FORT WAYNE, Ind., April 17, 2006 (PRIMEZONE) -- Tower Financial Corporation (Nasdaq:TOFC) today announced first quarter 2006 net income of $993,000, an increase of 36.6 percent from the $726,900 reported for the first quarter of 2005. Diluted earnings per share were $0.24, up 33.3 percent from first quarter 2005 earnings of $0.18 per share. Improvement reflects strong revenue growth derived from solid loan growth and increased non-interest income from trust, brokerage and other fees.
First quarter highlights include:
-- Loans were $474 million, up 14.4% from twelve months ago.
Year-to-date, commercial real estate loans grew 6.6% and
residential real estate loans held for investment increased
25.9%.
-- Deposits were $472 million, up 18.1% from twelve months ago.
Year-to-date, non-interest-bearing demand deposits rose 12.7% and
now comprise 15.9% of the deposit portfolio.
-- Total revenue increased 24.8% above the prior-year period.
-- The net interest margin (FTE) was 3.74% for the current period,
an 11 basis point improvement over the prior-year first quarter,
and 7 basis points below the fourth quarter of 2005.
-- Managed assets, including brokerage and trust, reached $504.7
million at March 31, 2006, up 19.4% year-over-year; fee income
was $791 thousand, an increase of 58.1% over the first quarter of
2005.
-- Non-performing assets plus delinquencies were $3.7 million, or
0.65% of total assets at period-end, compared with 0.80% a year
ago.
Donald F. Schenkel, Chairman and Chief Executive Officer, commented, "We are pleased to report another consecutive quarter of earnings growth. Our performance continues to be excellent in all areas of our business: loan growth, core deposit growth, wealth services, and asset quality, all of which have favorably impacted revenue growth and bottom-line earnings. Through our investment in people, products and infrastructure, we continue to build our reputation in the Fort Wayne community as the premier community and trust bank. Our sixth branch in southwest Fort Wayne is set to open in June, and we just received approval to convert our Angola LPO to a full-service branch, which will take place in the third quarter of this year. We look forward to the new opportunities and customers this network expansion will bring to our growing organization."
Total revenue, consisting of net interest income and non-interest income, was $6.2 million for the first quarter of 2006, an increase of 24.8 percent over the $4.9 million reported in the prior-year period. Net interest income grew 18.4 percent to $4.8 million, reflecting a 14.9 percent increase in average earning assets and a 10 basis point improvement in the net interest margin to 3.74 percent. Mr. Schenkel added, "We have maintained our net interest margin within a narrow band throughout the last twelve months; we have begun to neutralize our traditionally asset-sensitive portfolio by increasing the level of fixed-rate real estate loans held in portfolio."
Non-interest income for the first quarter of 2006 was $1.4 million, up 53.4 percent from the $907,000 reported in the first quarter of 2005. Trust and brokerage fees contributed $791,000, up $290,800 or 58.1 percent. "Trust services is providing us with substantial opportunities to serve as executor of client estates," Mr. Schenkel added. "This past quarter, we received $200,000 in fee income from this service, which has become an increasingly important component of our program as Tower Private Advisors gains recognition in the Fort Wayne community. Tower Private Advisors currently manages 589 accounts and $458.6 million in trust assets compared with 544 accounts and $398.8 million in trust assets a year ago, an increase of 8.3 percent and 15.0 percent, respectively. In addition to management of trust assets, Tower Private Advisors began offering brokerage services in July, 2004, and now manages $46.1 million of brokerage assets, up 93.2 percent from first quarter last year.
Fee income is increasingly diversified. In addition to a 20.8 percent increase in service charge income quarter-over-quarter, Tower reported significant increases in other fee income, up $200,300 or 102.0 percent. Approximately 59 percent of the increase was derived from BOLI and a purchased receivables program that was initiated in March 2005. The decline in mortgage banking fees of $31,600 results from management's decision to retain a greater volume of fixed-rate mortgage loan originations in portfolio, balancing Tower's preponderance of asset-sensitive commercial loans. Overall, first quarter 2006 mortgage originations were $7.5 million compared to the prior-year period's volume of $8.6 million. Tower retained $5.4 million in portfolio compared with $3.4 million last year.
Non-interest expense for the first quarter of 2006 was $4.1 million, a 26.3 percent increase over the $3.2 million reported for the first quarter of 2005. The increase supported overall corporate growth. Salaries, benefits and occupancy expense together rose 26.4 percent and accounted for the majority of expense growth; FTE employees totaled 156 at year-end, 23 employees or 17.8 percent higher than a year earlier, but only five employees higher than the previous quarter. The Company began expensing stock options in 2006; the first quarter expense was $30,500. Other expense, up $89,000 or 48.0 percent, resulted from additional growth-related activities, such as processing costs. The efficiency ratio for the first quarter of 2006 was 66.52 percent compared with 65.71 percent for the prior year first quarter, and 64.32 percent for the previous quarter.
Asset quality remains sound. Net charge-offs (annualized) were 0.14 percent of average loans for the first quarter of 2006, compared with 0.77 percent for the linked quarter, and 0.46 percent for the prior-year quarter. Non-performing assets plus delinquencies were $3.7 million, or 0.65 percent of total assets at March 31, 2006, down from $3.9 million and 0.80 percent, respectively, twelve months ago. Tower's allowance for loan losses was 1.28 percent of total loans at March 31, 2006.
Assets reached $572.6 million at March 31, 2006, a 17.4 percent increase over the $487.8 million reported twelve months ago. Loans outstanding grew by $59.6 million, or 14.4 percent, reaching $474.0 million at period-end; other earning assets increased by $14.4 million, or 28.3 percent. Commercial loans (CRE plus C&I) now account for 76.8 percent of Tower's loan portfolio. Deposits grew 18.1 percent over the twelve month period, to $472.2 million. Core deposits (DDA, savings, NOW, money market accounts and retail CDs) now comprise 56.4 percent of total deposits. Non-interest bearing DDA deposits contribute 15.9 percent of total deposits; they increased 12.7 percent since year-end 2005.
Shareholders' equity was $48.0 million at March 31, 2006, an increase of 7.8 percent from the $44.5 million reported twelve months ago. Tower continues to meet the requirements for "well-capitalized" banks; the total risk-based capital ratio was 13.00 percent. Period-end shares outstanding were 4,008,092. Mr. Schenkel concluded, "We are pleased with our year-to-date performance and remain optimistic about opportunities for growth throughout the rest of 2006."
ABOUT THE COMPANY
Headquartered in Fort Wayne, Indiana, Tower Financial Corporation is a financial services holding company for two subsidiaries: Tower Bank & Trust Company, a growing community bank that opened in February 1999; 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 located in Northeast Indiana through its five full-service banking centers in Fort Wayne and a business development office in Angola, Indiana. Tower Financial Corporation's common stock is listed on the Nasdaq National Market under the symbol "TOFC." For further information, please visit Tower's web site at www.TOFC.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 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, levies, and assessments; 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 the national and local economy; and other factors, including risk factors, referred to from time to time in filings made by the Corporation with the Securities and Exchange Commission and available via EDGAR. These are representative of the future factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement. The Corporation undertakes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise.
Tower Financial Corporation
Consolidated Financial Highlights
First Quarter 2006
(unaudited)
($ in thousands except for share data)
Quarterly
-----------------------------------------------------
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
2006 2005 2005 2005 2005
--------- --------- --------- --------- ---------
EARNINGS
Net interest
income $ 4,773 4,774 4,453 4,304 4,033
Provision for
loan loss $ 575 675 600 536 581
NonInterest
income $ 1,391 1,129 1,147 1,001 907
NonInterest
expense $ 4,100 3,797 3,578 3,460 3,246
Net income $ 993 938 933 842 727
Basic earnings
per share $ 0.25 0.23 0.23 0.21 0.18
Diluted
earnings per
share $ 0.24 0.23 0.23 0.21 0.18
Average shares
outstanding 4,008,000 4,007,936 4,007,697 4,005,824 4,003,156
Average
diluted
shares
outstanding 4,105,496 4,037,920 4,093,426 4,073,011 4,070,758
PERFORMANCE
RATIOS
Return on
average
assets(a) 0.72% 0.70% 0.71% 0.69% 0.62%
Return on
average common
equity(a) 8.42% 7.92% 8.02% 7.48% 6.61%
Net interest
margin (fully-
tax
equivalent)(a) 3.74% 3.79% 3.64% 3.75% 3.63%
Efficiency
ratio 66.52% 64.32% 63.89% 65.22% 65.71%
Full-time
equivalent
employees 155.50 150.50 147.00 138.50 132.25
CAPITAL
Equity to
assets 8.37% 8.47% 8.58% 9.01% 9.12%
Regulatory
leverage ratio 10.76% 11.08% 9.67% 10.12% 10.03%
Tier 1 capital
ratio 11.88% 12.16% 10.44% 10.69% 10.87%
Total risk-
based capital
ratio 13.00% 13.24% 11.62% 11.90% 12.09%
Book value per
share $ 11.96 11.79 11.61 11.41 11.11
Cash dividend
per share $ 0.04 n/a n/a n/a n/a
ASSET QUALITY
Net charge-
offs $ 158 860 697 334 464
Net charge-
offs to
average
loans(a) 0.14% 0.77% 0.63% 0.32% 0.46%
Allowance for
loan losses $ 6,062 5,645 5,830 5,927 5,725
Allowance for
loan losses to
total loans 1.28% 1.25% 1.31% 1.38% 1.38%
Nonperforming
loans $ 1,833 1,688 1,961 2,175 2,034
Other real
estate owned
(OREO) $ 509 244 -- 400 1,095
Nonperforming
assets (NPA) $ 2,342 1,932 1,961 2,575 3,129
90+ Day
delinquencies $ 1,380 864 1,136 765 783
NPA's plus 90
Days
delinquent $ 3,722 2,796 3,097 3,340 3,912
NPA's to Total
assets 0.41% 0.35% 0.36% 0.51% 0.64%
NPA's+90 to
Total assets 0.65% 0.50% 0.57% 0.66% 0.80%
NPA's to Loans
+ OREO 0.49% 0.43% 0.44% 0.60% 0.75%
END OF PERIOD
BALANCES
Total assets $ 572,632 557,821 542,632 507,519 487,833
Total earning
assets $ 539,187 528,036 513,036 479,241 465,217
Total loans $ 473,998 450,391 443,365 429,331 414,423
Total deposits $ 472,178 460,951 467,538 429,678 399,896
Stockholders'
equity $ 47,951 47,268 46,537 45,712 44,476
AVERAGE BALANCES
Total assets $ 556,479 534,172 518,540 487,429 477,739
Total earning
assets $ 526,423 507,361 492,937 468,357 458,122
Total loans $ 458,642 441,719 437,426 418,564 404,794
Total deposits $ 459,803 455,988 440,969 410,019 392,351
Stockholders'
equity $ 47,846 46,997 46,182 45,131 44,593
Year-To-Date
------------------------
2006 2005
---------- ----------
EARNINGS
Net interest income $ 4,773 4,033
Provision for loan loss $ 575 581
NonInterest income $ 1,391 907
NonInterest expense $ 4,100 3,246
Net income $ 993 727
Basic earnings per share $ 0.25 0.18
Diluted earnings per share $ 0.24 0.18
Average shares outstanding 4,008,000 4,003,156
Average diluted shares outstanding 4,105,496 4,070,758
PERFORMANCE RATIOS
Return on average assets(a) 0.72% 0.62%
Return on average common equity(a) 8.45% 6.63%
Net interest margin (fully-tax
equivalent)(a) 3.74% 3.63%
Efficiency ratio 66.52% 65.71%
Full-time equivalent employees 155.50 132.25
CAPITAL
Equity to assets 8.37% 9.12%
Regulatory leverage ratio 10.76% 10.03%
Tier 1 capital ratio 11.88% 10.87%
Total risk-based capital ratio 13.00% 12.09%
Book value per share $ 11.96 11.11
Cash dividend per share $ 0.04 n/a
ASSET QUALITY
Net charge-offs $ 158 464
Net charge-offs to average loans(a) 0.14% 0.46%
Allowance for loan losses $ 6,062 5,725
Allowance for loan losses to
total loans 1.28% 1.38%
Nonperforming loans $ 1,833 2,034
Other real estate owned (OREO) $ 509 1,095
Nonperforming assets (NPA) $ 2,342 3,129
90+ Day delinquencies $ 1,380 783
NPA's plus 90 Days delinquent $ 3,722 3,912
NPA's to Total assets 0.41% 0.64%
NPA's+90 to Total assets 0.65% 0.80%
NPA's to Loans + OREO 0.49% 0.75%
END OF PERIOD BALANCES
Total assets $ 572,632 487,833
Total earning assets $ 539,187 465,217
Total loans $ 473,998 414,423
Total deposits $ 472,178 399,896
Stockholders' equity $ 47,951 44,476
AVERAGE BALANCES
Total assets $ 556,405 477,739
Total earning assets $ 526,546 458,122
Total loans $ 458,565 404,794
Total deposits $ 459,952 392,351
Stockholders' equity $ 47,665 44,593
(a) annualized for quarterly data
Tower Financial Corporation
Consolidated Statements of Operations
For the three months ended March 31, 2006 and 2005
(unaudited)
For the Three Months Ended
March 31
-------------------------
2006 2005
----------------------------------------- -------------------------
Interest income:
Loans, including fees $8,145,444 $5,760,581
Securities - taxable 490,564 247,291
Securities - tax exempt 147,392 134,729
Other interest income 145,002 81,784
---------- ----------
Total interest income 8,928,402 6,224,385
Interest expense:
Deposits 3,593,755 1,863,603
Short-term borrowings
FHLB advances 352,179 246,989
Trust preferred securities 209,230 81,180
---------- ----------
Total interest expense 4,155,164 2,191,772
---------- ----------
Net interest income 4,773,238 4,032,613
Provision for loan losses 575,000 581,000
---------- ----------
Net interest income after
provision for loan losses 4,198,238 3,451,613
Noninterest income:
Trust and brokerage fees 790,956 500,141
Service charges 178,681 148,152
Loan broker fees 30,620 62,193
Other fees 391,045 196,437
---------- ----------
Total noninterest income 1,391,302 906,923
Noninterest expense:
Salaries and benefits 2,502,982 1,924,839
Occupancy and equipment 480,177 435,716
Marketing 172,346 156,533
Data processing 145,968 122,318
Loan and professional costs 220,786 176,407
Office supplies and postage 106,639 70,801
Courier service 92,706 79,232
Business Development 104,944 95,252
Other expense 273,338 184,695
---------- ----------
Total noninterest expense 4,099,886 3,245,793
---------- ----------
Income before income taxes 1,489,654 1,112,743
Income taxes expense 496,700 385,890
---------- ----------
Net income $ 992,954 $ 726,853
========== ==========
Basic earnings per common share $ 0.25 $ 0.18
Diluted earnings per common share $ 0.24 $ 0.18
Average common shares outstanding 4,008,000 4,003,156
Average common shares and dilutive
potential common shares outstanding 4,105,496 4,070,156
Tower Financial Corporation
Consolidated Balance Sheets
At March 31, 2006 and December 31, 2005
(unaudited)
March 31 December 31
2006 2005
---------------------------------------------------------------------
ASSETS
Cash and due from banks $ 16,752,996 $ 14,326,710
Short-term investments and
interest-earning deposits 3,667,190 16,393,439
Federal funds sold 4,260,941 7,188,188
------------ ------------
Total cash and cash equivalents 24,681,127 37,908,337
Securities available for sale,
at fair value 53,839,882 50,642,276
FHLBI and FRB stock 3,421,300 3,421,300
Loans held for sale
Loans 473,997,965 450,390,935
Allowance for loan losses (6,062,256) (5,645,301)
------------ ------------
Net loans 467,935,709 444,745,634
Premises and equipment, net 5,313,102 4,638,436
Accrued interest receivable 2,745,348 2,802,189
Bank Owned Life Insurance 10,557,700 10,462,402
Other assets 4,138,245 3,200,086
------------ ------------
Total assets $572,632,413 $557,820,660
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 75,188,378 $ 66,742,748
Interest-bearing 396,989,718 394,208,113
------------ ------------
Total deposits 472,178,096 460,950,861
Short-term borrowings -- --
Federal Home Loan Bank advances 37,700,000 34,700,000
Junior subordinated debt 11,856,000 11,856,000
Accrued interest payable 1,117,028 954,075
Other liabilities 1,830,503 2,091,670
------------ ------------
Total liabilities 524,681,627 510,552,606
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;
issued and outstanding - 4,008,092 shares
at March 31, 2006 and 4,007,936 shares
at December 31, 2005 38,039,443 38,006,929
Retained earnings 10,311,449 9,478,812
Accumulated other comprehensive income
(loss) , net of tax of $(225,060) at
March 31, 2006 and $(122,449) at
December 31, 2005 (400,106) (217,687)
------------ ------------
Total stockholders' equity 47,950,786 47,268,054
------------ ------------
Total liabilities and
stockholders' equity $572,632,413 $557,820,660
============ ============