FORT WAYNE, Ind., Jan. 22, 2009 (GLOBE NEWSWIRE) -- Tower Financial Corporation (Nasdaq:TOFC) reported fourth quarter 2008 earnings of $483,000, or $0.12 per diluted share, compared with a net loss of $784,000, or $0.19 per share, reported for the fourth quarter 2007. For the year ended December 31, 2008 Tower reported net income of $1.9 million, or $0.46 per diluted share, compared to a net loss of $2.6 million, or $0.64 per share for the year ended December 31, 2007, an improvement of $4.5 million.
Fourth quarter highlights include:
-- Loans grew by $6.3 million to $561.0 million, a 4.5 percent
annualized increase.
-- Trust and Brokerage assets under management were $635.3
million at December 31, 2008, an increase of $25.9 million,
or 4.3 percent, this in spite of a significant downturn in
the financial market.
-- The Company's regulatory capital ratios continue to remain
firmly above the "well-capitalized" levels.
-- Asset quality continues to improve as nonperforming loans
plus delinquencies were $19.6 million, or 2.81 percent of
total assets as of December 31, 2008, a decrease of $1.2
million from September 30, 2008.
-- Operating expenses decreased $197,000 from the third quarter
2008 and $479,000 from the fourth quarter 2007, 3.9 percent
and 9.0 percent respectively.
Asset Quality
Nonperforming assets plus delinquencies decreased $1.2 million from September 30, 2008. This was the net result of several settlements on nonperforming loans. Nonperforming assets plus delinquencies at period end were $19.6 million, or 2.81 percent of total assets. This compares with $20.8 million, or 2.99 percent of assets at September 30, 2008 and $20.0 million, or 2.84 percent of assets on December 31, 2007. Net recoveries were $10,000 for the quarter compared with net charge-offs of $1.8 million in the fourth quarter of 2007. Year to date net charge-offs were $1.9 million compared with $9.7 million in the 2007.
Tower's allowance for loan losses was 1.90 percent of total loans at December 31, 2008, an increase from 1.67 percent and 1.43 percent at September 30, 2008 and December 31, 2007, respectively. The year to date increase was the net result of a reduction on loan outstandings of $14.7 million, net charge-offs of $2.0 million, and loan loss provision of $4.4 million. The increase from the third quarter 2008 was the net result of loan growth of $6.3 million, net recoveries of $28,000, and loan loss provision of $1.3 million.
Operating Statement
Total revenue, consisting of net interest income and noninterest income, was $6.6 million for the fourth quarter 2008, a decrease of $146,000 from the fourth quarter 2007 and a decrease of $684,000 from the third quarter 2008. Fourth quarter 2008 net interest income was $5.2 million, a decrease of $253,000, or 4.7 percent from the third quarter 2008 and a slight decrease of $50,000, or 0.97 percent compared to the fourth quarter 2007. The decrease in net interest income was the combination of a decrease in Earning Assets of $4.1 million and a 17 basis point decrease in our net interest margin. Net interest margin for the fourth quarter 2008 was 3.26%, compared to 3.42% for the third quarter 2008 and 3.19% in the fourth quarter 2007. The decrease in net interest margin was primarily due to the 1.75 percent reduction in interest rates during the quarter. Overall, rates dropped 4.0 percent from December 31, 2007.
Noninterest income accounted for approximately 21 percent of total revenue. For the fourth quarter, noninterest income was $1.4 million, down 6.5 percent from the $1.5 million reported in the fourth quarter of 2007. Trust and brokerage fees of $750,000 accounted for 54 percent of fourth quarter noninterest income; they decreased 20.1 percent compared to the fourth quarter 2007. Currently, Tower Private Advisors manages $635.3 million in combined trust and brokerage assets, an increase of 4.3 percent above the $609.4 million of combined assets reported for December 31, 2007. Service charges for the Bank were $280,000, a 9.2 percent increase from the fourth quarter 2007. Loan broker fees were $66,000, a 41.7 percent decrease from the fourth quarter 2007. Other fee income increased by $155,000, or 119.5 percent, primarily as the result of an increase in processing revenue for debit/ATM card transaction, lock box fees, and BOLI (Bank-owned life insurance).
Fourth quarter noninterest expense decreased $479,000, or 9.0 percent from the fourth quarter 2007. The decrease was primarily associated to a decrease of $705,000 in salaries and benefits, which is primarily related to the workforce reduction that took place in April 2008. Other expense is down from the fourth quarter 2007, primarily due to a $120,000 gain on sale of an OREO property during the fourth quarter 2008. Data processing increased significantly from the fourth quarter 2007 mostly due to the cost associated with our on-line banking conversion and upgrade. Legal and professional expenses also increased due to the outsourcing of our internal audit and loan review functions, along with increased costs associated with the workout of non-performing assets.
Balance Sheet
Company assets were $696.5 million at December 31, 2008, a decrease of $10.0 million, or 1.42 percent from December 31, 2007. The decrease in assets during 2008 was primarily attributable to a decrease in loans of $14.7 million, a decrease in cash and cash equivalents of $2.2 million, and a decrease of $1.5 million in fixed assets; offset by an increase in securities available for sale of $12.4 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 management's plan to improve liquidity during this current period of volatility.
Core deposit growth during 2008 was led by $18.5 million in growth in interest-bearing checking, along with growth in savings and non-interest bearing checking of $3.3 million and $10.4 million, respectively. Growth in interest-bearing checking was led by our Health Savings Accounts (HSA), which grew by $12.9 million, or 111.7 percent. Additionally, HSA balances continue to grow into the new year, as we've experienced an increase of $10.9 million through mid-January 2009. As of December 31, 2008, checking and savings balances made up 53.4 percent of total deposits compared with 45.9 percent at December 31, 2007. Total deposits were $586.2 million at December 31, 2008, a decrease of $14.4 million, or 2.5 percent from December 31, 2007. The decrease in 2008 was the net result of a substantial increase in core deposits of $36.5 million, a planned increase of $9.4 million in brokered CDs offset by a decrease of $60.3 million in CDs greater than $100,000. The majority of the reduction in Jumbo CDs was in our variable rate product due mostly to the reduction in interest rates during 2008.
Shareholders' equity was $49.5 million at December 31, 2008, an increase of 2.7 percent from the $48.2 million reported at December 31, 2007. Affecting the increase in stockholders' equity during 2008 was $1.9 million in net income and $221,000 of additional paid in capital from the exercise of stock options. These increases were offset by $529,000 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.
Capital
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 December 31, 2008 was 11.7 percent, compared to 11.7 percent at September 30, 2008 and 10.9 percent at December 31, 2007. Total risked-based capital at December 31, 2008 was 13.0 percent, compared to 13.0 percent and 12.1 percent at September 30, 2008 and December 31, 2007, respectively.
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 December 31, 2008 and 2007
(unaudited)
December 31 December 31
2008 2007
====================================================================
ASSETS
Cash and due from banks $ 19,418,905 $ 25,913,449
Short-term investments and
interest-earning deposits 9,525,414 1,781,161
Federal funds sold 2,632,054 6,135,779
---------------------------
Total cash and cash equivalents 31,576,373 33,830,389
Securities available for sale, at fair
value 77,649,366 65,227,694
FHLBI and FRB stock 4,032,446 3,589,700
Loans Held for Sale 151,614 3,189,545
Loans 561,011,675 575,744,207
Allowance for loan losses (10,654,879) (8,208,162)
---------------------------
Net loans 550,356,796 567,536,045
Premises and equipment, net 8,010,596 9,549,233
Accrued interest receivable 2,615,260 3,246,455
Bank Owned Life Insurance 12,589,699 11,258,517
Other assets 9,507,666 9,065,564
---------------------------
Total assets $696,489,816 $706,493,142
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 82,107,483 $ 71,705,395
Interest-bearing 504,129,631 528,984,076
---------------------------
Total deposits 586,237,114 600,689,471
Federal Home Loan Bank advances 39,200,000 35,100,000
Junior subordinated debt 17,527,000 17,527,000
Accrued interest payable 608,231 1,721,972
Other liabilities 3,393,638 3,247,145
---------------------------
Total liabilities 646,965,983 658,285,588
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
December 31, 2008 and 4,062,769
shares at December 31, 2007 39,766,742 39,482,669
Treasury stock, at cost, 65,000
shares at December 31, 2008
and 53,036 shares at December 31,
2007 (884,376) (758,827)
Retained earnings 10,895,724 9,208,719
Accumulated other comprehensive
income (loss), net of tax of
($130,982) at December 31, 2008
and $141,663 at December 31, 2007 (254,257) 274,993
---------------------------
Total stockholders' equity 49,523,833 48,207,554
---------------------------
Total liabilities and stockholders'
equity $696,489,816 $706,493,142
===========================
Tower Financial Corporation
Consolidated Statements of Operations
For the three months and twelve months ended
December 31, 2008 and 2007
(unaudited)
For the Three Months For the Twelve Months
Ended December 31 Ended December 31
======================== ========================
2008 2007 2008 2007
================= ======================== ========================
Interest income:
Loans, including
fees $ 7,888,824 $10,513,949 $33,808,068 $43,006,181
Securities -
taxable 731,590 649,929 2,728,862 2,641,155
Securities -
tax exempt 225,584 193,433 883,645 791,584
Other interest
income 5,904 94,546 337,828 463,231
------------------------ ------------------------
Total interest
income 8,851,902 11,451,857 37,758,403 46,902,151
Interest expense:
Deposits 3,091,860 5,541,768 14,489,483 22,793,951
Fed Funds
Purchased 1,432 141 4,208 672
FHLB advances 304,143 409,463 1,161,902 1,434,885
Trust preferred
securities 281,649 277,073 1,129,440 1,126,326
------------------------ ------------------------
Total interest
expense 3,679,084 6,228,445 16,785,033 25,355,834
------------------------ ------------------------
Net interest
income 5,172,818 5,223,412 20,973,370 21,546,317
Provision for
loan losses 1,225,000 2,825,000 4,399,000 10,996,000
------------------------ ------------------------
Net interest
income after
provision for
loan losses 3,947,818 2,398,412 16,574,370 10,550,317
Noninterest income:
Trust and
brokerage fees 749,710 938,010 3,519,425 3,292,502
Service charges 280,479 256,817 1,204,019 977,300
Loan broker fees 65,989 113,129 258,934 257,727
Gain/(Loss) on
sale of
securities -- 39,352 65,841 (3,213)
Other fees 285,203 129,951 1,254,626 1,280,428
------------------------ ------------------------
Total non-
interest
income 1,381,381 1,477,259 6,302,845 5,804,744
Noninterest
expense:
Salaries and
benefits 2,509,009 3,213,978 11,460,652 11,814,263
Occupancy and
equipment 765,296 707,893 2,974,697 2,732,859
Marketing 146,060 125,640 651,423 442,563
Data processing 303,147 98,137 1,050,275 786,821
Loan and pro-
fessional costs 356,300 250,682 1,312,956 1,243,203
Office supplies
and postage 114,054 109,945 402,485 446,832
Courier service 67,713 94,834 297,106 387,809
Business
Development 170,558 199,483 639,707 715,736
Communication
Expense 108,558 79,795 351,137 267,661
FDIC Insurance
Premiums 149,272 133,376 697,063 484,815
Other expense 156,125 311,296 1,150,599 1,408,211
------------------------ ------------------------
Total
non-interest
expense 4,846,092 5,325,059 20,988,100 20,730,773
------------------------ ------------------------
Income/(loss)
before income
taxes/(benefit) 483,107 (1,449,388) 1,889,115 (4,375,712)
Income taxes
expense/(benefit) 476 (665,828) 23,004 (1,777,628)
------------------------ ------------------------
Net income/(loss) $ 482,631 $ (783,560) $ 1,866,111 $(2,598,084)
======================== ========================
Basic earnings/
(loss) per
common share $ 0.12 $ (0.19) $ 0.46 $ (0.64)
Diluted earnings/
(loss) per
common share $ 0.12 $ (0.19) $ 0.46 $ (0.64)
Average common
shares
outstanding 4,084,432 4,069,543 4,075,696 4,068,699
Average common
shares and
dilutive
potential common
shares outstanding 4,084,441 4,069,543 4,079,438 4,068,699
Dividends declared
per common share $ -- $ 0.044 $ -- $ 0.176
Tower Financial Corporation
Consolidated Financial Highlights
Fourth Quarter 2008
(unaudited)
Quarterly
============================================
($ in thousands except 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
for share data) 2008 2008 2008 2008
---------- --------- --------- ---------
EARNINGS
Net interest income $ 5,173 5,426 5,295 5,080
Provision for loan
loss $ 1,225 1,999 875 300
NonInterest income $ 1,381 1,812 1,469 1,641
NonInterest expense $ 4,846 5,043 5,620 5,479
Net income/(loss) $ 483 330 342 711
Basic earnings per
share $ 0.12 0.08 0.08 0.18
Diluted earnings
per share $ 0.12 0.08 0.08 0.17
Average shares
outstanding 4,084,432 4,084,432 4,078,934 4,062,145
Average diluted
shares outstanding 4,084,441 4,086,757 4,081,245 4,088,684
PERFORMANCE RATIOS
Return on average
assets * 0.28% 0.19% 0.20% 0.41%
Return on average
common equity * 3.96% 2.69% 2.79% 5.91%
Net interest
margin (fully-tax
equivalent) * 3.26% 3.43% 3.36% 3.15%
Efficiency ratio 73.94% 69.67% 83.09% 81.52%
Full-time equiva-
lent employees 173.75 176.50 181.25 184.25
CAPITAL
Equity to assets 7.11% 6.96% 7.01% 7.15%
Regulatory leverage
ratio 9.69% 9.62% 9.52% 9.33%
Tier 1 capital ratio 11.66% 11.69% 11.55% 11.35%
Total risk-based
capital ratio 12.99% 13.04% 12.92% 12.51%
Book value per share $ 12.13 11.86 11.92 12.18
Cash dividend per
share $ 0.00 0.00 0.00 0.044
ASSET QUALITY
Net charge-offs $ (27) 1,570 936 (527)
Net charge-offs to
average loans * (0.02)% 1.13% 0.67% (0.37)%
Allowance for loan
losses $ 10,655 9,278 8,974 9,035
Allowance for loan
losses to total
loans 1.90% 1.67% 1.62% 1.61%
Nonperforming loans $ 16,003 17,432 19,958 20,419
Other real estate
owned (OREO) $ 2,660 2,432 2,500 1,527
Nonperforming
assets (NPA) $ 18,663 19,864 22,458 21,946
90+ Day
delinquencies $ 941 982 1,919 486
NPAs plus 90 Days
delinquent $ 19,604 20,846 24,377 22,432
NPAs to Total assets 2.68% 2.85% 3.23% 3.18%
NPAs+90 to Total
assets 2.81% 2.99% 3.51% 3.25%
NPAs to Loans + OREO 3.31% 3.57% 4.04% 3.89%
END OF PERIOD
BALANCES
Total assets $ 696,490 696,061 695,427 691,208
Total earning assets $ 654,851 658,963 648,345 653,906
Total loans $ 561,163 554,760 553,843 562,235
Total deposits $ 586,237 573,221 600,118 587,735
Stockholders' equity $ 49,524 48,449 48,753 49,405
AVERAGE BALANCES
Total assets $ 696,490 682,958 685,547 701,423
Total earning assets $ 645,307 642,852 646,745 663,522
Total loans $ 555,558 551,407 562,165 570,010
Total deposits $ 566,253 580,589 580,563 607,402
Stockholders' equity $ 48,530 48,875 49,252 48,427
Quarterly
============================================
($ in thousands except 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
for share data) 2007 2007 2007 2007
--------------------------------- ---------
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 equiva-
lent 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 except
for share data) 2008 2007
---------- ---------
EARNINGS
Net interest income $ 20,974 21,545
Provision for loan loss $ 4,399 10,996
NonInterest income $ 6,303 5,805
NonInterest expense $ 20,988 20,731
Net income/(loss) $ 1,866 (2,598)
Basic earnings per share $ 0.46 (0.64)
Diluted earnings per share $ 0.46 (0.64)
Average shares outstanding 4,075,696 4,068,699
Average diluted shares outstanding 4,079,438 4,068,699
PERFORMANCE RATIOS
Return on average assets * 0.27% (0.38)%
Return on average common equity * 3.84% (5.16)%
Net interest margin (fully-tax equivalent) * 3.30% 3.34%
Efficiency ratio 76.94% 75.80%
Full-time equivalent employees 173.75 190.00
CAPITAL
Equity to assets 7.11% 6.82%
Regulatory leverage ratio 9.69% 9.19%
Tier 1 capital ratio 11.66% 10.92%
Total risk-based capital ratio 12.99% 12.08%
Book value per share $ 12.13 11.87
Cash dividend per share $ 0.044 0.176
ASSET QUALITY
Net charge-offs $ 1,952 9,658
Net charge-offs to average loans * 0.35% 1.68%
Allowance for loan losses $ 10,655 8,208
Allowance for loan losses to total loans 1.90% 1.43%
Nonperforming loans $ 16,003 18,594
Other real estate owned (OREO) $ 2,660 1,452
Nonperforming assets (NPA) $ 18,663 20,046
90+ Day delinquencies $ 941 0
NPAs plus 90 Days delinquent $ 19,604 20,046
NPAs to Total assets 2.68% 2.84%
NPAs+90 to Total assets 2.81% 2.84%
NPAs to Loans + OREO 3.31% 3.47%
END OF PERIOD
BALANCES
Total assets $ 696,490 706,493
Total earning assets $ 654,851 655,668
Total loans $ 561,163 575,744
Total deposits $ 586,237 600,689
Stockholders' equity $ 49,524 48,208
AVERAGE BALANCES
Total assets $ 684,664 690,552
Total earning assets $ 649,772 656,865
Total loans $ 560,260 576,417
Total deposits $ 583,442 591,338
Stockholders' equity $ 48,784 50,385
* annualized for quarterly data