Exhibit 99.1
Logo
 
FOR FURTHER INFORMATION:
 
 
FOR INVESTORS:  FOR MEDIA:
Richard R. Sawyer  Tina M. Farrington
Chief Financial Officer Executive Vice President
260-427-7150  260-427-7155
rick.sawyer@towerbank.net tina.farrington@towerbank.net
    
TOWER FINANCIAL CORPORATION REPORTS RECORD ANNUAL INCOME OF $6.6 MILLION
 
FORT WAYNE, INDIANA – JANUARY 26, 2012 –Tower Financial Corporation (NASDAQ: TOFC) reported record quarterly net income of $3.4 million or $0.71 per diluted share for the fourth quarter of 2011, compared with net income of $884,000 or $0.18 per diluted share, reported for the fourth quarter 2010.  Year to date earnings were a record $6.6 million, or $1.36 per diluted share, compared to $3.2 million, or $0.69 per diluted share for 2010.
 
 
Our fourth quarter and annual highlights include:
 
 
Record “Core” quarterly earnings of $2.8 million and record “core” annual earnings of $10.1 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, OREO (“other real estate owned”) related expenses, and timing of long-term incentives).
 
 
Included in our fourth quarter and our 2011 annual results, is the reversal of the valuation allowance on our Deferred Tax Asset (“DTA”) with a positive tax-effected impact to income in the amount of $2.7 million. The reversal of the valuation allowance was the result of eight consecutive quarters of positive net income.  Our net income prior to the reversal was $4.2 million, or $0.87 per diluted share, which still represents the highest net income in our history.  Fourth quarter net income prior to the reversal was $1.0 million, or $0.21 per diluted share, our third consecutive quarter in excess of $1.0 million in earnings. (Note: The DTA impact is not included in “core” earnings discussed above.)
 
 
Record annual revenues of $30.9 million, including record annual fee income of $8.2 million, led by $3.6 million in Trust fees and $1.1 million in Mortgage Brokerage fees.
 
 
1

 
 
 
Our classified assets decreased $22.0 million during 2011, or 43.9 percent, and now stand at 34.98 percent of Tier 1 capital plus Allowance for Loan Losses (“ALLL”).
 
 
Our capital ratios continue to increase and remain well above the regulatory standards necessary to be considered “well-capitalized.” As of December 31, 2011, our leverage ratio was 11.0 percent and our Total Risked Based Capital ratio was 15.2 percent, compared to regulatory requirements of 5.0 percent and 10.0 percent, respectively.
 
“We are extremely pleased to report record net income during a time of industry and economic uncertainty. This is the result of a lot of hard work over a long period of time by our talented and dedicated team members. We believe the reversal of the valuation allowance on our DTA demonstrates the belief in Tower’s ability to be profitable in the years ahead,” Commented Michael D. Cahill, President and CEO.  “While this is a significant milestone in Tower’s history, our work is by no means complete. We still have significant opportunities to expand our impact in our local communities, improve our service levels and efficiencies, and acquire new customers. We look forward to making continued progress for the benefit of all our stakeholders”.
 
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 Total risk-based capital.  Tier 1 capital at December 31, 2011, increased to 13.9 percent, compared to 13.1 percent at December 31, 2010.  Total risk-based capital at December 31, 2011, increased to 15.2 percent, compared to 14.3 percent at December 31, 2010.  Leverage capital grew to 11.0 percent at December 31, 2011, more than double the regulatory requirement of 5 percent to be considered “well-capitalized”.
 
The following table shows the current capital position as of December 31, 2011 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)
   
12/31/11
   
Excess
 
Tier 1 Capital / Risk Assets
  $31,652     $ 73,364     $ 41,712  
                       
Total Risk Based Capital / Risk Assets
  $52,753     $ 79,993     $ 27,240  
                       
Tier 1 Capital / Average Assets (Leverage)
  $33,425     $ 73,364     $ 39,939  
                       
Minimum Percentage Requirements
 
Regulatory
   
Tower
         
   
Minimum (Well-Capitalized)
   
12/31/11
         
Tier 1 Capital / Risk Assets
 
6% or more
      13.91 %        
                       
Total Risk Based Capital / Risk Assets
 
10% or more
      15.16 %        
                       
Tier 1 Capital / Quarterly Average Assets
 
5% or more
      10.97 %        
 
 
2

 
 
Asset Quality
 
Our nonperforming assets plus delinquencies were $17.1 million, or 2.5 percent of total assets as of December 31, 2011. This compares with $ 16.9 million, or 2.6 percent of total assets at September 30, 2011 and $27.8 million, or 4.2 percent of total assets at December 31, 2010.  Our net charge-offs were $1.6 million for the fourth quarter 2011, or 1.4 percent of average loan outstandings for the quarter.  This compares to net charge-offs of $2.8 million, or 2.3 percent of average loans for the third quarter 2011 and $332,000, or 0.3 percent of average loans for the fourth quarter of 2010.  Net charge-offs during the fourth quarter related primarily to two loan relationships. Net charge-offs for 2011 were 7.3 million, or 1.5 percent of average loans compared to $3.9 million, or 0.8 percent of average loans for 2010.  Our loan loss provision for 2011 was $4.2 million compared to $4.7 million for 2010.
 
The current and historical breakdown of our non-performing assets is as follows:
 
($000's omitted)
 
12/31/11
   
9/30/11
   
6/30/11
   
3/31/11
   
12/31/10
 
Non-Accrual loans
                             
Commercial
    5,020       5,978       5,983       7,338       6,155  
Acquisition & Development
    2,134       2,464       1,802       3,305       3,489  
Commercial Real Estate
    977       1,078       1,233       1,443       2,452  
Residential Real Estate
    551       393       645       652       843  
Total Non-accrual loans
    8,682       9,913       9,663       12,738       12,939  
Trouble-debt restructered (TDR)
    1,805       1,810       1,822       2,119       7,502  
OREO
    3,129       3,827       3,729       4,741       4,284  
Deliquencies greater than 90 days
    3,230       1,028       2,123       2,873       2,688  
Impaired Securities
    331       332       386       402       422  
                                         
Total Non-Performing Assets
    17,177       16,910       17,723       22,873       27,835  
                                         
Allowance for Loan Losses (ALLL)
    9,408       10,065       12,017       11,908       12,489  
                                         
ALLL / Non-accrual loans
    108.4 %     101.5 %     124.4 %     93.5 %     96.5 %
                                         
Classified Assets
    28,269       35,475       41,598       46,027       50,115  
 
The non-performing troubled-debt restructured (“TDR”) category consists of two loan relationships. These two relationships are separate parts of a larger land development project.  Due to the project being primarily collateral dependent with limited activity in the last year, we renewed the matured notes and allowed a period of several months to pay interest only.
 
Our delinquencies greater than 90 days have increased by $2.2 million from the third quarter 2011.  The increase is due to the addition of an accruing $1.2 million commercial loan and a 1.2 million residential mortgage loan.  The category consists of two commercial real estate loans totaling $430,000, one commercial loan totaling $1.2 million, four residential first mortgages totaling $1.3 million, and several consumer loans totaling $234,000.
 
 
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Our non-accrual commercial and industrial loan category decreased by $958,000 during the fourth quarter of 2011.  The primary reasons for the decrease were payments totaling $1.3 million received on two loans and the return to accruing status of a loan in the amount of $259,000.  One new relationship was added to non-accrual in this category in the amount of $740,000.  At December 31, 2011, there were nine relationships within this category, with four relationships comprising 78.0 percent of the total.
 
Our non-accrual commercial real estate category decreased by $101,000 during the fourth quarter due to upgrading a $100,000 relationship to an accruing substandard loan.  No loans were added to this category during the fourth quarter and it comprised of four relationships as of December 31, 2011.
 
Our non-accrual acquisition and development category decreased by $330,000 during the fourth quarter.  The decrease was the result of one loan sale of $1.5 million offset by the addition of a new relationship in the amount of $1.2 million.  There are three remaining relationships in this category as of December 31, 2011.
 
Our non-accrual residential category increased by $158,000 during the fourth quarter.  This was the result of three small loans being added to the list .  In total there are seven relationships that currently comprise the balance in this category.
 
Classified assets are comprised of substandard and non-accrual loans, along with impaired investments and OREO.  Classified assets reached their peak at the end of the second quarter of 2009 at $63.0 million.  We have made steady progress to reduce these assets by $34.9 million, or 55.4 percent since the end of the second quarter of 2009.  As of December 31, 2011, classified assets totaled $28.1 million and comprised 34.98 percent of Tier 1 capital plus the Allowance for Loan Losses (“ALLL”).
 
The allowance for loan losses decreased $657,000 during the fourth quarter of 2011 and was 2.03 percent of total loans at December 31, 2011, a decrease from 2.14 percent at September 30, 2011 and from 2.56 percent at December 31, 2010.  The allowance for loan losses has decreased by $3.1 million from December 31, 2010, as a result of loan provision of $4.2 million, offset by $7.3 million of net charge-offs. We continue to maintain an allowance for loan loss balance at more than 100% of our non-accrual loans.
 
Balance Sheet
Company assets were $700.7 million at December 31, 2011, an increase of $40.8, or 6.2 percent from December 31, 2010.  The significant increase stems from two large December deposits that increased our balance sheet by approximately $48 million as of the end of the year.  The deposits are short-term and we expect them to leave the bank by the end of January 2012.  Taking these short-term deposits into account, our assets decreased by approximately $7.2 million during 2011.  The decrease was primarily the net result of a $24.4 million decrease in our loan outstandings, offset by an increase of $18.5 million in our investment portfolio.
 
 
4

 
 
Our total loans at December 31, 2011 were $462.6 million, compared to $486.9 million at December 31, 2010.  The year to date decrease in loans came primarily from the Commercial and Industrial portfolio, which declined by $17.9 million.  Our home equity loans have decreased by $3.8 million. Our consumer loans have decreased by $2.2 million, and our commercial real estate loans have decreased by $1.9 million.  These loan decreases are offset by growth of $1.8 million in our residential mortgage portfolio.  The majority of this decrease in loans relates directly to the $20.7 million reduction in ‘classified loans’ during 2011. The lending environment has been challenging, but aside from our purposeful reductions from our focus on asset quality, we have been successful in replacing the amortization and payoff of existing loans with new opportunities.
 
Our long term investments at December 31, 2011 were $128.6 million, an increase of $18.5 million from December 31, 2010.   Sales within our investment portfolio generated $777,000 of income during 2011, as restructuring opportunities within the market allowed us to monetize some gains and reinvest the proceeds with minimal impact to the portfolio yield.  Long-term investments now comprise 18.4 percent of total assets as we continue to expand our investment portfolio to enhance liquidity and yield opportunities, bring a more purposeful balance to our balance sheet asset allocation, and offset loan growth challenges within the local economy.
 
Our total deposits at December 31, 2011 were $602.0 million compared to $576.4 million at December 31, 2010.  As mentioned above, we received two large, short-term, deposits of approximately $48 million in December 2011 that increased our balance sheet.  Therefore, our adjusted deposits at December 31, 2011 were $554.0 million.  This represents a decrease of approximately $22 million from December 31, 2010.  The decrease came primarily from a reduction in certificates of deposit, which decreased $30.4 million, and brokered certificate of deposit, which decreased $2.9 million.  These decreases were offset by growth in our health savings account portfolio of $15.1 million. Our core deposits at December 31, 2011 were $473.6 million and comprised 78.7 percent of total deposits.  Our cost of interest-bearing deposits was 0.92 percent for the fourth quarter 2011, a reduction from the 1.09 percent posted for the third quarter 2011.  For 2011, the cost of interest-bearing deposits was 1.07 percent, compared to 1.36 percent for 2010.
 
Our borrowings were $29.5 million at December 31, 2011 and were comprised of $17.5 million in trust preferred debt and $12.0 million in fixed term borrowings from the Federal Home Loan Bank of Indianapolis (“FHLBI”).  The fixed term debt with the FHLBI does not mature until 2012 and 2013.
 
Shareholders' equity was $62.1 million at December 31, 2011, an increase of 16.9 percent from the $53.1 million reported at December 31, 2010.  Affecting the year to date increase in stockholders’ equity was net income of $6.6 million (of which approximately $2.7 million was derived from the reversal of the valuation allowance on our DTA), $45,000 of additional paid in capital from the accounting treatment for stock options and restricted stock vesting, and an increase of $2.3 million in unrealized gains, net of tax, on securities available for sale.  Current common shares outstanding are 4,853,761.
 
 
5

 
 
Operating Statement
Our total revenue, consisting of net interest income and noninterest income, was $7.8 million for the fourth quarter 2011, a decrease of $290,000 from the third quarter.  Total revenue for 2011 was $30.9 million, compared to $30.1.  The 2011 total represents the highest revenue in our history.  Fourth quarter 2011 net interest income was $5.7 million a slight increase of $23,000 from the third quarter 2011.  Year to date net interest income was $22.8 million, compared to $22.3 million in 2010.  This also represents the highest mark in our history.  The annual increase in our net interest income was the result of a 15 basis point improvement in our net interest margin.  The increase came from a reduction in our cost of funds, which dropped from 1.56 percent in 2010 to 1.21 percent in 2011.  This more than offset the decrease in our earning asset yield from 5.02 percent in 2010 to 4.86 percent in 2011.  The current low interest rate environment provides challenges as we reinvest the cash flows and maturities from our investment and loan portfolios.  We have been able to offset this with a reduction in our deposit rates and repositioning the mix of our deposits to lower our interest expense.
 
Non-interest income was $2.1 million for the fourth quarter 2011, which represented 26.5 percent of total revenue.  This is a decrease of $313,000 from the third quarter.  The decrease stems from our $331,000 of gains on sales of securities during the third quarter.  We did not sell any of our investment securities during the fourth quarter.  Mortgage brokerage fees decreased by $302,000, primarily the result of an adjustment in accounting treatment for the fair value of rate locks on mortgage loans originated for sale that have not yet been closed.  This adjustment caused a $175,000 decrease in the fair value since the majority of the unclosed loans at September 30, 2011 closed during the fourth quarter.  This decrease was offset by a $245,000 increase in trust fees, as our trust fees topped $1.0 million for the first time in our history.  Year to date non-interest income was $8.2 million compared to $7.8 million in 2010.  The increase came primarily from Mortgage Brokerage fees, which increased $306,000, and Debit Card interchange fees, which increased $211,000.  These increases were offset by a reduction in gains on sale from our securities portfolio of $333,000.
 
Non-interest expenses were $5.8 million, an increase of $418,000 from the third quarter 2011.  The primary reasons for the increase stemmed from an increase in Other Real Estate Owned (“OREO”) expenses of $138,000, an increase in employment expenses of $360,000, and an increase in occupancy and equipment expenses of $68,000.  The increase in OREO expenses related to the reduction in the value of certain assets in the portfolio.  The increase in employment expenses related primarily to incentives earned based on our successful year and improvement of our asset quality metrics.  Salary expense remained relatively flat quarter over quarter.
 
Year to date non-interest expenses were $21.6 million, an increase of $376,000 from 2010.  This was the net result of a decrease in FDIC insurance premiums of $692,000 and a decrease in OREO expenses of $646,000; offset by an increase in employment expenses of $1.6 million.  $400,000 of increase in employment expenses relates to salaries, which increased by 5.7 percent from 2010.  $625,000 of the increase relates to incentive programs specific to 2011, while $172,000 relates to an increase in our profit sharing expense as a result of our increased profitability.  The remainder relates to increases in payroll taxes and benefits.  All other expense categories remained relatively flat from 2010.
 
 
6

 
 
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 48 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 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; changes in governmental and regulatory policy or enforcement; 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, as well as on our website at www.towerbank.net
# # # #
 
 
7

 
 
Tower Financial Corporation
Consolidated Balance Sheets
At December 31, 2011 and December 31, 2010
 
   
(unaudited)
       
   
December 31
   
December 31
 
   
2011
   
2010
 
ASSETS
           
Cash and due from banks
  $ 60,753,268     $ 24,717,935  
Short-term investments and interest-earning deposits
    3,260,509       3,313,006  
Federal funds sold
    3,258,245       1,648,441  
Total cash and cash equivalents
    67,272,022       29,679,382  
                 
Interest bearing deposits
    450,000       996,000  
Securities available for sale, at fair value
    128,619,951       110,108,656  
FHLBI and FRB stock
    3,807,700       4,075,100  
Loans Held for Sale
    4,930,368       2,140,872  
                 
Loans
    462,561,174       486,914,115  
Allowance for loan losses
    (9,408,013 )     (12,489,400 )
Net loans
    453,153,161       474,424,715  
                 
Premises and equipment, net
    9,062,817       8,329,718  
Accrued interest receivable
    2,675,870       2,391,953  
Bank Owned Life Insurance
    17,084,858       13,516,789  
Other Real Estate Owned
    3,129,231       4,284,263  
Prepaid FDIC Insurance
    1,551,133       2,864,527  
Other assets
    8,944,145       7,116,280  
                 
Total assets
  $ 700,681,256     $ 659,928,255  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
LIABILITIES
               
Deposits:
               
Noninterest-bearing
  $ 169,757,998     $ 92,872,957  
Interest-bearing
    432,278,838       483,483,179  
Total deposits
    602,036,836       576,356,136  
                 
Fed Funds Purchased
    -       -  
Federal Home Loan Bank advances
    12,000,000       7,500,000  
Junior subordinated debt
    17,527,000       17,527,000  
Accrued interest payable
    2,148,424       1,415,713  
Other liabilities
    4,871,924       4,000,654  
Total liabilities
    638,584,184       606,799,503  
                 
STOCKHOLDERS' EQUITY
               
Preferred stock, no par value, 4,000,000 shares authorized; no shares issued and outstanding
    -       757,213  
Common stock and paid-in-capital, no par value, 6,000,000 shares authorized; 4,918,761 and 4,789,023 hares issued at December 31, 2011and December 31, 2010, respectively; and 4,853,761 and 4,724,023 shares outstanding at December 31, 2011 and December 31, 2010, respectively
    44,542,795       43,740,155  
Treasury stock, at cost, 65,000 shares at December 31, 2011 andDecember 31, 2010
    (884,376 )     (884,376 )
Retained earnings
    15,070,115       8,450,579  
Accumulated other comprehensive income (loss), net of taxof  $1,735,307 at December 31, 2011 and  $548,730at December 31, 2010
    3,368,538       1,065,181  
Total stockholders' equity
    62,097,072       53,128,752  
                 
Total liabilities and stockholders' equity
  $ 700,681,256     $ 659,928,255  
 
 
8

 
 
Tower Financial Corporation
Consolidated Statements of Operations
For the three months and year ended December 31, 2011 and 2010
(unaudited)
 
   
For the Three Months Ended
   
For the Year ended
 
   
31-Dec
   
31-Dec
 
   
2011
   
2010
   
2011
   
2010
 
Interest income:
                       
Loans, including fees
  $ 5,990,191     $ 6,466,670     $ 24,828,298     $ 26,847,111  
Securities - taxable
    538,561       606,566       2,295,838       2,502,200  
Securities - tax exempt
    498,937       301,658       1,730,535       1,071,876  
Other interest income
    13,436       12,781       39,041       31,334  
Total interest income
    7,041,125       7,387,675       28,893,712       30,452,521  
Interest expense:
                               
Deposits
    1,076,737       1,502,196       5,090,715       6,566,581  
Fed Funds Purchased
    26       8       638       138  
FHLB advances
    45,501       68,902       230,713       465,756  
Trust preferred securities
    211,745       296,349       816,852       1,158,956  
Total interest expense
    1,334,009       1,867,455       6,138,918       8,191,431  
                                 
Net interest income
    5,707,116       5,520,220       22,754,794       22,261,090  
Provision for loan losses
    975,000       805,000       4,220,000       4,745,000  
                                 
                                 
Net interest income after provision for loan losses
    4,732,116       4,715,220       18,534,794       17,516,090  
                                 
Noninterest income:
                               
Trust and brokerage fees
    1,048,264       939,864       3,553,965       3,604,907  
Service charges
    278,968       281,103       1,092,260       1,125,707  
Mortgage banking income
    227,937       200,619       1,026,711       720,615  
Gain/(Loss) on sale of securities
    -       175,136       776,753       1,109,743  
Net debit card interchange income
    158,469       92,548       612,143       400,648  
Bank owned life insurance income
    147,028       117,401       568,070       470,216  
Impairment on AFS securities
    -       (128,169 )     (149,045 )     (158,303 )
Other fees
    198,749       146,859       670,294       540,571  
Total noninterest income
    2,059,415       1,825,361       8,151,151       7,814,104  
                                 
Noninterest expense:
                               
Salaries and benefits
    3,145,882       2,509,822       11,185,034       9,578,932  
Occupancy and equipment
    677,006       644,037       2,494,913       2,533,688  
Marketing
    100,095       55,689       431,833       423,443  
Data processing
    322,892       369,669       1,335,034       1,128,096  
Loan and professional costs
    370,687       411,701       1,612,321       1,629,582  
Office supplies and postage
    58,264       53,190       228,281       245,938  
Courier service
    58,061       55,222       224,987       221,756  
Business Development
    138,379       128,695       464,807       406,775  
Communication Expense
    49,131       46,067       192,520       186,164  
FDIC Insurance Premiums
    249,209       525,878       1,367,622       2,059,524  
OREO Expenses
    419,370       293,221       1,057,503       1,703,791  
Other expense
    236,616       251,894       1,023,585       1,125,007  
Total noninterest expense
    5,825,592       5,345,085       21,618,440       21,242,696  
                                 
Income/(loss) before income taxes/(benefit)
    965,939       1,195,496       5,067,505       4,087,498  
Income taxes expense/(benefit)
    (2,456,540 )     311,917       (1,552,031 )     923,727  
                                 
Net income/(loss)
  $ 3,422,479     $ 883,579     $ 6,619,536     $ 3,163,771  
Less: Preferred Stock Dividends
    -       -       -       -  
Net income/(loss) available to common shareholders
  $ 3,422,479     $ 883,579     $ 6,619,536     $ 3,163,771  
                                 
Basic earnings/(loss) per common share
  $ 0.71     $ 0.19     $ 1.37     $ 0.73  
Diluted earnings/(loss) per common share
  $ 0.71     $ 0.18     $ 1.36     $ 0.69  
Average common shares outstanding
    4,853,761       4,720,159       4,824,660       4,334,084  
                                 
Average common shares and dilutive potential common shares outstanding
    4,853,761       4,852,759       4,853,160       4,558,918  
                                 
Total Shares outstanding at end of period
    4,853,761       4,724,023       4,853,761       4,724,023  
Dividends declared per common share
  $ -     $ -     $ -     $ -  
 
 
9

 
 
Tower Financial Corporation
Consolidated Financial Highlights
 
(unaudited)
 
   
 
   
Year-To-Date
 
   
4th Qtr
   
3rd Qtr
   
2nd Qtr
   
1st Qtr
   
4th Qtr
   
3rd Qtr
   
2nd Qtr
   
1st Qtr
             
($ in thousands except for share data)
 
2011
   
2011
   
2011
   
2011
   
2010
   
2010
   
2010
   
2010
   
2011
   
2010
 
                                                             
EARNINGS
                                                           
Net interest income
  $ 5,707       5,684       5,721       5,643       5,521       5,580       5,597       5,563       22,755       22,261  
Provision for loan loss
  $ 975       900       1,125       1,220       805       1,500       1,100       1,340       4,220       4,745  
NonInterest income
  $ 2,059       2,372       2,072       1,647       1,825       2,657       1,734       1,598       8,150       7,814  
NonInterest expense
  $ 5,826       5,408       5,292       5,093       5,345       5,350       5,642       4,905       21,619       21,242  
Net income/(loss)
  $ 3,422       1,325       1,090       783       884       1,045       514       721       6,620       3,164  
Basic earnings per share
  $ 0.71       0.27       0.23       0.16       0.19       0.24       0.13       0.18       1.37       0.74  
Diluted earnings per share
  $ 0.71       0.27       0.22       0.16       0.18       0.22       0.12       0.17       1.36       0.69  
Average shares outstanding
    4,853,761       4,852,761       4,835,510       4,754,892       4,720,159       4,427,370       4,090,432       4,090,432       4,824,660       4,334,084  
Average diluted shares outstanding
    4,853,761       4,852,761       4,853,035       4,852,759       4,852,759       4,669,965       4,394,419       4,394,419       4,853,160       4,558,918  
                                                                                 
PERFORMANCE RATIOS
                                                                         
Return on average assets *
    2.02 %     0.80 %     0.66 %     0.48 %     0.53 %     0.63 %     0.31 %     0.43 %     1.00 %     0.48 %
Return on average common equity *
    23.22 %     9.24 %     7.92 %     5.92 %     6.56 %     8.17 %     4.26 %     6.17 %     11.81 %     6.33 %
Net interest margin (fully-tax equivalent) *
    3.93 %     3.80 %     3.83 %     3.83 %     3.72 %     3.69 %     3.72 %     3.66 %     3.85 %     3.70 %
Efficiency ratio
    75.02 %     67.13 %     67.91 %     69.85 %     72.76 %     64.95 %     76.96 %     68.50 %     69.95 %     70.63 %
Full-time equivalent employees
    150.75       158.50       157.00       150.75       150.75       149.25       145.75       150.25       150.75       150.75  
                                                                                 
CAPITAL
                                                                               
Equity to assets
    8.86 %     8.80 %     8.47 %     8.19 %     8.05 %     8.09 %     7.44 %     7.12 %     8.86 %     8.05 %
Regulatory leverage ratio
    10.97 %     11.09 %     10.82 %     10.59 %     10.55 %     10.35 %     9.50 %     9.20 %     10.97 %     10.55 %
Tier 1 capital ratio
    13.91 %     14.02 %     13.66 %     13.27 %     13.10 %     12.73 %     11.62 %     11.14 %     13.91 %     13.10 %
Total risk-based capital ratio
    15.16 %     15.28 %     14.92 %     14.53 %     14.30 %     13.98 %     13.11 %     12.66 %     15.16 %     14.30 %
Book value per share
  $ 12.79       11.97       11.54       11.11       11.09       11.15       11.53       11.30       12.79       11.09  
Cash dividend per share
  $ 0.000       0.000       0.000       0.000       0.000       0.000       0.000       0.000       0.000       0.000  
                                                                                 
ASSET QUALITY
                                                                               
Net charge-offs
  $ 1,632       2,852       1,015       1,802       332       2,202       531       789       7,301       3,854  
Net charge-offs to average loans *
    1.38 %     2.34 %     0.84 %     1.49 %     0.27 %     1.74 %     0.41 %     0.61 %     1.51 %     0.76 %
Allowance for loan losses
  $ 9,408       10,065       12,017       11,908       12,489       12,016       12,718       12,150       9,408       12,489  
Allowance for loan losses to total loans
    2.03 %     2.14 %     2.46 %     2.43 %     2.56 %     2.43 %     2.50 %     2.32 %     2.03 %     2.56 %
Other real estate owned (OREO)
  $ 3,129       3,827       3,729       4,741       4,284       3,843       6,477       4,443       3,129       4,284  
Non-accrual Loans
  $ 8,682       9,913       9,663       12,738       12,939       10,768       10,360       13,974       3,129       12,939  
90+ Day delinquencies
  $ 3,230       1,028       2,123       2,873       2,688       3,175       2,213       3,223       8,682       2,688  
Restructured Loans
  $ 1,805       1,810       1,822       2,120       7,502       1,761       1,862       1,997       1,805       7,502  
Total Nonperforming Loans
    13,717       12,751       13,608       17,731       23,129       15,704       14,435       19,194       13,717       23,129  
Impaired Securities (Market Value)
    331       332       386       402       422       437       489       440       331       422  
Total Nonperforming Assets
    17,177       16,910       17,723       22,874       27,835       19,984       21,401       24,077       17,177       27,835  
NPLs to Total loans
    2.97 %     2.71 %     2.78 %     3.62 %     4.75 %     3.17 %     2.83 %     3.67 %     2.97 %     4.75 %
NPAs (w/o 90+) to Total assets
    1.99 %     2.41 %     2.36 %     3.01 %     3.81 %     2.55 %     2.91 %     3.09 %     1.99 %     3.81 %
NPAs+90 to Total assets
    2.45 %     2.56 %     2.68 %     3.44 %     4.22 %     3.03 %     3.25 %     3.57 %     2.45 %     4.22 %
                                                                                 
END OF PERIOD BALANCES
                                                                         
Total assets
  $ 700,681       659,725       661,015       664,117       659,928       660,141       658,327       674,152       700,681       659,928  
Total earning assets
  $ 606,438       601,841       621,981       621,273       609,196       613,286       611,996       626,197       606,438       609,196  
Total loans
  $ 462,561       470,877       488,694       489,250       486,914       494,818       509,656       523,437       462,561       486,914  
Total deposits
  $ 602,037       565,937       547,896       575,525       576,356       577,094       564,988       559,291       602,037       576,356  
Stockholders' equity
  $ 62,097       58,071       56,015       54,413       53,129       53,382       48,950       48,002       62,097       53,129  
                                                                                 
AVERAGE BALANCES
                                                                         
Total assets
  $ 671,384       656,408       660,860       664,564       657,397       658,898       663,825       677,967       663,304       664,522  
Total earning assets
  $ 602,511       616,024       620,723       618,266       605,306       614,742       617,060       629,582       614,381       616,673  
Total loans
  $ 467,932       483,442       486,360       489,999       485,125       503,334       514,962       526,814       481,933       507,559  
Total deposits
  $ 576,898       559,615       558,198       577,654       574,072       561,966       569,759       564,238       568,091       567,509  
Stockholders' equity
  $ 58,468       56,914       55,213       53,662       53,438       50,744       48,404       47,421       56,064       50,002  
                                                                                 
* annualized for quarterly data
                                                                 
 
 
10


The following information was filed by Tower Financial Corp (TOFC) on Thursday, January 26, 2012 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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