A n n u a l R e p o r t 2010 Company Profile irst Defiance Financial Corp., headquartered in Defiance, 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 northwest Ohio, southeast Michigan and in Fort Wayne, Indiana. First Insurance & Investments is a full-service insurance agency with offices in Defiance, Archbold, Bowling Green and Bryan, Ohio. Founded in the 1920s as Northwest Savings, First Federal was chartered in 1935 as a federal mutual savings and loan company. First Federal converted to a mutual holding company and issued its first 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 Defiance 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 better reflect our community bank business strategy. Since 2003, First Defiance has acquired three banking offices, opened four de novo offices, acquired two insurance agencies and completed acquisitions of ComBanc, Inc. based in Delphos, Ohio; Genoa Savings and Loan based in Genoa, Ohio; and Safe Harbor Statement Statements contained in this Annual Report may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of 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 uncertainties inherent in general and local banking and insurance conditions, competitive factors specific 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 filings, including its most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q. Pavilion Bancorp, based in Adrian, Michigan. 1 2010 Financial Highlights (in thousands, except per share amounts) Summary of Operating Results 2010 2009 % Change Balance Sheet Data 2010 2009 % Change Net interest income $ 70,163 $ 67,322 Provision for loan losses Non-interest income (excluding securities gains/losses) Securities gains (losses) Non-interest expense (excluding non-recurring items) Net income Dividends accrued on preferred shares Accretion on preferred shares Net income applicable to common shares 23,177 27,929 23,232 29,951 4.2% (0.2%) (6.8%) Total Assets $ 2,035,517 $ 2,057,523 (1.1%) (339) (3,656) 90.7% 63,463 60,524 4.9% 8,108 7,194 12.7% (1,850) (1,850) — Loans, net 1,478,423 1,580,575 (6.5%) Deposits 1,575,419 1,580,226 (0.3%) Stockholders’ equity 240,331 234,086 2.7% (170) (160) 6.3% 6,088 5,184 17.4% Allowance for loan losses 41,080 36,547 12.4% Share Information: 2010 2009 % Change Key Ratios: 2010 2009 % 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 NM — % not meaningful $ 0.75 $ 0.64 17.2% 0.75 0.75 0.75 0.64 17.2% 0.63 19.0% 0.63 19.0% Average net interest margin 3.89% 3.76% 3.5% Return on average assets 0.39% 0.36% 8.3% – 0.295 NM Return on average equity 3.40% 3.09% 10.0% 17.16 16.44 4.4% 8,118 8,118 — Efficiency ratio 63.89% 61.50% (3.9%) 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 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 2 To Our Shareholders rom an economic environment perspective, the journey through 2010 can be compared to a ride on a roller through 2010 can be compared to a ride on a roller coaster. It was certainly a year filled with ups and downs and twists and turns. The year began with a sense of renewed optimism and enthusiasm that buoyed confidence and made many think we were going to finally shake all remnants of The Great Recession. Through the first five months of the year the positive energy was sustained, but was soon derailed as summer approached and several stimulus programs expired or stalled, and the housing market failed to exhibit any rally. The stock market gave up its better-than-five-percent gain attained through mid-May and continued to lose ground throughout the summer. Unemployment rates barely budged, and capital investments by businesses were at a standstill. At the same time, Washington was involved in several contentious legislative debates, including financial regulatory reform, which led to the passage of the Dodd-Frank Wall Street and Consumer Protection Act. The negative political rhetoric that bombarded us during the pre-election time frame did little to inspire consumer confidence, and any early optimism had totally vanished by August. Some hopefulness returned as we entered the final quarter of the year, and consumer confidence began to inch upward after the elections. The uptick continued through the end of 2010 following the two-year extension of the tax cuts to all taxpayers, but a cloud will continue to hang over the economy until the housing and job markets regain strength. The Dodd-Frank Act is the most comprehensive financial reform legislation to ever come out of Washington, and will have an effect on First Defiance. The bill was passed and signed into law in July, and it will take some time for all of the regulations prescribed in the bill to be written. However, we do know that because of this bill, First Defiance Financial Corp. will be operating under a different set of regulators in 2011. The Office of Thrift Supervision, our current regulator, is being phased out and 3 merged into the Office of the Comptroller of the Currency (OCC). Agency in Bryan, Ohio. This acquisition was accretive from The OCC will become the regulator of First Federal Bank, and the start, and strengthens our insurance agency presence in the Federal Reserve will regulate First Defiance Financial Corp. several of our market areas. The Dodd-Frank Act also created the new Consumer Financial Protection Bureau that will oversee all regulation pertaining to consumer financial products and services. One critical area we will be closely monitoring as the regulations are implemented is the bill’s overall effect on non-interest income. There is potential for this act to restrict service fees on certain products, which will negatively impact non-interest income for banks. Going forward, we will be adjusting to a new normal in financial services. The recent legislation, the change in regulators, the overall regulatory climate, and the tenuous economic scene all point to the need to develop new and different ways to conduct business. We know the economic and political twists and turns and ups and downs are now part of everyday life. We have been able to anticipate and react to them quite well Despite the challenges we faced as the economy limped throughout the year, thanks to our conservative operating along, First Defiance accomplished key strategic goals in 2010. history and prudent policies. We feel more prepared, Earnings remained below traditional run rate levels, primarily experienced, confident and ready to deal with a slow economic due to credit-related expenses, but the core earnings structure recovery. We know the local competition from large and was very solid. At First Federal Bank, significant deposit growth small financial service companies will be strong, but we will with an improved mix and disciplined pricing on the loan continue to differentiate our company with a full line of financial side produced a strong net interest margin throughout the products offered at the highest level of customer service. We year. Residential mortgage production was extremely robust, remain committed to all of our stakeholders – shareholders, especially in the second half of the year, resulting in substantial employees, and clients – and appreciate their trust and gain on sale income to the bank. We focused on controlling the commitment to us as we grow and succeed in this new era. operating expenses that will provide long-lasting benefits to the company. We also completed a conversion of our bank-wide Thank you for your interest in First Defiance Financial Corp. core processing system in November. The successful execution Sincerely, of this conversion was due to the diligence of our employees and their commitment to make this change as seamless as possible for our clients. The new system enhances our effectiveness and efficiency, and will help us create fresh and innovative products and services for our customers. Within our insurance unit First Insurance & Investments, we acquired a group life and health benefits book of business from the Andres, O’Neill, & Lowe William J. Small Chairman, President & CEO 4 Barbara A. Mitzel Area Manager Consumers Energy Adrian, Michigan 4, 5 & 7 James L. Rohrs President & Chief Executive Officer First Federal Bank Executive Vice President First Defiance Financial Corp. 1, 7 & 9 Samuel S. Strausbaugh Co-President & Chief Financial Officer Defiance Metal Products Defiance, Ohio 2, 3, 6 & 9 Thomas A. Voigt Vice President & General Manager Bryan Publishing Company Bryan, Ohio 3, 4 & 5 First Defiance Financial Corp. Board of Directors William J. Small Chairman, President & Chief Executive Officer First Defiance Financial Corp. 1, 7, 8 & 9 Stephen L. Boomer Vice Chairman & Lead Director First Defiance Financial Corp. President, Arps Dairy Defiance, Ohio 1, 2, 3, 4, 6, 8 & 9 John L. Bookmyer Executive Vice President Pain Management Group Findlay, Ohio 2, 3 & 7 Douglas A. Burgei, D.V.M. Veterinarian Napoleon, Ohio 5, 6 & 7 Peter A. Diehl Retired Business Owner Defiance, Ohio 2, 4, 5 & 6 Jean A. Hubbard Business Manager & Corporate Treasurer The Hubbard Company Defiance, Ohio 2, 3 & 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 Board Appointment 2. Audit Committee 3. Compensation Committee 4. Corporate Governance Key For Board of Directors: 1. Executive Committee Committee First Insurance & Investments, Inc. Donald P. Hileman Chief Executive Officer 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 Officer James L. Rohrs Executive Vice President John W. Boesling Senior Vice President & Corporate Secretary Donald P. Hileman Executive Vice President, Chief Financial Officer First Federal Bank of the Midwest William J. Small Chairman John H. Bick Senior Vice President, Asset Quality James L. Rohrs President, Chief Executive Officer 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 Dennis E. Rose, Jr. Executive Vice President, Chief Operations Officer James R. Williams Senior Vice President, Western Market Area President Brent L. Beard Senior Vice President, Controller John W. Boesling Senior Vice President, Secretary Lisa R. Christy Senior Vice President, Trust 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 Richard J. Mitsdarfer Senior Vice President, Risk Management Eric A. Morman Senior Vice President, Commercial Lending Michael D. Mulford Senior Vice President, Credit Administration Randall L. Rice Senior Vice President, Senior Credit Officer Marybeth Shunck Senior Vice President, Retail Administration Mary Beth K. Weisenburger Senior Vice President, Marketing Martha J. Woelke Senior Vice President, Residential Lending Community Advisory Boards Paul Kramer Kramer Enterprises, Inc. Michael Mallet Corporate Research International M. Michael Roberts dmh Toyota-Lift Michael Headley H&W Automotive Parts, Inc. & Headley Enterprises Sheryl Murphy Century 21 Strait Realty, Inc. Lenawee County, MI Jerry Lewis Speedy Arches Robert J. Schulte, Jr. HR Services Greg Wannemacher Wannemacher Enterprises Fort Wayne, IN Diane Parent Sperry Van Ness-Parke Group Fostoria, OH Frank Kinn Business/Financial Consultant Lynn Radabaugh Maple Grove Quarry, Inc. Tom Reineke Reineke Ford Dave Whitta Whitta Construction, Inc. Donald S. Yaris Fruth & Company Hicksville, OH Larry Haver Mayor of Hicksville Ed Engle Rima Manufacturing Dan Hupp Dan’s Farm Supply Emory Schmidt Retired J. David Stutzman Raymond & Stutzman Farms, LLC Lima, OH Tim DeHaven DeHaven’s Lawn & Garden Center Don Fischer Cappie Sportswear Jerry Johnson Attorney Napoleon, OH Greg Beck Beck Construction 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 Michael Keysor Custom Assembly William Shugars Retired Williams County, OH Stacey Bock Midwest Community Health Associates Walter Bumb Retired LeRoy Feather Retired Renee Isaac Retired Martin Sostoi Attorney Chad Tinkel Community Hospitals and Wellness Center James (Chip) Wood Bryan Ford Lincoln Mercury Defiance, OH Bryan Keller Keller Logistics Group, Inc. Mike Koester Koester Corporation Brad Mangas BE Mangas Construction Rick Weaver Poggemeyer Design Delphos, OH Eric Fritz Delphos Ace Hardware, Delphos Rental Corporation, Bobcat of Lima Richard Thompson Thompson Seed Farm Perry Wiltsie Vanamatic Company Findlay, OH Duane Jebbett Rowmark James Koehler Country Club Acres, Inc. 5 Shareholders Information Total Return Performance Annual Meeting The Annual Meeting of Shareholders of First Defiance Financial Corp. will be held on Tuesday, April 26, 2011 at 2:00 p.m. in the conference room at the First Federal Bank Operations Center at 25600 Elliott Road, Defiance, Ohio 43512. Investor Information Shareholders, investors and analysts interested in additional information about First Defiance Financial Corp. may contact Investor Relations at the corporate office, 419-782-5104. Stock Transfer Agent Shareholders with questions concerning the transfer of shares, lost certificates, dividend payments, dividend reinvestment, receipt of Dividends Policy The First Defiance Financial Corp. Board reviews and determines on a quarterly basis whether to declare dividends. There were no dividends multiple dividend checks, duplicate mailings or declared in 2010. changes of address should contact: Registrar and Transfer Company First Defiance Financial Corp. Transfer Agent 10 Commerce Drive, Cranford, NJ 07016-3573 Telephone: 800-368-5948 Internet: www.rtco.com Securities Listing First Defiance Financial Corp. common stock trades on the NASDAQ Global Select Market under the symbol FDEF. Dividend Reinvestment Plan Shareholders may automatically reinvest dividends in additional First Defiance 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 As of March 4, 2011, there were approximately 2,296 stockholders of record and 8,118,236 shares 330 East Jefferson Boulevard South Bend, Indiana 46624 General Counsel Vorys, Sater, Seymour & Pease LLP 221 East Fourth Street Suite 2000 Atrium Two Cincinnati, Ohio 45202 outstanding. Year Ended December 31, 2010 First Quarter Second Quarter Third Quarter Fourth Quarter High $ 12.33 $ 14.85 $ 10.63 $ 12.32 Year Ended December 31, 2009 First Quarter Second Quarter Third Quarter Fourth Quarter High $ 8.95 $ 14.25 $ 18.33 $ 18.93 Low $ 9.20 $ 8.53 $ 8.55 $ 9.94 Low $ 3.76 $ 6.10 $ 12.00 $ 10.06 First Defiance Financial Corp. 601 Clinton Street Defiance, OH 43512 419-782-5104 www.fdef.com First Federal Bank of the Midwest 601 Clinton Street Defiance, OH 43512 419-782-5015 www.first-fed.com First Insurance & Investments 419 Fifth Street, Suite 1200 Defiance, OH 43512 419-784-5431 www.firstii.com For investor relations information visit www.fdef.com