SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
FIRST DEFIANCE FINANCIAL CORP.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
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previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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4) Date Filed:
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FIRST DEFIANCE FINANCIAL CORP.
601 Clinton Street
Defiance, Ohio 43512
(419) 782-5015
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 2002
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 Bank of the
Midwest, located at 601 Clinton Street, Defiance, Ohio 43512, Tuesday, April 23,
2002 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 8, 2002 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/William J. Small
-------------------
William J. Small
Chairman, President and Chief Executive Officer
Defiance, Ohio
March 20, 2002
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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, WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED OR FOLLOW THE INSTRUCTIONS ON THE PROXY CARD
FOR VOTING BY TELEPHONE OR OVER THE INTERNET. IF YOU ATTEND THE ANNUAL 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 BEFORE IT IS EXERCISED.
--------------------------------------------------------------------------------
PROXY STATEMENT
First Defiance Financial Corp.
601 Clinton Street
Defiance, Ohio 43512
2002 ANNUAL MEETING OF SHAREHOLDERS
April 23, 2002
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
Bank of the Midwest ("First Federal") located at 601 Clinton Street, Defiance,
Ohio 43512, on Tuesday April 23, 2002 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 20, 2002.
Proxies
The proxy solicited hereby, if properly submitted 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 valid 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.
1
Voting Rights
Only shareholders of record at the close of business on March 8, 2002
("Voting Record Date") will be entitled to notice of and to vote at the Annual
Meeting. On the Voting Record Date, there were 6,874,448 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 proposal for election of directors is considered a
"discretionary" item upon which brokerage firms may vote in their discretion on
behalf of their clients if such clients have not furnished voting instructions.
2
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 persons 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"), 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.
Amount and Nature of
Name of Beneficial Owner or Beneficial Ownership as of Percent of
Number of Persons in Group March 8, 2002 (1) Common Stock
-------------------------- --------------------------- ------------
First Defiance Financial Corp.
Employee Stock Ownership Plan 720,065 (2) 10.47%
Private Capital Management 578,191 (3) 8.41%
Dimensional Fund Advisors, Inc. 543,089 (4) 7.90%
William J. Small 166,045 (5) 2.38%
Don C. Van Brackel 271,609 (6) 3.90%
Dr. John U. Fauster III 68,388 (7)(8) (9)
Dr. Marvin J. Ludwig 71,716 (10)(11) 1.04%
Stephen L. Boomer 47,101 (12) (9)
Thomas A. Voigt 30,176 (12)(13) (9)
Dr. Douglas A. Burgei 32,458 (12) (9)
Gerald W. Monnin 52,669 (14) (9)
Peter Diehl 20,128 (15) (9)
James L. Rohrs 26,326 (16) (9)
John C. Wahl 120,620 (17) 1.74%
All directors and executive
officers as a group (11 persons) 890,893 (18) 12.19%
(Footnotes on next page)
3
(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 Defiance Financial Corp. 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 Schedule 13G filed with the Securities and Exchange Commission
(the "SEC") on February 15, 2002, Private Capital Management ("PCM") is an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940. PCM has reported shared voting and investment power over
556,191 shares of Common Stock. Gregg J. Powers, President of PCM, has
reported shared voting and investment power over the same 556,191 shares of
Common Stock. Bruce S. Sherman, Chief Executive Officer of PCM, has
reported shared voting and investment power over 561,191 shares of Common
Stock, (including the 556,191 shares also reported by PCM and Mr. Powers)
and sole voting and investment power over an additional 17,000 shares of
Common Stock.
(4) Based on Schedule 13G dated January 30, 2002, filed with the SEC on January
30, 2002, 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 543,089 shares of
Common Stock. All 543,089 shares reported are owned by the entities for
which Dimensional serves as investment advisor, and Dimensional disclaims
beneficial ownership of such securities.
(5) Includes 11,373 shares which have been allocated to Mr. Small's account in
the ESOP and 107,100 shares that may be acquired upon the exercise of stock
options.
(6) Includes 137,046 shares owned with shared voting and investment power,
16,347 shares held in trust for the 1996 Management Recognition Plan and
Trust ("MRP") which vest after 60 days for which Mr. Van Brackel is a
trustee, 25,442 shares that have been allocated to Mr. Van Brackel's
account in the ESOP and 92,774 shares that may be acquired upon the
exercise of stock options.
(7) Includes 310 shares that vest within 60 days under the MRP and 40,631
shares that may be acquired upon the exercise of stock options.
(8) Includes 1,000 shares owned with shared voting and investment power.
(9) Less than 1% of the total outstanding shares of Common Stock.
(10) Includes 310 shares that vest within 60 days under the MRP and 35,631
shares that may be acquired upon the exercise of stock options.
4
(11) Includes 1,431 shares owned with shared voting and investment power.
(12) Includes 310 shares that vest within 60 days under the MRP and 19,041
shares that may be acquired upon the exercise of stock options.
(13) Includes 1,330 shares owned with shared voting and investment power.
(14) Includes 1,555 shares that vest within 60 days under the MRP and 15,154
shares that may be acquired upon the exercise of stock options.
(15) Includes 1,555 shares that vest within 60 days under the MRP and 14,376
shares that may be acquired upon the exercise of stock options.
(16) Includes 640 shares that vest within 60 days under the MRP, 495 shares that
have been allocated to Mr. Rohrs' account in the ESOP and 10,600 shares
that may be acquired upon the exercise of stock options.
(17) Includes 16,347 shares held in trust for the MRP which vest after 60 days
for which Mr. Wahl is a trustee, 1,600 shares that vest within 60 days
under the MRP, 14,714 shares that have been allocated to Mr. Wahl's account
in the ESOP and 60,000 shares that may be acquired upon the exercise of
stock options.
(18) Includes options to purchase 433,389 shares, 6,900 shares that vest within
60 days under the MRP, 52,027 shares allocated to the accounts of executive
officers in the ESOP, and 16,347 shares held in trust for the MRP which
vest after 60 days for which Mr. Van Brackel and Mr. Wahl are trustees.
5
INFORMATION REGARDING NOMINEES FOR DIRECTOR, DIRECTORS
WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
Election of Directors
First Defiance's Board of Directors is composed of nine members, divided
into three classes. The members of each class are 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 expiring in 2005, and in each case
until their successors are elected and qualified. Two of the nominees, Dr.
Fauster and Mr. Voigt, currently serve as directors of First Defiance. The third
nominee, Mr. Rohrs, is currently an Executive Vice President of First Defiance
and President and Chief Operating Officer of First Federal.
Unless otherwise directed, each valid proxy submitted 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.
6
Information Regarding Nominees for Director and Continuing Directors
The following tables present information concerning each nominee for
director and each director whose term continues.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
NOMINEES BE ELECTED AS DIRECTORS
NOMINEES FOR DIRECTOR WITH THREE-YEAR TERMS EXPIRING IN 2005
Positions Held at Director
Name Age First Defiance Since (1)
------------------- ----- --------------------------- -----------------
Dr. John U. Fauster 64 Director 1975
Thomas A. Voigt 59 Director 1995
James L. Rohrs 54 Executive Vice President
of First Defiance and
President and Chief
Operating Officer of
First Federal N/A
DIRECTORS WITH TERMS EXPIRING IN 2003
Positions Held at Director
Name Age First Defiance Since (1)
------------------- ----- --------------------------- -----------------
Don C. Van Brackel 63 Director, Vice Chairman 1979
Dr. Douglas A. Burgei 47 Director 1995
Gerald W. Monnin 63 Director 1997
(Footnotes on next page)
7
DIRECTORS WITH TERMS EXPIRING IN 2004
Positions Held at Director
Name Age First Defiance Since (1)
------------------- ----- --------------------------- -----------------
William J. Small 51 Chairman, President
and Chief Executive Officer 1998
Stephen L. Boomer 51 Director 1994
Peter A. Diehl 51 Director 1998
(1) Each director also serves as a director of First Federal, a wholly owned
subsidiary of First Defiance. The indicated year includes service as a
director of 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 retired from the practice of
dentistry during 2000. Prior to that he was affiliated with the Defiance Dental
Group, Defiance, Ohio. He has been a director since 1975 and currently serves as
a member of the Executive and Loan Review, Audit, Investment and Long Range
Planning Committees.
Thomas A. Voigt. Mr. Voigt is 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 as a member of the Compensation and MRP - Stock
Options Committees and serves on the Executive and Loan Review Committees on a
rotating basis during the year.
James L. Rohrs. Mr. Rohrs has served as an Executive Vice President of
First Defiance and as President and Chief Operating Officer of First Federal
since August 1999. He is standing for election to his first term as a director.
He joined First Defiance in his present capacity in August 1999. Prior to
joining First Defiance, Mr. Rohrs was employed by Huntington National Bank for
27 years. From 1994 to 1999 Mr. Rohrs served as Business Banking Product Manager
for Huntington's bank-wide small business market segment. Prior to that he was
regional executive for Huntington's Northwest Ohio region. Mr. Rohrs is a member
of the Leader Mortgage Board Committee and First Insurance and Investments Board
of Directors.
8
William J. Small. Mr. Small has served as President, Chairman of the Board
and Chief Executive Officer of First Defiance and Chairman of the Board and
Chief Executive Officer of First Federal since 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. Mr. Small is also Chairman of the
Executive Committee, the Loan Review Committee, and The Leader Mortgage Board
Committee and a member of the Investment and Trust Committees of First Federal.
He is also Chairman of First Insurance and Investments' Board of Directors.
Stephen L. Boomer. Mr. Boomer is President/Chief Executive Officer and
co-owner of Arps Dairy Inc., Defiance, Ohio, a processor and distributor of
dairy products. He has been a director since August 1994 and currently serves as
Chairman of the Audit Committee and as a member of the MRP - Stock Options
Committee and the Trust Committee as well as the First Insurance and Investments
Board. He also serves on the Executive and Loan Review Committees on a rotating
basis during the year.
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 as chairman of the Compensation Committee, as a member of the Audit and
Long Range Planning Committees, and as a member of the First Insurance and
Investments Board. He also serves on the Executive and Loan Review Committees on
a rotating basis during the year.
Don C. Van Brackel. Mr. Van Brackel has served as Vice Chairman of the
First Defiance Board of Directors since January 1, 1999. Prior to that, Mr. Van
Brackel served as Chairman of the Board of Directors and Chief Executive Officer
of First Defiance and First Federal, 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 since 1979. Mr. Van
Brackel is a member of the Executive, Loan Review, Investment, Long Range
Planning, Compensation, Trust and The Leader Mortgage Board Committees.
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 a member of the MRP - Stock Options, Investment and Long
Range Planning Committees and serves on the Executive and Loan Review Committees
on a rotating basis.
9
Gerald W. Monnin. Mr. Monnin is Chairman of the Board 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 as a member of the Compensation, Long Range Planning, 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.
Executive Officers Who Are Not Directors
The following sets forth certain information regarding the executive
officers of First Defiance who are not directors or nominees, including their
business experience for at least the past five years.
John C. Wahl, Age 41. 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 with Ernst & Young LLP, the Company's independent
auditors.
10
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 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 2001, First Defiance determined that all Section 16 filings were 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 14 meetings of the Board of Directors of First Defiance and 14
meetings of the Board of Directors of First Federal held during 2001. No
director attended fewer than 75% of the total number of meetings of the Board of
Directors of First Defiance or First Federal, as applicable, and meetings held
by all committees of the Board on which the director served during 2001.
The Boards of Directors of First Defiance and First Federal have
established various committees, including Executive, Audit, 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 articles of incorporation or code of
regulations or its Board of Directors. As Chairman of the Board, Mr. Small
serves as Chairman of the Executive Committee. Mr. Van Brackel served as a
permanent member of the Executive Committee in 2001. The remaining directors
serve on the Committee on a rotating basis during the year. The Executive
Committee met 52 times during 2001.
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, (iii) reports issued in connection
with internal audit procedures performed by firms engaged by the Audit Committee
and (iv) reports issued by First Federal Bank's Compliance Officer. Drs. Ludwig
and Fauster, and Messrs. Diehl and Boomer serve as members of this committee. In
January 2000 the Audit Committee adopted and the full Board of Directors
ratified a formal Audit Committee Charter.
11
The Compensation Committee, consisting of Messrs. Monnin, Voigt, Diehl and
Van Brackel and Dr. Ludwig was established by the Board of Directors to oversee
the compensation programs provided to First Defiance's management including base
salaries, bonuses and benefit plans.
First Defiance does not have a nominating committee. Nominations are made
by the full Board of Directors.
12
Report of the Audit Committee
The Audit Committee is comprised of four directors, all of whom are
considered "independent" under rule 4200(a)(14) of the National Association of
Securities Dealers' listing standards.
The Audit Committee oversees First Defiance's financial reporting process
on behalf of the Board of Directors. Management has the primary responsibility
for the financial statements and the reporting process including the systems of
internal control. In fulfilling its oversight responsibilities, the Committee
reviewed with management the audited financial statements in the Annual Report
on Form 10-K, including a discussion of the quality, not just the acceptability,
of the accounting principles, the reasonableness of significant judgments, and
the clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed under generally accepted
auditing standards. In addition, the Committee has discussed with the
independent auditors the auditors' independence from management and the Company,
including the matters in the written disclosures required by the Independence
Standards Board, and considered the compatibility of non-audit services with the
auditors' independence.
The Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Committee
meets with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, their evaluations of the
Company's internal controls, and the overall quality of the Company's financial
reporting. The Committee held five meetings during 2001.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2001 for filing with the SEC. The Committee and the
Board have also approved the selection of Ernst & Young LLP as the Company's
independent auditors for the year ended December 31, 2002.
Stephen L. Boomer, Audit Committee Chair
Marvin J. Ludwig, Audit Committee Member
John U. Fauster, III, Audit Committee Member
Peter A. Diehl, Audit Committee Member
March 18, 2002
13
EXECUTIVE COMPENSATION
Summary
The following table sets forth a summary of certain information concerning
the compensation awarded 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 its
subsidiaries whose total annual compensation during the year ended December 31,
2001 exceeded $100,000. Positions are listed as of December 31, 2001.
||===========================|========|=======================|==============================|====================||
|| | | Annual Compensation | Long Term Compensation | ||
|| | | (4) | | ||
|| | |-----------------------| | ||
|| Name and | Year |Salary | Bonus | Awards | All Other ||
|| Principal Position | | (1)(2) | (3) | | Compensation ||
|| | | | |------------------------------| (6) ||
|| | | | | Stock Securities | ||
|| | | | | Grants(5) Underlying | ||
|| | | | | Options | ||
||---------------------------|--------|----------|------------|-------------|----------------|--------------------||
||---------------------------|--------|----------|------------|-------------|----------------|--------------------||
|| | | | | | | ||
|| William J Small, | 2001 | $208,432| $102,502| -- | -- | $17,439 ||
|| Chairman, President and | 2000 | 197,200| 76,325| -- | -- | 21,639 ||
|| Chief Executive Officer | 1999 | 192,000| 56,857| -- | -- | 21,221 ||
|| | | | | | | ||
||---------------------------|--------|----------|------------|-------------|----------------|--------------------||
||---------------------------|--------|----------|------------|-------------|----------------|--------------------||
|| | | | | | | ||
|| John C. Wahl, Executive | 2001 | $129,800| $56,408| -- | -- | $16,947 ||
|| Vice President, Chief | 2000 | 125,000| 36,695| -- | -- | 20,340 ||
|| Financial Officer and | 1999 | 117,000| 26,246| -- | -- | 17,070 ||
|| Treasurer | | | | | | ||
||---------------------------|--------|----------|------------|-------------|----------------|--------------------||
||---------------------------|--------|----------|------------|-------------|----------------|--------------------||
|| | | | | | | ||
|| James L. Rohrs, Executive | 2001 | $150,000| $63,279| $34,800 | 40,000 | $17,439 ||
|| Vice President, President | 2000 | 135,000| 44,594| -- | 600 | 2,693 ||
|| and Chief Operating | 1999 | 43,735| --| 34,920 | 25,000 | -- ||
|| Officer of First Federal | | | | | | ||
||===========================|========|==========|============|=============|================|====================||
(Footnotes on next page)
14
(1) Includes amounts deferred by Messrs. Small, Wahl and Rohrs pursuant to
First Defiance's deferred compensation program.
(2) Mr. Rohrs 1999 compensation is from his August 30, 1999 hire date.
(3) Bonus amounts reflect amounts earned during the fiscal year as determined
by the Compensation Committee, including amounts which are paid in the
following year.
(4) 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 each of the years presented did not exceed the lesser of
$50,000 or 10% of the total of annual salary and bonus reported for the
individual.
(5) Represents the grant of 3,200 and 3,211 shares of restricted Common Stock
to Mr. Rohrs in April 2001 and August 1999, respectively 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 Mr. Rohrs had a fair value at
December 31, 2001 of $48,640 and $48,807 respectively.
(6) Consists of amounts allocated by First Defiance on behalf of Messrs. Small,
Wahl and Rohrs pursuant to the ESOP and matching and profit sharing
contributions pursuant to First Defiance's 401(k) Plan.
15
Stock Options
The following table provides information relating to option grants made in
2001 to the individuals named in the Summary Compensation Table.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
Potential realizable
value at assumed
annual rates of stock
Individual Grants price appreciation
for option terms
----------------------------------------------------------- -----------------------
Percent
Number of of total
securities options
underlying granted
Executive options to Exercise Expiration
Officer granted employees Price date 5% 10%
in 2001
---------------- ----------- ---------- --------- ----------- --------- ----------
James L. Rohrs 40,000 (1) 17.1% $14.00 2011 $352,181 $892,496
--------------------------------
(1) Options were granted under the 2001 Stock Option and Incentive Plan and
vest 20% per year on the anniversary date of the grant.
The following table sets forth certain information concerning options held
at December 31, 2001 under the 1993 Stock Incentive Plan, the 1996 Stock Option
Plan and the 2001 Stock Option and Incentive Plan. No options were exercised by
any of the named executives during 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Shares Number of
Acquired on Value Securities Underlying Value of Unexercised
Name Exercise Realized Unexercised In-the-Money Options at Year
Options at Year End End (1)
-------------------- ------------ ---------- -------------------------------- ---------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- -------------- ------------- ---------------
William J. Small -- -- 107,100 -- $505,570 --
James L. Rohrs -- -- 10,600 55,000 39,185 $102,563
John C. Wahl -- -- 60,000 -- 253,250 --
--------------------
(1) Based on a per share market price of $15.20 at December 31, 2001 and
exercise prices ranging from $10.375 per share to $14.00 per share.
16
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
70% to 80% of total compensation and incentive bonus targets ranging from 20% to
30%. 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 its subsidiaries 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 its
subsidiaries 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 executive
compensation for executive officers in First Defiance's peer group.
For 2001, the Board of Directors prescribed that certain target
measurements be met in order to fund the executive compensation pool. The
components measured included diluted earnings per share, growth in combined net
interest income and non-interest income, and the efficiency ratio. The Plan
provides for threshold, target and maximum payout levels with achievement of
targets resulting in 100% payouts. The formula provides for payouts in excess of
100% of the bonus pools if target levels are exceeded. Based on 2001 financial
results, 129.14% of the targeted executive bonus pool was funded.
Peter A. Diehl, Compensation Committee Chair
Marvin J. Ludwig, Compensation Committee Member
Thomas A. Voigt, Compensation Committee Member
Don C. Van Brackel, Compensation Committee Member
Gerald W. Monnin, Compensation Committee Member
17
Performance Graph
The following graph compares the yearly cumulative total return on the
Common Stock for the last five years with (i) the yearly cumulative total return
on the stocks included in the Nasdaq Stock Market Index (for United States
companies), (ii) the yearly cumulative total return on stocks included in the
Nasdaq Bank Stock Index and (iii) the SNL Midwest Thrift 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
[Graphic-Performance Graph]
Period Ending
------------------------------------------------------------------------
Index 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-----------------------------------------------------------------------------------------------------------
First Defiance Financial Corp. 100.00 132.32 120.96 92.15 100.14 144.93
NASDAQ - Total US 100.00 122.48 172.68 320.89 193.01 153.15
NASDAQ Bank Index 100.00 167.41 166.33 159.89 182.38 197.44
SNL Midwest Thrift Index 100.00 161.16 148.90 123.79 166.95 192.00
18
Directors' Compensation
During the year ended December 31, 2001, 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 First Defiance or First Federal Board meeting
attended (back-to-back First Defiance and First Federal board meetings are
considered one meeting for purposes of this fee). 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 and a $100 fee for each committee meeting attended ($200 for
committee chairman), with the exception of rotating service on the Executive
Committee and service on The Leader Mortgage Board Committee. For service on the
Executive Committee, Outside directors received $100 per meeting attended during
their term as members. For service on The Leader Mortgage Board Committee,
outside directors received $500 for each meeting attended. For service on the
First Insurance and Investments Board, outside directors received $300 for each
meeting attended.
As Vice Chairman of the Board, Mr. Van Brackel is paid an annual salary of
$63,000. 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 does not receive
any additional compensation for his service on the Board of Directors.
Employment Agreements
First Defiance has entered into employment agreements with Messrs. Small,
Rohrs, and Wahl (the "Executives"). The form of employment agreement for each of
the Executives is substantially the same and provides each officer with a
three-year term of employment commencing on the date of the agreement. Each
year, the Board of Directors of First Defiance considers and reviews the
extension of the terms of each agreement and extends the term unless either
party gives notice of non-renewal to the other party.
The employment agreements are terminable with or without cause by First
Defiance. 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 Defiance for cause, disability, retirement or death.
However, in the event that (i) an Executive terminates his employment because of
failure of First Defiance to comply with any material provision of the
employment agreement or (ii) the employment agreement is 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 Defiance 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 Defiance as well as continued
participation in employee benefit plans of First Defiance (other than retirement
plans and stock compensation plans) until the expiration of the remaining term
of employment. "Good Reason" is generally defined in the employment agreements
to include the assignment by First Defiance 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
Defiance prior to such assignment or prior to a change in control of First
Defiance.
19
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.
Indebtedness of Management
First Defiance had no loans outstanding during 2001 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 which did not involve more than
the normal risk of collectibility or present other unfavorable features.
20
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP served as the Company's independent auditors for the
fiscal year ended December 31, 2001, and has reported on the Company's
consolidated financial statements. Fees for the last fiscal year paid to Ernst &
Young LLP were as follows:
Audit Fees: During the year ended December 31, 2001, First Defiance
incurred fees totaling $125,000 to Ernst & Young LLP for professional services
in connection with the audit of First Defiance's annual financial statements and
the review of financial statements included in First Defiance's Forms 10-Q.
Financial Information Systems Design and Implementation Fees: During the
2001 fiscal year, First Defiance incurred no fees to Ernst & Young LLP for
professional accounting services to design, implement or manage, hardware or
software that collects or generates information significant to First Defiance's
financial statements
All Other Fees: During fiscal year 2001, First Defiance incurred fees
totaling $248,840 to Ernst & Young LLP for all accounting services other than
the services discussed in "Audit Fees". These fees including audit related
services of $129,740, and non-audit services of $119,100. Audit related services
generally include fees for pension and mortgage banking compliance audits,
accounting consultations, internal audit services at The Leader Mortgage
Company, and SEC registration statements. Non-audit services include tax return
compliance and tax planning and mergers and acquisition consulting including tax
consulting. The Audit Committee has determined that the provision of these
additional services is compatible with maintaining Ernst & Young LLP's
independence.
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.
21
OTHER MATTERS
Each proxy confers discretionary authority on the Board of Directors of
First Defiance to vote the proxy for 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.
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, 2002. 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. In addition, if a shareholder intends
to present a proposal at the 2003 annual meeting of shareholders of First
Defiance without including the proposal in the proxy solicitation materials
relating to that meeting, and if the proposal is not received by February 3,
2003, then the proxies designated by the Board of Directors of First Defiance
for the 2003 annual meeting may vote proxies in their discretion on any such
proposal without mention of such matter in the proxy solicitation materials or
on the proxy card for such meeting.
22
ANNUAL REPORTS AND FINANCIAL STATEMENTS
Shareholders of First Defiance as of the Voting Record Date for the Annual
Meeting are being provided with a copy of First Defiance's Annual Report to
Shareholders and Form 10-K for the year ended December 31, 2001 ("Annual
Report"). Included in the Annual Report are the consolidated financial
statements of First Defiance as of December 31, 2001 and 2000 and for each of
the years in the three-year period ended December 31, 2001, 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.
BY ORDER OF THE BOARD OF DIRECTORS
/S/John W. Boesling, Secretary
------------------------------
John W. Boesling
Secretary
March 20, 2002
Defiance, Ohio
23
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
REVOCABLE PROXY
FIRST DEFIANCE FINANCIAL CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FIRST DEFIANCE FINANCIAL CORP. ANNUAL MEETING OF SHAREHOLDERS
April 23, 2002
1:00 p.m. local time
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 8, 2002 at the Annual Meeting of Shareholders to be held at
the home office of its subsidiary, First Federal Bank, located at 601 Clinton
Street, Defiance, Ohio 43512, on Tuesday, April 23, 2002, at 1:00 p.m., Eastern
Time, and any adjournment thereof.
1. Election of directors for three-year term expiring in 2005.
Nominees for a three-year term expiring in 2005:
With- For all
[ _ ] For [ _ ] hold [ _ ] Except
(01) John U. Fauster (03) James L. Rohrs
(02) Thomas A. Voigt
INSTRUCTION: To withhold authority to vote for any nominee(s), mark "For All
Except" and write that nominee(s') name(s) in the space provided below. Please
be sure to sign and date Date this Proxy in the box below.
--------------------------------------------------------------------------------
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
The Board of Directors recommends a vote "FOR" Proposal 1.
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 PROPOSAL 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
Detach above card,sign, date and mail in postage paid envelope provided.
FIRST DEFIANCE FINANCIAL CORP.
PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR(S) ON THIS CARD. When signing as an
attorney, executor, administrator, trustee or guardian, please give full title.
If a corporation or partnership, write in the full corporate or partnership name
and have the President or other authorized officer sign. If shares are held
jointly, each holder should sign, but only one signature is required.
PLEASE ACT PROMPTLY SIGN, DATE & MAIL YOUR PROXY CARD TODAY
IF YOUR ADDRESS HS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE EMVELOPE PROVIDED.
_________________________________________
_________________________________________
_________________________________________