Safe Harbor Statement Statements contained in this Annual Report may not be based on historical facts and are “forward-looking statements” First Defi ance Financial Corp., headquartered in Defi ance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance & Investments. First Federal Bank operates 33 full service branches and 45 ATMs in 14 counties in northwest Ohio, southeast within the meaning of Section 27A of Michigan and in Fort Wayne, Indiana. First Insurance & Investments the Securities Act of 1933, as amended, and Section 21B of the Securities Act of 1934, as amended. Actual results could vary materially depending on risks and is a full-service insurance agency with offi ces in Defi ance and Bowling Green, Ohio. Founded in 1920 as Northwest Savings, First Federal was chartered uncertainties inherent in general and in 1935 as a federal mutual savings and loan company. First Federal local banking and insurance conditions, competitive factors specifi c to markets in which the Company and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions. The Company assumes no responsibility to update this information. For more details, please refer to the Company’s SEC fi lings, including its most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q. converted to a Mutual Holding Company and issued its fi rst stock to the public and employees in 1993. In September 1995, First Federal converted to a full stock company, trading stock on the NASDAQ national market under the ticker symbol FDEF. At the same time, First Defi ance Financial Corp. was founded as the holding company for First Federal. The bank’s name was changed to First Federal Bank of the Midwest in 1999, to refl ect our desire to provide more comprehensive fi nancial products and services. Since 2003, First Defi ance has acquired three banking offi ces, opened four de novo offi ces, acquired an insurance agency and completed acquisitions of ComBanc, Inc, based in Delphos, Ohio; Genoa Savings and Loan, based near Toledo in Genoa, Ohio; and Pavilion Bancorp, based in Adrian, Michigan. 2 O O 9 F I N A N C I A L H I G H L I G H T S (In Thousands, Except Per Share Amounts) Summary of Operating Results 2009 2008 Net interest income $ 67,322 $ 62,195 Provision for loan losses Non-interest income (excluding securities gains/losses) Securities gains (losses) Non-interest expense (excluding non-recurring items) 23,232 12,585 29,951 22,229 (3,656) (3,160) 60,524 57,794 % Change 8.2% 84.6% 34.7% 15.7% 4.7% Net income 7,194 7,357 (2.2%) Balance Sheet Data 2009 2008 % Change Total Assets $ 2,057,523 $ 1,957,400 5.1% Loans, net 1,580,575 1,592,643 (0.8%) Deposits 1,580,226 1,469,912 7.5% Dividends accrued on preferred shares Accretion on preferred shares Net income applicable to common shares (1,850) (134) 1280.6% Stockholders’ equity 234,086 229,159 2.2% (160) (11) 1354.5% 5,184 7,212 (28.1%) Allowance for loan losses 36,547 24,592 48.6% Share Information: 2009 2008 % Change Key Ratios: 2009 2008 % Change Basic earnings per common share Basic core earnings per common share Diluted earnings per common share Diluted core earnings per common share Dividends per common share Tangible book value per common share Shares outstanding at end of period $ 0.64 $ 0.91 (29.7%) 0.64 1.01 (36.6%) Average net interest margin 3.76% 3.80% (1.1%) 0.63 0.91 (30.8%) Return on average assets – core earnings 0.36% 0.44% (18.2%) 0.63 1.00 (37.0%) 0.295 0.95 (68.9%) Return on average equity – core earnings 3.09% 4.23% (27.0%) 16.44 15.67 4.9% 8,118 8,117 0.0% Effi ciency ratio – core basis 61.50% 66.43% ( 7.4%) Diluted Earnings Per Share Total Assets (in millions) Deposits (in millions) Loans (in millions) Total Non-Interest Income (excluding security gains, in millions) $2.50 $2,000 $1,500 2.00 1.50 1.00 0.50 0 1,500 1,000 500 1,000 500 $1,600 1,400 1,200 1,000 800 600 400 200 $30.0 25.0 20.0 15.0 10.0 5.0 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 2 IN September of 2008, I told a banking friend of mine that 2009 would go down in history as a year of survival for banks. The economic factors were aligning in an ominous way, even at that early point in time. It was evident we were going to have a rough ride. Sure enough, as 2008 closed out, it did not take with it the spiraling mess of the fi nancial markets or the catastrophic housing market, and there were no signs of job creation on the horizon to ease the unemployment woes. The fi rst three months of 2009 were probably the darkest and most economically challenging period any of us has ever experienced. However by midyear, even though the downturned economy still had a stranglehold on most of the country, we began to see some improvement in the future economic indicators. By year end, there appeared to be a light at the end of the tunnel. More indicators pointed to an improving economy, and we were encouraged by the stock market’s recovery from the low point in March 2009. The year proved especially tumultuous for the fi nancial services industry. The FDIC levied costly special assessments on all banks; consumers and business owners defaulted on loans in record numbers; regulators closed over 140 banks during the year and they also clamped down on lending while politicians were chastising banks for the lack of credit availability to consumers and businesses. First Defi ance faced most of the same challenges that confronted the industry throughout 2009. At First Federal Bank, credit quality was the most signifi cant of the challenges. The persistent weakness in the economy, along with the high unemployment throughout our region, heavily impacted our historically excellent asset quality. Other Than Temporary Impairment on certain investment assets also had a negative effect. And in mid-year, the aforementioned FDIC special assessment totaled nearly $1 million in pre-tax expense at First Federal. But the largest drain on earnings at the Bank throughout the year was the provision expense that was incurred to protect against possible future loan losses. After considering all of these factors, and faced William J. Small Chairman, President & CEO 3 with an uncertain regulatory climate, our Board felt it was The end result is that we weathered the stormy environ- prudent to build capital even beyond our traditionally high ment of 2009 and remained profi table, something many levels. Part of this capital plan was to fi rst reduce dividends banks were unable to accomplish. The core fundamentals to holders of common stock and then temporarily suspend were strong throughout the year, and we did not abandon dividend payments in the fourth quarter of 2009. our proven community bank strategy. This keeps us well- There are bright spots. Through all of these challenges the Bank continued to grow on a controlled basis. New business relationships were added throughout the year, resulting in signifi cant deposit growth. Mortgage loan production hit record highs in the fi rst half of 2009 as interest rates dropped to historical lows. While the mortgage production tempered somewhat in the second half of the year, it remained ahead of the levels of the prior two years. The deposit side of the balance sheet displayed dramatic positive change in the mix as our strategy of growing lower cost demand deposits and reducing our reliance on positioned to move forward as the economy recovers. How quickly the recovery will take place is still an unknown; indications are that it will be a relatively slow climb back to the top. The potential exists for additional FDIC assess- ments over and above the increased premiums already in place for deposit insurance. Talk out of Washington points toward the possibility of additional taxes against the fi nancial services industry as the government looks for ways to address the burgeoning defi cit. They are diffi cult to plan for, but we must be prepared to deal with these scenarios as well as any new opportunities when they arise. certifi cates of deposit was well executed. This change in We appreciate your investment in First Defi ance Financial mix, along with disciplined pricing on both sides of the Corp. Rest assured, we will steadfastly strive to navigate balance sheet, resulted in improvement in the net interest First Defi ance through any future rough seas and produce margin and growth in net interest income. Our insurance the results you expect and deserve. We have a dedicated subsidiary, First Insurance & Investments, also worked staff of qualifi ed individuals throughout our organization to maintain existing relationships while growing new who are focused on creating the best possible return business, though insurance premiums remained soft and for all of our stakeholders under any and all economic challenged profi tability. Assets under management in our circumstances. I am proud of our ability to stay on course Wealth Management Department grew throughout the year in this unprecedented environment, and I look forward to as additional trust and investment clients came on board. the success stories of 2010. Cross-selling between the Bank and the insurance agency improved, creating new opportunities for both entities. Our strategy of offering a complete package of fi nancial services and products throughout our markets has been well received and we enjoyed market share growth throughout our footprint in 2009. Sincerely, William J. Small Chairman, President & CEO 4 Barbara A. Mitzel Area Manager Consumers Energy Adrian, Michigan 5 & 7 James L. Rohrs President & Chief Executive Offi cer First Federal Bank Executive Vice President First Defi ance Financial Corp. 1, 7 & 9 Samuel S. Strausbaugh Co-President Defi ance Metal Products Defi ance, Ohio 2, 3, 6, 7 & 9 Thomas A. Voigt Vice President & General Manager Bryan Publishing Company Bryan, Ohio 3, 4, 5 & 6 FIRST DEFIANCE FINANCIAL CORP. BOARD OF DIRECTORS William J. Small Chairman, President & Chief Executive Offi cer First Defi ance Financial Corp. 1, 7, 8 & 9 Stephen L. Boomer Vice Chairman & Lead Director First Defi ance Financial Corp. President, Arps Dairy Defi ance, Ohio 1, 2, 3, 4, 6, 8 & 9 John L. Bookmyer Chief Executive Offi cer Pain Management Group Findlay, Ohio 2 & 3 Douglas A. Burgei, D.V.M. Veterinarian Napoleon, Ohio 4, 5, 6 & 7 Peter A. Diehl Retired Business Owner Defi ance, Ohio 2, 3, 5 & 6 Jean A. Hubbard Business Manager & Corporate Treasurer The Hubbard Company Defi ance, Ohio 4, 5 & 6 Dwain I. Metzger Farmer Elida, Ohio 4 & 5 5. Strategic Planning 6. Succession Planning 7. Investment Committee 8. Trust Committee 9. First Insurance & Investments Appointment 2. Audit Committee 3. Compensation Committee 4. Corporate Governance Key For Board of Directors: 1. Executive Committee Committee Board FIRST INSURANCE & INVESTMENTS, INC. Donald P. Hileman Chief Executive Offi cer Steven P. Grosenbacher Executive Vice President Kenneth G. Keller Executive Vice President Group Health & Life Timothy S. Whetstone Executive Vice President Secretary Lawrence H. Woods Executive Vice President Property & Casualty FIRST DEFIANCE FINANCIAL CORP. CORPORATE OFFICERS William J. Small Chairman, President & Chief Executive Offi cer James L. Rohrs Executive Vice President Richard J. Mitsdarfer Senior Vice President, Risk Management Donald P. Hileman Executive Vice President, Chief Financial Offi cer John W. Boesling Senior Vice President & Corporate Secretary FIRST FEDERAL BANK OF THE MIDWEST William J. Small Chairman James L. Rohrs President, Chief Executive Offi cer Gregory R. Allen Executive Vice President, Southern Market Area President Timothy K. Harris Executive Vice President, Eastern Market Area President Jeffrey D. Vereecke Executive Vice President, Northern Market Area President Bradley D. Spitnale Senior Vice President, Western Market Area President Dennis E. Rose, Jr. Executive Vice President, Chief Operations Offi cer Donald P. Hileman Executive Vice President, Chief Financial Offi cer Brent L. Beard Senior Vice President, Controller John H. Bick Senior Vice President, Asset Quality John W. Boesling Senior Vice President, Secretary Lisa R. Christy Senior Vice President, Certifi ed Trust and Financial Advisor Patricia A. Cooper Senior Vice President, Bank Secrecy, Fraud and Security David J. Kondas Senior Vice President, Wealth Management Kathleen A. Miller Senior Vice President, Information Technology Richard J. Mitsdarfer Senior Vice President, Risk Management Linda R. Moening Senior Vice President, Deposit Operations Eric A. Morman Senior Vice President, Commercial Lending James R. Williams Senior Vice President, Commercial Lending Michael D. Mulford Senior Vice President, Credit Administration Patrick S. Rothgery Senior Vice President, Residential Lending Mary Beth K. Weisenburger Senior Vice President, Marketing Marybeth Shunck Senior Vice President, Retail Administration Randall L. Rice Senior Vice President, Commercial Lending COM MUNIT Y ADVISORY BOARDS DEFIANCE, OH Rick Weaver Poggemeyer Design Mike Koester Koester Corporation Brad Mangas BE Mangas Construction Bryan Keller Keller Logistics Group, Inc. DELPHOS, OH Eric Fritz Delphos Ace Hardware, Delphos Rental Corporation, Bobcat of Lima Richard Thompson Thompson Seed Farm Perry Wiltsie Vanamatic Company FINDLAY, OH James Koehler Country Club Acres, Inc. Paul Kramer Kramer Enterprises, Inc. M. Michael Roberts dmh Toyota-Lift Michael Mallet Corporate Research International Duane Jebbett Rowmark FORT WAYNE, IN Tim Haffner Baker & Daniels Diana Parent Sperry Van Ness/Parke Group Jim Calkins Coventry Court FOSTORIA, OH Frank Kinn Business/Financial Consultant Lynn Radabaugh Maple Grove Quarry, Inc. Tom Reineke Reineke Ford Dave Whitta Whitta Construction, Inc. HICKSVILLE, OH Larry Haver Mayor of Hicksville Michael Headley H&W Automotive Parts, Inc. & Headley Enterprises LENAWEE COUNTY, MI J. David Stutzman Raymond & Stutzman Farms, LLC Dan Hupp Dan’s Farm Supply Emory Schmidt Retired Ed Engle Rima Manufacturing LIMA, OH Tim DeHaven DeHaven’s Lawn & Garden Center Robert J. Schulte, Jr. HR Services Greg Wannemacher Wannemacher Enterprises Jerry Johnson Attorney Don Fischer Cappie Sportswear Jerry Lewis Speedy Arches NAPOLEON, OH Greg Beck Beck Construction Kay Wesche Henry County Development Services Susan Witt Gerken Paving Char Zgela Mel Lanzer Co. OTTAWA, OH Kevin Ellerbrock Ellerbrock Construction Kenneth Konst Farmer Mike Ruhe Pathways Counseling Center Dr. Dean Walther Optometrist PAULDING, OH Joseph Burkard Cook, Troth, Burkard & Gorrell William Shugars Retired Michael Keysor Custom Assembly WILLIAMS COUNTY, OH LeRoy Feather Retired Renee Isaac Retired Martin Sostoi Attorney James (Chip) Wood Bryan Ford Lincoln Mercury Chad Tinkel Community Hospitals and Wellness Center Walter Bumb Retired Stacey Bock Midwest Community Health Associates 5 TOTAL RETURN PERFORMANCE RETURN PERFORMANCE RETURN PERFORMANCE DIVIDENDS POLICY Cash dividends on the common stock are declared quarterly and have been paid since First Defi ance and its predecessor, First Federal Savings and Loan, went public in 1993. Dividends declared in 2009 totalled $0.295 per share. DIVIDEND REINVESTMENT PLAN Shareholders may automatically reinvest dividends in additional First Defi ance Financial Corp. common stock through the Dividend Reinvestment Plan, which also provides for purchase by voluntary cash contributions. For additional information, please contact the Registrar and Transfer Company at 800-368-5948. AUDITORS Crowe Horwath LLP 330 East Jefferson Boulevard South Bend, Indiana 46624 GENERAL COUNSEL Vorys, Sater, Seymour & Pease LLP 221 East Fourth Street Suite 2100 Atrium Two Cincinnati, Ohio 45202 ANNUAL MEETING The Annual Meeting of Shareholders of First Defi ance Financial Corp. will be held on Tuesday, April 20, 2010 at 2:00 p.m. in the conference room at the First Federal Bank Operations Center at 25600 Elliott Road, Defi ance, Ohio 43512. INVESTOR INFORMATION Shareholders, investors and analysts interested in additional information about First Defi ance Financial Corp. may contact Investor Relations at the corporate offi ce, 419-782-5104. STOCK TRANSFER AGENT Shareholders with questions concerning the transfer of shares, lost certifi cates, dividend payments, dividend reinvestment, receipt of multiple dividend checks, duplicate mailings or changes of address should contact: Registrar and Transfer Company First Defi ance Financial Corp. Transfer Agent 10 Commerce Drive, Cranford, NJ 07016-3573 Telephone: 800-368-5948 Internet: www.rtco.com SECURITIES LISTING First Defi ance Financial Corp. common stock trades on the NASDAQ Global Select Market under the symbol FDEF. As of March 5, 2010, there were approximately 2,359 stockholders of record and 8,117,520 shares outstanding. PRICE RANGE Year Ended December 31, 2009 First Quarter Second Quarter Third Quarter Fourth Quarter High $ 8.95 $14.25 $18.33 $18.93 Year Ended December 31, 2008 First Quarter Second Quarter Third Quarter Fourth Quarter High $22.51 $20.00 $17.66 $14.50 Low $ 3.76 $ 6.10 $12.00 $10.06 Low $17.30 $15.90 $10.00 $6.00 First Defi ance Financial Corp. 601 Clinton Street Defi ance, OH 43512 www.fdef.com 419-782-5104 First Federal Bank of the Midwest 601 Clinton Street Defi ance, OH 43512 www.fi rst-fed.com 419-782-5015 First Insurance & Investments 419 Fifth Street, Suite 1200 Defi ance, OH 43512 www.fi rstii.com 419-784-5431 For investor relations information visit www.fdef.com