EX-99 3 tofc20130723_8kex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

FOR FURTHER INFORMATION:

 

FOR INVESTORS:

FOR MEDIA:

Richard R. Sawyer

Tina M. Farrington

Chief Financial Officer

Executive Vice President

260-427-7150

260-427-7155

rick.sawyer@towerbank.net 

tina.farrington@towerbank.net 

 

TOWER FINANCIAL CORPORATION REPORTS SECOND QUARTER NET

INCOME OF $1.6 MILLION AND ANNOUNCES A DIVIDEND OF $0.08 PER SHARE

 

FORT WAYNE, INDIANA – JULY 25, 2013 –Tower Financial Corporation (NASDAQ: TOFC) reported net income of $1.6 million or $0.34 per diluted share for the second quarter of 2013, compared with net income of $1.4 million, or $0.28 per diluted share, reported for the second quarter of 2012. Year to date earnings through the first six months of 2013 were $3.6 million, or $0.77 per diluted share, compared to $2.5 million, or $0.51 per diluted share, for the first six months of 2012.

 

Our second quarter highlights include:

 

Our Board of Directors declared a dividend of $0.08 per share, an increase of 14.3 percent from the second quarter payment. The dividend has a record date of August 8, 2013 and a payment date of August 22, 2013.

 

Our “Core” earnings were $2.4 million for the quarter, an increase of 3.5 percent, from the first quarter of 2013. We define core earnings as income before taxes, loan loss provision, and unusual items not related to the day-to-day operations (primarily security sales and other real estate owned (“OREO”) expenses).

 

Our third consecutive quarter of Return on Average Equity “ROE” in excess of 10 percent.

 

Our net interest margin for the second quarter increased 3 basis points from the first quarter of 2013.

 

Our nonperforming assets decreased by $3.8 million during the second quarter, and are now 1.95 percent of total assets.

 

Mike Cahill, President and Chief Executive Officer of Tower Financial Corporation stated, “We continue to be pleased with our progress and our ability to once again increase the dividend to our shareholders. Our efforts to control overhead, expand our fee revenues, and work through our non-performing assets has allowed our bottom line to improve during a period of lower loan demand and low interest rates. This is a tribute to the many fine team members that I am fortunate enough to work with. We continue to add new customers and expand our existing relationship base, which will greatly benefit us as the economy continues to recover.”

 

 

 

 

Capital

During the second quarter of 2013, our tier 1 capital increased by $1.3 million compared to the first quarter of 2013 as a result of net income for the quarter in the amount of $1.6 million offset by the payment of dividends in the amount of $327,000, or $0.07 per common diluted share. This increase in tier 1 capital resulted in an increase in our regulatory capital ratios to 15.1 percent for tier 1 capital and 16.4 percent for total risk based capital at June 30, 2013. 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 15.0 percent at March 31, 2013 and 14.7 percent at December 31, 2012. Total risk-based capital was 16.3 percent at March 31, 2013 and 15.9 percent at December 31, 2012. Our leverage capital was 11.5 percent at June 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 June 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)

6/30/13

Excess

Tier 1 Capital / Risk Assets

$30,788

$77,684

$46,896

       

Total Risk Based Capital / Risk Assets

$51,313

$84,115

$32,802

       

Tier 1 Capital / Average Assets (Leverage)

$33,879

$77,684

$43,805

       

Minimum Percentage Requirements

Regulatory

Tower

 
 

Minimum (Well-Capitalized)

6/30/13

 

Tier 1 Capital / Risk Assets

6% or more

15.14%

 
       

Total Risk Based Capital / Risk Assets

10% or more

16.39%

 
       

Tier 1 Capital / Quarterly Average Assets

5% or more

11.47%

 

 

Dividends

Our Board of Directors declared a dividend of $0.08 per share, an increase of 14.3 percent from the payment made during the second quarter of 2013. The dividend will have a record date of August 8, 2013 and a payment date of August 22, 2013.

 

Asset Quality

Our nonperforming assets were $13.3 million, or 1.95 percent of total assets compared to $17.1 million at March 31, 2013 and $18.8 million at December 31, 2012. Our net charge-offs were $172,000, or 0.2 percent of average loans outstanding, for the second quarter of 2013 compared to $350,000, or 0.3 percent of average outstanding loans, for the first quarter of 2013 and $451,000, or 0.4 percent of average outstanding loans, for the fourth quarter of 2012. Net charge-offs for the second quarter of 2012 were $1.0 million, or 0.9 percent of average loans outstanding. During the second quarter of 2013, our loan loss provision resulted in an expense of $300,000 compared a benefit in the amount of $275,000 for the first quarter of 2013 and an expense of $925,000 for the second quarter of 2012.

 

 
2

 

 

The current and historical breakdown of our non-performing assets is as follows:

($000's omitted)

6/30/13

3/31/13

12/31/12

9/30/12

6/30/12

Non-Accrual loans

         
 

Commercial

$ 5,792

$ 7,758

$ 8,897

$ 7,112

$ 6,988

 

Acquisition & Development

              2,064

              3,912

            2,789

             2,175

              3,176

 

Commercial Real Estate

                 738

                 749

               753

                764

                 948

 

Residential Real Estate

              2,190

              2,124

            2,447

             2,032

              2,163

 

Home Equity

                 194

                   82

                 82

                   -

                    -

Total Non-accrual loans

            10,978

            14,625

          14,968

           12,083

            13,275

Trouble-debt restructured (TDR) *

                    -

                 446

            1,645

             1,557

                 360

OREO & Other impaired assets

              1,759

              1,922

            2,038

             2,375

              2,562

Delinquencies greater than 90 days

                 559

                 133

               110

                913

                 472

Impaired Securities

                    -

                    -

                  -

                317

                 307

             

Total Non-Performing Assets

$ 13,296

$ 17,126

$ 18,761

$ 17,245

$ 16,976

             

Allowance for Loan Losses (ALLL)

$ 7,792

$ 7,664

$ 8,289

$ 8,539

$ 9,032

             

ALLL / Non-accrual loans

71.0%

52.4%

55.4%

70.7%

68.0%

             

* Non-performing TDR's

         

  

The $3.8 million decrease in nonperforming assets during the second quarter of 2013 was primarily due to receiving pay-offs on one commercial loan and one acquisition and development loan totaling $2.5 million. Additionally, we reclassified a commercial TDR loan in the amount of $446,000 from nonperforming to performing status during the second quarter of 2013 as a result of a proven payment history per regulatory guidelines. The remaining decrease was the result of upgrading a commercial real estate loan in the amount of $641,000 and gross charge-offs of $257,000.

 

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 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 71.0 percent. The remaining nonaccrual loan balance of $11.0 million at June 30, 2013 has experienced approximately $4.4 million of charge-offs.

 

 
3

 

 

The following table represents the change in principal loan balances within the non-performing asset categories during the second quarter of 2013:

($ in thousands)

Balance

3/31/13

Additions

Resolutions/

Paydowns

Other

Balance

6/30/13

Non-accrual Loans

         
 

Commercial

$ 7,758

$ 288

$ (2,014)

$ (240)

$ 5,792

 

Acquisition & Development

             3,912

                   -

            (1,838)

                 (10)

             2,064

 

Commercial Real Estate

                749

                   -

                   (4)

                   (7)

                738

 

Residential Real Estate

             2,124

                  75

                   (9)

                   -

             2,190

 

Home Equity

                  82

                113

                   (1)

                   -

                194

Total Non-accrual loans

           14,625

                476

            (3,866)

               (257)

           10,978

Troubled Debt Restructured

                446

                   -

                   -

               (446)

                   -

OREO & Other impaired assets

             1,922

                138

               (263)

                 (38)

             1,759

Delinquencies Greater than 90 days

                133

                501

                 (75)

                   -

                559

             

Total Non-Performing Assets

$ 17,126

$ 1,115

$ (4,204)

$ (741)

$ 13,296

 

The following table represents the change in total relationships within the non-performing asset categories during the second quarter of 2013:  
   

3/31/13

Additions

Subtractions

6/30/13

Non-accrual Loans

       
 

Commercial

                   13

                     1

                   (3)

                   11

 

Acquisition & Development

                     6

                   -

                   (2)

                     4

 

Commercial Real Estate

                     3

                   -

                   -

                     3

 

Residential Real Estate

                     6

                     1

                   -

                     7

 

Home Equity

                     2

                     1

                   -

                     3

Total Non-accrual loans

                   30

                     3

                   (5)

                   28

Troubled Debt Restructured

                     1

                   -

                   (1)

                   -

OREO & Other impaired assets

                   10

                     3

                   (1)

                   12

Delinquencies Greater than 90 days

                     3

                     3

                   (1)

                     5

Impaired Securities

                   -

                   -

                   -

                   -

   

                   -

   

                   -

Total Non-Performing Assets

                   44

                     9

                   (8)

                   45

  

 
4

 

 

Our classified assets, defined as substandard, non-accrual loans, impaired investments, and OREO, decreased by $2.3 million during the second quarter to $28.6 million at June 30, 2013 compared to $30.9 million at March 31, 2013 and $35.9 million at December 31, 2012. Our classified assets were 34.6 percent of tier 1 capital plus ALLL (classified assets ratio) as of June 30, 2013 compared to 38.1 percent at March 31, 2013. The decrease is a direct result of the sale of one nonaccrual commercial loan and a pay-off of one nonaccrual commercial real estate loan totaling $2.5 million during the second quarter of 2013. Our total “watch list” loans were $43.7 million compared to $34.6 million at March 31, 2013 and $39.4 million at December 31, 2012. The $9.1 million increase from the first quarter of 2013 to the second quarter of 2013 is primarily due to the addition of one commercial loan relationship and one commercial real estate loan totaling $8.2 million to the watch list. Watch list loans now comprise 9.96 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: 

 
 

6/30/2013

3/31/2013

12/31/2012

9/30/2012

6/30/2012

Watch

$ 7,294

$ 1,871

$ 1,232

$ 1,001

$ 3,951

Special mention

           10,690

             4,641

             5,493

             6,706

           14,889

Total non-classified loans

           17,984

             6,512

             6,725

             7,707

           18,840

           

Substandard

           15,119

           13,645

           18,293

           21,651

           13,505

Doubtful/Loss*

           10,599

           14,418

           14,393

           12,177

           13,191

Total classified loans

           25,718

           28,063

           32,686

           33,828

           26,696

           

Total watch list loans

$ 43,702

$ 34,575

$ 39,411

$ 41,535

$ 45,536

           

Watchlist loan/total loans

9.96%

7.86%

8.75%

9.07%

9.82%

           

Total classified assets

$ 28,641

$ 30,931

$ 35,894

$ 37,145

$ 30,368


*All loans in this risk rating are non-accrual.

  

The allowance for loan losses was $7.8 million at June 30, 2013 compared to $7.7 million at March 31, 2013 and $8.3 million at December 31, 2012. Impacting the allowance during the quarter were net charge-offs of $172,000 offset by loan loss provision of $300,000. The allowance for loan losses was 1.78 percent of total loans at June 30, 2013. This was an increase from 1.74 percent at March 31, 2013, but a decrease from 1.84 percent at December 31, 2012 and from 1.95 percent at June 30, 2012.

 

Balance Sheet

Our assets were $680.9 million at June 30, 2013, a decrease of $3.1 million, or 0.4 percent, from December 31, 2012. The decrease is the result of an $11.9 million decrease in total loans offset by an increase in investment securities in the amount of $5.5 and the purchase of additional bank owned life insurance policies for $2.8 million.

 

Our total loans at June 30, 2013 were $438.6 million, an $11.9 million decrease from $450.5 million at December 31, 2012. The 2.6% decrease in total loans was primarily due to decreases in our residential real estate loan, home equity loan, and commercial real estate loan categories, which decreased by $5.1 million, $2.6 million, and $2.5 million, respectively. The lending environment continues to be challenging. Of the decrease in loans, the $5.1 million in residential mortgage loans was primarily the result of existing loans being refinanced due to the low interest rate environment. As loans in our portfolio were refinanced, we sold the majority of our new and recently refinanced loans originated in an effort to reduce our exposure to long-term, low rate loans and to improve noninterest income. While we continue to add new loans to our commercial portfolio, it continues to be offset by amortization and paydowns on existing loans as business customers are using excess cash reserves to pay down loan balances. New commercial loan volume during the first six months of 2013 was approximately $58 million.

 

 
5

 

 

Our investment securities at June 30, 2013 were $179.8 million, an increase of $5.5 million from December 31, 2012. Investment securities now 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. Since June 30, 2012, investment securities have increased $57.5 million. 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.

 

Our total deposits increased $20.6 million, or 3.7 percent, to $581.6 million at June 30, 2013 compared to $561.0 million at December 31, 2012. HSAs continue to be the primary driver of deposit growth with an increase of $15.6 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.

 

Also impacting the increase in total deposits was the increase in brokered deposits in the amount of $11.6 million. This deposit category was strategically increased 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 caused a decrease in net interest margin. Additionally, there were increases of $3.0 million and $2.6 million in savings accounts and money markets accounts, respectively, offset by a decrease in noninterest bearing demand accounts in the amount of $2.1 million.

 

Our borrowings were $32.4 million at June 30, 2013 and were comprised of $17.5 million in trust preferred debt and $14.9 million in borrowings from the Federal Home Loan Bank of Indianapolis (“FHLBI”). This represents a decrease of $22.5 million from our borrowings at the FHLBI at December 31, 2012, as we utilized excess cash from loan pay downs and deposit growth to reduce our borrowings.

 

Our shareholders' equity was $61.5 million at June 30, 2013, a decrease of 3.5 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 $4.4 million from December 31, 2012. This decrease relates primarily to market value fluctuations in our fixed rate municipal bond investments as a result of a recent increase in long-term interest rates. Additionally, we paid two quarterly dividends totaling $0.14 per common share, or $655,000, 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 $3.6 million. Currently, we have 4,672,485 common shares outstanding. Tangible book value at June 30, 2013 was $13.16 per common share, a decrease of 2.2 percent from the $13.46 reported at December 31, 2012.

 

 
6

 

 

Income Statement

Our total revenue, consisting of net interest income and noninterest income, was $7.5 million for the second quarter of 2013 compared to $7.8 million for the first quarter of 2013 and for the second quarter of 2012. The $267,000 decrease from the prior quarter consisted of a decrease in noninterest income of $386,000 offset by an increase in net interest income of $119,000.

 

Net interest income increased $119,000 from the first quarter of 2013 due to an increase of 3 basis points in our net interest margin to 3.52 percent coupled with a $2.9 million increase in average earning assets during the second quarter of 2013. Our margin has stabilized over the past two quarters, after several quarters of compression due to the low interest rate environment and our municipal bond leverage strategy. In addition to the increase in net interest margin, average earning assets increased during the second quarter of 2013 primarily due to the $3.6 million increase in average investment securities. In spite of local competition continuing to drive loan rates lower due to a lack of borrowing demand compounded by an abundance of lending institutions in our marketplace, we were able to increase our loan yield by 3 basis points to 4.51 percent, which resulted in an increase in interest income from loans of $81,000. Average loan balances remained fairly close to those of the first quarter of 2013 at $439.1 million. Our cost of funds for the second quarter of 2013 remained the same as the first quarter of 2013 at 0.58 percent and interest expense was only $8,000 more in the second quarter than the first quarter of 2013. Due to the extended low interest rate environment and the margin compression that is impacting the entire industry, we continue to focus on net interest income versus the net interest margin. We expect this trend to continue as we move through 2013.

 

Noninterest income was $2.3 million compared to $2.7 million for the first quarter of 2013 and $2.1 million for the second quarter of 2012. The primary reason for the $386,000 decrease from the first quarter of 2013 was the decrease in gains on the sale of available-for-sale securities, which decreased $375,000. During the first quarter of 2013, we opted to sell securities that had either been recently downgraded or were no longer required to be pledged as collateral. All other noninterest income categories were within $25,000 of the amount reported in the first quarter of 2013. In comparison to the second quarter of 2012, noninterest income for the second quarter of 2013 increased $185,000, of which $139,000 was related to an increase in trust and brokerage fees. The increase in trust and brokerage fees during the second quarter of 2013 compared to the second quarter of 2012 was the result of an increase of $73.4 million in assets under management over the last twelve months.

 

Noninterest expenses were $5.1 million for the second quarter compared to $5.2 million for the first quarter of 2013 and $5.0 million from the second quarter of 2012. The $138,000 decrease in noninterest expenses during the second quarter of 2013 compared to the first quarter of 2013 was a result of decreases in other expense by $254,000 and data processing by $51,000. During the first quarter of 2013, we experienced and recorded a fraud loss of $176,000 related to cashier’s checks, which was partially recovered through insurance proceeds of $133,000 during the second quarter of 2013. Due to the expense and reimbursement in different quarters, there was a $309,000 fluctuation in the other expense category from the first quarter to the second quarter of 2013. Data processing expenses decreased during the second quarter by $51,000 compared to the first quarter of 2013 due to the timing of year-end processing costs. With over 50,000 HSA accounts, our data processing costs are highest in the first quarter when tax forms are prepared and sent to our customers by our core system provider. Offsetting these decreases in noninterest expense were increases in loan and professional costs of $118,000 and marketing expense of $44,000. Loan and professional costs increased during the second quarter primarily due to the timing of fees charged by our accounting firms for both internal audits and the quarterly review of our financial statements. Most of the services our independent auditing firms provide begin and occur during the second quarter each year; therefore, causing an increase in our professional fees during this three-month period in comparison to the first quarter. Marketing expenses also increased during the second quarter compared to the first quarter of 2013 due to timing of our campaigns. All other expenses remained relatively flat from the prior quarter.

 

 
7

 

 

Income tax expense was $529,000 in the second quarter of 2013 compared to $831,000 in the first quarter of 2013 and $517,000 in the second quarter of 2012. Our effective tax rate decreased from 29.3 percent in the first quarter of 2013 to 24.9 percent in the second quarter. The decrease in our effective tax rate is the result of an increase in our tax exempt income in comparison to our taxable income from the first quarter of 2013 and the application of tax credits from the addition of an investment in a Section 42 Housing project during 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.

  

 
 8

 

 

Tower Financial Corporation

Consolidated Balance Sheets

At June 30, 2013 and December 31, 2012


   

(unaudited)

June 30

2013

December 31

2012

ASSETS

                 

Cash and due from banks

  $ 9,508,566   $ 11,958,507

Short-term investments and interest-earning deposits

    48,184     159,866

Federal funds sold

    2,949,757     2,727,928
Total cash and cash equivalents     12,506,507     14,846,301
                   

Interest bearing deposits

    603,684     457,000

Trading Securities, at fair value

    213,353     -

Securities available for sale, at fair value

    179,635,351     174,383,499

FHLBI and FRB stock

    3,807,700     3,807,700

Loans Held for Sale

    5,275,457     4,933,299
                   

Loans

    438,565,317     450,465,610

Allowance for loan losses

    (7,792,325 )     (8,288,644 )
Net loans     430,772,992     442,176,966
                   

Premises and equipment, net

    8,721,230     8,904,214

Accrued interest receivable

    2,657,862     2,564,503

Bank owned life insurance (BOLI)

    20,724,276     17,672,783

Other real estate owned (OREO)

    1,708,710     1,908,010

Prepaid FDIC insurance

    -     925,337

Other assets

    14,313,389     11,393,469
                   
Total assets   $ 680,940,511   $ 683,973,081
                   

LIABILITIES AND STOCKHOLDERS' EQUITY

               

LIABILITIES

                 

Deposits:

                 

Noninterest-bearing

  $ 106,089,363   $ 108,147,229

Interest-bearing

    475,501,982     452,860,109
Total deposits     581,591,345     561,007,338
                   

Short-term borrowings

    395,620     9,093,652

Federal Home Loan Bank advances

    14,500,000     28,300,000

Junior subordinated debt

    17,527,000     17,527,000

Accrued interest payable

    104,143     107,943

Other liabilities

    5,315,406     4,191,237
Total liabilities     619,433,514     620,227,170
                   

STOCKHOLDERS' EQUITY

               

Common stock and paid-in-capital, no par value, 6,000,000 shares authorized;4,949,335 and 4,941,994 shares issued at June 30, 2013 and December 31, 2012; and 4,672,485 and 4,735,144 shares outstanding at June 30, 2013 and December 31, 2012, respectively

    44,890,315     44,834,605

Retained earnings

    20,824,956     17,880,539

Accumulated other comprehensive income (loss), net of tax of ($374,292) at June 30, 2013 and $1,880,433 at December 31, 2012

    (726,566 )     3,650,253
                   

Treasury stock, at cost, 276,850 and 206,850 shares at June 30, 2013 and December 31, 2012, respectively

    (3,481,708 )     (2,619,486 )
Total stockholders' equity     61,506,997     63,745,911
                   
Total liabilities and stockholders' equity   $ 680,940,511   $ 683,973,081

 

 

 

 

Tower Financial Corporation

Consolidated Statements of Operations

For the three and six months ended June 30, 2013 and 2012


 

(unaudited)

For the Three Months Ended

June 30

(unaudited)

For the Six Months ended

June 30

 

2013

2012

2013

2012

Interest income:

                               
Loans, including fees   $ 4,932,692   $ 5,596,283   $ 9,784,034   $ 11,239,028
Securities - taxable     291,493     525,259     548,246     1,025,245
Securities - tax exempt     704,755     493,811     1,397,113     979,486

Other interest income

    2,853     7,289     7,171     29,837

Total interest income

    5,931,793     6,622,642     11,736,564     13,273,596

Interest expense:

                               

Deposits

    616,358     787,900     1,218,391     1,801,718

Fed Funds Purchased

    -     91     1     98

FHLB advances

    29,106     29,753     67,061     76,765

Trust preferred securities

    81,519     99,003     160,771     276,945

Total interest expense

    726,983     916,747     1,446,224     2,155,526
                                 

Net interest income

    5,204,810     5,705,895     10,290,340     11,118,070

Provision for loan losses

    300,000     925,000     25,000     1,675,000
                                 

Net interest income after provision for loan losses

    4,904,810     4,780,895     10,265,340     9,443,070
                                 

Noninterest income:

                               
Trust and brokerage fees     1,061,916     923,195     2,119,916     1,867,855

Service charges

    266,811     277,788     552,908     570,861

Mortgage banking income

    312,367     374,765     642,401     604,821

Gain/(Loss) on sale of securities

    33,161     32,101     441,396     66,699

Net debit card interchange income

    211,417     197,645     445,836     401,501

Bank owned life insurance income

    156,699     147,446     301,493     291,490

Impairment on AFS securities

    -     -     -     -

Other fees

    268,520     172,622     504,084     338,080

Total noninterest income

    2,310,891     2,125,562     5,008,034     4,141,307
                                 

Noninterest expense:

                               

Salaries and benefits

    2,914,818     2,855,719     5,839,426     5,647,672

Occupancy and equipment

    620,959     623,056     1,258,273     1,251,409

Marketing

    162,981     99,108     282,334     195,305

Data processing

    386,233     318,567     823,679     689,620

Loan and professional costs

    412,322     345,007     706,218     676,422

Office supplies and postage

    47,288     38,606     94,592     109,005

Courier service

    53,652     59,592     112,232     117,333

Business Development

    128,960     119,720     244,501     240,612

Communication Expense

    41,390     44,960     94,713     105,746

FDIC Insurance Premiums

    123,355     137,463     269,449     382,955

OREO Expenses

    38,635     175,654     20,410     433,899

Other expense

    157,695     207,722     569,161     424,143

Total noninterest expense

    5,088,288     5,025,174     10,314,988     10,274,121
                                 

Income/(loss) before income taxes/(benefit)

    2,127,413     1,881,283     4,958,386     3,310,256

Income taxes expense/(benefit)

    528,881     516,549     1,359,386     857,542
                                 

Net income/(loss)

  $ 1,598,532   $ 1,364,734   $ 3,599,000   $ 2,452,714

Less: Preferred Stock Dividends

    -     -     -     -

Net income/(loss) available to common shareholders

  $ 1,598,532   $ 1,364,734   $ 3,599,000   $ 2,452,714
                                 

Basic earnings/(loss) per common share

  $ 0.34   $ 0.28   $ 0.77   $ 0.51

Diluted earnings/(loss) per common share

  $ 0.34   $ 0.28   $ 0.77   $ 0.51

Average common shares outstanding

    4,667,807     4,853,136     4,682,040     4,853,136

Average common shares and dilutive potential common shares outstanding

    4,668,104     4,853,136     4,682,185     4,853,136
                                 

Total Shares outstanding at end of period

    4,672,485     4,853,136     4,672,485     4,853,136

Dividends declared per common share

  $ 0.070   $ -   $ 0.140   $ -

 

 
 10

 

 

Tower Financial Corporation

Consolidated Financial Highlights

(unaudited)


   

Quarterly

 

Year-To-Date

($ in thousands except for share data)

   

2nd Qtr

2013

 

1st Qtr

2013

 

4th Qtr

2012

 

3rd Qtr

2012

 

2nd Qtr

2012

 

1st Qtr

2012

 

4th Qtr

2011

 

3rd Qtr

2011

 

2013

 

2012

                                           

EARNINGS

                                         

Net interest income

$

 

5,205

 

5,086

 

5,472

 

5,615

 

5,706

 

5,412

 

5,707

 

5,684

 

          10,291

 

       11,118

Provision for loan loss

$

 

               300

 

(275)

 

200

 

618

 

925

 

750

 

975

 

900

 

                 25

 

         1,675

NonInterest income

$

 

2,311

 

2,697

 

2,170

 

2,202

 

2,126

 

2,016

 

2,059

 

2,372

 

            5,008

 

         4,142

NonInterest expense

$

 

5,088

 

5,227

 

5,575

 

5,019

 

5,025

 

5,249

 

5,826

 

5,408

 

          10,315

 

       10,274

Net income/(loss)

$

 

1,599

 

2,000

 

1,729

 

1,563

 

1,365

 

1,088

 

3,422

 

1,325

 

            3,599

 

         2,453

Basic earnings per share

$

 

0.34

 

0.43

 

0.36

 

0.32

 

0.28

 

0.22

 

0.71

 

0.27

 

              0.77

 

           0.51

Diluted earnings per share

$

 

0.34

 

0.43

 

0.36

 

0.32

 

0.28

 

0.22

 

0.71

 

0.27

 

              0.77

 

           0.51

Average shares outstanding

   

4,667,807

 

4,696,432

 

4,855,557

 

4,874,660

 

4,853,136

 

4,853,136

 

4,853,645

 

4,852,761

 

     4,682,040

 

4,853,136

Average diluted shares outstanding

   

4,668,104

 

4,696,432

 

4,855,557

 

4,874,660

 

4,853,136

 

4,853,136

 

4,853,645

 

4,852,761

 

     4,682,185

 

4,853,136

                                           

PERFORMANCE RATIOS

                                         

Return on average assets *

   

0.94%

 

1.19%

 

1.01%

 

0.96%

 

0.84%

 

0.65%

 

2.02%

 

0.80%

 

1.07%

 

0.74%

Return on average common equity *

   

10.04%

 

12.75%

 

10.24%

 

9.43%

 

8.53%

 

6.92%

 

23.22%

 

9.24%

 

11.38%

 

7.73%

Net interest margin (fully-tax equivalent) *

   

3.52%

 

3.49%

 

3.65%

 

3.87%

 

3.98%

 

3.76%

 

3.90%

 

3.80%

 

3.51%

 

3.89%

Efficiency ratio

   

67.70%

 

67.16%

 

72.95%

 

64.21%

 

64.16%

 

70.67%

 

75.02%

 

67.13%

 

67.42%

 

67.33%

Full-time equivalent employees

   

          166.25

 

          155.00

 

          155.25

 

          154.50

 

          157.00

 

          158.00

 

          151.00

 

          158.50

 

          166.25

 

       157.00

                                           

CAPITAL

                                         

Equity to assets

   

9.03%

 

9.35%

 

9.32%

 

10.34%

 

9.97%

 

9.76%

 

8.86%

 

8.80%

 

9.03%

 

9.97%

Regulatory leverage ratio

   

11.47%

 

11.25%

 

11.18%

 

12.00%

 

11.71%

 

11.13%

 

10.97%

 

11.09%

 

11.47%

 

11.71%

Tier 1 capital ratio

   

15.14%

 

15.04%

 

14.65%

 

15.20%

 

14.87%

 

14.74%

 

13.91%

 

14.02%

 

15.14%

 

14.87%

Total risk-based capital ratio

   

16.39%

 

16.29%

 

15.90%

 

16.46%

 

16.13%

 

15.99%

 

15.16%

 

15.28%

 

16.39%

 

16.13%

Book value per share

$

 

            13.16

 

13.60

 

13.46

 

13.77

 

13.38

 

13.06

 

12.79

 

11.97

 

13.16

 

         13.38

Cash dividend per share

$

 

            0.070

 

0.070

 

0.555

 

0.055

 

0.000

 

0.000

 

0.000

 

0.000

 

0.140

 

0.000

                                           

ASSET QUALITY

                                         

Net charge-offs

$

 

172

 

350

 

451

 

1,111

 

1,001

 

1,050

 

1,632

 

2,852

 

522

 

         2,051

Net charge-offs to average loans *

   

0.16%

 

0.32%

 

0.39%

 

0.95%

 

0.86%

 

0.91%

 

1.38%

 

2.34%

 

0.24%

 

0.89%

Allowance for loan losses

$

 

7,792

 

7,664

 

8,289

 

8,539

 

9,032

 

9,108

 

9,408

 

10,065

 

7,792

 

9,032

Allowance for loan losses to total loans

   

1.78%

 

1.74%

 

1.84%

 

1.86%

 

1.95%

 

1.99%

 

2.03%

 

2.14%

 

1.78%

 

1.95%

Other real estate owned (OREO)

$

 

1,709

 

1,833

 

1,908

 

2,245

 

2,562

 

2,878

 

3,129

 

3,827

 

1,709

 

2,562

Non-accrual Loans

$

 

10,978

 

          14,625

 

          14,968

 

          12,083

 

          13,275

 

          14,375

 

            8,682

 

            9,913

 

10,978

 

13,275

90+ Day delinquencies

$

 

559

 

133

 

110

 

913

 

472

 

902

 

2,007

 

1,028

 

559

 

472

Restructured Loans

$

 

4,531

 

            4,254

 

            4,683

 

            4,242

 

            3,692

 

            1,802

 

            1,805

 

            1,810

 

4,531

 

3,692

Total Nonperforming Loans

   

11,537

 

          15,204

 

          16,723

 

          14,553

 

          14,107

 

          15,277

 

          12,494

 

          12,751

 

11,537

 

14,107

Impaired Securities (Market Value)

   

                  -

 

                  -

 

                  -

 

               317

 

               307

 

               314

 

               331

 

               332

 

                  -

 

307

Other Impaired Assets (Dougherty)

   

51

 

                 88

 

               130

 

               130

 

                   -

 

                   -

 

                   -

 

                   -

 

51

 

               -

Total Nonperforming Assets

   

13,296

 

          17,125

 

          18,761

 

          17,245

 

          16,976

 

          18,469

 

          15,954

 

          16,910

 

13,296

 

       16,976

NPLs to Total loans

   

2.63%

 

3.45%

 

3.71%

 

3.18%

 

3.04%

 

3.34%

 

2.70%

 

2.71%

 

2.63%

 

3.04%

NPAs (w/o 90+) to Total assets

   

1.87%

 

2.50%

 

2.73%

 

2.51%

 

2.53%

 

2.71%

 

1.99%

 

2.41%

 

1.87%

 

2.53%

NPAs+90 to Total assets

   

1.95%

 

2.52%

 

2.74%

 

2.66%

 

2.61%

 

2.84%

 

2.28%

 

2.56%

 

1.95%

 

2.61%

                                           

END OF PERIOD BALANCES

                                         

Total assets

$

 

680,941

 

679,069

 

683,973

 

649,466

 

651,239

 

649,343

 

700,681

 

659,725

 

680,941

 

     651,239

Total earning assets

$

 

631,099

 

632,185

 

636,935

 

607,484

 

601,014

 

601,190

 

606,888

 

602,291

 

631,099

 

     600,557

Total loans

$

 

438,565

 

440,075

 

450,466

 

457,865

 

463,833

 

457,260

 

462,561

 

470,877

 

438,565

 

     463,833

Total deposits

$

 

581,591

 

585,277

 

561,007

 

530,278

 

551,486

 

552,191

 

602,037

 

565,937

 

581,591

 

     551,486

Stockholders' equity

$

 

61,507

 

63,468

 

63,746

 

67,140

 

64,934

 

63,374

 

62,097

 

58,071

 

61,507

 

       64,934

                                           

AVERAGE BALANCES

                                         

Total assets

$

 

679,649

 

680,645

 

678,885

 

647,999

 

650,713

 

671,686

 

671,384

 

656,408

 

680,147

 

     661,200

Total earning assets

$

 

634,611

 

631,674

 

628,333

 

603,004

 

603,119

 

605,429

 

606,775

 

616,024

 

633,143

 

     603,795

Total loans

$

 

439,076

 

438,959

 

454,925

 

464,046

 

464,802

 

462,661

 

467,932

 

483,442

 

439,018

 

     463,732

Total deposits

$

 

575,801

 

581,480

 

565,105

 

544,142

 

550,441

 

572,134

 

576,898

 

559,615

 

578,641

 

     561,288

Stockholders' equity

$

 

63,867

 

63,640

 

67,168

 

65,927

 

64,180

 

63,021

 

58,468

 

56,914

 

63,754

 

       63,601


* annualized for quarterly data