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TowneBank Reports Second Quarter 2018 Earnings

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SUFFOLK, Va., July 26, 2018 (GLOBE NEWSWIRE) -- TowneBank (the "Bank" or "Company") (NASDAQ:TOWN) today reported record earnings for the quarter ended June 30, 2018, of $34.80 million, or $0.48 per diluted share, compared to the $26.21 million or $0.42,  per diluted share for the quarter ended June 30, 2017. Excluding acquisition-related expenses, earnings for the quarter ended June 30, 2018 were $35.51 million (non-GAAP), or $0.49 (non-GAAP) per diluted share, compared to $24.77 million (non-GAAP) or $0.40 (non-GAAP), per diluted share for the quarter ended June 30, 2017.

"We are pleased to report another record quarter, highlighted by a 14.6% increase in top-line revenue growth and a strong operating performance," said G. Robert Aston, Jr., Executive Chairman.  "Second quarter results included strong loan growth of 16%, annualized.  Credit quality remained strong and our return on average assets was 1.32%."

Highlights for the Second Quarter of 2018 Compared to the Second Quarter of 2017:

  • Total revenues were $137.06 million, an increase of $17.46 million, or 14.60%.
  • Loans held for investment increased $1.83 billion, or 30.69%, from June 30, 2017, and $304.81 million, or 4.08%, from March 31, 2018, or 16.37% on an annualized basis.  Excluding loans acquired in the Paragon merger of $1.43 billion, loans increased $393.40 million, or 6.61% from June 30, 2017.
  • Total deposits were $7.99 billion, an increase of $1.40 billion, or 21.16%.
  • Noninterest bearing deposits increased by 17.03%, to $2.60 billion, representing 32.50% of total deposits.
  • Annualized return on common shareholders' equity of 9.62% and annualized return of average tangible common shareholders' equity of 15.36% (non-GAAP).
  • Net interest margin of 3.69% and taxable equivalent net interest margin of 3.71% (non-GAAP).
  • Effective tax rate of 19.89% benefiting from the Tax Cuts and Jobs Act of 2017.
  • Expansion of the Towne footprint through the successful acquisition in the second quarter of Michael R. Bare, LLC, by TowneInsurance Agency, LLC.  Additionally, Towne Vacations Deep Creek, LLC, expanded its vacation offerings through merger with Deep Creek Lodging Company, LLC.  Both transactions included the retention of the acquired/merged management teams.

"In the second quarter, we capitalized on the growth opportunities afforded us by our successful Paragon merger in addition to continuing organic growth in our existing footprint.  We continue to identify market opportunities to expand our reach in North Carolina with our unique brand of Hometown Banking," said J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to the Second Quarter of 2017:

  • Net interest income was $86.82 million compared to $69.25 million at June 30, 2017.
  • Taxable equivalent net interest margin was 3.71%, including accretion of 23 basis points, compared to 3.84%, including accretion of 31 basis points, for 2017.  Second quarter 2017 accretion income included a one-time positive adjustment of $3.89 million, or 21 basis points.
  • Total cost of deposits increased to 0.60% from 0.44% at June 30, 2017.
  • Average interest-earning assets totaled $9.44 billion at June 30, 2018 compared to $7.32 billion at June 30, 2017, an increase of 29.01%.
  • Average loans held for investment represented 80.0% of average earning assets at June 30, 2018 compared to 80.98% in the second quarter of 2017.
  • Average interest-bearing liabilities totaled $6.41 billion, an increase of $1.58 billion from prior year.

The following table sets forth an estimate of the expected effects of the aggregate acquisition accounting adjustments on pre-tax net interest income for the periods shown (in thousands):

    Discount Accretion (Premium Amortization)
    For the three months ended
    September 30,   December 31,   March 31,   June 30,
    2018   2018   2019   2019
Assets:              
Investment Securities   $ (72 )   $ (71 )   $ (72 )   $ (71 )  
Loans   2,231     1,679     1,609     1,568    
                 
Liabilities:                
Deposits   104     91     60     54    
                 
Total estimated effect on net interest income   $ 2,055     $ 1,517     $ 1,477     $ 1,443    
                 
Note:   This information is intended for informational purposes only and is not necessarily indicative of future results.
     Actual results may differ due to factors such as changes in estimated prepayment speeds or projected credit loss rates.
 

Quarterly Provision for Loan Losses:

  • Recorded a provision for loan losses of $3.06 million compared to $1.95 million in the prior quarter and $1.32 million one year ago, driven by strong growth in loans held for investment during the quarter.
  • Net charge-offs were $0.26 million compared to $0.38 million one year prior.  The ratio of net charge-offs to average loans on an annualized basis was 0.01% compared to 0.02% in the prior quarter and 0.03% for the second quarter of 2017.
  • The allowance for loan losses represented 0.64% of total loans compared to 0.63% at March 31, 2018 and 0.74% at June 30, 2017.  Loan loss reserve as a percentage of total loans, excluding purchased loans, decreased to 0.84%, from 0.86% at March 31, 2018, and June 30, 2017.  The allowance for loan losses was 12.64 times nonperforming loans compared to 10.40 times at March 31, 2018 and 4.58 times at June 30, 2017.

Quarterly Noninterest Income Compared to the Second Quarter of 2017:

  • Total noninterest income was $50.23 million compared to $50.34 million, a decrease of $0.11 million.  This reflects a decrease of $2.85 million in residential mortgage banking income, which was offset by an increase of $0.33 million in service charges on deposit accounts and an increase of $2.19 million in insurance commissions and other title fees primarily related to increases in commercial line commissions and the timing of revenue due to the adoption of the new accounting guidance on revenue recognition.
  • Residential mortgage banking income was $18.74 million compared to $21.59 million in second quarter 2017.  Loan volume in the current quarter was $1.01 billion, with purchases comprising $922.75 million and refinancing activity accounting for $86.04 million.  Loan volume in second quarter 2017 was $1.08 billion, with purchase activity of $961.29 million and refinancing activity of $117.23 million.  Lower volumes and continued pressure on gain on sale margin led to the decline in revenue.
  • Insurance segment total revenue increased 18.03% to $17.58 million in second quarter.  The change in the timing of revenue recognition related to the adoption of new accounting guidance resulted in an increase of insurance commission revenue for the second quarter of approximately $0.81 million.
  • Property management fee revenue decreased $1.20 million, or 22.69%, primarily related to a change in the timing of revenue recognition due to the adoption of new accounting guidance on revenue recognition.  The change in accounting guidance resulted in a decrease of property management fee income for the second quarter of approximately $0.76 million.

Quarterly Noninterest Expense Compared to the Second Quarter of 2017:

  • Total noninterest expense was $89.22 million compared to $78.12 million, an increase of $11.10 million, or 14.21%.  This reflects increases of $5.86 million in salary and benefits expense, which includes a non-recurring retirement related adjustment of $1.11 million, $1.05 million in outside processing expenses, $0.99 million in intangible amortization expense, $0.94 million in professional fees, and $0.60 million in software expense.
  • Noninterest expense included operational expenses of entities acquired subsequent to second quarter 2017 of $9.78 million, primarily in our Banking and Insurance segments.  Excluding acquired entity expenses, noninterest expense was $79.45 million for the quarter ended June 30, 2018.

Quarterly Income Taxes Compared to the Second Quarter of 2017:

  • Income tax expense was $8.64 million compared to $12.24 million, one year prior.  This represents an effective tax rate of 19.89% compared to 31.83% in the second quarter of 2017.
  • The decrease in the effective tax rate from the prior year is due to the Tax Cuts and Jobs Act of 2017, signed into law on December 22, 2017.  The reduction from 35% to 21% of the U.S. federal corporate tax rate was among the key changes to U.S. tax law, effective January 1, 2018.

Investment Securities:

  • Total investment securities were $1.16 billion compared to $1.34 billion at March 31, 2018 and $0.79 billion at June 30, 2017.  The weighted average duration of the portfolio at June 30, 2018 was 3.02 years.  The carrying value of the available-for-sale portfolio included $20.60 million of net unrealized losses compared to $17.95 million at March 31, 2018 and $2.05 million in net unrealized losses at June 30, 2017.  The carrying value of the held-to-maturity portfolio does not reflect $0.64 million in net unrealized gains compared to $0.88 million in net unrealized gains at March 31, 2018 and $2.45 million in net unrealized gains at June 30, 2017.

Loans:

  • Total loans held for investment were $7.77 billion at June 30, 2018 compared to $7.47 billion at March 31, 2018 and $5.95 billion at June 30, 2017.
               
              % Change
  Q2   Q2   Q1   Q2 18 vs.   Q2 18 vs.
(dollars in thousands) 2018   2017   2018   Q2 17   Q1 18
Construction and land development $ 989,910     $ 888,566     $ 996,159        11.41 %      (0.63 )%
Commercial real estate - investment related properties 1,935,013     1,339,270     1,853,737     44.48 %   4.38 %
Commercial real estate - owner occupied 1,227,072     956,333     1,164,923     28.31 %   5.34 %
Multifamily real estate 288,043     206,894     297,085     39.22 %   (3.04 )%
1-4 family residential real estate 1,596,264     1,227,389     1,566,449     30.05 %   1.90 %
Commercial and industrial business loans 1,440,625     1,110,822     1,328,357     29.69 %   8.45 %
Consumer loans and other 298,029     219,787     263,441     35.60 %   13.13 %
Total $ 7,774,956     $ 5,949,061     $ 7,470,151     30.69 %   4.08 %
 

Asset Quality:

  • Nonperforming assets declined to $26.31 million, or 0.24% of total assets, compared to $35.69 million, or 0.42%, at June 30, 2017.
  • Nonperforming loans were 0.05% of period end loans.
  • Foreclosed property decreased to $20.13 million.

Deposits and Borrowings:

  • Total deposits were $7.99 billion compared to $7.83 billion at March 31, 2018, and $6.60 billion at June 30, 2017.  The increase in deposits includes $1.25 billion acquired in the Paragon merger.  Loans to deposits were 97.29% compared to 95.46% at March 31, 2018 and 90.20% at June 30, 2017.
  • Non-interest bearing deposits were 32.50% of total deposits at June 30, 2018 compared to 31.99% at March 31, 2018 and 33.65% at June 30, 2017.
  • Total borrowings were $1.17 billion compared to $1.18 billion and $0.56 billion at March 31, 2018 and June 30, 2017, respectively.
               
              % Change
  Q2   Q2   Q1   Q2 18 vs.   Q2 18 vs.
(dollars in thousands) 2018   2017   2018   Q2 17   Q1 18
Noninterest-bearing demand $ 2,597,320     $ 2,219,406     $ 2,503,246        17.03 %        3.76 %
Interest-bearing:                  
Demand and money market accounts 2,987,102     2,292,978     3,001,256     30.27 %   (0.47 )%
Savings 305,334     318,714     309,077     (4.20 )%   (1.21 )%
Certificates of deposits 2,101,455     1,764,671     2,011,843     19.08 %   4.45 %
Total $ 7,991,211     $ 6,595,769     $ 7,825,422     21.16 %   2.12 %
 

Capital:

  • Common equity tier 1 capital ratio of 11.33%.
  • Tier 1 leverage capital ratio of 10.00%.
  • Tier 1 risk-based capital ratio of 11.36%.
  • Total risk-based capital ratio of 14.71%.
  • Book value was $20.22 compared to $19.90 at March 31, 2018 and $17.74 at June 30, 2017.
  • Tangible book value was $13.50 compared to $13.34 at March 31, 2018 and $12.81 at June 30, 2017.
             
    Q2   Q2   Q1
    2018   2017   2018
Common Equity Tier 1      11.33 %      11.98 %      11.65 %
Tier 1   11.36 %   12.03 %   11.68 %
Total   14.71 %   12.68 %   15.27 %
Tier 1 Leverage Ratio   10.00 %   10.43 %   9.97 %
                   

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 40 banking offices serving Chesapeake, Chesterfield County, Glen Allen, Hampton, James City County, Mechanicsville, Newport News, Norfolk, Portsmouth, Richmond, Suffolk, Virginia Beach, Williamsburg, and York County in Virginia, along with Raleigh, Cary, Charlotte, Moyock, Grandy, Camden County, Southern Shores, Corolla and Nags Head in North Carolina.  Towne also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations.  Local decision-making is a hallmark of its hometown banking strategy that is delivered through the leadership of each group's President and Board of Directors.  With total assets of $10.83 billion as of June 30, 2018, TowneBank is one of the largest banks headquartered in Virginia.

Non-GAAP Financial Measures:
This press release contains financial information determined by methods other than in accordance with GAAP.  The Company's management uses these non-GAAP financial measures in its analysis of the Company's performance.  These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that are infrequent in nature.  Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company's core businesses.  These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP disclosures are included as tables at the end of this release.

Forward-Looking Statements:
Certain statements contained in this release constitute forward-looking statements within the meaning of U.S. federal securities laws.  These forward-looking statements speak only as of the date of this release, are based on current expectations, and involve a number of assumptions.  These include statements regarding TowneBank's future economic performance, financial condition, prospects, growth, strategies and expectations, and objectives of management, and are generally identified by the use of words such as "believe," "expect," "intend," "anticipate," "estimate," or "project" or similar expressions.  TowneBank intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. You should not place undue reliance on forward-looking statements, which are subject to assumptions that are subject to change. TowneBank's ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain.  These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ from those indicated or implied in the forward-looking statements and such differences may be material.  Factors which could have a material effect on the operations and future prospects of TowneBank include but are not limited to: changes in interest rates, general economic and business conditions; legislative/regulatory changes; the monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; the quality and composition of TowneBank's loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBank's market area; implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; changes in accounting principles, policies and guidelines; and other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation (the "FDIC").  TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

Media contact:
G. Robert Aston, Jr., Executive Chairman, 757-638-6780
J. Morgan Davis, President and Chief Executive Officer, 757-673-1673

Investor contact:
William B. Littreal, Chief Financial Officer, 757-638-6813


 
TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
 
              Increase/    % Increase/
Three Months Ended June 30, 2018   2017    (Decrease)    (Decrease)
                   
Results of Operations:              
  Net interest income $ 86,823     $ 69,253     $ 17,570         25.37 %
  Noninterest income 50,235     50,343     (108 )   (0.21 )%
  Total Revenue 137,058     119,596     17,462     14.60 %
  Acquisition-related expenses 797     1,281     (484 )   (37.78 )%
  Noninterest expenses, excluding acquisition-related expenses 88,424     76,838     11,586     15.08 %
  Provision for loan losses 3,056     1,320     1,736     131.52 %
  Income before income tax and noncontrolling interest 44,781     40,157     4,624     11.51 %
  Provision for income tax expense 8,643     12,240     (3,597 )   (29.39 )%
  Net income 36,138     27,917     8,221     29.45 %
  Net income attributable to noncontrolling interest (1,334 )   (1,704 )   370     (21.71 )%
  Net income attributable to TowneBank 34,804     26,213     8,591     32.77 %
  Net income available to common shareholders 34,804     26,213     8,591     32.77 %
  Net income per common share - basic 0.48     0.42     0.06     14.29 %
  Net income per common share - diluted 0.48     0.42     0.06     14.29 %
Period End Data:              
  Total assets $ 10,831,653     $ 8,427,042     $ 2,404,611     28.53 %
  Total assets - tangible 10,345,360     8,118,730     2,226,630     27.43 %
  Earning assets 9,751,972     7,590,796     2,161,176     28.47 %
  Loans (net of unearned income) 7,774,956     5,949,061     1,825,895     30.69 %
  Allowance for loan losses 49,535     44,131     5,404     12.25 %
  Goodwill and other intangibles 486,294     308,312     177,982     57.73 %
  Nonperforming assets 26,305     35,692     (9,387 )   (26.30 )%
  Noninterest bearing deposits 2,597,320     2,219,406     377,914     17.03 %
  Interest bearing deposits 5,393,891     4,376,363     1,017,528     23.25 %
      Total deposits 7,991,211     6,595,769     1,395,442     21.16 %
  Total equity 1,476,786     1,122,998     353,788     31.50 %
  Total equity - tangible 990,492     814,686     175,806     21.58 %
  Common equity 1,462,761     1,110,681     352,080     31.70 %
  Common equity - tangible 976,468     802,369     174,099     21.70 %
  Book value per common share 20.22     17.74     2.48     13.98 %
  Book value per common share - tangible 13.50     12.81     0.69     5.39 %
Daily Average Balances:              
  Total assets $ 10,536,847     $ 8,180,959     $ 2,355,888     28.80 %
  Total assets - tangible 10,056,639     7,873,036     2,183,603     27.74 %
  Earning assets 9,442,078     7,318,667     2,123,411     29.01 %
  Loans (net of unearned income), excluding nonaccrual loans 7,552,983     5,926,336     1,626,647     27.45 %
  Allowance for loan losses 47,745     43,501     4,244     9.76 %
  Goodwill and other intangibles 480,208     307,923     172,285     55.95 %
  Noninterest bearing deposits 2,493,211     2,081,819     411,392     19.76 %
  Interest bearing deposits 5,230,807     4,186,319     1,044,488     24.95 %
      Total deposits 7,724,018     6,268,138     1,455,880     23.23 %
  Total equity 1,461,815     1,115,008     346,807     31.10 %
  Total equity - tangible 981,607     807,085     174,522     21.62 %
  Common equity 1,450,555     1,103,813     346,742     31.41 %
  Common equity - tangible 970,347     795,891     174,456     21.92 %
Key Ratios:              
  Return on average assets 1.32 %   1.29 %   0.03 %   2.33 %
  Return on average assets - tangible 1.48 %   1.40 %   0.08 %   5.71 %
  Return on average equity 9.55 %   9.43 %   0.12 %   1.27 %
  Return on average equity - tangible 15.19 %   13.67 %   1.52 %   11.12 %
  Return on average common equity 9.62 %   9.53 %   0.09 %   0.94 %
  Return on average common equity - tangible 15.36 %   13.87 %   1.49 %   10.74 %
  Net interest margin-fully tax equivalent (1) 3.71 %   3.84 %   (0.13 )%   (3.39 )%
  Net interest margin 3.69 %   3.80 %   (0.11 )%   (2.89 )%
  Average earning assets/total average assets 89.61 %   89.46 %   0.15 %   0.17 %
  Average loans/average deposits 97.79 %   94.55 %   3.24 %   3.43 %
  Average noninterest deposits/total average deposits 32.28 %   33.21 %   (0.93 )%   (2.80 )%
  Allowance for loan losses/period end loans 0.64 %   0.74 %   (0.10 )%   (13.51 )%
  Nonperforming assets to period end assets 0.24 %   0.42 %   (0.18 )%   (42.86 )%
  Period end equity/period end total assets 13.63 %   13.33 %   0.30 %   2.25 %
  Efficiency ratio 65.10 %   65.32 %   (0.22 )%   (0.34 )%
                 
(1)  Presented on a tax-equivalent basis              
               
               


TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
 
              Increase/    % Increase/
Six Months Ended June 30, 2018   2017    (Decrease)    (Decrease)
                   
Results of Operations:              
  Net interest income $ 163,168     $ 129,533     $ 33,635     25.97 %
  Noninterest income 100,167     95,228     4,939     5.19 %
  Total Revenue 263,335     224,761     38,574     17.16 %
  Acquisition-related expenses 9,523     1,277     8,246     645.73 %
  Noninterest expenses, excluding acquisition-related expenses 172,001     147,090     24,911     16.94 %
  Provision for loan losses 5,009     3,861     1,148     29.73 %
  Income before income tax and noncontrolling interest 76,802     72,533     4,269     5.89 %
  Provision for income tax expense 14,720     21,626     (6,906 )   (31.93 )%
  Net income 62,082     50,907     11,175     21.95 %
  Net income attributable to noncontrolling interest (2,572 )   (2,727 )   155     (5.68 )%
  Net income attributable to TowneBank 59,510     48,180     11,330     23.52 %
  Net income available to common shareholders 59,510     48,180     11,330     23.52 %
  Net income per common share - basic 0.84     0.78     0.06     7.69 %
  Net income per common share - diluted 0.84     0.77     0.07     9.09 %
Period End Data:              
  Total assets $ 10,831,653     $ 8,427,042     $ 2,404,611     28.53 %
  Total assets - tangible 10,345,360     8,118,730     2,226,630     27.43 %
  Earning assets 9,751,972     7,590,796     2,161,176     28.47 %
  Loans (net of unearned income) 7,774,956     5,949,061     1,825,895     30.69 %
  Allowance for loan losses 49,535     44,131     5,404     12.25 %
  Goodwill and other intangibles 486,294     308,312     177,982     57.73 %
  Nonperforming assets 26,305     35,692     (9,387 )   (26.30 )%
  Noninterest bearing deposits 2,597,320     2,219,406     377,914     17.03 %
  Interest bearing deposits 5,393,891     4,376,363     1,017,528     23.25 %
      Total deposits 7,991,211     6,595,769     1,395,442     21.16 %
  Total equity 1,476,786     1,122,998     353,788     31.50 %
  Total equity - tangible 990,492     814,686     175,806     21.58 %
  Common equity 1,462,761     1,110,681     352,080     31.70 %
  Common equity - tangible 976,468     802,369     174,099     21.70 %
  Book value per common share 20.22     17.74     2.48     13.98 %
  Book value per common share - tangible 13.50     12.81     0.69     5.39 %
Daily Average Balances:              
  Total assets $ 10,194,507     $ 8,091,161     $ 2,103,346     26.00 %
  Total assets - tangible 9,742,834     7,786,156     1,956,678     25.13 %
  Earning assets 9,122,147     7,248,947     1,873,200     25.84 %
  Loans (net of unearned income), excluding nonaccrual loans 7,255,533     5,894,743     1,360,790     23.08 %
  Allowance for loan losses 46,976     43,058     3,918     9.10 %
  Goodwill and other intangibles 451,673     305,006     146,667     48.09 %
  Noninterest bearing deposits 2,398,693     2,020,195     378,498     18.74 %
  Interest bearing deposits 5,091,067     4,144,447     946,620     22.84 %
      Total deposits 7,489,760     6,164,642     1,325,118     21.50 %
  Total equity 1,408,694     1,104,308     304,386     27.56 %
  Total equity - tangible 957,021     799,303     157,718     19.73 %
  Common equity 1,397,841     1,093,128     304,713     27.88 %
  Common equity - tangible 946,167     788,122     158,045     20.05 %
Key Ratios:              
  Return on average assets 1.18 %   1.20 %   (0.02 )%   (1.67 )%
  Return on average assets - tangible 1.32 %   1.31 %   0.01 %   0.76 %
  Return on average equity 8.52 %   8.80 %   (0.28 )%   (3.18 )%
  Return on average equity - tangible 13.47 %   12.79 %   0.68 %   5.32 %
  Return on average common equity 8.59 %   8.89 %   (0.30 )%   (3.37 )%
  Return on average common equity - tangible 13.62 %   12.97 %   0.65 %   5.01 %
  Net interest margin-fully tax equivalent (1) 3.63 %   3.64 %   (0.01 )%   (0.27 )%
  Net interest margin 3.61 %   3.60 %   0.01 %   0.28 %
  Average earning assets/total average assets 89.48 %   89.59 %   (0.11 )%   (0.12 )%
  Average loans/average deposits 96.87 %   95.62 %   1.25 %   1.31 %
  Average noninterest deposits/total average deposits 32.03 %   32.77 %   (0.74 )%   (2.26 )%
  Allowance for loan losses/period end loans 0.64 %   0.74 %   (0.10 )%   (13.51 )%
  Nonperforming assets to period end assets 0.24 %   0.42 %   (0.18 )%   (42.86 )%
  Period end equity/period end total assets 13.63 %   13.33 %   0.30 %   2.25 %
  Efficiency ratio 68.93 %   66.01 %   2.92 %   4.42 %
                 
(1)  Presented on a tax-equivalent basis              
               
               


TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
 
    June 30,   March 31,   Increase/    % Increase/
Three Months Ended 2018   2018   (Decrease)    (Decrease)
                 
Results of Operations:              
  Net interest income $ 86,823     $ 76,344     $ 10,479     13.73 %
  Noninterest income 50,235     49,932     303     0.61 %
  Total Revenue 137,058     126,276     10,782     8.54 %
  Acquisition-related expenses 797     8,726     (7,929 )   (90.87 )%
  Noninterest expenses, excluding acquisition-related expenses 88,424     83,577     4,847     5.80 %
  Provision for loan losses 3,056     1,953     1,103     56.48 %
  Income before income tax and noncontrolling interest 44,781     32,020     12,761     39.85 %
  Provision for income tax expense 8,643     6,077     2,566     42.22 %
  Net income 36,138     25,943     10,195     39.30 %
  Net income attributable to noncontrolling interest (1,334 )   (1,238 )   (96 )   7.75 %
  Net income attributable to TowneBank 34,804     24,705     10,099     40.88 %
  Net income available to common shareholders 34,804     24,705     10,099     40.88 %
  Net income per common share - basic 0.48     0.36     0.12     33.33 %
  Net income per common share - diluted 0.48     0.36     0.12     33.33 %
Period End Data:              
  Total assets $ 10,831,653     $ 10,620,415     $ 211,238     1.99 %
  Total assets - tangible 10,345,360     10,146,133     199,227     1.96 %
  Earning assets 9,751,972     9,569,201     182,771     1.91 %
  Loans (net of unearned income) 7,774,956     7,470,151     304,805     4.08 %
  Allowance for loan losses 49,535     46,735     2,800     5.99 %
  Goodwill and other intangibles 486,294     474,282     12,012     2.53 %
  Nonperforming assets 26,305     28,479     (2,174 )   (7.63 )%
  Noninterest bearing deposits 2,597,320     2,503,246     94,074     3.76 %
  Interest bearing deposits 5,393,891     5,322,176     71,715     1.35 %
      Total deposits 7,991,211     7,825,422     165,789     2.12 %
  Total equity 1,476,786     1,449,350     27,436     1.89 %
  Total equity - tangible 990,492     975,068     15,424     1.58 %
  Common equity 1,462,761     1,438,480     24,281     1.69 %
  Common equity - tangible 976,468     964,198     12,270     1.27 %
  Book value per common share 20.22     19.90     0.32     1.61 %
  Book value per common share - tangible 13.50     13.34     0.16     1.20 %
Daily Average Balances:              
  Total assets $ 10,536,847     $ 9,848,364     $ 688,483     6.99 %
  Total assets - tangible 10,056,639     9,425,542     631,097     6.70 %
  Earning assets 9,442,078     8,809,558     632,520     7.18 %
  Loans (net of unearned income), excluding nonaccrual loans 7,552,983     6,954,777     598,206     8.60 %
    Allowance for loan losses 47,745     46,199     1,546     3.35 %
  Goodwill and other intangibles 480,208     422,822     57,386     13.57 %
  Noninterest bearing deposits 2,493,211     2,303,125     190,086     8.25 %
  Interest bearing deposits 5,230,807     4,949,775     281,032     5.68 %
      Total deposits 7,724,018     7,252,900     471,118     6.50 %
  Total equity 1,461,815     1,354,984     106,831     7.88 %
  Total equity - tangible 981,607     932,161     49,446     5.30 %
  Common equity 1,450,555     1,344,541     106,014     7.88 %
  Common equity - tangible 970,347     921,719     48,628     5.28 %
Key Ratios:              
  Return on average assets 1.32 %   1.02 %   0.30 %   29.41 %
  Return on average assets - tangible 1.48 %   1.15 %   0.33 %   28.70 %
  Return on average equity 9.55 %   7.39 %   2.16 %   29.23 %
  Return on average equity - tangible 15.19 %   11.64 %   3.55 %   30.50 %
  Return on average common equity 9.62 %   7.45 %   2.17 %   29.13 %
  Return on average common equity - tangible 15.36 %   11.77 %   3.59 %   30.50 %
  Net interest margin-fully tax equivalent (1) 3.71 %   3.54 %   0.17 %   4.80 %
  Net interest margin 3.69 %   3.51 %   0.18 %   5.13 %
  Average earning assets/total average assets 89.61 %   89.45 %   0.16 %   0.18 %
  Average loans/average deposits 97.79 %   95.89 %   1.90 %   1.98 %
  Average noninterest deposits/total average deposits 32.28 %   31.75 %   0.53 %   1.67 %
  Allowance for loan losses/period end loans 0.64 %   0.63 %   0.01 %   1.59 %
  Nonperforming assets to period end assets 0.24 %   0.27 %   (0.03 )%   (11.11 )%
  Period end equity/period end total assets 13.63 %   13.65 %   (0.02 )%   (0.15 )%
  Efficiency ratio 65.10 %   73.10 %   (8.00 )%   (10.94 )%
                 
(1)  Presented on a tax-equivalent basis              


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
  Three Months Ended   Three Months Ended   Three Months Ended
  June 30, 2018   March 31, 2018   June 30, 2017
      Interest   Average       Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate   Balance   Expense   Rate
Assets:                                  
Loans (net of unearned income
  and deferred costs), excluding 
  nonaccrual loans
$ 7,552,983     $ 93,548     4.97 %   $ 6,954,777     $ 81,910     4.78 %   $ 5,926,336     $ 72,167     4.88 %
Taxable investment securities 987,693     5,787     2.34 %   902,291     5,026     2.23 %   578,593     2,801     1.88 %
Tax-exempt investment securities 82,839     719     3.47 %   73,037     688     3.77 %   48,560     370     3.05 %
Interest-bearing deposits 499,349     2,159     1.73 %   640,350     2,362     1.53 %   474,127     1,188     1.05 %
Loans held for sale 319,214     3,557     4.46 %   239,103     2,379     3.98 %   291,051     2,879     3.96 %
Total earning assets 9,442,078     105,770     4.49 %   8,809,558     92,365     4.25 %   7,318,667     79,405     4.35 %
  Less: allowance for loan losses (47,745 )           (46,199 )           (43,501 )        
                                   
Total nonearning assets 1,142,514             1,085,005             905,793          
                                   
  Total assets $ 10,536,847             $ 9,848,364             $ 8,180,959          
                                   
Liabilities and Equity:                                  
Interest-bearing deposits                                  
  Demand and money market $ 2,945,897     $ 3,602     0.49 %   $ 2,774,347     $ 2,969     0.43 %   $ 2,235,869     $ 1,957     0.35 %
  Savings 306,937     941     1.23 %   308,539     876     1.15 %   318,323     815     1.03 %
  Certificates of deposit 1,977,973     7,077     1.43 %   1,866,889     5,641     1.23 %   1,632,127     4,105     1.01 %
Total interest-bearing deposits 5,230,807     11,620     0.89 %   4,949,775     9,486     0.78 %   4,186,319     6,877     0.66 %
Borrowings 927,216     3,827     1.65 %   820,967     2,878     1.40 %   641,748     2,551     1.57 %
Subordinated debt, net 249,966     2,986     4.78 %   259,205     3,158     4.87 %            
Total interest-bearing liabilities 6,407,989     18,433     1.15 %   6,029,947     15,522     1.04 %   4,828,067     9,428     0.78 %
Demand deposits 2,493,211             2,303,125             2,081,819          
Other noninterest-bearing liabilities 173,832             160,308             156,065          
  Total liabilities 9,075,032             8,493,380             7,065,951          
                                   
Shareholders' equity 1,461,815             1,354,984             1,115,008          
                                   
  Total liabilities and equity $ 10,536,847             $ 9,848,364             $ 8,180,959          
                                   
Net interest income (tax-equivalent basis)     $ 87,337             $ 76,843             $ 69,977      
Reconcilement of Non-GAAP Financial Measures                                
  Tax-equivalent basis adjustment     (514 )           (499 )           (724 )    
Net interest income (GAAP)     $ 86,823             $ 76,344             $ 69,253      
                                   
Interest rate spread (1)         3.34 %           3.21 %           3.57 %
Interest expense as a percent of average earning assets       0.78 %           0.71 %           0.52 %
Net interest margin (tax equivalent basis) (2)       3.71 %           3.54 %           3.84 %
Total cost of deposits         0.60 %           0.53 %           0.44 %
                                   

(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
  Six Months Ended   Six Months Ended   Six Months Ended June 30, 2018
  June 30, 2018   June 30, 2017   Compared with June 30, 2017
      Interest   Average       Interest   Average        
  Average   Income/   Yield/   Average   Income/   Yield/   Increase   Change due to
  Balance   Expense   Rate   Balance   Expense   Rate   (Decrease)   Rate   Volume
Assets:                                  
Loans (net of unearned income
  and deferred costs), excluding
  nonaccrual loans
$ 7,255,533     $ 175,458     4.88 %   $ 5,894,743     $ 137,146     4.69 %   $ 38,312     $ 5,586     $ 32,726  
Taxable investment securities 945,229     10,811     2.29 %   592,979     5,644     1.84 %   5,167     1,310     3,857  
Tax-exempt investment securities 77,964     1,408     3.61 %   49,522     746     3.01 %   662     170     492  
Interest-bearing deposits 564,041     4,522     1.62 %   472,391     2,074     0.92 %   2,448     1,981     467  
Loans held for sale 279,380     5,936     4.25 %   239,312     4,606     3.85 %   1,330     509     821  
Total earning assets 9,122,147     198,135     4.38 %   7,248,947     150,216     4.18 %   47,919     9,556     38,363  
  Less: allowance for loan losses (46,976 )           (43,058 )                    
                                   
Total nonearning assets 1,119,336             885,272                      
                                   
  Total assets $ 10,194,507             $ 8,091,161                      
                                   
Liabilities and Equity:                                  
Interest-bearing deposits                                  
  Demand and money market $ 2,860,596     $ 6,571     0.46 %   $ 2,254,288     $ 3,822     0.34 %   $ 2,749     $ 1,564     $ 1,185  
  Savings 307,734     1,817     1.19 %   319,315     1,573     0.99 %   244     304     (60 )
  Certificates of deposit 1,922,737     12,718     1.33 %   1,570,844     7,485     0.96 %   5,233     3,317     1,916  
Total interest-bearing deposits 5,091,067     21,106     0.84 %   4,144,447     12,880     0.63 %   8,226     5,185     3,041  
Borrowings 874,385     6,705     1.53 %   682,401     6,354     1.85 %   351     (1,243 )   1,594  
Subordinated debt, net 254,560     6,143     4.83 %           %   6,143         6,143  
Total interest-bearing liabilities 6,220,012     33,954     1.10 %   4,826,848     19,234     0.80 %   14,720     3,942     10,778  
Demand deposits 2,398,693             2,020,195                      
Other noninterest-bearing liabilities 167,108             139,810                      
  Total liabilities 8,785,813             6,986,853                      
                                   
Shareholders' equity 1,408,694             1,104,308                      
                                   
  Total liabilities and equity $ 10,194,507             $ 8,091,161                      
                                   
Net interest income (tax-equivalent basis)     $ 164,181             $ 130,982         $ 33,199     $ 5,614     $ 27,585  
Reconcilement of Non-GAAP Financial Measures                                
  Tax-equivalent basis adjustment     (1,013 )           (1,449 )       436          
Net interest income (GAAP)     $ 163,168             $ 129,533         $ 33,635          
                                   
Interest rate spread (1)         3.28 %           3.38 %            
Interest expense as a percent of average earning assets         0.75 %           0.54 %            
Net interest margin (tax equivalent basis) (2)         3.63 %           3.64 %            
Total cost of deposits         0.57 %           0.42 %            
                                   
(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.
 


TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
     
       
  June 30,   December 31,
  2018   2017   2017
  (unaudited)   (unaudited)   (audited)
ASSETS          
Cash and due from banks $ 440,054     $ 474,819     $ 504,095  
Interest-bearing deposits in financial institutions 17,749     24,321     17,094  
      Total Cash and Cash Equivalents 457,803     499,140     521,189  
Securities available for sale, at fair value 1,057,663     698,842     866,138  
Securities held to maturity, at amortized cost 53,954     63,937     61,304  
Other securities 5,206     1,512     1,516  
Federal Home Loan Bank stock, at amortized cost 46,393     29,586     29,595  
      Total Securities 1,163,216     793,877     958,553  
Mortgage loans held for sale 396,185     388,523     313,256  
Loans, net of unearned income and deferred costs:          
Real estate-residential 1-4 family 1,596,264     1,227,389     1,217,349  
Real estate-commercial 3,162,085     2,295,603     2,283,541  
Real estate-construction and development 989,910     888,566     930,426  
Real estate-multi-family 288,043     206,894     198,720  
Commercial 1,440,625     1,110,822     1,087,157  
Consumer and other loans 298,029     219,787     229,772  
Loans, net of unearned income and deferred costs 7,774,956     5,949,061     5,946,965  
    Less: allowance for loan losses (49,535 )   (44,131 )   (45,131 )
       Net Loans 7,725,421     5,904,930     5,901,834  
Premises and equipment, net 207,997     199,926     194,900  
Goodwill 425,625     268,246     270,250  
Other intangible assets, net 60,669     40,066     38,568  
Bank-owned life insurance policies 233,682     192,339     195,775  
Other assets 161,055     139,995     127,851  
TOTAL ASSETS $ 10,831,653     $ 8,427,042     $ 8,522,176  
           
LIABILITIES AND EQUITY          
Deposits:          
Noninterest-bearing demand $ 2,597,320     $ 2,219,406     $ 2,157,338  
Interest-bearing:          
Demand and money market accounts 2,987,102     2,292,978     2,225,211  
Savings 305,334     318,714     315,889  
Certificates of deposit 2,101,455     1,764,671     1,749,782  
Total Deposits 7,991,211     6,595,769     6,448,220  
Advances from the Federal Home Loan Bank 873,622     527,219     526,923  
Subordinated debt, net 247,563         247,196  
Repurchase agreements and other borrowings 50,981     28,571     24,850  
Total Borrowings 1,172,166     555,790     798,969  
Other liabilities 191,490     152,485     132,482  
TOTAL LIABILITIES 9,354,867     7,304,044     7,379,671  
Preferred stock          
Authorized and unissued shares - 2,000,000          
Common stock, $1.667 par: 90,000,000 shares authorized          
  72,354,504; 62,619,045; and 62,629,001 shares issued at          
  June 30, 2018 and 2017 and December 31, 2017, respectively 120,615     104,386     104,403  
Capital surplus 1,031,965     747,867     749,800  
Retained earnings 328,125     260,783     282,729  
Common stock issued to deferred compensation trust, at cost          
  758,041; 697,606; and 729,919 shares at          
  June 30, 2018 and 2017 and December 31, 2017, respectively (13,500 )   (11,492 )   (12,524 )
Deferred compensation trust 13,500     11,492     12,524  
Accumulated other comprehensive loss (17,944 )   (2,355 )   (5,692 )
TOTAL SHAREHOLDERS' EQUITY 1,462,761     1,110,681     1,131,240  
Noncontrolling interest 14,025     12,317     11,265  
TOTAL EQUITY 1,476,786     1,122,998     1,142,505  
TOTAL LIABILITIES AND EQUITY $ 10,831,653     $ 8,427,042     $ 8,522,176  
 


TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
               
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2018   2017   2018   2017
INTEREST INCOME:              
Loans, including fees $ 93,150     $ 71,443     $ 174,682     $ 135,698  
Investment securities 6,390     3,171     11,982     6,389  
Interest-bearing deposits in financial institutions and
   federal funds sold
2,159     1,188     4,522     2,074  
Mortgage loans held for sale 3,557     2,879     5,936     4,606  
    Total interest income 105,256     78,681     197,122     148,767  
INTEREST EXPENSE:              
Deposits 11,620     6,877     21,106     12,879  
Advances from the Federal Home Loan Bank 3,764     2,521     6,602     6,294  
Subordinated capital debentures 2,986         6,143      
Repurchase agreements and other borrowings, net of capitalized interest 63     30     103     61  
     Total interest expense 18,433     9,428     33,954     19,234  
Net interest income 86,823     69,253     163,168     129,533  
               
PROVISION FOR LOAN LOSSES 3,056     1,320     5,009     3,861  
    Net interest income after provision for loan losses 83,767     67,933     158,159     125,672  
NONINTEREST INCOME:              
Residential mortgage banking income, net 18,745     21,594     36,348     39,226  
Insurance commissions and other title fees and income, net 15,087     12,902     28,459     27,702  
Real estate brokerage and property management income, net 6,910     7,629     17,340     12,623  
Service charges on deposit accounts 2,969     2,644     5,852     5,115  
Credit card merchant fees, net 1,443     1,298     2,611     2,416  
Bank owned life insurance 1,633     1,421     3,165     2,896  
Other income 3,448     2,856     6,389     5,251  
Gain/(loss) on investment securities     (1 )   3     (1 )
    Total noninterest income 50,235     50,343     100,167     95,228  
NONINTEREST EXPENSE:              
Salaries and employee benefits 50,324     44,464     101,108     84,383  
Occupancy 6,802     6,658     13,279     13,342  
Furniture and equipment 3,546     3,563     7,244     6,906  
Other expenses 28,549     23,434     59,893     43,736  
    Total noninterest expense 89,221     78,119     181,524     148,367  
Income before income tax expense and noncontrolling interest 44,781     40,157     76,802     72,533  
Provision for income tax expense 8,643     12,240     14,720     21,626  
Net income $ 36,138     $ 27,917     $ 62,082     $ 50,907  
Net income attributable to noncontrolling interest (1,334 )   (1,704 )   (2,572 )   (2,727 )
Net income attributable to TowneBank $ 34,804     $ 26,213     $ 59,510     $ 48,180  
Net income available to common shareholders $ 34,804     $ 26,213     $ 59,510     $ 48,180  
Per common share information              
Basic earnings $ 0.48     $ 0.42     $ 0.84     $ 0.78  
Diluted earnings $ 0.48     $ 0.42     $ 0.84     $ 0.77  
Cash dividends declared $ 0.16     $ 0.14     $ 0.30     $ 0.27  
                               


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
                   
  June 30,   March 31,   December 31,   September 30,   June 30,
  2018   2018   2017   2017   2017
  (unaudited)   (unaudited)   (audited)   (unaudited)   (unaudited)
ASSETS                  
Cash and due from banks $ 440,054     $ 479,453     $ 504,095     $ 651,425     $ 474,819  
Interest-bearing deposits in financial institutions 17,749     17,728     17,094     17,246     24,321  
      Total Cash and Cash Equivalents 457,803     497,181     521,189     668,671     499,140  
Securities available for sale, at fair value 1,057,663     1,237,179     866,138     829,971     698,842  
Securities held to maturity, at amortized cost 53,954     55,283     61,304     62,487     63,937  
Other securities 5,206     5,002     1,516     1,512     1,512  
Federal Home Loan Bank stock, at amortized cost 46,393     46,400     29,595     29,586     29,586  
      Total Securities 1,163,216     1,343,864     958,553     923,556     793,877  
Mortgage loans held for sale 396,185     293,731     313,256     318,595     388,523  
Loans, net of unearned income and deferred costs 7,774,956     7,470,151     5,946,965     5,910,479     5,949,061  
  Less: allowance for loan losses (49,535 )   (46,735 )   (45,131 )   (44,398 )   (44,131 )
      Net Loans 7,725,421     7,423,416     5,901,834     5,866,081     5,904,930  
Premises and equipment, net 207,997     207,126     194,900     196,975     199,926  
Goodwill 425,625     416,789     270,250     270,901     268,246  
Other intangible assets, net 60,669     57,493     38,568     39,751     40,066  
Bank-owned life insurance policies 233,682     232,039     195,775     193,823     192,339  
Other assets 161,055     148,776     127,851     136,441     139,995  
TOTAL ASSETS $ 10,831,653     $ 10,620,415     $ 8,522,176     $ 8,614,794     $ 8,427,042  
LIABILITIES AND EQUITY                  
Deposits:                  
Noninterest-bearing demand $ 2,597,320     $ 2,503,246     $ 2,157,338     $ 2,212,047     $ 2,219,406  
Interest-bearing:                  
   Demand and money market accounts 2,987,102     3,001,256     2,225,211     2,253,746     2,292,978  
   Savings 305,334     309,077     315,889     320,028     318,714  
   Certificates of deposit 2,101,455     2,011,843     1,749,782     1,762,641     1,764,671  
      Total Deposits 7,991,211     7,825,422     6,448,220     6,548,462     6,595,769  
Advances from the Federal Home Loan Bank 873,622     873,773     526,923     527,072     527,219  
Subordinated debt, net 247,563     257,723     247,196     247,128      
Repurchase agreements and other borrowings 50,981     52,509     24,850     23,195     28,571  
      Total Borrowings 1,172,166     1,184,005     798,969     797,395     555,790  
Other liabilities 191,490     161,638     132,482     128,086     152,485  
TOTAL LIABILITIES 9,354,867     9,171,065     7,379,671     7,473,943     7,304,044  
Preferred stock                  
Authorized shares - 2,000,000                  
                   
Common stock, $1.667 par value 120,615     120,472     104,403     104,387     104,386  
Capital surplus 1,031,965     1,028,985     749,800     748,444     747,867  
Retained earnings 328,125     304,896     282,729     279,165     260,783  
Common stock issued to deferred compensation                  
trust, at cost (13,500 )   (12,612 )   (12,524 )   (12,304 )   (11,492 )
Deferred compensation trust 13,500     12,612     12,524     12,304     11,492  
Accumulated other comprehensive loss (17,944 )   (15,873 )   (5,692 )   (2,408 )   (2,355 )
TOTAL SHAREHOLDERS' EQUITY 1,462,761     1,438,480     1,131,240     1,129,588     1,110,681  
Noncontrolling interest 14,025     10,870     11,265     11,263     12,317  
TOTAL EQUITY 1,476,786     1,449,350     1,142,505     1,140,851     1,122,998  
TOTAL LIABILITIES AND EQUITY $ 10,831,653     $ 10,620,415     $ 8,522,176     $ 8,614,794     $ 8,427,042  
 


TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)
   
   
  Three Months Ended
  June 30,   March 31,   December 31,   September 30,   June 30,
  2018   2018   2017   2017   2017
INTEREST INCOME:                  
Loans, including fees $ 93,150     $ 81,533     $ 69,332     $ 68,969     $ 71,443  
Investment securities 6,390     5,592     3,598     3,076     3,171  
Interest-bearing deposits in financial institutions and federal funds sold 2,159     2,362     2,661     2,745     1,188  
Mortgage loans held for sale 3,557     2,379     2,874     3,081     2,879  
     Total interest income 105,256     91,866     78,465     77,871     78,681  
INTEREST EXPENSE:                  
Deposits 11,620     9,486     8,102     7,810     6,877  
Advances from the Federal Home Loan Bank 3,764     2,838     1,791     1,750     2,521  
Subordinated capital debentures 2,986     3,158     2,880     2,368      
Repurchase agreements and other borrowings 63     40     28     20     30  
     Total interest expense 18,433     15,522     12,801     11,948     9,428  
Net interest income 86,823     76,344     65,664     65,923     69,253  
                   
PROVISION FOR LOAN LOSSES 3,056     1,953     869     696     1,320  
     Net interest income after provision for loan
     losses
83,767     74,391     64,795     65,227     67,933  
NONINTEREST INCOME:                  
Residential mortgage banking income, net 18,745     17,604     17,537     19,087     21,594  
Insurance commissions and other title fees and income, net 15,087     13,372     12,115     12,116     12,902  
Real estate brokerage and property management income, net 6,910     10,429     4,823     10,042     7,629  
Service charges on deposit accounts 2,969     2,883     2,809     2,670     2,644  
Credit card merchant fees, net 1,443     1,168     1,204     1,388     1,298  
Bank owned life insurance 1,633     1,532     1,941     1,425     1,421  
Other income 3,448     2,941     3,048     2,688     2,856  
Net gain/(loss) on investment securities     3             (1 )
     Total noninterest income 50,235     49,932     43,477     49,416     50,343  
NONINTEREST EXPENSE:                  
Salaries and employee benefits 50,324     50,784     41,965     43,101     44,464  
Occupancy expense 6,802     6,477     6,878     6,635     6,658  
Furniture and equipment 3,546     3,698     3,456     3,710     3,563  
Other expenses 28,549     31,344     21,361     20,740     23,434  
     Total noninterest expense 89,221     92,303     73,660     74,186     78,119  
Income before income tax expense and noncontrolling interest 44,781     32,020     34,612     40,457     40,157  
Provision for income tax expense 8,643     6,077     21,325     11,862     12,240  
Net income 36,138     25,943     13,287     28,595     27,917  
Net income attributable to noncontrolling interest (1,334 )   (1,238 )   (954 )   (1,445 )   (1,704 )
Net income attributable to TowneBank $ 34,804     $ 24,705     $ 12,333     $ 27,150     $ 26,213  
Net income available to common shareholders $ 34,804     $ 24,705     $ 12,333     $ 27,150     $ 26,213  
Per common share information                  
Basic earnings $ 0.48     $ 0.36     $ 0.20     $ 0.44     $ 0.42  
Diluted earnings $ 0.48     $ 0.36     $ 0.20     $ 0.44     $ 0.42  
Basic weighted average shares outstanding 71,787,980     68,983,745     62,239,028     62,210,834     62,145,045  
Diluted weighted average shares outstanding 71,949,590     69,156,809     62,462,629     62,410,591     62,364,260  
Cash dividends declared $ 0.16     $ 0.14     $ 0.14     $ 0.14     $ 0.14  
                   


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
 
       
      Increase/(Decrease)
  Three Months Ended   June 30, 2018   June 30, 2018
  June 30,   March 31, 2018   June 30, 2017   March 31, 2018
  2018   2017     Amount   Percent   Amount   Percent
Revenue                          
Net interest income $ 83,686     $ 66,434     $ 74,042     $ 17,252     25.97 %   $ 9,644     13.03 %
     Service charges on deposit                          
  accounts 2,969     2,644     2,883     325     12.29 %   86     2.98 %
Credit card merchant fees 1,443     1,297     1,168     146     11.26 %   275     23.54 %
Other income 4,062     3,362     3,959     700     20.82 %   103     2.60 %
Total noninterest income 8,474     7,303     8,010     1,171     16.03 %   464     5.79 %
Total revenue 92,160     73,737     82,052     18,423     24.98 %   10,108     12.32 %
                           
Provision for loan losses 3,056     1,320     1,953     1,736     131.52 %   1,103     56.48 %
                           
Expenses                          
Salaries and employee benefits 27,840     23,163     30,202     4,677     20.19 %   (2,362 )   (7.82 )%
Occupancy expense 4,274     3,828     4,016     446     11.65 %   258     6.42 %
Furniture and equipment 2,491     2,372     2,532     119     5.02 %   (41 )   (1.62 )%
Advertising and marketing 1,523     1,207     1,171     316     26.18 %   352     30.06 %
Charitable contributions 2,264     1,647     1,485     617     37.46 %   779     52.46 %
Outside processing 1,994     1,112     1,403     882     79.32 %   591     42.12 %
Foreclosed property expenses 214     141     211     73     51.77 %   3     1.42 %
FDIC and other insurance 1,085     1,131     1,043     (46 )   (4.07 )%   42     4.03 %
Professional fees 1,762     748     1,436     1,014     135.56 %   326     22.70 %
Telephone and postage 940     963     796     (23 )   (2.39 )%   144     18.09 %
Other expenses 7,111     5,661     14,424     1,450     25.61 %   (7,313 )   (50.70 )%
Total expenses 51,498     41,973     58,719     9,525     22.69 %   (7,221 )   (12.30 )%
Income before income tax,
    corporate allocation and
    noncontrolling interest
37,606     30,444     21,380     7,162     23.53 %   16,226     75.89 %
Corporate allocation 476     410     456     66     16.10 %   20     4.39 %
Income before income tax
    provision and noncontrolling
    interest
38,082     30,854     21,836     7,228     23.43 %   16,246     74.40 %
Provision for income tax expense 7,142     9,307     3,881     (2,165 )   (23.26 )%   3,261     84.02 %
Net income 30,940     21,547     17,955     9,393     43.59 %   12,985     72.32 %
Noncontrolling interest (6 )   (1 )   (2 )   (5 )   500.00 %   (4 )   200.00 %
Net income attributable to TowneBank $ 30,934     $ 21,546     $ 17,953     $ 9,388     43.57 %   $ 12,981     72.31 %
                           
Efficiency ratio 55.88 %   56.92 %   71.56 %   (1.04 )%   (1.83 )%   (15.68 )%   (21.91 )%
                                         


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
               
               
  Six Months Ended
  Increase/(Decrease)
  June 30,   2018 over 2017
  2018   2017   Amount   Percent
Revenue              
Net interest income $ 157,729     $ 124,878     $ 32,851     26.31 %
Service charges on deposit accounts 5,852     5,115     737     14.41 %
Credit card merchant fees 2,611     2,416     195     8.07 %
Other income 8,020     6,468     1,552     24.00 %
Total noninterest income 16,483     13,999     2,484     17.74 %
Total revenue 174,212     138,877     35,335     25.44 %
               
Provision for loan losses 5,009     3,861     1,148     29.73 %
               
Expenses              
Salaries and employee benefits 58,042     43,228     14,814     34.27 %
Occupancy expense 8,291     7,955     336     4.22 %
Furniture and equipment 5,022     4,646     376     8.09 %
Advertising and marketing 2,695     2,249     446     19.83 %
Charitable contributions 3,749     2,960     789     26.66 %
Outside processing 3,397     2,266     1,131     49.91 %
Foreclosed property expenses 425     271     154     56.83 %
FDIC and other insurance 2,128     2,118     10     0.47 %
Professional fees 3,198     2,028     1,170     57.69 %
Telephone and postage 1,736     1,868     (132 )   (7.07 )%
Other expenses 21,534     10,734     10,800     100.61 %
Total expenses 110,217     80,323     29,894     37.22 %
Income before income tax, corporate allocation
    and noncontrolling interest
58,986     54,693     4,293     7.85 %
Corporate allocation 932     895     37     4.13 %
Income before income tax provision and
    noncontrolling interest
59,918     55,588     4,330     7.79 %
Provision for income tax expense 11,023     16,072     (5,049 )   (31.41 )%
Net income 48,895     39,516     9,379     23.73 %
Noncontrolling interest (8 )   (3 )   (5 )   166.67 %
Net income attributable to TowneBank $ 48,887     $ 39,513     $ 9,374     23.72 %
               
Efficiency ratio 63.27 %   57.84 %   5.43 %   9.39 %
                       


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
 
       
      Increase/(Decrease)
  Three Months Ended   June 30, 2018   June 30, 2018
  June 30,   March 31,   June 30, 2017   March 31, 2018
  2018   2017   2018   Amount   Percent   Amount   Percent
Revenue                          
Residential mortgage brokerage
    income, net
$ 19,344     $ 21,730     $ 17,661     $ (2,386 )   (10.98 )%   $ 1,683     9.53 %
Real estate brokerage income, net 2,818     2,337     1,698     481     20.58 %   1,120     65.96 %
Title insurance and settlement fees 579     582     315     (3 )   (0.52 )%   264     83.81 %
Property management fees, net 4,092     5,293     8,731     (1,201 )   (22.69 )%   (4,639 )   (53.13 )%
Income from unconsolidated
    subsidiary
100     250     94     (150 )   (60.00 )%   6     6.38 %
Net interest and other income 3,342     3,229     2,546     113     3.50 %   796     31.26 %
Total revenue 30,275     33,421     31,045     (3,146 )   (9.41 )%   (770 )   (2.48 )%
                           
Expenses                          
Salaries and employee benefits 15,403     15,206     13,877     197     1.30 %   1,526     11.00 %
Occupancy expense 1,964     2,269     1,894     (305 )   (13.44 )%   70     3.70 %
Furniture and equipment 835     999     980     (164 )   (16.42 )%   (145 )   (14.80 )%
Amortization of intangible assets 672     718     672     (46 )   (6.41 )%       %
Other expenses 8,158     7,509     6,294     649     8.64 %   1,864     29.62 %
Total expenses 27,032     26,701     23,717     331     1.24 %   3,315     13.98 %
                           
Income before income tax, corporate
    allocation and noncontrolling
    interest
3,243     6,720     7,328     (3,477 )   (51.74 )%   (4,085 )   (55.75 )%
Corporate allocation (293 )   (266 )   (289 )   (27 )   10.15 %   (4 )   1.38 %
Income before income tax provision
    and noncontrolling interest
2,950     6,454     7,039     (3,504 )   (54.29 )%   (4,089 )   (58.09 )%
Provision for income tax expense 633     1,889     1,559     (1,256 )   (66.49 )%   (926 )   (59.40 )%
Net income 2,317     4,565     5,480     (2,248 )   (49.24 )%   (3,163 )   (57.72 )%
Noncontrolling interest (891 )   (1,361 )   (622 )   470     (34.53 )%   (269 )   43.25 %
Net income attributable to
    TowneBank
$ 1,426     $ 3,204     $ 4,858     $ (1,778 )   (55.49 )%   $ (3,432 )   (70.65 )%
                           
Efficiency ratio 89.29 %   79.89 %   76.40 %   9.40 %   11.77 %   12.89 %   16.87 %
                                         


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
 
 
  Six Months Ended
  Increase/(Decrease)
  June 30,   2018 over 2017
  2018   2017   Amount   Percent
Revenue              
Residential mortgage brokerage
    income, net
$ 37,005     $ 39,505     $ (2,500 )   (6.33 )%
Real estate brokerage income, net 4,517     3,797     720     18.96 %
Title insurance and settlement fees 895     936     (41 )   (4.38 )%
Property management fees, net 12,823     8,826     3,997     45.29 %
Income from unconsolidated
    subsidiary
194     374     (180 )   (48.13 )%
Net interest and other income 5,887     5,431     456     8.40 %
Total revenue 61,321     58,869     2,452     4.17 %
               
Expenses              
Salaries and employee benefits 29,280     28,900     380     1.31 %
Occupancy expense 3,858     4,233     (375 )   (8.86 )%
Furniture and equipment 1,816     1,868     (52 )   (2.78 )%
Amortization of intangible assets 1,343     1,277     66     5.17 %
Other expenses 14,452     13,500     952     7.05 %
Total expenses 50,749     49,778     971     1.95 %
               
Income before income tax, corporate
    allocation and noncontrolling interest
10,572     9,091     1,481     16.29 %
Corporate allocation (582 )   (574 )   (8 )   1.39 %
Income before income tax provision and
    noncontrolling interest
9,990     8,517     1,473     17.29 %
Provision for income tax expense 2,192     2,516     (324 )   (12.88 )%
Net income 7,798     6,001     1,797     29.95 %
Noncontrolling interest (1,512 )   (1,872 )   360     (19.23 )%
Net income attributable to
    TowneBank
$ 6,286     $ 4,129     $ 2,157     52.24 %
               
Efficiency ratio 82.76 %   84.56 %   (1.80 )%   (2.13 )%
                       


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
                   
      Increase/(Decrease)
  Three Months Ended   June 30, 2018   June 30, 2018
  June 30,   March 31,   June 30, 2017   March 31, 2018
  2018   2017   2018   Amount   Percent   Amount   Percent
Commission and fee income                          
Property and casualty $ 11,059     $ 9,271     $ 9,356     $ 1,788     19.29 %   $ 1,703     18.20 %
Employee benefits 3,454     3,280     3,196     174     5.30 %   258     8.07 %
Travel insurance 1,389     1,159     1,768     230     19.84 %   (379 )   (21.44 )%
Specialized benefit services 171     158     169     13     8.23 %   2     1.18 %
Total commissions and fees 16,073     13,868     14,489     2,205     15.90 %   1,584     10.93 %
                           
Contingency and bonus revenue 1,433     948     1,133     485     51.16 %   300     26.48 %
Other income 71     76     70     (5 )   (6.58 )%   1     1.43 %
Total revenue 17,577     14,892     15,692     2,685     18.03 %   1,885     12.01 %
                           
Employee commission expense 2,954     2,454     2,513     500     20.37 %   441     17.55 %
Revenue, net of commission expense 14,623     12,438     13,179     2,185     17.57 %   1,444     10.96 %
                           
Salaries and employee benefits 7,081     6,095     6,705     986     16.18 %   376     5.61 %
Occupancy expense 563     562     567     1     0.18 %   (4 )   (0.71 )%
Furniture and equipment 220     192     185     28     14.58 %   35     18.92 %
Amortization of intangible assets 794     704     702     90     12.78 %   92     13.11 %
Other expenses 2,033     1,892     1,708     141     7.45 %   325     19.03 %
Total operating expenses 10,691     9,445     9,867     1,246     13.19 %   824     8.35 %
Income before income tax,
    corporate allocation and
    noncontrolling interest
3,932     2,993     3,312     939     31.37 %   620     18.72 %
Corporate allocation (183 )   (144 )   (167 )   (39 )   27.08 %   (16 )   9.58 %
Income before income tax
    provision and noncontrolling
    interest
3,749     2,849     3,145     900     31.59 %   604     19.21 %
Provision for income tax expense 868     1,044     637     (176 )   (16.86 )%   231     36.26 %
Net income 2,881     1,805     2,508     1,076     59.61 %   373     14.87 %
Noncontrolling interest (437 )   (342 )   (614 )   (95 )   27.78 %   177     (28.83 )%
Net income attributable to
    TowneBank
$ 2,444     $ 1,463     $ 1,894     $ 981     67.05 %   $ 550     29.04 %
                           
Efficiency ratio 73.11 %   75.94 %   74.87 %   (2.83 )%   (3.73 )%   (1.76 )%   (2.35 )%
                                         


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
         
  Six Months Ended   Increase/(Decrease)
  June 30,   2018 over 2017
  2018   2017   Amount   Percent
Commission and fee income              
Property and casualty $ 20,416     $ 17,728     $ 2,688     15.16 %
Employee benefits 6,650     6,254     396     6.33 %
Travel insurance 3,157     2,786     371     13.32 %
Specialized benefit services 340     323     17     5.26 %
Total commissions and fees 30,563     27,091     3,472     12.82 %
               
Contingency and bonus revenue 2,566     4,488     (1,922 )   (42.83 )%
Other income 141     162     (21 )   (12.96 )%
Total revenue 33,270     31,741     1,529     4.82 %
               
Employee commission expense 5,468     4,726     742     15.70 %
Revenue, net of commission expense 27,802     27,015     787     2.91 %
               
Salaries and employee benefits 13,786     12,255     1,531     12.49 %
Occupancy expense 1,130     1,154     (24 )   (2.08 )%
Furniture and equipment 406     392     14     3.57 %
Amortization of intangible assets 1,497     1,401     96     6.85 %
Other expenses 3,739     3,064     675     22.03 %
Total operating expenses 20,558     18,266     2,292     12.55 %
Income before income tax, corporate
    allocation and noncontrolling interest
7,244     8,749     (1,505 )   (17.20 )%
Corporate allocation (350 )   (321 )   (29 )   9.03 %
Income before income tax provision and
    noncontrolling interest
6,894     8,428     (1,534 )   (18.20 )%
Provision for income tax expense 1,505     3,038     (1,533 )   (50.46 )%
Net income 5,389     5,390     (1 )   (0.02 )%
Noncontrolling interest (1,052 )   (852 )   (200 )   23.47 %
Net income attributable to TowneBank $ 4,337     $ 4,538     $ (201 )   (4.43 )%
               
Efficiency ratio 73.94 %   67.61 %   6.33 %   9.36 %
                       


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
         
                   
  Three Months Ended   Six Months Ended
  June 30,   June 30,   March 31,   June 30,   June 30,
  2018   2017   2018   2018   2017
                   
Return on average assets (GAAP) 1.32 %   1.29 %   1.02 %   1.18 %   1.20 %
Impact of excluding average goodwill and other
    intangibles and amortization
0.16 %   0.11 %   0.13 %   0.14 %   0.11 %
Return on average tangible assets (non-GAAP) 1.48 %   1.40 %   1.15 %   1.32 %   1.31 %
                   
Return on average equity (GAAP) 9.55 %   9.43 %   7.39 %   8.52 %   8.80 %
Impact of excluding average goodwill and other
    intangibles and amortization
5.64 %   4.24 %   4.25 %   4.95 %   3.99 %
Return on average tangible equity (non-GAAP) 15.19 %   13.67 %   11.64 %   13.47 %   12.79 %
                   
Return on average common equity (GAAP) 9.62 %   9.53 %   7.45 %   8.59 %   8.89 %
Impact of excluding average goodwill and other
    intangibles and amortization
5.74 %   4.34 %   4.32 %   5.03 %   4.08 %
Return on average tangible common equity
(non-GAAP)
15.36 %   13.87 %   11.77 %   13.62 %   12.97 %
                   
Book value (GAAP) $ 20.22     $ 17.74     $ 19.90     $ 20.22     $ 17.74  
Impact of excluding average goodwill and other
    intangibles and amortization
(6.72 )   (4.93 )   (6.56 )   (6.72 )   (4.93 )
Tangible book value (non-GAAP) $ 13.50     $ 12.81     $ 13.34     $ 13.50     $ 12.81  
                   


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
                     
                     
Reconcilement of GAAP Earnings to Operating
Earnings Excluding Certain Items Affecting
Comparability
  Three Months Ended
    June 30,   March 31,   December 31,   September 30,   June 30,
    2018   2018   2017   2017   2017
                     
Net income (GAAP)   $ 34,804     $ 24,705     $ 12,333     $ 27,150     $ 26,213  
                     
Purchase accounting corrections                   (3,889 )
                     
Acquisition-related expenses   797     8,726     526     466     1,281  
Total charges   797     8,726     526     466     (2,608 )
Income tax expense -tax reform legislation           10,112          
Income tax expense (benefit) - other items   (93 )   (1,639 )   (98 )   (117 )   1,167  
Income tax expense (benefit)   (93 )   (1,639 )   10,014     (117 )   1,167  
Total charges, net of taxes   704     7,087     10,540     349     (1,441 )
Operating earnings, excluding certain items affecting
    comparability (non-GAAP)
  $ 35,508     $ 31,792     $ 22,873     $ 27,499     $ 24,772  
                     
Weighted average diluted shares   71,949,590     69,156,809     62,462,629     62,410,561     62,364,260  
                     
Diluted EPS (GAAP)   $ 0.48     $ 0.36     $ 0.20     $ 0.44     $ 0.42  
Diluted EPS, excluding certain items affecting
    comparability (non-GAAP)
  $ 0.49     $ 0.46     $ 0.37     $ 0.44     $ 0.40  
                     
Average assets   $ 10,536,847     $ 9,848,364     $ 8,579,705     $ 8,570,019     $ 8,180,959  
Average tangible equity   $ 981,607     932,161     $ 839,942     $ 824,787     $ 807,085  
                     
Return on average assets, excluding certain items
    affecting comparability (non-GAAP)
  1.35 %   1.31 %   1.06 %   1.27 %   1.21 %
Return on average tangible equity, excluding certain
items affecting comparability (non-GAAP)
  15.48 %   14.72 %   11.37 %   13.84 %   12.96 %
Return on average common tangible equity, excluding
certain items affecting comparability (non-GAAP)
  15.66 %   14.89 %   10.36 %   14.03 %   13.14 %
Efficiency ratio, excluding certain items affecting
    comparability (non-GAAP)
  64.52 %   66.19 %   67.01 %   63.92 %   66.41 %
                               


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
         
         
Reconcilement of GAAP Earnings to Operating Earnings Excluding
Certain Items Affecting Comparability
  Six months ended
    June 30,   June 30,
    2018   2017
         
Net income (GAAP)   $ 59,510     $ 48,180  
         
Purchase accounting corrections       (3,889 )
         
Acquisition-related expenses   9,523     1,276  
Total charges   9,523     (2,613 )
Income tax expense (benefit) - other items   (1,732 )   1,242  
Income tax expense (benefit)   (1,732 )   1,242  
Total charges, net of taxes   7,791     (1,371 )
Operating earnings, excluding certain items affecting
    comparability (non-GAAP)
  $ 67,301     $ 46,809  
         
Weighted average diluted shares   70,551,537     62,351,215  
         
Diluted EPS (GAAP)   $ 0.84     $ 0.77  
Diluted EPS, excluding certain items affecting
    comparability (non-GAAP)
  $ 0.95     $ 0.75  
         
Average assets   $ 10,194,507     $ 8,091,161  
Average tangible equity   $ 957,021     $ 799,303  
         
Return on average assets, excluding certain items
    affecting comparability (non-GAAP)
  1.33 %   1.16 %
Return on average tangible equity, excluding certain items affecting
comparability (non-GAAP)
  15.11 %   12.44 %
Return on average common tangible equity, excluding certain items
affecting comparability (non-GAAP)
  15.29 %   12.62 %
Efficiency ratio, excluding certain items affecting
    comparability (non-GAAP)
  65.32 %   66.60 %
             

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