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Tower Financial Upped to Strong Buy

Zacks Equity Research

On Sep 14, Zacks Investment Research upgraded Tower Financial Corporation (TOFC) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Tower Financial has been witnessing rising earnings estimates following the announcement of robust second-quarter 2013 results. Moreover, this Midwest regional bank has delivered positive earnings surprises in the last 4 quarters, with an average beat of 23.1%. Additionally, the company’s strong capital deployment activities added to the upside.

On Sep 4, the company paid a special cash dividend of 25 cents per share on its common stock. Earlier, on Aug 22, 2013, the company’s board of directors paid a dividend of 8 cents per share, rising 14.3% from the prior quarter’s payout.

Tower Financial reported second-quarter 2013 results on Jul 25. Earnings per share of 34 cents surpassed the Zacks Consensus Estimate by a nickel. Results benefited from growth in non-interest income and lower provision for credit losses, partially offset by higher operating expenses and a drop in net interest income.

Non-interest income rose 9.0% to $2.3 million. On the flip side, non-interest expense crept up 1.0% from the prior-year quarter to $5.1 million. Additionally, net interest income declined 9.0% year over year to $5.2 million.

Further, asset quality improved in the quarter. Provision for loan losses was $0.3 million, down 68% year over year. Net charge-offs were $0.2 million, down substantially by 80% from $1.0 million in the year-ago quarter. Further, nonperforming loans declined 18.0% to $11.5 million. Similarly non-performing assets declined 22% to $13.3 million.

Additionally, following the earnings release, the Zacks Consensus Estimate for 2013 increased 10.0% to $1.43 per share over the last 60 days. Positive earnings surprises and favorable estimate revisions stimulated the rank upgrade.

Other Stocks to Consider

While we prefer Tower Financial, other stocks with a Zacks Rank #1 include German American Bancorp Inc. (GABC), First Interstate Bancsystem Inc. (FIBK) and Firstbank Corporation (FBMI).

Read the Full Research Report on TOFCRead the Full Research Report on FIBKRead the Full Research Report on GABCRead the Full Research Report on FBMIZacks Investment Research