EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

 

NEWS RELEASE   Media Contact:   Investor Relations Contact:
FOR IMMEDIATE RELEASE   Andrew Samuel   Brent Smith
  717.724.2800   717.724.4666

TOWER BANCORP, INC. REPORTS SECOND QUARTER 2011 FINANCIAL RESULTS

2Q 2011 Diluted GAAP Net Income Per Share of $0.29

2Q 2011 Diluted Operating Income Per Share of $0.33

Net Interest Margin Remains Strong at 4.23%

Board of Directors Declares Cash Dividend Payable August 31, 2011

HIGHLIGHTS FROM THE SECOND QUARTER OF 2011

 

   

GAAP Net Income and Operating Income Growth: GAAP net income for the second quarter of 2011 equaled $3.5 million or $0.29 per diluted share in comparison to $218 thousand or $0.02 per diluted share for the first quarter of 2011. Operating (Non-GAAP) income totaled $4.1 million or $0.33 per diluted share for the second quarter of 2011 in comparison to $1.1 million or $0.10 per diluted share for the first quarter of 2011.

 

   

Net Interest Margin Growth: The net interest margin totaled 4.23% for the second quarter of 2011 compared to 4.21% for the first quarter of 2011 and 3.73% for the second quarter of 2010.

 

   

Decrease in Non-Interest Expense: Non-interest expense decreased $4.8 million or 17.5% to $22.8 million for the second quarter of 2011 compared to $27.6 million for the first quarter of 2011.

 

   

Continued Capital Strength: The ratios at June 30, 2011 of Total Capital to Risk-weighted Assets and Tier 1 Capital to Risk-weighted Assets continue to demonstrate the Company’s capital strength, equaling 13.53% and 12.17%, respectively. The ratio of tangible common equity to tangible assets (non-GAAP) equaled 9.27% at June 30, 2011.

 

 

Note Reconciliations of GAAP to Non-GAAP measures can be found in the tables located at the end of this release.


July 27, 2011 HARRISBURG, PA – Tower Bancorp, Inc. (NASDAQ: TOBC) (the “Company”), the parent company of Graystone Tower Bank (the “Bank”), reported net income available to shareholders of $3.5 million or $0.29 per diluted share for the second quarter of 2011, an increase of $2.3 million or $0.12 per diluted share over the same period in 2010 and an increase of $3.3 million or $0.27 per diluted share when compared to the first quarter of 2011. Net income for the second quarter of 2011 was negatively impacted by a net loss of approximately $1.2 million incurred by the Residential Mortgage Banking segment, which completed the wind down of the mortgage banking operations acquired as part of the First Chester County Corporation merger (“First Chester Merger”), and after-tax merger expenses related to the pending merger with Susquehanna Bancshares, Inc. (“Susquehanna”) of approximately $350 thousand. Included in results of the Residential Mortgage Banking segment are after-tax restructuring charges of $269 thousand incurred in relation to the wind down of the mortgage banking operations acquired as part of the First Chester Merger.

Operating (non-GAAP) income, that is net income recognized in accordance with Generally Accepted Accounting Principles (“GAAP”) adjusted for merger-related expenses, restructuring charges, and nonrecurring transactions, totaled $4.1 million or $0.33 per diluted share for the quarter ended June 30, 2011, an increase of $2.2 million or $0.06 per diluted share when compared to the quarter ended June 30, 2010. Operating (non-GAAP) income for the second quarter of 2011 increased $3.0 million or $0.23 per diluted share when compared to the first quarter of 2011.

Board of Directors Declares $0.14 per Share Dividend, Payable on August 31, 2011

Andrew Samuel, Chairman and CEO, also reported that the Board of Directors declared a quarterly cash dividend of $0.14 per share, payable on August 31, 2011 to shareholders of record at the close of business on August 15, 2011, commenting, “After careful consideration, the Board of Directors determined that this dividend was in the best interests of the Company and our shareholders given the existing economic, market and industry climate.”

Review of Balance Sheet, Credit Quality and Capital Position

Total assets at June 30, 2011 totaled $2.5 billion, representing a decrease of $89.4 million or 3.4% from March 31, 2011. Total gross loans held for investment remained relatively stable, decreasing $8.7 million or 0.42% from March 31, 2011 to June 30, 2011. The Company has experienced lower levels of loan originations than anticipated given the continued uncertain economic conditions and increased competition for high quality loans in the Company’s markets. Loans held for sale, representing agency-conforming residential mortgages originated for sale, decreased $24.9 million from March 31, 2011 to $15.7 million at June 30, 2011. This decrease is the direct result of the wind-down efforts related to the residential mortgage banking operations acquired through the First Chester Merger coupled with an overall decrease in residential mortgage loan demand due to the soft housing market.

The investment portfolio increased $1.2 million or 0.56% from March 31, 2011 to $209.2 million at June 30, 2011, which represents approximately 8.28% of the total assets. The investment portfolio has grown $106.5 million or 103.7% from December 31, 2010 to June 30, 2011. Following the First Chester Merger in the fourth quarter of 2010, the Company liquidated a majority of the investment holdings acquired from First Chester which were not consistent with the credit quality criteria and investment strategies of the Company. The increase during the first six months of 2011 is the direct result of completing the investment portfolio restructuring following the First Chester Merger. Consistent with the Company’s historic investment strategy, the investment portfolio consists mostly of agency CMO’s, Agency mortgage backed securities, agency securities, and highly rated general obligation municipal bonds. The investment portfolio contains unrealized net gains of $3.3 million as of June 30, 2011.

Total deposits decreased $80.7 million or 3.6% during the second quarter of 2011 to $2.1 billion. This decrease is mainly attributable to the strategic run-off of money market deposits and time deposits of $74.2 million and $21.2 million,

 

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respectively. These decreases were partially offset by $13.2 million in growth of interest checking accounts, which is the result of the Company’s strategy on generating low cost deposit accounts. The decreases in money market and time deposits were the result of management’s focus on lowering the cost of deposits through decreases in money market interest rates and allowing higher cost time deposits to mature without renewal. As of June 30, 2011, total non-reciprocal brokered deposits represented 6.6% of total deposits. The Company’s deposit mix continued to be weighted heavily in lower cost demand, savings and money market accounts, which comprised 61.7% and 62.1% of total deposits at June 30, 2011 and March 31, 2011, respectively. The average cost of deposits increased by 8 basis points from 0.80% for the quarter ended March 31, 2011 to 0.88% for the quarter ended June 30, 2011. At June 30, 2011, the Company had a weighted average cost of deposits of 1.01% exclusive of amortization from purchase accounting adjustments compared to 1.03% at March 31, 2011.

The provision for loan losses was $1.5 million during the second quarter of 2011 compared to $1.7 million for the first quarter of 2011 and $1.9 million for the second quarter of 2010. The allowance for loan losses at June 30, 2011 of $11.9 million is a decrease of $3.2 million from the balance at March 31, 2011. The change in the allowance for loan losses includes an increase due to the current quarter provision for loan losses of $1.5 million and a decrease of $4.7 million related to loan charge-offs. The largest portion of the loan charge-offs is attributed to a $4.3 million charge related to the estimated uncollectible portion of a $5.0 million commercial credit, of which $2.5 million was reserved as of March 31, 2011. As previously disclosed regarding this credit, the borrower had agreed to refinance the credit with additional collateral and cash flows from a newly formed entity, which agreement was contained within a plan of reorganization filed with the bankruptcy court in May 2011. However, the lead bank in this agreement withdrew from the financing arrangement in July 2011. Although the Company is continuing to negotiate with the borrower and other lenders to arrange for replacement secured financing, based upon its evaluation of the status of the bankruptcy proceedings and negotiations, the Company believed that it was appropriate to charge off $4.3 million related to this credit during the second quarter. The annualized rate of net charge-offs to average loans for the second quarter of 2011 and for the six months ended June 30, 2011 were 0.93%, and 0.51%, respectively.

During the second quarter of 2011, non-performing assets decreased $1.7 million in comparison to the first quarter of 2011. The main cause of this change is the $4.7 million charge-off of non-performing loans during the quarter partially offset by a $2.4 million increase in loans greater than ninety days past due and continuing to accrue interest. Acquired loans deemed to be impaired at the time of purchase in accordance with Accounting Standard Codification 310-30-30, previously known as Statement of Position (SOP) 03-3, “Accounting for Certain Loans Acquired in a Transfer,” have been recorded at their fair value based on anticipated future cash flows at the time of acquisition and are considered to be performing loans as the Company expects to fully collect the new carrying value (i.e. fair value) of the loans. For these loans acquired through the First Chester Merger, the Company recorded a reduction of $29.9 million to their carrying value to record them at fair value at the time of acquisition. As such, these loans have been excluded from non-performing assets for all periods discussed. Excluding non-accrual loans, total delinquencies equaled $22.5 million at June 30, 2011, a decrease of $4.0 million and $9.8 million when compared to March 31, 2011 and December 31, 2010, respectively.

The ratio of non-performing assets to total assets at June 30, 2011 was 1.64% in comparison to 1.65% at March 31, 2011. Although the second quarter allowance for loan loss to non performing loans of 31.38% is lower than the industry average, nearly half of the loan portfolio has been marked to market through purchase accounting within the past two years in connection with the First National Bank of Greencastle and First National Bank of Chester County acquisitions. When including general credit fair value adjustments recorded on the loan portfolio and the allowance for loan loss, the adjusted (non-GAAP) allowance for loan losses to non-performing loans is 78.51% at June 30, 2011.

 

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GAAP requires that expected credit losses associated with loans obtained in an acquisition be reflected at fair value as of each respective acquisition date and prohibits the carryover of the acquired entity’s allowance for loan losses. Accordingly, the Company’s management believes that presentation of the adjusted (non-GAAP) allowance for loan losses, consisting of the allowance for loan losses plus the credit fair value adjustment on loans purchased in merger transactions, is useful for investors to understand the complete allowance that is recorded as a representation of future expected losses over the Company’s loan portfolio. The details of this calculation and reconciliation of GAAP and non-GAAP measures are provided in the Selected Financial Data tables found later in this release.

Income Statement Review

Net income for the second quarter of 2011 equaled $3.5 million or $0.29 per diluted share, which is an increase of $2.3 million or $0.12 per diluted share as compared to the second quarter of 2010. When compared to the second quarter of 2010, operating (non-GAAP) income, representing net income adjusted for merger expenses, restructuring charges and nonrecurring transactions, increased $2.2 million or $0.06 per diluted share for the second quarter 2011 to $4.1 million or $0.33 per diluted share. Operating (non-GAAP) income excludes $350 thousand in after-tax merger expenses and $269 thousand in after-tax restructuring charges for the second quarter of 2011.

When compared to the first quarter of 2011, net income increased $3.3 million or $0.27 per diluted share to $3.5 million or $0.29 per diluted share for the second quarter of 2011. Operating (non-GAAP) income, representing net income adjusted for merger expenses, restructuring charges and nonrecurring transactions, increased $3.0 million or $0.23 per diluted share for the second quarter 2011 to $4.1 million or $0.33 per diluted share when compared to the first quarter of 2011.

Net interest income for the second quarter of 2011 increased $11.4 million or 88.6% from $12.9 million for the second quarter of 2010 to $24.3 million for the second quarter of 2011. When compared to the second quarter of 2010, the net interest margin increased 50 basis points from 3.73% to 4.23%. Average investments increased $33.6 million and average loans increased $888.9 million, when compared to the second quarter of 2010, while the average rate received on interest earning assets decreased by 5 basis points. The average balance of interest-bearing liabilities for the second quarter of 2011 increased by $720.3 million but the effect on interest expense was partially offset by the reduction in the average rate paid by 55 basis points compared to the second quarter of 2010. Exclusive of the amortization of purchase accounting fair value adjustments, the second quarter 2011 yield on interest earning assets would have been 5.07%, the cost of interest bearing liabilities would have been 1.40%, and net interest margin would have been 3.86%. Net interest income decreased $70 thousand in the second quarter of 2011 when compared to the first quarter of 2011. The net interest margin for the second quarter of 2011 increased 2 basis points over first quarter of 2011.

Noninterest income was $4.9 million for the second quarter of 2011, which represents an increase of $2.5 million or 102.8% over the second quarter of 2010. These increases are mostly the result of additional revenue streams acquired through the First Chester Merger, which provided significant increases to gains on service charges on deposit accounts, sale of mortgage loans and fiduciary fees and brokerage commissions. Noninterest income decreased $454 thousand from $5.3 million to $4.9 million from the first quarter of 2011 to the second quarter of 2011. The decrease is mostly the result of the continued wind down and restructuring of the mortgage operations acquired from the First Chester Merger, which contributed $340 thousand more in gain on sale of mortgage loans in the first quarter of 2011 compared to the second quarter of 2011.

When comparing the second quarter of 2011 to the first quarter of 2011, non-interest expenses decreased $4.8 million or 17.5%, as the Company realized cost savings related to mortgage banking segment restructuring and further incremental savings resulting from the First Chester Merger. Noninterest expense increased $11.0 million or 94.4% to $22.7 million

 

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for the second quarter of 2011 from $11.7 million for the second quarter of 2010. The Company experienced increases in all categories of non-interest expense, which are directly related to the First Chester Merger and expenses related to operating a significantly larger organization in 2011 as compared to 2010.

Income tax expense for the second quarter of 2011 was $1.5 million, which resulted in an effective tax rate of 29.9%, which is a one basis point decrease from the same period of 2010.

Residential Mortgage Segment

As previously disclosed, the Company had initiated a plan during the fourth quarter of 2010 to wind down and restructure the mortgage operations acquired in the First Chester Merger, which generated residential mortgage loans for the purpose of selling those loans to the secondary market. The Company completed the wind down and restructuring during the second quarter of 2011. For the second quarter of 2011, the Residential Mortgage Segment incurred a net loss of $1.2 million representing a $2.0 million decrease in the loss incurred when compared to the net loss of $3.2 million for the first quarter of 2011. As a result of the wind down and restructuring activities, the Segment incurred noninterest expense for the second quarter of 2011 of $3.1 million, a $3.4 million decrease as compared to the first quarter of 2011. The performance of this operating segment is subject to volatility in earnings due to fluctuations in the demand for residential mortgage loans. While the Company anticipates the financial performance of the Residential Mortgage Segment to improve, such improvements are limited by the current economic difficulties and could be further limited by legislative and regulatory developments affecting the mortgage industry.

Merger with Susquehanna Bancshares, Inc.

On June 20, 2011, the Company announced the signing of a definitive agreement with Susquehanna Bancshares, Inc. (“Susquehanna”) pursuant to which the Company will be acquired in a stock and cash transaction valued at approximately $343.0 million at the time of announcement. Under the terms of the merger agreement, the Company’s shareholders will have the option of receiving either 3.4696 shares of Susquehanna common stock or $28.00 in cash for each share of Tower common stock, with $88.0 million of the total consideration being paid in cash. The final transaction value will be determined at the closing of the acquisition based on the stock price of Susquehanna at that time. The merger is subject to shareholder and regulatory approvals and other customary closing conditions.

Andrew Samuel, Chairman and CEO of the Company stated, “We are excited about the upcoming merger with Susquehanna, which we anticipate closing in the first quarter of 2012. We believe that the combined organization will provide strength, size, and stability that will benefit all of our constituencies.”

Supplemental Information – Explanation of Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with GAAP. These measures include tangible assets, tangible common equity, operating income and performance and capital ratios derived from the foregoing. Tangible assets and tangible common equity are derived by reducing the balance of assets and equity, respectively, by the amount of GAAP reported goodwill and other intangible assets. Operating income is calculated by adjusting net income available to common shareholders for merger-related expenses and other nonrecurring transactions that occurred during the period presented, since such expenses are considered by management to be “non-operating” in nature. The Company calculates the return on average tangible equity by excluding the balance of intangible assets and their related amortization expense from the calculation of return on average equity. The Company believes the presentation of these non-GAAP financial measures provide useful supplemental information that is essential to an investor’s proper understanding of the operating results of the Company’s core businesses. The Company’s management uses these non-GAAP financial measures in their analysis of the Company’s performance. These non-GAAP disclosures

 

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should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP measures are included as tables at the end of this release.

About Tower Bancorp, Inc.

Tower Bancorp, Inc. is the parent company of Graystone Tower Bank, a full-service community bank operating 47 branch offices in central and southeastern Pennsylvania and Maryland through three divisions, Graystone Bank, Tower Bank, and 1N Bank. With total assets of approximately $2.5 billion, Tower Bancorp’s unparalleled competitive advantage is its employees and a strong corporate culture paired with a clear vision that provides customers with uncompromising service and individualized solutions to every financial need. Tower Bancorp’s common stock is listed on the NASDAQ Global Select Market under the symbol “TOBC.” More information about Tower Bancorp and its divisions can be found on the internet at www.yourtowerbank.com, www.graystonebank.com, 1nbank.com and www.towerbancorp.com.

Safe Harbor for Forward-Looking Statements

This document contains “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995, which are based on the Company’s current expectations, estimates and projections about future events. This includes statements regarding the future performance of Susquehanna, the timing of the merger transaction, the business plans and integration efforts once the transaction is complete, and the impact of the transaction and the anticipated closing of Susquehanna’s acquisition of Abington Bancorp, Inc., including specifically the impact of the Tower transaction, on Susquehanna’s earnings, market share and capital position. These statements are not historical facts or guarantees of future performance, events or results. Such statements involve potential risks and uncertainties, such as whether the merger will be approved by the shareholders of Susquehanna and the Company or by regulatory authorities, whether each of the other conditions to closing set forth in the merger agreement will be met, Susquehanna’s ability to integrate the Company as planned and the general effects of financial, economic, regulatory and political conditions affecting the banking and financial services industries. Accordingly, actual results may differ materially. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For additional factors that may affect future results, please see filings made by Susquehanna and the Company with the Securities and Exchange Commission (“SEC”), including their Annual Reports on Form 10-K for the year ended December 31, 2010, and Quarterly Reports on Form 10-Q for the quarter ended March 31, 2011.

Additional Information about the Merger and Where to Find It

In connection with the proposed merger of the Company and Susquehanna (the “Merger”), Susquehanna will file a registration statement on Form S-4 with the SEC. The registration statement will include the joint proxy statement for Susquehanna and the Company, which will also constitute a prospectus of Susquehanna. This joint proxy statement/prospectus will be mailed to the shareholders of Susquehanna and the Company. Investors and security holders of Susquehanna and the Company are urged to read the joint proxy statement/prospectus and the other relevant materials when they become available because they will contain important information about the Company, Susquehanna and the Merger. The joint proxy statement/prospectus and other relevant materials (when they become available), and any other documents filed by Susquehanna or the Company with the SEC, may be obtained free of charge at the SEC’s Web site at http://www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by the Company by contacting Brent Smith, Tower Bancorp, Inc., 112 Market Street, Harrisburg, PA 17101, telephone: 717-724-4666 or from Tower’s web site at http://www.towerbancorp.com. Investors and security holders may obtain free copies of the documents filed with the SEC by Susquehanna by contacting Abram G. Koser, Susquehanna Bancshares, Inc., 26 North Cedar Street, Lititz, PA 17543, telephone: 717-626-4721 or from Susquehanna’s web site at http://www.susquehanna.net.

 

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Susquehanna, the Company and their respective directors, executive officers and certain other members of management and employees may be deemed “participants” in the solicitation of proxies from shareholders of Susquehanna and the Company in favor of the Merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the shareholders of Susquehanna and the Company in connection with the proposed Merger will be set forth in the joint proxy statement/prospectus when it is filed with the SEC. You can find information about the executive officers and directors of Susquehanna in its Annual Report on Form 10-K for the year ended December 31, 2010 and in its joint proxy statement/prospectus filed with the SEC on March 18, 2011. You can find information about the Company’s executive officers and directors in its Annual Report on Form 10-K for the year ended December 31, 2010 and in its definitive proxy statement filed with the SEC on April 8, 2011.

Investors and security holders are urged to read the joint proxy statement/prospectus and the other relevant materials when they become available before making any voting or investment decision with respect to the Merger.

 

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Selected Financial Highlights

The financial information contained on the following pages provides more detail on the Company’s performance for the quarter-ended and six months ended June 30, 2011 as compared to the quarter-ended March 31, 2011, and the quarter-ended and six months ended June 30, 2010. Additionally, the following pages provide detail on the Company’s financial condition as of June 30, 2011 as compared to December 31, 2010. Persons seeking additional information should refer to the Company’s periodic reports as filed with the Securities and Exchange Commission (SEC).

 

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Tower Bancorp, Inc. and Subsidiary

Consolidated Balance Sheets

June 30, 2011, March 31, 2011, December 31, 2010 and June 30, 2010

(Amounts in thousands, except share data)

 

     June 30,
2011
    March 31,
2011
    December 31,
2010
    June 30,
2010
 
     (unaudited)     (unaudited)           (unaudited)  

Assets

        

Cash and due from banks

   $ 77,734      $ 111,326      $ 219,741      $ 57,124   

Federal funds sold

     17,738        37,038        28,738        14,303   
                                

Cash and cash equivalents

     95,472        148,364        248,479        71,427   

Securities available for sale

     209,209        208,054        102,695        190,895   

Restricted investments

     13,283        13,971        14,696        6,254   

Loans held for sale

     15,664        40,565        147,281        14,725   

Loans, net of allowance for loan losses of $11,869, $15,116, $14,053 and $11,619

     2,027,998        2,033,456        2,058,191        1,204,716   

Premises and equipment, net

     54,235        55,753        56,388        29,163   

Accrued interest receivable

     7,150        7,346        7,856        5,320   

Deferred tax asset, net

     15,401        20,283        19,526        1,128   

Bank owned life insurance

     40,466        40,074        39,670        37,340   

Goodwill

     17,996        18,041        16,750        11,935   

Other intangible assets, net

     6,697        7,060        7,493        3,031   

Other real estate owned

     3,520        3,477        4,647        799   

Other assets

     19,565        19,570        23,617        11,346   
                                

Total assets

   $ 2,526,656      $ 2,616,014      $ 2,747,289      $ 1,588,079   
                                

Liabilities and equity

        

Liabilities

        

Deposits:

        

Non-interest bearing

   $ 304,541      $ 301,042      $ 301,210      $ 120,206   

Interest bearing

     1,842,659        1,926,887        1,998,688        1,202,136   
                                

Total deposits

     2,147,200        2,227,929        2,299,898        1,322,342   

Securities sold under agreements to repurchase

     7,161        9,728        6,605        5,055   

Short-term borrowings

     43        5,041        55,039        10,285   

Long-term debt

     87,856        87,816        87,800        72,476   

Accrued interest payable

     1,713        1,761        1,950        1,083   

Other liabilities

     25,633        28,952        38,111        11,475   
                                

Total liabilities

     2,269,606        2,361,227        2,489,403        1,422,716   
                                

Equity

        

Common stock, no par value; 50,000,000 shares authorized; 12,110,545 issued and 12,007,187 outstanding at June 30, 2011, 12,090,859 issued and 11,987,501 outstanding at March 31, 2011, 12,074,757 issued and 11,971,399 outstanding at December 31, 2010 and 7,243,585 issued and 7,140,227 outstanding at June 30, 2010.

     —          —          —          —     

Additional paid-in capital

     272,454        271,751        271,350        172,925   

Accumulated deficit

     (13,852     (14,003     (10,868     (4,934

Accumulated other comprehensive income

     2,155        291        251        1,445   

Less: cost of treasury stock, 103,358 at June 30, 2011, March 31, 2011, December 31, 2010, and June 30, 2010

     (4,093     (4,093     (4,093     (4,093
                                

Total stockholders’ equity

     256,664        253,946        256,640        165,343   

Noncontrolling interests

     386        841        1,246        20   
                                

Total equity

     257,050        254,787        257,886        165,363   
                                

Total liabilities and equity

   $ 2,526,656      $ 2,616,014      $ 2,747,289      $ 1,588,079   
                                

 

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Tower Bancorp, Inc. and Subsidiary

Consolidated Statements of Operations

Three Months Ended June 30, 2011, March 31, 2011 and June 30, 2010 and Six Months Ended June 30, 2011 and 2010

(Amounts in thousands, except share data)

 

     For the Three Months Ended     For the Six Months Ended  
     June 30,
2011
    March 31,
2011
     June 30,
2010
    June 30,
2011
    June 30,
2010
 
     (unaudited)     (unaudited)      (unaudited)     (unaudited)     (unaudited)  

Interest income

           

Loans, including fees

   $ 28,979      $ 29,199       $ 17,274      $ 58,178      $ 33,780   

Securities

     1,389        973         1,167        2,362        2,203   

Federal funds sold and other

     41        97         41        138        74   
                                         

Total interest income

     30,409        30,269         18,482        60,678        36,057   

Interest expense

           

Deposits

     4,800        4,516         4,544        9,316        9,153   

Short-term borrowings

     65        189         212        254        305   

Long-term debt

     1,210        1,160         823        2,370        1,647   
                                         

Total interest expense

     6,075        5,865         5,579        11,940        11,105   
                                         

Net interest income

     24,334        24,404         12,903        48,738        24,952   

Provision for loan losses

     1,500        1,650         1,900        3,150        3,350   
                                         

Net interest income after provision for loan losses

     22,834        22,754         11,003        45,588        21,602   

Noninterest income

           

Service charges on deposit accounts

     1,128        1,109         805        2,237        1,545   

Fiduciary fees and brokerage commissions

     1,066        897         101        1,963        138   

Other service charges, commissions and fees

     950        904         581        1,854        1,070   

Gain on sale of mortgage loans originated for sale

     1,128        1,468         321        2,596        594   

Impairment losses on securities available for sale

     (63     —           (68     (63     (68

Income from bank owned life insurance

     387        409         442        796        734   

Other income

     262        525         214        787        358   
                                         

Total noninterest income

     4,858        5,312         2,396        10,170        4,371   

Noninterest expenses

           

Salaries and employee benefits

     11,297        13,110         5,315        24,407        10,385   

Occupancy and equipment

     3,952        4,370         1,735        8,322        3,431   

Amortization of intangible assets

     344        406         159        750        336   

FDIC insurance premiums

     764        894         538        1,658        936   

Advertising and promotion

     697        565         374        1,262        509   

Data processing

     1,096        1,155         643        2,251        1,154   

Communication

     364        715         295        1,079        493   

Professional service fees

     961        1,201         371        2,162        812   

Impairment on fixed assets

     —          —           920        —          920   

Other operating expenses

     2,332        3,757         1,284        6,089        2,352   

Restructuring charges

     414        1,160         —          1,574        —     

Merger related expenses

     538        247         76        785        187   
                                         

Total noninterest expenses

     22,759        27,580         11,710        50,339        21,515   
                                         

Income before income taxes

     4,933        486         1,689        5,419        4,458   
                                         

Income tax expense

     1,476        146         508        1,622        1,372   
                                         

Income

     3,457        340         1,181        3,797        3,086   

Less: income from noncontrolling interest

     (53     122         4        69        4   
                                         

Net income

   $ 3,510      $ 218       $ 1,177      $ 3,728      $ 3,082   
                                         

Per share data

           

Net income per shares

           

Basic

   $ 0.29      $ 0.02       $ 0.17      $ 0.31      $ 0.43   

Diluted

   $ 0.29      $ 0.02       $ 0.17      $ 0.31      $ 0.43   

Dividends declared

   $ 0.28      $ 0.28       $ 0.28      $ 0.56      $ 0.56   

Weighted average common shares outstanding

           

Basic

     11,996,283        11,975,795         7,133,681        11,986,039        7,129,491   

Diluted

     11,999,772        11,980,802         7,137,256        11,990,287        7,133,819   

 

10


Tower Bancorp, Inc. and Subsidiary

Yields on Average Interest-Earning Assets and Interest-Bearing Liabilities

Three months ended June 30, 2011 and 2010

(Amounts in thousands, except for rate data)

 

     For the Three Months Ended June 30,  
     2011     2010  
     Average
Balance
    Interest     Average
Rate
    Average
Balance
    Interest     Average
Rate
 

Interest-earning assets:

            

Federal funds sold and other (3)

   $ 14,444      $ 11        0.31   $ 18,738      $ 41        0.88

Investment securities (1)

     223,984        1,480        2.65     190,417        1,219        2.57

Loans

     2,072,405        28,979        5.61     1,183,489        17,274        5.85
                                                

Total interest-earning assets

     2,310,833        30,470        5.29     1,392,644        18,534        5.34
                                                

Other assets

     257,706            159,519       
                        

Total assets

   $ 2,568,539          $ 1,552,163       
                        

Interest-bearing liabilities:

            

Interest-bearing non-maturity deposits

   $ 1,030,828        1,460        0.57   $ 753,088        2,212        1.18

Time deposits

     852,261        3,340        1.57     418,126        2,332        2.24

Borrowings

     96,519        1,275        5.30     88,103        1,035        4.71
                                                

Total interest-bearing liabilities

     1,979,608        6,075        1.23     1,259,317        5,579        1.78
                                                

Demand deposits

     307,705            114,608       

Other liabilities

     25,640            12,979       

Equity

     255,586            165,259       
                        

Total liabilities and equity

   $ 2,568,539          $ 1,552,163       
                        

Net interest spread

         4.06         3.56

Net interest income and interest rate margin FTE

       24,395        4.23       12,955        3.73
                        

Tax equivalent adjustment

       (91         (52  
                        

Net interest income

       24,304            12,903     
                        

Ratio of average interest-earning assets to average interest-bearing liabilities

     116.7         110.6    
                        

 

(1) The average yields for investment securities available for sale are reported on a fully taxable-equivalent basis at a rate of 35% for 2011 and 34% for 2010.
(2) Average loan balances include non-accrual loans.
(3) Amounts exclude cash balances held at the Federal Reserve and any interest earned thereon.

 

11


Tower Bancorp, Inc. and Subsidiary

Yields on Average Interest-Earning Assets and Interest-Bearing Liabilities

For the Six Months Ended June 30, 2011 and 2010

(Amounts in thousands, except for rate data)

 

     For the Six Months Ended June 30,  
     2011     2010  
     Average
Balance
    Interest     Average
Rate
    Average
Balance
    Interest     Average
Rate
 

Interest-earning assets:

            

Federal funds sold and other (3)

   $ 20,691      $ 30        0.29   $ 21,641      $ 74        0.69

Investment securities (1)

     194,137        2,533        2.63     183,806        2,287        2.51

Loans

     2,114,581        58,178        5.55     1,167,322        33,780        5.84
                                                

Total interest-earning assets

     2,329,409        60,741        5.26     1,372,769        36,141        5.31
                                                

Other assets

     302,413            156,799       
                        

Total assets

   $ 2,631,822          $ 1,529,568       
                        

Interest-bearing liabilities:

            

Interest-bearing non-maturity deposits

   $ 1,061,841        2,939        0.56   $ 725,658        4,332        1.20

Time deposits

     853,872        6,377        1.51     426,857        4,821        2.28

Borrowings

     103,491        2,624        5.11     85,603        1,952        4.60
                                                

Total interest-bearing liabilities

     2,019,204        11,940        1.19     1,238,118        11,105        1.81
                                                

Demand deposits

     318,960            113,297       

Other liabilities

     38,392            13,492       

Equity

     255,266            164,661       
                        

Total liabilities and equity

   $ 2,631,822          $ 1,529,568       
                        

Net interest spread

         4.07         3.50

Net interest income and interest rate margin FTE

       48,801        4.22     $ 25,036        3.68
                        

Tax equivalent adjustment

       (171         (84  
                        

Net interest income

     $ 48,630          $ 24,952     
                        

Ratio of average interest-earning assets to average interest-bearing liabilities

     115.4         110.9    
                        

 

(1) The average yields for investment securities available for sale are reported on a fully taxable-equivalent basis at a rate of 35% for 2011 and 34% for 2010.
(2) Average loan balances include non-accrual loans.
(3) Amounts exclude cash balances held at the Federal Reserve and any interest earned thereon.

 

12


Tower Bancorp, Inc. and Subsidiary

Selected Financial Information

(Dollars in thousands, except share data and ratios)

(Unaudited)

 

     June 30,
2011
     March 31,
2011
     December 31,
2010
     June 30,
2010
 

Selected Balance Sheet Data:

           

Loans held for investment

   $ 2,039,867       $ 2,048,572       $ 2,072,244       $ 1,216,335   

Loans held for sale

     15,664         40,565         147,281         14,725   

Allowance for loans losses

   $ 11,869       $ 15,116       $ 14,053       $ 11,619   

Credit quality adjustment on loans purchased (1)

     17,828         19,404         21,693         1,676   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted (Non-GAAP) allowance for loan losses (9)

   $ 29,697       $ 34,520       $ 35,746       $ 13,295   

Total assets

   $ 2,526,656       $ 2,616,014       $ 2,747,289       $ 1,588,079   

Total deposits

     2,147,200         2,227,929         2,299,898         1,322,342   

Total borrowings and securities sold under agreements to repurchase

     95,060         102,585         149,444         87,816   

Total stockholders’ equity

     256,664         253,946         256,640         165,343   

Goodwill and other intangible assets

     24,693         25,101         24,243         14,966   

Tangible equity – Non-GAAP (9)

     231,971         228,845         232,397         150,377   

Tangible assets – Non-GAAP (9)

     2,501,963         2,590,913         2,723,046         1,573,113   

Shares outstanding at period end

     12,007,187         11,987,501         11,971,399         7,140,227   

 

     For the Three Months Ended      For the Six Months Ended  
     June 30,
2011
    March 31,
2011
     June 30,
2010
     June 30,
2011
     June 30,
2010
 

Selected Income Statement Data:

             

Interest income

   $ 30,409      $ 30,269       $ 18,482       $ 60,678       $ 36,057   

Interest expense

     6,075        5,865         5,579         11,940         11,105   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     24,334        24,404         12,903         48,738         24,952   

Provision for loan losses

     1,500        1,650         1,900         3,150         3,350   

Noninterest income

     4,858        5,312         2,396         10,170         4,371   

Noninterest expense

     22,759        27,580         11,710         50,339         21,515   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income before income taxes

     4,933        486         1,689         5,419         4,458   

Income tax expense

     1,476        146         508         1,622         1,372   

Less: Income from non-controlling interest

     (53     122         4         69         4   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 3,510      $ 218       $ 1,177       $ 3,728       $ 3,082   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income – Non-GAAP (9)

   $ 4,129      $ 1,133       $ 1,897       $ 5,261       $ 3,913   

Per Share Data:

             

Weighted average shares outstanding – basic

     11,996,283        11,975,795         7,133,681         11,986,039         7,129,491   

Weighted average shares outstanding – diluted

     11,999,772        11,980,802         7,137,256         11,990,287         7,133,819   

Book value per share

   $ 21.38      $ 21.18       $ 23.16       $ 21.38       $ 23.16   

Tangible book value per share – Non-GAAP (9)

   $ 19.32      $ 19.09       $ 21.06       $ 19.32       $ 21.06   

Basic earnings per share

   $ 0.29      $ 0.02       $ 0.17       $ 0.31       $ 0.43   

Diluted earnings per share

   $ 0.29      $ 0.02       $ 0.17       $ 0.31       $ 0.43   

Diluted operating income per share – Non-GAAP (9)

   $ 0.33      $ 0.10       $ 0.27       $ 0.44       $ 0.55   

 

13


     For the Three Months Ended     For the Six Months Ended  
     June 30,
2011
    March 31,
2011
    June 30,
2010
    June 30,
2011
    June 30,
2010
 

Performance Ratios:

          

Return on average assets

     0.55     0.03     0.30     0.29     0.41

Return on average equity

     5.51     0.35     2.86     2.95     3.77

Return on average tangible equity (Non-GAAP) (9)

     6.70     1.10     3.57     3.92     4.61

Net interest margin

     4.23     4.21     3.73     4.22     3.68

Efficiency ratio (2)

     77.96     92.81     76.54     85.45     73.37

Non-interest income to average assets

     0.76     0.80     0.62     0.78     0.58

Non-interest expenses to average assets

     3.55     4.15     3.03     3.86     2.84

Operating Performance Ratios (Non-GAAP) (9):

          

Return on average assets

     0.64     0.17     0.49     0.40     0.52

Return on average equity

     6.48     1.80     4.60     4.16     4.79

Return on average tangible equity (Non-GAAP)

     7.77     2.71     5.49     5.26     3.57

Net interest margin

     4.23     4.21     3.73     4.22     3.68

Efficiency ratio (2)

     75.84     89.73     71.83     82.85     70.54

Noninterest income to average assets

     0.76     0.80     0.62     0.78     0.58

Noninterest expenses to average assets

     3.41     3.94     2.77     3.68     2.69

 

     June 30,
2011
    March 31,
2011
    December 31,
2010
    June 30,
2010
 

Asset Quality Ratios:

        

Allowance for loan losses to total loans (6)

     0.59     0.75     0.64     0.95

Adjusted (Non-GAAP) allowance for loan losses to total loans (6) (8)

     1.49     1.69     1.66     1.09

Non-accrual loans to total loans (6) (7)

     1.68     1.86     0.82     0.82

Net charge-offs to average loans (3)

     0.92     0.11     0.71     0.40

Non-performing assets to total assets (4)

     1.64     1.65     0.87     0.83

Non-performing loans to total loans (5) (6)

     1.89     1.95     0.89     1.01

Allowance for loan losses to non-performing loans (5)

     31.38     38.17     73.40     93.51

Adjusted (Non-GAAP) allowance for loan losses to non-performing loans (5) (8)

     78.51     86.61     186.69     106.99

Capital Ratios:

        

Total capital (to risk-weighted assets)

     13.53     13.38     13.24     14.49

Tier 1 capital (to risk-weighted assets)

     12.17     11.91     11.83     12.00

Tier 1 capital (to average assets)

     9.65     9.14     13.45     9.69

Tangible equity to tangible assets – Non-GAAP (9)

     9.27     8.83     8.53     9.56

 

(1) The credit fair value adjustment relates to the risk of credit loss related to the non-impaired portfolio of purchased loans acquired through the merger between Tower Bancorp. Inc. and Graystone Financial Corp and loans acquired through the acquisition of First Chester County Corporation. It does not include the credit fair value adjustment of purchased impaired loans accounted for under ASC 310-30 (Statement of Position (SOP) 03-3).
(2) Efficiency ratio is calculated as total noninterest expense divided by the total of net interest income and noninterest income.
(3) Calculated as the annualized net loans charged off during the quarter ended divided by the average loans outstanding for the same quarter.
(4) Non-performing assets equals the sum of non-accrual loans, loans past due 90 days or greater that are still accruing, and other real estate owned. Purchased impaired loans accounted for under ASC 310-30 are excluded from non-performing assets.
(5) Non-performing loans equals the sum of non-accrual loans and loans past due 90 days or greater that are still accruing. Purchased impaired loans accounted for under ASC 310-30 are excluded from non-performing loans.
(6) Total loans excludes purchased impaired loans accounted for under ASC 310-30 acquired as part of mergers and acquisitions. The total balance of these loans, net of fair value mark, is $58.0 million as of June 31, 2011, $61.8 million as of March 31, 2011, $61.6 million as of December 31, 2010, and $6.3 million as of June 31, 2010.
(7) Non-accrual loans equals the sum of loans that have been placed on non-accrual status. Purchased impaired loans accounted for under ASC 310-30 are excluded from non-accrual loans.
(8) Adjusted (Non-GAAP) allowance for loan losses includes the allowance for loan loss and the credit fair value adjustment to the risk of credit loss related to the non-impaired portfolio of purchased loans acquired through mergers and acquisitions.
(9) This measure is considered to be a Non-GAAP measure. See the reconciliation of GAAP to Non-GAAP measures in the tables at the end of this release.

 

14


Tower Bancorp, Inc. and Subsidiary

Loan and Deposit Detail

(Dollars in thousands)

 

     June 30,
2011
    March 31,
2011
    December 31,
2010*
    June 30,
2010
 
     (Unaudited)     (Unaudited)           (Unaudited)  

Loan detail:

        

Commercial:

        

Industrial

   $ 1,048,996      $ 1,056,712      $ 1,073,666      $ 629,520   

Real estate

     304,025        302,392        305,423        169,185   

Construction

     195,741        193,707        183,729        138,211   

Consumer:

        

Home equity

     167,306        158,633        163,905        61,014   

Other

     63,421        69,479        65,305        34,009   

Residential mortgage

     260,099        267,500        280,154        184,474   
                                

Total loans

     2,039,588        2,048,423        2,072,182        1,216,413   

Deferred costs (fees)

     280        149        62        (78

Allowance for loan losses

     (11,869     (15,116     (14,053     (11,619
                                

Net loans

   $ 2,027,999      $ 2,033,456      $ 2,058,191      $ 1,204,716   
                                

 

     June 30,
2011
     March 31,
2011
     December 31,
2010
     June 30,
2010
 
     (Unaudited)      (Unaudited)             (Unaudited)  

Deposit detail:

           

Noninterest bearing transaction accounts

   $ 304,541       $ 301,042       $ 301,210       $ 120,206   

Interest checking accounts

     332,621         319,363         305,701         119,059   

Money market accounts

     526,025         600,244         651,760         591,256   

Savings accounts

     161,481         163,595         160,305         78,904   

Time deposits

     822,532         843,685         880,922         412,917   
                                   

Total deposits

   $ 2,147,200       $ 2,227,929       $ 2,299,898       $ 1,322,342   
                                   

 

* Amounts have been reclassified in order to be comparable to the amounts disclosed as of June 30, 2011 and March 31, 2011

 

15


Tower Bancorp, Inc. and Subsidiary

Non-Performing Assets Detail

(Dollars in thousands)

 

     June 30,
2011
     March 31,
2011
     December 31,
2010
     June 30,
2010
 
     (Unaudited)      (Unaudited)             (Unaudited)  

Non-accrual loans

           

Commercial:

           

Industrial

   $ 24,172       $ 20,675       $ 6,320       $ 2,554   

Real estate

     2,191         2,169         2,426         487   

Construction

     2,524         9,816         6,011         5,370   

Consumer:

           

Home equity

     218         272         115         —     

Other

     370         384         66         123   

Residential mortgage

     4,050         4,357         2,784         1,504   
                                   

Total non-accrual loans

     33,525         37,673         17,722         10,038   

Accruing loans greater than 90 days past due

           

Commercial:

           

Industrial

     2,781         —           —           —     

Real estate

     —           —           5         —     

Construction

     —           —           —           —     

Consumer:

           

Home equity

     89         403         351         432   

Other

     183         458         251         37   

Residential mortgage

     1,250         1,072         818         1,919   
                                   

Total accruing loans greater than 90 days past due

     4,303         1,933         1,425         2,388   

Non-performing loans

     37,828         39,606         19,147         12,426   

Other real estate owned

     3,520         3,477         4,647         799   
                                   

Non-performing assets

   $ 41,348       $ 43,083       $ 23,794       $ 13,225   
                                   

 

     June 30,
2011
     March 31,
2011
     December 31,
2010
     June 30,
2010
 
     (Unaudited)      (Unaudited)             (Unaudited)  

Accruing loans 30 to 89 days past due

   $ 18,219       $ 24,563       $ 30,865       $ 14,109   

Accruing loans greater than 90 days past due

     4,303         1,933         1,425         2,388   

Non-accrual loans

     33,525         37,673         17,722         10,038   
                                   

Total delinquencies

   $ 56,047       $ 64,169       $ 50,012       $ 26,535   
                                   

 

16


Tower Bancorp, Inc. and Subsidiary

Allowance for Loan Losses Quarterly Rollforward

(Dollars in thousands)

 

     June 30,
2011
    March 31,
2011
    December 31,
2010
    June 30,
2010
 
     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  

Balance, beginning of quarter

   $ 15,116      $ 14,053      $ 12,717      $ 10,892   

Provision for loan losses

     1,500        1,650        4,100        1,900   

Charge-offs

        

Commercial:

        

Industrial

     (409     (446     (1,460     (608

Real estate

     —          (8     (574     (245

Construction

     (4,250     —          (431     —     

Consumer:

        

Home equity

     —          —          (55     (200

Other

     (38     (98     —          (147

Residential mortgage

     (81     (177     (255     —     
                                

Total charge-offs

     (4,778     (729     (2,775     (1,200

Recoveries

        

Commercial:

        

Industrial

     14        20        7        26   

Real estate

     —          120        —          —     

Construction

     —          —          —          1   

Consumer:

        

Home equity

     8        —          —          —     

Other

     9        2        3        —     

Residential mortgage

     —          —          1        —     
                                

Total recoveries

     31        142        11        27   
                                

Net charge-offs

     (4,747     (587     (2,764     (1,173
                                

Balance, end of quarter

   $ 11,869      $ 15,116      $ 14,053      $ 11,619   
                                

 

17


Tower Bancorp, Inc. and Subsidiary

Condensed Statement of Operations by Segment

(Dollars in thousands)

(Unaudited)

 

     Three Months Ended June, 30, 2011  
     Banking
Segment
     Residential
Mortgage
Segment
    Elimination     Total  

Interest income

   $ 30,328       $ 202      $ (121   $ 30,409   

Interest expense

     6,075         121        (121     6,075   
                                 

Net interest income

     24,253         81        —          24,334   

Provision for loan losses

     1,500         —          —          1,500   

Noninterest income

     3,719         1,139        —          4,858   

Noninterest expense

     19,017         2,790        —          21,807   

Merger related expenses and restructuring charges

     597         355        —          952   
                                 

Net income (loss) before income taxes

     6,858         (1,925     —          4,933   

Income tax expense (benefit)

     2,150         (674       1,476   
                                 

Net income (loss) including noncontrolling interest

     4,708         (1,251     —          3,457   

Less: Income from non-controlling interest

     —           (53     —          (53
                                 

Net income (loss)

   $ 4,708       $ (1,198   $ —        $ 3,510   
                                 

 

     Six Months Ended June, 30, 2011  
     Banking
Segment
     Residential
Mortgage
Segment
    Elimination     Total  

Interest income

   $ 60,311       $ 902      $ (535   $ 60,678   

Interest expense

     11,940         535        (535     11,940   
                                 

Net interest income

     48,371         367        —          48,738   

Provision for loan losses

     3,150         —          —          3,150   

Noninterest income

     7,559         2,611        —          10,170   

Noninterest expense

     38,982         8,999        —          47,981   

Merger related expenses and restructuring charges

     1,670         688        —          2,358   
                                 

Net income (loss) before income taxes

     12,128         (6,709     —          5,419   

Income tax expense (benefit)

     3,986         (2,364     —          1,622   
                                 

Net income (loss) including noncontrolling interest

     8,142         (4,345     —          3,797   

Less: Income from non-controlling interest

     4         65        —          69   
                                 

Net income (loss)

   $ 8,138       $ (4,410   $ —        $ 3,728   
                                 

 

18


Tower Bancorp, Inc. and Subsidiary

Reconciliation of GAAP to Non-GAAP Measures

(Dollars in thousands, except share data and ratios)

(Unaudited)

 

     June 30,
2011
     March 31,
2011
     December 31,
2010
     June 30,
2010
 

Reconciliation of Non-GAAP Balance Sheet Data:

           

Total assets – GAAP

   $ 2,526,656       $ 2,616,014       $ 2,747,289       $ 1,588,079   

Less: Goodwill and other intangible assets

     24,693         25,101         24,243         14,966   
                                   

Total tangible assets – Non-GAAP

   $ 2,501,963       $ 2,590,913       $ 2,723,046       $ 1,573,113   
                                   

Total Stockholders’ equity – GAAP

   $ 256,664       $ 253,946       $ 256,640       $ 165,343   

Less: Goodwill and other intangible assets

     24,693         25,101         24,243         14,966   
                                   

Tangible equity – Non-GAAP

   $ 231,971       $ 228,845       $ 232,397       $ 150,377   
                                   

 

     For the Three Months Ended     For the Six Months Ended  
     June 30,
2011
    March 31,
2011
    June 30,
2010
    June 30,
2011
    June 30,
2010
 

Reconciliation of Non-GAAP Income Statement Data:

          

Net income – GAAP

   $ 3,510      $ 218      $ 1,177      $ 3,728      $ 3,082   

Plus: Merger related expenses

     538        247        76        785        187   

Plus: Restructuring charges

     414        1,160        —          1,574        —     

Plus: Impairment of fixed assets

     —          —          920        —          920   

Less: Tax effect of adjustments

     (333     (492     (276     (826     (276
                                        

Operating income – Non-GAAP

   $ 4,129      $ 1,133      $ 1,897      $ 5,261      $ 3,913   
                                        

Per Share Data:

          

Book value per share – GAAP

   $ 21.38      $ 21.18      $ 23.16      $ 21.38      $ 23.16   

Per share effect of intangible assets

     (2.06     (2.09     (2.10     (2.06     (2.10
                                        

Tangible book value per share – Non-GAAP

   $ 19.32      $ 19.09      $ 21.06      $ 19.32      $ 21.06   
                                        

Diluted earnings per share – GAAP

   $ 0.29      $ 0.02      $ 0.17      $ 0.31      $ 0.43   

Plus: Per share impact of merger related expenses

     0.04        0.02        0.01        0.07        0.03   

Plus: Per share impact of restructuring charges

     0.03        0.10        —          0.13        —     

Plus: Per share impact of impairment on fixed assets

     —          —          0.13        —          0.13   

Less: Per share impact of tax effect of adjustments

     (0.03     (0.04     (0.04     (0.07     (0.04
                                        

Diluted operating income per share – Non-GAAP

   $ 0.33      $ 0.10      $ 0.27      $ 0.44      $ 0.55   
                                        

 

19


Tower Bancorp, Inc. and Subsidiary

Reconciliation of GAAP to Non-GAAP Measures

(Dollars in thousands, except share data and ratios)

(Unaudited)

 

     For the Three Months Ended     For the Six Months Ended  
     June 30,
2011
    March 31,
2011
    June 30,
2010
    June 30,
2011
    June 30,
2010
 

Performance Ratios:

          

Return on average assets – GAAP

     0.55     0.03     0.30     0.29     0.41

Effect of Non-GAAP adjustments to net (loss) income

     0.09     0.14     0.19     0.11     0.11
                                        

Operating return on average assets – Non-GAAP

     0.64     0.17     0.49     0.40     0.52

Return on average equity – GAAP

     5.51     0.35     2.86     2.95     3.77

Effect of Non-GAAP adjustments to net (loss) income

     0.97     1.45     1.74     1.21     1.02
                                        

Operating return on average equity – Non-GAAP

     6.48     1.80     4.60     4.16     4.79

Return on average equity – GAAP

     5.51     0.35     2.86     2.95     3.77

Effect of goodwill and other intangible assets

     1.19     0.75     0.71     0.97     0.84
                                        

Return on average tangible equity – Non -GAAP

     6.70     1.10     3.57     3.92     4.61

Return on average tangible equity – Non -GAAP

     6.70     1.10     3.57     3.92     4.61

Effect of Non-GAAP adjustments to net (loss) income

     1.07     1.61     1.92     1.34     -1.04
                                        

Operating return on average tangible equity – Non-GAAP

     7.77     2.71     5.49     5.26     3.57

Efficiency ratio – GAAP

     77.96     92.81     76.54     85.45     73.37

Effect of Non-GAAP adjustments to net (loss) income

     -2.12     -3.08     -4.71     -2.60     -2.83
                                        

Operating efficiency ratio – Non-GAAP

     75.84     89.73     71.83     82.85     70.54

Non-interest expenses to average assets – GAAP

     3.55     4.15     3.03     3.86     2.84

Effect of Non-GAAP adjustments to net (loss) income

     -0.14     -0.21     -0.26     -0.18     -0.15
                                        

Operating non-interest expenses to average assets – Non-GAAP

     3.41     3.94     2.77     3.68     2.69

 

     June 30,
2011
    March 31,
2011
    December 31,
2010
    June 30,
2010
 

Asset Quality Ratios

        

Allowance for loan loss to total loans – GAAP

     0.59     0.75     0.64     0.95

Effect of Non-GAAP adjustment

     0.90     0.94     1.02     0.14
                                

Adjusted (non-GAAP) allowance for loan loss to total loans

     1.49     1.69     1.66     1.09

Allowance for loan loss to non performing loans – GAAP

     31.38     38.17     73.40     93.51

Effect of Non-GAAP adjustment

     47.13     48.44     113.29     13.48
                                

Adjusted (non-GAAP) allowance for loan loss to non-performing loans

     78.51     86.61     186.69     106.99

 

     June 30,
2011
    March 31,
2011
    December 31,
2010
    June 30,
2010
 

Capital Ratios:

        

Total equity to total assets – GAAP

     10.16     9.71     9.34     10.41

Effect of intangible assets

     -0.89     -0.88     -0.81     -0.85
                                

Tangible common equity to tangible assets – Non-GAAP

     9.27     8.83     8.53     9.56

 

20