FORT WAYNE, Ind., Oct. 16, 2008 (GLOBE NEWSWIRE) -- Tower Financial Corporation (Nasdaq:TOFC) reported third quarter 2008 earnings of $330,000, or $0.08 per diluted share, compared with a net loss of $2.2 million, or $0.54 per share, reported third quarter 2007. For the nine months ended September 30, 2008 Tower reported a net income of $1.4 million, or $0.34 per diluted share, compared to a net loss of $1.8 million, or $0.45 per share for the nine months ended September 2007.
Third quarter highlights include:
-- Core deposits grew to $406.7 million, an increase of $36.4
million from December 31, 2007 and an increase of $5.8 million
from June 30, 2008.
-- The Company's regulatory capital ratios continue to remain above
the "well-capitalized" levels of 6 percent for tier 1 capital and
10 percent for risked-based capital. Tier 1 capital at September
30, 2008 was 11.7 percent, compared to 11.6 percent at June 30,
2008 and 10.9 percent at December 31, 2007. Total risked-based
capital at September 30, 2008 was 13.0 percent, compared to 12.9
percent and 12.1 percent at June 30, 2008 and December 31, 2007,
respectively.
-- Operating expenses decreased $577,000 from the second quarter
2008, primarily due to reduction in workforce in second quarter
2008. The efficiency ratio improved to 69.7 percent compared to
83.1 percent in the second quarter 2008 and 71.7 percent in the
third quarter 2007.
-- Asset quality improved as nonperforming loans plus delinquencies
decreased by $4.1 million during the quarter to $21.4 million, or
3.08 percent of total assets. The loan loss reserve was 1.67
percent of total loans at September 30, 2008 compared to 1.43
percent at December 31, 2007, as the Company continues to
aggressively increase reserves in light of current economic
conditions.
-- The Company continues to improve its liquidity position as the
investment portfolio increased by $4.2 million. The loan to
funding (deposits plus borrowings) ratio improved to 86.2
percent, from 86.3 percent and 88.1 percent at June 30, 2008 and
December 31, 2007, respectively.
-- Fee Income increased $344,000, or 23.4 percent from the second
quarter 2008 and $403,000, or 28.7 percent from the third quarter
2007. Fee Income accounted for 25 percent of total revenue. Trust
fees were $937,000, or 52 percent of total fee income.
Balance Sheet
Company assets were $696.1 million at September 30, 2008, a decrease of $10.4 million, or 1.5 percent from December 31, 2007, and a decrease of $10.9 million, or 1.5 percent from September 30, 2007. The decrease in assets during the first nine months was primarily attributable to a decrease in loans of $21.0 million, offset by an increase in securities available for sale of $12.9 million. The decrease in loans came primarily from the commercial real estate category due to scheduled paydowns, reduced market activity, and a planned exit strategy for certain non-performing loans. The increase in securities available for sale was part of managements plan to improve liquidity during this current period of volatility.
Core deposit growth during the first nine months of 2008 was led by $14.9 million of growth in non-interest bearing checking accounts, along with growth in Savings and NOW accounts of $2.7 million and $11.9 million, respectively. As of September 30, 2008, checking and savings accounts made up 54.5 percent of total deposits compared with 45.9 percent at December 31, 2007 and 43.1 percent as of September 30, 2007. Total deposits were $573.2 million at September 30, 2008, a decrease of $27.5 million, or 4.6 percent from December 31, 2007. The decrease through the first nine months of 2008 was the net result of a substantial increase in core deposits of $36.4 million, offset by a planned decrease of $12.9 million in brokered CDs and a planned decrease of $51.0 million in CDs greater than $100,000.
Shareholders' equity was $48.5 million at September 30, 2008, an increase of 0.5 percent from the $48.2 million reported at December 31, 2007. Affecting the increase in stockholders' equity during the first nine months of 2008 was $1.4 million in net income and $126,000 of additional paid in capital from the exercise of stock options. These increases were offset by $1.1 million in unrealized losses, net of tax, on available for sale securities, the first quarter dividend payment of $179,000, or $0.044 per share and stock repurchases totaling $126,000. Period-end common shares outstanding were 4,084,432.
Operating Statement
Total revenue, consisting of net interest income and noninterest income, was $7.2 million for the third quarter 2008, an increase of $341,000 from the third quarter 2007 and an increase of $475,000 from the second quarter 2008. Third quarter 2008 net interest income was $5.4 million, an increase of $131,000, or 2.5 percent from the second quarter 2008 and a slight decrease of $62,000, or 1.0 percent compared to the third quarter 2007. Net interest margin for the third quarter 2008 was 3.43%, an increase of 7 basis points from the second quarter 2008 and an increase of 12 basis points from the third quarter 2007. This was primarily due to the lowering of our cost of funds via growth in our lower cost core deposits.
Noninterest income accounted for approximately 25 percent of total revenue. For the third quarter, noninterest income was $1.8 million, up 28.7 percent from the $1.4 million reported in the third quarter of 2007. Trust and brokerage fees of $937,000 accounted for 52 percent of third quarter noninterest income; they grew 18.7 percent compared to the third quarter 2007. Currently, Tower Private Advisors manages $712.9 million in combined trust and brokerage assets, an increase of 15.4 percent above the $618.0 million of combined assets reported for the year-ago quarter. Service charges for the Bank were $288,000, a 22.8 percent increase from the third quarter 2007. Loan broker fees were $65,000, an 11.6 percent increase from the third quarter 2007. Other fee income increased by $190,000, or 58.5 percent, primarily as the result of an increase in the market value of an investment held at the holding company.
Third quarter noninterest expense increased $102,000, or 2.1 percent from the third quarter 2007, however we experienced a decrease of $577,000 from the second quarter 2008. The decrease from the second quarter was primarily associated to the workforce reduction that took place in April 2008. The increase from the third quarter 2007 expenses relates to increased legal and professional costs associated with nonperforming assets and increased FDIC insurance premiums.
Asset Quality
Nonperforming assets plus delinquencies decreased $4.1 million from June 30, 2008. This was the net result of several settlements on nonperforming loans along with charge-off activity. Nonperforming assets plus delinquencies at period end were $21.4 million, or 3.1 percent of total assets. This compares with $25.6 million, or 3.7 percent of assets at June 30, 2008 and $20.0 million, or 2.8 percent of assets on December 31, 2007. Net charge-offs were $1.6 million for the quarter compared with net charge-offs of $5.2 million in the third quarter of 2007. Year to date net charge-offs were $2.0 million compared with $7.9 million in the first nine months of 2007.
Tower's allowance for loan losses was 1.67 percent of total loans at September 30, 2008, an increase from 1.62 percent and 1.43 percent at June 30, 2008 and December 31, 2007, respectively. The year to date increase was the net result of a reduction on loans outstanding of $21.0 million, net charge-offs of $2.0 million, and loan loss provision of $3.2 million. The increase from the second quarter 2008 was the net result of minimal loan growth, $1.0 million, net charge-offs of $1.6 million, and loan loss provision of $2.0 million.
ABOUT THE COMPANY
Headquartered in Fort Wayne, Indiana, Tower Financial Corporation is a financial services holding company with two subsidiaries: Tower Bank & Trust Company, a community bank headquartered in Fort Wayne; and Tower Trust Company, a state-chartered wealth services firm doing business as Tower Private Advisors. Tower Bank provides a wide variety of financial services to businesses and consumers through its six full-service financial centers in Fort Wayne, and one in Warsaw, Indiana. Tower Financial Corporation's common stock is listed on the NASDAQ Global Market under the symbol "TOFC." For further information, visit Tower's web site at www.towerbank.net.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation and the Bank.
These forward-looking statements are intended to be covered by the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Actual results and outcomes may differ materially from what may be expressed or forecasted in the forward-looking statements. Future factors include changes in interest rates and interest-rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies, trends in customer behavior and their ability to repay loans; changes in local real estate values; changes in the national and local economy; and other factors, including various risk factors identified and described in the Corporation's Annual Report on Form 10-K, quarterly reports of Form 10-Q and in other periodic reports we file from time to time with the Securities and Exchange Commission. These reports are available on the Commission's website at www.sec.gov, as well as on our website at www.towerbank.net.
Tower Financial Corporation
Consolidated Balance Sheets
At September 30, 2008 and December 31, 2007
(unaudited) (unaudited)
Sept 30 December 31 Sept 30
2008 2007 2007
------------------------------------------------------ ------------
ASSETS
Cash and due from banks $ 12,847,912 $ 25,913,449 $ 12,475,451
Short-term investments
and interest-earning
deposits 812,700 1,781,161 7,286,505
Federal funds sold 21,191,867 6,135,779 6,290,981
--------------------------- ------------
Total cash and cash
equivalents 34,852,479 33,830,389 26,052,937
Securities available
for sale, at fair
value 78,165,942 65,227,694 69,046,042
FHLBI and FRB stock 4,032,446 3,589,700 3,454,700
Loans Held for Sale 698,899 3,189,545 4,007,123
Loans 554,760,310 575,744,207 579,902,194
Allowance for loan
losses (9,127,838) (8,208,162) (7,180,424)
--------------------------- ------------
Net loans 545,632,472 567,536,045 572,721,770
Premises and equipment,
net 8,187,885 9,549,233 8,914,857
Accrued interest
receivable 2,801,883 3,246,455 3,609,815
Bank Owned Life
Insurance 11,579,500 11,258,517 11,153,097
Other assets 10,109,579 9,065,564 7,953,438
--------------------------- ------------
Total assets $696,061,085 $706,493,142 $706,913,779
=========================== ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 86,542,430 $ 71,705,395 $ 74,708,805
Interest-bearing 486,678,852 528,984,076 518,145,021
--------------------------- ------------
Total deposits 573,221,282 600,689,471 592,853,826
-- -- --
Federal Home Loan Bank
advances 52,700,000 35,100,000 43,400,000
Junior subordinated
debt 17,527,000 17,527,000 17,527,000
Accrued interest
payable 785,047 1,721,972 1,816,374
Other liabilities 3,378,988 3,247,145 2,486,349
--------------------------- ------------
Total liabilities 647,612,317 658,285,588 658,083,549
STOCKHOLDERS' EQUITY
Preferred stock, no
par value, 4,000,000
shares authorized; no
shares issued and
outstanding
Common stock and
paid-in-capital, no
par value, 6,000,000
shares authorized;
4,149,432 issued and
4,084,432 outstanding
shares at September
30, 2008 and
4,062,769 shares at
December 31, 2007 39,758,513 39,482,669 39,469,478
Treasury stock, at
cost, 65,000 shares
at September 30, 2008
and 53,036 shares at
December 31, 2007 (884,376) (758,827) (634,119)
Retained earnings 10,413,094 9,208,719 10,172,045
Accumulated other
comprehensive income
(loss), net of tax of
($431,935) at
September 30, 2008
and $141,663 at
December 31, 2007 (838,463) 274,993 (177,174)
--------------------------- ------------
Total stockholders'
equity 48,448,768 48,207,554 48,830,230
--------------------------- ------------
Total liabilities
and stockholders'
equity $696,061,085 $706,493,142 $706,913,779
=========================== ============
Tower Financial Corporation
Consolidated Statements of Operations
For the three months and nine months ended September 30, 2008 and 2007
(unaudited)
For the For the
Three Months Ended Nine Months Ended
Sept 30 Sept 30
------------------------ ------------------------
2008 2007 2008 2007
------------------ ------------------------ ------------------------
Interest income:
Loans, including
fees $ 8,303,686 $11,085,796 $25,919,244 $32,492,233
Securities -
taxable 734,502 660,063 1,997,272 1,991,226
Securities - tax
exempt 220,715 202,210 658,061 598,151
Other interest
income 59,938 128,032 331,924 368,686
------------------------ ------------------------
Total interest
income 9,318,841 12,076,101 28,906,501 35,450,296
Interest expense:
Deposits 3,322,465 5,863,839 11,397,623 17,252,182
Fed Funds
Purchased 2,776 15 2,776 532
FHLB advances 284,982 436,366 857,759 1,025,421
Trust preferred
securities 283,071 287,647 847,791 849,253
------------------------ ------------------------
Total interest
expense 3,893,294 6,587,867 13,105,949 19,127,388
------------------------ ------------------------
Net interest
income 5,425,547 5,488,234 15,800,552 16,322,908
Provision for
loan losses 1,999,000 5,246,000 3,174,000 8,171,000
------------------------ ------------------------
Net interest
income after
provision for
loan losses 3,426,547 242,234 12,626,552 8,151,908
Noninterest income:
Trust and
brokerage fees 937,324 790,002 2,770,350 2,354,492
Service charges 288,186 234,657 923,540 720,483
Loan broker fees 65,075 58,310 192,945 144,598
Gain/(Loss) on
sale of
securities 6,004 -- 65,841 --
Other fees 515,632 325,410 968,788 1,107,914
------------------------ ------------------------
Total
noninterest
income 1,812,221 1,408,379 4,921,464 4,327,487
Noninterest
expense:
Salaries and
benefits 2,613,399 2,627,862 8,751,643 8,600,285
Occupancy and
equipment 719,498 676,222 2,209,401 2,024,966
Marketing 131,147 138,499 505,363 316,922
Data processing 246,198 230,508 747,128 688,684
Loan and
professional
costs 326,588 266,687 956,656 992,521
Office supplies
and postage 92,452 96,045 288,431 336,888
Courier service 64,858 97,204 229,393 292,975
Business
Development 140,317 174,503 469,149 516,253
Communication
Expense 90,856 61,641 242,579 187,866
FDIC Insurance
Premiums 180,036 116,260 547,791 351,439
Other expense 437,450 455,412 1,194,474 1,096,916
------------------------ ------------------------
Total
noninterest
expense 5,042,799 4,940,843 16,142,008 15,405,715
------------------------ ------------------------
Income/(loss)
before income
taxes/(benefit) 195,969 (3,290,230) 1,406,008 (2,926,320)
Income taxes
expense/(benefit) (133,632) (1,081,984) 22,528 (1,111,800)
------------------------ ------------------------
Net income/(loss) $ 329,601 $(2,208,246) $ 1,383,480 $(1,814,520)
======================== ========================
Basic earnings/
(loss) per
common share $ 0.08 $ (0.54) $ 0.34 $ (0.45)
Diluted earnings/
(loss) per
common share $ 0.08 $ (0.54) $ 0.34 $ (0.45)
Average common
shares
outstanding 4,084,432 4,060,754 4,072,762 4,067,667
Average common
shares and
dilutive potential
common shares
outstanding 4,086,757 4,060,754 4,081,441 4,067,667
Dividends declared
per common share $ -- $ 0.044 $ 0.044 $ 0.132
Tower Financial Corporation
Consolidated Financial Highlights
Third Quarter 2008
(unaudited)
Quarterly
-----------------------------------
3rd Qtr 2nd Qtr 1st Qtr
($ in thousands 2008 2008 2008
except for share data) -----------------------------------
EARNINGS
Net interest income $ 5,426 5,295 5,080
Provision for loan loss $ 1,999 875 300
Noninterest income $ 1,812 1,469 1,641
Noninterest expense $ 5,043 5,620 5,479
Net income/(loss) $ 330 342 711
Basic earnings per share $ 0.08 0.08 0.18
Diluted earnings per share $ 0.08 0.08 0.17
Average shares outstanding 4,084,432 4,078,934 4,062,145
Average diluted shares
outstanding 4,086,757 4,081,245 4,088,684
PERFORMANCE RATIOS
Return on average assets * 0.19% 0.20% 0.41%
Return on average common
equity * 2.69% 2.79% 5.91%
Net interest margin
(fully-tax equivalent) * 3.43% 3.36% 3.15%
Efficiency ratio 69.67% 83.09% 81.52%
Full-time equivalent
employees 176.50 181.25 184.25
CAPITAL
Equity to assets 6.96% 7.01% 7.15%
Regulatory leverage ratio 9.62% 9.52% 9.33%
Tier 1 capital ratio 11.69% 11.55% 11.35%
Total risk-based capital
ratio 13.04% 12.92% 12.51%
Book value per share $ 11.84 11.92 12.18
Cash dividend per share $ 0.00 0.00 0.044
ASSET QUALITY
Net charge-offs $ 1,570 936 (527)
Net charge-offs to average
loans * 1.13% 0.67% -0.37%
Allowance for loan losses $ 9,278 8,974 9,035
Allowance for loan losses
to total loans 1.67% 1.62% 1.61%
Nonperforming loans $ 18,048 19,412 20,358
Other real estate owned
(OREO) $ 2,432 2,500 1,527
Nonperforming assets (NPA) $ 20,480 23,752 21,885
90+ Day delinquencies $ 982 1,840 547
NPAs plus 90 Days delinquent $ 21,462 25,592 22,432
NPAs to Total assets 2.94% 3.42% 3.17%
NPAs+90 to Total assets 3.08% 3.68% 3.25%
NPAs to Loans + OREO 3.68% 4.27% 3.88%
END OF PERIOD BALANCES
Total assets $ 696,061 695,427 691,208
Total earning assets $ 658,963 648,345 653,906
Total loans $ 554,760 553,843 562,235
Total deposits $ 573,221 600,118 587,735
Stockholders' equity $ 48,449 48,753 49,405
AVERAGE BALANCES
Total assets $ 682,958 685,547 701,423
Total earning assets $ 642,852 646,745 663,522
Total loans $ 551,407 562,165 570,010
Total deposits $ 580,589 580,563 607,402
Stockholders' equity $ 48,875 49,252 48,427
Quarterly
-------------------------------------------
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
($ in thousands 2007 2007 2007 2007
except for share data) -------------------------------------------
EARNINGS
Net interest income $ 5,223 5,488 5,583 5,251
Provision for loan
loss $ 2,825 5,246 1,500 1,425
Noninterest income $ 1,477 1,409 1,430 1,489
Noninterest expense $ 5,325 4,941 5,303 5,162
Net income/(loss) $ (784) (2,208) 217 177
Basic earnings per
share $ (0.19) (0.54) 0.05 0.04
Diluted earnings per
share $ (0.19) (0.54) 0.05 0.04
Average shares
outstanding 4,070,766 4,063,750 4,073,678 4,065,657
Average diluted shares
outstanding 4,070,766 4,063,750 4,146,386 4,163,169
PERFORMANCE RATIOS
Return on average
assets * -0.45% -1.25% 0.12% 0.11%
Return on average
common equity * -6.32% -17.52% 1.69% 1.41%
Net interest margin
(fully-tax equivalent) * 3.19% 3.31% 3.44% 3.43%
Efficiency ratio 79.48% 71.64% 75.62% 76.59%
Full-time equivalent
employees 190.00 193.00 192.75 191.75
CAPITAL
Equity to assets 6.82% 6.91% 7.20% 7.52%
Regulatory leverage
ratio 9.19% 9.34% 9.91% 10.28%
Tier 1 capital ratio 10.92% 11.03% 11.37% 11.81%
Total risk-based
capital ratio 12.08% 12.15% 12.47% 12.97%
Book value per share $ 11.87 12.01 12.44 12.62
Cash dividend per
share $ 0.044 0.044 0.044 0.044
ASSET QUALITY
Net charge-offs $ 1,797 5,241 1,987 633
Net charge-offs to
average loans * 1.24% 3.54% 1.36% 0.47%
Allowance for loan
losses $ 8,208 7,180 7,176 7,663
Allowance for loan
losses to total
loans 1.43% 1.24% 1.23% 1.35%
Nonperforming loans $ 18,594 7,116 4,845 5,239
Other real estate
owned (OREO) $ 1,452 645 744 744
Nonperforming assets
(NPA) $ 20,046 7,761 5,589 5,983
90+ Day
delinquencies $ 0 14 81 564
NPAs plus 90 Days
delinquent $ 20,046 7,775 5,670 6,547
NPAs to Total assets 2.84% 1.10% 0.80% 0.88%
NPAs+90 to Total
assets 2.84% 1.10% 0.81% 0.96%
NPAs to Loans + OREO 3.47% 1.34% 0.96% 1.05%
END OF PERIOD BALANCES
Total assets $ 706,493 706,914 701,641 683,032
Total earning assets $ 655,668 669,988 673,032 651,077
Total loans $ 575,744 579,902 581,783 568,481
Total deposits $ 600,689 592,854 595,558 589,802
Stockholders' equity $ 48,208 48,830 50,536 51,386
AVERAGE BALANCES
Total assets $ 698,452 702,538 697,117 664,026
Total earning assets $ 660,812 669,524 663,411 633,569
Total loans $ 574,266 587,531 585,480 551,000
Total deposits $ 595,913 596,140 597,806 575,389
Stockholders' equity $ 49,199 50,014 51,579 50,779
Year-To-Date
------------------------
($ in thousands 2008 2007
except for share data) ------------------------
EARNINGS
Net interest income $ 15,801 16,322
Provision for loan loss $ 3,174 8,171
Noninterest income $ 4,922 4,328
Noninterest expense $ 16,142 15,406
Net income/(loss) $ 1,383 (1,814)
Basic earnings per share $ 0.34 (0.45)
Diluted earnings per share $ 0.34 (0.45)
Average shares outstanding 4,072,762 4,067,667
Average diluted shares outstanding 4,081,441 4,067,667
PERFORMANCE RATIOS
Return on average assets * 0.27% -0.35%
Return on average common equity * 3.79% -4.78%
Net interest margin (fully-tax
equivalent) * 3.31% 3.39%
Efficiency ratio 77.89% 74.61%
Full-time equivalent employees 176.50 193.00
CAPITAL
Equity to assets 6.96% 6.91%
Regulatory leverage ratio 9.62% 9.34%
Tier 1 capital ratio 11.69% 11.03%
Total risk-based capital ratio 13.04% 12.15%
Book value per share $ 11.84 12.01
Cash dividend per share $ 0.044 0.132
ASSET QUALITY
Net charge-offs $ 1,979 7,861
Net charge-offs to average loans * 0.47% 1.83%
Allowance for loan losses $ 9,278 7,180
Allowance for loan losses to total
loans 1.67% 1.23%
Nonperforming loans $ 18,048 7,116
Other real estate owned (OREO) $ 2,432 645
Nonperforming assets (NPA) $ 20,480 7,761
90+ Day delinquencies $ 982 14
NPAs plus 90 Days delinquent 21,462 7,775
NPAs to Total assets 2.94% 1.10%
NPAs+90 to Total assets 3.08% 1.10%
NPAs to Loans + OREO 3.68% 1.34%
END OF PERIOD BALANCES
Total assets $ 696,061 706,914
Total earning assets $ 658,963 669,988
Total loans $ 554,760 579,902
Total deposits $ 573,221 592,854
Stockholders' equity $ 48,449 48,830
AVERAGE BALANCES
Total assets $ 689,953 687,918
Total earning assets $ 651,269 655,501
Total loans $ 561,164 574,670
Total deposits $ 589,194 589,814
Stockholders' equity $ 48,868 50,780
* annualized for quarterly data
CONTACT: Tower Financial Corporation
Investors:
Richard R. Sawyer, Chief Financial Officer
260-427-7150
rick.sawyer@towerbank.net
Media:
Tina M. Farrington, Senior Vice President
260-427-7155
tina.farrington@towerbank.net
