losses of $1.1 million compared with net recoveries of $220,000 and a provision of $472,000 for the same period in 2018. The allowance for loan loss as a percentage of total loans was 1.12% at December 31, 2019, compared with 1.13% at September 30, 2019, and 1.12% at December 31, 2018.

“Our non-performing assets to total assets at year-end improved significantly from the prior year to 0.39%, and net recoveries were $7,000 in 2019,” said Hileman. “A heightened, strategic focus in asset quality played a significant role in this achievement. A continuation of these efforts in 2020 is anticipated to lead to additional reductions in our non-performing assets.”

Annual results

Net income for the full year ended on December 31, 2019, totaled $49.4 million, or $2.48 per diluted common share, compared to $46.2 million, or $2.26 per diluted common share for 2018. The year 2018 included a benefit of $806,000 from an accounting correction, which had an after-tax impact of $636,000 or $0.03 per diluted share. The year 2019 included acquisition-related expenses, which had an after-tax impact of $1.1 million or $0.05 per diluted share.

Net interest income for 2019 totaled $115.6 million, compared with $108.3 million for 2018. Average interest-earning assets increased to $2.97 billion for 2019, compared to $2.74 billion in 2018. Net interest margin for 2019 was 3.93%, down five basis points from the 3.98% margin for 2018. The provision for loan losses for 2019 was $2.9 million, compared to $1.2 million for 2018.

Non-interest income for the year 2019 was $45.0 million, compared to $39.2 million in 2018. Service fees and other charges were $14.0 million for 2019, up from $13.1 million in 2018. Mortgage banking income increased to $9.5 million for 2019 from $7.1 million in 2018. Gains on the sale of non-mortgage loans were $226,000 for 2019, compared to $317,000 in 2018. Insurance commissions were $14.1 million for 2019, consistent with $14.1 million in 2018. Non-interest income for 2019 included $24,000 of net securities gains compared to $173,000 of net securities gains for 2018.

Non-interest expense increased to $97.1 million in 2019 from $89.4 million in 2018. Included in non-interest expense for 2019 were acquisition-related expenses of $1.4 million. Compensation and benefits expense was $57.2 million for 2019 compared to $52.6 million for 2018. Expenses also included decreases in data processing expense of $500,000 and FDIC insurance premiums of $537,000, partly offset by an increase in occupancy expense of $386,000. Other non-interest expense was $17.6 million in 2019 compared to $15.2 million (or $16.0 million excluding the benefit from the deferred compensation accounting correction) in 2018.

Total assets at $3.47 billion

Total assets at December 31, 2019, were $3.47 billion compared to $3.18 billion at December 31, 2018. Net loans receivable (excluding loans held for sale) were $2.75 billion at December 31, 2019, compared to $2.51 billion at December 31, 2018. Also, at December 31, 2019, goodwill and other intangible assets totaled $103.8 million compared to $103.0 million at December 31, 2018.

Total deposits at December 31, 2019, were $2.87 billion compared with $2.62 billion at December 31, 2018. Total stockholders’ equity was $426.2 million at December 31, 2019, compared to $399.6 million at December 31, 2018. The change in stockholders’ equity from year-end 2018 was impacted by the company’s repurchase of 515,000 shares of its common stock for $15.1 million during the first quarter of 2019. During the quarter ended June 30, 2019, the company announced a new 500,000 share repurchase plan authorization with all such shares available for repurchase as of December 31, 2019.

Dividend to be paid February 21

The Board of Directors declared a quarterly cash dividend of $0.22 per common share payable February 21, 2020, to shareholders of record at the close of business on February 14, 2020. The dividend represents an annual dividend of 2.82% based on the First Defiance common stock closing price on January 17, 2020. First Defiance has approximately 19,730,000 common shares outstanding.

Conference call

First Defiance will host a conference call at 11:00 a.m. ET on Tuesday, January 21, 2020, to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-444-1726. A live webcast may also be accessed at https://services.choruscall.com/links/fdef200121.html.

The replay of the conference call webcast will be available at www.fdef.com until 9:00 a.m. ET on Wednesday, January 20, 2021.

First Defiance Financial Corp.

First Defiance Financial Corp. (NASDAQ:FDEF), headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance Group. First Federal Bank operates 44 full-service branches in northwest and central Ohio, southeast Michigan and northeast Indiana and a loan production office in Ann Arbor, Michigan. First Insurance Group is a full-service insurance agency with nine offices throughout northwest Ohio.

For more information, visit the company’s website at www.fdef.com.

Financial Statements and Highlights Follow

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: changes in economic conditions, the nature, extent and timing of governmental actions and reforms, future movements of interest rates, the production levels of mortgage loan generation, the ability to continue to grow loans and deposits, the ability to benefit from a changing interest rate environment, the ability to sustain credit quality ratios at current or improved levels, the ability to sell real estate owned properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability 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 First Defiance 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 our Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the year ended December 31, 2018. One or more of these factors have affected or could in the future affect First Defiance’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 First Defiance or any other persons, that our objectives and plans will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of First Defiance. We assume no obligation to update any forward-looking statements. As required by U.S. GAAP, First Defiance will evaluate the impact of subsequent events through the issuance date of its December 31, 2019 consolidated financial statements as part of its Annual Report on Form 10-K to be filed with the SEC. Accordingly, subsequent events could occur that may cause First Defiance to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

Consolidated Balance Sheets (Unaudited)

First Defiance Financial Corp.


(in thousands)	December 31, 2019			December 31, 2018
*Assets*
Cash and cash equivalents
Cash and amounts due from depository institutions	$	46,254		$	55,962
Interest-bearing deposits		85,000			43,000

		131,254			98,962
Securities
Available-for sale, carried at fair value		283,448			294,076
Held-to-maturity, carried at amortized cost		—			526

		283,448			294,602
Loans		2,777,564			2,540,039
Allowance for loan losses		(31,243	)		(28,331	)

Loans, net		2,746,321			2,511,708
Loans held for sale		18,008			6,613
Mortgage servicing rights		10,267			10,119
Accrued interest receivable		10,244			9,641
Federal Home Loan Bank stock		11,915			14,217
Bank Owned Life Insurance		75,544			67,660
Office properties and equipment		39,563			40,670
Real estate and other assets held for sale		100			1,205
Goodwill		100,069			98,569
Core deposit and other intangibles		3,772			4,391
Other assets		38,487			23,365

*Total Assets*	$	3,468,992		$	3,181,722

*Liabilities and Stockholders’ Equity*
Non-interest-bearing deposits	$	630,359		$	607,198
Interest-bearing deposits		2,239,966			2,013,684

Total deposits		2,870,325			2,620,882
Advances from Federal Home Loan Bank		85,063			85,189
Notes payable and other interest-bearing liabilities		2,999			5,741
Subordinated debentures		36,083			36,083
Advance payments by borrowers for tax and insurance		5,491			3,652
Deferred taxes		1,326			264
Other liabilities		41,538			30,322

Total Liabilities		3,042,825			2,782,133
Stockholders’ Equity
Preferred stock		—			—
Common stock, net		127			127
Additional paid-in-capital		161,955			161,593
Accumulated other comprehensive income (loss)		4,595			(2,148	)
Retained earnings		329,934			295,588
Treasury stock, at cost		(70,444	)		(55,571	)

Total stockholders’ equity		426,167			399,589

*Total Liabilities and Stockholders’ Equity*	$	3,468,992		$	3,181,722

Consolidated Statements of Income (Unaudited)

First Defiance Financial Corp.


	Three Months Ended December 31,					Twelve Months Ended December 31,
(in thousands, except per share amounts)	2019		2018			2019		2018
Interest Income:
Loans	$	33,695	$	30,841		$	130,853	$	114,398
Investment securities		1,889		2,167			8,183		8,134
Interest-bearing deposits		537		325			1,395		1,270
FHLB stock dividends		120		217			653		915

Total interest income		36,241		33,550			141,084		124,717
Interest Expense:
Deposits		5,999		4,389			22,613		13,897
FHLB advances and other		431		318			1,443		1,261
Subordinated debentures		311		347			1,354		1,281
Notes Payable		2		4			25		23

Total interest expense		6,743		5,058			25,435		16,462

Net interest income		29,498		28,492			115,649		108,255
Provision for loan losses		1,084		472			2,905		1,176

Net interest income after provision for loan losses		28,414		28,020			112,744		107,079
Non-interest Income:
Service fees and other charges		3,693		3,338			14,028		13,100
Mortgage banking income		2,683		1,445			9,483		7,077
Gain on sale of non-mortgage loans		11		17			226		317
Gain on sale of securities		13		97			24		173
Insurance commissions		3,123		3,061			14,118		14,085
Trust income		746		503			2,255		2,091
Income from Bank Owned Life Insurance		456		402			2,158		1,767
Other non-interest income		1,091		(494	)		2,664		598

Total Non-interest Income		11,816		8,369			44,956		39,208
Non-interest Expense:
Compensation and benefits		14,631		13,550			57,175		52,566
Occupancy		2,277		2,390			9,027		8,641
FDIC insurance premium		208		204			484		1,021
Financial institutions tax		526		525			2,193		2,118
Data processing		1,763		2,206			8,055		8,555
One time acquisition related charges		882		—			1,422		—
Amortization of intangibles		281		314			1,120		1,312
Other non-interest expense		4,192		2,021			17,587		15,199

Total Non-interest Expense		24,760		21,210			97,063		89,412

Income before income taxes		15,470		15,179			60,637		56,875
Income taxes		2,953		3,082			11,267		10,626

Net Income	$	12,517	$	12,097		$	49,370	$	46,249

Earnings per common share:
Basic	$	0.63	$	0.60		$	2.49	$	2.27
Diluted	$	0.63	$	0.59		$	2.48	$	2.26
Average Shares Outstanding:
Basic		19,792		20,313			19,844		20,358
Diluted		19,895		20,404			19,931		20,449

Financial Summary and Comparison (Unaudited)

First Defiance Financial Corp.


	Three Months Ended December 31,									Twelve Months Ended December 31,
(dollars in thousands, except per share data)	2019			2018			% change			2019			2018			% change
*Summary of Operations*
Tax-equivalent interest income (2)	$	36,473		$	33,808			7.9	%	$	142,051		$	125,721			13.0	%
Interest expense		6,743			5,058			33.3			25,435			16,462			54.5
Tax-equivalent net interest income (2)		29,730			28,750			3.4			116,616			109,259			6.7
Provision for loan losses		1,084			472			129.7			2,905			1,176			147.0
Tax-equivalent NII after provision for loan loss (2)		28,646			28,278			1.3			113,711			108,083			5.2
Investment securities gains		13			97			(86.6	)		24			173			(86.1	)
Non-interest income (excluding securities gains/losses)		11,803			8,272			42.7			44,932			39,035			15.1
Non-interest expense		24,760			21,210			16.7			97,063			89,412			8.6
Income taxes		2,953			3,082			(4.2	)		11,267			10,626			6.0
Net Income		12,517			12,097			3.5			49,370			46,249			6.7
Tax equivalent adjustment (2)		232			258			(10.1	)		967			1,004			(3.7	)
*At Period End*
Assets		3,468,992			3,181,722			9.0
Earning assets		3,175,935			2,898,471			9.6
Loans		2,777,564			2,540,039			9.4
Allowance for loan losses		31,243			28,331			10.3
Deposits		2,870,325			2,620,882			9.5
Stockholders’ equity		426,167			399,589			6.7
*Average Balances*
Assets		3,425,097			3,138,202			9.1			3,283,780			3,048,525			7.7
Earning assets		3,107,224			2,831,866			9.7			2,969,662			2,741,215			8.3
Loans		2,688,519			2,474,221			8.7			2,597,864			2,382,941			9.0
Deposits and interest-bearing liabilities		2,954,049			2,705,736			9.2			2,830,244			2,626,004			7.8
Deposits		2,830,043			2,594,635			9.1			2,717,224			2,507,553			8.4
Stockholders’ equity		420,352			392,701			7.0			406,286			384,305			5.7
Stockholders’ equity / assets		12.27	%		12.51	%		(1.9	)		12.37	%		12.61	%		(1.9	)
*Per Common Share Data*
Net Income
Basic	$	0.63		$	0.60			5.0		$	2.49		$	2.27			9.7
Diluted		0.63			0.59			6.8			2.48			2.26			9.7
Dividends		0.22			0.17			29.4			0.79			0.64			23.4
Market Value:
High	$	32.39		$	31.09			4.2		$	32.39		$	31.09			4.2
Low		27.77			22.78			21.9			24.12			22.78			5.9
Close		31.32			24.51			27.8			31.32			24.51			27.8
Common Book Value		21.60			19.81			9.0			21.60			19.81			9.0
Tangible Common Book Value (1)		16.34			14.71			11.1			16.34			14.71			11.1
Shares outstanding, end of period (000)		19,730			20,171			(2.2	)		19,730			20,171			(2.2	)
Performance Ratios (annualized)
Tax-equivalent net interest margin (2)		3.80	%		4.02	%		(5.4	)		3.93	%		3.98	%		(1.2	)
Return on average assets		1.45	%		1.53	%		(5.2	)		1.50	%		1.52	%		(0.9	)
Return on average equity		11.81	%		12.22	%		(3.3	)		12.15	%		12.03	%		1.0
Efficiency ratio (3)		59.62	%		57.29	%		4.1			60.08	%		60.29	%		(0.3	)
Effective tax rate		19.09	%		20.30	%		(6.0	)		18.58	%		18.68	%		(0.5	)
Dividend payout ratio (basic)		34.92	%		28.33	%		23.2			31.73	%		28.19	%		12.5

(1)	Tangible common book value = total stockholders’ equity less the sum of goodwill, core deposit and other intangibles, and preferred stock divided by shares outstanding at the end of the period.

(2)	Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 21%

(3)	Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains or losses, 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 December 31,						Twelve Months Ended December 31,
(dollars in thousands)	2019			2018			2019			2018
Gain from sale of mortgage loans	$	2,035		$	758		$	7,706		$	4,502
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue		978			978			3,820			3,784
Amortization of mortgage servicing rights		(553	)		(332	)		(1,809	)		(1,341	)
Mortgage servicing rights valuation adjustments		223			41			(234	)		132

		648			687			1,777			2,575

Total revenue from sale and servicing of mortgage loans	$	2,683		$	1,445		$	9,483		$	7,077

Yield Analysis

First Defiance Financial Corp.


	Three Months Ended December 31, (dollars in thousands)
	2019							2018
	Average Balance		Interest(1)		Yield Rate(2)			Average Balance		Interest(1)		Yield Rate(2)
Interest-earning assets:
Loans receivable	$	2,688,519	$	33,716		4.98	%	$	2,474,221	$	30,867		4.95	%
Securities		287,172		2,100		2.96	% (3)		289,233		2,399		3.22	% (3)
Interest Bearing Deposits		119,618		537		1.78	%		54,195		325		2.38	%
FHLB stock		11,915		120		4.00	%		14,217		217		6.06	%

Total interest-earning assets		3,107,224		36,473		4.67	%		2,831,866		33,808		4.73	%
Non-interest-earning assets		317,873							306,336

Total assets	$	3,425,097						$	3,138,202

Deposits and Interest-bearing liabilities:
Interest bearing deposits	$	2,205,673	$	5,999		1.08	%	$	2,002,541	$	4,389		0.87	%
FHLB advances and other		85,291		431		2.00	%		69,782		318		1.81	%
Subordinated debentures		36,083		311		3.42	%		36,083		347		3.82	%
Notes payable		2,632		2		0.30	%		5,236		4		0.30	%

Total interest-bearing liabilities		2,329,679		6,743		1.15	%		2,113,642		5,058		0.95	%
Non-interest bearing deposits		624,370		—		—			592,094		—		—

Total including non-interest-bearing demand deposits		2,954,049		6,743		0.91	%		2,705,736		5,058		0.74	%
Other non-interest-bearing liabilities		50,696							39,765

Total liabilities		3,004,745							2,745,501
Stockholders’ equity		420,352							392,701

Total liabilities and stockholders’ equity	$	3,425,097						$	3,138,202

Net interest income; interest rate spread			$	29,730		3.52	%			$	28,750		3.78	%

Net interest margin (4)						3.80	%						4.02	%

Average interest-earning assets to average interest bearing liabilities						133	%						134	%


	Twelve Months Ended December 31,
	2019							2018
	Average Balance		Interest(1)		Yield Rate			Average Balance		Interest(1)		Yield Rate
Interest-earning assets:
Loans receivable	$	2,597,864	$	130,943		5.04	%	$	2,382,941	$	114,500		4.80	%
Securities		294,027		9,060		3.08	% (3)		279,867		9,036		3.23	% (3)
Interest Bearing Deposits		65,424		1,395		2.13	%		63,261		1,270		2.01	%
FHLB stock		12,347		653		5.29	%		15,146		915		6.04	%

Total interest-earning assets		2,969,662		142,051		4.78	%		2,741,215		125,721		4.59	%
Non-interest-earning assets		314,118							307,310

Total assets	$	3,283,780						$	3,048,525

Deposits and Interest-bearing liabilities:
Interest bearing deposits	$	2,122,439	$	22,613		1.07	%	$	1,945,114	$	13,897		0.71	%
FHLB advances and other		73,013		1,443		1.98	%		73,421		1,261		1.72	%
Subordinated debentures		36,083		1,354		3.75	%		36,083		1,281		3.55	%
Notes payable		3,924		25		0.64	%		8,947		23		0.26	%

Total interest-bearing liabilities		2,235,459		25,435		1.14	%		2,063,565		16,462		0.80	%
Non-interest bearing deposits		594,785		—		—			562,439		—		—

Total including non-interest-bearing demand deposits		2,830,244		25,435		0.90	%		2,626,004		16,462		0.63	%
Other non-interest-bearing liabilities		47,250							38,216

Total liabilities		2,877,494							2,664,220
Stockholders’ equity		406,286							384,305

Total liabilities and stockholders’ equity	$	3,283,780						$	3,048,525

Net interest income; interest rate spread			$	116,616		3.64	%			$	109,259		3.79	%

Net interest margin (4)						3.93	%						3.98	%

Average interest-earning assets to average interest bearing liabilities						133	%						133	%

(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 21%.

(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 tax equivalent net interest income divided by average interest-earning assets.

Selected Quarterly Information

First Defiance Financial Corp.


(dollars in thousands, except per share data)	4th Qtr 2019			3rd Qtr 2019			2nd Qtr 2019			1st Qtr 2019			4th Qtr 2018
*Summary of Operations*
Tax-equivalent interest income (1)	$	36,473		$	35,922		$	35,490		$	34,166		$	33,808
Interest expense		6,743			6,791			6,252			5,649			5,058
Tax-equivalent net interest income (1)		29,730			29,131			29,238			28,517			28,750
Provision for loan losses		1,084			1,327			282			212			472
Tax-equivalent NII after provision for loan losses (1)		28,646			27,804			28,956			28,305			28,278
Investment securities gains, net of impairment		13			11			—			—			97
Non-interest income (excluding securities gains/losses)		11,803			11,831			10,486			10,813			8,272
Non-interest expense		24,760			23,203			24,235			24,866			21,210
Income taxes		2,953			3,033			2,759			2,523			3,082
Net income		12,517			13,171			12,199			11,482			12,097
Tax equivalent adjustment (1)		232			239			249			247			258
*At Period End*
Total assets	$	3,468,992		$	3,350,724		$	3,277,552		$	3,221,249		$	3,181,722
Earning assets		3,175,935			3,045,659			2,980,243			2,934,860			2,898,471
Loans		2,777,564			2,665,300			2,624,219			2,548,968			2,540,039
Allowance for loan losses		31,243			30,250			28,934			28,164			28,331
Deposits		2,870,325			2,760,615			2,680,637			2,685,792			2,620,882
Stockholders’ equity		426,167			418,046			407,216			395,789			399,589
Stockholders’ equity / assets		12.29	%		12.48	%		12.42	%		12.29	%		12.56	%
Goodwill		100,069			100,069			98,569			98,569			98,569
*Average Balances*
Total assets	$	3,425,097		$	3,303,013		$	3,223,997		$	3,183,012		$	3,138,202
Earning assets		3,107,224			2,985,498			2,914,587			2,871,340			2,831,866
Loans		2,688,519			2,624,314			2,561,341			2,517,283			2,474,221
Deposits and interest-bearing liabilities		2,954,049			2,843,079			2,781,216			2,742,626			2,705,736
Deposits		2,830,043			2,718,632			2,678,060			2,642,158			2,594,635
Stockholders’ equity		420,352			411,041			398,612			395,138			392,701
Stockholders’ equity / assets		12.27	%		12.44	%		12.36	%		12.41	%		12.51	%
*Per Common Share Data*
Net Income:
Basic	$	0.63		$	0.67		$	0.62		$	0.57		$	0.60
Diluted		0.63			0.66			0.61			0.57			0.59
Dividends		0.22			0.19			0.19			0.19			0.17
Market Value:
High	$	32.39		$	29.44		$	30.44		$	31.30		$	31.09
Low		27.77			25.50			26.59			24.12			22.78
Close		31.32			28.97			28.57			28.74			24.51
Common Book Value		21.60			21.19			20.65			20.08			19.81
Shares outstanding, end of period (in thousands)		19,730			19,729			19,723			19,713			20,171
*Performance Ratios (annualized)*
Tax-equivalent net interest margin (1)		3.80	%		3.88	%		4.03	%		4.03	%		4.02	%
Return on average assets		1.45	%		1.58	%		1.52	%		1.46	%		1.53	%
Return on average equity		11.81	%		12.71	%		12.28	%		11.78	%		12.22	%
Efficiency ratio (2)		59.62	%		56.65	%		61.01	%		63.22	%		57.29	%
Effective tax rate		19.09	%		18.72	%		18.44	%		18.01	%		20.30	%
Common dividend payout ratio (basic)		34.92	%		28.36	%		30.65	%		33.33	%		28.33	%

(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 21%.

(2)	Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains, net.

Selected Quarterly Information

First Defiance Financial Corp.


(dollars in thousands, except per share data)	4th Qtr 2019			3rd Qtr 2019			2nd Qtr 2019			1st Qtr 2019			4th Qtr 2018
*Loan Portfolio Composition*
One to four family residential real estate	$	324,773		$	330,369		$	322,123		$	321,644		$	322,686
Construction		305,305			308,061			335,847			304,241			265,772
Commercial real estate		1,506,026			1,430,919			1,411,463			1,394,500			1,404,810
Commercial		578,071			537,806			530,528			509,627			509,577
Consumer finance		37,649			36,644			35,350			34,262			34,405
Home equity and improvement		122,864			123,871			125,860			124,450			128,152

Total loans		2,874,688			2,767,670			2,761,171			2,688,724			2,665,402
Less:
Undisbursed loan funds		94,865			100,260			134,794			137,742			123,293
Deferred loan origination fees		2,259			2,110			2,158			2,014			2,070
Allowance for loan loss		31,243			30,250			28,934			28,164			28,331

Net Loans	$	2,746,321		$	2,635,050		$	2,595,285		$	2,520,804		$	2,511,708

*Allowance for loan loss activity*
Beginning allowance	$	30,250		$	28,934		$	28,164		$	28,331		$	27,639
Provision for loan losses		1,084			1,327			282			212			472
Credit loss charge-offs:
One to four family residential real estate		258			74			11			172			31
Commercial real estate		—			—			15			—			30
Commercial		436			25			13			187			15
Consumer finance		34			80			33			142			105
Home equity and improvement		136			12			64			33			75

Total charge-offs		864			191			136			534			256
Total recoveries		773			180			624			155			476

Net charge-offs (recoveries)		91			11			(488	)		379			(220	)

Ending allowance	$	31,243		$	30,250		$	28,934		$	28,164		$	28,331

*Credit Quality*
Total non-performing loans (1)	$	13,459		$	14,677		$	15,334		$	17,645		$	19,016
Real estate owned (REO)		100			—			—			941			1,205

Total non-performing assets (2)	$	13,559		$	14,677		$	15,334		$	18,586		$	20,221

Net charge-offs (recoveries)		91			11			(488	)		379			(220	)
Restructured loans, accruing (3)		8,427			10,334			10,308			11,908			11,573
Allowance for loan losses / loans		1.12	%		1.13	%		1.10	%		1.10	%		1.12	%
Allowance for loan losses / non-performing assets		230.42	%		206.10	%		188.69	%		151.53	%		140.11	%
Allowance for loan losses / non-performing loans		232.13	%		206.10	%		188.69	%		159.61	%		148.99	%
Non-performing assets / loans plus REO		0.49	%		0.55	%		0.58	%		0.73	%		0.80	%
Non-performing assets / total assets		0.39	%		0.44	%		0.47	%		0.58	%		0.64	%
Net charge-offs / average loans (annualized)		0.01	%		0.00	%		-0.08	%		0.06	%		-0.04	%
*Deposit Balances*
Non-interest-bearing demand deposits	$	630,359		$	604,129		$	584,735		$	586,033		$	607,198
Interest-bearing demand deposits and money market		1,198,012			1,124,208			1,088,694			1,107,511			1,040,471
Savings deposits		303,166			294,594			304,051			300,244			292,829
Retail time deposits less than $250,000		631,253			634,737			610,345			601,012			591,822
Retail time deposits greater than $250,000		107,535			102,947			92,812			90,992			88,562

Total deposits	$	2,870,325		$	2,760,615		$	2,680,637		$	2,685,792		$	2,620,882

(1)	Non-performing loans consist of non-accrual loans.

(2)	Non-performing assets are non-performing loans plus real estate and other assets acquired by foreclosure or deed-in-lieu thereof.

(3)	Accruing restructured loans are loans with known credit problems that are not contractually past due and therefore are not included in non-performing loans.

Loan Delinquency Information

First Defiance Financial Corp.


(dollars in thousands)	Total Balance		Current		30 to 89 days past due		Non Accrual Loans
December 31, 2019
One to four family residential real estate	$	324,773	$	321,058	$	1,298	$	2,417
Construction		305,305		305,305		—		—
Commercial real estate		1,506,026		1,497,845		546		7,635
Commercial		578,071		574,593		519		2,959
Consumer finance		37,649		37,444		205		—
Home equity and improvement		122,864		121,211		1,205		448

Total loans	$	2,874,688	$	2,857,456	$	3,773	$	13,459

September 30, 2019
One to four family residential real estate	$	330,369	$	325,573	$	1,787	$	3,009
Construction		308,061		308,061		—		—
Commercial real estate		1,430,919		1,414,694		8,012		8,213
Commercial		537,806		534,321		516		2,969
Consumer finance		36,644		36,413		231		—
Home equity and improvement		123,871		122,103		1,282		486

Total loans	$	2,767,670	$	2,741,165	$	11,828	$	14,677

December 31, 2018
One to four family residential real estate	$	322,686	$	317,740	$	1,306	$	3,640
Construction		265,772		265,772		—		—
Commercial real estate		1,404,810		1,394,211		242		10,357
Commercial		509,577		504,884		193		4,500
Consumer finance		34,405		34,079		200		126
Home equity and improvement		128,152		126,188		1,571		393

Total loans	$	2,665,402	$	2,642,874	$	3,512	$	19,016

Exhibit 99.2


		Contacts:		*NEWS RELEASE* Donald P. Hileman President and CEO First Defiance Financial Corp. (419) 782-5104 dhileman@first-fed.com

				Gary M. Small President and CEO United Community Financial Corp. (330) 742-0472 gsmall@homesavings.com

For Immediate Release

FIRST DEFIANCE FINANCIAL CORP. RECEIVES REGULATORY

APPROVAL FOR UNITED COMMUNITY FINANCIAL CORP. MERGER

DEFIANCE and YOUNGSTOWN, OHIO (January 20, 2020) – First Defiance Financial Corp. (Nasdaq: FDEF) (“First Defiance”), holding company of First Federal Bank of the Midwest (“First Federal Bank”), and United Community Financial Corp. (Nasdaq: UCFC) (“United Community”), holding company of Home Savings Bank (“Home Savings”), jointly announced today that approval has been received from the Federal Reserve Bank, the Federal Deposit Insurance Corp. and the Ohio Division of Financial Institutions (collectively, the “Regulatory Authorities”) for the merger of United Community with and into First Defiance, followed by the merger of Home Savings with and into First Federal Bank.

Immediately prior to the merger, First Defiance will convert from a Unitary Thrift Holding Company to a Bank Holding Company, and it has elected Financial Holding Company status, and First Federal Bank will convert from a Federal Savings Association to an Ohio-chartered commercial bank.

“We are pleased to have received all necessary shareholder approvals in mid-December and now to have received all required approvals from the Regulatory Authorities. We are progressing as planned, and we anticipate to close the transaction at the end of January,” stated Donald P. Hileman, President and CEO of First Defiance. “We are excited to bring together two organizations as a premier community bank with enhanced products, services and technology while honoring our commitment to superior customer service, personalized financial solutions and unwavering community support.”

First Defiance’s Board of Directors approved the selection of directors that will sit on the combined company’s board following the completion of the merger. The new board will consist of 13 members including John L. Bookmyer, current First Defiance Chairman, serving as Chairman of the Board until succession of Donald Hileman to Executive Chairman when he relinquishes his CEO role. John Bookmyer will serve on the board until he stands for reelection at the 2022 Annual Meeting of Shareholders. Richard J. Schiraldi, current United Community Chairman, will serve as Vice Chairman of the Board until he stands for reelection at the 2020 Annual Meeting of Shareholders. In addition to Bookmyer and Schiraldi, there will be 6 directors from First Defiance and 5 directors from United Community:

Current directors from United Community that will serve on the Board following the merger:

•

Marty E. Adams, who will serve until he stands for reelection at the 2021 Annual Meeting of Shareholders;

•

Zahid Afzal, who will serve until he stands for reelection at the 2022 Annual Meeting of Shareholders;

•

Louis M. Altman, who will serve until he stands for reelection at the 2022 Annual Meeting of Shareholders;

•

Lee Burdman, who will serve until he stands for reelection at the 2020 Annual Meeting of Shareholders;

•

Gary M. Small, who will serve until he stands for reelection at the 2021 Annual Meeting of Shareholders.

Current directors from First Defiance that will serve on the Board following the merger:

•

Terri A. Bettinger, who will serve until she stands for reelection at the 2022 Annual Meeting of Shareholders;

•

Donald P. Hileman, who will serve until he stands for reelection at the 2021 Annual Meeting of Shareholders;

•

Jean A. Hubbard, who will serve until she stands for reelection at the 2020 Annual Meeting of Shareholders;

•

Charles D. Niehaus, who will serve until he stands for reelection at the 2020 Annual Meeting of Shareholders;

•

Mark A. Robison, who will serve until he stands for reelection at the 2020 Annual Meeting of Shareholders;

•

Samuel S. Strausbaugh, who will serve until he stands for reelection at the 2021 Annual Meeting of Shareholders.

The transaction was announced on September 9, 2019, and is expected to close on January 31, 2020, pending the satisfaction of all closing considerations. Customer account conversion is planned for early third quarter 2020.

About First Defiance Financial Corp.

First Defiance Financial Corp. (Nasdaq:FDEF), headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance Group. First Federal Bank operates 44 full-service branches in northwest and central Ohio, southeast Michigan and northeast Indiana and a loan production office in Ann Arbor, Michigan. First Insurance Group is a full-service insurance agency with nine offices throughout northwest Ohio. For more information, visit the company’s website at www.fdef.com.

About United Community Financial Corp.

United Community Financial Corp. (Nasdaq: UCFC), headquartered in Youngstown, Ohio, is the holding company for Home Savings Bank and HSB Insurance, LLC, commonly referred to as James & Sons. Home Savings Bank, founded in 1889, is a wholly owned subsidiary of United Community, offering a full line of commercial, wealth management and consumer banking products and services with 33 retail banking offices (32 in Ohio and one in Pennsylvania). Home Savings also has residential mortgage loan centers servicing Ohio, West Virginia, western Pennsylvania, northern Kentucky, and eastern Indiana. Additional information about the United Community, including its products, services and banking locations is available at www.homesavings.com and ir.ucfconline.com.