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Tower Financial Corporation Reports First Quarter Net Income of $2.0 Million

FORT WAYNE, Ind., April 25, 2013 (GLOBE NEWSWIRE) -- Tower Financial Corporation (Nasdaq:TOFC) reported net income of $2.0 million or $0.43 per diluted share for the first quarter of 2013, compared with net income of $1.1 million, or $0.22 per diluted share, reported for the first quarter of 2012.

Our first quarter highlights include:

  • Record pre-tax earnings of $2.8 million with "core" earnings comprising $2.3 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).
  • Increased trust and brokerage assets under management by approximately $41 million, or 6.0 percent, to $713 million during the first quarter of 2013.
  • Health Savings Accounts ("HSAs") grew by $18.5 million, or 23.3 percent during the first quarter of 2013 and were $97.8 million as of March 31, 2013 with more than 50,000 accounts.
  • Repurchased 70,000 shares of the Company's common stock at an average price of $12.32 per share during the first quarter of 2013. This brings the total shares repurchased under our program announced December 10, 2012 to 211,850 shares at an average price of $12.26 per share compared to our quarter end book value of $13.60 per share.
  • Decreased classified assets by $5.0 million during the first quarter of 2013.

Mike Cahill, President and Chief Executive Officer of Tower Financial Corporation stated, "It is always gratifying to have a record quarter, and to have the highest pre-tax earnings in our company's history is something we are very proud of. We continue to work hard in this challenging low interest rate environment to find ways to improve our shareholders' value, while maintaining focus on our clients."

Capital

During the first quarter of 2013, our tier 1 capital increased by $700,000 as a result of net income for the quarter in the amount of $2.0 million offset by the payment of dividends and repurchasing common stock. During the quarter, we issued dividends to our shareholders in the amount of $328,000, or $0.07 per common diluted share, and repurchased 70,000 shares of common stock at a cost of $862,000. The increase in tier 1 capital resulted in an increase in our regulatory capital ratios to 15.0 percent for tier 1 capital and 16.3 percent for total risk based capital at March 31, 2013. Our regulatory capital ratios continue to remain significantly above the "well-capitalized" levels of 6 percent for tier 1 capital and 10 percent for total risk-based capital. Tier 1 capital was 14.7 percent at December 31, 2012 and 14.7 percent at March 31, 2012. Total risk-based capital was 15.9 percent at December 31, 2012 and 16.0 percent at March 31, 2012. Our leverage capital was 11.3 percent at March 31, 2013, more than double the regulatory requirement of 5 percent to be considered "well-capitalized".

The following table provides the current capital position as of March 31, 2013 in both dollars and percentages, compared to the minimum amounts required per regulatory standards for "well-capitalized" institutions.

Minimum Dollar Requirements Regulatory Tower
($000's omitted) Minimum (Well-Capitalized) 3/31/13 Excess
Tier 1 Capital / Risk Assets $30,469 $76,370 $45,901
Total Risk Based Capital / Risk Assets $50,782 $82,734 $31,952
Tier 1 Capital / Average Assets (Leverage) $33,928 $76,370 $42,442
Minimum Percentage Requirements Regulatory Tower
Minimum (Well-Capitalized) 3/31/13
Tier 1 Capital / Risk Assets 6% or more 15.04%
Total Risk Based Capital / Risk Assets 10% or more 16.29%
Tier 1 Capital / Quarterly Average Assets 5% or more 11.25%

Asset Quality

Our nonperforming assets were $17.1 million, or 2.5 percent of total assets as of March 31, 2013. This compares with $18.8 million at December 31, 2012 and $18.5 million at March 31, 2012. Our net charge-offs were $350,000, or 0.3 percent of average loans outstanding, for the first quarter of 2013 compared to $451,000, or 0.4 percent of average outstanding loans, for the fourth quarter of 2012. Net charge-offs for the first quarter of 2012 were $1.1 million, or 0.9 percent of average loans outstanding. During the first quarter of 2013, our loan loss provision/(benefit) resulted in income in the amount of $275,000 compared to an expense of $200,000 for the fourth quarter of 2012 and an expense of $750,000 for the first quarter of 2012.

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

($000's omitted) 3/31/13 12/31/12 9/30/12 6/30/12 3/31/12
Non-Accrual loans
Commercial $ 7,758 $ 8,897 $ 7,112 $ 6,988 $ 7,213
Acquisition & Development 3,912 2,789 2,175 3,176 3,268
Commercial Real Estate 749 753 764 948 1,515
Residential Real Estate 2,124 2,447 2,032 2,163 1,630
Home Equity 82 82 -- -- 748
Total Non-accrual loans 14,625 14,968 12,083 13,275 14,374
Trouble-debt restructured (TDR) * 446 1,645 1,557 360 --
OREO & Other impaired assets 1,922 2,038 2,375 2,562 2,878
Delinquencies greater than 90 days 133 110 913 472 902
Impaired Securities -- -- 317 307 314
Total Non-Performing Assets $ 17,126 $ 18,761 $ 17,245 $ 16,976 $ 18,468
Allowance for Loan Losses (ALLL) $ 7,664 $ 8,289 $ 8,539 $ 9,032 $ 9,108
ALLL / Non-accrual loans 52.4% 55.4% 70.7% 68.0% 63.4%
* Non-performing TDR's

The $1.6 million decrease in nonperforming assets was due to reclassifying a commercial TDR loan in the amount of $1.2 million from nonperforming to performing status during the first quarter of 2013. This loan continues to be classified as a TDR and evaluated for impairment, but was moved to performing as a result of a proven payment history per regulatory guidelines. The remaining decrease was the result of two large commercial loan payments totaling $842,000 and a commercial loan charge-off in the amount of $468,000. Subsequent to the end of the first quarter of 2013, we received $2.5 million in April 2013 to pay-off one commercial loan and one acquisition and development loan classified as nonaccrual at March 31, 2013.

When a loan has deteriorated to the point that it is classified as impaired and/or placed on nonaccrual status, a specific reserve or charge-off is recommended utilizing one of three impairment measurement methods (present value of expected cash flows, fair value of collateral, or observable market price). A charge-off will be taken in the place of a specific reserve at the point when facts and recent events support a reliable estimate of the extent and probability of loss. Our ALLL to nonaccrual ratio has decreased as a result of approximately $5.0 million in charge-offs over approximately the past five years on several long-standing nonaccrual relationships to get to the remaining nonaccrual loan balance of $14.6 million at March 31, 2013.

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

Balance Resolutions/ Balance
($ in thousands) 12/31/12 Additions Paydowns Other 3/31/13
Non-accrual Loans
Commercial $ 8,897 $ 340 $ (1,006) $ (473) $ 7,758
Acquisition & Development 2,789 1,180 (57) -- 3,912
Commercial Real Estate 753 -- (4) -- 749
Residential Real Estate 2,447 -- (323) -- 2,124
Home Equity 82 -- -- -- 82
Total Non-accrual loans 14,968 1,520 (1,390) (473) 14,625
Troubled Debt Restructured 1,645 -- -- (1,199) 446
OREO & Other impair assets 2,038 -- (75) (41) 1,922
Delinquencies Greater than 90 days 110 75 (52) -- 133
Impaired Securities -- -- -- -- --
Total Non-Performing Assets $ 18,761 $ 1,595 $ (1,517) $ (1,713) $ 17,126

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

12/31/12 Additions Subtractions 3/31/13
Non-accrual Loans
Commercial 12 2 (1) 13
Acquisition & Development 5 1 -- 6
Commercial Real Estate 3 -- -- 3
Residential Real Estate 8 -- (2) 6
Home Equity 2 -- -- 2
Total Non-accrual loans 30 3 (3) 30
Troubled Debt Restructured 2 -- (1) 1
OREO & Other impair assets 10 -- -- 10
Delinquencies Greater than 90 days 3 1 (1) 3
Impaired Securities -- -- -- --
Total Non-Performing Assets 45 4 (5) 44

Our classified assets, defined as substandard, non-accrual loans, impaired investments, and OREO, decreased by $5.0 million during the first quarter and totaled $30.9 million at March 31, 2013 compared to $35.9 million at December 31, 2012. Our classified assets were 38.1 percent of tier 1 capital plus ALLL (classified assets ratio) as of March 31, 2013 compared to 44.3 percent at December 31, 2012. The decrease represents pay-offs or pay downs from five commercial lending relationships in the amount of $2.1 million and improvements in two commercial lending relationship warranting upgrades to non-classified, pass-rated loans in the amount of $2.0 million. Our total "watch list" loans were $34.6 million at March 31, 2013 compared to $39.4 million at December 31, 2012, a decrease of $4.8 million. Watch list loans now comprise 7.7 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:

3/31/2013 12/31/2012 9/30/2012 6/30/2012 3/31/2012
Watch $ 1,871 $ 1,232 $ 1,001 $ 3,951 $ 7,123
Special mention 4,641 5,493 6,706 14,889 20,365
Total non-classified loans 6,512 6,725 7,707 18,840 27,488
Substandard 13,645 18,293 21,651 13,505 7,433
Doubtful/Loss* 14,418 14,393 12,177 13,191 14,361
Total classified loans 28,063 32,686 33,828 26,696 21,794
Total watch list loans $ 34,575 $ 39,411 $ 41,535 $ 45,536 $ 49,282
Watchlist loan/total loans 7.68% 8.75% 9.07% 9.82% 10.78%
Total classified assets $ 30,931 $ 35,894 $ 37,145 $ 30,368 $ 28,759
*All loans in this risk rating are non-accrual.

Additionally, as mentioned earlier, we received payoffs in April 2013 for one commercial loan and one commercial real estate loan included in the Doubtful/Loss category totaling $2.5 million. These transactions would reduce our classified assets ratio to 35.0 percent.

The allowance for loan losses was $7.7 million at March 31, 2013, a decrease of $625,000 from the $8.3 million reported at December 31, 2012. The quarterly decrease was primarily the result of one commercial loan charge-off in the amount of $468,000. Also impacting the allowance during the quarter was a loan loss provision credit of $275,000 and $122,000 of recoveries. The allowance for loan losses was 1.74 percent of total loans at March 31, 2013, a decrease from 1.84 percent at December 31, 2012 and from 1.99 percent at March 31, 2012.

Balance Sheet

Our assets were $679.1 million at March 31, 2013, a decrease of $4.9 million, or 0.7 percent from December 31, 2012. The decrease is the result of a $9.8 million decrease in net loans offset by an increase in available-for-sale securities in the amount of $2.8 million. Deposits increased $24.3 million, or 4.3 percent, to $585.3 million at March 31, 2013. The increase was primarily derived from our HSAs, which increased by $18.5 million. The growth in deposits resulted in a decrease in short-term borrowings in the amount of $25.9 million.

Our total loans at March 31, 2013 were $440.1 million, compared to $450.5 million at December 31, 2012. The decrease in total loans of $10.4 million, or 2.3 percent, was comprised of decreases in our residential real estate loan, commercial real estate loan, and home equity loan categories, which decreased by $4.8 million, $2.2 million, and $1.8 million, respectively. The lending environment continues to be challenging as business customers are using excess cash reserves to pay down loan balances.

Our securities available for sale at March 31, 2013 were $177.2 million, an increase of $2.8 million from December 31, 2012. Securities available for sale now comprise 26.1 percent of total assets. We have been strategically increasing the size of our investment portfolio to help preserve our net interest income as prudently as possible. Since March 31, 2012, securities available for sale have increased $48.1 million. The increase in the portfolio will help maintain net interest income, but will most likely result in the further compression of our net interest margin and an increase in our overall assets.

Our total deposits at March 31, 2013 were $585.3 million compared to $561.0 million at December 31, 2012. HSAs continue to be the primary driver of deposit growth with an increase of $18.5 million from December 31, 2012. As expected in January of 2013, we received annual employer-funded contributions to HSAs, which is the primary reason for the increase in this deposit category annually.

Also impacting the increase in total deposits was the increase in brokered certificates of deposit in the amount of $9.0 million. This deposit category was strategically increased to fund the remaining portion of the $25.0 million municipal bond leverage strategy. As described in our 2012 Annual Report filed on Form 10-K, this strategy was implemented in the fourth quarter of 2012 to help supplement net interest income. This strategy will provide approximately $250,000 annually to our net interest income, but will cause a decrease in net interest margin. Offsetting the increases in HSAs and brokered certificates of deposit was a decrease in money market accounts in the amount of $6.5 million.

Our borrowings were $26.0 million at March 31, 2013 and were comprised of $17.5 million in trust preferred debt and $8.5 million in borrowings from the Federal Home Loan Bank of Indianapolis ("FHLBI"). This represents a decrease of $28.9 million from our borrowings at the FHLBI at December 31, 2012, as we utilized excess cash from loan pay downs and deposit growth to reduce our borrowings.

Our shareholders' equity was $63.5 million at March 31, 2013, a decrease of 0.4 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 $1.1 million from December 31, 2012. Additionally, we paid a dividend in the amount of $0.07 per common share, or $328,000, and repurchased 70,000 shares of our common stock at average price of $12.32 per share during the first quarter of 2013, or $862,000. Offsetting the decreases in shareholders' equity was net income of $2.0 million. Currently, we have 4,665,144 common shares outstanding. Tangible book value at March 31, 2013 was $13.60 per common share, an increase of 1.0 percent from the $13.46 reported at December 31, 2012.

Income Statement

Our total revenue, consisting of net interest income and noninterest income, was $7.8 million for the first quarter of 2013 compared to $7.6 million for the fourth quarter of 2012 and $7.4 million for the first quarter of 2012. The $141,000 increase from the fourth quarter of 2012 was the result of an increase in noninterest income of $527,000 offset by a decrease in net interest income of $386,000.

Net interest income decreased during the first three months of 2013 as a result of a decrease in the net interest margin from the three-month period ending December 31, 2012. The primary driver of the decrease was a decrease in average loan balances coupled with a decrease in loan yield from 4.63 percent at December 31, 2012 to 4.40 percent at March 31, 2013. Local competition continues to drive loan rates lower due to a lack of borrowing demand compounded by an abundance of lending institutions in our marketplace. Interest income from long-term investments only increased $17,000, or 1.8 percent, from the fourth quarter of 2012 due to an increase in average long-term investments of $19.4 million offset by a decrease in the tax equivalent investment yield from 2.99 percent at December 31, 2012 to 2.91 percent at March 31, 2013. The loss of interest income was offset by our continued reduction in our cost of funds, which decreased to 0.58 percent for the first quarter of 2013 from the 0.64 percent reported for the fourth quarter of 2012. Due to the extended low interest rate environment and the margin compression that is impacting the entire industry, we continue to focus on net interest income versus the net interest margin. We expect this trend to continue as we move through 2013.

Noninterest income was $2.7 million compared to $2.2 million for the fourth quarter of 2012 and $2.0 million for the first quarter of 2012. Driving the increase in noninterest income was an increase in the gain on sale of securities, which increased $335,000 from the amount reported in this category during the fourth quarter of 2012. These gains were taken early in the quarter as a result of the sold securities either being recently downgraded or no longer required to be pledged as collateral. In addition to the gains on securities available for sale, we experienced increases in trust and brokerage fees of $96,000 and net debit card interchange income of $73,000 from the fourth quarter of 2012. Our trust and brokerage fee income increased as a result of an increase of $40.6 million in trust and brokerage assets under management from December 31, 2012 to March 31, 2013. Net debit card interchange income increased as a direct result of an increase in debit cards outstanding from March 31, 2012 by 15,000 and from December 31, 2012 by 3,600. The other income category also increased from the first quarter of 2012 and the fourth quarter of 2012 primarily due to an increase in foreign exchange transaction fees and letter of credit activity. These fees are not recurring and will vary based on the needs of our customers.

Noninterest expenses were $5.2 million for the first quarter of 2013, compared to $5.6 million for the fourth quarter of 2012 and $5.2 million for the first quarter of 2012. The decrease in the first quarter of 2013 from the fourth quarter of 2012 was primarily due to decreases in Other Real Estate Owned ("OREO") expenses of $210,000 and loan and professional costs of $185,000. OREO expenses continue to decrease as the number of properties in this category decrease. The market prices of these properties have also stabilized resulting in fewer write-downs to fair value compared to the last couple of years. Our loan and professional costs have also decreased compared to the fourth quarter of 2012 as a result of decreases in accounting fees and expenses related to bad debt collections. Offsetting these decreases was an increase of $97,000 in salaries and benefits expenses from the fourth quarter of 2012 to the first quarter of 2013. This increase was the result of an increase in the profit sharing accrual, which is directly impacted by the improvement in our quarterly earnings. Also during the first quarter, we experienced a fraud loss of $176,000 related to cashier's checks, which is expected to be partially or fully recovered during the second or third quarter of 2013. All other expenses remained relatively flat from the prior quarter.

Income tax expense increased $693,000 in the first quarter of 2013 from the fourth quarter of 2012 and $490,000 from the first quarter of 2012. The income tax expense recorded in the fourth quarter of 2012 was lower than the first quarter of 2013 as a result of reversing the federal and state valuation allowances on the impairment previously recorded on one other-than-temporarily-impaired security. This security was sold during the fourth quarter of 2012 resulting in the reversal of the valuation allowance of approximately $375,000. The reversal of the valuation allowance lowered the effective tax rate for the fourth quarter of 2012 to 7.4 percent compared to the effective tax rates during the first quarter of 2013 and the first quarter of 2012 of 29.3 percent and 23.9 percent, respectively.

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 March 31, 2013 and December 31, 2012
(unaudited)
March 31 December 31
2013 2012
ASSETS
Cash and due from banks $ 11,830,091 $ 11,958,507
Short-term investments and interest-earning deposits 2,322,738 159,866
Federal funds sold 3,355,795 2,727,928
Total cash and cash equivalents 17,508,624 14,846,301
Interest bearing deposits 457,000 457,000
Trading Securities, at fair value 202,550 --
Securities available for sale, at fair value 177,202,369 174,383,499
FHLBI and FRB stock 3,807,700 3,807,700
Loans Held for Sale 4,761,678 4,933,299
Loans 440,074,872 450,465,610
Allowance for loan losses (7,663,900) (8,288,644)
Net loans 432,410,972 442,176,966
Premises and equipment, net 8,873,535 8,904,214
Accrued interest receivable 2,555,430 2,564,503
Bank owned life insurance (BOLI) 17,817,577 17,672,783
Other real estate owned (OREO) 1,833,377 1,908,010
Prepaid FDIC insurance 788,371 925,337
Other assets 10,849,401 11,393,469
Total assets $ 679,068,584 $ 683,973,081
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 110,715,440 $ 108,147,229
Interest-bearing 474,561,655 452,860,109
Total deposits 585,277,095 561,007,338
Short-term borrowings -- 9,093,652
Federal Home Loan Bank advances 8,500,000 28,300,000
Junior subordinated debt 17,527,000 17,527,000
Accrued interest payable 115,183 107,943
Other liabilities 4,181,388 4,191,237
Total liabilities 615,600,666 620,227,170
STOCKHOLDERS' EQUITY
Common stock and paid-in-capital, no par value, 6,000,000 shares authorized; 4,941,994 shares issued at March 31, 2013 and December 31, 2012; and 4,665,144 and 4,735,144 shares oustanding at March 31, 2013 and December 31, 2012, respectiveley 44,848,124 44,834,605
Retained earnings 19,552,984 17,880,539
Accumulated other comprehensive income (loss), net of tax of $1,312,873 at March 31, 2013 and $1,880,433 at December 31, 2012 2,548,518 3,650,253
Treasury stock, at cost, 276,850 and 206,850 shares at March 31, 2013 and December 31, 2012, respectively (3,481,708) (2,619,486)
Total stockholders' equity 63,467,918 63,745,911
Total liabilities and stockholders' equity $ 679,068,584 $ 683,973,081
Tower Financial Corporation
Consolidated Statements of Operations
For the three months ended March 31, 2013 and 2012
(unaudited for 2013)
For the Three Months Ended
March 31
2013 2012
Interest income:
Loans, including fees $ 4,851,342 $ 5,642,745
Securities - taxable 256,753 499,986
Securities - tax exempt 692,358 485,675
Other interest income 4,318 22,548
Total interest income 5,804,771 6,650,954
Interest expense:
Deposits 602,033 1,013,818
Fed Funds Purchased 1 7
FHLB advances 37,955 47,012
Trust preferred securities 79,252 177,942
Total interest expense 719,241 1,238,779
Net interest income 5,085,530 5,412,175
Provision for loan losses (275,000) 750,000
Net interest income after provision for loan losses 5,360,530 4,662,175
Noninterest income:
Trust and brokerage fees 1,058,000 944,660
Service charges 286,097 293,073
Mortgage banking income 330,034 230,056
Gain/(Loss) on sale of securities 408,235 34,598
Net debit card interchange income 234,419 203,856
Bank owned life insurance income 144,794 144,044
Impairment on AFS securities -- --
Other fees 235,564 165,458
Total noninterest income 2,697,143 2,015,745
Noninterest expense:
Salaries and benefits 2,924,608 2,791,953
Occupancy and equipment 637,314 628,353
Marketing 119,353 96,197
Data processing 437,446 371,053
Loan and professional costs 293,896 331,415
Office supplies and postage 47,304 70,399
Courier service 58,580 57,741
Business Development 115,541 120,892
Communication Expense 53,323 60,786
FDIC Insurance Premiums 146,094 245,492
OREO Expenses (18,225) 258,245
Other expense 411,466 216,421
Total noninterest expense 5,226,700 5,248,947
Income/(loss) before income taxes/(benefit) 2,830,973 1,428,973
Income taxes expense/(benefit) 830,505 340,993
Net income/(loss) $ 2,000,468 $ 1,087,980
Less: Preferred Stock Dividends -- --
Net income/(loss) available to common shareholders $ 2,000,468 $ 1,087,980
Basic earnings/(loss) per common share $ 0.43 $ 0.22
Diluted earnings/(loss) per common share $ 0.43 $ 0.22
Average common shares outstanding 4,696,432 4,853,136
Average common shares and dilutive potential common shares outstanding 4,696,432 4,853,136
Total Shares outstanding at end of period 4,665,144 4,853,136
Dividends declared per common share $ 0.070 $ --
Tower Financial Corporation
Consolidated Financial Highlights
(unaudited)
Quarterly Year-To-Date
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
($ in thousands except for share data) 2013 2012 2012 2012 2012 2011 2011 2011 2013 2012
EARNINGS
Net interest income $ 5,086 5,472 5,615 5,706 5,412 5,707 5,684 5,721 5,086 5,412
Provision for loan loss $ (275) 200 618 925 750 975 900 1,125 (275) 750
NonInterest income $ 2,697 2,170 2,202 2,126 2,016 2,059 2,372 2,072 2,697 2,016
NonInterest expense $ 5,227 5,575 5,019 5,025 5,249 5,826 5,408 5,292 5,227 5,249
Net income/(loss) $ 2,000 1,729 1,563 1,365 1,088 3,422 1,325 1,090 2,000 1,088
Basic earnings per share $ 0.43 0.36 0.32 0.28 0.22 0.71 0.27 0.23 0.43 0.22
Diluted earnings per share $ 0.43 0.36 0.32 0.28 0.22 0.71 0.27 0.22 0.43 0.22
Average shares outstanding 4,696,432 4,855,557 4,874,660 4,853,136 4,853,136 4,853,645 4,852,761 4,835,510 4,696,432 4,853,136
Average diluted shares outstanding 4,696,432 4,855,557 4,874,660 4,853,136 4,853,136 4,853,645 4,852,761 4,853,035 4,696,432 4,853,136
PERFORMANCE RATIOS
Return on average assets * 1.19% 1.01% 0.96% 0.84% 0.65% 2.02% 0.80% 0.66% 1.19% 0.65%
Return on average common equity * 12.75% 10.24% 9.43% 8.53% 6.92% 23.22% 9.24% 7.92% 12.75% 6.92%
Net interest margin (fully-tax equivalent) * 3.49% 3.65% 3.87% 3.98% 3.76% 3.90% 3.80% 3.83% 3.49% 3.76%
Efficiency ratio 67.16% 72.95% 64.21% 64.16% 70.67% 75.02% 67.13% 67.91% 67.16% 70.67%
Full-time equivalent employees 155.00 155.25 154.50 157.00 158.00 151.00 158.50 157.00 155.00 158.00
CAPITAL
Equity to assets 9.35% 9.32% 10.34% 9.97% 9.76% 8.86% 8.80% 8.47% 9.35% 9.76%
Regulatory leverage ratio 11.25% 11.18% 12.00% 11.71% 11.13% 10.97% 11.09% 10.82% 11.25% 11.13%
Tier 1 capital ratio 15.04% 14.65% 15.20% 14.87% 14.74% 13.91% 14.02% 13.66% 15.04% 14.74%
Total risk-based capital ratio 16.29% 15.90% 16.46% 16.13% 15.99% 15.16% 15.28% 14.92% 16.29% 15.99%
Book value per share $ 13.60 13.46 13.77 13.38 13.06 12.79 11.97 11.54 13.60 13.06
Cash dividend per share $ 0.070 0.555 0.055 0.000 0.000 0.000 0.000 0.000 0.070 0.000
ASSET QUALITY
Net charge-offs $ 350 451 1,111 1,001 1,050 1,632 2,852 1,015 350 1,050
Net charge-offs to average loans * 0.32% 0.39% 0.95% 0.86% 0.91% 1.38% 2.34% 0.84% 0.32% 0.91%
Allowance for loan losses $ 7,664 8,289 8,539 9,032 9,108 9,408 10,065 12,017 7,664 9,108
Allowance for loan losses to total loans 1.74% 1.84% 1.86% 1.95% 1.99% 2.03% 2.14% 2.46% 1.74% 1.99%
Other real estate owned (OREO) $ 1,833 1,908 2,245 2,562 2,878 3,129 3,827 3,729 1,833 2,878
Non-accrual Loans $ 14,625 14,968 12,083 13,275 14,375 8,682 9,913 9,663 14,625 14,375
90+ Day delinquencies $ 133 110 913 472 902 2,007 1,028 2,123 133 902
Restructured Loans $ 4,254 4,683 4,242 3,692 1,802 1,805 1,810 1,822 4,254 1,802
Total Nonperforming Loans 15,204 16,723 14,553 14,107 15,277 12,494 12,751 13,608 15,204 15,277
Impaired Securities (Market Value) -- -- 317 307 314 331 332 386 -- 314
Other Impaired Assets (Dougherty) 88 130 130 -- -- -- -- -- 88 --
Total Nonperforming Assets 17,125 18,761 17,245 16,976 18,469 15,954 16,910 17,723 17,125 18,469
NPLs to Total loans 3.45% 3.71% 3.18% 3.04% 3.34% 2.70% 2.71% 2.78% 3.45% 3.34%
NPAs (w/o 90+) to Total assets 2.50% 2.73% 2.51% 2.53% 2.71% 1.99% 2.41% 2.36% 2.50% 2.71%
NPAs+90 to Total assets 2.52% 2.74% 2.66% 2.61% 2.84% 2.28% 2.56% 2.68% 2.52% 2.84%
END OF PERIOD BALANCES
Total assets $ 679,069 683,973 649,466 651,239 649,343 700,681 659,725 661,015 679,069 649,343
Total earning assets $ 632,185 636,935 607,484 601,014 601,190 606,888 602,291 621,981 632,185 601,190
Total loans $ 440,075 450,466 457,865 463,833 457,260 462,561 470,877 488,694 440,075 457,260
Total deposits $ 585,277 561,007 530,278 551,486 552,191 602,037 565,937 547,896 585,277 552,191
Stockholders' equity $ 63,468 63,746 67,140 64,934 63,374 62,097 58,071 56,015 63,468 63,374
AVERAGE BALANCES
Total assets $ 680,645 678,885 647,999 650,713 671,686 671,384 656,408 660,860 680,645 671,686
Total earning assets $ 631,674 628,333 603,004 603,119 605,429 606,775 616,024 620,723 631,674 605,429
Total loans $ 438,959 454,925 464,046 464,802 462,661 467,932 483,442 486,360 438,959 462,661
Total deposits $ 581,480 565,105 544,142 550,441 572,134 576,898 559,615 558,198 581,480 572,134
Stockholders' equity $ 63,640 67,168 65,927 64,180 63,021 58,468 56,914 55,213 63,640 63,021
* 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.netSource:Tower Financial Corporation