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Published: Tuesday, 7/22/2008

First Defiance posts decline, boosts loan-loss provision

DEFIANCE - Stung by loan problems, First Defiance Financial Corp. yesterday reported a 24 percent drop in profit to $2.7 million, or 34 cents a share, in the second quarter.

The banking company had a profit of $3.6 million, or 50 cents a share, for the same period a year ago.

Its net interest income, a key revenue source, climbed 34 percent to $16.2 million in the latest quarter from $12.1 million a year ago.

Its provision for loan losses soared nearly fivefold to $2.8 million, from $580,000 a year earlier, primarily because of commercial loans.

The latest period included a $752,000 expense related to losses associated with a former First Defiance investment adviser. Some of the money could be recovered, the firm said, but a claim to the bank's fidelity bond was denied by the insurance carrier.

William Small, company chief executive, said in a statement, "The current credit environment will continue to present major challenges to the banking industry for the foreseeable future and we will be affected along with everyone else."

The company's acquisition this year of Pavilion Bancorp in Adrian helped boost its assets to $1.93 billion from $1.61 billion at the end of last year, and its deposits were $1.43 billion, up from $1.22 billion at the end of last year.

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