By DOUG LEDUC, Greater Fort Wayne Business Weekly
dougl@fwbusiness.com
Tower Bank plans to close its Angola branch to focus on development of the branch it just opened in Warsaw and on opportunities in Allen County.
The bank plans to replace its Dupont Road branch on the north side of Fort Wayne with a larger banking center that will be easier to get in and out of. It also has a location selected for an additional branch in northern Allen County.
The Angola branch Tower opened in August 2006 at 330 Intertech Parkway will close Feb. 1, partly as a result of changes in the banking landscape of Steuben County and also because of the loss of key personnel, said Mike Cahill, the bank's president and chief executive officer.
"Two of our lead people in that market, both who had been with the bank here in Fort Wayne, left us this summer to go into something else," he said. "One went into property management ... and one of our key people, the assistant branch manager, had an opportunity to stay home with her grandchildren."
The decision to close the Angola branch follows a decision announced in June to withdraw from the Indianapolis market after coming close to opening a branch there.
Tower will spend about $800,000 to build a 3,500-square-foot facility at the southeast corner of Dupont and Lima roads to replace the Dupont Financial Center at 1545 W. Dupont Road.
"That area of the county just continues to explode," Cahill said. Design work for the facility will be done next year, and it will open in the fall of 2008 or spring of 2009.
The new banking center will have a drive-through, and will be "out there and visible, as opposed to being tucked away in a shopping center," he said.
An additional Tower branch of about 3,000 square feet will open somewhere on the north side of Allen County during the summer of 2009. The bank isn't ready to disclose the location it has chosen.
Late last month, Tower opened a two-story, 4,500-square-foot banking center with seven employees in Warsaw. It was 50 percent larger than a typical branch for the bank.
A few years ago, when Tower entered the Steuben County market by opening a loan production office in Angola, the First National Bank of Fremont was for sale. Tower executives didn't expect it to be purchased by a community bank.
If the ownership had switched to an out-of-state megabank, some First Bank of Fremont business would have been "up for grabs," Cahill said.
But the bank was purchased in November 2005 by LaGrange-based Farmers State Bank, a community bank in a better position to defend the acquired business.
"They've done a great job and retained it," Cahill said.
Tower Bank is owned by Fort Wayne-based Tower Financial Corp., which also owns Tower Trust Co., a wealth services firm doing business as Tower Private Advisors.
Don Schenkel, chairman, president and chief executive officer of Tower Financial, said in June the bank corporation decided not to pursue finalization of the Indianapolis charter that regulators had approved after "re-evaluating the timing of our entry into the Indianapolis community."
"This decision is based upon our assessment of a combination of factors, including both current Indianapolis market conditions and other opportunities available to us closer to our home base," he had said in a statement. "This does not, however, rule out Tower's entry into central Indiana at some future date."
Some executives in that area who would have run Tower's Indianapolis branch went to work for Symphony Bank, a new bank in Indianapolis.
Tower had announced plans for Tower Bank of Central Indiana in October 2006, with a goal of opening the new bank as early as the first quarter of 2007.
The bank's initial capitalization was intended to be within a range of $13.5 to $15 million, of which 49 percent would be provided by outside investors and the remaining 51 percent by Tower Financial.
Obtaining the regulatory approval and opening a loan production office in Indianapolis cost Tower $426,000 this year, including $259,000 during the second quarter.
Costs associated with withdrawing from the Indianapolis market and an increase of the bank's net loan charge-offs to $2 million contributed to a 76-percent drop in its second-quarter earnings.
Cahill said closing the Angola branch will cost about $50,000 but is expected to save Tower close to $15,000 annually.
Tower Financial announced in October a third-quarter net loss of $2.2 million, or 54 cents per share, compared with net income of $973,000, or 24 cents per share, for the year-ago quarter. The third quarter results reflected a $3.6 million charge related to certain residential development loans.
"Our $3.6 million third-quarter charge reflects a conservative assessment of both overall credit conditions and the slowdown in the pace of retail sales in the residential real estate development marketplace we serve," Schenkel said in a prepared statement.
"In this regard, Tower is not alone, as other local and regional banking institutions have also adopted a more cautious view of near and mid-term market conditions."
Noting Tower Financial's action was taken with respect to a particular block of loans, Schenkel added he believed Tower's actual experience and realizations on the loans should be better than reflected by their reduced carrying value.
"This past quarter, and to a lesser extent, in the first and second quarters, we charged down and reserved for certain of these weakened loans, absent actual loan defaults, in order to reduce the level of carried risk in our loan portfolio," he said in the earnings statement.
"We have also taken this step so we can focus on the many initiatives in progress that should generate positive results by the fourth quarter, and in future quarters to come."