FORT WAYNE, Ind., Jan. 25, 2008 (PRIME NEWSWIRE) -- Tower Financial Corporation (Nasdaq:TOFC) today announced a fourth quarter 2007 net loss of $784,000, or $0.19 per diluted share, compared with net income of $810,000, or $0.20 per share, for the year-ago quarter. For all of 2007, the net loss was $2.6 million, or $0.64 per diluted share, compared with net income of $3.7 million, or $0.89 per diluted share, for the previous year.
Fourth quarter and 2007 highlights include:
* Fourth quarter results reflect a $2.8 million provision for loan losses primarily related to borrowers and projects identified in previous quarters. During the fourth quarter we expanded our review of asset quality and borrower financial condition underlying certain loan relationships previously identified. This review, along with the further deterioration in the residential real estate development marketplace resulted in net charge-offs of $1.8 million during the fourth quarter, along with an additional reserve of $1.0 million. Nonperforming assets plus delinquencies were $20.0 million at December 31, 2007, or 2.8 percent of total assets. * Tower Bank ended 2007 with $703.5 million in assets, an increase of $34.0 million, or 5.1%. The majority of the increase came from loan growth. During 2007, loans grew by $25.3 million, or 4.6%. Additionally, Bank grew its core deposits as a percentage of total deposits. Core deposits now account for 61.6 percent of total deposits, up from 57.3 percent for the year-ago period * The Trust Company ended the year with $609.4 million in assets under management, an increase of $42.2 million or 7.4%. Trust revenues were at a record high of $3.3 million, which helped to produce net income of $513,000. * Tower opened the Warsaw branch in late October 2007. As of December 31, 2007, this new location had loan outstandings of $3.8 million and total deposits of $12.6 million. Tower also announced during the fourth quarter the closure of its Angola location and incurred some related closure expenses of approximately $75,000.
Balance Sheet
Company assets were $706.5 million at December 31, 2007, a $35.3 million, or 5.3 percent, increase over the $671.2 million reported twelve months ago. Loans outstanding grew by $25.3 million, or 4.6 percent, reaching $575.7 million as of December 31, 2007. Loan growth was primarily driven by residential real estate and C&I loans, up $18.6 million and $15.1 million, respectively. Commercial real estate loans, which comprised 29.6 percent of the portfolio at December 31, were reduced by $8.1 million during 2007.
Deposits increased $13.9 million, or 2.4 percent, over the past twelve months, reaching $600.7 million. Compared with December 31, 2006, core deposits (excluding wholesale and brokered CDs) increased as a percent of total deposits; as of December 31, 2007, they comprised 61.6 percent of deposits compared with 57.3 percent for the year-ago quarter. Total in-market deposits (core and wholesale deposits), however, increased by $33.9 million, allowing us to reduce brokered deposits by $40.3 million. Interest-bearing checking accounts and money-market accounts made up the majority of our core deposit growth, increasing $17.3 million and $11.9 million respectively.
Shareholders' equity was $48.2 million at December 31, 2007, a decrease of 5.4 percent from the $51.0 million reported for the year-ago period. Tower's Tier 1 and risk-based capital ratios remain above "well-capitalized" levels, decreasing only slightly from last year to 10.92 percent and 12.08 percent, respectively. Period-end common shares outstanding were 4,060,769.
Operating Statement
Total revenue, consisting of net interest income and noninterest income, was $6.7 million for the fourth quarter of 2007, the same as reported for the year-ago quarter. Fourth quarter 2007 net interest income decreased to $5.2 million, a decline of 2.4 percent compared to the fourth quarter 2006. While average earning assets increased 7.8% from the fourth quarter of 2006, the relative flatness of our total revenue is reflective of a 34 basis point decrease in net interest margin due primarily to the increase in non-performing assets, which negatively impacted our fourth quarter net interest margin by 25 bps. Without the impact of these fourth quarter asset quality issues, we would have had a net interest margin of 3.48% which would have been an increase of 18 bps from last quarter. This is reflective of our liability sensitive balance sheet which increases our net interest margin as rates decrease.
Noninterest income accounted for approximately 22 percent of total revenue. For the fourth quarter, noninterest income was $1.48 million, up 7.0 percent from the $1.38 million reported in the fourth quarter of 2006. Trust and brokerage fees of $938,000 accounted for 63.5 percent of fourth quarter noninterest income; they grew 35.2 percent compared to the fourth quarter 2006. Currently, Tower Private Advisors manages $609.4 million in combined trust and brokerage assets, an increase of 7.4 percent above the $567.2 million of combined assets reported for the year-ago quarter. Service charges for the Bank were $257,000, up $28,900 or 12.2 percent, above the 2006 fourth quarter. Loan broker fees were $113,000, up 51,800, or 84.45, above the 2006 fourth quarter.
Fourth quarter noninterest expense increased $96,000, or 1.8%, from the fourth quarter 2006. The primary causes of the increase related to increased FDIC insurance premiums, expenses related to the closure of our Angola branch, and increased occupancy costs related to our new location in Warsaw. Salary expenses decreased $142,000, or 4.5% from the fourth quarter of 2006, despite a 2.0% increase in total FTE's. Tower continues to focus on expense savings, as was shown by our decision to close the Angola location.
Asset Quality
Nonperforming assets plus delinquencies at period end were $20.0 million, or 2.84 percent of assets. This compares with $4.8 million, or 0.72 percent of assets, for the year-ago period, and $7.8 million, or 1.10 percent of assets, for the linked quarter. As indicated above approximately 70% of our nonperforming assets relate to those borrowers and projects identified in previous quarters. Net charge-offs were $1.8 million for the quarter, or an annualized 1.24 percent of average loans, compared with net charge-offs of $5.2 million, or 3.54 percent of average loans, and net charge-offs of $633,000, or 0.47 percent of average loans, for the linked and year-ago quarters, respectively. Tower's allowance for loan losses was 1.43 percent of total loans at December 31, 2007.
Donald F. Schenkel, Tower Financial Corporation's Chairman, stated: "2007 has been a real challenge for us, as we acted during each of the last several quarters to re-assess the value of certain pre-existing problem loans carried in our residential real estate development portfolio. We have done so after conservatively assessing the realizable value of our underlying collateral associated with these loans and after considering the prevailing deteriorating local market conditions and the financial condition of the related borrowers. Naturally, if our actual experience with some of these loans results in recoveries in excess of the reduced portfolio values, we would rather be surprised on the upside in future quarters."
Mr. Schenkel continued: "We regret that these actions, which we believe were necessary, have overshadowed the many positive developments during the year that we would have preferred to emphasize. We remain firmly committed to our mission and believe that we have the best and most devoted employees, as well as a growing base of loyal and appreciative bank and trust company customers and clients. We clearly look forward to a much brighter and very positive 2008."
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 December 31, 2007 and 2006
(unaudited)
December 31 December 31
2007 2006
---------------------------------------------------------------------
ASSETS
Cash and due from banks $ 25,913,449 $ 14,393,790
Short-term investments and
interest-earning deposits 1,781,161 8,863,112
Federal funds sold 6,135,779 5,608,064
----------------------------
Total cash and cash equivalents 33,830,389 28,864,966
Securities available for sale,
at fair value 65,227,694 69,491,806
FHLBI and FRB stock 3,589,700 3,078,400
Loans Held for Sale 3,189,545 --
Loans 575,744,207 550,450,313
Allowance for loan losses (8,208,162) (6,870,442)
----------------------------
Net loans 567,536,045 543,579,871
Premises and equipment, net 9,549,233 5,870,699
Accrued interest receivable 3,246,455 3,620,368
Bank Owned Life Insurance 11,258,517 10,851,519
Other assets 9,065,564 5,797,183
----------------------------
Total assets $706,493,142 $671,154,812
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 71,705,395 $ 77,772,481
Interest-bearing 528,984,076 508,997,823
----------------------------
Total deposits 600,689,471 586,770,304
Federal Home Loan Bank advances 35,100,000 11,200,000
Junior subordinated debt 17,527,000 17,527,000
Accrued interest payable 1,721,972 1,716,994
Other liabilities 3,247,145 2,982,675
----------------------------
Total liabilities 658,285,588 620,196,973
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
- 4,060,769 shares at December 31,
2007 and 4,043,882 shares at
December 31, 2006 39,482,669 38,536,406
Treasury stock, at cost, 53,036 shares
at December 31, 2007 (758,827) --
Retained earnings 9,208,719 12,523,750
Accumulated other comprehensive
income (loss), net of tax of
$141,663 at December 31, 2007,
$(53,785) at December 31, 2006 274,993 (102,317)
----------------------------
Total stockholders' equity 48,207,554 50,957,839
----------------------------
Total liabilities and stockholders'
equity $706,493,142 $671,154,812
============================
Tower Financial Corporation
Consolidated Statements of Operations
For the three and twelve months ended December 31, 2007 and 2006
(unaudited)
For the Three Months For the Twelve Months
Ended Ended
December 31 December 31
------------------------ ------------------------
2007 2006 2007 2006
------------------ ------------------------ ------------------------
Interest income:
Loans, including
fees $10,513,949 $10,386,071 $43,006,181 $37,648,724
Securities -
taxable 649,929 575,974 2,641,155 2,156,655
Securities -
tax exempt 193,433 182,661 791,584 681,615
Other interest
income 94,546 144,188 463,231 569,560
------------------------ ------------------------
Total interest
income 11,451,857 11,288,894 46,902,151 41,056,554
Interest expense:
Deposits 5,541,768 5,517,162 22,793,951 18,642,725
Fed Funds
Purchased 141 -- 672 --
FHLB advances 409,463 241,006 1,434,885 1,334,608
Trust preferred
securities 277,073 181,728 1,126,326 809,419
------------------------ ------------------------
Total interest
expense 6,228,445 5,939,896 25,355,834 20,786,752
------------------------ ------------------------
Net interest
income 5,223,412 5,348,998 21,546,317 20,269,802
Provision for loan
losses 2,825,000 500,000 10,996,000 2,195,000
------------------------ ------------------------
Net interest income
after provision
for loan losses 2,398,412 4,848,998 10,550,317 18,074,802
Noninterest income:
Trust and
brokerage fees 938,010 693,997 3,292,502 2,806,267
Service charges 256,817 228,918 977,300 723,725
Loan broker fees 113,129 61,339 257,727 122,322
Gain/(Loss) on
sale of
securities 39,352 -- (3,213) --
Other fees 129,951 396,567 1,280,428 1,473,856
--------------------------------------------------
Total
noninterest
income 1,477,259 1,380,821 5,804,744 5,126,170
Noninterest
expense:
Salaries and
benefits 3,213,978 3,186,788 11,814,263 10,939,447
Occupancy and
equipment 707,893 592,583 2,732,859 2,139,751
Marketing 125,640 155,217 442,563 598,324
Data processing 98,137 203,248 786,821 704,081
Loan and
professional
costs 250,682 265,116 1,243,203 1,012,805
Office supplies
and postage 109,945 129,272 446,832 463,011
Courier service 94,834 93,775 387,809 365,107
Business
Development 199,483 170,275 715,736 560,677
Communication
Expense 79,795 43,461 267,661 206,547
FDIC Insurance
Premiums 133,376 15,802 484,815 60,692
Other expense 311,296 373,457 1,408,211 1,038,981
------------------------ ------------------------
Total noninterest
expense 5,325,059 5,228,994 20,730,773 18,089,423
------------------------ ------------------------
Income before
income taxes (1,449,388) 1,000,825 (4,375,712) 5,111,549
Income taxes
expense (665,828) 190,937 (1,777,628) 1,423,637
------------------------ ------------------------
Net income $ (783,560) $ 809,888 $(2,598,084) $ 3,687,912
======================== ========================
Basic earnings per
common share $ (0.19) $ 0.20 $ (0.64) $ 0.92
Diluted earnings
per common share $ (0.19) $ 0.20 $ (0.64) $ 0.89
Average common
shares outstanding 4,068,766 4,030,081 4,068,699 4,020,004
Average common
shares and
dilutive potential
common shares
outstanding 4,068,766 4,129,774 4,068,699 4,137,665
Dividends declared
per share $ 0.044 $ 0.040 $ 0.176 $ 0.160
Tower Financial Corporation
Consolidated Financial Highlights
Fourth Quarter 2007
(unaudited)
Quarterly
------------------------------------------------------
($ in thousands
except for 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
share data) 2007 2007 2007 2007 2006
-------------------------------- ---------- ----------
EARNINGS
Net interest
income $ 5,223 5,488 5,583 5,251 5,349
Provision for
loan loss $ 2,825 5,246 1,500 1,425 500
NonInterest
income $ 1,477 1,409 1,430 1,489 1,380
NonInterest
expense $ 5,325 4,941 5,303 5,162 5,230
Net income $ (784) (2,208) 217 177 809
Basic
earnings per
share $ (0.19) (0.54) 0.05 0.04 0.20
Diluted
earnings per
share $ (0.19) (0.54) 0.05 0.04 0.20
Average
shares
outstanding 4,068,766 4,063,750 4,073,678 4,065,657 4,030,081
Average
diluted
shares
outstanding 4,068,766 4,063,750 4,146,386 4,163,169 4,129,774
PERFORMANCE
RATIOS
Return on
average
assets * -0.45% -1.25% 0.12% 0.11% 0.49%
Return on
average
common
equity * -6.32% -17.52% 1.69% 1.41% 6.40%
Net interest
margin
(fully-tax
equivalent) * 3.19% 3.31% 3.44% 3.43% 3.53%
Efficiency
ratio 79.48% 71.64% 75.62% 76.59% 77.72%
Full-time
equivalent
employees 190.00 193.00 192.75 191.75 186.25
CAPITAL
Equity to
assets 6.82% 6.91% 7.20% 7.52% 7.59%
Regulatory
leverage
ratio 9.19% 9.34% 9.91% 10.28% 10.46%
Tier 1
capital
ratio 10.92% 11.03% 11.37% 11.81% 11.94%
Total risk-
based
capital
ratio 12.08% 12.15% 12.47% 12.97% 13.06%
Book value
per share $ 11.85 12.01 12.44 12.62 12.60
Cash dividend
per share $ 0.044 0.044 0.044 0.044 0.04
ASSET QUALITY
Net charge-
offs $ 1,797 5,241 1,987 633 210
Net charge-
offs to
average
loans * 1.24% 3.54% 1.36% 0.47% 0.15%
Allowance for
loan losses $ 8,208 7,180 7,176 7,663 6,870
Allowance for
loan losses
to total
loans 1.43% 1.24% 1.23% 1.35% 1.25%
Nonperforming
loans $ 18,594 7,116 4,845 5,239 3,977
Other real
estate owned
(OREO) $ 1,452 645 744 744 370
Nonperforming
assets (NPA) $ 20,046 7,761 5,589 5,983 4,347
90+ Day
delinquencies$ 0 14 81 564 487
NPAs plus 90
Days
delinquent $ 20,046 7,775 5,670 6,547 4,834
NPAs to Total
assets 2.84% 1.10% 0.80% 0.88% 0.65%
NPAs+90 to
Total assets 2.84% 1.10% 0.81% 0.96% 0.72%
NPAs to Loans
+ OREO 3.47% 1.34% 0.96% 1.05% 0.79%
END OF PERIOD
BALANCES
Total assets $ 706,493 706,914 701,641 683,032 671,155
Total earning
assets $ 655,668 669,988 673,032 651,077 637,491
Total loans $ 575,744 579,902 581,783 568,481 550,450
Total
deposits $ 600,689 592,854 595,558 589,802 586,780
Stockholders'
equity $ 48,208 48,830 50,536 51,386 50,958
AVERAGE
BALANCES
Total assets $ 698,452 702,538 697,117 664,026 650,721
Total earning
assets $ 660,812 669,524 663,411 633,569 612,944
Total loans $ 574,266 587,531 585,480 551,000 540,227
Total
deposits $ 595,913 596,140 597,806 575,389 567,469
Stockholders'
equity $ 49,199 50,014 51,579 50,779 50,117
Year-To-Date
------------------------
($ in thousands except for share
data) 2007 2006
----------- -----------
EARNINGS
Net interest income $ 21,545 20,270
Provision for loan loss $ 10,996 2,195
NonInterest income $ 5,805 5,126
NonInterest expense $ 20,731 18,090
Net income $ (2,598) 3,687
Basic earnings per share $ (0.64) 0.92
Diluted earnings per share $ (0.64) 0.89
Average shares outstanding 4,068,699 4,020,004
Average diluted shares outstanding 4,068,699 4,136,138
PERFORMANCE RATIOS
Return on average assets * -0.38% 0.61%
Return on average common equity * -5.16% 7.57%
Net interest margin (fully-tax
equivalent) * 3.34% 3.58%
Efficiency ratio 75.80% 71.23%
Full-time equivalent employees 193.00 186.25
CAPITAL
Equity to assets 6.82% 7.59%
Regulatory leverage ratio 9.19% 10.46%
Tier 1 capital ratio 10.92% 11.94%
Total risk-based capital ratio 12.08% 13.06%
Book value per share $ 11.85 12.60
Cash dividend per share $ 0.176 0.16
ASSET QUALITY
Net charge-offs $ 9,658 970
Net charge-offs to average loans * 1.68% 0.19%
Allowance for loan losses $ 8,208 6,870
Allowance for loan losses to total
loans 1.43% 1.25%
Nonperforming loans $ 18,594 3,977
Other real estate owned (OREO) $ 1,452 370
Nonperforming assets (NPA) $ 20,046 4,347
90+ Day delinquencies 0 487
NPAs plus 90 Days delinquent $ 20,046 4,834
NPAs to Total assets 2.84% 0.65%
NPAs+90 to Total assets 2.84% 0.72%
NPAs to Loans + OREO 3.47% 0.79%
END OF PERIOD BALANCES
Total assets $ 706,493 671,155
Total earning assets $ 655,668 637,491
Total loans $ 575,744 550,450
Total deposits $ 600,689 586,780
Stockholders' equity $ 48,208 50,958
AVERAGE BALANCES
Total assets $ 690,552 606,272
Total earning assets $ 656,865 573,714
Total loans $ 576,417 502,665
Total deposits $ 591,338 514,311
Stockholders' equity $ 50,385 48,731
* annualized for quarterly data