FORT WAYNE, Ind., July 24, 2008 (PRIME NEWSWIRE) -- Tower Financial Corporation (Nasdaq:TOFC) today announced second quarter 2008 net income of $342,000, or $0.08 per diluted share, compared with net income of $217,000, or $0.05 per share, for the year-ago quarter. This brings year to date net income to $1.1 million, or $0.26 per diluted share, compared to year to date net income of $394,000, or $0.09 per share at June 30, 2007.
Second quarter highlights include:
* Assets under management in Tower Trust Company surpassed the $800 million mark. The quarter end balance of $805 million represents an increase of 33.9 percent from the second quarter 2007 and an increase of 33.5 percent from the end of the first quarter of 2008. * Fee income from the Trust Company was $939,000, an all-time high and a 30.6 percent increase from the second quarter 2007. * Net interest margin was 3.36 percent, a decline of 6 basis points from the second quarter 2007, but an increase of 21 basis points from the first quarter 2008. This was helped by growth in our in-market checking and savings deposits of $51.7 million in the past 12 months. * Liquidity improved as the loan to deposit ratio at the end of the second quarter 2008 was 92.3 percent compared to 97.7 percent at the end of the second quarter 2007. Earnings assets remained relatively flat at $648 million. * The Company incurred approximately $210,000 in one-time expenses related to the reduction in the workforce of the Bank completed in April of 2008. Beginning with the third quarter 2008, the Company will realize annual savings of approximately $700,000.
Balance Sheet
Company assets were $695.6 million at June 30, 2008, a decrease of $10.9 million, or 1.6 percent from December 31, 2007, and a decrease of $6.2 million, or 0.9 percent from June 30, 2007. The decrease in assets during the first six months was primarily attributable to a decrease in loans of $21.9 million, offset by an increase in securities available for sale of $8.7 million.
While deposit levels remained relatively flat at $600.1 million as of June 30, 2008, this was a net result of $10.2 million of in-market deposit growth along with the reduction of out-of-market CD's of $10.7 million. The in-market growth was comprised of $30.2 million of growth in checking and savings accounts, offset by $20.0 million of reduction in CDs. As of June 30, 2008, checking and savings accounts made up 51.0 percent of total deposits compared with 45.9 percent at December 31, 2007 and 42.7 percent as of June 30, 2007.
Shareholders' equity was $48.8 million at June 30, 2008, an increase of 1.0 percent from the $48.2 million reported at December 31, 2007. Tower's Tier 1 and risk-based capital ratios remain above "well-capitalized" levels, increasing slightly from year-end to 11.55 percent and 12.92 percent, respectively. Period-end common shares outstanding were 4,091,432. The Company purchased 11,964 shares of Treasury stock during the first six months of 2008 to complete the repurchase of the 65,000 shares authorized by its Stock Repurchase Plan that was announced in May 2007.
Operating Statement
Total revenue, consisting of net interest income and noninterest income, was $6.8 million for the second quarter 2008, a decrease of $250,000 from the second quarter 2007. Second quarter 2008 net interest income decreased to $5.3 million, a decline of 5.2 percent compared to the second quarter 2007. The increase in non-performing loans during late 2007, along with a significant drop in the prime rate during the first quarter of 2008, caused the net interest margin to drop to 3.36 percent from 3.44 percent one year ago.
Noninterest income accounted for approximately 22 percent of total revenue. For the second quarter, noninterest income was $1.5 million, up 2.7 percent from the $1.4 million reported in the second quarter of 2007. Trust and brokerage fees of $939,000 accounted for 64 percent of second quarter noninterest income; they grew 30.6 percent compared to the second quarter 2007. Currently, Tower Private Advisors manages $805.3 million in combined trust and brokerage assets, an increase of 33.9 percent above the $601.4 million of combined assets reported for the year-ago quarter. Service charges for the Bank were $314,000, a 42.5 percent increase from the second quarter 2007. Loan broker fees were $67,000, a 17.0 percent increase from the second quarter 2007. Other fee income decreased by $285,000, or 65.7 percent, primarily as the result of a decrease in the market value of an investment held at the holding company.
Second quarter noninterest expense increased $318,000, or 6.0 percent from the second quarter 2007. Increases related primarily to costs associated with the production and airtime for new television commercials and a one-time miscellaneous expense of $115,000 relating to a credit issue that was reserved for in the past in the allowance for loan loss. Additionally, we incurred approximately $210,000 of one-time salaries and benefits expense related to the reduction in the workforce of the Bank of eight full-time equivalent employees at the beginning of the second quarter.
Asset Quality
Nonperforming assets plus delinquencies at period end were $24.7 million, or 3.54 percent of total assets. This compares with $5.7 million, or 0.81 percent of assets, for the year-ago period and with $20.0 million, or 2.84 percent of assets on December 31, 2007. Approximately $4.4 million or 19 percent of our nonperforming assets plus delinquencies are currently performing according to the original terms of their contracts. These loans have been partially charged down to reflect deterioration in underlying project collateral values despite each operator's ability thus far to generate sufficient operating cash flow to service required payments. Management considers the original loan amounts to be impaired justifying the adverse classification, but thinks the current basis fairly represents amounts collectible should the borrower actually default. Net charge-offs were $936,000 for the quarter compared with net charge-offs of $2.0 million in the second quarter of 2007. Year to date net charge-offs were $409,000 compared with $2.6 million in the first half of 2007.
Tower's allowance for loan losses was 1.62 percent of total loans at June 30, 2008, an increase from 1.43 percent of total loans at December 31, 2007. The increase was the net result of a reduction on loans outstanding of $21.9 million, net charge-offs of $409,000, and loan loss provision of $1.2 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 June 30, 2008 and December 31, 2007 (unaudited) (unaudited) June 30, December 31, June 30, 2008 2007 2007 ------------------------------------------------------ ------------ ASSETS Cash and due from banks $ 22,508,927 $ 25,913,449 $ 6,977,240 Short-term investments and interest-earning deposits 11,175,161 1,781,161 154,569 Federal funds sold 5,794,850 6,135,779 10,631,456 --------------------------- ------------ Total cash and cash equivalents 39,478,938 33,830,389 17,763,265 Securities available for sale, at fair value 73,942,131 65,227,694 67,895,093 FHLBI and FRB stock 3,589,700 3,589,700 3,112,500 Loans Held for Sale 869,308 3,189,545 9,455,115 Loans 553,842,920 575,744,207 581,782,504 Allowance for loan losses (8,974,052) (8,208,162) (7,175,809) --------------------------- ------------ Net loans 544,868,868 567,536,045 574,606,695 Premises and equipment, net 9,340,820 9,549,233 6,782,316 Accrued interest receivable 2,635,972 3,246,455 3,779,111 Bank Owned Life Insurance 11,468,330 11,258,517 11,047,397 Other assets 9,389,872 9,065,564 7,199,385 --------------------------- ------------ Total assets $695,583,939 $706,493,142 $701,640,877 =========================== ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Noninterest-bearing $ 84,281,872 $ 71,705,395 $ 76,035,017 Interest-bearing 515,835,743 528,984,076 519,523,019 --------------------------- ------------ Total deposits 600,117,615 600,689,471 595,558,036 -- -- Federal Home Loan Bank advances 24,200,000 35,100,000 33,850,000 Junior subordinated debt 17,527,000 17,527,000 17,527,000 Accrued interest payable 835,656 1,721,972 1,623,428 Other liabilities 4,072,354 3,247,145 2,546,390 --------------------------- ------------ Total liabilities 646,752,625 658,285,588 651,104,854 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 - 4,091,432 shares at June 30, 2008 and 4,062,769 shares at December 31, 2007 39,735,315 39,482,669 39,053,685 Treasury stock, at cost, 65,000 shares at June 30, 2008 and 53,036 shares at December 31, 2007 (884,376) (758,827) (224,655) Retained earnings 10,083,494 9,208,719 12,559,285 Accumulated other compre- hensive income (loss), net of tax of $194,779 at June 30, 2008 and $141,663 at December 31, 2007 (103,119) 274,993 (852,292) --------------------------- ------------ Total stockholders' equity 48,831,314 48,207,554 50,536,023 --------------------------- ------------ Total liabilities and stockholders' equity $695,583,939 $706,493,142 $701,640,877 =========================== ============ Tower Financial Corporation Consolidated Statements of Operations For the three months and six months ended June 30, 2008 and 2007 (unaudited) For the Three For the Six Months Ended Months Ended June 30, June 30, ------------------------ ----------------------- 2008 2007 2008 2007 ------------------- ------------------------ ----------------------- Interest income: Loans, including fees $ 8,348,159 $11,088,346 $17,615,558 $21,406,436 Securities - taxable 648,256 668,747 1,262,770 1,331,162 Securities - tax exempt 223,312 195,166 437,346 395,941 Other interest income 89,634 21,574 271,986 240,653 ------------------------ ----------------------- Total interest income 9,309,361 11,973,833 19,587,660 23,374,192 Interest expense: Deposits 3,433,023 5,712,457 8,075,158 11,388,342 Fed Funds Purchased -- 516 -- 516 FHLB advances 298,637 397,313 572,777 589,057 Trust preferred securities 283,071 279,957 564,720 561,606 ------------------------ ----------------------- Total interest expense 4,014,731 6,390,243 9,212,655 12,539,521 ------------------------ ----------------------- Net interest income 5,294,630 5,583,590 10,375,005 10,834,671 Provision for loan losses 875,000 1,500,000 1,175,000 2,925,000 ------------------------ ----------------------- Net interest income after provision for loan losses 4,419,630 4,083,590 9,200,005 7,909,671 Noninterest income: Trust and brokerage fees 938,634 718,607 1,833,026 1,564,490 Service charges 314,144 220,494 635,354 489,525 Loan broker fees 66,812 57,093 127,870 82,590 Gain/(Loss) on sale of securities -- -- 59,837 -- Other fees 148,879 433,839 453,156 782,505 ------------------------ ----------------------- Total noninterest income 1,468,469 1,430,033 3,109,243 2,919,110 Noninterest expense: Salaries and benefits 3,051,846 2,976,922 6,138,244 5,972,423 Occupancy and equipment 731,588 660,552 1,489,903 1,348,745 Marketing 224,014 99,380 374,216 178,422 Data processing 220,172 230,228 500,930 458,177 Loan and professional costs 386,418 367,022 630,068 725,835 Office supplies and postage 81,947 117,458 195,979 240,842 Courier service 75,070 94,962 164,535 195,771 Business Development 173,959 183,996 328,832 341,748 Communication Expense 80,931 51,470 151,723 126,225 FDIC Insurance Premiums 200,241 218,278 367,755 235,179 Other expense 394,239 302,308 757,024 641,504 ------------------------ ----------------------- Total noninterest expense 5,620,425 5,302,576 11,099,209 10,464,871 ------------------------ ----------------------- Income before income taxes 267,674 211,047 1,210,039 363,910 Income taxes expense (75,033) (6,065) 156,160 (29,815) ------------------------ ----------------------- Net income $ 342,707 $ 217,112 $ 1,053,879 $ 393,725 ======================== ======================= Basic earnings per common share $ 0.08 $ 0.05 $ 0.26 $ 0.10 Diluted earnings per common share $ 0.08 $ 0.05 $ 0.26 $ 0.09 Average common shares outstanding 4,078,934 4,073,678 4,070,539 4,071,181 Average common shares and dilutive potential common shares outstanding 4,081,245 4,146,386 4,073,905 4,152,975 Dividends declared per share $ 0.044 $ 0.044 $ -- $ 0.160 Tower Financial Corporation Consolidated Financial Highlights Second Quarter 2008 (unaudited) Quarterly ---------------------------------------------------------- 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 2008 2008 2007 2007 2007 2007 -------- --------- ----------------------------- --------- ($ in thousands except for share data) EARNINGS Net interest income $ 5,295 5,080 5,223 5,488 5,583 5,251 Provision for loan loss $ 875 300 2,825 5,246 1,500 1,425 Noninterest income $ 1,469 1,641 1,477 1,409 1,430 1,489 Noninterest expense $ 5,620 5,479 5,325 4,941 5,303 5,162 Net income $ 342 711 (784) (2,208) 217 177 Basic earnings per share $ 0.08 0.18 (0.19) (0.54) 0.05 0.04 Diluted earnings per share $ 0.08 0.17 (0.19) (0.54) 0.05 0.04 Average shares outstand- ing 4,078,934 4,062,145 4,070,766 4,063,750 4,073,678 4,065,657 Average diluted shares outstand- ing 4,081,245 4,088,684 4,070,766 4,063,750 4,146,386 4,163,169 PERFORMANCE RATIOS Return on average assets * 0.20% 0.41% -0.45% -1.25% 0.12% 0.11% Return on average common equity * 2.79% 5.91% -6.32% -17.52% 1.69% 1.41% Net interest margin (fully- tax equi- valent) * 3.36% 3.15% 3.19% 3.31% 3.44% 3.43% Efficiency ratio 83.09% 81.52% 79.48% 71.64% 75.62% 76.59% Full-time equivalent employees 181.25 184.25 190.00 193.00 192.75 191.75 CAPITAL Equity to assets 7.01% 7.15% 6.82% 6.91% 7.20% 7.52% Regulatory leverage ratio 9.52% 9.33% 9.19% 9.34% 9.91% 10.28% Tier 1 capital ratio 11.55% 11.35% 10.92% 11.03% 11.37% 11.81% Total risk-based capital ratio 12.92% 12.51% 12.08% 12.15% 12.47% 12.97% Book value per share $ 11.92 12.18 11.87 12.01 12.44 12.62 Cash dividend per share $ 0.00 0.044 0.044 0.044 0.044 0.044 ASSET QUALITY Net charge- offs $ 936 (527) 1,797 5,241 1,987 633 Net charge- offs to average loans * 0.67% -0.37% 1.24% 3.54% 1.36% 0.47% Allowance for loan losses $ 8,974 9,035 8,208 7,180 7,176 7,663 Allowance for loan losses to total loans 1.62% 1.61% 1.43% 1.24% 1.23% 1.35% Nonper- forming loans $ 19,412 20,358 18,594 7,116 4,845 5,239 Other real estate owned (OREO) $ 2,500 1,527 1,452 645 744 744 Nonperforming assets (NPA) $ 23,752 21,885 20,046 7,761 5,589 5,983 90+ Day delin- quencies $ 1,840 547 0 14 81 564 NPAs plus 90 Days delin- quent $ 25,592 22,432 20,046 7,775 5,670 6,547 NPAs to Total assets 3.42% 3.17% 2.84% 1.10% 0.80% 0.88% NPAs+90 to Total assets 3.68% 3.25% 2.84% 1.10% 0.81% 0.96% NPAs to Loans + OREO 4.27% 3.88% 3.47% 1.34% 0.96% 1.05% END OF PERIOD BALANCES Total assets $695,584 691,208 706,493 706,914 701,641 683,032 Total earning assets $648,345 653,906 655,668 669,988 673,032 651,077 Total loans $553,843 562,235 575,744 579,902 581,783 568,481 Total deposits $600,118 587,735 600,689 592,854 595,558 589,802 Stock- holders' equity $ 48,753 49,405 48,208 48,830 50,536 51,386 AVERAGE BALANCES Total assets $685,547 701,423 698,452 702,538 697,117 664,026 Total earning assets $646,745 663,522 660,812 669,524 663,411 633,569 Total loans $562,165 570,010 574,266 587,531 585,480 551,000 Total deposits $580,563 607,402 595,913 596,140 597,806 575,389 Stock- holders' equity $ 49,252 48,427 49,199 50,014 51,579 50,779 * annualized for quarterly data Year-To-Date ---------------------- ($ in thousands except for share data) 2008 2007 --------- --------- EARNINGS Net interest income $ 10,375 10,834 Provision for loan loss $ 1,175 2,925 NonInterest income $ 3,110 2,919 NonInterest expense $ 11,099 10,465 Net income $ 1,053 394 Basic earnings per share $ 0.26 0.09 Diluted earnings per share $ 0.26 0.09 Average shares outstanding 4,070,539 4,071,181 Average diluted shares outstanding 4,073,905 4,152,975 --------- --------- PERFORMANCE RATIOS Return on average assets * 0.31% 0.12% Return on average common equity * 4.35% 1.55% Net interest margin (fully-tax equivalent) * 3.25% 3.43% Efficiency ratio 82.31% 76.09% Full-time equivalent employees 181.25 192.75 CAPITAL Equity to assets 7.01% 7.20% Regulatory leverage ratio 9.52% 9.91% Tier 1 capital ratio 11.55% 11.37% Total risk-based capital ratio 12.92% 12.47% Book value per share $ 11.92 12.44 Cash dividend per share $ 0.044 0.088 ASSET QUALITY Net charge-offs $ 409 2,620 Net charge-offs to average loans * 0.14% 0.93% Allowance for loan losses $ 8,974 7,176 Allowance for loan losses to total loans 1.62% 1.23% Nonperforming loans $ 19,412 4,845 Other real estate owned (OREO) $ 2,500 744 Nonperforming assets (NPA) $ 23,752 5,589 90+ Day delinquencies $ 1,840 81 NPAs plus 90 Days delinquent $ 25,592 5,670 NPAs to Total assets 3.42% 0.80% NPAs+90 to Total assets 3.68% 0.81% NPAs to Loans + OREO 4.27% 0.96% END OF PERIOD BALANCES Total assets $695,584 701,641 Total earning assets $648,345 673,032 Total loans $553,843 581,783 Total deposits $600,118 595,558 Stockholders' equity $ 48,753 50,536 AVERAGE BALANCES Total assets $693,487 680,572 Total earning assets $655,008 648,490 Total loans $566,104 568,240 Total deposits $593,479 586,597 Stockholders' equity $ 48,869 51,179 * annualized for quarterly data