Tower Financial Corporation Reports Third Quarter Net Income of $1.6 Million

Thu Oct 25, 2012 5:30am EDT

* Reuters is not responsible for the content in this press release.

FORT WAYNE, Ind., Oct. 25, 2012 (GLOBE NEWSWIRE) -- Tower Financial Corporation (Nasdaq:TOFC) reported net income of $1.6 million or $0.32 per diluted share for the third quarter of 2012, compared with net income of $1.3 million, or $0.27 per diluted share, reported for the third quarter of 2011. Year to date earnings through the first nine months of 2012 were $4.0 million, or $0.83 per diluted share, compared to $3.2 million, or $0.66 per diluted share for the first nine months of 2011.

Our third quarter highlights include:

  • Our $4.0 million net income through the first nine months already exceeds the $3.6 million reported for the full calendar year of 2006, which was our second highest annual net income year in our history.
     
  • Sixth consecutive quarter with earnings in excess of $1.0 million, and "Core" quarterly earnings of $2.9 million. We define core earnings as income before taxes, loan loss provision, and unusual items not related to day to day operations (primarily securities sales and other real estate owned ("OREO") expenses).
     
  • Trust assets under management grew to $675.2 million, an increase of $80.6 million from December 31, 2011.
     
  • Our Board of Directors approved a cash dividend of $0.055 per share, payable on November 15, 2012 to shareholders of record on November 1, 2012.
     
  • Our leverage capital ratio (Tier 1 Capital divided by average quarterly assets) is now at 12 percent, which is more than double the regulatory requirement of 5% to be considered "well-capitalized".

"I have shared in the past how pleased we are with the improvement in our results, but we believe we can do better. Our team continues to prove this time and time again, which is demonstrated by this quarter's results," stated Mike Cahill, President and CEO. "While we have made and continue to make headway on asset quality, we believe we have significant upside to be gained on that front. We believe that we have terrific opportunities with our Health Savings Accounts (HSA) and that we have only begun to scratch the surface in this area. Our Trust Company has established itself as the local 'go to' shop, but even here, we have tremendous upside and we are trying to improve. Our commercial lending team, retail team, residential mortgage team, and private banking teams are all poised to significantly improve Tower's presence and impact. While we may be going through a tough economic and banking environment, at Tower we are excited about the future."

Capital

The Company's regulatory capital ratios continue to remain significantly above the "well-capitalized" levels of 6 percent for tier 1 capital and 10 percent for total risk-based capital. Tier 1 capital at September 30, 2012 was 15.2 percent compared to 14.9 percent at June 30, 2012 and 13.9 percent at December 31, 2011. Total risk-based capital at September 30, 2012 was 16.5 percent compared to 16.2 percent at June 30, 2012 and 15.2 percent at December 31, 2011. Our leverage capital grew to 12.0 percent at September 30, 2012, more than double the regulatory requirement of 5 percent to be considered "well-capitalized". 

The following table shows the current capital position as of September 30, 2012 in both dollars and percentages, compared to the minimum amounts required per regulatory standards for "well-capitalized" institutions. 

Minimum Dollar Requirements  Regulatory Tower  
($000's omitted) Minimum (Well-Capitalized) 9/30/12 Excess
Tier 1 Capital / Risk Assets $30,541 $77,395 $46,854
       
Total Risk Based Capital / Risk Assets $50,902 $83,785 $32,883
       
Tier 1 Capital / Average Assets (Leverage) $32,256 $77,395 $45,139
       
Minimum Percentage Requirements Regulatory Tower  
  Minimum (Well-Capitalized) 9/30/12  
Tier 1 Capital / Risk Assets 6% or more 15.20%  
       
Total Risk Based Capital / Risk Assets 10% or more 16.46%  
       
Tier 1 Capital / Quarterly Average Assets 5% or more 12.00%  

Asset Quality

Our nonperforming assets were $17.2 million, or 2.7 percent of total assets as of September 30, 2012. This compares with $17.0 million at June 30, 2012 and $16.0 million at December 31, 2011. Our net charge-offs were $1.1 million for the third quarter of 2012, or 1.0 percent of average outstanding loans for the quarter. This compares to net charge-offs of $1.0 million, or 0.9 percent of average loans for the second quarter of 2012 and $2.9 million, or 2.3 percent of average loans for the third quarter of 2011. Net charge-offs during the third quarter related primarily to one loan relationship, which was fully reserved as of June 30, 2012. Our loan loss provision for the third quarter of 2012 was $618,000 compared to $925,000 for the second quarter of 2012 and $900,000 for the third quarter of 2011.  

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

($000's omitted) 9/30/12 6/30/12 3/31/12 12/31/11 9/30/11
Non-Accrual loans          
Commercial  $ 7,112  $ 6,988  $ 7,213  $ 5,020  $ 5,978
Acquisition & Development  2,175  3,176  3,268  2,134  2,464
Commercial Real Estate  764  948  1,515  977  1,078
Residential Real Estate  2,032  2,163  1,630  551  393
Home Equity  --   --   748  --   -- 
Total Non-accrual loans  12,083  13,275  14,374  8,682  9,913
Trouble-debt restructured (TDR) *  1,557  360  --   1,805  1,810
OREO & Other impaired assets  2,375  2,562  2,878  3,129  3,827
Deliquencies greater than 90 days  913  472  902  2,007  1,028
Impaired Securities  317  307  314  331  332
           
Total Non-Performing Assets  $ 17,245  $ 16,976  $ 18,468  $ 15,954  $ 16,910
           
Allowance for Loan Losses (ALLL)  $ 8,539  $ 9,032  $ 9,108  $ 9,408  $ 10,065
           
ALLL / Non-accrual loans 70.7% 68.0% 63.4% 108.4% 101.5%
           
Classified Assets  $ 37,145  $ 30,368  $ 28,759  $ 28,108  $ 35,475
           
* Non-performing TDR's          

The two loan relationships that were classified as a TDR in the fourth quarter of 2011 were all taken to non-accrual status during the first quarter and are included in the non-accrual loan balances shown above. One new TDR was added during the third quarter of 2012 in the amount of $1.2 million and will be included in nonperforming assets until a consistent payment history can be documented, which is typically six months. There are currently two relationships included in this category at September 30, 2012 in the amount of $1.6 million.

Our delinquencies greater than 90 days have decreased by $1.1 million from the fourth quarter of 2011, but have increased $441,000 from the second quarter 2012. The increase in the third quarter was primarily due to a commercial loan that had matured and wasn't renewed until after September 30, 2012 causing it to be administratively delinquent at quarter end. The renewal of this loan in October resolved the delinquent status.

Our non-accrual commercial loan category increased by $124,000 during the third quarter of 2012. The primary reason for the increase was the addition of two relationships totaling $271,000. Offsetting the increase was one small charge-off of $11,000 and payments of $136,000. At September 30, 2012, there were twelve relationships within this category, and four of those relationships comprised 65.4 percent of the total.

Our non-accrual acquisition and development category decreased by $1.0 million during the third quarter of 2012. The decrease was due to a charge-off of the specific reserve on one relationship in the amount of $926,000. The remaining decrease was the result of receiving payments on the five relationships that made up this category of loans, of which one loan made up 45.0 percent of the total.

Our non-accrual commercial real estate category decreased by $184,000 during the third quarter due to a charge-off in the amount of $119,000 and the transition of one loan into OREO in the amount of $60,000. This category was comprised of three relationships as of September 30, 2012.

Our non-accrual residential category decreased by $131,000 during the third quarter of 2012 due to two loans that have or will be moving to OREO. One of these loans was charged-down to fair value by $43,000 and foreclosure will likely occur in the fourth quarter of 2012. The other loan moved into OREO during the third quarter causing a decrease by the balance of the loan in the amount of $79,000. This category is comprised of six relationships with two relationships making up 76.4 percent of the total.

Our non-accrual home equity category decreased by $748,000 from March 31, 2012 and had no loans in it at June 30, 2012 or at September 30, 2012. Of the two loans that made up this category in the first quarter, one was charged-off in the amount of $338,000 and the other was resolved and returned to accruing status.

OREO and other impaired assets decreased by $187,000 during the third quarter as a result of commercial real estate property sales in the amount of $399,000 offset by the addition of four residential real estate properties totaling $82,000.  Also offsetting the decrease in this category was the addition of $130,000, which represents the fair value of the Company's participation in an aircraft lease that has expired. During the third quarter, the value of the asset decreased and was written down from $261,000 to $130,000.

Our classified assets, defined as substandard, non-accrual loans, impaired investments, and OREO, increased by $6.8 million during the third quarter and totaled $37.1 million at September 30, 2012. Our classified assets were 44.0 percent of tier 1 capital plus ALLL (classified assets ratio) as of September 30, 2012. Our classified assets ratio at June 30, 2012 was 36.5 percent and was 44.3 percent at September 30, 2011. The increase relates primarily to previously identified loans that were downgraded from special mention to substandard during the quarter, including one relationship totaling $5.2 million. Our total "watch list" loans was $41.5 million at September 30, 2012, a decrease of $4.0 million from the second quarter and a $12.4 million decrease from December 31, 2011. Watch list loans now comprise 9.1 percent of the total loan portfolio. The watch list comprises all non "pass" rated credits, including substandard and classified.

"While our classified assets did increase during the third quarter, we are encouraged by the decline in our total watch list loans," stated Rick Sawyer, Chief Financial Officer of Tower Financial Corporation. "We believe this is a good indication that we have stabilized the asset quality in our current portfolio, allowing us to focus on working through legacy credits that have been and still are rated special mention and classified."

The allowance for loan losses was $8.5 million at September 30, 2012, a decrease of $493,000 from the $9.0 million reported at June 30, 2012. The quarterly decrease was the net result of loan loss provision of $618,000, offset by $1.1 million of net charge-offs. The year to date loan loss provision was $2.3 million, offset by $3.2 million in net charge-offs. The allowance for loan losses was 1.87 percent of total loans at September 30, 2012, a decrease from 2.03 percent at December 31, 2011 and from 2.34 percent at September 30, 2011.

Balance Sheet

Company assets were $649.5 million at September 30, 2012, a decrease of $51.2, or 7.3 percent from December 31, 2011. The significant decrease stems from two large December short-term deposits that increased our assets by approximately $48 million as of the end of the year. As described in our fourth quarter earnings release and annual report on form 10-K, these deposits were short-term in nature and, as expected, left the Bank by the end of January 2012. Taking these short-term deposit reductions into account, our assets decreased by approximately $3.2 million during the first nine months of 2012. 

Our total loans at September 30, 2012 were $457.9 million, compared to $462.6 million at December 31, 2011. The decrease of $4.7 million, or 1.0 percent, came primarily from commercial loans and home equity loans, which decreased by $9.0 million and $2.3 million respectively. These decreases were offset by increases of $4.3 million in commercial real estate loans and $3.4 million in residential mortgage loans. 

Our securities available for sale at September 30, 2012 were $135.0 million, an increase of $6.4 million from December 31, 2011. Securities available for sale now comprise 20.8 percent of total assets. We have been strategically increasing the size of our investment portfolio to help combat future margin compression and a reduction in our loan portfolio as we continue to clean up our asset quality. We are focusing on preserving our current level of net interest income as prudently as possible. The increase in the portfolio will most likely result in the further compression of our net interest margin and an increase in our overall assets.

Our total deposits at September 30, 2012 were $530.3 million compared to $602.0 million at December 31, 2011. As described above, we received two large, short-term, deposits of approximately $48 million in December 2011 that increased our deposit totals. Therefore, our adjusted deposits at December 31, 2011 were approximately $554.0 million. Excluding these short-term deposits, our deposit portfolio decreased by approximately $24 million during the first nine months of 2012. The decrease is primarily due to a reduction in brokered CD's of $30.1 million, offset by an increase of $6.3 million in in-market deposits. In-market deposit growth was led by our HSA product which grew $13.6 million during the first nine months of 2012. Offsetting this growth was a decline in both jumbo and non-jumbo CD's. Our core deposits at September 30, 2012 were $439.5 million and comprised 82.9 percent of total deposits.   

Our borrowings were $45.0 million at September 30, 2012 and were comprised of $17.5 million in trust preferred debt and $27.5 million in borrowings from the Federal Home Loan Bank of Indianapolis ("FHLBI"). 

Shareholders' equity was $67.1 million at September 30, 2012, an increase of 8.1 percent from the $62.1 million reported at December 31, 2011. Affecting the year to date increase in stockholders' equity was net income of $4.0 million, $277,300 of additional paid in capital from the accounting treatment for restricted stock vesting and issuance of shares related to the long-term incentive plan, and an increase of $1.0 million in unrealized gains, net of tax, on securities available for sale. Currently, we have 4,876,994 common shares outstanding. Tangible book value at September 30, 2012 was $13.77 per common share.

Operating Statement

Our total revenue, consisting of net interest income and noninterest income, was $7.8 million for the third quarter of 2012, roughly the same as reported for the second quarter 2012. Net interest income for the third quarter of 2012 was $5.6 million, a decrease of $91,000 from the second quarter of 2012. The quarter over quarter decrease in our net interest income was primarily the result of an 11 basis point decline in our net interest margin. This reduction in our margin came from yield reductions on earning assets. Our yield on loans dropped to 4.74 percent during the third quarter from the 4.84 percent reported for the second quarter, while the yield on our investment portfolio dropped to 3.61 percent from 3.92 percent quarter over quarter. This was offset slightly by our continued reduction in our cost of funds, which decreased to 0.73 percent for the third quarter 2012 from the 0.78 percent reported for the second quarter. We expect this trend to continue due to the extended low rate environment and limited reinvestment and loan opportunities. As mentioned in our balance sheet section, we will continue to prudently increase the investment portfolio as we focus on maintaining our current level of net interest income.

Non-interest income was $2.2 million for the third quarter of 2012, which represented 28.2 percent of total revenue. This is an increase of $77,000 from the second quarter of 2012. The increase relates primarily to an increase of $76,000 in trust and brokerage fee income. Trust and brokerage assets under management were $675.2 million at September 30, 2012, an increase of $37.4 million or 5.9 percent, from the $637.8 million reported as June 30, 2012. Mortgage production continues at a high pace with $29.3 million in closings with $20.0 million of that production being originated for sale for the third quarter, which generated $477,000 of fee income compared to the $375,000 reported for the second quarter 2012. Other fee categories remained relatively flat quarter over quarter.

Non-interest expenses of $5.0 million remained flat quarter over quarter. There were no significant fluctuations in the individual expense categories from the second quarter 2012. We expect this trend to continue for the remainder of the year.

ABOUT THE COMPANY

Headquartered in Fort Wayne, Indiana, Tower Financial Corporation is a financial services holding company with one subsidiary; Tower Bank & Trust Company (Tower Bank), a community bank headquartered in Fort Wayne. Tower Bank provides a wide variety of financial services to businesses and consumers through its six full-service financial centers in Fort Wayne, and one in Warsaw, Indiana. Tower Bank has a wholly-owned subsidiary, Tower Trust Company, which is a state-chartered wealth services firm doing business as Tower Private Advisors. Tower Bank also markets under the HSA Authority brand, which provides Health Savings Accounts to clients in 50 states. Tower Financial Corporation's common stock is listed on the NASDAQ Global Market under the symbol "TOFC." For further information, visit Tower's web site at www.towerbank.net

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements that, by their nature, are predictive and are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about our company.

These forward-looking statements are intended to be covered by the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance, speak only as of this date, and involve risks and uncertainties related to our banking business or to general business and economic conditions that may affect our business, which may cause actual results to turn out differently. More detailed information about such risks and uncertainties may be found in our most recent Annual Report on Form 10-K, or, if applicable, in subsequently filed Forms 10-Q quarterly reports, under the captions "Forward-Looking Statements" and "Risk Factors," which we file from time to time with the Securities and Exchange Commission. These reports are available on the Commission's website at www.sec.gov, as well as on our website at www.towerbank.net.

     
Tower Financial Corporation    
Consolidated Balance Sheets    
At September 30, 2012 and December 31, 2011    
  (unaudited)  
  September 30 December 31
  2012 2011
ASSETS    
Cash and due from banks  $ 10,333,854  $ 60,753,268
Short-term investments and interest-earning deposits  514,469  3,260,509
Federal funds sold  2,787,294  3,258,245
Total cash and cash equivalents  13,635,617  67,272,022
     
Interest bearing deposits  457,000  450,000
Securities available for sale, at fair value  135,044,138  128,619,951
FHLBI and FRB stock  3,807,700  3,807,700
Loans Held for Sale  7,008,138  4,930,368
     
Loans  457,864,803  462,561,174
Allowance for loan losses  (8,539,180)  (9,408,013)
Net loans  449,325,623  453,153,161
     
Premises and equipment, net  8,903,340  9,062,817
Accrued interest receivable  2,363,387  2,675,870
Bank Owned Life Insurance  17,526,430  17,084,858
Other Real Estate Owned  2,245,003  3,129,231
Prepaid FDIC Insurance  1,058,911  1,551,133
Other assets  8,090,441  8,944,145
     
Total assets  $ 649,465,728  $ 700,681,256
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
LIABILITIES    
Deposits:    
Noninterest-bearing  $ 110,088,104  $ 169,757,998
Interest-bearing  420,189,726  432,278,838
Total deposits  530,277,830  602,036,836
     
Fed Funds Purchased  --   -- 
Short-term borrowings  3,962,905  -- 
Federal Home Loan Bank advances  23,500,000  12,000,000
Junior subordinated debt  17,527,000  17,527,000
Accrued interest payable  118,010  2,148,424
Other liabilities  6,939,975  4,871,924
Total liabilities  582,325,720  638,584,184
     
STOCKHOLDERS' EQUITY    
Preferred stock, no par value, 4,000,000 shares authorized; no shares issued and outstanding  --   -- 
Common stock and paid-in-capital, no par value, 6,000,000 shares authorized; 4,941,994 and 4,918,136 shares issued at September 30, 2012 and December 31, 2011, respectively; and 4,876,994 and 4,853,136 shares outstanding at September 30, 2012 and December 31, 2011, respectively  44,820,086  44,542,795
Treasury stock, at cost, 65,000 shares at September 30, 2012 and December 31, 2011  (884,376)  (884,376)
Retained earnings  18,817,231  15,070,115
Accumulated other comprehensive income (loss), net of tax of $2,260,004 at September 30, 2012 and $1,735,307 at December 31, 2011  4,387,067  3,368,538
Total stockholders' equity  67,140,008  62,097,072
     
Total liabilities and stockholders' equity  $ 649,465,728  $ 700,681,256
         
         
Tower Financial Corporation        
Consolidated Statements of Operations        
For the three and nine months ended September 30, 2012 and 2011      
(unaudited)        
  For the Three Months Ended For the Nine Months ended
  September 30 September 30
  2012 2011 2012 2011
Interest income:        
Loans, including fees  $ 5,525,196  $ 6,272,290  $ 16,764,224  $ 18,838,107
Securities - taxable  441,668  536,123  1,466,913  1,748,639
Securities - tax exempt  486,401  428,152  1,465,887  1,240,236
Other interest income  6,696  4,651  36,533  25,605
Total interest income  6,459,961  7,241,216  19,733,557  21,852,587
Interest expense:        
Deposits  714,875  1,302,033  2,516,593  4,013,978
Fed Funds Purchased  159  227  257  612
FHLB advances  40,469  50,376  117,234  185,212
Trust preferred securities  89,854  204,540  366,799  605,107
Total interest expense  845,357  1,557,176  3,000,883  4,804,909
         
Net interest income  5,614,604  5,684,040  16,732,674  17,047,678
Provision for loan losses  618,000  900,000  2,293,000  3,245,000
         
Net interest income after provision for loan losses  4,996,604  4,784,040  14,439,674  13,802,678
         
Noninterest income:        
Trust and brokerage fees  998,715  803,317  2,866,570  2,505,701
Service charges  257,509  262,668  828,370  813,292
Mortgage banking income  477,319  530,391  1,082,140  798,774
Gain/(Loss) on sale of securities  9,110  331,248  75,809  776,753
Net debit card interchange income  162,432  153,735  563,933  453,674
Bank owned life insurance income  150,082  146,711  441,572  421,042
Impairment on AFS securities  (688)  (22,758)  (688)  (149,045)
Other fees  147,792  166,963  485,872  471,545
Total noninterest income  2,202,271  2,372,275  6,343,578  6,091,736
         
Noninterest expense:        
Salaries and benefits  2,867,136  2,785,886  8,514,808  8,039,152
Occupancy and equipment  640,569  608,867  1,891,978  1,817,907
Marketing  111,882  107,450  307,187  331,738
Data processing  301,914  311,439  991,534  1,012,142
Loan and professional costs  342,182  459,979  1,018,604  1,241,634
Office supplies and postage  51,360  57,505  160,365  170,017
Courier service  58,341  56,097  175,674  166,926
Business Development  90,535  99,801  331,147  326,428
Communication Expense  62,489  50,422  168,235  143,389
FDIC Insurance Premiums  138,754  261,642  521,709  1,118,413
OREO Expenses  15,123  280,690  449,022  638,133
Other expense  338,926  328,092  763,069  786,969
Total noninterest expense  5,019,211  5,407,870  15,293,332  15,792,848
         
Income/(loss) before income taxes/(benefit)  2,179,664  1,748,445  5,489,920  4,101,566
Income taxes expense/(benefit)  617,028  423,860  1,474,570  904,509
         
Net income/(loss)  $ 1,562,636  $ 1,324,585  $ 4,015,350  $ 3,197,057
Less: Preferred Stock Dividends  --   --   --   -- 
Net income/(loss) available to common shareholders  $ 1,562,636  $ 1,324,585  $ 4,015,350  $ 3,197,057
         
Basic earnings/(loss) per common share  $ 0.32  $ 0.27  $ 0.83  $ 0.66
Diluted earnings/(loss) per common share  $ 0.32  $ 0.27  $ 0.83  $ 0.66
Average common shares outstanding  4,874,660  4,852,761  4,860,363  4,814,746
Average common shares and dilutive        
 potential common shares outstanding  4,874,660  4,852,761  4,860,363  4,852,852
         
Total Shares outstanding at end of period  4,876,994  4,852,761  4,876,994  4,852,761
Dividends declared per common share  $ 0.055  $ --   $ 0.055  $ -- 
     
     
Tower Financial Corporation     
Consolidated Financial Highlights     
     
(unaudited)    
  Quarterly Year-To-Date
  3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr    
($ in thousands except for share data) 2012 2012 2012 2011 2011 2011 2011 2012 2011
                   
EARNINGS                  
Net interest income $ 5,615 5,706 5,412 5,707 5,684 5,721 5,643  16,733  17,048
Provision for loan loss $ 618 925 750 975 900 1,125 1,220  2,293  3,245
NonInterest income $ 2,202 2,126 2,016 2,059 2,372 2,072 1,647  6,344  6,091
NonInterest expense $ 5,019 5,025 5,249 5,826 5,408 5,292 5,093  15,293  15,793
Net income/(loss) $ 1,563 1,365 1,088 3,422 1,325 1,090 783  4,016  3,198
Basic earnings per share $ 0.32 0.28 0.22 0.71 0.27 0.23 0.16  0.83  0.66
Diluted earnings per share $ 0.32 0.28 0.22 0.71 0.27 0.22 0.16  0.83  0.66
Average shares outstanding 4,874,660 4,853,136 4,853,136 4,853,645 4,852,761 4,835,510 4,754,892  4,860,363 4,814,746
Average diluted shares outstanding 4,874,660 4,853,136 4,853,136 4,853,645 4,852,761 4,853,035 4,852,759  4,860,363 4,852,852
                   
PERFORMANCE RATIOS                  
Return on average assets * 0.96% 0.84% 0.65% 2.02% 0.80% 0.66% 0.48% 0.81% 0.65%
Return on average common equity * 9.43% 8.53% 6.92% 23.22% 9.24% 7.92% 5.92% 8.31% 7.74%
Net interest margin (fully-tax equivalent) * 3.87% 3.98% 3.76% 3.90% 3.80% 3.83% 3.83% 3.87% 3.82%
Efficiency ratio 64.21% 64.16% 70.67% 75.02% 67.13% 67.91% 69.85% 66.27% 68.25%
Full-time equivalent employees  154.50  157.00  158.00  151.00  158.50  157.00  150.75  154.50  158.50
                   
CAPITAL                  
Equity to assets 10.34% 9.97% 9.76% 8.86% 8.80% 8.47% 8.19% 10.34% 8.80%
Regulatory leverage ratio 12.00% 11.71% 11.13% 10.97% 11.09% 10.82% 10.59% 12.00% 11.09%
Tier 1 capital ratio 15.20% 14.87% 14.74% 13.91% 14.02% 13.66% 13.27% 15.20% 14.02%
Total risk-based capital ratio 16.46% 16.13% 15.99% 15.16% 15.28% 14.92% 14.53% 16.46% 15.28%
Book value per share $ 13.77 13.38 13.06 12.79 11.97 11.54 11.11 13.77  11.97
Cash dividend per share $ 0.055 0.000 0.000 0.000 0.000 0.000 0.000 0.055 0.000
                   
ASSET QUALITY                  
Net charge-offs $ 1,111 1,001 1,050 1,632 2,852 1,015 1,802 3,162  5,669
Net charge-offs to average loans * 0.95% 0.86% 0.91% 1.38% 2.34% 0.84% 1.49% 0.91% 1.56%
Allowance for loan losses $ 8,539 9,032 9,108 9,408 10,065 12,017 11,908 8,539 10,065
Allowance for loan losses to total loans 1.86% 1.95% 1.99% 2.03% 2.14% 2.46% 2.43% 1.86% 2.14%
Other real estate owned (OREO) $ 2,245 2,562 2,878 3,129 3,827 3,729 4,741 2,245 3,827
Non-accrual Loans  $ 12,083  13,275  14,375  8,682  9,913  9,663  12,738 2,245 3,827
90+ Day delinquencies $ 913 472 902 2,007 1,028 2,123 2,873 12,083 9,913
Restructured Loans  $ 4,242  3,692  1,802  1,805  1,810  1,822  2,120 4,242 1,810
Total Nonperforming Loans  14,553  14,107  15,277  12,494  12,751  13,608  17,731 14,553 12,751
Impaired Securities (Market Value)  317  307  314  331  332  386  402 317 332
Other Impaired Assets (Dougherty)  130  --   --   --   --   --   --  130 0
Total Nonperforming Assets  17,245  16,976  18,469  15,954  16,910  17,723  22,874 17,245 16,910
NPLs to Total loans 3.18% 3.04% 3.34% 2.70% 2.71% 2.78% 3.62% 3.18% 2.71%
NPAs (w/o 90+) to Total assets 2.51% 2.53% 2.71% 1.99% 2.41% 2.36% 3.01% 2.51% 2.41%
NPAs+90 to Total assets 2.66% 2.61% 2.84% 2.28% 2.56% 2.68% 3.44% 2.66% 2.56%
                   
END OF PERIOD BALANCES                  
Total assets $ 649,466 651,239 649,343 700,681 659,725 661,015 664,117 649,466 659,725
Total earning assets $ 607,484 601,014 601,190 606,888 602,291 621,981 621,273 607,484 602,291
Total loans $ 457,865 463,833 457,260 462,561 470,877 488,694 489,250 457,865 470,877
Total deposits $ 530,278 551,486 552,191 602,037 565,937 547,896 575,525 530,278 565,937
Stockholders' equity $ 67,140 64,934 63,374 62,097 58,071 56,015 54,413 67,140 58,071
                   
AVERAGE BALANCES                  
Total assets $ 647,999 650,713 671,686 671,384 656,408 660,860 664,564 656,799 660,611
Total earning assets $ 603,004 603,119 605,429 606,775 616,024 620,723 618,266 603,851 618,338
Total loans $ 464,046 464,802 462,661 467,932 483,442 486,360 489,999 463,836 486,600
Total deposits $ 544,142 550,441 572,134 576,898 559,615 558,198 577,654 555,572 565,156
Stockholders' equity $ 65,927 64,180 63,021 58,468 56,914 55,213 53,662 64,376 55,263
                   
* 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
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