Tower Financial Corporation Reports Earnings of $0.17 Per Share


FORT WAYNE, Ind., April 24, 2008 (PRIME NEWSWIRE) -- Tower Financial Corporation (Nasdaq:TOFC) today announced first quarter 2008 net income of $711,000, or $0.17 per diluted share, compared with net income of $177,000, or $0.04 per share, for the year-ago quarter.

First quarter highlights include:



 * In-market deposits grew by $8.3 million during the period, which
   annualizes to 6.3 percent.

 * Minimal loan loss provision expense of $300,000, or 21 bps
   annualized on average loans.

 * Assets under management in Tower Trust Company increased 5 percent
   from the first quarter 2007 to $603.1 million.  While the growth
   was minimized by market conditions, the number of accounts grew by
   28 percent during the same time frame.

 * The bank executed a sale of its interest rate floor for a net
   pre-tax gain of $723,000, which will be amortized over the
   remaining original term that runs through July 2009.

Chairman and Chief Executive Officer, Don Schenkel stated, "We are pleased to return the Company to profitability with our highest earnings since the fourth quarter of 2006. However, we are not satisfied, and we still have a lot of hard work in front of us. We need to continue focusing on lowering our non-performing assets, growing our in-market deposits, and aggressively pursue and expand profitable client relationships."

Effective April 25, 2008, Chief Lending Officer, Darrell Jaggers has resigned his position. Mr. Jaggers made this decision based on a desire to focus on his family and begin slowing down professionally with an eye towards retirement in the next few years. Mike Cahill, President and Chief Executive Officer of Tower Bank, will absorb these duties in the interim, and we expect to replace the Chief Lending Officer from within the current management team.

At the same time, the Company has reduced its workforce by eight FTE's (full-time equivalent employees), to adjust to an appropriate level of overhead given the current economic climate. These reductions, along with the resignation of Mr. Jaggers, will cause one-time charges to the second quarter of $200,000. These changes will result in annual savings of approximately $900,000, which will begin to be recognized in the third quarter of 2008.

Balance Sheet

Company assets were $691.2 million at March 31, 2008, a decrease of $15.3 million, or 2.2 percent from December 31, 2007, and an increase of $8.2 million, or 1.2 percent from March 31, 2007. The decrease in assets during the first quarter was primarily attributable to a decrease in loans of $16.0 million. The primary changes to the loan portfolio were the sale of a $3.2 million loan related to our Indianapolis office, the sale of a $2.2 million non-performing loan, and the non-renewal of a $4.6 million commercial real estate loan.

Deposits were $587.7 million at March 31, 2008, a decrease of $13.0 million from December 31, 2007. The decrease in deposits was the net result of $8.3 million of in-market deposit growth along with the reduction of out-of-market CD's of $21.3 million due to lower funding needs. The in-market growth was comprised of $3.4 million of growth in core, non-CD accounts (demand deposit, savings, interest-bearing checking, and money market accounts) and $4.9 million of growth in CDs.

Shareholders' equity was $49.4 million at March 31, 2008, an increase of 2.5 percent from the $48.2 million reported at December 31, 2007. Tower's Tier 1 and risk-based capital ratios remain above "well-capitalized" levels, increasing slightly from year-end to 11.35 percent and 12.51 percent, respectively. Period-end common shares outstanding were 4,056,769. The Company purchased 6,000 shares of Treasury stock during the quarter as part of its Stock Repurchase Plan. Since the plans inception in May 2007, the Company has repurchased 59,036 shares of the 65,000 shares authorized.

Operating Statement

Total revenue, consisting of net interest income and noninterest income, was $6.7 million for the first quarter of 2008, the same as reported for the year-ago quarter and the fourth quarter 2007. First quarter 2008 net interest income decreased to $5.1 million, a decline of 3.1 percent compared to the first quarter 2007, and a decline of 2.7 percent compared to the fourth quarter 2007. The increase in non-performing loans during late 2007, along with a significant drop in the prime rate during the first quarter of 2008, caused the net interest margin to drop to 3.15 percent from 3.42 percent one year ago and from 3.19 percent for the fourth quarter 2007. The company has a liability sensitive balance sheet; however, this will manifest itself over the balance of the year versus in the short term.

Noninterest income accounted for approximately 24 percent of total revenue. For the first quarter, noninterest income was $1.64 million, up 10.2 percent from the $1.49 million reported in the first quarter of 2007 and up 11.1 percent from the $1.48 million reported in the fourth quarter 2007. Trust and brokerage fees of $894,000 accounted for 55 percent of first quarter noninterest income; they grew 5.7 percent compared to the first quarter 2007, but decreased 4.7 percent compared to the fourth quarter 2007. The decrease from the linked quarter was primarily related to market conditions. Currently, Tower Private Advisors manages $603.1 million in combined trust and brokerage assets, an increase of 4.9 percent above the $574.7 million of combined assets reported for the year-ago quarter. While growth in assets was minimal, the number of trust and brokerage accounts at the end of the first quarter 2008 was 1,589, a 28.8 percent increase from 1,234 accounts one year ago. Service charges for the Bank were $321,000, a 21.1 percent increase from the first quarter 2007, and a 25.1 percent increase from the fourth quarter 2007. Loan broker fees were $61,000, a 109.1 percent increase from the first quarter 2007, and a decrease of 46.0 percent from the fourth quarter 2007.

First quarter noninterest expense increased $317,000, or 6.1 percent, from the first quarter 2007 and $154,000, or 2.9 percent from the fourth quarter 2007. The primary causes related to increased FDIC insurance premiums and increased occupancy and equipment expenses related to the addition of our expansion in Warsaw. Salary and benefit expenses account for 56 percent of the total noninterest expenses for the quarter. While salaries and benefits increased by 3.0 percent from the first quarter in 2007, this category decreased by 4.0 percent from the fourth quarter 2007.

Asset Quality

Nonperforming assets plus delinquencies at period end were $22.4 million, or 3.25 percent of total assets. This compares with $6.5 million, or 0.96 percent of assets, for the year-ago period and with $20.0 million, or 2.84 percent of assets on December 31, 2007. The increase during the first quarter of $2.4 million was primarily the net result of the disposition of a $2.2 million loan and the addition of a $4.6 million residential development loan. We feel that we have adequate reserves on the $4.6 million development loan through our collateral and outside investor guarantees. Net recoveries were $527,000 for the quarter compared with net charge-offs of $633,000 in the first quarter of 2007.

Tower's allowance for loan losses was 1.61 percent of total loans at March 31, 2008, an increase from 1.43 percent of total loans at December 31, 2007. The increase was the net result of a reduction on loans outstanding of $16.0 million, net recoveries of $527,000, and loan loss provision of $300,000.

ABOUT THE COMPANY

Headquartered in Fort Wayne, Indiana, Tower Financial Corporation is a financial services holding company with two subsidiaries: Tower Bank & Trust Company, a community bank headquartered in Fort Wayne; and Tower Trust Company, a state-chartered wealth services firm doing business as Tower Private Advisors. 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 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.TOFC.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 interest rates and interest-rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies, trends in customer behavior and their ability to repay loans; changes in local real estate values; changes in the national and local economy; 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.



 Tower Financial Corporation
 Consolidated Balance Sheets
 At March 31, 2008 and December 31, 2007

                                            (unaudited)                
                                              March 31    December 31
                                                2008          2007     
 ---------------------------------------------------------------------
 ASSETS
 Cash and due from banks                    $ 14,464,669  $ 25,913,449 
 Short-term investments and 
  interest-earning deposits                    8,588,209     1,781,161 
 Federal funds sold                           10,011,579     6,135,779 
                                            -------------------------- 
    Total cash and cash equivalents           33,064,457    33,830,389 

 Securities available for sale, at fair 
  value                                       68,794,701    65,227,694 
 FHLBI and FRB stock                           3,589,700     3,589,700 
 Loans Held for Sale                             686,529     3,189,545 

 Loans                                       562,234,854   575,744,207 
 Allowance for loan losses                    (9,035,370)   (8,208,162)
                                            -------------------------- 
       Net loans                             553,199,484   567,536,045 

 Premises and equipment, net                   9,597,339     9,549,233 
 Accrued interest receivable                   2,781,066     3,246,455 
 Bank Owned Life Insurance                    11,362,127    11,258,517 
 Other assets                                  8,132,962     9,065,564 
                                            -------------------------- 
       Total assets                         $691,208,365  $706,493,142 
                                            ========================== 

 LIABILITIES AND STOCKHOLDERS' EQUITY
 LIABILITIES
 Deposits:
  Noninterest-bearing                       $ 69,643,584  $ 71,705,395 
  Interest-bearing                           518,090,945   528,984,076 
                                            -------------------------- 
       Total deposits                        587,734,529   600,689,471 
                                                      --            -- 
 Federal Home Loan Bank advances              32,200,000    35,100,000 
 Junior subordinated debt                     17,527,000    17,527,000 
 Accrued interest payable                      1,347,760     1,721,972 
 Other liabilities                             2,994,306     3,247,145 
                                            -------------------------- 
       Total liabilities                     641,803,595   658,285,588 

 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; issued 
  and outstanding - 4,062,769 shares at 
  December 31, 2007 and 4,043,882 shares 
  at December 31, 2006                        39,497,429    39,482,669 
 Treasury stock, at cost, 53,036 shares at
  December 31, 2007                             (824,447)     (758,827)
 Retained earnings                             9,740,787     9,208,719 
 Accumulated other comprehensive income 
  (loss), net of tax of $141,663 at 
  December 31, 2007, $(53,785) at 
  December 31, 2006                              991,001       274,993 
                                            -------------------------- 
       Total stockholders' equity             49,404,770    48,207,554 
                                            -------------------------- 

       Total liabilities and stockholders' 
        equity                              $691,208,365  $706,493,142 
                                            ==========================


 Tower Financial Corporation
 Consolidated Statements of Operations
 For the three months ended March 31, 2008 and 2007
 (unaudited)
                                          For the Three Months Ended
                                                   March 31
                                          ---------------------------
                                              2008          2007
 ---------------------------------------  ---------------------------
 Interest income:
     Loans, including fees                $  9,267,399   $ 10,318,089
     Securities - taxable                      614,514        653,946
     Securities - tax exempt                   214,034        200,775
     Other interest income                     182,352        219,080
                                          ---------------------------
         Total interest income              10,278,299     11,391,890
 Interest expense:
     Deposits                                4,642,135      5,675,885
     Fed Funds Purchased                                           --
     FHLB advances                             274,140        191,744
     Trust preferred securities                281,649        281,649
                                          ---------------------------
         Total interest expense              5,197,924      6,149,278
                                          ---------------------------

 Net interest income                         5,080,375      5,242,612
 Provision for loan losses                     300,000      1,425,000
                                          ---------------------------

 Net interest income after provision
    for loan losses                          4,780,375      3,817,612

 Noninterest income:
     Trust and brokerage fees                  894,392        845,883
     Service charges                           321,210        265,331
     Loan broker fees                           61,058         29,195
     Gain/(Loss) on sale of securities          59,837             --
     Other fees                                304,277        357,138
                                          ---------------------------
         Total noninterest income            1,640,774      1,497,547

 Noninterest expense:
     Salaries and benefits                   3,086,398      2,995,501
     Occupancy and equipment                   758,315        688,194
     Marketing                                 150,202         79,043
     Data processing                           280,758        227,949
     Loan and professional costs               243,650        358,813
     Office supplies and postage               114,032        123,385
     Courier service                            89,465        100,810
     Business Development                      154,873        157,753
     Communication Expense                      70,792         74,755
     FDIC Insurance Premiums                   167,514         16,901
     Other expense                             362,785        339,192
                                          ---------------------------
         Total noninterest expense           5,478,784      5,162,296
                                          ---------------------------

 Income before income taxes                    942,365        152,863
 Income taxes expense                          231,193        (23,750)
                                          ---------------------------

 Net income                               $    711,172   $    176,613
                                          ===========================

 Basic earnings per common share          $       0.18   $       0.04
 Diluted earnings per common share        $       0.17   $       0.04
 Average common shares outstanding           4,062,145      4,068,657
 Average common shares and dilutive
  potential common shares outstanding        4,088,684      4,163,169

 Dividends declared per share             $      0.044   $      0.044


 Tower Financial Corporation
 Consolidated Financial Highlights
 First Quarter 2008
 (unaudited)

 ($ in thousands except for share data)

                 -----------------------------------------------------
                  1st Qtr     4th Qtr    3rd Qtr    2nd Qtr   1st Qtr
                    2008       2007       2007       2007      2007
                 ---------  -------------------------------  ---------
 EARNINGS
  Net interest
   income        $   5,080      5,223      5,488      5,583      5,251
  Provision for
   loan loss     $     300      2,825      5,246      1,500      1,425
  NonInterest
   income        $   1,641      1,477      1,409      1,430      1,489
  NonInterest
   expense       $   5,479      5,325      4,941      5,303      5,162
  Net income     $     711       (784)    (2,208)       217        177
  Basic earnings
   per share     $    0.18      (0.19)     (0.54)      0.05       0.04
  Diluted
   earnings per
   share         $    0.17      (0.19)     (0.54)      0.05       0.04
  Average shares
   outstanding   4,062,145  4,070,766  4,063,750  4,073,678  4,065,657
  Average diluted
   shares
   outstanding   4,088,684  4,070,766  4,063,750  4,146,386  4,163,169

 PERFORMANCE
 RATIOS
  Return on
   average
   assets *           0.41%    -0.45%     -1.25%       0.12%      0.11%
  Return on
   average common
   equity *           5.91%    -6.32%    -17.52%       1.69%      1.41%
  Net interest
   margin (fully-
   tax equiva-
   lent) *            3.15%      3.19%      3.31%      3.44%      3.43%
  Efficiency ratio   81.52%     79.48%     71.64%     75.62%     76.59%
  Full-time
   equivalent
   employees        184.25     190.00     193.00     192.75     191.75

 CAPITAL
  Equity to assets    7.15%      6.82%      6.91%      7.20%      7.52%
  Regulatory
   leverage ratio     9.33%      9.19%      9.34%      9.91%     10.28%
  Tier 1 capital
   ratio             11.35%     10.92%     11.03%     11.37%     11.81%
  Total risk-based
   capital ratio     12.51%     12.08%     12.15%     12.47%     12.97%
  Book value per
   share         $   12.18      11.87      12.01      12.44      12.62
  Cash dividend
   per share     $   0.044      0.044      0.044      0.044      0.044

 ASSET QUALITY
  Net charge-
   offs          $    (527)     1,797      5,241      1,987        633
  Net charge-offs
   to average
   loans *           -0.37%      1.24%      3.54%      1.36%      0.47%
  Allowance for
   loan losses   $   9,035      8,208      7,180      7,176      7,663
  Allowance for
   loan losses to
   total loans        1.61%      1.43%      1.24%      1.23%      1.35%
  Nonperforming
   loans         $  20,358     18,594      7,116      4,845      5,239
  Other real
   estate owned
   (OREO)        $   1,527      1,452        645        744        744
  Nonperforming
   assets (NPA)  $  21,885     20,046      7,761      5,589      5,983
  90+ Day delin-
   quencies      $     547          0         14         81        564
  NPAs plus 90
   Days delin-
    quent        $  22,432     20,046      7,775      5,670      6,547
  NPAs to Total
   assets             3.17%      2.84%      1.10%      0.80%      0.88%
  NPAs+90 to
   Total assets       3.25%      2.84%      1.10%      0.81%      0.96%
  NPAs to Loans
   + OREO             3.88%      3.47%      1.34%      0.96%      1.05%

 END OF PERIOD
 BALANCES
  Total assets   $ 691,208    706,493    706,914    701,641    683,032
  Total earning
   assets        $ 653,906    655,668    669,988    673,032    651,077
  Total loans    $ 562,235    575,744    579,902    581,783    568,481
  Total deposits $ 587,735    600,689    592,854    595,558    589,802
  Stockholders'
   equity        $  49,405     48,208     48,830     50,536     51,386

 AVERAGE BALANCES
  Total assets   $ 701,423    698,452    702,538    697,117    664,026
  Total earning
   assets        $ 663,522    660,812    669,524    663,411    633,569
  Total loans    $ 570,010    574,266    587,531    585,480    551,000
  Total deposits $ 607,402    595,913    596,140    597,806    575,389
  Stockholders'
   equity        $  48,427     49,199     50,014     51,579     50,779

                                                ----------------------
                                                      Year-To-Date
                                                ----------------------
($ in thousands except for share data)             2008        2007
                                                ----------  ----------
 EARNINGS
    Net interest income                         $    5,080       5,251
    Provision for loan loss                     $      300       1,425
    NonInterest income                          $    1,641       1,489
    NonInterest expense                         $    5,479       5,162
    Net income                                  $      711         177
    Basic earnings per share                    $     0.18        0.04
    Diluted earnings per share                  $     0.17        0.04
    Average shares outstanding                   4,062,145   4,065,657
    Average diluted shares outstanding           4,088,684   4,163,169

 PERFORMANCE RATIOS
    Return on average assets *                        0.41%       0.11%
    Return on average common equity *                 5.95%       1.41%
    Net interest margin (fully-tax equivalent) *      3.15%       3.43%
    Efficiency ratio                                 81.52%      76.59%
    Full-time equivalent employees                  184.25      191.75

 CAPITAL
    Equity to assets                                  7.15%       7.52%
    Regulatory leverage ratio                         9.33%      10.28%
    Tier 1 capital ratio                             11.35%      11.81%
    Total risk-based capital ratio                   12.51%      12.97%
    Book value per share                        $    12.18       12.62
    Cash dividend per share                     $    0.044       0.044

 ASSET QUALITY
    Net charge-offs                             $     (527)        633
    Net charge-offs to average loans *               -0.37%       0.47%
    Allowance for loan losses                   $    9,035       7,663
    Allowance for loan losses to total loans          1.61%       1.35%
    Nonperforming loans                         $   20,358       5,239
    Other real estate owned (OREO)              $    1,527         744
    Nonperforming assets (NPA)                  $   21,885       5,983
   90+ Day delinquencies                        $      547         564
    NPAs plus 90 Days delinquent                $   22,432       6,547
    NPAs to Total assets                              3.17%       0.88%
    NPAs+90 to Total assets                           3.25%       0.96%
    NPAs to Loans + OREO                              3.88%       1.05%

 END OF PERIOD BALANCES
    Total assets                                $  691,208     683,032
    Total earning assets                        $  653,906     651,077
    Total loans                                 $  562,235     568,481
    Total deposits                              $  587,735     589,802
    Stockholders' equity                        $   49,405      51,386

 AVERAGE BALANCES
    Total assets                                $  701,423     664,026
    Total earning assets                        $  663,522     633,569
    Total loans                                 $  570,010     551,000
    Total deposits                              $  607,402     575,389
    Stockholders' equity                        $   48,427      50,779

  * annualized for quarterly data


            

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