FORT WAYNE, Ind., April 24, 2008 (PRIME NEWSWIRE) -- Tower Financial Corporation (Nasdaq:TOFC) today announced first quarter 2008 net income of $711,000, or $0.17 per diluted share, compared with net income of $177,000, or $0.04 per share, for the year-ago quarter.
First quarter highlights include:
* In-market deposits grew by $8.3 million during the period, which annualizes to 6.3 percent. * Minimal loan loss provision expense of $300,000, or 21 bps annualized on average loans. * Assets under management in Tower Trust Company increased 5 percent from the first quarter 2007 to $603.1 million. While the growth was minimized by market conditions, the number of accounts grew by 28 percent during the same time frame. * The bank executed a sale of its interest rate floor for a net pre-tax gain of $723,000, which will be amortized over the remaining original term that runs through July 2009.
Chairman and Chief Executive Officer, Don Schenkel stated, "We are pleased to return the Company to profitability with our highest earnings since the fourth quarter of 2006. However, we are not satisfied, and we still have a lot of hard work in front of us. We need to continue focusing on lowering our non-performing assets, growing our in-market deposits, and aggressively pursue and expand profitable client relationships."
Effective April 25, 2008, Chief Lending Officer, Darrell Jaggers has resigned his position. Mr. Jaggers made this decision based on a desire to focus on his family and begin slowing down professionally with an eye towards retirement in the next few years. Mike Cahill, President and Chief Executive Officer of Tower Bank, will absorb these duties in the interim, and we expect to replace the Chief Lending Officer from within the current management team.
At the same time, the Company has reduced its workforce by eight FTE's (full-time equivalent employees), to adjust to an appropriate level of overhead given the current economic climate. These reductions, along with the resignation of Mr. Jaggers, will cause one-time charges to the second quarter of $200,000. These changes will result in annual savings of approximately $900,000, which will begin to be recognized in the third quarter of 2008.
Balance Sheet
Company assets were $691.2 million at March 31, 2008, a decrease of $15.3 million, or 2.2 percent from December 31, 2007, and an increase of $8.2 million, or 1.2 percent from March 31, 2007. The decrease in assets during the first quarter was primarily attributable to a decrease in loans of $16.0 million. The primary changes to the loan portfolio were the sale of a $3.2 million loan related to our Indianapolis office, the sale of a $2.2 million non-performing loan, and the non-renewal of a $4.6 million commercial real estate loan.
Deposits were $587.7 million at March 31, 2008, a decrease of $13.0 million from December 31, 2007. The decrease in deposits was the net result of $8.3 million of in-market deposit growth along with the reduction of out-of-market CD's of $21.3 million due to lower funding needs. The in-market growth was comprised of $3.4 million of growth in core, non-CD accounts (demand deposit, savings, interest-bearing checking, and money market accounts) and $4.9 million of growth in CDs.
Shareholders' equity was $49.4 million at March 31, 2008, an increase of 2.5 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 11.35 percent and 12.51 percent, respectively. Period-end common shares outstanding were 4,056,769. The Company purchased 6,000 shares of Treasury stock during the quarter as part of its Stock Repurchase Plan. Since the plans inception in May 2007, the Company has repurchased 59,036 shares of the 65,000 shares authorized.
Operating Statement
Total revenue, consisting of net interest income and noninterest income, was $6.7 million for the first quarter of 2008, the same as reported for the year-ago quarter and the fourth quarter 2007. First quarter 2008 net interest income decreased to $5.1 million, a decline of 3.1 percent compared to the first quarter 2007, and a decline of 2.7 percent compared to the fourth 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 3.15 percent from 3.42 percent one year ago and from 3.19 percent for the fourth quarter 2007. The company has a liability sensitive balance sheet; however, this will manifest itself over the balance of the year versus in the short term.
Noninterest income accounted for approximately 24 percent of total revenue. For the first quarter, noninterest income was $1.64 million, up 10.2 percent from the $1.49 million reported in the first quarter of 2007 and up 11.1 percent from the $1.48 million reported in the fourth quarter 2007. Trust and brokerage fees of $894,000 accounted for 55 percent of first quarter noninterest income; they grew 5.7 percent compared to the first quarter 2007, but decreased 4.7 percent compared to the fourth quarter 2007. The decrease from the linked quarter was primarily related to market conditions. Currently, Tower Private Advisors manages $603.1 million in combined trust and brokerage assets, an increase of 4.9 percent above the $574.7 million of combined assets reported for the year-ago quarter. While growth in assets was minimal, the number of trust and brokerage accounts at the end of the first quarter 2008 was 1,589, a 28.8 percent increase from 1,234 accounts one year ago. Service charges for the Bank were $321,000, a 21.1 percent increase from the first quarter 2007, and a 25.1 percent increase from the fourth quarter 2007. Loan broker fees were $61,000, a 109.1 percent increase from the first quarter 2007, and a decrease of 46.0 percent from the fourth quarter 2007.
First quarter noninterest expense increased $317,000, or 6.1 percent, from the first quarter 2007 and $154,000, or 2.9 percent from the fourth quarter 2007. The primary causes related to increased FDIC insurance premiums and increased occupancy and equipment expenses related to the addition of our expansion in Warsaw. Salary and benefit expenses account for 56 percent of the total noninterest expenses for the quarter. While salaries and benefits increased by 3.0 percent from the first quarter in 2007, this category decreased by 4.0 percent from the fourth quarter 2007.
Asset Quality
Nonperforming assets plus delinquencies at period end were $22.4 million, or 3.25 percent of total assets. This compares with $6.5 million, or 0.96 percent of assets, for the year-ago period and with $20.0 million, or 2.84 percent of assets on December 31, 2007. The increase during the first quarter of $2.4 million was primarily the net result of the disposition of a $2.2 million loan and the addition of a $4.6 million residential development loan. We feel that we have adequate reserves on the $4.6 million development loan through our collateral and outside investor guarantees. Net recoveries were $527,000 for the quarter compared with net charge-offs of $633,000 in the first quarter of 2007.
Tower's allowance for loan losses was 1.61 percent of total loans at March 31, 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 $16.0 million, net recoveries of $527,000, and loan loss provision of $300,000.
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.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 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 March 31, 2008 and December 31, 2007
(unaudited)
March 31 December 31
2008 2007
---------------------------------------------------------------------
ASSETS
Cash and due from banks $ 14,464,669 $ 25,913,449
Short-term investments and
interest-earning deposits 8,588,209 1,781,161
Federal funds sold 10,011,579 6,135,779
--------------------------
Total cash and cash equivalents 33,064,457 33,830,389
Securities available for sale, at fair
value 68,794,701 65,227,694
FHLBI and FRB stock 3,589,700 3,589,700
Loans Held for Sale 686,529 3,189,545
Loans 562,234,854 575,744,207
Allowance for loan losses (9,035,370) (8,208,162)
--------------------------
Net loans 553,199,484 567,536,045
Premises and equipment, net 9,597,339 9,549,233
Accrued interest receivable 2,781,066 3,246,455
Bank Owned Life Insurance 11,362,127 11,258,517
Other assets 8,132,962 9,065,564
--------------------------
Total assets $691,208,365 $706,493,142
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 69,643,584 $ 71,705,395
Interest-bearing 518,090,945 528,984,076
--------------------------
Total deposits 587,734,529 600,689,471
-- --
Federal Home Loan Bank advances 32,200,000 35,100,000
Junior subordinated debt 17,527,000 17,527,000
Accrued interest payable 1,347,760 1,721,972
Other liabilities 2,994,306 3,247,145
--------------------------
Total liabilities 641,803,595 658,285,588
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; issued
and outstanding - 4,062,769 shares at
December 31, 2007 and 4,043,882 shares
at December 31, 2006 39,497,429 39,482,669
Treasury stock, at cost, 53,036 shares at
December 31, 2007 (824,447) (758,827)
Retained earnings 9,740,787 9,208,719
Accumulated other comprehensive income
(loss), net of tax of $141,663 at
December 31, 2007, $(53,785) at
December 31, 2006 991,001 274,993
--------------------------
Total stockholders' equity 49,404,770 48,207,554
--------------------------
Total liabilities and stockholders'
equity $691,208,365 $706,493,142
==========================
Tower Financial Corporation
Consolidated Statements of Operations
For the three months ended March 31, 2008 and 2007
(unaudited)
For the Three Months Ended
March 31
---------------------------
2008 2007
--------------------------------------- ---------------------------
Interest income:
Loans, including fees $ 9,267,399 $ 10,318,089
Securities - taxable 614,514 653,946
Securities - tax exempt 214,034 200,775
Other interest income 182,352 219,080
---------------------------
Total interest income 10,278,299 11,391,890
Interest expense:
Deposits 4,642,135 5,675,885
Fed Funds Purchased --
FHLB advances 274,140 191,744
Trust preferred securities 281,649 281,649
---------------------------
Total interest expense 5,197,924 6,149,278
---------------------------
Net interest income 5,080,375 5,242,612
Provision for loan losses 300,000 1,425,000
---------------------------
Net interest income after provision
for loan losses 4,780,375 3,817,612
Noninterest income:
Trust and brokerage fees 894,392 845,883
Service charges 321,210 265,331
Loan broker fees 61,058 29,195
Gain/(Loss) on sale of securities 59,837 --
Other fees 304,277 357,138
---------------------------
Total noninterest income 1,640,774 1,497,547
Noninterest expense:
Salaries and benefits 3,086,398 2,995,501
Occupancy and equipment 758,315 688,194
Marketing 150,202 79,043
Data processing 280,758 227,949
Loan and professional costs 243,650 358,813
Office supplies and postage 114,032 123,385
Courier service 89,465 100,810
Business Development 154,873 157,753
Communication Expense 70,792 74,755
FDIC Insurance Premiums 167,514 16,901
Other expense 362,785 339,192
---------------------------
Total noninterest expense 5,478,784 5,162,296
---------------------------
Income before income taxes 942,365 152,863
Income taxes expense 231,193 (23,750)
---------------------------
Net income $ 711,172 $ 176,613
===========================
Basic earnings per common share $ 0.18 $ 0.04
Diluted earnings per common share $ 0.17 $ 0.04
Average common shares outstanding 4,062,145 4,068,657
Average common shares and dilutive
potential common shares outstanding 4,088,684 4,163,169
Dividends declared per share $ 0.044 $ 0.044
Tower Financial Corporation
Consolidated Financial Highlights
First Quarter 2008
(unaudited)
($ in thousands except for share data)
-----------------------------------------------------
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
2008 2007 2007 2007 2007
--------- ------------------------------- ---------
EARNINGS
Net interest
income $ 5,080 5,223 5,488 5,583 5,251
Provision for
loan loss $ 300 2,825 5,246 1,500 1,425
NonInterest
income $ 1,641 1,477 1,409 1,430 1,489
NonInterest
expense $ 5,479 5,325 4,941 5,303 5,162
Net income $ 711 (784) (2,208) 217 177
Basic earnings
per share $ 0.18 (0.19) (0.54) 0.05 0.04
Diluted
earnings per
share $ 0.17 (0.19) (0.54) 0.05 0.04
Average shares
outstanding 4,062,145 4,070,766 4,063,750 4,073,678 4,065,657
Average diluted
shares
outstanding 4,088,684 4,070,766 4,063,750 4,146,386 4,163,169
PERFORMANCE
RATIOS
Return on
average
assets * 0.41% -0.45% -1.25% 0.12% 0.11%
Return on
average common
equity * 5.91% -6.32% -17.52% 1.69% 1.41%
Net interest
margin (fully-
tax equiva-
lent) * 3.15% 3.19% 3.31% 3.44% 3.43%
Efficiency ratio 81.52% 79.48% 71.64% 75.62% 76.59%
Full-time
equivalent
employees 184.25 190.00 193.00 192.75 191.75
CAPITAL
Equity to assets 7.15% 6.82% 6.91% 7.20% 7.52%
Regulatory
leverage ratio 9.33% 9.19% 9.34% 9.91% 10.28%
Tier 1 capital
ratio 11.35% 10.92% 11.03% 11.37% 11.81%
Total risk-based
capital ratio 12.51% 12.08% 12.15% 12.47% 12.97%
Book value per
share $ 12.18 11.87 12.01 12.44 12.62
Cash dividend
per share $ 0.044 0.044 0.044 0.044 0.044
ASSET QUALITY
Net charge-
offs $ (527) 1,797 5,241 1,987 633
Net charge-offs
to average
loans * -0.37% 1.24% 3.54% 1.36% 0.47%
Allowance for
loan losses $ 9,035 8,208 7,180 7,176 7,663
Allowance for
loan losses to
total loans 1.61% 1.43% 1.24% 1.23% 1.35%
Nonperforming
loans $ 20,358 18,594 7,116 4,845 5,239
Other real
estate owned
(OREO) $ 1,527 1,452 645 744 744
Nonperforming
assets (NPA) $ 21,885 20,046 7,761 5,589 5,983
90+ Day delin-
quencies $ 547 0 14 81 564
NPAs plus 90
Days delin-
quent $ 22,432 20,046 7,775 5,670 6,547
NPAs to Total
assets 3.17% 2.84% 1.10% 0.80% 0.88%
NPAs+90 to
Total assets 3.25% 2.84% 1.10% 0.81% 0.96%
NPAs to Loans
+ OREO 3.88% 3.47% 1.34% 0.96% 1.05%
END OF PERIOD
BALANCES
Total assets $ 691,208 706,493 706,914 701,641 683,032
Total earning
assets $ 653,906 655,668 669,988 673,032 651,077
Total loans $ 562,235 575,744 579,902 581,783 568,481
Total deposits $ 587,735 600,689 592,854 595,558 589,802
Stockholders'
equity $ 49,405 48,208 48,830 50,536 51,386
AVERAGE BALANCES
Total assets $ 701,423 698,452 702,538 697,117 664,026
Total earning
assets $ 663,522 660,812 669,524 663,411 633,569
Total loans $ 570,010 574,266 587,531 585,480 551,000
Total deposits $ 607,402 595,913 596,140 597,806 575,389
Stockholders'
equity $ 48,427 49,199 50,014 51,579 50,779
----------------------
Year-To-Date
----------------------
($ in thousands except for share data) 2008 2007
---------- ----------
EARNINGS
Net interest income $ 5,080 5,251
Provision for loan loss $ 300 1,425
NonInterest income $ 1,641 1,489
NonInterest expense $ 5,479 5,162
Net income $ 711 177
Basic earnings per share $ 0.18 0.04
Diluted earnings per share $ 0.17 0.04
Average shares outstanding 4,062,145 4,065,657
Average diluted shares outstanding 4,088,684 4,163,169
PERFORMANCE RATIOS
Return on average assets * 0.41% 0.11%
Return on average common equity * 5.95% 1.41%
Net interest margin (fully-tax equivalent) * 3.15% 3.43%
Efficiency ratio 81.52% 76.59%
Full-time equivalent employees 184.25 191.75
CAPITAL
Equity to assets 7.15% 7.52%
Regulatory leverage ratio 9.33% 10.28%
Tier 1 capital ratio 11.35% 11.81%
Total risk-based capital ratio 12.51% 12.97%
Book value per share $ 12.18 12.62
Cash dividend per share $ 0.044 0.044
ASSET QUALITY
Net charge-offs $ (527) 633
Net charge-offs to average loans * -0.37% 0.47%
Allowance for loan losses $ 9,035 7,663
Allowance for loan losses to total loans 1.61% 1.35%
Nonperforming loans $ 20,358 5,239
Other real estate owned (OREO) $ 1,527 744
Nonperforming assets (NPA) $ 21,885 5,983
90+ Day delinquencies $ 547 564
NPAs plus 90 Days delinquent $ 22,432 6,547
NPAs to Total assets 3.17% 0.88%
NPAs+90 to Total assets 3.25% 0.96%
NPAs to Loans + OREO 3.88% 1.05%
END OF PERIOD BALANCES
Total assets $ 691,208 683,032
Total earning assets $ 653,906 651,077
Total loans $ 562,235 568,481
Total deposits $ 587,735 589,802
Stockholders' equity $ 49,405 51,386
AVERAGE BALANCES
Total assets $ 701,423 664,026
Total earning assets $ 663,522 633,569
Total loans $ 570,010 551,000
Total deposits $ 607,402 575,389
Stockholders' equity $ 48,427 50,779
* annualized for quarterly data