SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
FIRST DEFIANCE FINANCIAL CORP.
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(Name of Registrant as Specified in Its Charter)
<PAGE>
FIRST DEFIANCE FINANCIAL CORP.
601 Clinton Street
Defiance, Ohio 43512
(419) 782-5015
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 20, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders ("Annual
Meeting") of First Defiance Financial Corp., Defiance, Ohio ("First Defiance")
will be held at the home office of its subsidiary First Federal Savings and
Loan, located at 601 Clinton Street, Defiance, Ohio 43512, Tuesday, April 20,
1999 at 1:00 p.m., Eastern Time, for the following purposes, all of which are
more completely set forth in the accompanying Proxy Statement:
(1) To elect three (3) directors for three-year terms, and
until their successors are elected and qualified;
(2) To transact such other business as may properly come
before the Annual Meeting or any adjournment thereof. Management is not
aware of any other business.
The Board of Directors has fixed March 5, 1999 as the voting record
date for the determination of shareholders entitled to notice of and to vote at
the Annual Meeting or at any adjournment thereof. Only those shareholders of
record as of the close of business on that date will be entitled to vote at the
Annual Meeting or at any such adjournment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/John W. Boesling
-------------------
John W. Boesling
Secretary
Defiance, Ohio
March 22, 1999
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YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
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<PAGE>
PROXY STATEMENT
First Defiance Financial Corp.
601 Clinton Street
Defiance, Ohio 43512
1999 ANNUAL MEETING OF SHAREHOLDERS
April 20, 1999
General
This Proxy Statement is being furnished to holders of common stock,
$0.01 par value per share ("Common Stock"), of First Defiance Financial Corp.,
Defiance, Ohio ("First Defiance"). Proxies are being solicited on behalf of the
Board of Directors of First Defiance to be used at the Annual Meeting of
Shareholders ("Annual Meeting") to be held at the home office of First Federal
Savings and Loan ("First Federal") located at 601 Clinton Street, Defiance, Ohio
43512, on Tuesday April 20, 1999 at 1:00 p.m., Eastern Time, and at any
adjournment thereof for the purposes set forth in the Notice of Annual Meeting
of Shareholders. This Proxy Statement is first being mailed to shareholders on
or about March 22, 1999.
Proxies
The proxy solicited hereby, if properly signed and returned to First
Defiance and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted for the nominees for director described herein and,
upon the transaction of such other business as may properly come before the
meeting, in accordance with the best judgment of the persons appointed as
proxies. Any shareholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of First Defiance
written notice thereof (John W. Boesling, Secretary, First Defiance Financial
Corp., 601 Clinton Street, Defiance, Ohio 43512); (ii) submitting a
duly-executed proxy bearing a later date; or (iii) appearing at the Annual
Meeting and giving notice of revocation to the Secretary. Proxies solicited
hereby may be exercised only at the Annual Meeting and any adjournment thereof
and will not be used for any other meeting.
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<PAGE>
Voting Rights
Only shareholders of record at the close of business on March 5, 1999
("Voting Record Date") will be entitled to notice of and to vote at the Annual
Meeting. On the Voting Record Date, there were 7,574,955 shares of Common Stock
issued and outstanding and First Defiance had no other class of equity
securities outstanding. Each share of Common Stock is entitled to one vote at
the Annual Meeting on all matters properly presented at the meeting.
The presence, either in person or by proxy, of at least a majority of
the outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. Directors are elected by a plurality
of the votes cast with a quorum present. Abstentions are considered in
determining the presence of a quorum and will not affect the plurality vote
required for the election of directors. The proposals for election of directors
are considered "discretionary" items upon which brokerage firms may vote in
their discretion on behalf of their clients if such clients have not furnished
voting instructions and for which there will not be "broker non-votes."
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<PAGE>
Beneficial Ownership
The following table includes, as of the Voting Record Date, certain
information as to the Common Stock beneficially owned by (i) the only person or
entities, including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended ("1934 Act"), who or which was known
to First Defiance to be the beneficial owner of more than 5% of the issued and
outstanding Common Stock, (ii) each director and each person nominated to become
a director of First Defiance, (iii) the executive officers of First Defiance
named in the Summary Compensation Table set forth under "Executive
Compensation," and (iv) all directors and executive officers of First Defiance
as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner or Beneficial Ownership as of Percent of
Number of Persons in Group March 5, 1999 (1) Common Stock
-------------------------- ----------------- ------------
<S> <C> <C>
First Federal Savings and Loan
Employee Stock Ownership Plan 804,099 (2) 10.62%
Dimensional Fund Advisors, Inc. 499,389 (3) 6.59%
Don C. Van Brackel 256,368 (4) 3.33%
William J. Small 98,413 (5) 1.29%
P. Scott Carson 20,000 (6)
Dr. John U. Fauster III 56,419 (7)(8) (6)
Dr. Marvin J. Ludwig 59,748 (7)(9) (6)
Stephen L. Boomer 39,935 (7) (6)
Thomas A. Voigt 17,671 (10) (6)
Dr. Douglas A. Burgei 17,541 (10) (6)
Gerald W. Monnin 22,915 (11) (6)
Peter Diehl 6,352 (12) (6)
John C. Wahl 78,189 (13) 1.03%
John W. Boesling 112,597 (14) 1.48%
All directors and executive
officers as a group (16 persons) 836,024 (15) 10.54%
</TABLE>
(Footnotes on next page)
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<PAGE>
(1) Unless otherwise indicated, the named person has sole voting power and
sole investment power with respect to the indicated shares.
(2) Shares owned by First Federal Savings and Loan Employee Stock Ownership
Plan ("ESOP") which have been allocated to persons listed in this
beneficial ownership table are also included in those persons'
holdings.
(3) Based on Form 13G filed with the Securities and Exchange Commission,
Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
possesses both voting and investment power over 499,389 shares of
Common Stock. All 499,389 shares reported are owned by the entities for
which Dimensional serves as investment advisor, and Dimensional
disclaims beneficial ownership of such securities.
(4) Includes 109,154 shares owned by trusts for the benefit of Mr. Van
Brackel and his wife, 9,327 shares that vest within 60 days under the
1996 Management Recognition Plan and Trust ("1996 MRP"), 22,716 shares
that have been allocated to Mr. Van Brackel's account in the ESOP and
115,170 shares that may be acquired upon the exercise of stock options.
(5) Includes 103 shares owned jointly with his son, 206 shares held as
custodian for minor children, 2,760 shares that vest within 60 days
under the 1996 MRP, 8,499 shares which have been allocated to Mr.
Small's account in the ESOP and 62,940 shares that may be acquired upon
the exercise of stock options.
(6) Less than 1% of the total outstanding shares of Common Stock.
(7) Includes 1,555 shares that vest within 60 days under the 1996 MRP and
32,082 shares that may be acquired upon the exercise of stock options.
(8) Includes 1,000 shares owned by his wife.
(9) Includes 1,431 shares owned by his wife.
(10) Includes 1,555 shares that vest within 60 days under the 1996 MRP and
10,492 shares that may be acquired under the exercise of stock options.
(11) Includes 1,399 shares that vest within 60 days under the 1996 MRP and
3,497 shares that may be acquired under the exercise of stock options.
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<PAGE>
(12) Includes 2,000 shares owned by trusts for the benefit of Mr. Diehl and
his wife, 1,243 shares that vest within 60 days under the 1996 MRP and
3,109 shares that may be acquired under the exercise of stock options
(13) Includes 306 shares held as custodian for minor children, 4,000 shares
that vest within 60 days under the 1996 MRP, 11,482 shares that have
been allocated to Mr. Wahl's account in the ESOP and 48,000 shares that
may be acquired upon the exercise of stock options
(14) Includes 2,760 shares that vest within 60 days under the 1996 MRP,
16,139 shares that have been allocated to Mr. Boesling's account in the
ESOP and 41,408 shares that may be acquired upon the exercise of stock
options.
(15) Includes options to purchase 430,309 shares, 35,064 shares that vest
within 60 days under the 1996 MRP, 78,810 shares allocated to the
accounts of executive officers in the ESOP, and 137,718 shares held in
trust for the 1996 MRP which vest after 60 days.
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<PAGE>
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR, DIRECTORS
WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
Election of Directors
First Defiance's Board of Directors is currently composed of ten
members. The Code of Regulations of First Defiance provides that the Board of
Directors of First Defiance shall be divided into three classes which are as
equal in number as possible, and that the members of each class are to be
elected for a term of three years and until their successors are elected and
qualified. One class of directors is elected annually.
At the Annual Meeting, shareholders of First Defiance will be asked to
elect three directors for three year terms, and in each case until their
successors are elected and qualified. Dr. Ludwig, Dr. Fauster and Mr. Voigt
currently serve as directors of First Defiance.
Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted for the election of the nominees for director listed
below. If any person named as nominee should be unwilling to stand for election
at the time of the Annual Meeting, the proxies will vote for any replacement
nominee or nominees recommended by the Board of Directors. At this time, the
Board of Directors knows of no reason why any of the nominees listed below may
not be able to serve as a director if elected.
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<PAGE>
Information with Respect to Nominees for Director and Continuing Directors
The following tables present information concerning each nominee for
director and each director whose term continues, including his tenure as a
director of First Federal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
NOMINEES BE ELECTED AS DIRECTORS
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTOR WITH THREE-YEAR TERMS EXPIRING IN 2002
Positions Held in Director
Name Age First Defiance Since (1)
---- --- -------------- ---------
<S> <C> <C> <C>
Dr. John U. Fauster 61 Director 1975
Dr. Marvin J. Ludwig 72 Director 1979
Thomas A. Voigt 56 Director 1995
<CAPTION>
DIRECTORS WITH TERMS EXPIRING IN 2000
Positions Held in Director
Name Age First Defiance Since (1)
---- --- -------------- ---------
<S> <C> <C> <C>
Don C. Van Brackel 60 Director, Vice Chairman 1979
Dr. Douglas A. Burgei 44 Director 1995
Gerald W. Monnin 60 Director 1997
P. Scott Carson 55 Director, Executive Vice
President, President and
Chief Operating Officer,
First Federal Savings and Loan 1998
</TABLE>
(Footnotes on next page)
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<PAGE>
<TABLE>
<CAPTION>
DIRECTORS WITH TERMS EXPIRING IN 2001
Positions Held in Director
Name Age First Defiance Since (1)
---- --- -------------- ---------
<S> <C> <C> <C>
William J. Small 48 Chairman, President
and Chief Executive Officer 1998
Stephen L. Boomer 48 Director 1994
Peter A. Diehl 48 Director 1998
</TABLE>
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(1) Each director also serves as a director of First Federal Savings and Loan
("First Federal"), a wholly owned subsidiary of First Defiance. The
indicated year includes service as a director for First Federal prior to
the formation of First Defiance in 1995.
The business experience of each of the nominees or directors for at least
the past five years is as follows:
John U. Fauster III D.D.S. Dr. Fauster is affiliated with the Defiance
Dental Group and engages in the general practice of dentistry in Defiance, Ohio.
He has been a director of First Defiance and its predecessors since 1975 and
currently serves as a member of its Audit, Compensation and Long Range Planning
Committees and serves on the Executive and Loan Review Committees on a rotating
basis during the year.
Marvin J. Ludwig. Dr. Ludwig was president of The Defiance College, an
independent, co-educational, liberal arts college affiliated with the United
Church of Christ, from 1975 until his retirement on June 30, 1994. He has served
as a director of First Defiance and its predecessors since 1979 and currently
serves as Chairman of the Audit and Compensation Committees and as a member of
the MRP - Stock Options and The Leader Mortgage Board Committees and serves on
the Executive and Loan Review Committees on a rotating basis during the year.
Thomas A. Voigt. Mr. Voigt is a vice president and general manager of the
Bryan Publishing Company, commercial printers and publishers of The Bryan Times,
The Countyline, The Montpelier Leader Enterprise and Realty Northwest. He was
appointed to the board in August, 1995 and he serves as Chairman of the
Long-Range Planning Committee and on the Compensation and MRP - Stock Options
Committees and serves on the Executive and Loan Review Committees on a rotating
basis during the year.
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<PAGE>
William J. Small. Mr. Small became President, Chairman of the Board and
Chief Executive Officer of First Defiance and Chairman of the Board and Chief
Executive Officer of First Federal on January 1, 1999. He previously served as
President and Chief Operating Officer of First Federal from June 1996 through
December 31, 1998 and before that he served as Senior Vice President responsible
for lending from July 1, 1994. Prior to joining First Defiance he was President
and Managing Officer of The Hicksville Building, Loan and Savings Bank,
Hicksville, Ohio from 1987 until July 1994. As Chairman and CEO, Mr. Small is
also Chairman of the Executive and Loan Review and The Leader Mortgage Board
Committees and a member of the Investment committee.
Don C. Van Brackel. Effective January 1, 1999, Mr. Van Brackel became Vice
Chairman of First Defiance Financial Corp. Mr. Van Brackel served as Chairman of
the Board of Directors and Chief Executive Officer of First Defiance and First
Federal, First Defiance's predecessor, from January 1, 1995 until his retirement
on December 31, 1998. He was President and Managing Officer of First Federal
from July 1992 until June 1996 and has been a director of First Defiance and its
predecessors since 1979. He previously was president and chief executive officer
of A. Van Brackel & Sons, Inc., Defiance, Ohio, a company that sells and
services coin-operated equipment, sound systems and satellite-delivered
background music as a 3-M franchisee. Mr. Van Brackel is a member of the
Executive and Loan Review, Compensation, Long-Range Planning and MRP - Stock
Options and The Leader Mortgage Board Committees.
P. Scott Carson. Mr. Carson joined First Defiance as an Executive Vice
President on December 17, 1998 and was named President and Chief Operating
Officer of First Federal on January 1, 1999. He was appointed to the Board of
Directors in December 1998. Prior to joining First Defiance, Mr. Carson was
President and Chief Executive Officer of Trumbull Financial Corporation and
Trumbull Savings and Loan, Warren, Ohio from 1991 until November 1998. Mr.
Carson serves on the Executive, Loan Review, Investment and The Leader Mortgage
Board Committees.
Peter A. Diehl. Mr. Diehl is President/Chief Executive Officer of Diehl,
Inc., a privately held company headquartered in Defiance, Ohio which produces
canned dairy products and non-dairy creamers for distribution throughout the
United States and Asia. He has been a director since April 1998 and currently
serves on the Audit, Compensation and Governance Committees and serves on the
Executive and Loan Review Committees on a rotating basis during the year.
Stephen L. Boomer. Mr. Boomer is President and co-owner of Arps Dairy
Inc., Defiance, Ohio, a processor and distributor of various dairy products. He
has been a director since August 1994 and currently serves as Chairman of the
MRP - Stock Options Committee and as a member of the Audit and Governance
Committees and serves on the Executive and Loan Review Committees on a rotating
basis during the year.
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<PAGE>
Douglas A. Burgei, D.V.M. Dr. Burgei is a veterinarian practicing in
Napoleon, Ohio since 1978. He was appointed to the Board of Directors in August
1995 and he serves as Chairman of the Governance Committee and as a member of
the Investment and Long-Range Planning and serves on the Executive and Loan
Review Committees on a rotating basis.
Gerald W. Monnin. Mr. Monnin is President and Chief Executive Officer of
Northwest Controls, a Defiance, Ohio company that distributes high technology
electronic automation and control products and systems. He has been a director
since April 1997 and serves on the Long-Range Planning, MRP - Stock Options,
Governance and The Leader Mortgage Board Committees and serves on the Executive
and Loan Review Committees on a rotating basis during the year.
Executive Officers Who Are Not Directors
The following sets forth certain information with respect to the executive
officers of First Federal who are not directors or nominees, including their
business experience for at least the past five years.
John C. Wahl. Age 38. Mr. Wahl was promoted to Executive Vice President of
First Defiance and First Federal in November 1998. He previously was appointed
Treasurer in April, 1997 and Senior Vice President and Chief Financial Officer
in January, 1997 after having served as Controller since June 1, 1994. Prior to
joining First Defiance he was a senior manager with Ernst & Young LLP, the
Company's independent auditors.
Mark D. Gazarek. Age 41. Mr. Gazarek joined First Federal in July 1998 as
Senior Vice President of Trust Operations and was promoted to Executive Vice
President in November 1998. Prior to joining First Federal, Mr. Gazarek was
Manager of the Trust Department at the Ohio Bank, Findlay, Ohio, where he was
employed since 1994. Prior to joining the Ohio Bank, Mr. Gazarek was employed in
the trust department at Fifth Third Bank from 1987 until 1994.
Gregory R. Allen. Age 35. Mr. Allen joined First Federal in June 1998 as
Vice President responsible for commercial lending and was promoted to Executive
Vice President and Chief Lending Officer of First Federal in November 1998.
Prior to joining First Federal, Mr. Allen was with the Ohio Bank, Findlay, Ohio
from 1992 until 1998, most recently as Vice President/Regional Executive
responsible for Ohio Bank's branches in Fostoria, Ohio.
Jeffrey D. Vereecke. Age 37. Mr. Vereecke was appointed Executive Vice
President, Retail Operations in November 1998. Previously he served as Senior
Vice President responsible for lending at First Federal. Mr. Vereecke joined
First Federal in 1984 and has served in a variety of capacities, most recently
as Senior Vice President, lending and before that Vice President of consumer and
commercial lending.
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<PAGE>
Compliance with Section 16(a) of the 1934 Act
Section 16(a) of the 1934 Act requires First Defiance's officers and
directors, and persons who own more than 10% of the Common Stock to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than 10% shareholders
are required by regulation to furnish First Defiance with copies of all Section
16(a) forms they file.
SEC regulations require that First Defiance disclose any Section 16 filing
that was not made by the appropriate due date. Based on a review of the filings
for 1998, First Defiance determined that a Form 4 for Peter A. Diehl was not
filed by the applicable due date.
The Board of Directors and Its Committees
Regular meetings of the Board of Directors of First Defiance are held
monthly and special meetings of the Board of Directors of First Defiance are
held from time to time as needed. Regular meetings of the Board of Directors of
First Federal are also held on at least a monthly basis and special meetings of
the Board of Directors of First Federal are held from time-to-time as needed.
There were 17 meetings of the Board of Directors of First Defiance and 15
meetings of the Board of Directors of First Federal held during 1998. No
director attended fewer than 75% of the total number of meetings of the Board of
Directors of either First Defiance or First Federal held during 1998 and the
total number of meetings held by all committees of the Board on which the
director served during such year.
The Boards of Directors of First Defiance and First Federal have
established various committees, including Executive, Audit, Governance,
Compensation, Long Range Planning, MRP - Stock Options and The Leader Mortgage
Board Committees.
The Executive Committee generally has the power and authority to act on
behalf of the Board of Directors on important matters between scheduled Board
meetings unless specific Board of Directors action is required or unless
otherwise restricted by First Defiance's or First Federal's charter or bylaws or
its Board of Directors. As Chairman of the Board, Mr. Small serves as Chairman
of the Executive Committee. Mr. Van Brackel served in that capacity during 1998.
The seven outside directors serve on the Committee on a rotating basis during
the year. The Executive Committee met 52 times during 1998.
The Audit Committee reviews (i) the independent auditors' reports and
results of their examination (ii) the OTS and Federal Deposit Insurance
Corporation and other regulatory reports and (iii) reports issued by First
Federal's internal auditor. The entire Board of Directors subsequently reviews
such reports and examinations. Currently, Drs. Ludwig and Fauster, and Messrs.
Diehl and Boomer serve as members of this committee. The Audit Committee met two
time during 1998.
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<PAGE>
The Governance Committee, consisting of Messrs. Diehl and Boomer and Drs.
Burgei and Fauster, meets to review certain policies established by the Board of
Directors and to ensure compliance with First Federal and OTS standards.
The Compensation Committee, consisting of Dr. Ludwig and Messrs. Van
Brackel, Voigt, Monnin and Diehl was established by the Board of Directors to
oversee the compensation programs provided to First Federal's management
including base salaries, bonuses and benefit plans.
The Long Range Planning Committee, consisting of Messrs. Voigt, Van Brackel
and Monnin and Drs. Fauster and Burgei, is responsible for reviewing strategic
decisions which will have a long-term impact on First Federal's operations.
The MRP - Stock Options Committee, consisting of Messrs. Boomer, Van
Brackel, Voigt and Monnin and Dr. Ludwig, is responsible for reviewing and
approving grants made to management under First Defiance's 1993 MRP, the 1996
Management Recognition Plan (the "1996 MRP"), and the Option Plans. Such grants
are also subject to approval by the full Board of Directors.
The Leader Mortgage Board Committee, consisting of Messrs Small, Van
Brackel, Carson, Monnin and Ludwig along with certain senior management
personnel from The Leader Mortgage Company and First Defiance, is responsible
for reviewing, monitoring, and providing strategic direction for the operations
of The Leader Mortgage Company. The Committee meets on a monthly basis.
To date, First Defiance has not established a nominating committee, the
functions of which are performed by the full Board of Directors.
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<PAGE>
EXECUTIVE COMPENSATION
Summary
The following table sets forth a summary of certain information concerning
the compensation awarded to or paid by First Defiance for services rendered in
all capacities during the last three fiscal years to the Chief Executive Officer
and the most highly compensated executive officers of First Defiance and First
Federal whose total compensation during the year ended December 31, 1998
exceeded $100,000. Positions with First Defiance are listed as of December 31,
1998.
<TABLE>
<CAPTION>
Annual Compensation
(3) Long Term Compensation
----------------------- ---------------------------------------
Name and Year Salary Bonus Awards Payouts All Other
Principal Position (1) (2) ------------------------- ------------ Compensation (5)
Securities
Stock Underlying
Grants(4) Options LTIP Payouts
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Don C. Van Brackel, 1998 $210,000 --- --- --- --- $31,816
Chairman, President and 1997 173,005 $97,803 --- --- --- 50,786
Chief Executive Officer 1996 157,862 80,475 $507,145 116,584 --- 43,782
William J Small, 1998 $152,000 --- --- --- --- $31,816
Executive Vice President, 1997 129,048 $53,474 --- --- --- 50,786
President, Chief 1996 89,124 53,474 $369,750 107,100 --- 36,356
Operating Officer
First Federal
Savings and Loan
John C. Wahl, 1998 $115,000 --- --- --- --- $30,965
Executive Vice President, 1997 82,168 $49,301 $ 87,000 10,000 --- 50,786
Chief Financial Officer 1996 68,724 41,429 130,500 50,000 --- 31,236
and Treasurer
John W. Boesling, 1998 $100,000 --- --- --- --- $30,385
Senior Vice President 1997 77,878 $46,727 --- --- --- 50,786
and Secretary 1996 73,824 39,375 $150,075 34,500 --- 33,205
</TABLE>
(Footnotes on next page)
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<PAGE>
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(1) Includes amounts deferred by Messrs. Van Brackel, Small and Wahl pursuant
to First Defiance's deferred compensation program.
(2) Bonus amounts reflect amounts earned during the fiscal year as determined
by the Compensation Committee, including amounts which are paid in the
following year.
(3) Does not include amounts attributable to miscellaneous benefits received by
executive officers. In the opinion of management of First Defiance the
costs to First Defiance of providing such benefits to any individual
executive during the year ended December 31, 1998 did not exceed the lesser
of $50,000 or 10% of the total of annual salary and bonus reported for the
individual.
(4) Represents the grant of 8,000 shares of restricted Common Stock to Mr. Wahl
in April, 1997 and 46,634, 13,800, 12,000 and 13,800 shares of restricted
Common Stock to Messrs. Van Brackel, Small, Wahl and Boesling,
respectively, in April, 1996 under the 1996 MRP. Mr. Small received an
additional grant of 20,200 shares in July, 1996 under the 1996 MRP. All
shares granted under this program vest 20% per year over five years on the
anniversary date of the grant. Unvested shares are forfeited upon
termination or retirement. The awards to Messrs. Van Brackel, Small, Wahl
and Boesling had a fair value at December 31, 1998 of $664,534, $484,500,
$285,000 and $196,650 respectively.
(5) Consists of amounts allocated by First Defiance on behalf of Messrs. Van
Brackel, Small, Wahl and Boesling pursuant to First Defiance's Employee
Stock Ownership Plan and matching contributions pursuant to First
Defiance's 401(k) Plan.
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<PAGE>
Stock Options
There were no option grants made during fiscal 1998 pursuant to First
Defiance's Stock Option Programs to the individuals named in the Summary
Compensation Table.
The following table sets forth certain information concerning exercises
of stock options granted pursuant to the Company's 1993 Stock Incentive Plan by
the named executive officers during the year ended December 31, 1998 and options
held at December 31, 1998 under the 1993 Stock Incentive Plan and the 1996 Stock
Option Plan.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of
Shares Securities Underlying
Acquired on Value Unexercised Value of Unexercised Options at
Name Exercise Realized Options at Year End Year End (1)
---- -------- -------- ------------------- ------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Don C. Van Brackel 10,800 $84,996 91,854 69,950 $609,894 $262,312
William J. Small --- --- 56,040 51,060 208,555 195,270
John C. Wahl --- --- 42,000 18,000 128,750 67,500
John W. Boesling 5,200 $37,674 34,508 20,700 250,961 77,625
</TABLE>
- -------------
(1) Based on a per share market price of $14.25 at December 31, 1998 and
exercise prices ranging from $4.63 per share to $13.00 per share.
-15-
<PAGE>
Report of the Compensation Committee
In order to provide compensation levels comparable to its peers and to
provide incentives for achieving improved performance the Compensation Committee
recommended and the Board of Directors adopted an incentive-based executive
salary program which will provide the Chief Executive Officer with a base salary
targeted at approximately 70% of total cash compensation with the remaining 30%
consisting of an incentive bonus. Other members of senior management participate
under a similar program, with base targets ranging from 75% to 80% of total
compensation and incentive bonus targets ranging from 20% to 25%. Under the
program, senior management would attain targeted levels of compensation only
upon realizing prescribed levels of performance established by the Board.
The Committee evaluates the base salaries of the executive officers of
First Defiance and First Federal annually. An executive officer's base salary is
determined based upon longevity with First Defiance, the effectiveness of such
individual in performing his duties, peer averages at the position in question
and First Defiance's overall performance. No particular weight is assigned to
these variables. The base salary component alone, while designed to be
competitive with peer group averages, is not designed to produce top levels of
compensation for the executive officers of First Defiance and First Federal when
compared to its peer group. The incentive component, as described below, which
requires First Defiance to achieve specific goals before additional compensation
is paid, is the element which is designed to make total compensation for each of
the executive officers comparable with comparable executive compensation for
executive officers in First Defiance's peer group.
For 1998, the Board of Directors prescribed that certain target
measurements be met in order to fund the executive compensation pool. The
measurements included a minimum level of diluted earnings per share, a minimum
target for growth in net interest income, and a maximum efficiency ratio. Once
the bonus pool is funded, payment to the individual executives is based in part
on achievement of personal goals. Based on 1998 financial results, the
prescribed targets as set by First Defiance's Board of Directors were not met
and the executive bonus pool was not funded.
In 1998 the Board of Directors made allocations under the 1996 MRP and 1996
Stock Option Plans to certain of its executive officers. The bases of the
allocations were the contributions made by the executive officer to First
Defiance and the responsibilities of the executive officer within the First
Defiance organization. The stock awards allocated under the MRP were also
designed to provide an incentive to executive officers to contribute to First
Defiance's future success.
By the Compensation Committee: M.J. Ludwig, Chairman, G.W. Monnin, T.A.
Voigt and P.A. Diehl.
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<PAGE>
Performance Graph
The following graph compares the yearly cumulative total return on the
Common Stock from the closing price on the date of First Defiance's conversion
in 1993 to a stock company with (i) the yearly cumulative total return on the
stocks included in the Nasdaq Stock Market Index (for United States companies)
and (ii) the yearly cumulative total return on stocks included in the Nasdaq
Bank Stock Index. All of these cumulative returns are computed assuming the
reinvestment of dividends at the frequency with which dividends were paid during
the applicable years.
First Defiance Financial Corp
(including predecessors)
[GRAPHIC-GRAPH PLOTTED TO POINTS LISTED BELOW]
<TABLE>
<CAPTION>
Period Ending
-----------------------------------------------------------------
Index 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Defiance Financial Corp. 100.00 101.44 170.76 214.31 283.57 259.22
NASDAQ - Total US ............ 100.00 97.75 138.26 170.01 208.58 293.21
NASDAQ Bank Index ............ 100.00 99.64 148.38 195.91 328.02 324.90
</TABLE>
-17-
<PAGE>
Directors' Compensation
During the year ended December 31, 1998, each outside member of the Board
of Directors of First Defiance received an annual fee of $16,580 plus an
additional fee of $400 per Board meeting attended. Outside Directors have the
option to defer up to $5,000 of their annual fees pursuant to a deferred
compensation plan. Directors also received a $500 annual fee for each committee
they serve on, with the exception of rotating service on the Executive Committee
and service on The Leader Mortgage Board Committee. For service on the Executive
Committee, they received $100 per meeting attended during their term as members.
For service on The Leader Mortgage Board Committee, outside directors receive
$500 for each meeting attended.
Beginning January 1, 1999, Mr. Van Brackel, formerly Chairman, President
and CEO, assumed the responsibilities of Vice Chairman of the Board. In that
capacity, Mr. Van Brackel will be paid an annual salary of $63,000 for a
three-year period. Mr. Van Brackel is receiving that salary in lieu of any other
director's compensation. He has the option to defer up to $10,000 of his annual
salary pursuant to the deferred compensation plan. Mr. Small and Mr. Carson do
not receive any additional compensation for their service on the Board of
Directors.
In 1998, the non-employee directors received grants under the 1996 Stock
Option Plan to purchase an aggregate of 27,202 shares of Common Stock at
exercise prices of between $13.50 and $15.50 per share
Employment Agreements
First Defiance has entered into employment agreements with Messrs. Small,
Van Brackel, Carson, Wahl, Allen, Gazarek and Vereecke (the "Executives"). The
form of employment agreement for each Executive is substantially the same and
provides each officer with a three-year term of employment commencing on the
date of the agreement. On the first anniversary of each agreement and each
anniversary thereafter, the Board of Directors of First Federal shall consider
and review extension of the terms of each agreement and shall continue to extend
under such terms unless either party gives notice of non-renewal to the other
party.
The employment agreements are terminable with or without cause by First
Federal. The Executives have no right to compensation or other benefits pursuant
to the employment agreement for any period after voluntary termination or
termination by First Federal for cause, disability, retirement or death.
However, in the event that (i) an Executive terminates his employment because of
failure of First Federal to comply with any material provision of the employment
agreement or (ii) the employment agreement was terminated by an Executive for
Good Reason, as defined, an Executive would be entitled to 2.99 times the
average annual compensation paid to him by First Federal during the five most
recent taxable years ending during the calendar year in which the notice of
termination occurs or such portion of such period in which the Executive served
as senior officer of First Federal as well as continued participation in
employee benefit plans of First Federal (other than retirement plans and stock
-18-
<PAGE>
compensation plans) until the expiration of the remaining term of employment.
"Good Reason" would generally be defined in the employment agreements to include
the assignment by First Federal to the Executive of any duties which, in the
Executive's good faith determination, are materially inconsistent with the
Executive's positions, duties, responsibilities and status with First Federal
prior to such assignment or prior to a change in control of First Federal.
The employment agreements provide that in the event that any of the
payments to be made thereunder or otherwise upon termination of employment are
deemed to constitute "excess parachute payments" within the meaning of Section
280G of the Internal Revenue Code of 1986, then such payments and benefits
received thereunder would be reduced, in the manner determined by First
Defiance, by the amount, if any, which is the minimum necessary to result in no
portion of the payments and benefits being nondeductible by First Defiance for
federal income tax purposes. Excess parachute payments generally would be
defined as payments in excess of three times the recipient's average annual
compensation from First Defiance includable in the recipients gross income
during the most recent five taxable years ending before the date on which a
change in control of First Defiance or other triggering events occurred ("base
amount"). A recipient of excess parachute payments is subject to a 20% excise
tax on the amount by which such payments exceed the base amount, in addition to
regular income taxes, and payments in excess of the base amount would not be
deductible by First Defiance as compensation expense for federal income tax
purposes.
-19-
<PAGE>
Indebtedness of Management
First Defiance has had no loans outstanding since January 1, 1997 in excess
of $60,000 to any director, nominee for election as a director or executive
officer of First Defiance, any member of the immediate family of any such person
or to certain corporations, organizations or trusts affiliated with any such
person, except loans made in the ordinary course of business on substantially
the same terms, including interest rates and collateral as those prevailing at
the time for comparable transactions with other persons and did not involve more
than the normal risk of collectibility or present other unfavorable features.
-20-
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP served as the Company's independent auditors for the
fiscal year ended December 31, 1998, and has reported on the Company's
consolidated financial statements. Representatives of the firm will be present
at the Annual Meeting, will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions from
shareholders.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of First Defiance to vote the proxy with respect to the
election of any person as a director if the nominee is unable to serve or for
good cause will not serve, matters incident to the conduct of the meeting, and
upon such other matters as may properly come before the Annual Meeting.
Management is not aware of any business to come before the Annual Meeting other
than those matters described in this Proxy Statement. However, if any other
matters should properly come before the Annual Meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
The cost of solicitation of proxies will be borne by First Defiance. First
Defiance will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of the Common Stock. In addition to solicitations by
mail, directors, officers and employees of First Defiance may solicit proxies
personally or by telephone without additional compensation.
-21-
<PAGE>
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to have included in the proxy
solicitation materials to be used in connection with the next Annual Meeting of
Shareholders of First Defiance must be received at the main office of First
Defiance no later than November 20, 1999. If such proposal is in compliance with
all of the requirements of Rule 14a-8 under the 1934 Act, it will be included in
the Proxy Statement and set forth on the form of proxy issued for the next
Annual Meeting of Shareholders. It is urged that any such proposals be sent by
certified mail, return receipt requested.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
Shareholders of First Defiance as of the Voting Date for the Annual Meeting
are being forwarded a copy of First Defiance's Annual Report to Shareholders for
the year ended December 31, 1998 ("Annual Report"). Included in the Annual
Report are the consolidated financial statements of First Defiance as of
December 31, 1998 and 1997 and for each of the years in the three-year period
ended December 31, 1998, prepared in accordance with generally accepted
accounting principles, and the related report of First Defiance's independent
public accountants. The Annual Report is not a part of this Proxy Statement.
Upon receipt of a written request, First Defiance will furnish to any
shareholder without charge a copy of its Annual Report on Form 10-K filed with
the SEC under the 1934 Act for the year ended December 31, 1998. Upon written
request, First Defiance will furnish to any such shareholder a copy of the
exhibits to the Annual Report on Form 10-K. Such written requests should be
directed to First Defiance Financial Corp., 601 Clinton Street, Defiance, Ohio
43512, Attention: John C. Wahl, Exec. Vice President and Chief Financial
Officer. The Annual Report on Form 10-K is not a part of this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/John W. Boesling
-------------------
John W. Boesling, Secretary
March 22, 1999
Defiance, Ohio
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<PAGE>
REVOCABLE PROXY
FIRST DEFIANCE FINANCIAL CORP.
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST DEFIANCE
FINANCIAL CORP. FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
APRIL 20, 1999 AND AT ANY ADJOURNMENT THEREOF.
The undersigned hereby appoints the Board of Directors of First Defiance
Financial Corp. (the "Company") as proxies, each with power to appoint his
substitute, and hereby authorizes them to represent and vote, as designated
below, all the shares of Common Stock of the Company held of record by the
undersigned on March 5, 1999 at the Annual Meeting of Shareholders to be held at
the home office of its subsidiary, First Federal Savings and Loan, located at
601 Clinton Street, Defiance, Ohio 43512, on Tuesday, April 20, 1999, at 1:00
p.m., Eastern Time, and any adjournment thereof.
1. ELECTION OF DIRECTORS FOR THREE-YEAR TERM EXPIRING IN 2002
Nominees for a three-year term expiring in 2002:
John U. Fauster III, Marvin J. Ludwig, Thomas A. Voigt
For All
[ ] For [ ] Withhold [ ] Except
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE SHARES OF THE COMPANY'S
COMMON STOCK WILL BE VOTED AS SPECIFIED. IF NOT OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE BOARD OF DIRECTORS' NOMINEES TO THE BOARD
OF DIRECTORS SPECIFIED IN ITEM 1 AND OTHERWISE AT THE DISCRETION OF THE PROXIES.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED AT THE
ANNUAL MEETING.
Please be sure to sign and date
this Proxy in the box below.
_________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
<PAGE>
Detach above card, sign, date and mail in postage paid envelope provided.
FIRST DEFIANCE FINANCIAL CORP.
Please sign this exactly as your name(s) appear(s) on this proxy card. When
signing in a representative capacity, please give title. When shares are held
jointly, only one holder need sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
