| | Annual Compensation (3) | Long Term Compensation | |
---|
Name and | Year | Salary (1) | Bonus (2) | Awards | All Other Compensation |
---|
Principal Position | | | | | (4) |
---|
| | | | Stock Grants | Securities Underlying Options | |
---|
William J Small, Chairman, | 2005 | $243,909 | $105,643 | — | 1,000 | $20,391 |
President and Chief Executive | 2004 | 233,009 | 75,914 | — | 1,000 | 24,421 |
Officer | 2003 | 225,024 | 43,815 | — | 1,000 | 24,133 |
John C. Wahl, Executive Vice | 2005 | $150,600 | $ 50,734 | — | 2,000 | $18,298 |
President, Chief Financial | 2004 | 145,500 | 36,870 | — | 1,000 | 24,421 |
Officer and Treasurer | 2003 | 140,000 | 66,326 | — | 5,000 | 19,562 |
James L. Rohrs, Executive | 2005 | $172,300 | $ 58,044 | — | 2,000 | $20,391 |
Vice President, President and | 2004 | 166,500 | 42,191 | — | 1,000 | 24,421 |
Chief Operating Officer of First Federal | 2003 | 162,000 | 76,749 | — | 5,000 | 23,769 |
Gregory R. Allen, Executive | 2005 | $133,680 | $ 38,600 | — | 2,000 | $15,892 |
Vice President and Chief | 2004 | 129,786 | 28,190 | — | 5,000 | 24,421 |
Lending Officer of First Federal | 2003 | 126,006 | 51,169 | — | 10,000 | 19,234 |
(1) | Includes amounts deferred by executives 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 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. |
(4) | Consists of amounts allocated by First Defiance on behalf the executives pursuant to the ESOP and matching contributions pursuant to First Defiance’s 401(k) Plan. |
When the Threshold performance level is not achieved, the payout percentage for that component of the bonus calculation is zero. If the performance level for a component is between the Threshold and Target or between the Target and the Maximum amount, the payout percentage is prorated. For 2006, the overall total bonus payout percentage was determined as follows:
| | | | | | | | | |
Bonus Component | | Actual Result | | Payout Percentage Achieved | | Weighting % | | Computed Factor | |
Earnings Per Share | | $ | 2.18 | | | 103.85 | % | x | 50 | % | = | 51.92 | % |
Revenue Growth | | | 11.51 | % | | 73.87 | % | x | 25 | % | = | 18.47 | % |
Efficiency Ratio | | | 63.63 | % | | 111.70 | % | x | 25 | % | = | 27.93 | % |
Total Bonus Payout Percentage | | 98.32 | % |
COMPENSATION COMMITTEEThe resulting total bonus payout percentage is then multiplied by the respective bonus potential for each Named Executive Officer to determine his bonus. The 2006 bonuses were calculated as follows:
| | | | | | | |
Named Executive Officer | | Target Bonus Potential ($) | | Bonus Payout (%) | | Bonus Amount ($) | |
William J. Small | | $ | 115,762 | | X | 98.32 | % | = | $ 113,818 | |
John C. Wahl | | $ | 54,565 | | X | 98.32 | % | = | $ 53,648 | |
James L. Rohrs | | $ | 62,422 | | X | 98.32 | % | = | $ 61,374 | |
Gregory R. Allen | | $ | 50,750 | | X | 98.32 | % | = | $ 49,897 | |
REPORT ON EXECUTIVE COMPENSATIONThe Committee retains the discretion to adjust the bonus for the Named Executive Officers based on a number of factors, including achievement of individual objectives, regulator exam issues, and other factors as determined by the Committee. There were no discretionary adjustments to the 2006 cash incentive bonuses for any of the Named Executive Officers.
The BoardEquity Based Compensation
First Defiance utilizes stock options to link shareholder value and long-term executive incentive compensation and to provide an opportunity for increased equity ownership by executives. Significant levels of Directors has delegatedstock options were granted to the CompensationNamed Executive Officers at the time they were named to their current positions. Since then, the Committee responsibility for the oversight and administrationhas not granted Named Executive Officers a substantially higher level of all compensation and benefit plansstock option awards than are awarded to other officers of First Defiance and its subsidiaries. The Committee has adopted a compensation philosophy to align management’s interests withDefiance. Generally, all of the interestsNamed Executive Officers are awarded option grants of First Defiance’s shareholders by linking compensation with the achievement of individual and organizational goals. Organizational results are measured in terms of performance targets based on strategic objectives established by the Board of Directors1,000 options on an annual basis.
The compensation program In 2006, the Committee granted an additional 1,000 stock options to Mr. Allen in conjunction with his promotion to Southern Market President of First Defiance and its subsidiaries has three main components: base salary, annual cash bonuses, and long-term incentive compensation awards, including accumulated (realized and unrealized) option and restricted stock gains. The Committee utilizes these three components of compensation to attract and maintain highly qualified management, to provide short-term incentives that are consistent with the achievement of strategic targets established during the strategic planning process, and to align management’s long-term goals for First Defiance with those of shareholders.
Base SalaryFederal Bank.
The base salary forStock option awards are typically granted annually at the Chief Executive Officer is established annually byApril or May board meeting. Options are awarded at the Committee. The Committee conducts an annual performance reviewNasdaq Global Market closing price of First Defiance’s common stock on the date of the Chief Executive Officer, for which it obtains input from all ofgrant. Stock options granted to First Defiance employees have never been dated on any date other than the independent directors. The Committee utilizes peer group information which it obtains from published surveys of financial institutions. When utilizing peer group information to evaluate the Chief Executive Officer’s salary, the Committee considers the asset size, geographic location, and performance criteria, including return on equity and return on assets, of peer institutions and uses that data to establish a range for the Chief Executive’s base salary. The determination of where the Chief Executive’s salary falls within that range is determined based on his achievement of specific goals, other performance related criteria, and the evaluations of the Committee based on the overall performance of First Defiance. The Committee makes a recommendation which it then presents to all of the independent directors who have the opportunity to provide input to the Compensation Committee. The Compensation Committee approves the overall compensation package.
The base salary for other executive officers is established by the Chief Executive Officer in consultation with the Committee. These base salaries are established based on industry salary surveys and performance criteria established by the Chief Executive Officer.
The Committee also considers the recommendations of the Chief Executive Officer as to the parameters for annual salary adjustments for all employees to assure that salaries are competitively established.
Annual Bonusgrant date.
Corporate-wide bonus awards play a key role in implementingOptions granted under the First Defiance’s strategystock option plans vest at a rate of attracting20% per year over the first five years of the ten-year option term. Vesting and retaining qualified executive officers by rewarding quality performance. The annual cash bonus paidexercise rights cease upon termination of employment except in the case of death, disability or retirement. Prior to officers is based on First Defiance’s annual performancethe exercise of the option, the holder has no rights as measured by three key performance measures whicha shareholder with respect to the Committee has determined drive value for First Defiance: earnings pershares subject to such option, including voting rights and the right to receive dividends.
share, growthRetirement and Other Benefits
All employees of First Defiance, including the Named Executive Officers, are eligible to participate in revenue, and cost controls. Of these factors, the Committee has determined that earnings per share is the most important measure and has assigned a weighting of 50% to that factor. Earnings growth is achieved both through revenue growth and cost controls. The Committee has assigned a 25% weighting factor to targeted revenue growth and a 25% weighting factor to achievement of targeted efficiency ratio standards.
Within each of these three components, there are threshold, target and maximum goals. Performance below the threshold results in no payout for that component. Performance at the threshold level results in a 50% payout of that component. Performance at the target level results in a 100% payout of that component. Performance at or above the maximum goal results in a 150% payout of that component. Exact payout percentages for payouts within the 50% to 150% range are calculated based on actual results. The payout percentage achieved for each component is then multiplied by the weighting factor (50% or 25%First Defiance Financial Corp. 401(k) Employee Savings Plan (the "Savings Plan") and those three components are added together to determine the percentage of potential bonus that will be paid. For 2005 bonus purposes, the payout percentage was 96.25%.
This payout percentage is then applied to the bonus potential for each executive officer. Mr. Small has a potential bonus equal to 45% of his base salary, Mr. Rohrs and Mr. Wahl each have a potential bonus equal to 35% of base salary, and Mr. Allen’s bonus potential is 30% of base salary. This bonus plan is also utilized for all First Defiance and First Federal officers with the rank of Senior Vice President or higher, with bonus potential ranging between 20% and 30% of base salary depending upon the officer’s level of responsibility. This plan is not utilized for First Insurance and Investment senior officers, who receive commission-based wages.
Long-Term Incentive CompensationEmployee Stock Ownership Plan (the "ESOP").
Stock Options
The Committee also considers long-term, stock-based compensation as an important component in aligning the interests of management with that of First Defiance’s shareholders. In its evaluation of the appropriate level of long-term stock-based compensation, the Committee considers: dilution, the number of shares of First Defiance’s common stock outstanding, First Defiance’s financial performance and the officer’s individual performance in granting stock-based awards. During 2005, incentive stock options were grantedSavings Plan is a tax-qualified retirement savings plan pursuant to executive officers under First Defiance’s 2005 Stock Option and Incentive Planwhich all employees are able to encourage these individuals to manage First Defiance in a manner that would increase long-term shareholder value. Options are granted at an exercise price of 100% of the common stock’s market value on the grant date, vest in increments over five years and expire 10 years from the date of grant, but are terminated sooner if the optionee no longer serves as an employee or director of First Defiance or its subsidiaries. Significant option grants were givencontribute up to the Chief Executive Officer and other executive officers in prior years to provide a meaningful incentive. More recently, option grantslimit prescribed by the Internal Revenue Service to the Chief Executive Officer and other executive officers have been ofSavings Plan on a limited nature as part of an overall program the Committee implemented for most salaried employees of First Defiance.
Retirement Plans
Other long-term compensation includes First Defiance contributions under the Profit Sharing, 401(k) Plan and ESOP. First Defiance also sponsors a non-qualified deferred compensation plan through which directors and executive officers can elect, prior to the start of a year, to defer a portion of their compensation.before-tax basis. First Defiance matches 50% of contributions made by employees under the 401(k) Plan up to the first 6% of pay that is contributed to the Savings Plan. All employee contributions for a maximum contribution of 3%. First Defiance may also make additional contributions to the 401(k)Savings Plan are fully vested upon contribution and First Defiance’s matching contribution is vested upon completion of a minimum service requirement.
The ESOP is a tax qualified plan under which shares of First Defiance common stock are allocated annually to participant accounts based on the participant’s compensation relative to compensation of all active participants in the discretionPlan. The compensation of participants, including the Named Executive Officers, is limited to the Internal Revenue Service mandated maximum of $220,000 in 2006 for purposes of calculating the annual allocation of shares. Shares allocated to participant accounts are fully vested when the participant has completed three years of service. Participants in the ESOP hold full voting privileges for shares allocated to their account. Additional shares are allocated to participant accounts in lieu of dividends earned on allocated shares.
The Named Executive Officers are entitled to participate in the First Defiance Deferred Compensation Plan. Pursuant to this plan, Named Executive Officers can defer up to 80% of their base salary and up to 100% of bonus payments. The First Defiance Deferred Compensation Plan is discussed in further detail under the heading "Nonqualified Deferred Compensation" on page 19.
Perquisites and Other Personal Benefits
First Defiance provides Named Executive Officers with perquisites and other personal benefits that the Company and the Committee believe are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain employees for key positions. The Committee periodically reviews the levels of perquisites and other personal benefits provided to Named Executive Officers.
In 2006, each of the Committee. However, there wereNamed Executive Officers was provided the use of company automobiles and a country club membership. Upon relocation, key executive officers may receive reimbursement for certain reasonable expenses associated with the costs of such relocation. In 2006, Mr. Allen was reimbursed for certain expenses to relocate his residence from Defiance, Ohio to the Findlay Ohio area following his promotion to Southern Market President. The total amount that he was reimbursed was $24,406, which includes a tax "gross up" of $10,575.
Each Named Executive Officer is entitled to receive life insurance proceeds equal to two times the executive’s base salary, provided that the executive is employed by the Company at the time of his death. Approximately one half of such coverage (i.e., one times base salary) is provided as part of the Company’s group life insurance program that is offered to all full-time employees, and the balance is provided as an inducement for employees to consent to allowing the Company to insure them under their Bank Owned Life Insurance program.
The value of these perquisites is included in column (i) of the "Summary Compensation Table" on page 16. The Committee has determined that the practice of providing company automobiles will be discontinued for all employees, including the Named Executive Officers, and will be replaced with a monthly automobile allowance. The automobiles will be phased out as existing leases expire but in all cases by no later than December 31, 2007.
no discretionary contributions
The Company has entered into Employment Agreements with certain key employees, including the Named Executive Officers. The employment agreements include provisions for severance payments upon a change of control and are designed to promote stability and continuity of senior management. Information regarding applicable payments under such agreements for the 401(k) Plan in 2005. Contributionsnamed executive officers is provided under the ESOP are a functionheading "Potential Payments Upon Termination or Change in Control" beginning on page 20.
Tax and Accounting Implications
Nonqualified Deferred Compensation
On October 22, 2004, The American Jobs Creation Act of principal and interest payments made2004 was signed into law, changing the tax rules applicable to fund scheduled loan paymentsnonqualified deferred compensation arrangements. While the final regulations have not become effective yet, the Company believes it is operating in good faith compliance with the statutory provisions which were effective January 1, 2005. A more detailed discussion of the Company’s nonqualified deferred compensation arrangements is provided on page 19 under the heading "Nonqualified Deferred Compensation."
Accounting for Stock-Based Compensation
Beginning on January 1, 2006, the Company began accounting for its stock option plans in accordance with the ESOP plan document, and individual allocationsrequirements of that benefit are made based on a participant’s compensation relative to total compensation of all participants, subject to certain regulatory limits.FASB Statement No. 123(R) Share-Based Payment.
Perquisites and Other Fringe BenefitsCOMPENSATION COMMITTEE REPORT
The Committee also monitors all perquisites and other fringe benefits provided by First Defiance Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Chief Executive OfficerBoard that the Compensation Discussion and other executive officers. Such benefits include country club memberships and personal use of company owned vehicles. The annual value of such benefits does not exceed 10% of the total of annual salary and bonus for the Chief Executive Officer or other executive officers.
ConclusionAnalysis be included in this Proxy Statement.
Based on procedures performed, the Committee finds the aggregate compensation of each of the Chief Executive Officer and all other executive officers of First Defiance to be reasonable and not excessive.
Peter A. Diehl, Compensation Committee Chair
John Bookmyer, Compensation Committee Member
Stephen L. Boomer, Compensation Committee Member
Gerald W. Monnin, Compensation Committee Member
Thomas A. Voigt, Compensation Committee Member | THE COMPENSATION COMMITTEE |
| Peter Diehl, Chairman |
| John Bookmyer |
| Stephen Boomer |
| Gerald W. Monnin |
| Thomas A. Voigt |
Stock OptionsEXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides information relating to option grants made pursuant tobelow summarizes the 1996 Stock Option Plan and the 2001 Stock Option and Incentive Plan to the individuals named in the Summary Compensation Table.
STOCK OPTION GRANTS IN LAST FISCAL YEAR |
| | Individual Grants | | |
| | Number of securities underlying options | | Percent of total options granted to employees | | Exercise | | Expiration | | Potential realizable value at assumed rates of stock price appreciation for option terms |
Executive Officer | | granted (1) | | in 2005 | | Price | | date | | 5% | | 10% |
William J. Small | | 1,000 | | 1.63% | | $25.89 | | 2015 | | $16,282 | | $41,262 |
| | | | | | | | | | | | |
John C. Wahl | | 2,000 | | 3.27 | | 25.89 | | 2015 | | 32,564 | | 82,524 |
| | | | | | | | | | | | |
James L. Rohrs | | 2,000 | | 3.27 | | 25.89 | | 2015 | | 32,564 | | 82,524 |
| | | | | | | | | | | | |
Gregory R. Allen | | 2,000 | | 3.27 | | 25.89 | | 2015 | | 32,564 | | 82,524 |
| | 7,000 | | 11.43 | | | | | | $113,974 | | $288,834 |
| | | | | | | | | | | | |
(1) Options were granted under the 2005 Stock Option and Incentive Plan. Options vest 20% per year over a five year period on the anniversary datetotal compensation paid or earned by each of the grant. Unvested options are generally forfeited upon termination of employment.
The following table sets forth certain information concerning options held atNamed Executive Officers for the fiscal year ended December 31, 2005 by2006. The Named Executive Officers are the individuals named in the Summary Compensation Table.Company’s Chief Executive Officer, Chief Financial Officer, and two other most highly compensated executive officers.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Name | Shares Acquired on Exercise | Value Realized | Number of Securities Underlying Unexercised Options at Year End | Value of Unexercised In-the-Money Options at Year End (1) |
| | | Exercisable | Unexercisable | Exercisable | Unexercisable |
| | | | | | |
William J. Small | 33,277 | $601,065 | 72,423 | 2,400 | $1,199,233 | $ 5,736 |
John C. Wahl | 4,100 | 67,291 | 51,100 | 5,800 | 798,390 | 25,080 |
James L. Rohrs | − | − | 59,800 | 13,800 | 832,132 | 129,800 |
Gregory R. Allen | 8,500 | 124,830 | 15,700 | 18,000 | 170,243 | 126,210 |
| | | | | | |
| | | | | | | | | | | | | | | |
(a) | | (b) | | (c) | | (e) | | (f) | | (g) | | (i) | | (j) | |
Name and Principal Position | | Year | | Salary ($) | | Stock Awards ($)(1) | | Option Awards ($)(2) | | Non-Equity Incentive Plan Compen- sation ($)(3) | | All Other Compen-sation ($)(4) | | Total ($) | |
William J. Small Chairman of the Board & Chief Executive Officer | | | 2006 | | $ | 257,250 | | | − | | $ | 4,160 | | $ | 113,818 | | $ | 31,257 | | $ | 406,485 | |
| | | | | | | | | | | | | | | | | | | | | | |
John C. Wahl Executive Vice President & Chief Financial Officer | | | 2006 | | $ | 155,900 | | | − | | $ | 8,976 | | $ | 53,648 | | $ | 28,144 | | $ | 246,668 | |
| | | | | | | | | | | | | | | | | | | | | | |
James L. Rohrs Executive Vice President & President of First Federal Bank | | | 2006 | | $ | 178,350 | | $ | 17,427 | | $ | 26,281 | | $ | 61,374 | | $ | 35,378 | | $ | 318,810 | |
| | | | | | | | | | | | | | | | | | | | | | |
Gregory R. Allen First Federal Bank President of Southern Market Area | | | 2006 | | $ | 145,000 | | | − | | $ | 32,942 | | $ | 49,897 | | $ | 44,020 | | $ | 271,859 | |
| (1) | Based on a per share market price of $27.09 atThe amount in column (e) reflects amounts for grants made in 2001 to the extent the vesting period for such grant fell in 2006. |
| (2) | The amounts in column (f) reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 20052006, in accordance with FAS 123(R) of awards pursuant to the Stock Option Plans and exercise prices rangingthus include amounts from $10.375 per shareawards granted in and prior to $27.13 per share.2006. Assumptions used in the calculation of this amount are included in footnote 2 to the Company’s audited financial statements for the fiscal year ended December 31, 2006 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2007. |
| (3) | The amounts in column (g) reflect the cash awards to the named individuals under the Company’s Performance Based Incentive Compensation Plan which is discussed in further detail on page 12 under the heading “Performance Based Incentive Compensation”. |
| (4) | The amount shown as “All Other Compensation” includes the following perquisites and personal benefits: |
Employment Agreements
| | | | | | | | | | | | | | | | | |
Name | | Club Membership | | Personal Use of Company Automobile | | 401(k) Match | | ESOP Allocation | | Value of Life Insurance | | Tax Gross- ups (a) | | Employee Stock Purchase Plan Match (b) | | Other (c) | |
William J. Small | | $ | 3,451 | | $ | 3,145 | | $ | 6,600 | | $ | 14,561 | | $ | 1,700 | | | | | $ | 1,800 | | | | |
John C. Wahl | | $ | 3,451 | | $ | 2,689 | | $ | 6,600 | | $ | 13,726 | | $ | 440 | | | | | $ | 1,238 | | | | |
James L. Rohrs | | $ | 3,451 | | $ | 4,917 | | $ | 6,600 | | $ | 14,561 | | $ | 1,597 | | | | | $ | 1,800 | | $ | 2,452 | |
Gregory R. Allen | | $ | 10,943 | | $ | 2,319 | | $ | 5,172 | | $ | 12,910 | | $ | 301 | | $ | 10,575 | | $ | 1,800 | | | | |
| (a) | Mr. Allen’s gross-up is for a moving allowance |
| (b) | First Defiance sponsors a non-qualified Employee Stock Purchase Plan. The Company matches 15% of all contributions up to $150 per month. |
| (c) | Represents accrued dividends and interest paid on vested Management Recognition Plan shares |
First Defiance has entered into employment agreements with Messrs. Small, Rohrs, Wahl and Allen (the "Executives"). The form2006 Grants of employment agreement for each of the Executives is substantially the same and provides each officer with a three-year term of employment commencing on the date of the agreement. Each year, the Board of Directors of First Defiance considers and reviews the extension of the terms of each agreement and extends the term unless either party gives notice of non-renewal to the other party.Plan-Based Awards
The employment agreementsfollowing table provides information on stock options granted in 2006 to each of the Named Executive Officers. There is no assurance that the grant date fair value of option awards will ever be realized. The amount included in column (e) is the aggregate FAS 123(R) value of all awards made in 2006. In contrast, the Summary Compensation Table includes only the portion of that value that was expensed in 2006.
| | | | | | | | | |
(a) | | (b) | | (c) | | (d) | | (e) | |
Name | | Grant Date | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($ / sh) | | Grant Date Fair Value of Stock and Option Awards ($) | |
William J. Small | | | 5/21/06 | | | 1,000 | | $ | 26.47 | | $ | 5,980 | |
John C. Wahl | | | 5/21/06 | | | 1,000 | | $ | 26.47 | | $ | 5,980 | |
James L. Rohrs | | | 5/21/06 | | | 1,000 | | $ | 26.47 | | $ | 5,980 | |
Gregory R. Allen | | | 5/21/06 | | | 2,000 | | $ | 26.47 | | $ | 11,960 | |
Outstanding Equity Awards at Fiscal Year-End 2006
The following table provides information concerning unexercised options for each Named Executive Officer outstanding as of the end of the most recently completed fiscal year. Each outstanding award is represented by a separate row which indicates the number of securities underlying the award. The table also discloses the exercise price and the expiration date.
| | | |
| | Option Awards | |
(a) | | (b) | | (c) | | (d) | | (e) | |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options(1) (#) Unexercisable | | Option Exercise Price | | Option Expiration Date | |
William J. Small | | | 600 | | | 400 | | $ | 19.53 | | | 04/20/2013 | |
| | | 400 | | | 600 | | $ | 27.13 | | | 04/18/2014 | |
| | | 200 | | | 800 | | $ | 25.89 | | | 04/18/2015 | |
| | | − | | | 1,000 | | $ | 26.47 | | | 05/21/2016 | |
| | | | | | | | | | | | | |
John C. Wahl | | | 10,000 | | | − | | $ | 13.00 | | | 04/18/2007 | |
| | | 3,000 | | | 2,000 | | $ | 19.53 | | | 04/20/2013 | |
| | | 400 | | | 600 | | $ | 27.13 | | | 04/18/2014 | |
| | | 400 | | | 1,600 | | $ | 25.89 | | | 04/18/2015 | |
| | | − | | | 1,000 | | $ | 26.47 | | | 05/21/2016 | |
| | | | | | | | | | | | | |
James L. Rohrs | | | 25,000 | | | − | | $ | 11.56 | | | 08/29/2009 | |
| | | 600 | | | − | | $ | 10.52 | | | 12/17/2010 | |
| | | 40,000 | | | − | | $ | 14.00 | | | 09/16/2011 | |
| | | 3,000 | | | 2,000 | | $ | 19.53 | | | 04/20/2013 | |
| | | 400 | | | 600 | | $ | 27.13 | | | 04/18/2014 | |
| | | 400 | | | 1,600 | | $ | 25.89 | | | 04/18/2015 | |
| | | − | | | 1,000 | | $ | 26.47 | | | 05/21/2016 | |
| | | | | | | | | | | | | |
Gregory R. Allen | | | 11,700 | | | − | | $ | 14.00 | | | 09/16/2011 | |
| | | 3,000 | | | 2,000 | | $ | 19.56 | | | 01/19/2013 | |
| | | 3,000 | | | 2,000 | | $ | 19.53 | | | 04/20/2013 | |
| | | 2,000 | | | 3,000 | | $ | 27.13 | | | 04/18/2014 | |
| | | 400 | | | 1,600 | | $ | 25.89 | | | 04/18/2015 | |
| | | − | | | 2,000 | | $ | 26.47 | | | 05/21/2016 | |
(1)All options listed above vest at a rate of 20% per year over the first five years of the ten-year option term.
Option Exercises and Stock Vested In 2006
The following table provides information concerning exercises of stock options and vesting of stock awards during the most recently completed fiscal year for each of the Named Executive Officers on an aggregated basis. The table reports the number of securities for which the options were exercised; the aggregate dollar value realized upon exercise of options, the number of shares of stock that have vested; and the aggregate dollar value realized upon vesting of stock. The value realized upon vesting of stock awards does not include accrued dividends and interest, which is included in "All Other Compensation" in the Summary Compensation Table.
| | | | | |
| | Option Awards | | Stock Awards | |
(a) | | (b) | | (c) | | (d) | | (e) | |
Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) | |
William J. Small | | | 71,823 | | $ | 1,131,399 | | | − | | $ | − | |
John C. Wahl | | | 38,900 | | $ | 623,689 | | | − | | $ | − | |
James L. Rohrs | | | − | | $ | − | | | 640 | | $ | 17,427 | |
Gregory R. Allen | | | 5,000 | | $ | 68,500 | | | − | | $ | − | |
Nonqualified Deferred Compensation
Pursuant to the First Defiance Deferred Compensation Plan, certain executives, including Named Executive Officers, as well as the directors of First Defiance Financial Corp. may defer receipt of up to 80% of their base compensation and up to 100% of non-equity incentive plan compensation and, in the case of directors up to 100% of directors fees. Deferral elections are terminablemade by eligible executives or directors in December of each year for amounts to be earned in the following year.
Amounts deferred in the First Defiance Deferred Compensation Plan may be invested in any funds available under the Plan. The table below shows the funds available under the Plan and their annual rate of return for the calendar year ended December 31, 2006, as reported by the administrator of the Plan.
Name of Fund | Rate of Return | Name of Fund | Rate of Return |
MainStay VP Cash Management | 4.60% | Royce Small Cap | 15.58% |
T. Rowe Limited Term Bond | 4.09% | Alger American Small Cap | 20.00% |
Fidelity VIP Investment Grade Bond: IC | 4.34% | MainStay VP International Equity | 31.33% |
PIMCO VIT Total Return: AC | 3.85% | UIF U.S. Real Estate | 38.06% |
American Century VP Value: CI 2 | 18.47% | Fidelity VIP Freedom Lifestyle Fund 2010 | 9.84% |
Fidelity VIP Contrafund: IC | 11.72% | Fidelity VIP Freedom Lifestyle Fund 2020 | 11.97% |
Janus AS Forty: IS | 9.36% | Fidelity VIP Freedom Lifestyle Fund 2030 | 13.20% |
MainStay VP Midcap Core | 14.98% | | |
Benefits under the First Defiance Deferred Compensation Plan are generally paid beginning the year following the executive’s retirement or termination. However, the Plan does have provisions for scheduled "in-service" distributions from the plan and it also allows for hardship withdrawals upon the approval of the Compensation Committee. Retirement benefits are paid either in a lump sum or in scheduled installment payments when the executive’s termination is considered a retirement. All other distributions are made in lump sum payments.
The following table provides information with or without causerespect to the Named Executive Officers participation in the First Defiance Deferred Compensation Plan. All contributions to the First Defiance Deferred Compensation plan are made by the executives participating in the Plan. There are no contributions by First Defiance. However,Defiance and none of the Named Executive Officers received a withdrawal or distribution under the Plan.
| | | | | | | |
(a) | | (b) | | (d) | | (f) | |
Name | | Executive Contributions in Last Fiscal Year ($) | | Aggregate Earnings in Last Fiscal Year ($) | | Aggregate Balance at Last Fiscal Year End ($) | |
William J. Small | | $ | 15,000 | | $ | 21,631 | | $ | 183,634 | |
John C. Wahl | | $ | 7,795 | | $ | 10,948 | | $ | 94,955 | |
James L. Rohrs | | $ | 10,000 | | $ | 8,316 | | $ | 103,869 | |
Gregory R. Allen | | $ | 13,000 | | $ | 8,221 | | $ | 91,289 | |
Potential Payments Upon Termination or Change in Control
The table below summarizes the estimated payments to be made under each contract, agreement, plan or arrangement which provides for payments to a Named Executive Officer at, following, or in connection with any termination or employment including by resignation, severance, retirement, disability or a constructive termination; by a change of control of the Company, or by a change in the Named Executive Officer’s responsibilities (that may not result in a termination of employment).
The amounts shown assume that such termination was effective as of December 31, 2006, and thus include amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. The actual amounts to be paid out can only be determined at the time of such executive’s separation from the Company.
Payments Made Upon Termination
Regardless of the manner in which a Named Executive Officer’s employment terminates, the executive is entitled to receive amounts earned during the term of employment. Such amounts include:
| · | non-equity incentive compensation earned during the fiscal year; |
| · | amounts contributed under the First Defiance Deferred Compensation Plan; |
| · | unused vacation pay; and |
| · | amounts accrued and vested through the Company’s 401(k) Plan |
Payments Made Upon Retirement
In the event that (i)of retirement of a Named Executive Officer, in addition to the items identified above, the executive will be entitled to the following:
| · | vesting of all outstanding unvested stock options; |
| · | a prorated share of the annual allocation of benefits under the First Defiance Employee Stock Ownership Plan; and |
| · | executives who meet minimum age and years of service requirements are entitled to continue to participate in the Company’s health and welfare benefits. These benefits are the same as retiree medical benefits offered to all employees of First Defiance and are more fully described in Note 15 to the Financial Statements |
Payments Made Upon Death or Disability
In the event of the death or disability of a Named Executive Officer, in addition to the benefits listed under the headings "Payments Made upon Termination" and "Payments Made Upon Retirement" above, the Named Executive Officer will receive benefits under the Company’s disability plan or payments under the Company’s life insurance plans, as appropriate.
Payments Made Upon Change of Control
Each Named Executive Officer has entered into an employment agreement with First Defiance and First Federal, the terms of which are similar for each officer. Pursuant to these agreements, if an executive’s employment is terminated following a change of control (other than termination by the Company terminates an Executive’s employment for acause or by reason other than cause, (ii) an Executiveof death or disability) or if the executive terminates his employment because of failure of First Defiance to comply with any material provision ofin certain circumstances defined in the employment agreement or (iii)agreements which constitute "good reason", in addition to the employment agreement is terminated by anbenefits listed under the heading "Payments Made Upon Termination" the Named Executive for Good Reason, as defined, an Executive would be entitled to (A)Officer will receive a lump sum severance payment of 2.99 times the employee’s average annual compensation paid to him by First Defiance duringfor the five most recent taxable years ending during the calendar year in which the noticeNotice of termination occurs or such portion of such period in whichTermination occurs. Under the agreements, compensation is defined as base salary plus non-equity incentive bonus.
Further, all unvested stock options held by the Named Executive served as senior officer of First Defiance as well as (B) continued participation in employee benefit plans of First Defiance (other than retirement plansOfficer will automatically vest and stock compensation plans) until the expiration of the remaining term of employment. "Good Reason" is generally definedbecome exercisable in the employment agreements to include the assignment by First Defiance to the Executiveevent 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 controlcontrol. Such unvested options do not vest in the event of First Defiance.termination for reasons other than retirement, death or disability, even if such termination is for "good reason."
The employment agreement entered into with Mr. Small was filed as exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000. The employment agreements provide that inentered into with Mr. Rohrs and Mr. Wahl were filed as exhibits 10.7 and 10.8 respectively to the event that any ofCompany’s Annual Report filed on Form 10-K for the paymentsyear ended December 31, 2001. The employment agreement entered into with Mr. Allen was filed as exhibit 10.9 to be made thereunder or otherwise upon termination of employment are deemed to constitute "excess parachute payments" within the meaning of Section 280G ofCompany’s Annual Report filed on Form 10-K for 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.
year ended December 31, 2002.
Generally, pursuant to the agreements, a change of control is deemed to occur:
| (i) | if any person becomes the beneficial owner of securities representing 25% or more of the combined voting power of the then outstanding securities of First Defiance; |
| (ii) | if during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of First Defiance cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; or |
| (iii) | a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended. |
| | | | | | | | | | | | | |
Executive Benefits and Payments upon Termination | | Voluntary Termination | | For Cause Termination | | Involuntary Not for Cause Or Voluntary Good Reason Termination | | Involuntary Change of Control Termination (CIC) | | Death | | Disability | |
William J. Small | | | | | | | | | | | | | | | | | | | |
Severance | | $ | − | | $ | − | | $ | 992,277 | | $ | 992,277 | | $ | − | | $ | − | |
Accelerated Vesting of stock options | | $ | − | | $ | − | | $ | − | | $ | 13,428 | | $ | 13,428 | | $ | 13,428 | |
John C. Wahl | | | | | | | | | | | | | | | | | | | |
Severance | | $ | − | | $ | − | | $ | 571,380 | | $ | 571,380 | | $ | − | | $ | − | |
Accelerated Vesting of stock options | | $ | − | | $ | − | | $ | − | | $ | 34,068 | | $ | 34,068 | | $ | 34,068 | |
James L. Rohrs | | | | | | | | | | | | | | | | | | | |
Severance | | $ | − | | $ | − | | $ | 652,297 | | $ | 652,297 | | $ | − | | $ | − | |
Accelerated Vesting of stock options | | $ | − | | $ | − | | $ | − | | $ | 34,068 | | $ | 34,068 | | $ | 34,068 | |
Gregory R. Allen | | | | | | | | | | | | | | | | | | | |
Severance | | $ | − | | $ | − | | $ | 514,657 | | $ | 514,657 | | $ | − | | $ | − | |
Accelerated Vesting of stock options | | $ | − | | $ | − | | $ | − | | $ | 66,716 | | $ | 66,716 | | $ | 66,716 | |
PERFORMANCE GRAPHBENEFICIAL OWNERSHIP
The following graph comparestable includes, as of the yearly cumulative total return onVoting Record Date, certain information as to the Common Stock for the last five years withbeneficially owned by (i) the yearly cumulative total return ononly persons or entities, including any "group" as that term is used in Section 13(d)(3) of the stocks includedSecurities 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 Nasdaq Stock Market Index (for United States companies), (ii) the yearly cumulative total return on stocks included in the SNL Nasdaq Bank Stock IndexSummary Compensation Table set forth under "Executive Compensation," and (iii) the SNL Midwest Thrift Index. All(iv) all directors and executive officers 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 as a group.
| | | |
| | Common Stock | |
Name of Beneficial Owner | | Shares Owned | | Right to Acquire Beneficial Ownership Under Options Exercisable Within 60 Days | | Percent of Class (a) | | Phantom Stock Units (b) | |
| | | | | | | | | | | | | | | | |
First Defiance Financial Corp. Employee Stock Ownership Plan | | | 581,867 | | | (c | ) | | | | | 8.13 | % | | | |
Private Capital Management | | | 675,711 | | | (d | ) | | | | | 9.44 | % | | | |
Dimensional Fund Advisors, Inc. | | | 518,122 | | | (e | ) | | | | | 7.24 | % | | | |
John L. Bookmyer | | | 1,017 | | | | | | | | | − | | | 1,401 | |
Stephen L. Boomer | | | 13,369 | | | (f | ) | | | | | − | | | | |
Dr. Douglas A. Burgei | | | 18,993 | | | (f | ) | | 1,943 | | | − | | | | |
Peter A. Diehl | | | 7,202 | | | | | | | | | − | | | | |
Dr. John U. Fauster III | | | 23,450 | | | (f | ) | | 1,943 | | | − | | | | |
Dwain I. Metzger | | | 1,016 | | | | | | | | | − | | | | |
Gerald W. Monnin | | | 41,786 | | | (f | ) | | | | | − | | | | |
James L. Rohrs | | | 29,873 | | | | | | 71,000 | | | 1.40 | % | | | |
William J. Small | | | 111,358 | | | (f | ) | | 1,800 | | | 1.58 | % | | | |
Samuel S. Strausbaugh | | | 1,003 | | | | | | | | | − | | | 34 | |
Thomas A. Voigt | | | 13,290 | | | (f | ) | | 1,943 | | | − | | | | |
Gregory R. Allen | | | 18,543 | | | | | | 23,500 | | | − | | | | |
John C. Wahl | | | 77,148 | | | (f | ) | | 15,400 | | | 1.29 | % | | | |
All directors and executive officers as a group (13 persons) | | | 358,048 | | | | | | | | | 6.54 | % | | 1,435 | |
| Period Ending |
Index | 12/31/00 | 12/31/01 | 12/31/02 | 12/31/03 | 12/31/04 | 12/31/05 |
First Defiance Financial Corp. | 100.00 | 144.73 | 185.65 | 261.83 | 300.81 | 291.62 |
NASDAQ Composite | 100.00 | 79.18 | 54.44 | 82.09 | 89.59 | 91.54 |
SNL NASDAQ Bank Index | 100.00 | 108.85 | 111.95 | 144.51 | 165.62 | 160.57 |
SNL Midwest Thrift Index | 100.00 | 115.01 | 148.26 | 205.97 | 227.46 | 222.27 |
(a) | If no percent is provided, the number of shares is less than 1% of the total outstanding shares of Common Stock |
(b) | Represents phantom shares denominated in First Defiance Financial Corp. Common Stock under the First Defiance Deferred Compensation Plan. |
(c) | Shares owned by First Defiance Financial Corp. Employee Stock Ownership Plan, 601 Clinton St., Defiance, OH ("ESOP") which have been allocated to persons listed in this table are also included in those persons’ holdings: Mr. Rohrs - 4,081 shares, Mr. Small - 16,806 shares, Mr. Allen - 4,604 shares, Mr. Wahl - 20,486 shares, and all directors and executive officers as a group - 45,977 shares. |
(footnotes continued on next page)
(d) | Based on Schedule 13G filed with the Securities and Exchange Commission (the "SEC") on February 14, 2007, Private Capital Management, 8889 Pelican Bay Blvd. Suite 500, Naples, FL 34108 ("PCM") is an investment advisor registered under Section 203 of the Investment Advisors Act of 1940. PCM reported shared voting and investment power over 675,711 shares of Common Stock. |
(e) | Based on Schedule 13G filed with the SEC on February 1, 2007, Dimensional Fund Advisors LP., 1299 Ocean Avenue, Santa Monica, CA 90401 ("Dimensional"), an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, possesses both voting and investment power over 518,122 shares of Common Stock. All 518,122 shares reported are owned by the entities for which Dimensional serves as investment advisor, and Dimensional disclaims beneficial ownership of such securities. |
(f) | Includes shares of Common Stock in which beneficial owners share voting and/or investment power as follows: 10,125 held jointly by Mr. Boomer and his spouse; 5,122 shares held jointly by Dr. Burgei and his spouse; 1,000 shares held by Dr. Fauster’s spouse; 41,786 held in Mr. Monnin’s trusts for which he is a trustee; 266 shares and 90,563 shares which Mr. Small owns jointly with his children and spouse respectively; 1,330 shares held by Mr. Voigt’s spouse; and 20,000 shares, 2,000 shares and 425 shares held by Mr. Wahl’s spouse, jointly by Mr. Wahl and his spouse and held in custodial accounts for minor children for which Mr. Wahl’s is custodian |
Indebtedness of ManagementRELATED PERSON TRANSACTIONS
All directors and executive officers have commercial, consumer or mortgage banking relationships with First Defiance had noFederal and a number have insurance relationships through First Insurance & Investments. All loans outstanding during 2005or deposits made to any director, nominee for election as a director ordirectors and 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 loansofficers (i) were made in the ordinary course of businessbusiness; (ii) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactionsloans or deposits with other persons not related to First Federal; and which(iii) did not involve more than the normal risk of collectibility or present other unfavorable features.
First Federal has a policy which covers all loans to directors and executive officers. In accordance with that policy, any loan request for directors or executive officers, which when aggregated with other extensions of credit from First Federal exceeds $500,000 requires prior Board of Directors approval. Loans to executive officers, which when aggregated with existing extensions of credit are less than $500,000, do not require prior Board of Directors approval but must be reported at the next Board meeting. Loans to directors, which when aggregated with existing extensions of credit are less than $500,000, do not require Board approval and are not required to be reported to the Board at the next Board meeting. However, all loan transactions with related persons are reported to and ratified by the audit committee quarterly. First Defiance’s policy is that it will not enter into related person transactions that are outside of normal banking relationships.
Independent Registered Public Accounting FirmSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires First Defiance’s executive officers and directors, and persons who own more than ten percent of Common Stock, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission and to provide First Defiance with a copy of such form. Based on First Defiance’s review of the copies of such forms it has received, First Defiance believes that its executive officers and directors complied with all filing requirements applicable to them with respect to transactions during the fiscal year ended December 31, 2006.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
On June 7, 2005, First Defiance received notice from Ernst & Young LLP ("Ernst & Young") of its resignation as First Defiance's independent registered public accounting firm upon the appointment of a new auditor for the 2005 financial statements, but in no event later than the filing of First Defiance's Form 10-Q for the quarter ending September 30, 2005.
Ernst & Young's reports on the financial statements for First Defiance's fiscal years ended December 31, 2003 and 2004 did not contain any adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. During First Defiance's fiscal years ended December 31, 2003 and 2004 and the subsequent interim period through August 9, 2005, there were no (i) disagreements between First Defiance and Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement if not resolved to Ernst & Young's satisfaction, would have caused Ernst & Young to make reference to the subject matter of the disagreement in connection with its reports, or (ii) reportable events as defined in Regulation S-K Item 304(a)(1)(v).
Ernst & Young provided First Defiance a letter addressed to the Securities and Exchange Commission stating that it agreed with the statements made above. A copy of Ernst & Young's response letter dated June 13, 2005 was attached as exhibit 16 to Form 8-K filed with the SEC on June 13, 2005.
On September 16, 2005, The audit committee of First Defiance Financial Corp.the Audit Committee approved the engagement of Crowe Chizek and Company LLC (Crowe Chizek) as First Defiance’sDefiance's principal independent registered public accounting firm for the year ended December 31, 2005. Prior to approving the engagement of Crowe Chizek, First Defiance did not consult with Crowe Chizek regarding either:
| 1. | The application of accounting principles to a specified transaction, either completed or proposed; or to the type of audit opinion that might be rendered on the First Defiance’sDefiance's financial statements, and neither a written report was provided to First Defiance or oral advice was provided that Crowe Chizek concluded was an important factor considered by First Defiance in reaching a decision as to the accounting, auditing or financial reporting issue; or |
| 2. | Any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304) or a reportable event (as described in Item 304 (a) (1) (v) of Regulation S-K). |
Resignation of Ernst & Young LLP
On June 7, 2005, First Defiance received notice from Ernst & Young LLP (“Ernst & Young”) of its resignationCrowe Chizek also served as the Company’s independent registered public accounting firm upon the appointment of a new auditor for the 2005 financial statements, but in no event later than the filing of First Defiance’s Form 10-Q for the quarter ending September 30, 2005.
Ernst & Young’s reports on the financial statements for First Defiance’s two most recent fiscal years did not contain any adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. During First Defiance’s two most recent fiscal years and the subsequent interim period through August 9, 2005, there were no disagreements between First Defiance and Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement if not resolved to Ernst & Young’s satisfaction, would have caused Ernst & Young to make reference to the subject matter of the disagreement in connection with its reports.
During the fiscal yearsyear ended December 31, 20042006 and 2003 and through August 9, 2005, there were no reportable events as defined in Regulation S-K Item 304(a)(1)(v).
Ernst & Young provided First Defiance a letter addressed tohas reported on the Securities and Exchange Commission stating that it agreed with the statements made above. A copy of Ernst & Young’s response letter dated June 13, 2005 was attached as exhibit 16 to Form 8-K filed with the SEC on June 13, 2005.Company’s consolidated financial statements.
The following table sets forth the aggregate fees that were incurred for audit and non-audit services provided by Crowe Chizek in 2006 and by Crowe Chizek and Ernst & Young and Crowe Chizek, both entities who acted as independent registered public accounting firms for First Defiance in the fiscal year ending December 31, 2005. The table lists audit fees, audit related fees, tax fees and all other fees.
| | | | | | | |
Services Rendered | | Crowe Chizek Fees for 2006 | | Crowe Chizek Fees 9/16/2005 - 12/31/2005 | | Ernst & Young Fees 1/01/2005 - 9/16/2005 | |
Audit Fees | | $ | 252,000 | | $ | 240,000 | | $ | 59,700 | |
Audit Related Fees | | | 20,500 | | | 4,260 | | | 28,545 | |
Tax Fees | | | 48,025 | | | − | | | 20,907 | |
Other | | | − | | | − | | | − | |
Total fees paid | | $ | 320,525 | | $ | 244,260 | | $ | 109,152 | |
| | Ernst & Young Fees for 2004 | | Ernst & Young Fees 1/1/2005 - 9/16/2005 | | Crowe Chizek Fees 9/16/2005 - 12/31/2005 | |
Audit Fees | | $ | 232,970 | | $ | 59,700 | | $ | 240,000 | |
Audit Related Fees | | | 19,550 | | | 28,545 | | | 4,260 | |
Tax Fees | | | 31,445 | | | 20,907 | | | − | |
Other | | | − | | | − | | | − | |
Total fees paid | | $ | 283,965 | | $ | 109,152 | | $ | 244,260 | |
Audit related fees relate to services for employee benefit plan audits, compliance services and services related to accounting consultations relating to the Company’s mergers and acquisitions activity. Tax fees include the following (all paid(paid to Crowe Chizek in 2006, Ernst & Young)Young in 2005):
| | 2004 | | 2005 | | | | | | |
Tax Services Rendered | | | | 2006 | | | 2005 | |
Tax return preparation | | $ | 19,500 | | $ | 20,907 | | | $ | 20,000 | | $ | 20,907 | |
Other tax | | | 11,945 | | | − | | |
| | $ | 31,445 | | $ | 20,907 | | |
Other tax compliance | | | | 28,025 | | | − | |
Total Tax Fees | | | $ | 48,025 | | $ | 20,907 | |
Representatives of Crowe Chizek 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.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is comprised of four directors, all of whom are considered “independent” under rule 4200(a)(15) 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 also reviews the effectiveness of First Defiance’s system of internal controls, including a review of the process used by management to evaluate the effectiveness of the system of internal control.
The Committee reviewed with the independent registered public accounting firm which is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, its judgment 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 their professional standards. In addition, the Committee has discussed with the independent registered public accounting firm the auditor’s 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 also pre-approved all professional services provided to the Company by the independent registered public accounting firm.
The Committee discussed with the Company’s internal auditor and independent registered public accounting firm the overall scope and plans for their respective audits. The Committee meets with the internal auditor and independent registered public accounting firm, 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 sevenfive meetings during 2005.2006.
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, 20052006 for filing with the SEC. The Committee and the Board have also approved the selection of Crowe Chizek and Company LLC as the Company’s independent registered public accounting firm for the year ending December 31, 2006.2007.
John Bookmyer, Audit Committee Chair
Stephen L. Boomer, Audit Committee Member
Peter A. Diehl, Audit Committee Member
Gerald W. Monnin,Samuel S. Strausbaugh, Audit Committee Member
March 9, 200612, 2007
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. First Defiance will also pay the standard charges and expenses of brokerage houses, voting trustees, banks, associations and other custodians, nominees and fiduciaries who are record holders of Common Stock not beneficially owned by them, for forwarding the proxy materials to, and obtaining proxies from, the beneficial owners of First Defiance Common Stock entitled to vote at the Annual Meeting.
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 Meetingannual meeting of Shareholdersshareholders of First Defiance must be received at the main office of First Defiance no later than November 17, 2006.23, 2007. 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 Meetingannual meeting of Shareholders.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 20072008 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 January 31, 2007,2008, then the proxies designated by the Board of Directors of First Defiance for the 20072008 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.
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, 20052006 ("Annual Report"). Included in the Annual Report are the consolidated financial statements of First Defiance as of December 31, 20052006 and 20042005 and for each of the years in the three-year period ended December 31, 2005,2006, prepared in accordance with generally accepted accounting principles, and the related reports of First Defiance's independent registered public accounting firms. The Annual Report is not a part of this Proxy Statement.
| BY ORDER OF THE BOARD OF DIRECTORS |
| |
| William J. Small, Chairman, President and |
| Chairman, President and Chief Executive Officer |
March 17, 200616, 2007
Defiance, Ohio