Attached files
| file | filename |
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| 8-K - TOWER FINANCIAL 8-K 1-29-2010 - TOWER FINANCIAL CORP | form8k.htm |
| EX-99.2 - EXHIBIT 99.2 - TOWER FINANCIAL CORP | ex99_2.htm |
| EX-99.3 - EXHIBIT 99.3 - TOWER FINANCIAL CORP | ex99_3.htm |
Exhibit 99.1
FOR
FURTHER INFORMATION:
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FOR
INVESTORS:
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FOR
MEDIA:
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Richard
R. Sawyer
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Tina
M. Farrington
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Chief
Financial Officer
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Executive
Vice President
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260-427-7150
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260-427-7155
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rick.sawyer@towerbank.net
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tina.farrington@towerbank.net
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TOWER
FINANCIAL CORPORATION REPORTS FOURTH QUARTER RESULTS
FORT
WAYNE, INDIANA – JANUARY 29, 2010 –Tower Financial Corporation (NASDAQ: TOFC)
reported a loss of $1.23 million, or $0.2932 per diluted share for the
fourth quarter of 2009, compared with net income of $483,000, or $0.12 per
share, reported for the fourth quarter 2008. This brings the year to
date net loss to $5.67 million, or $1.3740 per diluted share, compared to year to date net
income of $1.9 million, or $0.46 per share at December 31, 2008.
The
quarterly loss was mainly caused by:
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·
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The
write down of state deferred tax
assets
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·
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Costs
related to contractual obligations associated with the early retirement of
Tower’s Chairman of the Board.
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·
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Additional “Other Than Temporary
Impairment” (OTTI) charges on an
investment
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Exclusive
of these one time expenses, the company would have reported a positive net
income of approximately $40125,000 for the fourth
quarter.
Mike
Cahill, President and CEO, stated, “If not for the one time charges relating to
the write down of our state deferred tax asset, and accruing the costs of our Chairman’s
early retirement and OTTI charge, we would have shown a
small profit for the quarter, which is indicative of the progress we continue to
make in our ongoing operations. We have made significant improvements in our net
interest margin and net interest income; we have significantly lowered our
ongoing overhead; we have increased the efficiencies of our fee based business
units; and we have made significant progress during the quarter in lowering our
non-performing loans and assets. We believe we have made tremendous strides in
positioning Tower appropriately to return to future profitable
operations.”
Fourth
quarter highlights include:
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·
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Trust
and brokerage assets under management grew to $762.2 million as of
December 31, 2009, an increase of $39.8 million or 5.5 percent during the
fourth quarter. Year to date growth is $126.9 million, or 20.0 percent.
This is the tenth consecutive year of annual increases in assets under
management.
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·
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Net
interest income increased by $304,000, or 6.0 percent, from the prior
quarter. Fourth quarter net interest margin was 3.47%, a 23
basis point improvement from the third quarter. This represents a 62 basis
point improvement since the first quarter of
2009.
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·
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Core
deposits were $432.3 million as of December 31, 2009, up $25.6 million, or
6.3 percent, year to date. Core deposits now make up 76.1 percent of the
total deposit portfolio.
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·
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Non-performing
assets decreased by approximately $7.0 million in the fourth quarter. This
lowered our non-performing asset ratio to 2.76% of assets, a drop of 104
basis points since the end of the third
quarter.
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·
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All
the Company’s regulatory capital ratios continue to remain significantly
above “well-capitalized” levels.
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·
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Annual
operating expenses were reduced by approximately $1.75 million in the last
six months of 2009. $1.0 million of this was based on actions taken in the
fourth quarter.
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Capital
The
Company’s regulatory capital ratios continue to remain above the
“well-capitalized” levels of 6 percent for tier 1 capital and 10 percent for
risked-based capital. Tier 1 capital at December 31, 2009, was
10.89 percent, compared to 11.7
percent at December 31, 2008. Total risked-based capital at December
31, 2009, was 12.4 percent, compared to 13.0 percent at December 31,
2008. Leverage capital was 9.0 percent at December 31, 2009, well
above the regulatory requirement of 5 percent to be considered
“well-capitalized”. The year to date reduction in capital ratios are
the direct result of large loan loss provisions, the write down of a foreclosed
land development, and the impairment charges on a securities, offset by a reduction in
total assets as well as capital raised during the third quarter.
The
following table shows the current Capital position as of December 31, 2009 in
both dollars and percentages, compared to the minimum amounts required per
regulatory standards for “well-capitalized” institutions.
2
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Minimum Dollar
Requirements
($000's
omitted)
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Regulatory
Minimum
(Well-Capitalized)
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Tower
12/31/09
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Excess
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|||||||||
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Tier
1 Capital / Risk Assets
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$ | 33,807 | $ | 61,275 | $ | 27,468 | ||||||
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Total
Risk Based Capital / Risk Assets
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$ | 56,346 | $ | 70,028 | $ | 13,682 | ||||||
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Tier
1 Capital / Average Assets (Leverage)
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$ | 33,922 | $ | 61,275 | $ | 27,353 | ||||||
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Minimum Percentage
Requirements
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Regulatory
Minimum
(Well-Capitalized)
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Tower
12/31/09
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||||||||||
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Tier
1 Capital / Risk Assets
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6%
or more
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10.87% | ||||||||||
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Total
Risk Based Capital / Risk Assets
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10%
or more
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12.43% | ||||||||||
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Tier
1 Capital / Quarterly Average Assets
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5%
or more
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9.03% | ||||||||||
Asset
Quality
Nonperforming
assets plus delinquencies were $18.8 million, or 2.8 percent of total assets as
of December 31, 2009. This compares with $25.8 million, or 3.8 percent of assets
at September 30, 2009 and $19.7 million, or 2.8 percent of assets at December
31, 2008. Net charge-offs were $4.5 million for the quarter bringing
year to date net charge-offs to $9.8 million or 1.8 percent of average loans,
which was more than covered by the year to date loan loss provision of $10.7
million. The current and historical breakdown of non-performing
assets is as follows:
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($000's
omitted)
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12/31/09
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9/30/09
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6/30/09
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3/31/09
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12/31/08
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|||||||||||||||
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Non-Accrual
loans
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Commercial
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6,687 | 8,644 | 5,907 | 1,246 | 1,658 | |||||||||||||||
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Acquisition
& Development
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4,627 | 9,812 | 9,882 | 9,801 | 13,221 | |||||||||||||||
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Commercial
Real Estate
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1,030 | 682 | 2,675 | 437 | 449 | |||||||||||||||
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Residential
Real Estate
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1,122 | 1,081 | 552 | 224 | 347 | |||||||||||||||
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Total
Non-accrual loans
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13,466 | 20,219 | 19,016 | 11,708 | 15,675 | |||||||||||||||
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Trouble-debt
restructered
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140 | 163 | 184 | 191 | 198 | |||||||||||||||
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OREO
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4,634 | 3,990 | 4,060 | 5,080 | 2,660 | |||||||||||||||
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Deliquencies
greater than 90 days
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561 | 1,476 | 2,509 | 1,304 | 1,020 | |||||||||||||||
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Total
Non-Performing Assets
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18,801 | 25,848 | 25,769 | 18,283 | 19,553 | |||||||||||||||
The
Commercial non-accrual category decreased by $2.0 million, as approximately $1.7
million held within three relationships was brought to resolution. Of
the total $6.7 million of non-accrual loans in the commercial category, $6.2
million are comprised within eight lending relationships. The Acquisition and
Development category was reduced by $5.1 million, as one of the four
relationships was brought to resolution and two other relationships were charged
down in the amount of $3.6 million. The Commercial Real Estate category
increased by $348,000, the net result of the resolution of one relationship
totaling $150,000, along with addition of a new relationship totaling
$500,000. The Commercial Real Estate category has only two
relationships encompassing this category.
The
allowance for loan losses increased $943,000 during 2009 and was 2.20 percent of
total loans at December 31, 2009, an increase from 1.90 percent and December 31,
2008. The year to date increase was the net result of a reduction in
loan outstandings of $33.7 million, net charge-offs of $9.8 million, and loan
loss provision of $10.7 million. This increased provisioning was
primarily driven by a deliberate focus by management on reserve building,
recognition of valuation changes in the marketplace related to underperforming
assets and the collateral value backing these assets, and current economic
factors in our markets.
3
Balance
Sheet
Company
assets were $680.21 million at December 31, 2009, a decrease of $16.45 million, or 2.4 percent from December 31,
2008. The decrease in assets was primarily attributable to decreases
in cash and cash equivalents of $6.9 million and loans of $33.7
million. These changes were offset by an increase in long term
investments of $12.1 million and loans held for sale of $3.7 million. This
planned reduction in assets was based on the aggressive provisioning, charge
downs, and resolutions related to non-performing assets, slower economic growth
in the region, and focusing our existing capital on existing client needs versus
aggressive expansion.
Total
loans at December 31, 2009 were $527.3 million, compared to $561.0 million at
December 31, 2008. The planned decrease in loans came in primarily in
Commercial and Residential Real estate categories. Commercial real estate loans
decreased by $20.3 million from December 31, 2008, while Residential real estate
loans decreased by $11.7 million during that same time frame. The
decrease in commercial real estate was due to continued amortization and payoffs
in the portfolio combined with limited new activity. The decrease in the
residential portfolio was due to increased refinancing activity during 2009
combined with the Company’s desire to sell these mortgages rather than hold them
for both interest rate risk and fee income purposes.
Long term
investments increased by $12.1 million to $94.0 million, as we continue to
expand our investment portfolio to enhance liquidity and yield opportunities in
light of the planned reduction in our loan portfolio and recognition of fewer
lending opportunities in the local economy. This is a continued purposeful
change in asset allocation driven by profitability and liquidity targets,
current economic conditions, and capital management guidelines.
Total
deposits at December 31, 2009 were $568.4 million compared to $586.2 million at
December 31, 2008, a decrease of $17.9 million, or 3.1 percent, which is
correlated with a reduction in brokered deposits of $15.9
million. Core deposit growth of $25.6 million, or 6.3 percent, was
led by $12.9 million of growth in our non-interest bearing checking accounts,
$11.7 million in money-market accounts, and $16.3 million in interest bearing
checking accounts. This growth was offset by a $27.6 million decrease
in certificates of deposit greater than $100,000. Core deposits,
which totaled $432.3 million at December 31, 2009, now comprise 76.1 percent of
the entire deposits of the Company compared to 69.4 percent at December 31,
2008.
Shareholders'
equity was $46.8 million at December 31, 2009, a decrease of 5.6 percent from
the $49.6 million reported at December 31, 2008. Affecting the
decrease in stockholders’ equity was a net loss of $5.6 million, $69,000 of
additional paid in capital from the FAS123R accounting treatment for stock
options, an increase of $973,000 in unrealized gains, net of tax, on securities
available for sale, and $1.8 million in convertible preferred stock sold to
insiders and previously disclosed in our 8k filing of September 28,
2009. Period-end common shares outstanding were
4,090,432.
Operating
Statement
Total
revenue, consisting of net interest income and noninterest income, was $7.1
million for the fourth quarter 2009, an increase of $763,000 from the third
quarter 2009 and an increase of $629,000 from the second quarter
2009. Fourth quarter 2009 net interest income was $5.4 million an
increase of $304,000, or 6.0 percent from the third quarter 2009 and an increase
of $559,000, or 11.6 percent compared to the second quarter 2009. The increase
in net interest income was the result of a 23 basis point improvement in our net
interest margin. Net interest margin for the fourth quarter 2009 was
3.47 percent, a steady improvement from 3.24 percent for the third quarter 2009,
3.02 percent for the second quarter 2009, and 2.85 percent in the first quarter
2009.
4
Noninterest
income accounted for approximately 231.7 percent of total revenue. For the fourth quarter,
noninterest income was $1.75 million, an increase from the
$1.2 million reported for the third quarter 2009 and a decrease from the $1.6 million reported
in the second quarter of 2009. The increase relates primarily to a
$477,000 other-than-temporary-impairment (OTTI) charge on an available for sale
security during the third quarter compared to $2126,000 during the fourth quarter. Trust and brokerage
fees were $881,000, an increase of 7.6 percent from the third quarter
2009. Looking forward, our fees are positively impacted by the growth
in assets under management. Currently, Tower Private Advisors manages $762.2
million in combined trust and brokerage assets, an increase of 5.5 percent from
the $722.4 million of combined assets reported for September 30,
2009. Service charges for the Bank were $294,000, a 3.1 percent
increase from the third quarter 2009. Loan broker fees were $173,000,
a 21.0 percent decrease from the third quarter 2009, however these fees are
higher than normal for this period due to increased refinancing activity being
experienced throughout the country. Other fee income remained
relatively flat from the previous quarter.
Fourth
quarter noninterest expense increased $916774,000, or 164.82 percent from the third quarter
2009. Approximately $1.43 million of the fourth quarter
increase was due to costs associated with the retirement of the Chairman,
increases in FDIC premiums, and losses from disposition of foreclosed
properties, as well as the write-down of the value of two foreclosed properties
of $181,000.
The
non-interest expenses for 2009 versus 2008 are down by $1.6 million (excluding
the increase in FDIC premiums, the write down and disposition of REO, the costs
associated with the Chairman’s retirement, and the letter of credit claim in
2009). This reflects management’s continuing diligence in reducing operating
costs of the Company. This has been and will continue to receive significant
attention and action by management. We expect the significant impact of these
efforts be seen in our operating results in the first quarter of
2010.
The
Company recorded income tax expense of $659707,000 for the fourth quarter in spite of posting an
operating loss of $539602,000. This was due to the charge-off of
our deferred state tax asset of $1.45 million. After much analysis,
the decision was made to charge-off the deferred tax asset at the state level
due to the updated accounting regulations surrounding these items and due to the
amount of time and future profits required in order to amortize the deferred tax
asset. Without this adjustment, we would have recorded a tax benefit
of approximately $14095,000.
ABOUT
THE COMPANY
Headquartered
in Fort Wayne, Indiana, Tower Financial Corporation is a financial services
holding company with
one subsidiary; Tower Bank & Trust Company, 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 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
5
FORWARD-LOOKING
STATEMENTS
This news
release contains forward-looking statements that are based on management's
beliefs, assumptions, current expectations, estimates and projections about the
financial services industry, the economy, and about the Corporation and the
Bank.
These
forward-looking statements are intended to be covered by the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict with regard to
timing, extent, likelihood and degree of occurrence. Actual results and outcomes
may differ materially from what may be expressed or forecasted in the
forward-looking statements. Future factors include changes in banking
regulation; governmental and regulatory policy changes; changes in the national
and local economy; changes in interest rates and interest-rate relationships;
demand for products and services; the degree of competition by traditional and
non-traditional competitors; changes in tax laws; changes in prices; the impact
of technological advances; the outcomes of contingencies, trends in customer
behavior and their ability to repay loans; changes in local real estate values;
and other factors, including various risk factors identified and described in
the Corporation’s Annual Report on Form 10-K, quarterly reports of Form 10-Q and
in other periodic reports we file from time to time with the Securities and
Exchange Commission. These reports are available on the Commission’s website at
www.sec.gov, www.towerbank.net
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