FORT WAYNE, Ind., April 23, 2009 (GLOBE NEWSWIRE) -- Tower Financial Corporation (Nasdaq:TOFC) reported first quarter 2009 earnings of $410,000, or $0.10 per diluted share, compared with net income of $711,000, or $0.17 per share, reported for the first quarter 2008. The decrease in earnings is a result primarily of an additional $660,000 of pre-tax loan provision expense recorded in the first quarter 2009 compared to the first quarter 2008.
First quarter highlights include:
* Consumer banking growth was led by an increase in core deposits of $29.7 million, an annualized increase of 29.2 percent. Our commitment to building our local franchise remains unchanged. * The Company's regulatory capital ratios continued to remain above the "well-capitalized" levels even while the bank continues to increase its loan loss reserves due to a challenging economic climate. * Asset quality continues to steadily improve as nonperforming assets plus delinquencies were lowered to $18.3 million, or 2.55 percent of total assets as of March 31, 2009, a decrease of $1.2 million from December 31, 2008 and $6.0 million lower than our highest point reached at the end of the second quarter of 2008. * Lending experienced solid growth in our Commercial & Industrial (C&I) and Home Equity categories. C&I loans grew by $6.5 million and Home Equities grew by $3.4 million. These were offset by reductions in both our Commercial and Residential real estate loan categories of $7.1 million and $4.7 million, respectively. * Allowance for Loan Losses increased to 2.06 percent of Total loans compared to 1.90 percent at December 31, 2008. This increase was primarily the result of $960,000 of loan loss provision expense compared to $300,000 in the first quarter 2008.
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 March 31, 2009 was 11.5 percent, compared to 11.7 percent at December 31, 2008. Total risked-based capital at March 31, 2009 was 12.8 percent, compared to 13.0 percent at December 31, 2008. Leverage capital was 9.5 percent at March 31, 2009, almost double the regulatory requirement of 5 percent to be considered "well-capitalized". The slight reduction in capital levels pertain primarily to a high level of quarterly asset growth of $19.0 million.
Asset Quality
Nonperforming assets plus delinquencies decreased $1.4 million from December 31, 2008. This was the net result of several settlements on nonperforming loans. Nonperforming assets plus delinquencies at period end were $18.3 million, or 2.55 percent of total assets. This compares with $19.7 million, or 2.83 percent of assets at December 31, 2008 and $20.8 million, or 2.99 percent of assets on September 30, 2008. Net charge-offs were $117,000 for the quarter compared with net recoveries of $527,000 in the first quarter of 2008.
Tower's allowance for loan losses was 2.06 percent of total loans at March 31, 2009, an increase from 1.90 percent and 1.67 percent at December 31, 2008 and September 30, 2008, respectively. The year to date increase was the net result of a reduction on loan outstandings of $2.9 million, net charge-offs of $117,000, and loan loss provision of $960,000. This increased provisioning was primarily driven by current economic factors in our local marketplace. The coverage of non-performing loans increased from 54 percent to 63 percent due to continued planned reserve building.
Balance Sheet
Company assets were $715.6 million at March 31, 2009, an increase of $19.0 million, or 2.7 percent from December 31, 2008. The increase in assets was primarily attributable to a substantial increase in cash and cash equivalents of $25.4 million due to the substantial deposit growth that occurred. This growth was offset by a decrease in loans of $2.9 million and a decrease in securities held for sale of $6.0 million. The decrease in loans came primarily from the commercial real estate category due mostly to the foreclosure of two loans totaling $2.9 million, scheduled paydowns, reduced market activity, and a planned exit strategy for certain non-performing loans, along with a decrease of $4.7 million in residential real estate loans. The decrease in securities available for sale was due to the sale of certain investments during the quarter. These investments will be replaced and most likely expanded during the second quarter as management resumes its plan to increase our investment portfolio to enhance liquidity and yield opportunities in light of lower loan demand in our markets.
Core deposit growth of $29.7 million was led by $24.7 million in growth in money-market accounts and interest bearing checking accounts of $10.2 million, offset by a decrease in non-interest bearing checking accounts of $7.0 million. Growth in our money-market accounts came primarily from consumer customers, $13.2 million, and public funds, $6.5 million. Growth in interest-bearing checking was led by our Health Savings Accounts (HSA), which grew by $12.0 million, or 49.4 percent. Approximately $10 million of our first quarter growth in HSA's was from a one-time funding from one of the employer groups. The decrease in non-interest bearing checking accounts came primarily from our business customers who moved funds into interest-bearing accounts during the quarter. As of March 31, 2009, checking and savings balances made up 55.0 percent of total deposits compared with 53.4 percent at December 31, 2008. Total deposits were $618.7 million at March 31, 2009, an increase of $32.5 million, or 5.5 percent from December 31, 2008.
Shareholders' equity was $50.3 million at March 31, 2009, an increase of 1.3 percent from the $49.6 million reported at December 31, 2008. Affecting the increase in stockholders' equity was $410,000 in net income, $19,000 of additional paid in capital from the FAS123R accounting treatment for stock options, and an increase of $233,000 in unrealized gains, net of tax, on available for sale. Period-end common shares outstanding were 4,090,432.
Operating Statement
Total revenue, consisting of net interest income and noninterest income, was $6.3 million for the first quarter 2009, a decrease of $223,000 from the fourth quarter 2008 and a decrease of $390,000 from the first quarter 2008. First quarter 2009 net interest income was $4.5 million a decrease of $631,000, or 12.2 percent from the fourth quarter 2008 and a decrease of $539,000, or 10.6 percent compared to the first quarter 2008. The decrease in net interest income was the results of a 43 basis point decrease in our net interest margin. Net interest margin for the first quarter 2009 was 2.85%, compared to 3.28% for the fourth quarter 2008 and 3.15% in the first quarter 2008. The decrease in net interest margin was primarily due to the 75 basis point reduction in interest rates that occurred in late December 2008. Overall, the prime interest rate dropped 4.0 percent during 2008. We believe that the first quarter will be the low point in our net interest margin due to the rolling off and replacement of CD's, the implementation of interest rate floors on loans as they renew, the steady increase in local deposits, and less loan price sensitivity in our markets.
Noninterest income accounted for approximately 28.3 percent of total revenue. For the first quarter, noninterest income was $1.8 million, up 29.5 percent from the $1.4 million reported in the fourth quarter of 2008, and up 9.1 percent from the $1.6 million reported in the first quarter 2008. Trust and brokerage fees were $868,000, a decrease of 3.0 percent from the first quarter 2008. Currently, Tower Private Advisors manages $601.7 million in combined trust and brokerage assets, a decrease of 0.24 percent from the $603.1 million of combined assets reported for March 31, 2008. Service charges for the Bank were $258,000, a 19.7 percent decrease from the first quarter 2008. The decrease in service charges was related to fees on our HSA accounts. The fee structure was reconfigured on our HSA product, as we eliminated the service charges, but also reduced the interest rates paid on these accounts. Loan broker fees were $138,000, a 126.5 percent increase from the first quarter 2008, due to increased refinancing activity being experienced throughout the country. We sold $5.5 million in securities held for sale during the first quarter, which resulted in a gain on sale of $191,000, an increase from the gain we reported in the first quarter of 2008 of $60,000. These securities were liquidated in order to free up additional funds for further yield opportunities on the investment front. Other fee income increased by $30,000, or 9.8 percent, primarily as the result of an increase in processing revenue for debit/ATM card transaction, sweep dividends, and BOLI (Bank-owned life insurance) income.
First quarter noninterest expense decreased $486,000, or 8.9 percent from the first quarter 2008. 75 percent of the decrease, or $364,000, was due to the reduction in force and related actions that took place beginning in the second quarter of 2008. This savings was offset by a $112,000 increase in FDIC premiums due to deposit growth and increased assessment rates. Occupancy and equipment expense decreased by $60,000, due primarily to a reduction in depreciation. Legal and professional increased by $68,000, primarily from the accrual of additional accounting fees related to testing and audit work related to Sarbanes-Oxley (SOX) requirements. Business development expenses decreased by $54,000 due to a conscious effort on expense savings. Data processing increased by $13,000 as a result of the addition of our ATM network and upgrade of our on-line banking system. Other expense decreased by $124,000 due to a reduction in directors fees, insurance costs, and miscellaneous expenses.
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 banking regulation; governmental and regulatory policy changes; changes in the national and local economy; 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 tax laws; changes in prices; the impact of technological advances; the outcomes of contingencies, trends in customer behavior and their ability to repay loans; changes in local real estate values; 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 March 31, 2009 and December 31, 2008
(unaudited) (unaudited)
March 31 December 31
2009 2008
---------------------------------------------------------------------
ASSETS
Cash and due from banks $ 10,571,522 $ 19,418,905
Short-term investments and interest-earning
deposits 7,174,523 9,525,414
Federal funds sold 39,188,562 2,632,054
--------------------------
Total cash and cash equivalents 56,934,607 31,576,373
Securities available for sale, at fair
value 71,799,765 77,792,255
FHLBI and FRB stock 4,032,446 4,032,446
Loans Held for Sale 1,344,649 151,614
Loans 558,148,415 561,011,675
Allowance for loan losses (11,497,524) (10,654,879)
--------------------------
Net loans 546,650,891 550,356,796
Premises and equipment, net 7,817,558 8,010,596
Accrued interest receivable 2,446,081 2,615,260
Bank Owned Life Insurance 12,704,445 12,589,699
Other assets 11,903,502 9,459,084
--------------------------
Total assets $715,633,944 $696,584,123
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 75,079,864 $ 82,107,483
Interest-bearing 543,624,688 504,129,631
--------------------------
Total deposits 618,704,552 586,237,114
Federal Home Loan Bank advances 25,200,000 39,200,000
Junior subordinated debt 17,527,000 17,527,000
Accrued interest payable 582,410 658,956
Other liabilities 3,339,821 3,342,913
--------------------------
Total liabilities 665,353,783 646,965,983
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;
4,155,432 and 4,149,432 shares issued; and
4,090,432 and 4,084,432 shares outstanding
at March 31, 2009 and December 31, 2008 39,785,415 39,766,742
Treasury stock, at cost, 65,000 shares at
March 31, 2009 and December 31, 2008 (884,376) (884,376)
Retained earnings 11,305,949 10,895,724
Accumulated other comprehensive income
(loss), net of tax of ($120,094) at
March 31, 2009 and ($82,399) at
December 31, 2008 73,173 (159,950)
--------------------------
Total stockholders' equity 50,280,161 49,618,140
--------------------------
Total liabilities and stockholders'
equity $715,633,944 $696,584,123
==========================
Tower Financial Corporation
Consolidated Statements of Operations
For the three months ended December 31, 2009 and 2008
(unaudited)
For the Three Months Ended
March 31
--------------------------
2009 2008
----------------------------------------- --------------------------
Interest income:
Loans, including fees $ 7,047,954 $ 9,267,399
Securities - taxable 633,717 614,514
Securities - tax exempt 226,283 214,034
Other interest income 6,845 182,352
--------------------------
Total interest income 7,914,799 10,278,299
Interest expense:
Deposits 2,842,890 4,642,135
Fed Funds Purchased -- --
FHLB advances 250,256 274,140
Trust preferred securities 280,226 281,649
--------------------------
Total interest expense 3,373,372 5,197,924
--------------------------
Net interest income 4,541,427 5,080,375
Provision for loan losses 960,000 300,000
--------------------------
Net interest income after provision for
loan losses 3,581,427 4,780,375
Noninterest income:
Trust and brokerage fees 867,889 894,392
Service charges 257,833 321,210
Loan broker fees 138,278 61,058
Gain/(Loss) on sale of securities 191,151 59,837
Other fees 334,152 304,277
--------------------------
Total noninterest income 1,789,303 1,640,774
Noninterest expense:
Salaries and benefits 2,722,449 3,086,398
Occupancy and equipment 698,592 758,315
Marketing 144,657 150,202
Data processing 294,009 280,758
Loan and professional costs 311,944 243,650
Office supplies and postage 97,057 114,032
Courier service 61,435 89,465
Business Development 100,997 154,873
Communication Expense 43,918 70,792
FDIC Insurance Premiums 279,490 167,514
Other expense 238,723 362,785
--------------------------
Total noninterest expense 4,993,271 5,478,784
--------------------------
Income/(loss) before income taxes/(benefit) 377,459 942,365
Income taxes expense/(benefit) (32,766) 231,193
--------------------------
Net income/(loss) $ 410,225 $ 711,172
==========================
Basic earnings/(loss) per common share $ 0.10 $ 0.18
Diluted earnings/(loss) per common share $ 0.10 $ 0.17
Average common shares outstanding 4,090,365 4,062,145
Average common shares and dilutive
potential common shares outstanding 4,090,365 4,088,684
Dividends declared per common share $ -- $ 0.044
Tower Financial Corporation
Consolidated Financial Highlights
First Quarter 2009
(unaudited)
Quarterly
-------------------------------------------------
($ in thousands 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
except for share 2009 2008 2008 2008 2008
data) --------- --------- --------- --------- ---------
EARNINGS
Net interest
income $ 4,541 5,172 5,426 5,295 5,080
Provision for
loan loss $ 960 1,225 1,999 875 300
NonInterest
income $ 1,789 1,381 1,812 1,469 1,641
NonInterest
expense $ 4,993 4,846 5,043 5,620 5,479
Net income/(loss) $ 410 506 330 342 711
Basic earnings
per share $ 0.10 0.12 0.08 0.08 0.18
Diluted earnings
per share $ 0.10 0.12 0.08 0.08 0.17
Average shares
outstanding 4,090,365 4,075,696 4,084,432 4,078,934 4,062,145
Average diluted
shares
outstanding 4,090,365 4,079,438 4,086,757 4,081,245 4,088,684
PERFORMANCE RATIOS
Return on average
assets* 0.24% 0.29% 0.19% 0.20% 0.41%
Return on average
common equity* 3.33% 4.15% 2.69% 2.79% 5.91%
Net interest
margin (fully-tax
equivalent)* 2.85% 3.28% 3.43% 3.36% 3.15%
Efficiency ratio 78.88% 73.95% 69.67% 83.09% 81.52%
Full-time
equivalent
employees 176.50 173.75 176.50 181.25 184.25
CAPITAL
Equity to assets 7.03% 7.12% 6.96% 7.01% 7.15%
Regulatory
leverage ratio 9.52% 9.69% 9.62% 9.52% 9.33%
Tier 1 capital
ratio 11.47% 11.66% 11.69% 11.55% 11.35%
Total risk-based
capital ratio 12.77% 12.99% 13.04% 12.92% 12.51%
Book value per
share $ 12.29 12.15 11.86 11.92 12.18
Cash dividend per
share $ 0.000 0.00 0.00 0.00 0.044
ASSET QUALITY
Net charge-offs $ 117 (27) 1,570 936 (527)
Net charge-offs to
average loans* 0.08% -0.02% 1.13% 0.67% -0.37%
Allowance for
loan losses $ 11,498 10,655 9,278 8,974 9,035
Allowance for
loan losses to
total loans 2.06% 1.90% 1.67% 1.62% 1.61%
Other real estate
owned (OREO) $ 5,080 2,660 2,432 2,500 1,527
Non-accrual Loans $ 11,708 15,675 17,066 19,412 19,726
90+ Day
delinquencies $ 1,304 1,020 982 1,840 547
Restructured
Loans $ 191 198 366 624 633
Total
Nonperforming
Loans 13,203 16,893 18,414 21,876 20,906
Total
Nonperforming
Assets 18,283 19,553 20,846 24,376 22,433
NPLs to Total
loans 2.37% 3.01% 3.32% 3.95% 3.72%
NPAs (w/o 90+) to
Total assets 2.37% 2.66% 2.85% 3.24% 3.17%
NPAs+90 to Total
assets 2.55% 2.81% 2.99% 3.51% 3.25%
END OF PERIOD
BALANCES
Total assets $ 715,634 696,584 696,061 695,427 691,208
Total earning
assets $ 681,688 655,145 658,963 648,345 653,906
Total loans $ 558,148 561,012 554,760 553,843 562,235
Total deposits $ 618,705 586,237 573,221 600,118 587,735
Stockholders'
equity $ 50,280 49,618 48,449 48,753 49,405
AVERAGE BALANCES
Total assets $ 696,431 684,669 682,958 685,547 701,423
Total earning
assets $ 662,712 642,213 642,852 646,745 663,522
Total loans $ 559,607 555,558 551,407 562,165 570,010
Total deposits $ 598,807 566,193 580,589 580,563 607,402
Stockholders'
equity $ 49,942 48,540 48,875 49,252 48,427
Quarterly Year-To-Date
------------------- -------------------
($ in thousands except for 4th Qtr 3rd Qtr
share data) 2007 2007 2009 2008
--------- --------- --------- ---------
EARNINGS
Net interest income $ 5,223 5,488 4,541 5,080
Provision for loan loss $ 2,825 5,246 960 300
NonInterest income $ 1,477 1,409 1,789 1,641
NonInterest expense $ 5,325 4,941 4,993 5,479
Net income/(loss) $ (784) (2,208) 410 711
Basic earnings per share $ (0.19) (0.54) 0.10 0.18
Diluted earnings per share $ (0.19) (0.54) 0.10 0.17
Average shares outstanding 4,070,766 4,063,750 4,090,365 4,062,145
Average diluted shares
outstanding 4,070,766 4,063,750 4,090,365 4,088,684
PERFORMANCE RATIOS
Return on average assets* -0.45% -1.25% 0.24% 0.41%
Return on average common
equity* -6.32% -17.52% 3.33% 5.91%
Net interest margin (fully-
tax equivalent)* 3.19% 3.31% 2.85% 3.15%
Efficiency ratio 79.48% 71.64% 78.88% 81.52%
Full-time equivalent
employees 190.00 193.00 176.50 184.25
CAPITAL
Equity to assets 6.82% 6.91% 7.03% 7.15%
Regulatory leverage ratio 9.19% 9.34% 9.52% 9.33%
Tier 1 capital ratio 10.92% 11.03% 11.47% 11.35%
Total risk-based capital
ratio 12.08% 12.15% 12.77% 12.51%
Book value per share $ 11.87 12.01 12.29 12.18
Cash dividend per share $ 0.044 0.044 0.000 0.044
ASSET QUALITY
Net charge-offs $ 1,797 5,241 117 (527)
Net charge-offs to average
loans* 1.24% 3.54% 0.08% -0.37%
Allowance for loan losses $ 8,208 7,180 11,498 9,035
Allowance for loan losses
to total loans 1.43% 1.24% 2.06% 1.61%
Other real estate owned
(OREO) $ 1,452 645 5,080 1,527
Non-accrual Loans $ 17,954 6,471 11,708 19,726
90+ Day delinquencies $ 0 14 1,304 547
Restructured Loans $ 639 645 191 633
Total Nonperforming Loans 18,593 7,130 13,203 20,906
Total Nonperforming Assets 20,045 N/A 18,283 22,433
NPLs to Total loans 3.23% N/A 2.37% 3.72%
NPAs (w/o 90+) to Total
assets 2.84% N/A 2.37% 3.17%
NPAs+90 to Total assets 2.84% N/A 2.55% 3.25%
END OF PERIOD BALANCES
Total assets $ 706,493 706,914 715,634 691,208
Total earning assets $ 655,668 669,988 681,688 653,906
Total loans $ 575,744 579,902 558,148 562,235
Total deposits $ 600,689 592,854 618,705 587,735
Stockholders' equity $ 48,208 48,830 50,280 49,405
AVERAGE BALANCES
Total assets $ 698,452 702,538 696,431 701,423
Total earning assets $ 660,812 669,524 662,712 663,522
Total loans $ 574,266 587,531 559,607 570,010
Total deposits $ 595,913 596,140 598,807 607,402
Stockholders' equity $ 49,199 50,014 49,942 48,427
* annualized for quarterly data