News Column

Tower Financial Corporation Reports Record Annual Income of $8.1 Million and Announces Dividend

February 4, 2014

FORT WAYNE, Ind. , Feb. 4, 2014 (GLOBE NEWSWIRE) -- Tower Financial Corporation (Nasdaq:TOFC) reported net income of $2.4 million or $0.52 per diluted share for the fourth quarter of 2013, compared with net income of $1.7 million , or $0.36 per diluted share, reported for the fourth quarter of 2012. Year to date earnings for calendar year 2013 were $8.1 million , or $1.73 per diluted share, compared to $5.7 million , or $1.18 per diluted share, for the calendar year 2012. Our highlights include: Our 2013 earnings of $8.1 million are the highest amount in our history. This represents a 41.2 percent increase from our 2012 earnings of $5.7 million . Fourth quarter 2013 earnings of $2.4 million represent an increase of 40.4 percent from the fourth quarter 2012 and 16.5 percent from the third quarter of 2013. Our trust and brokerage annual fee income was the highest in our history at $4.5 million , a 16.3 percent increase from 2012. Assets under management were $742.7 million at December 31, 2013 , an increase of $70.4 million or 10.5 percent from December 31, 2012 . Asset quality continues its improvement, as our classified assets ratio was 25.7 percent as of December 31, 2013 compared to 32.2 percent at September 30, 2013 and 44.8 percent at December 31 , 2012. Our board declared a dividend of $0.08 per share to be paid on March 4, 2014 to all shareholders of record as of February 18 , 2014. Total dividends paid since we reinstated dividends in August 2012 are $1.24 per common share. Mike Cahill , President and Chief Executive Officer of Tower Financial Corporation stated, "We believe these record numbers are a reflection of the talent of our team members who have worked tirelessly to make Tower successful. The last three years have resulted in the highest net incomes in our company's fourteen years of existence. 2013 is by far the highest annual net income in our history." Asset Quality Our nonperforming assets were $12.9 million , or 1.89 percent of total assets compared to $9.9 million at September 30, 2013 and $18.8 million at December 31 , 2012. We had net recoveries for the fourth quarter of $360,000 , or 0.31 percent of average loans outstanding compared to net charge-offs of $134,000 , or 0.12 percent of average loans outstanding for the third quarter 2013 and $451,000 , or 0.39 percent of average loans outstanding for the fourth quarter 2012. During the fourth quarter of 2013, our loan loss provision resulted in a benefit of $1.2 million compared to a benefit in the amount of $850,000 for the third quarter of 2013 and an expense in the amount of $200,000 for the fourth quarter of 2012. The current and historical breakdown of our non-performing assets is as follows: ( $000 's omitted) 12/31/13 9/30/13 6/30/13 3/31/13 12/31/12 Non-Accrual loans Commercial $ 8,642 $ 4,269 $ 5,792 $ 7,758 $ 8,897 Acquisition & Development 778 1,123 2,064 3,912 2,789 Commercial Real Estate 385 734 738 749 753 Residential Real Estate 443 444 2,190 2,124 2,447 Home Equity 204 192 194 82 82 Total Non-accrual loans 10,452 6,762 10,978 14,625 14,968 Trouble-debt restructured (TDR) * -- -- -- 446 1,645 OREO & Other impaired assets 2,298 2,402 1,759 1,922 2,038 Delinquencies greater than 90 days 138 743 559 133 110 Impaired Securities -- -- -- -- -- Total Non-Performing Assets $ 12,888 $ 9,907 $ 13,296 $ 17,126 $ 18,761 Allowance for Loan Losses (ALLL) $ 5,715 $ 6,808 $ 7,792 $ 7,664 $ 8,289 ALLL / Non-accrual loans 54.7% 100.7% 71.0% 52.4% 55.4% * Non-performing TDR's The $3.0 million increase in nonperforming assets during the fourth quarter of 2013 relates to two commercial loans to the same borrower in the amount of $4.3 million that were taken to non-accrual status. This loan has been on our substandard loan list in previous quarters with a specific reserve put in place for any potential loan losses. The move to non-accrual status did not cause any changes to the specific reserve. When a loan has deteriorated to the point that it is classified as impaired and/or placed on nonaccrual status, a specific reserve or charge-off is recommended utilizing one of three impairment measurement methods (present value of expected cash flows, fair value of the collateral or observable market price). A charge-off will be taken in the place of a specific reserve at the point when facts and recent events support a reliable estimate of the extent and probability of loss. During the fourth quarter, a $4.3 million commercial loan relationship deemed impaired in previous quarters further deteriorated in the final quarter of 2013 to nonaccrual status. As a result of this movement, our ALLL to nonaccrual ratio dropped to 56.6 percent in the fourth quarter. Of the $10.5 million loans in nonaccrual status, we have already experienced approximately $400,000 of charge-offs. Our classified assets, defined as substandard, non-accrual loans, impaired investments, and OREO, decreased by $3.6 million during the fourth quarter to $23.0 million at December 31, 2013 compared to $26.6 million at September 30, 2013 and $35.9 million at December 31 , 2012. Our classified assets were 25.7 percent of tier 1 capital plus ALLL (classified assets ratio) as of December 31, 2013 compared to 32.2 percent at September 30 , 2013. Our total "watch list" loans were $27.1 million compared to $30.0 million at September 30, 2013 and $39.4 million at December 31, 2012 . Watch list loans now comprise 5.95 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: 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 Watch $ 951 $ 1,695 $ 7,294 $ 1,871 $ 1,232 Special mention 5,013 4,848 10,690 4,641 5,493 Total non-classified loans 5,964 6,543 17,984 6,512 6,725 Substandard 10,084 17,304 15,119 13,645 18,293 Doubtful/Loss* 9,888 6,200 10,599 14,418 14,393 Total classified loans 19,972 23,504 25,718 28,063 32,686 Total watch list loans $ 25,936 $ 30,047 $ 43,702 $ 34,575 $ 39,411 Watchlist loan/total loans 5.69% 6.65% 9.96% 7.86% 8.75% Total classified assets $ 23,029 $ 26,625 $ 28,641 $ 30,931 $ 35,894 *All loans in this risk rating are non-accrual. The allowance for loan losses was $5.7 million at December 31, 2013 compared to $6.8 million at September 30, 2013 and $8.3 million at December 31 , 2012. Impacting the allowance during the quarter were net recoveries of $360,000 and a loan loss benefit of $1.2 million . The allowance for loan losses was 1.25 percent of total loans at December 31 , 2013. This was a decrease from 1.51 percent at September 30, 2013 and from 1.84 percent at December 31 , 2012. The allowance for loan losses was 54.7 percent of non-accrual loans as of December 31, 2013 compared to 100.7 percent at September 30, 2013 . Balance Sheet Our assets were $690.6 million at December 31, 2013 , an increase of $6.6 million , or 1.0 percent, from December 31 , 2012. The increase is primarily the result of an increase in total loans of $5.3 million , an increase in cash and short-term investments of $27.5 million and the purchase of additional bank owned life insurance policies for $2.8 million , offset by a decrease in long-term investments of $30.6 million . Our total loans were $455.8 million at December 31 , 2013. This was a $5.3 million increase from $450.5 million at December 31, 2012 and a $4.3 million increase from $451.5 million at September 30 , 2013. The $5.3 million increase in total loans from December 31, 2012 was the result of an increase in commercial loans of $28.0 million , offset by decreases in commercial real estate loans, residential real estate loans, home equity loans, and consumer loans of $10.6 million , $6.0 million , $4.4 million , and $1.7 million , respectively. Our investment securities at December 31, 2013 were $143.8 million , a decrease of $30.6 million from December 31 , 2012. Investment securities comprise 20.8 percent of total assets. Due to our pending merger transaction with Old National Bank , we sold off $41.8 million in investment securities during the fourth quarter. We recognized a net gain on these sales of $872,000 . The sales were completed in order to realize gains and to increase our liquidity heading into the merger transaction. The gains helped offset approximately $500,000 of merger related expenses incurred during the third and fourth quarters of 2013. Our total deposits increased $37.4 million , or 6.7 percent, to $598.4 million at December 31, 2013 compared to $561.0 million at December 31 , 2012. Health Savings Accounts ("HSAs") continue to be the primary driver of deposit growth with an increase of $15.6 million from December 31 , 2012. We also experienced growth of $10.1 million in our money market saving accounts, $4.3 million in interest-bearing checking accounts, and $3.9 million in savings accounts. Our borrowings were $23.0 million at December 31, 2013 and were comprised of $17.5 million in trust preferred debt and $5.5 million in a fixed rate term borrowing from the Federal Home Loan Bank of Indianapolis ("FHLBI"). This represents a decrease of $31.9 million from our borrowings at the FHLBI at December 31, 2012 , as we utilized excess cash from investment sales and deposit growth to reduce our borrowings. Our shareholders' equity was $63.3 million at December 31, 2013 , a decrease of 0.8 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 $5.4 million from December 31 , 2012. This decrease relates primarily to market value fluctuations in our fixed rate municipal bond investments as a result of an increase in long-term interest rates. Additionally, we paid four quarterly dividends totaling $0.30 per common share, or $1.4 million , one special dividend of $0.25 per common share, or $1.2 million , and used $862,000 of capital to repurchase 70,000 shares of our common stock at average price of $12.32 per share during the first quarter of 2013. Offsetting the decreases in shareholders' equity was net income of $8.1 million . Currently, we have 4,680,551 common shares outstanding. Tangible book value at December 31, 2013 was $13.52 per common share, an increase of 0.5 percent from the $13.46 reported at December 31, 2012 . Income Statement Our total revenue, consisting of net interest income and noninterest income, was $8.3 million for the fourth quarter of 2013 compared to $7.3 million for the third quarter of 2013 and $7.6 million for the fourth quarter of 2012. The $1.0 million increase from the prior quarter was primarily due to $872,000 in gains on sales of investment securities during the quarter. Net interest income increased $91,000 from the third quarter of 2013 due to an increase of five basis points in our net interest margin to 3.51 percent. Earning assets remained relatively flat quarter over quarter. Average loans grew by $16.1 million , but were offset by sales on investment securities. Noninterest income was $3.1 million for the fourth quarter of 2013, compared to $2.2 million for the third quarter of 2013 and $2.2 million for the fourth quarter of 2012. The primary factor for the large increase was $872,000 of gains on sales of investment securities that occurred during the fourth quarter 2013 compared to $73,000 of gains in the fourth quarter of 2012 and no gains during the third quarter of 2013. Trust and brokerage fees grew to $1.2 million for the fourth quarter of 2013, an increase from the $1.1 million and $962,000 posted for the third quarter 2013 and fourth quarter 2012 respectively. The remainder of the fee income categories remained basically unchanged during the fourth quarter. Noninterest expenses were $5.9 million for the fourth quarter of 2013 compared to $5.3 million for the third quarter of 2013 and $5.6 million for the fourth quarter of 2012. The $535,000 increase from the third quarter was primarily due to a $386,000 increase in our OREO expense and a $133,000 increase in employment expenses. The main cause of the change in our OREO expense was that we recorded a $264,000 gain from the sale of a property during the third quarter, and incurred $122,000 of expenses during the fourth quarter. Employment expenses increased primarily due to an increase in profit sharing, as our annual results were better than expected causing an increase in the liability at December 31 , 2013. We incurred $229,000 of expenses during the fourth quarter related to the pending merger transaction with Old National Bancorp, compared to $279,000 incurred during the third quarter 2013. INFORMATION ON PENDING MERGER In connection with a pending merger between Tower Financial Corporation ("TOFC") and Old National Bancorp ("ONB"), ONB has filed with the Securities and Exchange Commission (the "SEC") a Registration Statement on Form S-4, which was declared effective by the SEC on December 19, 2013 , and includes TOFC's Proxy Statement and a Prospectus of ONB, and each of TOFC and ONB have filed and will file other documents with respect to the proposed merger. A definitive Proxy Statement/Prospectus was mailed to shareholders of TOFC on or about December 19 , 2013. Shareholders are urged to read the Proxy Statement/Prospectus regarding the merger and any other relevant documents filed with the SEC , as well as any amendments or supplements to those documents, because they contain important information. A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about TOFC and ONB, may be obtained at the SEC's Internet site ( http://www.sec.gov ). You may also obtain these documents, free of charge, by accessing ONB's website at www.oldnational.com under the tab "Investor Relations" and then under the heading "Financial Information" or from TOFC's website at www.towerbank.net under the tab "Investor Relations" and then under the heading "SEC Filings." TOFC and ONB and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of TOFC in connection with the proposed merger. Information about the directors and executive officers of TOFC is set forth in the proxy statement for TOFC's 2013 annual meeting of shareholders, as filed with the SEC on Schedule 14A on March 28, 2013. Information about the directors and executive officers of ONB is set forth in the proxy statement for ONB's 2013 annual meeting of shareholders, as filed with the SEC on Schedule 14A on March 15, 2013. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger. Free copies of this document may be obtained as described in the preceding paragraph. 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, to general business and economic conditions that may affect our business, and to consummation of the pending merger between TOFC and ONB, any or all of 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 Quarterly Reports on Forms 10-Q, under the captions "Forward-Looking Statements" and "Risk Factors," which we file from time to time with the SEC , as well as in the definitive Proxy Statement/Prospectus mailed to TOFC's shareholders on or about December 19, 2013 and any amendments or supplements to the definitive Proxy Statement/Prospectus under similar captions. These reports are available on the SEC's website at www.sec.gov , as well as on our website at www.towerbank.net . Tower Financial Corporation Consolidated Balance Sheets At December 31, 2013 and 2012 (unaudited) December 31 December 31 2013 2012 ASSETS Cash and due from banks $ 37,682,577 $ 11,958,507 Short-term investments and interest-earning deposits 1,435,203 159,866 Federal funds sold 3,050,740 2,727,928 Total cash and cash equivalents 42,168,520 14,846,301 Interest bearing deposits 603,684 457,000 Trading Securities, at fair value 252,876 -- Securities available for sale, at fair value 143,553,908 174,383,499 FHLBI and FRB stock 3,807,700 3,807,700 Loans Held for Sale 2,169,067 4,933,299 Loans 455,795,160 450,465,610 Allowance for loan losses (5,715,120) (8,288,644) Net loans 450,080,040 442,176,966 Premises and equipment, net 8,575,985 8,904,214 Accrued interest receivable 2,685,762 2,564,503 Bank owned life insurance (BOLI) 21,066,198 17,672,783 Other real estate owned (OREO) 2,154,813 1,908,010 Prepaid FDIC insurance -- 925,337 Other assets 13,434,923 11,393,469 Total assets $ 690,553,476 $ 683,973,081 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Noninterest-bearing $ 110,715,005 $ 108,147,229 Interest-bearing 487,684,684 452,860,109 Total deposits 598,399,689 561,007,338 Short-term borrowings -- 9,093,652 Federal Home Loan Bank advances 5,500,000 28,300,000 Junior subordinated debt 17,527,000 17,527,000 Accrued interest payable 103,942 107,943 Other liabilities 5,771,693 4,191,237 Total liabilities 627,302,324 620,227,170 STOCKHOLDERS' EQUITY Common stock and paid-in-capital, no par value, 6,000,000 shares authorized; 4,957,401 and 4,941,994 shares issued at December 31, 2013 and and December 31, 2012 ; and 4,680,551 and 4,735,144 shares outstanding at December 31, 2013 and December 31, 2012 , respectivley 45,038,581 44,834,605 Retained earnings 23,421,087 17,880,539 Accumulated other comprehensive income (loss), net of tax of ( $889,568 ) at December 31, 2013 and $1,880,433 at December 31, 2012 (1,726,808) 3,650,253 Treasury stock, at cost, 276,850 and 206,850 shares at December 31, 2013 and December 31, 2012 , respectively (3,481,708) (2,619,486) Total stockholders' equity 63,251,152 63,745,911 Total liabilities and stockholders' equity $ 690,553,476 $ 683,973,081 Tower Financial Corporation Consolidated Statements of Operations For the three and twelve months ended December 31, 2013 and 2012 (unaudited) (unaudited) For the Three Months Ended For the Twelve Months ended December 31 December 31 2013 2012 2013 2012 Interest income: Loans, including fees $ 4,800,181 $ 5,299,343 $ 19,362,002 $ 22,063,567 Securities - taxable 356,411 371,044 1,216,294 1,837,958 Securities - tax exempt 745,821 561,244 2,873,877 2,027,131 Other interest income 10,869 9,026 22,907 45,559 Total interest income 5,913,282 6,240,657 23,475,080 25,974,215 Interest expense: Deposits 576,325 640,929 2,370,512 3,157,522 Fed Funds Purchased -- 132 3 388 FHLB advances 20,049 43,602 108,578 160,836 Trust preferred securities 78,688 84,466 319,963 451,265 Total interest expense 675,062 769,129 2,799,056 3,770,011 Net interest income 5,238,220 5,471,528 20,676,024 22,204,204 Provision for loan losses (1,150,000) 200,000 (1,975,000) 2,493,000 Net interest income after provision for loan losses 6,388,220 5,271,528 22,651,024 19,711,204 Noninterest income: Trust and brokerage fees 1,224,958 961,721 4,451,684 3,828,291 Service charges 270,634 261,658 1,106,527 1,090,028 Mortgage banking income 183,253 396,346 1,075,461 1,478,486 Gain/(Loss) on sale of securities 872,318 73,289 1,313,714 149,098 Net debit card interchange income 186,697 161,631 821,995 725,564 Bank owned life insurance income 169,535 146,353 643,415 587,925 Impairment on AFS securities -- (688) -- (688) Other fees 170,958 170,026 849,471 655,210 Total noninterest income 3,078,353 2,170,336 10,262,267 8,513,914 Noninterest expense: Salaries and benefits 3,293,919 2,827,700 12,294,446 11,342,508 Occupancy and equipment 633,056 707,018 2,509,501 2,598,996 Marketing 126,725 176,386 522,035 483,573 Data processing 412,586 452,775 1,660,192 1,444,309 Loan and professional costs 520,803 478,396 1,829,721 1,497,000 Office supplies and postage 41,104 42,200 169,380 202,565 Courier service 51,277 56,505 214,810 232,179 Business Development 174,508 191,817 571,175 522,964 Communication Expense 44,908 49,666 181,681 217,901 FDIC Insurance Premiums 126,363 143,061 511,373 664,770 OREO Expenses 121,898 192,168 (121,533) 641,190 Other expense 303,218 257,489 1,137,592 1,020,558 Total noninterest expense 5,850,365 5,575,181 21,480,373 20,868,513 Income/(loss) before income taxes/(benefit) 3,616,208 1,866,683 11,432,918 7,356,605 Income taxes expense/(benefit) 1,188,261 137,869 3,321,879 1,612,439 Net income/(loss) $ 2,427,947 $ 1,728,814 $ 8,111,039 $ 5,744,166 Less: Preferred Stock Dividends -- -- -- -- Net income/(loss) available to common shareholders $ 2,427,947 $ 1,728,814 $ 8,111,039 $ 4,015,350 Basic earnings/(loss) per common share $ 0.52 $ 0.36 $ 1.73 $ 1.18 Diluted earnings/(loss) per common share $ 0.52 $ 0.36 $ 1.73 $ 1.18 Average common shares outstanding 4,675,147 4,855,557 4,677,897 4,859,155 Average common shares and dilutive potential common shares outstanding 4,675,545 4,855,557 4,682,890 4,859,155 Total Shares outstanding at end of period 4,680,551 4,735,144 4,680,551 4,735,144 Dividends declared per common share $ 0.080 $ 0.555 $ 0.550 $ 0.610 Tower Financial Corporation Consolidated Financial Highlights (unaudited) Quarterly Year-To-Date 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr ($ in thousands except for share data) 2013 2013 2013 2013 2012 2012 2012 2012 2011 2013 2012 EARNINGS Net interest income $ 5,238 5,147 5,205 5,086 5,472 5,615 5,706 5,412 5,707 20,676 22,205 Provision for loan loss $ (1,150) (850) 300 (275) 200 618 925 750 975 (1,975) 2,493 NonInterest income $ 3,078 2,176 2,311 2,697 2,170 2,202 2,126 2,016 2,059 10,262 8,514 NonInterest expense $ 5,850 5,315 5,088 5,227 5,575 5,019 5,025 5,249 5,826 21,480 20,868 Net income/(loss) $ 2,428 2,084 1,599 2,000 1,729 1,563 1,365 1,088 3,422 8,111 5,745 Basic earnings per share $ 0.52 0.45 0.34 0.43 0.36 0.32 0.28 0.22 0.71 1.73 1.18 Diluted earnings per share $ 0.52 0.45 0.34 0.43 0.36 0.32 0.28 0.22 0.71 1.73 1.18 Average shares outstanding 4,675,147 4,672,496 4,667,807 4,696,432 4,855,557 4,874,660 4,853,136 4,853,136 4,853,645 4,677,897 4,859,155 Average diluted shares outstanding 4,675,545 4,672,673 4,668,104 4,696,432 4,855,557 4,874,660 4,853,136 4,853,136 4,853,645 4,682,890 4,859,155 PERFORMANCE RATIOS Return on average assets * 1.37% 1.20% 0.94% 1.19% 1.01% 0.96% 0.84% 0.65% 2.02% 1.18% 0.87% Return on average common equity * 15.40% 13.64% 10.04% 12.75% 10.24% 9.43% 8.53% 6.92% 23.22% 12.94% 8.80% Net interest margin (fully-tax equivalent) * 3.51% 3.46% 3.52% 3.49% 3.65% 3.87% 3.98% 3.76% 3.90% 3.50% 3.81% Efficiency ratio 70.35% 72.58% 67.70% 67.16% 72.95% 64.21% 64.16% 70.67% 75.02% 69.43% 67.93% Full-time equivalent employees 151.00 165.25 166.25 155.00 155.25 154.50 157.00 158.00 151.00 151.00 155.25 CAPITAL Equity to assets 9.16% 8.83% 9.03% 9.35% 9.32% 10.34% 9.97% 9.76% 8.86% 9.16% 9.32% Regulatory leverage ratio 11.47% 11.39% 11.47% 11.25% 11.18% 12.00% 11.71% 11.13% 10.97% 11.47% 11.18% Tier 1 capital ratio 15.29% 14.76% 15.14% 15.04% 14.65% 15.20% 14.87% 14.74% 13.91% 15.29% 14.65% Total risk-based capital ratio $ 16 .38% 16.01% 16.39% 16.29% 15.90% 16.46% 16.13% 15.99% 15.16% 16.38% 15.90% Book value per share $ 13.51 13.27 13.16 13.60 13.46 13.77 13.38 13.06 12.79 13.51 13.46 Cash dividend per share $ 0.080 0.330 0.070 0.070 0.555 0.055 0.000 0.000 0.000 0.550 0.610 ASSET QUALITY Net charge-offs $ (360) 134 172 350 451 1,111 1,001 1,050 1,632 296 3,613 Net charge-offs to average loans * -0.31% 0.12% 0.16% 0.32% 0.39% 0.95% 0.86% 0.91% 1.38% 0.07% 0.78% Allowance for loan losses $ 5,919 6,808 7,792 7,664 8,289 8,539 9,032 9,108 9,408 5,919 8,289 Allowance for loan losses to total loans 1.30% 1.51% 1.78% 1.74% 1.84% 1.86% 1.95% 1.99% 2.03% 1.30% 1.84% Other real estate owned (OREO) $ 2,248 2,352 1,709 1,833 1,908 2,245 2,562 2,878 3,129 2,248 1,908 Non-accrual Loans $ 10,452 6,762 10,978 14,625 14,968 12,083 13,275 14,375 8,682 10,452 14,968 90+ Day delinquencies $ 138 743 559 133 110 913 472 902 2,007 138 110 Restructured Loans $ 781 3,437 4,531 4,254 4,683 4,242 3,692 1,802 1,805 781 4,683 Total Nonperforming Loans 10,590 7,505 11,537 15,204 16,723 14,553 14,107 15,277 12,494 10,590 16,723 Impaired Securities (Market Value) -- -- -- -- -- 317 307 314 331 -- 0 Other Impaired Assets 51 51 51 88 130 130 -- -- -- 51 130 Total Nonperforming Assets 12,888 9,907 13,296 17,125 18,761 17,245 16,976 18,469 15,954 12,888 18,761 NPLs to Total loans 2.32% 1.66% 2.63% 3.45% 3.71% 3.18% 3.04% 3.34% 2.70% 2.32% 3.71% NPAs (w/o 90+) to Total assets 1.85% 1.31% 1.87% 2.50% 2.73% 2.51% 2.53% 2.71% 1.99% 1.85% 2.73% NPAs+90 to Total assets 1.87% 1.41% 1.95% 2.52% 2.74% 2.66% 2.61% 2.84% 2.28% 1.87% 2.74% END OF PERIOD BALANCES Total assets $ 690,553 701,875 680,941 679,069 683,973 649,466 651,239 649,343 700,681 690,553 683,973 Total earning assets $ 610,668 647,170 631,099 632,185 636,935 607,484 601,014 601,190 606,888 610,668 636,935 Total loans $ 455,795 451,516 438,565 440,075 450,466 457,865 463,833 457,260 462,561 455,795 450,466 Total deposits $ 598,400 590,236 581,591 585,277 561,007 530,278 551,486 552,191 602,037 598,400 561,007 Stockholders' equity $ 63,251 61,991 61,507 63,468 63,746 67,140 64,934 63,374 62,097 63,251 63,746 AVERAGE BALANCES Total assets $ 703,384 688,776 679,649 680,645 678,885 647,999 650,713 671,686 671,384 688,114 662,321 Total earning assets $ 634,618 634,003 634,611 631,674 628,333 603,004 603,119 605,429 606,775 633,727 609,971 Total loans $ 454,436 438,312 439,076 438,959 454,925 464,046 464,802 462,661 467,932 442,696 461,609 Total deposits $ 608,195 589,039 575,801 581,480 565,105 544,142 550,441 572,134 576,898 588,629 557,956 Stockholders' equity $ 62,552 60,602 63,867 63,640 67,168 65,927 64,180 63,021 58,468 62,665 65,074 * annualized for quarterly data CONTACT: FOR INVESTORS: Richard R. Sawyer Chief Financial Officer 260-427-7150 rick.sawyer@towerbank.net FOR MEDIA: Tina M. Farrington Executive Vice President 260-427-7155 tina.farrington@towerbank.net Source: Tower Financial Corporation


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