Tower Financial Corp. (TOFC, Financial) filed Quarterly Report for the period ended 2009-06-30.
Tower Financial Corporation was incorporated to acquire all of the issued and outstanding stock of Tower Bank & Trust Company and to engage in the business of a bank holding company. The bank offers a broad array of deposit products including checking business checking savings and money market accounts certificates of deposit and direct deposit services. Tower Financial Corp. has a market cap of $21.1 million; its shares were traded at around $5.16 with and P/S ratio of 0.5.
Total deposits increased $8.4 million, or 1.4%, during the first half of 2009. The increase was primarily driven by increases in non-interest bearing checking accounts and money market accounts of $23.6 million and $10.3 million, respectively. This increase was offset by decreases non-core deposits of $29.2 million, which includes decreases in certificate of deposits greater than $100,000 and brokered certificate of deposits in the amounts of $14.1 and $15.1 million, respectively. In an effort to decrease our out-of-market funding, the Company remained liquid during the first half of 2009 to pay off FHLB advances that have matured. FHLB advances decreased by $18.0 million from December 31, 2008 to June 30, 2009, while Federal Funds Purchased from the Federal Reserve Bank Discount Window increased by $2.8 million.
Nonperforming Assets. Nonperforming assets include nonperforming loans and other real estate owned (OREO). Nonperforming loans include loans past due over 90 days and still accruing interest, restructured loans, and all nonaccrual loans. Nonperforming assets have increased from $19.7 million, or 2.8% of total assets at December 31, 2008 to $25.8 million, or 3.8% of total assets, at June 30, 2009. The increase is primarily attributed to the continued economic downturn and the declining property values. While a few commercial loan customers had to close their business due to a lack of sales, the commercial real estate loan customers are struggling to sell their properties and are additionally battling the decrease in property values. Nonaccrual loans increased by $3.3 million primarily due to three commercial loan relationships and two commercial real estate loan relationships being downgraded to non-accrual and charged-down by $3.9 million to a total value of $7.9 million. Total impaired loans at June 30, 2009 were $28.2 million, compared to $23.4 million at December 31, 2008. At June 30, 2009, management believes it has allocated adequate specific reserves for these risks. Other real estate owned increased by $1.4 million, primarily due to transferring in a commercial property in the amount of $2.7 million during the first quarter, which was charged down by $950,000 to its recently appraised value in the second quarter of 2009.
The allowance for loan losses at June 30, 2009 was $14.1 million, or 2.53% of total loans outstanding, an increase of $3.5 million from $10.7 million, or 1.90% of total loans outstanding, at December 31, 2008. The provision for loan losses during the first six months of 2009 was $7.5 million compared to $1.2 million in the first six months of 2008. The increase in loan loss provision incurred in the second quarter of 2009 compared to the second quarter 2008 was due to an increase of $3.6 million in specific allocations reserved on three commercial real estate loan relationships amounting to $10.8 million, charge-offs of $3.9 million of which only $1.5 million was previously specifically reserved, and the continuing decline in the economic environment.
Deposits. Total deposits were $594.6 million at June 30, 2009 compared to total deposits at December 31, 2008 of $586.2 million. The increase of $8.4 million, or 1.4%, during the first six months of 2009 was reflective of the $37.6 million increase in core deposits, including increases of $23.6 million in non-interest bearing checking accounts and $10.3 million in money market accounts. The increase was offset by a $29.2 million decrease in non-core deposits, which includes a decrease of $14.1 million and $15.1 million in certificate of deposits greater than $100,000 and brokered certificate of deposits, respectively. The significant growth in our in-market deposits during the second quarter allowed us to let out-of-market funding mature without being replaced. Brokered certificate of deposits were $69.4 million and $84.5 million at June 30, 2009 and December 31, 2008, respectively.
Results of operations for the three-month period ended June 30, 2009 reflected net loss of $4.1 million, or ($1.00) per diluted share. This was a $4.4 million decrease from 2008 s second quarter net income of $342,707, or $0.08 per diluted share. The operating results for the three-month period ended June 30, 2009 were unfavorable as we were faced with a decrease in the net interest margin, recording an additional $5.7 million to provision expense compared to the same period in 2008, and increases in FDIC insurance premiums of $479,067 compared to the amount recorded as of June 30, 2008. Our non-interest income grew by $130,479 primarily due to an increase in loan broker fees of $128,591 from an increase in mortgage originations. As interest rates began dropping dramatically in 2008 causing a compression of our net interest margin, we continually looked for ways to decrease our non-interest expenses. While our non-interest expenses increased by $837,456, the increase was primarily due a write-down of $950,000 on an other real estate owned property and a special assessment from the FDIC of $315,000. Most non-interest expenses decreased, including employment expenses by $406,886,or 13.3%, and marketing by $89,799, or 40.1%.
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Tower Financial Corporation was incorporated to acquire all of the issued and outstanding stock of Tower Bank & Trust Company and to engage in the business of a bank holding company. The bank offers a broad array of deposit products including checking business checking savings and money market accounts certificates of deposit and direct deposit services. Tower Financial Corp. has a market cap of $21.1 million; its shares were traded at around $5.16 with and P/S ratio of 0.5.
Highlight of Business Operations:
Net loss was $4.1 million and $3.7 million for the second quarter 2009 and year-to-date, a increase of $4.4 million and $4.7 million from the same periods in 2008. The increase was due to an increase in loan loss provision expense bringing the quarterly expense to $6.6 million and a write-down in value of an other real estate owned property of $950,000. Provision expenses increased by $5.7 million from the $875,000 recorded in the second quarter 2008 due to the continual decline in environmental conditions, to place specific reserves on three commercial real estate loan relationships, and to replace charge-downs on three commercial and two commercial real estate loan relationships. Upon the receipt of new appraisals, we were required to write down the value of an other real estate owned property to fair value, thus recording an expense of $950,000 through operating expenses. Also adding to the decrease in earnings was an industry-wide increase in FDIC insurance premiums coupled with an industry-wide FDIC special assessment to which our share was $315,000. These two FDIC charges accounted for a total increase of $479,067 from the second quarter 2008 to the second quarter 2009.Total deposits increased $8.4 million, or 1.4%, during the first half of 2009. The increase was primarily driven by increases in non-interest bearing checking accounts and money market accounts of $23.6 million and $10.3 million, respectively. This increase was offset by decreases non-core deposits of $29.2 million, which includes decreases in certificate of deposits greater than $100,000 and brokered certificate of deposits in the amounts of $14.1 and $15.1 million, respectively. In an effort to decrease our out-of-market funding, the Company remained liquid during the first half of 2009 to pay off FHLB advances that have matured. FHLB advances decreased by $18.0 million from December 31, 2008 to June 30, 2009, while Federal Funds Purchased from the Federal Reserve Bank Discount Window increased by $2.8 million.
Nonperforming Assets. Nonperforming assets include nonperforming loans and other real estate owned (OREO). Nonperforming loans include loans past due over 90 days and still accruing interest, restructured loans, and all nonaccrual loans. Nonperforming assets have increased from $19.7 million, or 2.8% of total assets at December 31, 2008 to $25.8 million, or 3.8% of total assets, at June 30, 2009. The increase is primarily attributed to the continued economic downturn and the declining property values. While a few commercial loan customers had to close their business due to a lack of sales, the commercial real estate loan customers are struggling to sell their properties and are additionally battling the decrease in property values. Nonaccrual loans increased by $3.3 million primarily due to three commercial loan relationships and two commercial real estate loan relationships being downgraded to non-accrual and charged-down by $3.9 million to a total value of $7.9 million. Total impaired loans at June 30, 2009 were $28.2 million, compared to $23.4 million at December 31, 2008. At June 30, 2009, management believes it has allocated adequate specific reserves for these risks. Other real estate owned increased by $1.4 million, primarily due to transferring in a commercial property in the amount of $2.7 million during the first quarter, which was charged down by $950,000 to its recently appraised value in the second quarter of 2009.
The allowance for loan losses at June 30, 2009 was $14.1 million, or 2.53% of total loans outstanding, an increase of $3.5 million from $10.7 million, or 1.90% of total loans outstanding, at December 31, 2008. The provision for loan losses during the first six months of 2009 was $7.5 million compared to $1.2 million in the first six months of 2008. The increase in loan loss provision incurred in the second quarter of 2009 compared to the second quarter 2008 was due to an increase of $3.6 million in specific allocations reserved on three commercial real estate loan relationships amounting to $10.8 million, charge-offs of $3.9 million of which only $1.5 million was previously specifically reserved, and the continuing decline in the economic environment.
Deposits. Total deposits were $594.6 million at June 30, 2009 compared to total deposits at December 31, 2008 of $586.2 million. The increase of $8.4 million, or 1.4%, during the first six months of 2009 was reflective of the $37.6 million increase in core deposits, including increases of $23.6 million in non-interest bearing checking accounts and $10.3 million in money market accounts. The increase was offset by a $29.2 million decrease in non-core deposits, which includes a decrease of $14.1 million and $15.1 million in certificate of deposits greater than $100,000 and brokered certificate of deposits, respectively. The significant growth in our in-market deposits during the second quarter allowed us to let out-of-market funding mature without being replaced. Brokered certificate of deposits were $69.4 million and $84.5 million at June 30, 2009 and December 31, 2008, respectively.
Results of operations for the three-month period ended June 30, 2009 reflected net loss of $4.1 million, or ($1.00) per diluted share. This was a $4.4 million decrease from 2008 s second quarter net income of $342,707, or $0.08 per diluted share. The operating results for the three-month period ended June 30, 2009 were unfavorable as we were faced with a decrease in the net interest margin, recording an additional $5.7 million to provision expense compared to the same period in 2008, and increases in FDIC insurance premiums of $479,067 compared to the amount recorded as of June 30, 2008. Our non-interest income grew by $130,479 primarily due to an increase in loan broker fees of $128,591 from an increase in mortgage originations. As interest rates began dropping dramatically in 2008 causing a compression of our net interest margin, we continually looked for ways to decrease our non-interest expenses. While our non-interest expenses increased by $837,456, the increase was primarily due a write-down of $950,000 on an other real estate owned property and a special assessment from the FDIC of $315,000. Most non-interest expenses decreased, including employment expenses by $406,886,or 13.3%, and marketing by $89,799, or 40.1%.
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