Tower Financial Corporation Reports Annual Net Income Of $5.7 Million

Our borrowings were $54.9 million at December 31, 2012 and were comprised of $17.5 million in trust preferred debt and $37.4 million in borrowings from the Federal Home Loan Bank of Indianapolis ("FHLBI"). 

Shareholders' equity was $63.7 million at December 31, 2012, an increase of 2.7 percent from the $62.1 million reported at December 31, 2011. Affecting the year to date increase in stockholders' equity was net income of $5.7 million, $292,000 of additional paid in capital from the accounting treatment for restricted stock vesting and issuance of shares related to the long-term incentive plan, treasury stock purchases of $1.7 million, shareholders dividends of $2.9 million, and an increase of $282,000 in unrealized gains, net of tax, on securities available for sale. Currently, we have 4,735,144 common shares outstanding. Tangible book value at December 31, 2012 was $13.46 per common share.

Income Statement

Our total revenue, consisting of net interest income and noninterest income, was $7.6 million for the fourth quarter of 2012, a decrease of $175,000 from the third quarter 2012. Total revenue for 2012 was $30.7 million, down by $188,000, or 0.6 percent, from the record results posted for 2011. Net interest income for the fourth quarter of 2012 was $5.5 million, a decrease of $143,000 from the third quarter of 2012, while 2012 annual net interest income was $22.2 million, a decrease of approximately $550,000, or 2.4 percent, from 2011. The quarter over quarter decrease in our net interest income was primarily the result of a 22 basis point decline in our net interest margin. This reduction in our margin came from yield compression on earning assets. Our yield on loans dropped to 4.63 percent during the fourth quarter from the 4.74 percent reported for the third quarter, while the yield on our investment portfolio dropped to 2.99 percent from 3.61 percent quarter over quarter. This was offset slightly by our continued reduction in our cost of funds, which decreased to 0.64 percent for the fourth quarter 2012 from the 0.73 percent reported for the third quarter. The reduction in net interest margin was offset by an increase of $25.3 million in average earning assets for the quarter. Total earning assets were $636.9 million at December 31, 2012, compared to $607.5 million at September 30, 2012 and $606.9 million at December 31, 2011. Due to the extended low interest rate environment and the margin compression that is impacting the entire industry, we have shifted our focus to net interest income versus the net interest margin. We expect this trend to continue as we move into 2013.

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