For the nine month period ended September 30, 2008, First Defiance earned$6.5 million or $0.83 per diluted share compared to $10.3 million or $1.44 perdiluted share for the nine month period ended September 30, 2007. The 2008nine month results included $1.0 million of acquisition-related chargesassociated with the March 14, 2008 acquisition of Pavilion Bancorp of Adrian,Michigan (Pavilion) and its subsidiary the Bank of Lenawee. Excluding theafter-tax impact of those charges, First Defiance had earnings of $7.1million, or $0.91 per diluted share for the nine-months ended September 30,2008.

Loan Loss Provision, Investment Portfolio Write-Downs Lead to LowerResults for Quarter

The 2008 third quarter results include expense for provision for loanlosses of $4.9 million, compared with just $671,000 in the same period in2007. In addition, the 2008 third quarter also included approximately $2.1million of expense ($1.3 million or $0.16 per share after tax) related toimpairment of certain securities in the Company's investment portfolio thatmanagement deemed to be other-than-temporary.

"These are very difficult economic times for our country and for ourmarket area in particular," said William J. Small, Chairman, President andChief Executive Officer of First Defiance. "These challenges are reflected inour results for the quarter. From the national perspective, we recognizedOther-Than-Temporary Impairment in our investment portfolio when the federalgovernment placed Fannie Mae and Freddie Mac in conservatorship in September.We have an investment in preferred stock of those government sponsoredenterprises that cost $2 million when purchased but which declinedsubstantially in value. Those securities were written down to the September 30market value of $151,000. Also in the 2008 third quarter, we recorded aProvision for Loan Losses of $4.9 million, due primarily to the deteriorationof a number of large credits in our commercial portfolio. We recorded specificloan loss provisions on 30 credits that totaled $3.1 million and we had $1.2million of additional expense for loan charge-offs that exceeded previouslyrecorded allowance amounts."

Non-performing loans totaled $25.5 million at September 30, 2008, anincrease from $17.7 million at June 30, 2008. The September 30 balanceincluded $24.6 million of loans that are 90 days past due on that date andanother $900,000 of loans considered non-performing because of changes interms granted to distressed borrowers. In addition, First Defiance had $4.8million of Real Estate Owned at September 30, 2008. For the 2008 thirdquarter, First Defiance recorded charge-offs of $2.2 million, whichrepresented 0.55% of average loans outstanding (annualized) for the quarter.

"We've historically taken great pride in our asset quality and I stillbelieve our underwriting standards are sound," said Mr. Small. "However, wenow have situations where good customers are struggling to make theirpayments. In some cases, they're in industries that are in the thick of thecurrent downturn and in other cases health issues or other factors have causedthem to fall behind. At the same time, real estate values have declined andsome collateral-dependent loans no longer have enough collateral value tosupport the outstanding balance. We are proactively working to identify allpotential problems and mitigate our losses as much as possible. At this time,I believe we've provided a conservative level of provision expense for all ofthe problem loans that we have identified in our portfolio."

Margin Improved by 35 basis points; Service Fee Income IncreasesSignificantly

"Despite the bottom-line quarterly results, there were positivedevelopments this quarter," said Mr. Small. "Net interest margin remainsstrong at 3.81%, which was a 34 basis point improvement over last year's thirdquarter, though it was off 11 basis points from the second quarter of 2008level of 3.92%. Excluding investment securities losses due to impairment-related charges, non-interest income for the 2008 third quarter improved by11% over last year's third quarter with service fees up by more than 34%between those two periods."

Net interest margin improvement was driven by a 142 basis point decline ininterest-bearing liabilities, to 2.65% in the 2008 third quarter compared to4.07% for the same period in 2007. That decline more than offset a 96 basispoint drop in yields on interest-earning assets. The margin also improved dueto growth in interest-earning assets following the Pavilion acquisition andsubstantial growth in non-interest bearing liabilities. At September 30, 2008,non-interest bearing deposits were 11.0% of total deposits, compared to 10.0%at December 31, 2007.

"Despite the improvement over last year's third quarter, we are seeingpressure on our net interest margin," noted Mr. Small. "Our asset yields andaverage loan rates are down 12 and 13 basis points, respectively from thisyear's second quarter while our deposit costs are down just two basis points.As a result, the overall margin slipped from 3.92% to 3.81%. Customers arecurrently migrating to CDs to get yield. This flow of funding sources fromsavings and money market accounts to CDs has had a negative impact on ouroverall cost of funds. With the 50 basis point cut in the Fed Funds rate lastweek, I think we'll continue to experience downward pressure on our margin forthe balance of this year."

Investment Portfolio Matters

The majority of the Other-Than-Temporary Impairment (OTTI) recognized byFirst Defiance in the 2008 third quarter related to the write-down ofpreferred stock issued by Fannie Mae and Freddie Mac. First Defiance invested$1 million in the preferred shares of each agency in January 2008 and wrotethose investments down to $87,000 (Fannie Mae) and $64,000 (Freddie Mac) atSeptember 30, 2008. The Company also recorded $150,000 of additional OTTI onits investment in the equity notes of two Trust Preferred Collateralized DebtObligations (CDOs) in the 2008 third quarter. At September 30, 2008, thevalue of those CDOs, which had a total original cost of $1 million, had beenwritten down to $168,000.

First Defiance has other Trust Preferred CDO investments with a totaloriginal cost of $8.8 million and market values of $2.6 million at September30, 2008. The decline in value of those investments is primarily due to theoverall lack of liquidity in the CDO market as the investments continue to payprincipal and interest payments in accordance with the contractual terms ofthe securities. Management has not deemed the impairment in value of these CDOinvestments to be Other-Than-Temporary and therefore has not recognized thereduction in value of those investments in earnings.

Non-Interest Expenses Rise Due to Acquisition

Total non-interest expense increased to $15.2 million for the quarterended September 30, 2008, an increase of 23.9% from the $12.3 million of non-interest expense recognized in the 2007 third quarter. Increases across theboard are attributable to the Pavilion acquisition, which closed late in the2008 first quarter. The efficiency ratio for the 2008 third quarter was 66.8%compared to 69.2% in the third quarter of 2007.

Year-To-Date Results

For the nine month period ended September 30, 2008, net interest incometotaled $46.2 million, a $10.1 million or 27.9% increase over the first ninemonths of 2007. Average interest-earning assets increased to $1.63 billion forthe nine months ended September 30, 2008 compared to $1.38 billion in 2007,the result of the Pavilion acquisition. Net interest margin for the first ninemonths of 2008 was 3.83%, up 27 basis points from the 3.56% margin reported inthe nine month period ended September 30, 2007.

The provision for loan losses for the 2008 year-to-date period was $8.8million, compared to just $1.7 million recorded during the first nine monthsof 2007.

Non-interest income for the period ended September 30, 2008 was $16.3million compared to $16.9 million during the same period of 2007. The 2008results include securities losses of $2.6 million recognized year-to-date forOTTI charges recognized for impaired investment securities. Excluding the losson securities, most of the remaining non-interest income increase wasattributable to service fees and other charges, which were $9.8 million forthe first nine months of 2008 compared to $8.0 million during the same periodin 2007. In addition, mortgage banking income increased by $847,000 andinsurance commission income increased by $137,000 between the 2007 and 2008periods.

Non-interest expense increased to $44.2 million for the first nine monthsof 2008 from $35.9 million in 2007. Excluding one-time acquisition-relatedcharges of $1.0 million, non-interest expense increased by 20.1%. Most of thisincrease relates to ongoing costs of operating the eight branches acquired inthe Pavilion acquisition. In addition, FDIC insurance expense has increased by$691,000 due to changes in the assessment rates and full utilization ofcredits issued by the FDIC early in the 2008 first quarter. Non-interestexpense also includes $752,000 of expense associated with losses related to aformer investment advisor, which were recorded in the 2008 second quarterfollowing the denial of coverage under the Company's fidelity bond.

Total Assets at $1.92 Billion

Total assets at September 30, 2008 were $1.92 billion, compared to $1.61billion at December 31, 2007. Net loans receivable (excluding loans held forsale) were $1.57 billion at September 30, 2008 compared to $1.28 billion atDecember 31, 2007. Total deposits at September 30, 2008 were $1.44 billioncompared to $1.22 billion at December 31, 2007. Non-interest bearing depositsat September 30, 2008 were $158.1 million compared to $121.6 million atDecember 31, 2007. Total stockholders' equity was $189.7 million at September30, 2008 compared to $166.0 million at the end of 2007, with the increaseattributable to the 1,036,861 shares of First Defiance issued in the Pavilionacquisition. Also at September 30, 2008, goodwill and other intangible assetstotaled $65.6 million compared to $40.4 million at December 31, 2007. Thebalance sheet changes are primarily attributable to the Pavilion acquisition.

Impact of Recent Developments

"This is the most difficult operating environment I've experienced in my30 years in banking," said Mr. Small. "But I believe it is a time of greatopportunity for community banks like ours. We remain well capitalized withrisk-based capital that is nearly 20% more than the regulatory standard to beconsidered well capitalized. We have never been involved in the sub-primelending market, which is at the heart of the recent crisis. First Federal Bankand First Defiance are positioned to continue following the business plan thathas served us well over the years and prepares us for times like this.Needless to say, there are better environments to operate in, but we willcontinue to work with our customers and offer the best in products andservices as we look forward to better times."

Conference Call

First Defiance Financial Corp. will host a conference call at 11:00 a.m.(EDT) on Tuesday, October 21, 2008 to discuss the earnings results andbusiness 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 thefollowing Web address:http://www.talkpoint.com/viewer/starthere.asp?Pres=123058 .

The audio replay of the Internet Webcast will be available at www.fdef.comuntil Tuesday, November 4, 2008.

First Defiance Financial Corp.

First Defiance Financial Corp., headquartered in Defiance, Ohio, is theholding company for First Federal Bank of the Midwest and First Insurance &Investments. First Federal operates 36 full service branches and 47 ATMlocations in northwest Ohio, southeast Michigan and Fort Wayne, Indiana. FirstInsurance & Investments specializes in property and casualty and group healthand life insurance, with offices in Defiance and Bowling Green, Ohio.

For more information, visit the company's Web site at www.fdef.com. - Financial Statements and Highlights Follow - Safe Harbor Statement

This news release may contain certain forward-looking statements withinthe meaning of Section 27A of the Securities Act of 1933, as amended, andSection 21 B of the Securities Act of 1934, as amended, which are intended tobe safe harbors created thereby. Those statements may include, but are notlimited to, all statements regarding intent, beliefs, expectations,projections, forecasts and plans of First Defiance Financial Corp. and itsmanagement, and specifically include statements regarding: future movements ofinterest rates, the production levels of mortgage loan generation, the abilityto continue to grow loans and deposits, the ability to benefit from a changinginterest rate environment, the ability to sustain credit quality ratios atcurrent or improved levels, the ability to sell OREO properties, continuedstrength in the market area for First Federal Bank of the Midwest, and theability of the Company to grow in existing and adjacent markets. Theseforward-looking statements involve numerous risks and uncertainties, includingthose inherent in general and local banking, insurance and mortgageconditions, competitive factors specific to markets in which the Company andits subsidiaries operate, future interest rate levels, legislative andregulatory decisions or capital market conditions and other risks anduncertainties detailed from time to time in the Company's Securities andExchange Commission (SEC) filings, including the Company's Annual Report onForm 10-K for the year ended December 31, 2007. One or more of these factorshave affected or could in the future affect the Company's business andfinancial results in future periods and could cause actual results to differmaterially from plans and projections. Therefore, there can be no assurancesthat the forward-looking statements included in this news release will proveto be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information shouldnot be regarded as a representation by the Company or any other persons, thatthe objectives and plans of the Company will be achieved. All forward-lookingstatements made in this news release are based on information presentlyavailable to the management of the Company. The Company assumes no obligationto update any forward-looking statements.

Consolidated Balance Sheets First Defiance Financial Corp. (Unaudited) September 30, December 31, September 30, (in thousands) 2008 2007 2007 Assets Cash and cash equivalents Cash and amounts due from depository institutions $34,230 $53,976 $30,558 Interest-bearing deposits 358 11,577 29,379 34,588 65,553 59,937 Securities Available-for sale, carried at fair value 113,036 112,370 111,236 Held-to-maturity, carried at amortized cost 978 1,117 1,236 114,014 113,487 112,472 Loans 1,596,327 1,289,696 1,264,872 Allowance for loan losses (23,445) (13,890) (13,427) Loans, net 1,572,882 1,275,806 1,251,445 Loans held for sale 9,363 5,751 7,426 Mortgage servicing rights 9,335 5,973 5,917 Accrued interest receivable 8,672 6,755 8,102 Federal Home Loan Bank stock 21,376 18,586 18,586 Bank Owned Life Insurance 29,174 28,423 28,315 Office properties and equipment 47,379 40,545 38,287 Real estate and other assets held for sale 4,776 2,460 3,392 Goodwill 56,830 36,820 36,515 Core deposit and other intangibles 8,771 3,551 3,717 Other assets 4,866 5,694 5,835 Total Assets $1,922,026 $1,609,404 $1,579,946 Liabilities and Stockholders' Equity Non-interest-bearing deposits $158,139 $121,563 $109,128 Interest-bearing deposits 1,277,665 1,096,295 1,099,036 Total deposits 1,435,804 1,217,858 1,208,164 Advances from Federal Home Loan Bank 173,581 139,536 128,461 Notes payable and other interest- bearing liabilities 70,238 30,055 24,645 Subordinated debentures 36,083 36,083 36,083 Advance payments by borrowers for tax and insurance 496 762 430 Deferred taxes 1,469 1,306 1,292 Other liabilities 14,679 17,850 16,165 Total liabilities 1,732,350 1,443,450 1,415,240 Stockholders' Equity Preferred stock - - - Common stock, net 127 117 117 Additional paid-in-capital 140,360 112,651 112,587 Stock acquired by ESOP - (202) (202) Accumulated other comprehensive loss (4,933) (415) (699) Retained earnings 126,760 126,630 124,899 Treasury stock, at cost (72,638) (72,827) (71,996) Total stockholders' equity 189,676 165,954 164,706 Total liabilities and stockholders' equity $1,922,026 $1,609,404 $1,579,946 Consolidated Statements of Income (Unaudited) First Defiance Financial Corp. Three Months Ended Nine Months Ended (in thousands, except per September 30, September 30, share amounts) 2008 2007 2008 2007 Interest Income: Loans $24,902 $22,983 $72,220 $67,882 Investment securities 1,435 1,439 4,382 4,290 Interest-bearing deposits 5 262 119 483 FHLB stock dividends 301 305 797 898 Total interest income 26,643 24,989 77,518 73,553 Interest Expense: Deposits 7,658 10,536 23,851 30,130 FHLB advances and other 1,603 1,636 4,803 5,253 Subordinated debentures 461 597 1,445 1,518 Notes Payable 555 193 1,217 519 Total interest expense 10,277 12,962 31,316 37,420 Net interest income 16,366 12,027 46,202 36,133 Provision for loan losses 4,907 671 8,761 1,704 Net interest income after provision for loan losses 11,459 11,356 37,441 34,429 Non-interest Income: Service fees and other charges 3,717 2,764 9,756 7,997 Mortgage banking income 1,011 921 3,627 2,780 Gain on sale of non-mortgage loans 134 138 177 204 Loss on securities (2,051) 21 (2,564) 21 Insurance and investment sales commissions 1,179 1,180 4,381 4,244 Trust income 114 95 343 280 Income from Bank Owned Life Insurance 224 321 751 929 Other non-interest income (188) 144 (166) 407 Total Non-interest Income 4,140 5,584 16,305 16,862 Non-interest Expense: Compensation and benefits 7,980 6,424 22,421 19,610 Occupancy 1,949 1,516 5,562 4,324 State franchise tax 533 355 1,540 1,074 Acquisition related charges 20 - 1,032 - Data processing 1,221 941 3,384 2,838 Amortization of intangibles 424 167 1,035 481 Other non-interest expense 3,106 2,893 9,250 7,623 Total Non-interest Expense 15,233 12,296 44,224 35,950 Income before income taxes 366 4,644 9,522 15,341 Income taxes 44 1,515 3,046 4,995 Net Income $322 $3,129 $6,476 $10,346 Earnings per share: Basic $0.04 $0.44 $0.83 $1.46 Diluted $0.04 $0.44 $0.83 $1.44 Core operating earnings per share*: Basic $0.04 $0.44 $0.91 $1.46 Diluted $0.04 $0.44 $0.91 $1.44 Average Shares Outstanding: Basic 8,113 7,080 7,813 7,101 Diluted 8,123 7,171 7,842 7,201 * - See Non-GAAP Disclosure Reconciliations Financial Summary and Comparison First Defiance Financial Corp. (Unaudited) Three Months Ended Nine months ended (dollars in thousands, September 30, September 30, except per share % % data) 2008 2007 change 2008 2007 change Summary of Operations Tax-equivalent interest income (1) 26,876 25,177 6.7 78,171 74,090 5.5 Interest expense 10,277 12,962 (20.7) 31,316 37,420 (16.3) Tax-equivalent net interest income (1) 16,599 12,215 35.9 46,855 36,670 27.8 Provision for loan losses 4,907 671 631.3 8,761 1,704 414.1 Tax-equivalent NII after provision for loan loss (1) 11,692 11,544 1.3 38,094 34,966 8.9 Securities losses (2,051) 21 NM (2,564) 21 NM Non-interest income -excluding securities losses 6,191 5,563 11.3 18,869 16,841 12.0 Non-interest expense 15,233 12,296 23.9 44,224 35,950 23.0 Non-interest expense -excluding non-core charges 15,213 12,296 23.7 43,192 35,950 20.1 One time acquisition related charges 20 - NM 1,032 - NM Income taxes 44 1,515 (97.1) 3,046 4,995 (39.0) Net Income 322 3,129 (89.7) 6,476 10,346 (37.4) Core operating earnings (2) 335 3,129 (89.3) 7,147 10,346 (30.9) Tax equivalent adjustment (1) 233 188 23.9 653 537 21.6 At Period End Assets 1,922,026 1,579,946 21.7 Earning assets 1,741,438 1,432,735 21.5 Loans 1,596,327 1,264,872 26.2 Allowance for loan losses 23,445 13,427 74.6 Deposits 1,435,804 1,208,164 18.8 Stockholders' equity 189,676 164,706 15.2 Average Balances Assets 1,928,987 1,550,174 24.4 1,824,197 1,529,404 19.3 Earning assets 1,727,343 1,397,521 23.6 1,630,873 1,377,499 18.4 Deposits and interest-bearing liabilities 1,712,212 1,367,421 25.2 1,611,785 1,347,872 19.6 Loans 1,585,489 1,244,531 27.4 1,485,455 1,233,987 20.4 Deposits 1,437,273 1,177,594 22.1 1,365,631 1,154,718 18.3 Stockholders' equity 194,452 164,751 18.0 187,330 163,490 14.6 Stockholders' equity / assets 10.08% 10.63% (5.2) 10.27% 10.69% (3.9) Per Common Share Data Net Income Basic $0.04 $0.44 (90.9) $0.83 $1.46 (43.2) Diluted 0.04 0.44 (90.9) 0.83 1.44 (42.4) Core operating earnings (2) Basic $0.04 $0.44 (90.7) $0.91 $1.46 (37.2) Diluted 0.04 0.44 (90.5) 0.91 1.44 (36.6) Dividends 0.26 0.25 4.0 0.78 0.75 4.0 Market Value: High $17.66 $29.64 (40.4) $22.51 $30.25 (25.6) Low 10.00 23.99 (58.3) 10.00 23.99 (58.3) Close 11.01 27.00 (59.2) 11.01 27.00 (59.2) Book Value 23.37 23.21 0.7 23.37 23.21 0.7 Tangible Book Value 15.29 17.54 (12.9) 15.29 17.54 (12.9) Shares outstanding, end of period (000) 8,117 7,095 14.4 8,117 7,095 14.4 Performance Ratios (annualized) Tax-equivalent net interest margin (1) 3.81% 3.47% 9.9 3.83% 3.56% 7.7 Return on average assets -GAAP 0.07% 0.80% (91.7) 0.47% 0.90% (47.3) Return on average assets -Core Operating 0.07% 0.80% (91.4) 0.52% 0.90% (41.9) Return on average equity- GAAP 0.66% 7.53% (91.3) 4.62% 8.46% (45.4) Return on average equity- Core Operating 0.69% 7.53% (90.9) 5.10% 8.46% (39.8) Efficiency ratio (3) - GAAP 66.84% 69.16% (3.4) 67.29% 67.18% 0.2 Efficiency ratio (3) - Core Operating 66.75% 69.16% (3.5) 65.72% 67.18% (2.2) Effective tax rate 12.02% 32.62% (63.1) 31.99% 32.56% (1.8) Dividend payout ratio (basic) 650.00% 56.82% NM 93.98% 51.37% 82.9 (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) Core operating earnings = Net income plus after tax effect of acquisition related and other one-time charges. See Non-GAAP Disclosure Reconciliation. (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 and asset sales gains, net. NM Percentage change not meaningful Non-GAAP Disclosure Reconciliations First Defiance Financial Corp. Management believes that the presentation of the non-GAAP financialmeasures in this release assists investors when comparing results period-to-period in a more meaningful and consistent manner and provides a bettermeasure of results for First Defiance's ongoing operations.

Core operating earnings are net income adjusted to exclude discontinuedoperations, merger, integration and restructuring expenses and the results ofcertain significant transactions not representative of ongoing operations.

Core Operating Earnings Three months ended Nine months ended (dollars in thousands, except per September 30, September 30, share data) 2008 2007 2008 2007 Net Income $322 $3,129 $6,476 $10,346 Acquisition related charges 20 - 1,032 - Tax effect (7) - (361) - After-tax non-operating items 13 - 671 - Core operating earnings $335 $3,129 $7,147 $10,346 Acquisition related charges in 2008 reflect charges associated with theacquisition of Pavilion Bancorp.

Core operating earnings is used as the numerator to calculate coreoperating return on average assets, core operating return on average equityand core operating earnings per share. Additionally, non-operating items arededucted from non-interest expense in the numerator and non-interest income inthe denominator of the core operating efficiency ratio disclosed in thetables. Comparable information on a GAAP basis is also provided in the tables.

Income from Mortgage Banking

Revenue from sales and servicing of mortgage loans consisted of thefollowing: Three months ended Nine months ended September 30, September 30, (dollars in thousands) 2008 2007 2008 2007 Gain from sale of mortgage loans $624 $674 $2,808 $1,992 Mortgage loan servicing revenue (expense): Mortgage loan servicing revenue 691 422 1,839 1,266 Amortization of mortgage servicing rights (268) (150) (1,008) (480) Mortgage servicing rights valuation adjustments (36) (25) (12) 2 387 247 819 788 Total revenue from sale and servicing of mortgage loans $1,011 $921 $3,627 $2,780 Yield Analysis First Defiance Financial Corp. Three Months Ended September 30, 2008 Average Yield Balance Interest(1) Rate(2) Interest-earning assets: Loans receivable $1,585,489 $24,934 6.26% Securities 118,502 1,636 5.31% Interest Bearing Deposits 2,231 5 0.89% FHLB stock 21,121 301 5.67% Total interest-earning assets 1,727,343 26,876 6.18% Non-interest-earning assets 201,644 Total assets $1,928,987 Deposits and Interest-bearing liabilities: Interest bearing deposits $1,268,016 $7,658 2.40% FHLB advances and other 174,343 1,603 3.66% Other Borrowings 64,368 555 3.43% Subordinated debentures 36,228 461 5.06% Total interest-bearing liabilities 1,542,955 10,277 2.65% Non-interest bearing deposits 169,257 - - Total including non-interest-bearing demand deposits 1,712,212 10,277 2.39% Other non-interest-bearing liabilities 22,323 Total liabilities 1,734,535 Stockholders' equity 194,452 Total liabilities and stockholders' equity $1,928,987 Net interest income; interest rate spread $16,599 3.53% Net interest margin (3) 3.81% Average interest-earning assets to average interest bearing liabilities 112% Three Months Ended September 30, 2007 Average Yield Balance Interest(1) Rate(2) Interest-earning assets: Loans receivable $1,244,531 $22,995 7.33% Securities 112,645 1,615 5.66% Interest Bearing Deposits 21,760 262 4.78% FHLB stock 18,585 305 6.51% Total interest-earning assets 1,397,521 25,177 7.14% Non-interest-earning assets 152,653 Total assets $1,550,174 Deposits and Interest-bearing liabilities: Interest bearing deposits $1,074,413 $10,536 3.89% FHLB advances and other 128,597 1,636 5.05% Other Borrowings 24,935 193 3.07% Subordinated debentures 36,295 597 6.53% Total interest-bearing liabilities 1,264,240 12,962 4.07% Non-interest bearing deposits 103,181 - - Total including non-interest-bearing demand deposits 1,367,421 12,962 3.76% Other non-interest-bearing liabilities 18,002 Total liabilities 1,385,423 Stockholders' equity 164,751 Total liabilities and stockholders' equity $1,550,174 Net interest income; interest rate spread $12,215 3.07% Net interest margin (3) 3.47% Average interest-earning assets to average interest bearing liabilities 111% Nine Months Ended September 30, 2008 Average Yield Balance Interest(1) Rate(2) Interest-earning assets: Loans receivable $1,485,455 $72,297 6.50% Securities 118,908 4,959 5.50% Interest Bearing Deposits 6,311 119 2.52% FHLB stock 20,199 797 5.27% Total interest-earning assets 1,630,873 78,172 6.40% Non-interest-earning assets 193,324 Total assets $1,824,197 Deposits and Interest-bearing liabilities: Interest bearing deposits $1,210,631 $23,851 2.63% FHLB advances and other 161,891 4,803 3.96% Other Borrowings 48,018 1,217 3.39% Subordinated debentures 36,245 1,445 5.33% Total interest-bearing liabilities 1,456,785 31,316 2.87% Non-interest bearing deposits 155,000 - - Total including non-interest-bearing demand deposits 1,611,785 31,316 2.60% Other non-interest-bearing liabilities 25,082 Total liabilities 1,636,867 Stockholders' equity 187,330 Total liabilities and stockholders' equity $1,824,197 Net interest income; interest rate spread $46,856 3.53% Net interest margin (3) 3.83% Average interest-earning assets to average interest bearing liabilities 112% Nine Months Ended September 30, 2007 Average Yield Balance Interest(1) Rate(2) Interest-earning assets: Loans receivable $1,233,987 $67,916 7.36% Securities 112,466 4,795 5.68% Interest Bearing Deposits 12,461 483 5.18% FHLB stock 18,585 898 6.46% Total interest-earning assets 1,377,499 74,092 7.19% Non-interest-earning assets 151,905 Total assets $1,529,404 Deposits and Interest-bearing liabilities: Interest bearing deposits $1,053,810 $30,130 3.82% FHLB advances and other 139,087 5,253 5.05% Other Borrowings 22,920 519 3.03% Subordinated debentures 31,147 1,518 6.52% Total interest-bearing liabilities 1,246,964 37,420 4.01% Non-interest bearing deposits 100,908 - - Total including non-interest-bearing demand deposits 1,347,872 37,420 3.71% Other non-interest-bearing liabilities 18,042 Total liabilities 1,365,914 Stockholders' equity 163,490 Total liabilities and stockholders' equity $1,529,404 Net interest income; interest rate spread $36,672 3.18% Net interest margin (3) 3.56% 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 share data) 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2008 2008 2008 2007 2007 Summary of Operations Tax-equivalent interest income (1) $26,876 $26,453 $24,843 $25,383 $25,177 Interest expense 10,277 9,991 11,048 12,669 12,962 Tax-equivalent net interest income (1) 16,599 16,462 13,795 12,714 12,215 Provision for loan losses 4,907 2,797 1,058 603 671 Tax-equivalent NII after provision for loan losses (1) 11,692 13,665 12,737 12,111 11,544 Investment securities gains (losses) (2,051) (432) (81) - 21 Non-interest income (excluding securities gains/ losses) 6,191 6,582 6,096 5,268 5,563 Non-interest expense 15,233 15,515 13,476 12,161 12,296 Acquisition and other on-time charges 20 262 750 - - Income taxes 44 1,349 1,653 1,474 1,515 Net income 322 2,735 3,419 3,558 3,129 Core operating earnings (2) 335 2,905 3,906 3,558 3,129 Tax equivalent adjustment (1) 233 216 204 186 188 At Period End Total assets $1,922,026 $1,928,925 $1,886,047 $1,609,404 $1,579,946 Earning assets 1,741,438 1,736,238 1,689,813 1,439,097 1,432,735 Loans 1,596,327 1,582,751 1,535,354 1,289,696 1,264,872 Allowance for loan losses 23,445 20,578 18,556 13,890 13,427 Deposits 1,435,804 1,427,141 1,413,701 1,217,858 1,208,164 Stockholders' equity 189,676 194,280 194,780 165,954 164,706 Stockholders' equity / assets 9.87% 10.07% 10.33% 10.31% 10.42% Goodwill 56,830 56,111 57,315 36,820 36,515 Average Balances Total assets $1,928,987 $1,898,165 $1,645,436 $1,589,264 $1,550,174 Earning assets 1,727,343 1,689,398 1,475,882 1,432,061 1,397,521 Deposits and interest-bearing liabilities 1,712,212 1,678,026 1,445,113 1,404,065 1,367,421 Loans 1,585,489 1,544,409 1,326,468 1,265,307 1,244,531 Deposits 1,437,273 1,423,266 1,236,354 1,212,486 1,177,594 Stockholders' equity 194,452 195,845 171,693 165,762 164,751 Stockholders' equity / assets 10.08% 10.32% 10.43% 10.43% 10.63% Per Common Share Data Net Income: Basic $0.04 $0.34 $0.48 $0.51 $0.44 Diluted 0.04 0.34 0.47 0.50 0.44 Core operating earnings (2) Basic 0.04 0.36 0.54 0.51 0.44 Diluted 0.04 0.36 0.54 0.50 0.44 Dividends 0.26 0.26 0.26 0.26 0.25 Market Value: High $17.66 $20.00 $22.51 $26.93 $29.64 Low 10.00 15.90 17.30 20.58 23.99 Close 11.01 16.01 18.35 22.02 27.00 Book Value 23.37 23.93 24.01 23.51 23.21 Shares outstanding, end of period (in thousands) 8,117 8,118 8,114 7,059 7,095 Performance Ratios (annualized) Tax-equivalent net interest margin (1) 3.81% 3.92% 3.76% 3.52% 3.47% Return on average assets - GAAP 0.07% 0.58% 0.84% 0.89% 0.80% Return on average assets - Core Operating 0.07% 0.62% 0.95% 0.89% 0.80% Return on average equity - GAAP 0.66% 5.62% 8.01% 8.52% 7.53% Return on average equity - Core Operating 0.69% 5.97% 9.15% 8.52% 7.53% Efficiency ratio (3) - GAAP 66.84% 67.33% 67.75% 67.63% 69.16% Efficiency ratio (3) - Core Operating 66.75% 66.19% 63.98% 67.63% 69.16% Effective tax rate 12.02% 33.03% 32.59% 29.29% 32.62% Dividend payout ratio (basic) 650.00% 76.47% 54.17% 50.98% 56.82% (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) See Non-GAAP Disclosure Reconciliation (3) 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 share data) 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2008 2008 2008 2007 2007 Loan Portfolio Composition One to four family residential real estate $250,244 $251,887 $262,710 $229,588 $230,075 Construction 75,822 83,279 66,283 56,698 15,392 Commercial real estate 746,676 731,472 706,442 580,621 592,914 Commercial 353,453 351,812 332,772 283,072 267,897 Consumer finance 41,964 41,251 41,209 37,743 38,280 Home equity and improvement 158,992 153,715 151,563 128,080 127,641 Total loans 1,627,151 1,613,416 1,560,979 1,315,802 1,272,199 Less: Loans in process 29,794 29,585 24,581 25,074 6,301 Deferred loan origination fees 1,030 1,080 1,044 1,032 1,026 Allowance for loan loss 23,445 20,578 18,556 13,890 13,427 Net Loans $1,572,882 $1,562,173 $1,516,798 $1,275,806 $1,251,445 Allowance for loan loss activity Beginning allowance $20,578 $18,556 $13,890 $13,427 $13,417 Provision for loan losses 4,907 2,797 1,058 603 671 Reserve from acquisitions 121 38 4,099 - - Credit loss charge-offs: One to four family residential real estate 478 281 57 33 128 Commercial real estate 1,495 319 464 135 586 Commercial 220 - 7 - Consumer finance 73 56 27 42 25 Home equity and improvement 216 18 72 30 10 Total charge-offs 2,262 894 620 247 749 Total recoveries 101 81 129 107 88 Net charge-offs (recoveries) 2,161 813 491 140 661 Ending allowance $23,445 $20,578 $18,556 $13,890 $13,427 Credit Quality Non-accrual loans $24,630 $17,727 $13,497 $9,217 $8,523 Restructured loans, accruing 905 - - - - Total non- performing loans (2) 25,535 17,727 13,497 9,217 8,523 Real estate owned (REO) 4,776 3,158 3,448 2,460 3,392 Total non- performing assets (2) $30,311 $20,885 $16,945 $11,677 $11,915 Net charge-offs 2,161 813 491 140 661 Allowance for loan losses / loans 1.47% 1.30% 1.21% 1.08% 1.06% Allowance for loan losses / non-performing assets 77.35% 98.53% 109.51% 118.95% 112.69% Allowance for loan losses / non-performing loans 91.82% 116.08% 137.48% 150.70% 157.54% Non-performing assets / loans plus REO 1.89% 1.32% 1.10% 0.90% 0.94% Non-performing assets / total assets 1.58% 1.08% 0.90% 0.73% 0.75% Net charge-offs / average loans (annualized) 0.55% 0.21% 0.15% 0.04% 0.21% Deposit Balances Non-interest-bearing demand deposits $158,139 $181,034 $168,049 $121,563 $109,128 Interest-bearing demand deposits and money market 365,251 401,401 408,979 342,367 330,168 Savings deposits 145,019 146,697 144,184 105,873 98,719 Retail time deposits less than $100,000 557,643 514,209 529,990 509,720 524,347 Retail time deposits greater than $100,000 177,848 163,614 162,400 137,927 142,645 National/Brokered time deposits 31,904 20,186 99 408 3,157 Total deposits $1,435,804 $1,427,141 $1,413,701 $1,217,858 $1,208,164 (1) Construction loans to commercial loan customers were included in commercial real estate loans prior to December 31, 2007. (2) 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. Loan Delinquency Information First Defiance Financial Corp. 90+ Troubled 30 to 89 days Debt Total days past Restru- (dollars in thousands) Balance Current past due due (1) cturing September 30, 2008 One to four family residential real estate $250,244 $240,791 $4,053 $5,400 $902 Construction 75,822 74,232 101 1,489 - Commercial real estate 746,676 726,013 6,914 13,749 - Commercial 353,453 348,507 1,371 3,575 3 Consumer finance 41,964 41,341 473 150 - Home equity and improvement 158,992 156,645 2,080 267 - Total loans $1,627,151 $1,587,529 $14,992 $24,630 $905 June 30, 2008 One to four family residential real estate $251,887 $243,444 $2,870 $5,573 $- Construction 83,279 80,372 1,766 1,141 - Commercial real estate 731,472 710,980 11,230 9,262 - Commercial 351,812 347,020 3,899 893 - Consumer finance 41,251 40,714 352 185 - Home equity and improvement 153,715 151,217 1,825 673 - Total loans $1,613,416 $1,573,747 $21,942 $17,727 $- December 31, 2007 One to four family residential real estate $229,588 $226,264 $1,751 $1,573 $- Construction 56,698 56,432 - 266 - Commercial real estate 580,621 569,814 4,819 5,988 - Commercial 283,072 281,805 592 675 - Consumer finance 37,743 37,448 276 19 - Home equity and improvement 128,080 125,969 1,415 696 - Total loans $1,315,802 $1,297,732 $8,853 $9,217 $- September 30, 2007 One to four family residential real estate $230,075 $227,097 $1,953 $1,025 $- Construction 15,392 14,928 198 266 - Commercial real estate 592,914 583,006 4,102 5,806 - Commercial 267,897 266,438 743 716 - Consumer finance 38,280 38,034 213 33 - Home equity and improvement 127,641 124,951 2,013 677 - Total loans $1,272,199 $1,254,454 $9,222 $8,523 $- (1) All loans 90+ days past due are non accrualSOURCE First Defiance Financial Corp.