Compensation Milwaukee Brewers and benefits increased by

Compensation divulges milwaukee brewers and benefits baseball tickets states increased by 3.6% compared to 2008, driven largelyby increased medical costs. Other non-interest expense decreased to $3.0million in the second quarter of 2009 from $3.5 million in the second quarterof 2008. The second quarter of 2008 included an expense of $752,000 associatedwith losses related to a former investment advisor. The period over periodexpense reduction benefit was offset partially by credit, collection andOREO-related costs, which increased $574,000 over the second quarter of 2008. "We broke records that were in place from the refinancingboom of 2002 through 2004.

FDIC insurance expense increased to $1.5 million in the secondquarter of 2009 from $431,000 in the same period of 2008 as a result of theFDIC rate increases, higher insured deposits and a special assessment of$900,000 brew crew ball . Loss on investment securities for the second quarter of 2009 was $750,000,which included $874,000 of OTTI charges compared with a loss of $432,000 inthe second quarter of 2008 related to OTTI charges."Mortgage banking activity in the second quarter surpassed all expectations,"commented Small brew crew t shirt . The MSR valuation adjustment is areflection of the increase in the fair value of certain sectors of theCompany's portfolio of mortgage servicing rights ned yost . Gains from the sale ofmortgage loans nearly tripled in the second quarter of 2009 to $2.9 millionfrom $1.0 million in the second quarter of 2008 brewers jewelry . Mortgage loan servicingrevenue remained relatively flat for the 2009 second quarter compared to 2008.The increases in gains and servicing revenue were offset by expense increasesof $765,000 for the amortization of mortgage servicing rights due to thehigher refinance activity during the quarter.First Defiance recaptured $1.5 million of the mortgage servicing rights (MSR)valuation adjustment in the second quarter of 2009 compared with a recaptureof $167,000 in the second quarter of 2008. Most of the increase was inmortgage banking income, which increased to $4.0 million in the 2009 secondquarter from $1.5 million for the same period in 2008. "It's a low rate environment, which requires that we focuson a disciplined pricing strategy to strengthen net interest margin for theremainder of the year." Non-Interest IncomeNon-interest income for the 2009 second quarter increased to $8.4 million from$6.2 million in the second quarter of 2008.

Netinterest margin was 3.61% for the 2009 second quarter compared to 3.71% in thefirst quarter of 2009 and 3.91% in the second quarter of 2008 brewers sausage race . Yield oninterest earning assets declined by 79 basis points, to 5.50% from 6.29% inthe 2008 second quarter while the cost of interest-bearing liabilities andnon-interest-bearing demand deposits decreased by 44 basis points, to 1.95%from 2.39%."Despite the fact that we are seeing some encouraging signs of economicrecovery in our markets, the challenges to net interest margin are far fromover," said Small prince fielder . Management has not deemed the impairment in value of these CDOinvestments to be Other-Than-Temporary, and, therefore, has not recognized thereduction in value of those investments in earnings.Net Interest MarginNet interest income was basically flat compared to the 2008 second quarter,with a slight decrease to $16.2 million for the second quarter of 2009 dan plesac . These investments continue to pay principaland interest payments in accordance with the contractual terms of thesecurities baseball tickets . The OTTI charge for thequarter related to four Trust Preferred Collateralized Debt Obligations (CDOs)with a remaining book value of $2.3 million. First Defiance also has one otherCDO investment that had an OTTI charge in the first quarter of 2009, which hasa remaining book value of $243,000 and market value of $163,000 at June 30,2009.

The OTTI charge is due to the credit deterioration of the underlyingcollateral brewers sausage . First Defiance also has other Trust Preferred CDO investments with a totalbook value of $3.8 million and market value of $1.4 million at June 30, 2009.The decline in value of those investments is primarily due to the overall lackof liquidity in the CDO market brew crew t shirt . In addition, First Defiancehad $8.6 million of Real Estate Owned at June 30, 2009 ned yost . For the second quarterof 2009, First Defiance recorded net charge-offs of $3.8 million, whichrepresented 0.96% of average loans outstanding (annualized) for the quarter."First Federal Bank has a long history of excellent asset quality, but in thecurrent economic situation, we, like most other banks, continue to seedeterioration in some credits in our portfolio . These charge-offs were notunexpected, and were accounted for in our provision for loan losses in thequarter.Two credit relationships, one a land development credit and theother a manufacturing business, accounted for more than 60% of the charge-offamount this quarter.We continue to monitor the portfolio and the economicenvironments in our markets closely and react quickly to any identifiedweaknesses," Small said.Investment Portfolio The Other-Than-Temporary Impairment (OTTI) charge recognized by First Defiancein the second quarter of 2009 totaled $874,000. The June 30, 2009 balance included $35.5million of loans that are 90 days past due and another $6.3 million of loansconsidered non-performing because of changes in terms granted to borrowersalthough the loans are still accruing interest.