UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Securities Exchange Act of 1934 (Amendment

(Amendment No.    )

Filed by the Registrantx

  ☒                             Filed by a Party other than the Registrant¨

  ☐

Check the appropriate box:

FIRST DEFIANCE FINANCIAL CORP.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Your vote on these matters is important, regardless of the number of shares you own. In order to ensure that your shares are represented, I urge you to promptly execute and return the enclosed form of Proxy or submit your Proxy by telephone or Internet.

REQUIRED VOTE

You are entitled to cast one vote for each share owned. Below are specifics regarding the vote requirement for each proposal:

For Proposal 1, the election of directors at the Annual Meeting, director nominees will be elected by a plurality of the votes cast. Our Articles of Incorporation do not permit shareholders to cumulate votes in the election of directors. Abstentions and brokernon-votes will not affect the plurality vote required to elect directors.

Proposal 2 to approve our executive compensation Proposal 3 to determine the frequency of holding a vote on executive compensation, and Proposal 83 to ratify the appointment of Crowe each requires that the number of votes cast in favor of the proposal exceed the number of votes cast against it. Because abstentions will not be counted as votes cast at the Annual Meeting, they will not affect either of these proposals. Similarly, brokernon-votes will not affect Proposals 2 or 3. Proposal 82. Proposal 3 is a “discretionary” item, so it will not have brokernon-votes.

Proposals 4, 6 and 7 to amend the Company’s Articles of Incorporation to remove the supermajority voting standards for, respectively, amendments to our Code of Regulations, amendments to our Articles of Incorporation and approval of certain business combinations must be approved by at least 75% of the votes entitled to be cast at the Annual Meeting. Abstentions and broker non-votes will be counted as votes “AGAINST” each of these proposals. In addition, Proposal 4 may only be approved if the corresponding amendment in Proposal 5 also receives shareholder approval.

Proposal 5 to amend the Company’s Code of Regulations to remove the supermajority voting standard for amendments to our Code of Regulations must be approved by at least two-thirds of the votes entitled to be cast at the Annual Meeting. Abstentions and broker non-votes will be counted as votes “AGAINST” this proposal. In addition, Proposal 5 may only be approved if the corresponding amendment in Proposal 4 also receives shareholder approval.

Because the proposals to approve our executive compensation, determine the frequency of votes on executive compensation and ratify the appointment of Crowe as our independent registered public accounting firm are advisory, they will not be binding upon the Board. However, the Compensation Committee will take into account the outcome of votes when considering the frequency of holding votes on executive compensation and future executive compensation arrangements. Further, if the appointment of Crowe is not ratified by the shareholders, the Audit Committee mayre-consider its selection of Crowe as our independent registered public accounting firm for the fiscal year ending December 31, 2019.

2020.

Proposals 1-71-2 are not “discretionary” items. If your shares are held in “street name,”you must provide instructions to your brokerage firm in order to cast a vote on these proposals. The ratification of the appointment of Crowe is considered a “discretionary” item, so your brokerage firm may vote in its discretion on your behalf if you do not furnish voting instructions.

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OUR DIRECTOR NOMINEES AND CONTINUING DIRECTORS

You are being asked to vote on the election of five (5) director nominees listed below. We also included some relevant information on our continuing directors. Detailed information about each nominee’s and continuing director’s background, skills and expertise can be found under Proposal 1 – Election of Directors.

CORPORATE GOVERNANCE HIGHLIGHTS

We believe that sound principles of corporate governance are the hallmark of long-term growth and profitability. Our governance policies are designed to promote independent and diverse consideration of our business and risk management strategies, with the goal of achieving robust returns for our shareholders.

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PROPOSAL 1

Election of Directors

Composition of the Board

On January 31, 2020, First Defiance acquired United Community Financial Corp. (“UCFC”) (the “Merger”) in accordance with the terms of the previously disclosed Agreement and Plan of Merger (the “Merger Agreement”), dated September 9, 2019, between First Defiance and UCFC. Immediately prior to the closing of the Merger on January 20, 2020, the board of directors of First Defiance (the “Board”) accepted the resignation of each of Robert E. Beach, Dr. Douglas A. Burgei, Thomas K. Herman, Barbara A. Mitzel, and Thomas A. Reineke from the Board and appointed six directors designated by UCFC to the Board, in each case subject to and effective upon the closing of the Merger.

Since the closing of the Merger, the Board has been comprised of seven members of the Board of First Defiance prior to the Merger (consisting of Donald P. Hileman, John L. Bookmyer, Terri A. Bettinger, Jean A. Hubbard, Charles D. Niehaus, Mark A. Robison and Samuel S. Strausbaugh) and the six directors designated by UCFC (consisting of Gary M. Small, Richard J. Schiraldi, Marty E. Adams, Zahid Afzal, Louis M. Altman and Lee Burdman).

Currently, the Board consists of 13 directors and is divided into three classes, with two of the classesClass I having four members, Class II having four members and one classClass III having five members. The directors are elected by class to serve a three-year term. The terms of the three classes expire at successive annual meetings so that the shareholders elect one class of directors at each annual meeting. We currently have a vacancy in the class of directors whose terms expire at the Annual Meeting due to William J. Small’s retirement on July 31, 2018. We intend to hold this vacancy open while we consider whether another director should be added to the Board. Each of the directors of First Defiance is also a director of our wholly-owned banking subsidiary, First Federal Bank of the Midwest (“First Federal”).

The current composition of the Board is:

We will elect fourfive directors at the Annual Meeting. The director nominees standing for election at the Annual Meeting are Mr. Bookmyer,Burdman, Ms. Bettinger,Hubbard, Mr. HermanNiehaus, Mr. Robison and Mr. Reineke.Schiraldi. Those nominees elected to the Board at the Annual Meeting will serve until our annual meeting in 2022,2023, and until each such person’s successor is duly elected and qualified. If any of the fourfive nominees should become unable or unwilling to stand for election at the Annual Meeting, the persons named on the proxy card as proxies may vote for other person(s) selected by the Board. We have no reason to believe that any of the director nominees for election named in this Proposal 1 will be unable or unwilling to serve. Each director nominee has consented to act as a director if elected.

The Board has determined that each of Marty E. Adams, Louis M. Altman, Zahid Afzal, Terri A. Bettinger, John L. Bookmyer, Douglas A. Burgei, Thomas K. Herman,Lee Burdman, Jean A. Hubbard, Barbara A. Mitzel, Charles D. Niehaus, Thomas A. Reineke, Mark A. Robison, Richard J. Schiraldi and Samuel S. Strausbaugh is “independent” under the rules of The NASDAQ Stock Market LLC (“NASDAQ”). In assessing the independence of directors and the director nominees, the Board considered the business relationships between First Defiance and its directors or their affiliated businesses, other than ordinary banking relationships. Where business relationships other than ordinary banking relationships existed, including those disclosed under “Related Person Transactions” below, the Board determined that none of the relationships between First Defiance and their affiliated businesses impaired the directors’ or director nominees’ independence because the amounts involved were immaterial to the directors or to those businesses when compared to their annual income or gross revenues. Although Robert E. BeachMr. Afzal is “independent” under the rules of NASDAQ, the Board has determined he is not “independent” due to his prior position as Executive Vice President and CEOChief Operating Officer of Commercial Bancshares, Inc., which was acquired by the Company on February 24, 2017.UCFC.

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Nominees for Election at this Annual Meeting:

Continuing Directors With Terms Expiring at the 2020 Annual Meeting:

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Continuing Directors With Terms Expiring at the 2021 Annual Meeting:

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Continuing Directors With Terms Expiring at the 2022 Annual Meeting:

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between promoting our strategic development and preserving the Board’s management oversight function. In his role as Vice Chairman, Mr. Schiraldi attends executive committee meetings and performs the responsibilities of the Chairman in his absence. The Board also believes that its leadership structure has created an environment of open, efficient communication between the Board and management, enabling the Board to monitor and oversee those matters that may present significant risks to the Company and to maintain an active informed role in risk management.

Board Committees

The Board has five standing committees: Audit, Corporate Governance and Nominating, Compensation, Executive and Risk. The current members of our standing committees are named below:

# – Chairperson

Audit Committee

Meetings held in 2019: 5

2019 Committee Members

2020 Committee Members

# - Chairperson

## - Vice Chairperson

*** -Denotes Rotating Service

TheAudit Committee is responsible for: (i) the appointment of our independent registered public accounting firm; (ii) review of the external audit plan and the results of the auditing engagement; (iii) review of the internal audit plan and results of the internal audits; (iv) review of reports issued by our Compliance Officer; (v) review of the effectiveness of our system of internal control, including review ofthe process used by management to evaluate the effectiveness of the system of internal control; and (vi) oversight of our accounting and financial reporting practices. The Audit Committee has adopted a written charter setting forth these responsibilities, a copy of which is posted on our website athttp://www.fdef.com under the link “Governance

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Documents.” The Board has determined that John L. BookmyerRichard J. Schiraldi and Samuel S. Strausbaugh each have the attributes listed in the definition of “audit committee financial expert” set forth in Item 407(d)(5)(ii) of RegulationS-K and in the NASDAQ listing requirements. All of the Audit Committee members are considered “independent” for purposes of NASDAQ listing requirements and meet the NASDAQ standards for financial sophistication. The Audit

Governance and Nominating Committee met five times

Meetings held in 2018.2019: 3

2019 Committee Members

Members		Independent
Richard J. Schiraldi (Chair)			✓
Marty E. Adams			✓
Jean A. Hubbard			✓
Charles D. Niehaus			✓

TheGovernance and Nominating Committeewas established by the Board to ensure that the Board is appropriately constituted and conducts its affairs in a manner that will best serve the Company’s interests and those of our shareholders. Specific duties of the Committee include administering our conflict of interest policy/code of ethics, monitoring the Board’s continuing education and self-assessment process, nominating directors to the Board, and conducting an annual assessment of the Board as a whole, including an assessment of Board composition and committee assignments. The Governance and Nominating Committee develops, with management, the materials discussed and presented at the board strategic planning meeting. The Governance and Nominating Committee maintains a robust process for succession planning for the CEO as well as for other executive-level positions. The Governance and Nominating Committee maintains both an emergency plan and a long-range succession plan. The plans are reviewed at least annually by the Governance Committee. The Governance and Nominating Committee has adopted a written charter setting forth its responsibilities, a copy of which is posted on our website athttp://www.fdef.com under the link “Governance Documents.” The

Pursuant to the Merger Agreement, at the effective time of the Merger, First Defiance’s Code of Regulations was amended and restated to provide that the Board would consist of 13 directors: (i) Mr. Hileman, Mr. Bookmyer and five other persons who served as directors of First Defiance or First Federal immediately prior to the effective time of the Merger Agreement (the “First Defiance related directors”) and (ii) Mr. Small, Mr. Schiraldi, and four other persons who served as directors of UCFC or Home Savings Bank immediately prior to the effective time of the Merger Agreement (the “UCFC related directors”). If, prior to the second anniversary of the “succession date” (as defined in the Code of Regulations), which will be between January 1, 2021, and June 30, 2021, any of the initial Class I, II or III directors ceases to serve as a director for any reason or does not stand for reelection, the vacancy will be filled by the Board with an individual selected by the UCFC related directors (if such director was a UCFC related director) or the First Defiance related directors (if such director

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was a First Defiance related director) in good faith in a manner intended to preserve the principles of representation in the Code of Regulations, provided that such individual is reasonably agreeable to the Governance and Nominating Committee met four times in 2018.

accordance with the good faith execution of its duties.

The Governance and Nominating Committee believes that candidates for director should have certain minimum qualifications, including being able to read and understand basic financial statements, having business experience, and exhibiting high moral character. Although the Committee does not have a formal diversity policy in place, the Committee seeks to promote a diverse set of viewpoints and business experience in the Board’s membership. The Committee retains the right to modify these minimum qualifications from time to time as circumstances dictate. The Committee has a general process for choosing nominees, which process considers both incumbent directors and new candidates. In evaluating an incumbent director whose term of office is set to expire, the Committee reviews such director’s overall service to us during his or her term, including attendance at meetings, participation and quality of performance. If the Committee chooses to evaluate new director candidates, the Committee uses its network of contacts to compile a list of potential candidates. Then, the Committee determines whether such candidates are independent, which determination is based upon applicable securities laws. Finally, the Committee meets to discuss and consider all candidates’ qualifications and then chooses those candidates who will be proposed as director nominees to the full Board. The Governance and Nominating Committee considers the following criteria in proposing director nominees to the full Board: (1) independence; (2) high personal and professional ethics and integrity; (3) ability to devote sufficient time to fulfilling duties as a director; (4) impact on diversity of the Board, including skills and other factors relevant to our business; and (5) overall experience in business, education, and other factors relevant to our business.

Our shareholders may also make nominations for candidates for director to the Governance and Nominating Committee, provided that notice of such nomination is given in writing to our Secretary not less than 60 days prior to the anniversary date of the immediately preceding annual meeting of shareholders. The notice must set forth the name, age, business address and residence address (if available) of the nominee and the number of shares that are beneficially owned by the nominee. Also, the shareholder making the nomination must promptly provide any other information reasonably requested by the Governance and Nominating Committee. This Committee does not alter the manner in which it evaluates candidates, including the minimum criteria set forth above, when evaluating a candidate who was recommended by a shareholder. No director nominations were received from shareholders for the election of directors at the Annual Meeting.

Compensation Committee

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TheCompensation Committee is responsible for overseeing our compensation programs, including base salaries, long-term incentive compensation, equity-based compensation, perquisites and benefit plans. The Committee also administers the process for evaluating our Chief Executive Officer and recommends to the Board the compensation for directors (including committee member and committee chair’s fees, equity-based awards and other similar items, as appropriate). The Committee uses the services of an independent executive compensation consulting firm, Pay Governance, to fulfill its responsibilities for evaluating and establishing the compensation program for the Company’s executive officers. In 2018, the Committee engaged Pay Governance to review and analyze our executive compensation program, including salaries for our directors, CEO, CFO Chief Risk Officer and Community Banking President/Chief Lending Officer of First Federal,other key executives, to provide a study of comparative compensation data derived from the Company’s peer group and to advise the Committee on developing governance trends among such peer group. Pay Governance reports directly to the Compensation Committee and serves at the discretion of the Committee, although the CEO has consulted directly with Pay Governance regarding the compensation of executives among our peer group in recommending 20182019 salaries for our remaining executive officers. The Committee has the sole authority to appoint, compensate and oversee Pay Governance, including responsibility for evaluating Pay Governance’s independence and establishing its fees and retention terms. In retaining Pay Governance for fiscal year 2018,2019, the Committee assessed Pay Governance’s independence pursuant to the applicable rules of the Securities and Exchange Commission and determined that Pay Governance’s services for the Compensation Committee did not raise any conflict of interest. In addition, Pay Governance did not provide any additional services to the Company other than the services to the Compensation Committee in fiscal year 2018.2019. Further description of the Compensation Committee’s responsibilities and the role of Pay Governance in determining executive compensation is set forth under “Compensation Discussion and Analysis” below. The Compensation Committee has adopted a written charter setting forth its responsibilities, a copy of which is posted athttp://www.fdef.com under the link “Governance Documents.” All of the Compensation Committee members are considered “independent” for purposes of NASDAQ listing requirements. The Compensation

Executive Committee met three times

Meetings held in 2018.2019: 3

2019 Committee Members

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2020 Committee Members

TheExecutive Committee generally has the power and authority to act on behalf of the Board between scheduled meetings unless specific Board action is required or unless otherwise restricted by our Articles of Incorporation or Code of Regulations or by action of the Board. As Chairman of the Board, Mr. Bookmyer serves as Chairman of the Executive Committee. Mr. Bookmyer and Mr. Hileman serve as permanent members. The remaining directors serve on the Executive

Risk Committee on a rotating basis during the year. The Executive

Meetings held in 2019: 4

2019 Committee met one time during 2018.Members

2020 Committee Members

TheRisk Committeewas established by the Board of Directors to assist the Board in fulfilling its oversight responsibilities with regard to the risk appetite of the Company and the risk management and compliance framework and the governance structure that support the Company. The Risk Committee has adopted a written charter setting forth these responsibilities, a copy of which is posted on the Company’s website athttp://www.fdef.com under the link “Governance Documents.” The Risk Committee met four times during 2018.

Compensation Committee Interlocks and Insider Participation

Mr. Bookmyer, Ms. Hubbard, Ms. Bettinger and Mr. Strausbaugh served on the Compensation Committee during 2018.2019. There were no Compensation Committee interlocks or insider (employee) participation during 2018.2019.

Board and Board Committee Meetings

Our Board holds regular meetings each quarter. First Federal’s Board of Directors meets twice each quarter. Special meetings of the Boards are held from time to time as needed. There were fiveseven meetings of the Board of Directors of First Defiance and teneight meetings of the Board of Directors of First Federal held during 2018.2019. All of our directors attended at least 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 2018.

2019.

Neither the Board nor the Corporate Governance Committee has implemented a formal policy regarding director attendance at our annual shareholder meetings. In 2018, all thirteen2019, eleven out of twelve of our then incumbent directors attended the annual meeting.

Non-management directors met two times in executive session in 2018.

2019.

Director Compensation

The table below provides information concerning our director compensation for the fiscal year ended December 31, 2018.2019. Employee directors are not paid for Board service. Eachnon-employee director received an annual retainer of $31,000$35,000 in 2018,2019, except that thenon-employee Chairman received a retainer of $56,000.$60,000. The Company pays directors $10,000$14,000 of the annual retainer in First Defiance stock and the remainder in cash. The Company uses a 20 day20-day average stock price when calculating the number of shares to be issued. Committee chairs received an additional annual retainer as follows: (1) Audit Committee – $5,000; (2) Compensation Committee – $5,000; (3) Risk Committee – $5,000; and (4) Corporate Governance and Nominating Committee – $3,500. In addition, eachnon-employee director received $750 for each board meeting attended for either First Defiance or First Federal. Mr. Robison, Mr. Beach and Mr. Burgei as well as Mr. Small until his retirement, were also directors of First Insurance Group of the Midwest, Inc., and they received $500 for each First Insurance board meeting attended.Non-employee directors also received compensation for each committee meeting attended as follows: (1) Audit Committee – $500; (2) Compensation Committee – $500; (3) Executive or First Federal Executive LoanSelect Strategic Committee meetings – $200;$1,500; and (4) other First Defiance and First Federal Board committees – $500.

Our directors may defer their retainer and/or meeting fees payable to them under the First Defiance Deferred Compensation Plan. The returns on the amounts deferred are dependent on the investment elections made by the director. The directors’ choices include a number of mutual funds and an account of our common shares. Returns under the plan are calculated to mirror these elections. Because these earnings are denominated in our shares or mutual fund equivalents, such earnings are not considered to be preferential or above market and are not reported in the table below. Also, no director received perquisites or personal benefits with an aggregate value exceeding $10,000.

The Board has set ownership guidelines for the Board and executive management. The guideline for each Board member is ownership equal to a value of 5 times the annual retainer of $31,000$35,000 in shares of First Defiance. The Company allows for the payment of directors fees in either cash or stock at the election of the individual director.

201819

2019 Director Compensation

Communication with Directors

The Board has adopted a process by which shareholders may communicate with the directors. Any shareholder wishing to do so may write to the Board at our principal business address – 601 Clinton St., Defiance, Ohio 43512. Any shareholder communication so addressed will be delivered unopened to the director or a member of the group of directors to whom it is addressed, or to the Chairman if addressed to the Board.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines as a framework to assist the Board in exercising its responsibilities. These Guidelines address expectations of the Board in performing its duties and reflect its ongoing efforts to enhance its effectiveness and corporate governance. These Guidelines will be periodically reviewed and modified as deemed appropriate by the Board. The Guidelines can be found on the Company’s website athttp://www.fdef.comunder the link “Governance Documents.”

Board’s Role in Strategic Planning

Our Board has the legal responsibility for overseeing our affairs and, thus, an obligation to keep informed about our business and strategies. This involvement enables the Board to provide guidance to management in formulating and developing plans and to exercise independently its decision-making authority on matters of importance to us. Acting as a full Board and through its standing committees, the Board is fully involved in our strategic planning process.

Each year, typically in September, senior management and the Board hold an extended meeting to focus on corporate strategy. This session involves presentations from management and input from the directors regarding

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the assumptions, priorities and strategies that will form the basis for management’s operating plan and strategy for the coming year. At subsequent meetings, the Board continues to review our progress against the strategic plan and to exercise oversight and decision-making authority regarding strategic areas of importance and revise the strategic plan as necessary. The role the Board plays is inextricably linked to the development and review of our strategic plan. Through these procedures, the Board, consistent with good corporate governance practices, encourages our long-term success by exercising sound and independent business judgment on the strategic issues that are important to our business.

Board’s Role in Risk Oversight

The Board’s function of overseeing risk is handled primarily by the Risk Committee. The Chief Risk Officer works with management as well as internal and external auditors to determine and evaluate significant risks that we may be taking and communicates those findings directly to the Risk Committee. The Risk Committee is focused on identifying, quantifying, and minimizing our risks. The Risk Committee believes that by involving both management and auditors in this important process, it is best able to perform its function. First Federal also has a standing Officer Risk Management Committee, Compliance Committee, Information Technology Steering Committee and Asset Review Committee that meet regularly to provide structure and input into our Risk Management Process. The minutes and findings of these committees are presented to the Risk Committee.

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EXECUTIVE OFFICERS

The following table sets forth the name of each current executive officer, other than Mr. Hileman and Mr. Small, whose information is set forth above, and the principal position and offices he or she holds with First Defiance or First Federal.

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) provides a detailed description of our executive compensation philosophy and programs, the compensation decisions the Compensation Committee (the “Committee”) has made under those programs and the factors considered in making those decisions. This CD&A focuses on the compensation of our named executive officers (“Named Executive Officers” or “NEOs”) identified in the Summary Compensation Table below.

2019 Performance Summary

Our goal is to becomecontinue to be a high-performing community-focused financial institution, meeting or exceeding the 75^th percentile of our peers in key financial measures. Compensation is a key component of attracting talent to our organization that will enable us to reach this goal.

The following Compensation DiscussionMerger closed on January 31, 2020, creating a $6.3 billion financial services company with branches and Analysis describesloan production offices located within a five state area. Although the material elementsMerger will impact performance measurements on ago-forward basis, on a stand-alone basis in 2019, First Defiance continued its trend of compensation of our executive officers identified in the Summary Compensation Table (“Named Executive Officers”).strong annual performance results.

For the three-year period ending December 31, 2018,2019, our cumulative growth in earnings per share was 60%55%. ThisOur performance was mainly due todriven by a strong three yearthree-year average return on assets of 1.28%1.38%, while successfully executing onand our successful execution of our organic and acquisition growth strategies. EmphasizingBy emphasizing growth opportunities in our metro markets, our three-year compound organiccompounded growth in assets was 7%, which was supplemented11.87% with two strategic acquisitions in 2017. The acquisitionorganic growth of Commercial Bancshares, Inc. added approximately $350 million in assets, expanded our footprint, and provided enhanced efficiency opportunities. The acquisition of Corporate One Benefits Agency, Inc. enhanced our employee benefit offerings and expanded our insurance business presence into adjacent markets.7.62%. Over this same three-year period, First Defiance shares posted a total return to shareholders of 38.3%32.98%.

Compensation Philosophy and Objectives

The Board believes the most effective executive compensation program is one that rewards the achievement of specific annual, long-term and strategic goals that are established in conjunction with strategic planning initiatives and the long-term objective of maximizing shareholder value. Consistent with that philosophy, our executive compensation packages include both cash and stock-based compensation that reward performance as measured against predetermined goals. The Compensation Committee (the “Committee”) evaluates our executive compensation program to ensure that it is sufficiently competitive to enable us to attract and retain qualified employees in key positions. Total compensation commensurate with the median compensation overall and by component paid to similarly situated executives of peer companies, both overall and by component is generally what the Committee considers competitive.

The Board encourages ownership of FDEF shares by its executive management in order to align with shareholders, which is why a significant part of each Named Executive Officer’sNEO’s compensation package is paid in equity. As a result, theThe Committee also has established share ownership guidelines for executives as follows:

Advisory Vote on Executive Compensation

At our 20132019 annual meeting, our shareholders approved holding annual votes on our executive compensation. The feedback provided by our shareholders through this advisory vote, in addition to investor feedback we receive through the Company’s shareholder engagement throughout the year, provides invaluable information forto the Board and the Committee. TheBecause of the value that we place on investor feedback, the Company maintainsstrives to maintain open communication with its shareholders, including through participation at investor conferences. In 2018,2019, executive management hostedparticipated in several meetings with institutional investors, including hosting an investor visit at the Company’s offices, which was arranged by Sandler O’Neill, as well as participatedby participating in several key investor conferences throughout the year, including the Sandler O’Neill East Coast Financial Services Conference in Florida, the KBW Community Bank Investor Conference in New York New York,City and the Raymond James U.S. Bank Conference in Chicago, Illinois. NoChicago. During these various conferences and communications with investors, no concerns onregarding our executive compensation philosophy or programs were raised byraised. The Company hadone-on-one meetings with approximately 30 individual institutional investors from these communications or at eitherover the course of the conferences.year. The Company encourages open dialogue on all governance matters. Further, at our 20182019 annual meeting, our shareholders approved our executive compensation with 96.1%more that 96% of the votes cast in favor, indicating that shareholders are strongly supportive of our executive compensation program. Even though the resolution to approve First Defiance’s executive compensation is not binding, the Committee considered this overwhelming shareholder support for our existing executive compensation program and, as a result, the Committee made no significant changes were made to the executive compensation for 2018.during 2019 (other than Merger related changes, as described in this CD&A). The Committee will continue to monitor shareholder approval levels going forward.

forward, including variation, if any, from prior years in connection with the opposition of Institutional Shareholder Services (“ISS”) to certain Merger related compensation decisions, The Board’s reasoning with respect to such decisions is set forth below under the heading “Merger-Related Impacts.”

Roles of the Committee and Chief Executive Officer in Compensation Decisions

The Committee makes all compensation decisions for the Company’s executive officers. The CEO makes compensation recommendations to the Committee for all Named Executive Officers exceptNEOs other than himself.

20182019 Executive Compensation Components

For the fiscal year ended December 31, 2018,2019, the principal components of compensation for our Named Executive OfficersNEOs were:

In the latter part of 2016,2018, the Committee engaged an independent compensation consultant, Pay Governance to perform an analysis of compensation for our directors, CEO, CFO and Chief Risk Officer.other key executives. In conducting this analysis, Pay Governance independently developed competitive data for base salaries, short-term incentives, total cash compensation (sum of salary and bonus), long-term incentives, equity compensation and total direct compensation (sum of cash compensation and long-term incentives) from: (1) proxies and SEC filings of select peer banks ranging in asset size from $1.3 billion to $5.4$6.2 billion, with a median asset size of $2.9$3.1 billion, compared to $2.8 billion proforma for First Defiance, with its then pending acquisition of Commercial Bancshares, Inc., (2) surveys of other banks,industry surveys, and (3) the consulting experience of Pay Governance. The work also included an analysis of the structure of First Defiance’s pay program relative to typical market practices for base pay, short term incentive and long term incentive compensation. The data indicated that First Defiance’s approach to incentive compensation measures reflects that of other banks surveyed. First Defiance’s short term and long term

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incentive plans cap awards at 150% of target opportunity, which is consistent with approximately half of the regional, high performing and other banks surveyed.

In 2018, the Committee and management reviewedagreed with the peer group recommended by Pay Governance to evaluate the appropriateness of the compensation package for each of First Defiance and First Federal’s officers, including the Named Executive Officers,NEOs, and to evaluate the relative performance measures for the long-term incentive compensation payable under the First Defiance Financial Corp. and Affiliates Incentive Compensation Plan (the “Incentive Compensation Plan”). ThatThe peer group utilized for 2018 is:setting 2019 compensation was:

with rewards and supports the long-term performance goals of the Company. Therefore, under the Incentive Compensation Plan, we have created opportunities for certain employees to earn short-term and long-term incentive compensation in the form of both cash and equity awardsin the Company based on the level of achievement of performance targetsgoals that are establishedthe Committee establishes each year by the Committee. The Board believes this incentive compensation aligns with shareholder interests, enables attraction and retention of executive talent, balances risk with rewards and supports the long-term performance goals of the Company.year. In general, for each incentive award, the Committee establishes a threshold, target and maximum bonus payout based upon the level of achievement of respective performance goals. If the threshold performance level is not achieved, the payout percentage for that component of the bonus calculationaward is zero. If the performance level for a component is between the threshold and target or between the target and the maximum, performance goal, the payout percentage is prorated.

prorated based upon linear interpolation.

In 2017,2018, the Committee, in consultation with Pay Governance, established incentive targets and granted awards for 20182019 under the Incentive Compensation Plan to permit employees who areallow selected as participants to earn a specified “target” percentage of their base salary which is split betweenupon attainment of incentive targets established by the Committee for 2019. With respect to our NEOs, incentive awards included a short-term award paidpayable in cash andthat was based on the Company’s 20182019 performance, and a long-term award paid in equity andincentive awards that were based on the Company’s performance for the three – year period from 20182019 to 2020.2021. Both the short-term award and the long-term awardawards can be earned atpayout between 0% and 150% of the specified “target” depending on the level of attainment of the performance objectives.target opportunity. Specific payout amounts and performance criteria for these incentive-basedincentive awards are discussed below.

20182019 Short-Term Executive Incentive Compensation.As authorized under the Incentive Compensation Plan, the Company may grant short-term incentive compensation to key officers, including the Named Executive Officers.NEOs. At the end of the performance period, these short-term incentive compensation awards are payable in cash based upon the level of achievement with respect to the specified annual performance goals. The goals for each Named Executive Officer are established in conjunction with the Board’s and management’s expectations for the year and weighted for each officer based on the officer’s role within the Company.

For 2018,2019, the performance goals for the short-term incentive compensation award for the Named Executive OfficersNEOs included three common goals: Earnings Per Share, Efficiency Ratio, and Deposit Growth. The Board believes that Earnings Per Share measures the Company’s profitability consistent with shareholder interests, Efficiency accentuates controlling expenses, and Deposit Growth reflects the organic expansion of our business. The 20182019 Earnings Per Share, target reflects the 2-for-1 stock split completed in 2018 and represents a 34% increase over the 2017 actual result, while Efficiency and Deposit Growth targets both reflect expected improvement from 20172018 targets.

The related payout percentages of the bonus potential for the common goals are described below:

In addition, for 2018,2019, the performance goals for Mr. Reisner Mr. Allen, and Mr. HarrisMs. Davis included an individual performance goal component based on their respective roles and responsibilities in the Company. The criteria for Mr. Reisner’s performance were focused on the performance of the Risk Management Group, for Mr. AllenMs. Davis the criteria focused on the performance of the Fort Wayne, Indiana, metro-market, and for Mr. Harris the criteria focused on the performance of the credit function of the Bank. The performance goals for Mr. Rose were aligned consistent with the 2018 objectives for his role as Director of Strategy Management.Human Resources team.

The relative weighting of the goals for each Named Executive Officer is described below:

In 2017,2019, the Named Executive OfficersNEOs exceeded the Threshold level of performance in all award components except one, net income after allocations and taxes for Fort Wayne.of performance. The Committee reviewed the components and earned payouts and certified the cash payouts at the earnedadjusted level for the short-term incentive compensation. The short-term incentive payouts for the Named Executive OfficersNEOs ranged between 21%34% and 51%61% of base salary.

The 20182019 target short-term incentive compensation component and actual bonus payout as approved by the Committee for the Named Executive OfficersNEOs is set forth below:

In addition, Mr. Allen, in his new position as Market Area Executive, Fort Wayne, Indiana was eligible for additional variable pay incentives based on loan production and fee income generated in his market area. In 2018, Mr. Allen earned $17,330 for these components.

20182019 Long-Term Executive Incentive Compensation.In addition to the short-term incentive compensation awards, the Committee may also grant long-term incentive compensation awards under the Incentive Compensation Plan. These long-term awards are intended to reward certain executives for increasing the value of the Company through sustained future growth and profitability. At the beginning of a three-year performance period, awards are made in restricted stock units (“RSUs”). Through April 2018, these RSUs were issued under our 2010 Equity Incentive Plan and subsequently under our 2018 Equity Incentive Plan. At the end of such three-year performance period, First Defiance’s performance is evaluated and each whole or fractional RSU entitles the officer to receive one FDEF common share on the date the RSU is settled. In the first quarter of 2018,2019, the Committee established long-term incentive compensation awards for certain executives, including the Named Executive Officers except for Mr. Allen,NEOs, with a three-year performance period. With respect to these awards, we entered into two Performance-Based Restricted Stock Unit Award Agreements with each of the Named Executive Officers other than Mr. Allen:NEOs: the 20182019 Long-term Incentive Equity Plan and the 20182019 Long-term Equity Asset Growth Plan.Plan, the components of which are described below. The Long-term Equity Asset Growth Plan was established by the Committee as an additional performance goal or “kicker” goal applicable to the long-term incentive compensation awards based upon the achievement of growth in total assets, consistent with the Company’s strategic growth objectives. Upon the achievement of this additional goal, the Committee may grant, within its sole discretion, to each Named Executive Officer an additional payout of from 10% to 25% of the target bonus potential under the long-term incentive compensation awards. Pursuant to these agreements, each officer was awarded an amount of RSUs equal to 100% of the Maximummaximum payout under each of the Long-term Incentive Equity Plan and the Long-term Equity Asset Growth Plan. Each plan has a separate maximum level which, in the aggregate, is equal to the maximum long-term incentive compensation component of the Incentive Compensation Plan. The number of RSUs granted under the Planthese Plans was calculated by taking the

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maximum incentive payout dollar value dividedfor each plan and dividing by the20-day average share closing price as of December 31, 2017.2018. Under each of these Performance-Based Restricted Stock Unit Award Agreements, if the officer’s employment terminates for any reason (except for certain circumstances as described in the Award Agreement that has special vesting schedules for death, disability, retirement and change in control) prior to the end of the applicable performance period, the officer forfeits all of the RSUs subject to the target award for that and any subsequent performance period.

Under the 2018 Long-term Incentive Equity Plan, the 2018-20202019-2021 long-term incentive compensation award target for each of the Named Executive Officers, except Mr. Allen,NEOs, is set forth below:

Under the 2018 Long-term Incentive Equity Plan, the awards granted in 20182019 have the same payout percentages and components as the awards granted in 2017,2018, and utilize the same peer group established by the Committee as set forth above under the heading “20182019 Executive Compensation Components.” The applicable performance criteria and weighting for the 2018-20202019-2021 performance period are as described below:

Under the 2018 Long-termEquity Plan, the Equity Asset Growth Plan for the 2018-20202019-2021 period, the long-term incentive compensation award target for each of the Named Executive Officers, except Mr. Allen,NEOs is set forth below:

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Under the 2018 Long-term Incentive Equity Plan, the Equity Asset Growth Plan awards granted in 20182019 have the following asset levels and payout percentages as described below:

Achievement of the performance levels are determined by the Committee, in its sole discretion, using financial information filed with the Securities and Exchange Commission and other sources as available. The Committee reserves the right, in its sole discretion, to make such periodic adjustments as it determines appropriate to the peer group.

For the 20162017 long-term incentive compensation awards with a performance period endingthat ended on December 31, 2018,2019, the relative weighting of each target and the related payout percentage of the bonus potential are described below: