FORT WAYNE, Ind., Oct. 24, 2013 (GLOBE NEWSWIRE) -- Tower Financial Corporation (Nasdaq:TOFC) reported net income of $2.1 million or $0.45 per diluted share for the third quarter of 2013, compared with net income of $1.6 million, or $0.32 per diluted share, reported for the third quarter of 2012. Year to date earnings through the first nine months of 2013 were $5.7 million, or $1.21 per diluted share, compared to $4.0 million, or $0.83 per diluted share, for the first nine months of 2012.
Our third quarter highlights include:
- Our earnings of $2.1 million and $5.7 million for the quarter and year-to-date, respectively, represent records for us.
- Our total assets were $701.9 million at September 30, 2013, our highest total since the first quarter of 2009. Our earning assets grew by $16.1 million during the quarter, led by loan growth of $12.9 million.
- Our trust and brokerage quarterly fee income was the highest in its history at $1.1 million with assets under management of $719.4 million at September 30, 2013.
- Our board declared a dividend of $0.08 per share to be paid on November 21, 2013 to all shareholders of record as of November 7, 2013. Total dividends paid since we reinstated dividends in August 2012 are $1.16 per common share.
- Asset quality continues to improve, as our nonperforming assets to total assets are now 1.4 percent, a decrease from the 2.0 percent we reported in the second quarter.
Mike Cahill, President and Chief Executive Officer of Tower Financial Corporation stated, "Tower continues to benefit from the combination of our talented group of team members and our great customers and clients who believe in our team and mission. The numbers, which we believe are a lagging indicator, are now beginning to show our true capabilities. I am reminded, once again, how very fortunate I am to be able to be a part of Tower. This team truly humbles me."
Capital
During the third quarter of 2013, our tier 1 capital increased by $561,000 compared to the second quarter of 2013 as a result of net income for the quarter in the amount of $2.1 million offset by the payment of a quarterly dividend of $374,000, or $0.08 per share common diluted share and a special dividend in the amount of $1.2 million, or $0.25 per common diluted share. As of September 30, 2013, our regulatory capital ratios were 14.8 percent for tier 1 capital and 16.0 percent for total risk based capital. Our regulatory capital ratios continue to remain significantly above the "well-capitalized" levels of 6 percent for tier 1 capital and 10 percent for total risk-based capital. Tier 1 capital was 15.1 percent at June 30, 2013 and 14.7 percent at December 31, 2012. Total risk-based capital was 16.4 percent at June 30, 2013 and 15.9 percent at December 31, 2012. Our leverage capital was 11.4 percent at September 30, 2013, more than double the regulatory requirement of 5 percent to be considered "well-capitalized."
The following table provides the current capital position as of September 30, 2013 in both dollars and percentages, compared to the minimum amounts required per regulatory standards for "well-capitalized" institutions.
| Minimum Dollar Requirements | Regulatory | Tower | |
| ($000's omitted) | Minimum (Well-Capitalized) | 9/30/13 | Excess |
| Tier 1 Capital / Risk Assets | $31,799 | $78,244 | $46,445 |
| Total Risk Based Capital / Risk Assets | $52,999 | $84,871 | $31,872 |
| Tier 1 Capital / Average Assets (Leverage) | $34,335 | $78,244 | $43,909 |
| Minimum Percentage Requirements | Regulatory | Tower | |
| Minimum (Well-Capitalized) | 9/30/13 | ||
| Tier 1 Capital / Risk Assets | 6% or more | 14.76% | |
| Total Risk Based Capital / Risk Assets | 10% or more | 16.01% | |
| Tier 1 Capital / Quarterly Average Assets | 5% or more | 11.39% |
Asset Quality
Our nonperforming assets were $9.9 million, or 1.41 percent of total assets compared to $13.3 million at June 30, 2013 and $18.8 million at December 31, 2012. Our net charge-offs were $134,000, or 0.1 percent of average loans outstanding, for the third quarter of 2013 compared to $172,000, or 0.2 percent of average outstanding loans, for the second quarter of 2013 and $1.1 million, or 0.95 percent of average outstanding loans, for the third quarter of 2012. During the third quarter of 2013, our loan loss provision resulted in a benefit of $850,000 compared to an expense in the amount of $300,000 for the second quarter of 2013 and an expense in the amount of $618,000 for the third quarter of 2012.
"We continue to make significant improvements in our asset quality metrics. While this quarter represents some of the best metrics we have experienced in many years, our team believes we can continue to make further improvements in this area, which are and will be reflected in our earnings performance," stated Mr. Cahill.
The current and historical breakdown of our non-performing assets is as follows:
| ($000's omitted) | 9/30/13 | 6/30/13 | 3/31/13 | 12/31/12 | 9/30/12 |
| Non-Accrual loans | |||||
| Commercial | $ 4,269 | $ 5,792 | $ 7,758 | $ 8,897 | $ 7,112 |
| Acquisition & Development | 1,123 | 2,064 | 3,912 | 2,789 | 2,175 |
| Commercial Real Estate | 734 | 738 | 749 | 753 | 764 |
| Residential Real Estate | 444 | 2,190 | 2,124 | 2,447 | 2,032 |
| Home Equity | 192 | 194 | 82 | 82 | -- |
| Total Non-accrual loans | 6,762 | 10,978 | 14,625 | 14,968 | 12,083 |
| Trouble-debt restructured (TDR) * | -- | -- | 446 | 1,645 | 1,557 |
| OREO & Other impaired assets | 2,402 | 1,759 | 1,922 | 2,038 | 2,375 |
| Delinquencies greater than 90 days | 743 | 559 | 133 | 110 | 913 |
| Impaired Securities | -- | -- | -- | -- | 317 |
| Total Non-Performing Assets | $ 9,907 | $ 13,296 | $ 17,126 | $ 18,761 | $ 17,245 |
| Allowance for Loan Losses (ALLL) | $ 6,808 | $ 7,792 | $ 7,664 | $ 8,289 | $ 8,539 |
| ALLL / Non-accrual loans | 100.7% | 71.0% | 52.4% | 55.4% | 70.7% |
| * Non-performing TDR's |
The $3.4 million decrease in nonperforming assets during the third quarter of 2013 was primarily the result of pay-offs and principal payments totaling $1.6 million, the sale of an acquisition and development loan in the amount of $800,000, the sale of various other real estate owned ("OREO") properties totaling $1.3 million, and charge-offs on nonaccrual loans of $137,000. These decreases were offset by the addition of one commercial loan in the amount of $444,000 to nonaccrual status, which had previously been categorized as a classified asset at June 30, 2013. OREO activity for the quarter included the addition of three properties totaling $2.0 million from the nonaccrual loan category. Prior to the end of the quarter, one of the properties was sold in the amount of $576,000, which resulted in a gain on the sale. Furthermore, there were three other property sales from OREO totaling $766,000 during the quarter. All four properties sold from OREO during the quarter resulted in gains totaling $325,000.
When a loan has deteriorated to the point that it is classified as impaired and/or placed on nonaccrual status, a specific reserve or charge-off is recommended utilizing one of three impairment measurement methods (present value of expected cash flows, fair value of the collateral or observable market price). A charge-off will be taken in the place of a specific reserve at the point when facts and recent events support a reliable estimate of the extent and probability of loss. As a result of recent pay-offs on a couple of larger credits without additional charge-offs, our ALLL to nonaccrual ratio has increased to 100.7 percent. The remaining nonaccrual loan balance of $6.8 million at September 30, 2013 has already experienced approximately $1.5 million of charge-offs.
The following table represents the change in principal loan balances within the non-performing asset categories during the third quarter of 2013:
| Balance | Resolutions/ | Balance | |||
| ($ in thousands) | 6/30/13 | Additions | Paydowns | Other | 9/30/13 |
| Non-accrual Loans | |||||
| Commercial | $ 5,792 | $ 444 | $ (1,009) | $ (958) | $ 4,269 |
| Acquisition & Development | 2,064 | -- | (941) | -- | 1,123 |
| Commercial Real Estate | 738 | -- | (4) | -- | 734 |
| Residential Real Estate | 2,190 | 38 | (747) | (1,037) | 444 |
| Home Equity | 194 | -- | (2) | -- | 192 |
| Total Non-accrual loans | 10,978 | 482 | (2,703) | (1,995) | 6,762 |
| Troubled Debt Restructured | -- | -- | -- | -- | -- |
| OREO & Other impaired assets | 1,759 | 1,985 | (1,342) | -- | 2,402 |
| Delinquencies Greater than 90 days | 559 | 592 | (370) | (38) | 743 |
| Total Non-Performing Assets | $ 13,296 | $ 3,059 | $ (4,415) | $ (2,033) | $ 9,907 |
The following table represents the change in total relationships within the non-performing asset categories during the third quarter of 2013:
| 6/30/13 | Additions | Subtractions | 9/30/13 | |
| Non-accrual Loans | ||||
| Commercial | 11 | 1 | (4) | 8 |
| Acquisition & Development | 4 | -- | (1) | 3 |
| Commercial Real Estate | 3 | -- | -- | 3 |
| Residential Real Estate | 7 | 1 | (4) | 4 |
| Home Equity | 3 | -- | -- | 3 |
| Total Non-accrual loans | 28 | 2 | (9) | 21 |
| Troubled Debt Restructured | -- | -- | -- | -- |
| OREO & Other impaired assets | 12 | 3 | (4) | 11 |
| Delinquencies Greater than 90 days | 5 | 7 | (3) | 9 |
| Impaired Securities | -- | -- | -- | -- |
| Total Non-Performing Assets | 45 | 12 | (16) | 41 |
Our classified assets, defined as substandard, non-accrual loans, impaired investments, and OREO, decreased by $2.0 million during the third quarter to $26.6 million at September 30, 2013 compared to $28.6 million at June 30, 2013 and $35.9 million at December 31, 2012. Our classified assets were 32.2 percent of tier 1 capital plus ALLL (classified assets ratio) as of September 30, 2013 compared to 34.6 percent at June 30, 2013. In addition to the decreases on nonperforming assets noted above, we received payments and/or pay-offs on substandard loans totaling $479,000 and we sold one substandard loan in the amount of $1.5 million at a 3% discount. Offsetting these decreases was the addition of one commercial loan relationship to our substandard risk category in the amount $3.9 million. This loan has been rated substandard in the past and was downgraded this quarter based on its recent financial performance.
Our total "watch list" loans were $30.0 million compared to $43.7 million at June 30, 2013 and $39.4 million at December 31, 2012. The $13.7 million decrease from the second quarter of 2013 to the third quarter of 2013 is primarily due to reasons noted above and the resolution of loan exceptions on a $4.2 million watch rated commercial loan warranting an upgrade to a pass rating. Watch list loans now comprise 6.65 percent of the total loan portfolio. The watch list comprises all non "pass" rated credits. The following table presents the watch list by risk category:
| 9/30/2013 | 6/30/2013 | 3/31/2013 | 12/31/2012 | 9/30/2012 | |
| Watch | $ 1,695 | $ 7,294 | $ 1,871 | $ 1,232 | $ 1,001 |
| Special mention | 4,848 | 10,690 | 4,641 | 5,493 | 6,706 |
| Total non-classified loans | 6,543 | 17,984 | 6,512 | 6,725 | 7,707 |
| Substandard | 17,304 | 15,119 | 13,645 | 18,293 | 21,651 |
| Doubtful/Loss* | 6,200 | 10,599 | 14,418 | 14,393 | 12,177 |
| Total classified loans | 23,504 | 25,718 | 28,063 | 32,686 | 33,828 |
| Total watch list loans | $ 30,047 | $ 43,702 | $ 34,575 | $ 39,411 | $ 41,535 |
| Watchlist loan/total loans | 6.65% | 9.96% | 7.86% | 8.75% | 9.07% |
| Total classified assets | $ 26,625 | $ 28,641 | $ 30,931 | $ 35,894 | $ 37,145 |
| *All loans in this risk rating are non-accrual. | |||||
The allowance for loan losses was $6.8 million at September 30, 2013 compared to $7.8 million at June 30, 2013 and $8.3 million at December 31, 2012. Impacting the allowance during the quarter were net charge-offs of $134,000 and a loan loss benefit of $850,000. The allowance for loan losses was 1.51 percent of total loans at September 30, 2013. This was a decrease from 1.78 percent at June 30, 2013 and from 1.84 percent at December 31, 2012. The allowance for loan losses was 100.7 percent of non-accrual loans as of September 30, 2013 compared to 71.0 percent at June 30, 2013.
Subsequent to quarter end, we received a pay-off on a substandard loan with a principal balance of $3.6 million at September 30, 2013. This transaction closed on October 11, 2013. We continue to carry an unsecured note to the borrower in the amount of $300,000.
Balance Sheet
Our assets were $701.9 million at September 30, 2013, an increase of $17.9 million, or 2.6 percent, from December 31, 2012. The increase is the result of an $11.2 million increase in long-term investments, an additional investment of $2.0 million in low-income housing tax credits, and the purchase of additional bank owned life insurance policies for $2.8 million.
Our total loans were $451.5 million at September 30, 2013. This was a $1.0 million increase from $450.5 million at December 31, 2012 and a $12.9 million increase from $438.6 million at June 30, 2013. Throughout 2013, we have experienced an increase in loan prepayments as a result of heightened mortgage refinancing due to low loan rates and our clients having excess cash to pay down their lines of credit as a result of a lack of investment alternatives. The increase in prepayments caused our total loans to decrease approximately $12.0 million from December 2012 to June 2013. During the third quarter of 2013, we were able to change that trend by increasing our loans by $12.9 million from June 30, 2013. The increase was due to a combination of new local commercial loan originations and loan participations requested by other smaller financial institutions, which are subject to our underwriting standards prior to the purchase. Offsetting the increase was the resolution of several nonperforming loans in the form of payment, sale, or the transfer to OREO, as described above. The $1.0 million increase in total loans from December 31, 2012 was the result of increases in commercial loans of $8.8 million and commercial real estate loans of $5.5 million offset by decreases in residential real estate loans, home equity loans, and consumer loans of $7.3 million, $4.7 million, and $1.0 million, respectively.
Our investment securities at September 30, 2013 were $185.6 million, an increase of $11.2 million from December 31, 2012. Investment securities comprise 26.4 percent of total assets. We have been strategically increasing the size of our investment portfolio to help preserve our net interest income as prudently as possible. The increase in the portfolio will help maintain net interest income, but has resulted in the further compression of our net interest margin and an increase in our overall assets. Due to the pending merger transaction with Old National Bank, we will not grow our investment portfolio for the remainder of 2013. Any purchases we make will be short-term in duration and will be made only in the event we have excess liquidity. The portfolio will most likely decline during the fourth quarter.
Our total deposits increased $29.2 million, or 5.2 percent, to $590.2 million at September 30, 2013 compared to $561.0 million at December 31, 2012. Health Savings Accounts ("HSAs") continue to be the primary driver of deposit growth with an increase of $15.3 million from December 31, 2012. As expected in January of 2013, we received annual employer-funded contributions to HSAs, which is the primary reason for the increase in this deposit category annually. Brokered certificates of deposit, money market and savings accounts also increased by $9.5 million, $6.8 million, and $4.6 million, respectively; while interest bearing checking accounts decreased $8.8 million.
The increase in brokered deposits was strategic in order to fund the remaining portion of the $25.0 million municipal bond leverage strategy. As described in our 2012 Annual Report filed on Form 10-K, this strategy was implemented in the fourth quarter of 2012 to help supplement net interest income. This strategy will provide approximately $250,000 annually to our net interest income, but has caused a decrease in our net interest margin.
Our borrowings were $44.3 million at September 30, 2013 and were comprised of $17.5 million in trust preferred debt and $26.8 million in borrowings from the Federal Home Loan Bank of Indianapolis ("FHLBI"). This represents a decrease of $10.6 million from our borrowings at the FHLBI at December 31, 2012, as we utilized excess cash from deposit growth to reduce our borrowings. Of the borrowings at September 30, 2013, $21.3 million were short-term in duration with variable rates. Due to the pending merger transaction with Old National Bank, any liquidity needs we have during the fourth quarter will be handled through sales from the investment portfolio and short-term borrowings on our FHLBI line of credit.
Our shareholders' equity was $62.0 million at September 30, 2013, a decrease of 2.6 percent from the $63.7 million reported at December 31, 2012. The primary reason for the decrease was a decrease in the unrealized gains, net of tax, on our investment portfolio in the amount of $4.5 million from December 31, 2012. This decrease relates primarily to market value fluctuations in our fixed rate municipal bond investments as a result of an increase in long-term interest rates. Additionally, we paid three quarterly dividends totaling $0.22 per common share, or $1.0 million, one special dividend of $0.25 per common share, or $1.2 million, and used $862,000 of capital to repurchase 70,000 shares of our common stock at average price of $12.32 per share during the first quarter of 2013. Offsetting the decreases in shareholders' equity was net income of $5.7 million. Currently, we have 4,672,521 common shares outstanding. Tangible book value at September 30, 2013 was $13.27 per common share, a decrease of 1.4 percent from the $13.46 reported at December 31, 2012.
Income Statement
Our total revenue, consisting of net interest income and noninterest income, was $7.3 million for the third quarter of 2013 compared to $7.5 million for the second quarter of 2013 and $7.8 million for the third quarter of 2012. The $192,000 decrease from the prior quarter consisted of a decreases in both net interest income and noninterest income of $57,000 and $135,000, respectively.
Net interest income decreased $57,000 from the second quarter of 2013 due to a decrease of 6 basis points in our net interest margin to 3.46 percent, coupled with a slight decrease of $607,000 in average earning assets from the second quarter of 2013. While our margin did decrease slightly, it has stabilized over the past few quarters at around 3.50 percent, following several quarters of compression due to the low interest rate environment and our municipal bond leverage strategy. While we don't expect much change in our net interest margin over the next couple of quarters, we do expect an increase in our average earning assets; and therefore, an increase in our net interest income, in the fourth quarter as a result of a $12.9 million increase in loans, with the majority of the loans funding toward the end of the third quarter of 2013.
Noninterest income was $2.2 million for the third quarter of both 2013 and 2012, compared to $2.3 million for the second quarter of 2013. The primary reason for the $135,000 decrease from the second quarter of 2013 was the combination of decreases in mortgage banking income, gain on the sale of securities, and net debit card interchange income of $63,000, $33,000, and $22,000 respectively. We also experienced a decrease of $94,000 in other fees in the third quarter of 2013 compared to the second quarter of 2013, which was led by a decrease in letter of credit income of $37,000 and the stabilization of the fair value of an equity investment causing a decrease in income from the second quarter by $22,000. These decreases were offset by an increase in trust and brokerage fees during the third quarter compared to the second quarter of 2013 by $45,000, which was the result of an $8.2 million increase in assets under management from June 30, 2013 and a $47.1 million increase from December 31, 2012. Trust and brokerage assets under management were $719.4 million at September 30, 2013.
Noninterest expenses were $5.3 million for the third quarter of 2013 compared to $5.1 million for the second quarter of 2013 and $5.0 million for the third quarter of 2012. The $227,000 increase from the second quarter of 2013 was a direct result of $279,000 of professional fees related to the pending transaction with Old National Bank. In addition, salaries and benefits increased $246,000 from the second quarter of 2013. This increase was primarily due to an increase of $128,000 in the accrual for our profit sharing plan due to continued improvement in our financial results. The Other Expense category also increased $108,000 from the second quarter of 2013. The second quarter Other Expense category was unusually low due to receiving a partial recovery from a fraud loss recorded in the first quarter of 2013 in the amount of $176,000. The positive variance in OREO expense of $302,000 from the second quarter of 2013 to the third quarter of 2013 was a result of the sale of four OREO properties at gains totaling $325,000 offset by expenses of $61,000. For the quarter, our OREO expense category was income of $264,000 compared to expense of $38,000 for the second quarter of 2013. All other expenses were within $50,000 of those recorded in the second quarter of 2013.
Income tax expense was $774,000 in the third quarter of 2013 compared to $529,000 in the second quarter of 2013 and $617,000 in the third quarter of 2012. Our effective tax rate increased from 24.9 percent in the second quarter of 2013 to 27.1 percent in the third quarter. The increase in our effective tax rate is the result of a decrease in our tax exempt income in comparison to our taxable income from the second quarter of 2013.
ABOUT THE COMPANY
Headquartered in Fort Wayne, Indiana, Tower Financial Corporation is a financial services holding company with one subsidiary; Tower Bank & Trust Company (Tower Bank), a community bank headquartered in Fort Wayne. 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 Bank has a wholly-owned subsidiary, Tower Trust Company, which is a state-chartered wealth services firm doing business as Tower Private Advisors. Tower Bank also markets under the HSA Authority brand, which provides Health Savings Accounts to clients in 50 states. 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, by their nature, are predictive and are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about our company.
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, speak only as of this date, and involve risks and uncertainties related to our banking business or to general business and economic conditions that may affect our business, which may cause actual results to turn out differently. More detailed information about such risks and uncertainties may be found in our most recent Annual Report on Form 10-K, or, if applicable, in subsequently filed Forms 10-Q quarterly reports, under the captions "Forward-Looking Statements" and "Risk Factors," which 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 September 30, 2013 and December 31, 2012 | ||
| (unaudited) | ||
| September 30 | December 31 | |
| 2013 | 2012 | |
| ASSETS | ||
| Cash and due from banks | $ 13,325,821 | $ 11,958,507 |
| Short-term investments and interest-earning deposits | 243,521 | 159,866 |
| Federal funds sold | 2,638,726 | 2,727,928 |
| Total cash and cash equivalents | 16,208,068 | 14,846,301 |
| Interest bearing deposits | 453,713 | 457,000 |
| Trading Securities, at fair value | 230,300 | -- |
| Securities available for sale, at fair value | 185,393,296 | 174,383,499 |
| FHLBI and FRB stock | 3,807,700 | 3,807,700 |
| Loans Held for Sale | 2,886,621 | 4,933,299 |
| Loans | 451,515,862 | 450,465,610 |
| Allowance for loan losses | (6,808,338) | (8,288,644) |
| Net loans | 444,707,524 | 442,176,966 |
| Premises and equipment, net | 8,669,365 | 8,904,214 |
| Accrued interest receivable | 2,654,861 | 2,564,503 |
| Bank owned life insurance (BOLI) | 20,896,663 | 17,672,783 |
| Other real estate owned (OREO) | 2,351,694 | 1,908,010 |
| Prepaid FDIC insurance | -- | 925,337 |
| Other assets | 13,615,607 | 11,393,469 |
| Total assets | $ 701,875,412 | $ 683,973,081 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| LIABILITIES | ||
| Deposits: | ||
| Noninterest-bearing | $ 110,828,555 | $ 108,147,229 |
| Interest-bearing | 479,406,946 | 452,860,109 |
| Total deposits | 590,235,501 | 561,007,338 |
| Short-term borrowings | 10,303,828 | 9,093,652 |
| Federal Home Loan Bank advances | 16,500,000 | 28,300,000 |
| Junior subordinated debt | 17,527,000 | 17,527,000 |
| Accrued interest payable | 106,669 | 107,943 |
| Other liabilities | 5,211,474 | 4,191,237 |
| Total liabilities | 639,884,472 | 620,227,170 |
| STOCKHOLDERS' EQUITY | ||
| Common stock and paid-in-capital, no par value, 6,000,000 shares authorized; 4,949,371 and 4,941,994 shares issued at September 30, 2013 and December 31, 2012; and 4,672,521 and 4,735,144 shares outstanding at September 30, 2013 and December 31, 2012, respectively | 44,908,295 | 44,834,605 |
| Retained earnings | 21,367,593 | 17,880,539 |
| Accumulated other comprehensive income (loss), net of tax of ($413,790) at September 30, 2013 and $1,880,433 at December 31, 2012 | (803,240) | 3,650,253 |
| Treasury stock, at cost, 276,850 and 206,850 shares at September 30, 2013 and December 31, 2012, respectively | (3,481,708) | (2,619,486) |
| Total stockholders' equity | 61,990,940 | 63,745,911 |
| Total liabilities and stockholders' equity | $ 701,875,412 | $ 683,973,081 |
| Tower Financial Corporation | ||||
| Consolidated Statements of Operations | ||||
| For the three and nine months ended September 30, 2013 and 2012 | ||||
| (unaudited) | (unaudited) | |||
| For the Three Months Ended | For the Nine Months ended | |||
| September 30 | September 30 | |||
| 2013 | 2012 | 2013 | 2012 | |
| Interest income: | ||||
| Loans, including fees | $ 4,777,786 | $ 5,525,196 | $ 14,561,821 | $ 16,764,224 |
| Securities - taxable | 311,638 | 441,669 | 859,883 | 1,466,914 |
| Securities - tax exempt | 730,943 | 486,401 | 2,128,056 | 1,465,887 |
| Other interest income | 4,867 | 6,696 | 12,038 | 36,533 |
| Total interest income | 5,825,234 | 6,459,962 | 17,561,798 | 19,733,558 |
| Interest expense: | ||||
| Deposits | 575,796 | 714,875 | 1,794,187 | 2,516,593 |
| Fed Funds Purchased | 2 | 158 | 3 | 256 |
| FHLB advances | 21,468 | 40,469 | 88,529 | 117,234 |
| Trust preferred securities | 80,504 | 89,854 | 241,275 | 366,799 |
| Total interest expense | 677,770 | 845,356 | 2,123,994 | 3,000,883 |
| Net interest income | 5,147,464 | 5,614,606 | 15,437,804 | 16,732,674 |
| Provision for loan losses | (850,000) | 618,000 | (825,000) | 2,293,000 |
| Net interest income after provision for loan losses | 5,997,464 | 4,996,606 | 16,262,804 | 14,439,674 |
| Noninterest income: | ||||
| Trust and brokerage fees | 1,106,810 | 998,715 | 3,226,726 | 2,866,570 |
| Service charges | 282,985 | 257,509 | 835,893 | 828,370 |
| Mortgage banking income | 249,807 | 477,319 | 892,208 | 1,082,140 |
| Gain/(Loss) on sale of securities | -- | 9,110 | 441,396 | 75,809 |
| Net debit card interchange income | 189,462 | 162,432 | 635,298 | 563,933 |
| Bank owned life insurance income | 172,387 | 150,082 | 473,880 | 441,572 |
| Impairment on AFS securities | -- | -- | -- | -- |
| Other fees | 174,429 | 147,104 | 678,513 | 485,184 |
| Total noninterest income | 2,175,880 | 2,202,271 | 7,183,914 | 6,343,578 |
| Noninterest expense: | ||||
| Salaries and benefits | 3,161,101 | 2,867,136 | 9,000,527 | 8,514,808 |
| Occupancy and equipment | 618,172 | 640,569 | 1,876,445 | 1,891,978 |
| Marketing | 112,976 | 111,882 | 395,310 | 307,187 |
| Data processing | 423,927 | 301,914 | 1,247,606 | 991,534 |
| Loan and professional costs | 602,700 | 342,182 | 1,308,918 | 1,018,604 |
| Office supplies and postage | 33,684 | 51,360 | 128,276 | 160,365 |
| Courier service | 51,301 | 58,341 | 163,533 | 175,674 |
| Business Development | 152,166 | 90,535 | 396,667 | 331,147 |
| Communication Expense | 42,060 | 62,489 | 136,773 | 168,235 |
| FDIC Insurance Premiums | 115,561 | 138,754 | 385,010 | 521,709 |
| OREO Expenses | (263,841) | 15,123 | (243,431) | 449,022 |
| Other expense | 265,213 | 338,926 | 834,374 | 763,069 |
| Total noninterest expense | 5,315,020 | 5,019,211 | 15,630,008 | 15,293,332 |
| Income/(loss) before income taxes/(benefit) | 2,858,324 | 2,179,666 | 7,816,710 | 5,489,920 |
| Income taxes expense/(benefit) | 774,232 | 617,028 | 2,133,618 | 1,474,570 |
| Net income/(loss) | $ 2,084,092 | $ 1,562,638 | $ 5,683,092 | $ 4,015,350 |
| Less: Preferred Stock Dividends | -- | -- | -- | -- |
| Net income/(loss) available to common shareholders | $ 2,084,092 | $ 1,562,638 | $ 5,683,092 | $ 4,015,350 |
| Basic earnings/(loss) per common share | $ 0.45 | $ 0.32 | $ 1.21 | $ 0.83 |
| Diluted earnings/(loss) per common share | $ 0.45 | $ 0.32 | $ 1.21 | $ 0.83 |
| Average common shares outstanding | 4,672,496 | 4,874,660 | 4,678,824 | 4,860,363 |
| Average common shares and dilutive potential common shares outstanding | 4,672,673 | 4,874,660 | 4,680,035 | 4,860,363 |
| Total Shares outstanding at end of period | 4,672,521 | 4,876,994 | 4,672,521 | 4,876,994 |
| Dividends declared per common share | $ 0.330 | $ 0.055 | $ 0.470 | $ 0.055 |
| Tower Financial Corporation | ||||||||||||||||||
| Consolidated Financial Highlights | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| Quarterly | Year-To-Date | |||||||||||||||||
| 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | ||||||||||
| ($ in thousands except for share data) | 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | 2012 | 2011 | 2011 | 2013 | 2012 | |||||||
| EARNINGS | ||||||||||||||||||
| Net interest income | $ | 5,147 | 5,205 | 5,086 | 5,472 | 5,615 | 5,706 | 5,412 | 5,707 | 5,684 | 15,438 | 16,733 | ||||||
| Provision for loan loss | $ | (850) | 300 | (275) | 200 | 618 | 925 | 750 | 975 | 900 | (825) | 2,293 | ||||||
| NonInterest income | $ | 2,176 | 2,311 | 2,697 | 2,170 | 2,202 | 2,126 | 2,016 | 2,059 | 2,372 | 7,184 | 6,344 | ||||||
| NonInterest expense | $ | 5,315 | 5,088 | 5,227 | 5,575 | 5,019 | 5,025 | 5,249 | 5,826 | 5,408 | 15,630 | 15,293 | ||||||
| Net income/(loss) | $ | 2,084 | 1,599 | 2,000 | 1,729 | 1,563 | 1,365 | 1,088 | 3,422 | 1,325 | 5,683 | 4,016 | ||||||
| Basic earnings per share | $ | 0.45 | 0.34 | 0.43 | 0.36 | 0.32 | 0.28 | 0.22 | 0.71 | 0.27 | 1.21 | 0.82 | ||||||
| Diluted earnings per share | $ | 0.45 | 0.34 | 0.43 | 0.36 | 0.32 | 0.28 | 0.22 | 0.71 | 0.27 | 1.21 | 0.82 | ||||||
| Average shares outstanding | 4,672,496 | 4,667,807 | 4,696,432 | 4,855,557 | 4,874,660 | 4,853,136 | 4,853,136 | 4,853,645 | 4,852,761 | 4,678,824 | 4,860,363 | |||||||
| Average diluted shares outstanding | 4,672,673 | 4,668,104 | 4,696,432 | 4,855,557 | 4,874,660 | 4,853,136 | 4,853,136 | 4,853,645 | 4,852,761 | 4,680,035 | 4,860,363 | |||||||
| PERFORMANCE RATIOS | ||||||||||||||||||
| Return on average assets * | 1.20% | 0.94% | 1.19% | 1.01% | 0.96% | 0.84% | 0.65% | 2.02% | 0.80% | 1.11% | 0.81% | |||||||
| Return on average common equity * | 13.64% | 10.04% | 12.75% | 10.24% | 9.43% | 8.53% | 6.92% | 23.22% | 9.24% | 12.12% | 8.31% | |||||||
| Net interest margin (fully-tax equivalent) * | 3.46% | 3.52% | 3.49% | 3.65% | 3.87% | 3.98% | 3.76% | 3.90% | 3.80% | 3.55% | 3.87% | |||||||
| Efficiency ratio | 72.58% | 67.70% | 67.16% | 72.95% | 64.21% | 64.16% | 70.67% | 75.02% | 67.13% | 69.09% | 66.27% | |||||||
| Full-time equivalent employees | 165.25 | 166.25 | 155.00 | 155.25 | 154.50 | 157.00 | 158.00 | 151.00 | 158.50 | 165.25 | 154.50 | |||||||
| CAPITAL | ||||||||||||||||||
| Equity to assets | 8.83% | 9.03% | 9.35% | 9.32% | 10.34% | 9.97% | 9.76% | 8.86% | 8.80% | 8.83% | 10.34% | |||||||
| Regulatory leverage ratio | 11.39% | 11.47% | 11.25% | 11.18% | 12.00% | 11.71% | 11.13% | 10.97% | 11.09% | 11.39% | 12.00% | |||||||
| Tier 1 capital ratio | 14.76% | 15.14% | 15.04% | 14.65% | 15.20% | 14.87% | 14.74% | 13.91% | 14.02% | 14.76% | 15.20% | |||||||
| Total risk-based capital ratio | 16.01% | 16.39% | 16.29% | 15.90% | 16.46% | 16.13% | 15.99% | 15.16% | 15.28% | 16.01% | 16.46% | |||||||
| Book value per share | $ | 13.27 | 13.16 | 13.60 | 13.46 | 13.77 | 13.38 | 13.06 | 12.79 | 11.97 | 13.27 | 13.77 | ||||||
| Cash dividend per share | $ | 0.330 | 0.070 | 0.070 | 0.555 | 0.055 | 0.000 | 0.000 | 0.000 | 0.000 | 0.470 | 0.055 | ||||||
| ASSET QUALITY | ||||||||||||||||||
| Net charge-offs | $ | 134 | 172 | 350 | 451 | 1,111 | 1,001 | 1,050 | 1,632 | 2,852 | 656 | 3,162 | ||||||
| Net charge-offs to average loans * | 0.12% | 0.16% | 0.32% | 0.39% | 0.95% | 0.86% | 0.91% | 1.38% | 2.34% | 0.20% | 0.91% | |||||||
| Allowance for loan losses | $ | 6,808 | 7,792 | 7,664 | 8,289 | 8,539 | 9,032 | 9,108 | 9,408 | 10,065 | 6,808 | 8,539 | ||||||
| Allowance for loan losses to total loans | 1.51% | 1.78% | 1.74% | 1.84% | 1.86% | 1.95% | 1.99% | 2.03% | 2.14% | 1.51% | 1.86% | |||||||
| Other real estate owned (OREO) | $ | 2,352 | 1,709 | 1,833 | 1,908 | 2,245 | 2,562 | 2,878 | 3,129 | 3,827 | 2,352 | 2,245 | ||||||
| Non-accrual Loans | $ | 6,762 | 10,978 | 14,625 | 14,968 | 12,083 | 13,275 | 14,375 | 8,682 | 9,913 | 6,762 | 12,083 | ||||||
| 90+ Day delinquencies | $ | 743 | 559 | 133 | 110 | 913 | 472 | 902 | 2,007 | 1,028 | 743 | 913 | ||||||
| Restructured Loans | $ | 3,437 | 4,531 | 4,254 | 4,683 | 4,242 | 3,692 | 1,802 | 1,805 | 1,810 | 3,437 | 4,242 | ||||||
| Total Nonperforming Loans | 7,505 | 11,537 | 15,204 | 16,723 | 14,553 | 14,107 | 15,277 | 12,494 | 12,751 | 7,505 | 14,553 | |||||||
| Impaired Securities (Market Value) | -- | -- | -- | -- | 317 | 307 | 314 | 331 | 332 | -- | 317 | |||||||
| Other Impaired Assets | 51 | 51 | 88 | 130 | 130 | -- | -- | -- | -- | 51 | 130 | |||||||
| Total Nonperforming Assets | 9,907 | 13,296 | 17,125 | 18,761 | 17,245 | 16,976 | 18,469 | 15,954 | 16,910 | 9,907 | 17,245 | |||||||
| NPLs to Total loans | 1.66% | 2.63% | 3.45% | 3.71% | 3.18% | 3.04% | 3.34% | 2.70% | 2.71% | 1.66% | 3.18% | |||||||
| NPAs (w/o 90+) to Total assets | 1.31% | 1.87% | 2.50% | 2.73% | 2.51% | 2.53% | 2.71% | 1.99% | 2.41% | 1.31% | 2.51% | |||||||
| NPAs+90 to Total assets | 1.41% | 1.95% | 2.52% | 2.74% | 2.66% | 2.61% | 2.84% | 2.28% | 2.56% | 1.41% | 2.66% | |||||||
| END OF PERIOD BALANCES | ||||||||||||||||||
| Total assets | $ | 701,875 | 680,941 | 679,069 | 683,973 | 649,466 | 651,239 | 649,343 | 700,681 | 659,725 | 701,875 | 649,466 | ||||||
| Total earning assets | $ | 647,170 | 631,099 | 632,185 | 636,935 | 607,484 | 601,014 | 601,190 | 606,888 | 602,291 | 647,170 | 607,484 | ||||||
| Total loans | $ | 451,516 | 438,565 | 440,075 | 450,466 | 457,865 | 463,833 | 457,260 | 462,561 | 470,877 | 451,516 | 457,865 | ||||||
| Total deposits | $ | 590,236 | 581,591 | 585,277 | 561,007 | 530,278 | 551,486 | 552,191 | 602,037 | 565,937 | 590,236 | 530,278 | ||||||
| Stockholders' equity | $ | 61,991 | 61,507 | 63,468 | 63,746 | 67,140 | 64,934 | 63,374 | 62,097 | 58,071 | 61,991 | 67,140 | ||||||
| AVERAGE BALANCES | ||||||||||||||||||
| Total assets | $ | 688,776 | 679,649 | 680,645 | 678,885 | 647,999 | 650,713 | 671,686 | 671,384 | 656,408 | 683,023 | 656,799 | ||||||
| Total earning assets | $ | 634,003 | 634,611 | 631,674 | 628,333 | 603,004 | 603,119 | 605,429 | 606,775 | 616,024 | 633,429 | 603,850 | ||||||
| Total loans | $ | 438,312 | 439,076 | 438,959 | 454,925 | 464,046 | 464,802 | 462,661 | 467,932 | 483,442 | 438,782 | 463,836 | ||||||
| Total deposits | $ | 589,039 | 575,801 | 581,480 | 565,105 | 544,142 | 550,441 | 572,134 | 576,898 | 559,615 | 582,107 | 555,572 | ||||||
| Stockholders' equity | $ | 60,602 | 63,867 | 63,640 | 67,168 | 65,927 | 64,180 | 63,021 | 58,468 | 56,914 | 62,703 | 64,376 | ||||||
| * annualized for quarterly data | ||||||||||||||||||