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