TOWN - TowneBank Reports Full Year and Fourth Quarter Financial Results for 2018

January, 24 2019 07:30 AM Towne Bank

SUFFOLK, Va., Jan. 24, 2019 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (Nasdaq: TOWN) today reported financial results for the full year and the fourth quarter ended December 31, 2018. For the year ended December 31, 2018, earnings were $133.79 million, or $1.88 per diluted share, compared to $87.66 million, or $1.41 per diluted share for the year ended December 31, 2017. “2018 was a great year for TowneBank, highlighted by a strong operating performance, continued number one deposit market share in Hampton Roads, and a successful merger with Paragon Commercial Corporation. At $133.79 million, annual net income increased 52.62% over 2017, credit quality remained strong and our annual return on average assets was 1.26%,” said G. Robert Aston, Jr., Executive Chairman.

Earnings in fourth quarter 2017 included an expense of $10.11 million related to the enactment of the Tax Cuts and Jobs Act of 2017 (“Tax Reform”) and fourth quarter 2018 included an expense of $0.70 million due to the finalization of the provisional component of the impact of Tax Reform. Excluding acquisition-related expenses and adjustments related to tax reform, earnings for the year ended December 31, 2018 were $141.50 million (non-GAAP), or $1.98 (non-GAAP) per diluted share, compared to $97.18 million (non-GAAP), or $1.56 (non-GAAP) per diluted share for the year ended December 31, 2017.

Earnings for the fourth quarter were $35.99 million, or $0.50 per diluted share, versus $12.33 million, or $0.20 per diluted share, for the quarter ended December 31, 2017. Excluding acquisition-related expenses and adjustments related to tax reform, earnings for the quarter ended December 31, 2018 were $35.52 million (non-GAAP), or $0.49 (non-GAAP) per diluted share, compared to $22.87 million (non-GAAP), or $0.37 (non-GAAP) per diluted share for the quarter ended December 31, 2017.

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

Total revenues were $131.42 million, an increase of $22.28 million, or 20.41%.
Loans held for investment increased $2.07 billion, or 34.83%, from December 31, 2017, and $0.14 billion, or 1.73%, from September 30, 2018, or 6.87% on an annualized basis. Excluding loans acquired in the Paragon merger of $1.43 billion, loans increased $638.77 million, or 10.74% from December 31, 2017.
Total deposits were $8.37 billion, an increase of $1.92 billion, or 29.81%.
Noninterest bearing deposits increased by 21.57%, to $2.62 billion, representing 31.33% of total deposits.
Annualized return on common shareholders' equity of 9.53% and annualized return on average tangible common shareholders' equity of 15.11% (non-GAAP).
Net interest margin of 3.53% and taxable equivalent net interest margin of 3.55% (non-GAAP).
Effective tax rate of 22.33% benefiting from the lower federal rate related to Tax Reform, partially offset by the finalization of the provisional component of the Tax Reform impact.

“Our team worked hard in 2018 as is evident by our stellar performance. Throughout the year we focused our efforts on cultivating the benefits achieved through our successful Paragon merger and organic growth. These efforts resulted in annual loan growth of 10.74%, balanced across legacy and new markets, excluding loans acquired in the Paragon merger. We have also been working diligently to identify market opportunities in North Carolina where we can share our unique brand of Hometown Banking,” said J. Morgan Davis, President and Chief Executive Officer.

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

Net interest income was $89.21 million compared to $65.66 million for the quarter ended December 31, 2017.
Taxable equivalent net interest margin was 3.55%, including accretion of 12 basis points, compared to 3.41%, including accretion of 9 basis points, for 2017.
Total cost of deposits increased to 0.83% from 0.49% at December 31, 2017.
Average interest-earning assets totaled $10.02 billion at December 31, 2018 compared to $7.73 billion at December 31, 2017, an increase of 29.69%.
Average loans held for investment represented 79.04% of average earning assets in the fourth quarter of 2018 compared to 76.59% in the fourth quarter of 2017.
Average interest-bearing liabilities totaled $6.83 billion, an increase of $1.69 billion from the 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


March 31,

June 30,

September 30,

December 31,


2019

2019

2019

2019
Assets:







Investment Securities

$
(72
)

$
(72
)

$
(70
)

$
(70
)
Loans

1,730


2,040


1,482


1,469










Liabilities:








Deposits

60


54


51


47










Total estimated effect on net interest income

$
1,598


$
1,914


$
1,361


$
1,352



















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 $2.29 million compared to $0.87 million one year ago and $1.24 million in the prior quarter.
Net charge-offs were $0.43 million compared to $0.14 million one year prior. The ratio of net charge-offs to average loans on an annualized basis was 0.02% compared to 0.03% in the prior quarter and 0.01% for the fourth quarter of 2017.
The allowance for loan losses represented 0.65% of total loans compared to 0.64% at September 30, 2018 and 0.76% at December 31, 2017. Loan loss reserve as a percentage of total loans, excluding purchased loans, remained unchanged at 0.82%, from September 30, 2018, and decreased from 0.86% at December 31, 2017. The allowance for loan losses was 10.97 times nonperforming loans compared to 7.25 times at September 30, 2018 and 9.39 times at December 31, 2017.

Quarterly Noninterest Income Compared to the Fourth Quarter of 2017:

Total noninterest income was $42.21 million compared to $43.48 million in 2017. Increases of $1.16 million in real estate brokerage and property management income and $1.10 million in insurance commissions were offset by a decrease in residential mortgage brokerage income of $4.59 million.
Property management fee revenue increased 39.08%, or $1.07 million, 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 an increase of property management fee income for the fourth quarter of approximately $0.84 million.
Insurance segment total revenue increased $1.75 million or 12.31% to $15.92 million in the fourth quarter. The increase is primarily attributable to revenue generated by insurance agencies acquired in the second and fourth quarters of 2018, in addition to a rise in revenue from benefit insurance.
Residential mortgage banking income was $12.95 million compared to $17.54 million in fourth quarter 2017. Loan volume in the current quarter was $600.07 million, with purchases comprising $531.87 million and refinancing activity accounting for $68.20 million. Loan volume in fourth quarter 2017 was $797.74 million, with purchase activity of $657.28 million and refinancing activity of $140.46 million. Lower volumes and continued pressure on gain on sale margin led to the decline in revenue.

Quarterly Noninterest Expense Compared to the Fourth Quarter of 2017:

Total noninterest expense was $82.34 million compared to $73.66 million, an increase of $8.68 million, or 11.78%. This reflects increases of $8.27 million in salary and benefits expense, $1.29 million in intangible amortization expense, and $0.89 million in outside processing expenses.
Noninterest expense included operational expenses of entities acquired subsequent to fourth quarter 2017 of $8.75 million, primarily in our Banking and Insurance segments. Excluding acquired entity expenses, noninterest expense was $73.59 million for the quarter ended December 31, 2018, or a decrease of 0.09% compared to 2017.

Quarterly Income Taxes Compared to the Fourth Quarter of 2017:

Income tax expense was $10.35 million compared to $21.33 million, one year prior. This represents an effective tax rate of 22.33% compared to 33.31% in the fourth quarter of 2017.
The decrease in the effective tax rate from the prior year is due to Tax Reform, 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. Included in income tax expense in fourth quarter 2017 was $10.11 million related to the revaluation of deferred tax assets due to Tax Reform, and a final adjustment in fourth quarter 2018 to the Tax Reform provision of $0.70 million.

Investment Securities:

Total investment securities were $1.19 billion compared to $1.16 billion at September 30, 2018 and $0.96 billion at December 31, 2017. The weighted average duration of the portfolio at December 31, 2018 was 3.0 years. The carrying value of the available-for-sale portfolio included $11.91 million of net unrealized losses compared to $26.22 million at September 30, 2018 and $6.43 million in net unrealized losses at December 31, 2017. The change in net unrealized losses was primarily due to interest rate fluctuations. The carrying value of the held-to-maturity portfolio does not reflect $0.67 million in net unrealized gains compared to $0.17 million in net unrealized gains at September 30, 2018 and $1.58 million in net unrealized gains at December 31, 2017.

Loans:

Total loans held for investment were $8.02 billion at December 31, 2018 compared to $7.88 billion at September 30, 2018 and $5.95 billion at December 31, 2017.








% Change









Annualized

Q4

Q4

Q3

Q4 18 vs.

Q4 18 vs.
(dollars in thousands)
2018

2017

2018

Q4 17

Q3 18
Construction and land development
$
1,067,239


$
930,426


$
1,016,120


14.70
%

19.96
%
Commercial real estate - investment related properties
1,978,592


1,344,774


1,957,297


47.13
%

4.32
%
Commercial real estate - owner occupied
1,262,748


938,767


1,259,368


34.51
%

1.06
%
Multifamily real estate
260,987


198,720


284,423


31.33
%

(32.69
)%
1-4 family residential real estate
1,626,896


1,217,349


1,608,517


33.64
%

4.53
%
Commercial and industrial business loans
1,510,364


1,087,157


1,447,794


38.93
%

17.15
%
Consumer loans and other
311,407


229,772


308,173


35.53
%

4.16
%
Total
$
8,018,233


$
5,946,965


$
7,881,692


34.83
%

6.87
%

Asset Quality:

Nonperforming assets declined to $24.17 million, or 0.22% of total assets, compared to $28.09 million, or 0.33% of total assets, at December 31, 2017.
Nonperforming loans were 0.06% of period end loans.
Foreclosed property decreased to $17.16 million from $19.82 million at December 31, 2017.

Deposits and Borrowings:

Total deposits were $8.37 billion compared to $8.30 billion at September 30, 2018 and $6.45 billion at December 31, 2017. The increase in deposits includes $1.25 billion acquired in the Paragon merger.
Total loans to total deposits were 95.79% compared to 94.97% at September 30, 2018 and 92.23% at December 31, 2017.
Non-interest bearing deposits were 31.33% of total deposits at December 31, 2018 compared to 32.19% at September 30, 2018 and 33.46% at December 31, 2017. Non-interest bearing deposits were affected by seasonality in the fourth quarter.
Total borrowings were $1.09 billion compared to $1.17 billion and $0.80 billion at September 30, 2018 and December 31, 2017, respectively.








% Change









Annualized

Q4

Q4

Q3

Q4 18 vs.

Q4 18 vs.
(dollars in thousands)
2018

2017

2018

Q4 17

Q3 18
Noninterest-bearing demand
$
2,622,761


$
2,157,338


$
2,671,558


21.57
%

(7.25
)%
Interest-bearing:









Demand and money market accounts
3,223,215


2,225,211


3,096,317


44.85
%

16.26
%
Savings
286,684


315,889


298,368


(9.25
)%

(15.54
)%
Certificates of deposits
2,237,762


1,749,782


2,233,188


27.89
%

0.81
%
Total
$
8,370,422


$
6,448,220


$
8,299,431


29.81
%

3.39
%

Capital:

Common equity tier 1 capital ratio of 11.64%.
Tier 1 leverage capital ratio of 9.87%.
Tier 1 risk-based capital ratio of 11.67%.
Total risk-based capital ratio of 15.00%.
Book value was $21.05 compared to $20.54 at September 30, 2018 and $18.06 at December 31, 2017.
Tangible book value was $14.26 compared to $13.83 at September 30, 2018 and $13.13 at December 31, 2017.

Annual Meeting of Shareholders:
TowneBank announced that its 2019 Annual Meeting of Shareholders would be held at 11:30 a.m. on Wednesday, May 22, 2019 at the Virginia Beach Convention Center, 1000 19th Street in Virginia Beach, Virginia.

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. TowneBank 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 $11.16 billion as of December 31, 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 accounting principles generally accepted in the United States of America ("GAAP"). The Company's management uses these non-GAAP financial measures in their 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. Since the presentation of these GAAP performance measures and their impact differ between companies, 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 areas; 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 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)





Three Months Ended


December 31,

September 30,

June 30,

March 31,

December 31,

2018

2018

2018

2018

2017
Income and Performance Ratios:










Total Revenue
$
131,417


$
137,915


$
137,058


$
126,276


$
109,141


Net income
36,440


39,252


36,138


25,943


13,287


Net income attributable to TowneBank
35,990


38,293


34,804


24,705


12,333


Net income per common share - diluted
0.50


0.53


0.48


0.36


0.20


Book value per common share
21.05


20.54


20.22


19.90


18.06


Tangible book value per share ^(non-GAAP)
14.26


13.83


13.50


13.34


13.13


Return on average assets
1.28
%

1.40
%

1.32
%

1.02
%

0.57
%

Return on average assets - tangible ^(non-GAAP)
1.43
%

1.56
%

1.48
%

1.15
%

0.65
%

Return on average equity
9.44
%

10.21
%

9.55
%

7.39
%

4.26
%

Return on average equity - tangible ^(non-GAAP)
14.91
%

16.08
%

15.19
%

11.64
%

6.39
%

Return on average common equity
9.53
%

10.30
%

9.62
%

7.45
%

4.30
%

Return on average common equity - tangible ^(non-GAAP)
15.11
%

16.30
%

15.36
%

11.77
%

6.47
%

Noninterest income as a percentage of total revenue
32.12
%

35.69
%

36.65
%

39.54
%

39.84
%











Regulatory Capital Ratios (1):










Common equity tier 1
11.64
%

11.53
%

11.33
%

11.65
%

12.19
%

Tier 1
11.67
%

11.57
%

11.36
%

11.68
%

12.23
%

Total
15.00
%

14.90
%

14.71
%

15.27
%

16.48
%

Tier 1 leverage ratio
9.87
%

9.98
%

10.00
%

9.97
%

10.17
%











Asset Quality:










Allowance for loan losses to nonperforming loans
10.97
x

7.25
x

12.64
x

10.40
x

9.39
x

Allowance for loan losses to period end loans
0.65
%

0.64
%

0.64
%

0.63
%

0.76
%

Allowance for loan losses to period end loans excluding purchased loans
0.82
%

0.82
%

0.84
%

0.86
%

0.86
%

Nonperforming loans to period end loans
0.06
%

0.09
%

0.05
%

0.06
%

0.08
%

Nonperforming assets to period end assets
0.22
%

0.25
%

0.24
%

0.27
%

0.33
%

Net charge-offs to average loans (annualized)
0.02
%

0.03
%

0.01
%

0.02
%

0.01
%












Nonperforming loans
$
4,749


$
6,926


$
3,919


$
4,495


$
4,807


Former bank premises
2,253


2,253


2,253


2,253


3,469


Foreclosed property
17,163


18,153


20,133


21,731


19,818


Total nonperforming assets
$
24,165


$
27,332


$
26,305


$
28,479


$
28,094


Loans past due 90 days and still accruing interest
$
394


$
153


$
22


$
199


$
103













Allowance for loan losses
$
52,094


$
50,236


$
49,535


$
46,735


$
45,131












Mortgage Banking:










Loans originated, mortgage
$
531,871


$
561,543


$
667,189


$
478,039


$
585,567


Loans originated, joint venture
68,196


249,956


284,337


185,306


212,173


Total loans originated
$
600,067


$
811,499


$
951,526


$
663,345


$
797,740


Number of loans originated
2,472


3,068


3,687


2,603


3,061


Average number of originators
314


329


336


330


302


Purchase %
88.89
%

90.00
%

91.50
%

81.80
%

83.10
%

Loans sold
$
695,521


$
853,981


$
827,575


$
679,167


$
806,323


Realized gain on sales and fees as a % of loans sold
3.18
%

3.18
%

3.11
%

3.38
%

3.45
%











Other Ratios:










Net interest margin
3.53
%

3.62
%

3.69
%

3.51
%

3.37
%

Net interest margin-fully tax equivalent ^(non-GAAP)
3.55
%

3.64
%

3.71
%

3.54
%

3.41
%

Average earning assets/total average assets
89.91
%

89.69
%

89.61
%

89.45
%

90.09
%

Average loans/average deposits
95.32
%

97.55
%

97.79
%

95.89
%

91.10
%

Average noninterest deposits/total average deposits
31.90
%

32.61
%

32.28
%

31.75
%

33.27
%

Period end equity/period end total assets
13.78
%

13.49
%

13.63
%

13.65
%

13.41
%

Efficiency ratio
62.65
%

64.00
%

65.10
%

73.10
%

67.49
%












(1) Current reporting period regulatory capital ratios are preliminary.

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)


Three Months Ended

Three Months Ended

Three Months Ended

December 31, 2018

September 30, 2018

December 31, 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
$
7,923,978


$
99,895


5.00
%

$
7,825,065


$
97,704


4.95
%

$
5,920,302


$
70,019


4.69
%
Taxable investment securities
1,101,892


7,515


2.73
%

1,022,051


6,403


2.51
%

644,875


3,237


2.01
%
Tax-exempt investment securities
80,656


747


3.70
%

82,235


766


3.73
%

46,825


386


3.30
%
Interest-bearing deposits
652,131


3,559


2.17
%

450,455


2,149


1.89
%

825,164


2,661


1.28
%
Loans held for sale
266,058


3,176


4.77
%

346,806


4,012


4.63
%

292,697


2,874


3.93
%
Total earning assets
10,024,715


114,892


4.55
%

9,726,612


111,034


4.53
%

7,729,863


79,177


4.06
%
Less: allowance for loan losses
(50,792
)





(50,144
)





(44,704
)






















Total nonearning assets
1,176,037






1,168,102






894,547























Total assets
$
11,149,960






$
10,844,570






$
8,579,706























Liabilities and Equity:

















Interest-bearing deposits

















Demand and money market
$
3,122,973


$
5,670


0.72
%

$
2,957,038


$
4,217


0.57
%

$
2,247,745


$
2,091


0.37
%
Savings
293,135


1,022


1.38
%

301,311


984


1.30
%

320,218


870


1.08
%
Certificates of deposit
2,245,039


10,803


1.91
%

2,147,337


9,339


1.73
%

1,768,212


5,141


1.15
%
Total interest-bearing deposits
5,661,147


17,495


1.23
%

5,405,686


14,540


1.07
%

4,336,175


8,102


0.74
%
Borrowings
920,389


4,643


1.97
%

920,380


4,195


1.78
%

554,039


1,819


1.28
%
Subordinated debentures
247,769


2,961


4.78
%

247,615


2,962


4.78
%

247,152


2,880


4.66
%
Total interest-bearing liabilities
6,829,305


25,099


1.46
%

6,573,681


21,697


1.31
%

5,137,366


12,801


0.99
%
Noninterest bearing demand deposits
2,651,495






2,615,946






2,162,271





Other noninterest-bearing liabilities
157,238






166,575






130,181





Total liabilities
9,638,038






9,356,202






7,429,818























Shareholders’ equity
1,511,922






1,488,368






1,149,888























Total liabilities and equity
$
11,149,960






$
10,844,570






$
8,579,706























Net interest income (tax-equivalent basis)


$
89,793






$
89,337






$
66,376



Reconcilement of Non-GAAP Financial Measures
















Tax-equivalent basis adjustment


(585
)





(640
)





(712
)


Net interest income (GAAP)


$
89,208






$
88,697






$
65,664





















Interest rate spread (1)




3.09
%





3.22
%





3.07
%
Interest expense as a percent of average earning assets



0.99
%





0.88
%





0.66
%
Net interest margin (tax equivalent basis) (2)



3.55
%





3.64
%





3.41
%
Total cost of deposits




0.83
%





0.72
%





0.49
%


















(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)


Year Ended December 31,

2018


2017


2016




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
$
7,567,570


$
373,057


4.93
%

$
5,901,797


$
276,746


4.69
%

$
5,129,990


$
234,318


4.57
%
Taxable investment securities
1,004,080


24,729


2.46
%

600,080


11,597


1.93
%

695,082


11,254


1.62
%
Tax-exempt investment securities
79,720


2,920


3.66
%

48,228


1,582


3.28
%

52,689


1,601


3.04
%
Interest-bearing deposits
560,368


10,229


1.83
%

696,507


7,480


1.07
%

300,130


1,145


0.38
%
Mortgage loans held for sale
293,017


13,124


4.48
%

271,281


10,561


3.89
%

264,494


9,152


3.46
%
Total earning assets
9,504,755


424,059


4.46
%

7,517,893


307,966


4.10
%

6,442,385


257,470


4.00
%
Less: allowance for loan losses
(48,737
)





(43,760
)





(39,547
)




Total nonearning assets
1,143,167






860,866






802,398





Total assets
$
10,599,185






$
8,334,999






$
7,205,236























Liabilities and Equity:

















Interest-bearing deposits

















Demand and money market
$
2,951,038


$
16,458


0.56
%

$
2,260,378


$
8,020


0.35
%

$
2,012,061


$
6,043


0.30
%
Savings
302,435


3,824


1.26
%

319,940


3,305


1.03
%

309,049


2,859


0.93
%
Certificates of deposit
2,060,587


32,859


1.59
%

1,668,252


17,467


1.05
%

1,530,990


13,414


0.88
%
Total interest-bearing deposits
5,314,060


53,141


1.00
%

4,248,570


28,792


0.68
%

3,852,100


22,316


0.58
%
FHLB advances and repurchase agreements
897,574


15,542


1.71
%

617,720


9,942


1.61
%

523,366


13,424


2.56
%
Subordinated capital debentures
251,097


12,067


4.81
%

113,752


5,249


4.61
%

–


–


–
%
Total interest-bearing liabilities
6,462,731


80,750


1.25
%

4,980,042


43,983


0.88
%

4,375,466


35,740


0.82
%
Noninterest-bearing liabilities

















Noninterest bearing demand deposits
2,517,173






2,094,753






1,720,093





Other noninterest-bearing liabilities
164,486






136,616






145,902





Total liabilities
9,144,390






7,211,411






6,241,461





Shareholders' equity
1,454,795






1,123,588






963,775





Total liabilities and equity
$
10,599,185






$
8,334,999






$
7,205,236





Net interest income (tax-equivalent basis)

$
343,309






$
263,983






$
221,730



Reconcilement of Non-GAAP Financial Measures
















Tax-equivalent basis adjustment

(2,236
)





(2,862
)





(2,854
)


Net interest income (GAAP)

$
341,073






$
261,121






$
218,876



Interest rate spread (1)



3.21
%





3.22
%





3.18
%
Interest expense as a percent of average earning assets



0.85
%





0.59
%





0.55
%
Net interest margin (tax-equivalent basis) (2)



3.61
%





3.51
%





3.44
%
Total cost of deposits



0.68
%





0.45
%





0.40
%


















(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)




2018

2017

(unaudited)

(audited)
ASSETS



Cash and due from banks
$
665,029


$
504,095

Interest-bearing deposits in financial institutions
21,667


17,094

Total Cash and Cash Equivalents
686,696


521,189

Securities available for sale, at fair value
1,095,339


866,138

Securities held to maturity, at amortized cost
50,598


61,304

Other equity securities
4,797


1,516

Federal Home Loan Bank stock, at amortized cost
43,229


29,595

Total Securities
1,193,963


958,553

Mortgage loans held for sale
220,986


313,256

Loans, net of unearned income and deferred costs:



Real estate-residential 1-4 family
1,626,896


1,217,349

Real estate-commercial
3,241,340


2,283,541

Real estate-construction and development
1,067,239


930,426

Real estate-multi-family
260,987


198,720

Commercial and industrial business
1,510,364


1,087,157

Consumer and other loans
311,407


229,772

Loans, net of unearned income and deferred costs
8,018,233


5,946,965

Less: allowance for loan losses
(52,094
)

(45,131
)
Net Loans
7,966,139


5,901,834

Premises and equipment, net
211,796


194,900

Goodwill
433,658


270,250

Other intangible assets, net
58,752


38,568

Bank-owned life insurance policies
237,371


195,775

Other assets
153,669


127,851

TOTAL ASSETS
$
11,163,030


$
8,522,176





LIABILITIES AND EQUITY



Deposits:



Noninterest-bearing demand
$
2,622,761


$
2,157,338

Interest-bearing:



Demand and money market accounts
3,223,215


2,225,211

Savings
286,684


315,889

Certificates of deposit
2,237,762


1,749,782

Total Deposits
8,370,422


6,448,220

Advances from the Federal Home Loan Bank
799,315


526,923

Subordinated debt, net
247,861


247,196

Repurchase agreements and other borrowings
47,156


24,850

Total Borrowings
1,094,332


798,969

Other liabilities
159,856


132,482

TOTAL LIABILITIES
9,624,610


7,379,671

Preferred stock



Authorized and unissued shares - 2,000,000
–


–

Common stock, $1.667 par: Authorized shares - 120,000,000



Issued and outstanding shares 72,465,923 in 2018



and 62,629,001 in 2017
120,801


104,403

Capital surplus
1,034,676


749,800

Retained earnings
379,239


282,729

Common stock issued to deferred compensation trust, at cost



769,200 shares in 2018 and 729,919 shares in 2017
(13,955
)

(12,524
)
Deferred compensation trust
13,955


12,524

Accumulated other comprehensive loss
(9,190
)

(5,692
)
TOTAL SHAREHOLDERS’ EQUITY
1,525,526


1,131,240

Noncontrolling interest
12,894


11,265

TOTAL EQUITY
1,538,420


1,142,505

TOTAL LIABILITIES AND EQUITY
$
11,163,030


$
8,522,176

TOWNEBANK
Consolidated Statements of Income
(dollars in thousands, except per share data)












Three Months Ended

Twelve Months Ended

December 31,

December 31,

2018

2017

2018

2017

(unaudited)

(unaudited)

(unaudited)

(audited)
INTEREST INCOME:







Loans, including fees
$
99,446


$
69,332


$
371,343


$
273,999

Investment securities
8,126


3,598


27,127


13,064

Interest-bearing deposits in financial institutions and federal funds sold
3,559


2,661


10,229


7,480

Mortgage loans held for sale
3,176


2,874


13,124


10,561

Total interest income
114,307


78,465


421,823


305,104

INTEREST EXPENSE:







Deposits
17,495


8,102


53,141


28,792

Advances from the Federal Home Loan Bank
4,585


1,791


15,340


9,837

Subordinated debt, net
2,961


2,880


12,067


5,249

Repurchase agreements and other borrowings
58


28


202


105

Total interest expense
25,099


12,801


80,750


43,983

Net interest income
89,208


65,664


341,073


261,121









PROVISION FOR LOAN LOSSES
2,292


869


8,541


5,426

Net interest income after provision for loan losses
86,916


64,795


332,532


255,695

NONINTEREST INCOME:







Residential mortgage banking income, net
12,951


17,537


65,104


75,851

Insurance commissions and other title fees and income, net
13,212


12,115


56,164


51,933

Real estate brokerage and property management income, net
5,982


4,823


31,863


27,487

Service charges on deposit accounts
2,928


2,809


11,808


10,594

Credit card merchant fees, net
1,298


1,204


5,472


5,008

Bank owned life insurance
2,014


1,941


6,836


6,262

Other income
3,824


3,048


14,343


10,987

Gain (loss) on investment securities
–


–


3


(1
)
Total noninterest income
42,209


43,477


191,593


188,121

NONINTEREST EXPENSE:







Salaries and employee benefits
50,233


41,965


201,838


169,449

Occupancy
7,352


6,878


27,644


26,855

Furniture and equipment
3,587


3,456


14,477


14,072

Other expenses
21,165


21,361


108,165


85,838

Total noninterest expense
82,337


73,660


352,124


296,214

Income before income tax expense & noncontrolling interest
46,788


34,612


172,001


147,602

Provision for income tax expense
10,348


21,325


34,227


54,813

Net income
$
36,440


$
13,287


$
137,774


$
92,789

Net income attributable to noncontrolling interest
(450
)

(954
)

(3,981
)

(5,126
)
Net income attributable to TowneBank
$
35,990


$
12,333


$
133,793


$
87,663









Per common share information







Basic earnings
$
0.50


$
0.20


$
1.88


$
1.41

Diluted earnings
$
0.50


$
0.20


$
1.88


$
1.41

Cash dividends declared
$
0.16


$
0.14


$
0.62


$
0.55

TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)












December 31,

September 30,

June 30,

March 31,

December 31,

2018

2018

2018

2018

2017

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(audited)
ASSETS









Cash and due from banks
$
665,029


$
688,584


$
440,054


$
479,453


$
504,095

Interest-bearing deposits in financial institutions
21,667


20,910


17,749


17,728


17,094

Total Cash and Cash Equivalents
686,696


709,494


457,803


497,181


521,189

Securities available for sale, at fair value
1,095,339


1,051,773


1,057,663


1,237,179


866,138

Securities held to maturity, at amortized cost
50,598


52,002


53,954


55,283


61,304

Other equity securities
4,797


5,519


5,206


5,002


1,516

Federal Home Loan Bank stock, at amortized cost
43,229


46,393


46,393


46,400


29,595

Total Securities
1,193,963


1,155,687


1,163,216


1,343,864


958,553

Mortgage loans held for sale
220,986


333,354


396,185


293,731


313,256

Loans, net of unearned income and deferred costs
8,018,233


7,881,692


7,774,956


7,470,151


5,946,965

Less: allowance for loan losses
(52,094
)

(50,236
)

(49,535
)

(46,735
)

(45,131
)
Net Loans
7,966,139


7,831,456


7,725,421


7,423,416


5,901,834

Premises and equipment, net
211,796


210,724


207,997


207,126


194,900

Goodwill
433,658


427,117


425,625


416,789


270,250

Other intangible assets, net
58,752


58,165


60,669


57,493


38,568

Bank-owned life insurance policies
237,371


235,348


233,682


232,039


195,775

Other assets
153,669


159,887


161,055


148,776


127,851

TOTAL ASSETS
$
11,163,030


$
11,121,232


$
10,831,653


$
10,620,415


$
8,522,176

LIABILITIES AND EQUITY









Deposits:









Noninterest-bearing demand
$
2,622,761


$
2,671,558


$
2,597,320


$
2,503,246


$
2,157,338

Interest-bearing:









Demand and money market accounts
3,223,215


3,096,317


3,017,767


3,001,256


2,225,211

Savings
286,684


298,368


305,334


309,077


315,889

Certificates of deposit
2,237,762


2,233,188


2,070,790


2,011,843


1,749,782

Total Deposits
8,370,422


8,299,431


7,991,211


7,825,422


6,448,220

Advances from the Federal Home Loan Bank
799,315


873,469


873,622


873,773


526,923

Subordinated debt, net
247,861


247,712


247,563


257,723


247,196

Repurchase agreements and other borrowings
47,156


45,591


50,981


52,509


24,850

Total Borrowings
1,094,332


1,166,772


1,172,166


1,184,005


798,969

Other liabilities
159,856


155,205


191,490


161,638


132,482

TOTAL LIABILITIES
9,624,610


9,621,408


9,354,867


9,171,065


7,379,671

Preferred stock









Authorized shares - 2,000,000
–


–


–


–


–











Common stock, $1.667 par value
120,801


120,613


120,615


120,472


104,403

Capital surplus
1,034,676


1,032,863


1,031,965


1,028,985


749,800

Retained earnings
379,239


354,842


328,125


304,896


282,729

Common stock issued to deferred compensation trust, at cost
(13,955
)

(13,780
)

(13,500
)

(12,612
)

(12,524
)
Deferred compensation trust
13,955


13,780


13,500


12,612


12,524

Accumulated other comprehensive loss
(9,190
)

(22,348
)

(17,944
)

(15,873
)

(5,692
)
TOTAL SHAREHOLDERS’ EQUITY
1,525,526


1,485,970


1,462,761


1,438,480


1,131,240

Noncontrolling interest
12,894


13,854


14,025


10,870


11,265

TOTAL EQUITY
1,538,420


1,499,824


1,476,786


1,449,350


1,142,505

TOTAL LIABILITIES AND EQUITY
$
11,163,030


$
11,121,232


$
10,831,653


$
10,620,415


$
8,522,176

TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)













Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

2018

2018

2018

2018

2017
INTEREST INCOME:









Loans, including fees
$
99,446


$
97,215


$
93,150


$
81,533


$
69,332

Investment securities
8,126


7,019


6,390


5,592


3,598

Interest-bearing deposits in financial institutions and federal funds sold
3,559


2,148


2,159


2,362


2,661

Mortgage loans held for sale
3,176


4,012


3,557


2,379


2,874

Total interest income
114,307


110,394


105,256


91,866


78,465

INTEREST EXPENSE:









Deposits
17,495


14,540


11,620


9,486


8,102

Advances from the Federal Home Loan Bank
4,585


4,153


3,764


2,838


1,791

Subordinated debt
2,961


2,962


2,986


3,158


2,880

Repurchase agreements and other borrowings
58


42


63


40


28

Total interest expense
25,099


21,697


18,433


15,522


12,801

Net interest income
89,208


88,697


86,823


76,344


65,664











PROVISION FOR LOAN LOSSES
2,292


1,241


3,056


1,953


869

Net interest income after provision for loan losses
86,916


87,456


83,767


74,391


64,795

NONINTEREST INCOME:









Residential mortgage banking income, net
12,951


15,804


18,745


17,604


17,537

Insurance commissions and other title fees and income, net
13,212


14,493


15,087


13,372


12,115

Real estate brokerage and property management income, net
5,982


8,542


6,910


10,429


4,823

Service charges on deposit accounts
2,928


3,028


2,969


2,883


2,809

Credit card merchant fees, net
1,298


1,563


1,443


1,168


1,204

Bank owned life insurance
2,014


1,657


1,633


1,532


1,941

Other income
3,824


4,130


3,448


2,941


3,048

Gain on investment securities
–


–


–


3


–

Total noninterest income
42,209


49,217


50,235


49,932


43,477

NONINTEREST EXPENSE:









Salaries and employee benefits
50,233


50,497


50,324


50,784


41,965

Occupancy expense
7,352


7,013


6,802


6,477


6,878

Furniture and equipment
3,587


3,646


3,546


3,698


3,456

Other expenses
21,165


27,106


28,549


31,344


21,361

Total noninterest expense
82,337


88,262


89,221


92,303


73,660

Income before income tax expense and noncontrolling interest
46,788


48,411


44,781


32,020


34,612

Provision for income tax expense
10,348


9,159


8,643


6,077


21,325

Net income
36,440


39,252


36,138


25,943


13,287

Net income attributable to noncontrolling interest
(450
)

(959
)

(1,334
)

(1,238
)

(954
)
Net income attributable to TowneBank
$
35,990


$
38,293


$
34,804


$
24,705


$
12,333

Per common share information









Basic earnings
$
0.50


$
0.53


$
0.48


$
0.36


$
0.20

Diluted earnings
$
0.50


$
0.53


$
0.48


$
0.36


$
0.20

Basic weighted average shares outstanding
71,905,956


71,875,085


71,787,980


68,983,745


62,239,028

Diluted weighted average shares outstanding
72,043,369


72,044,355


71,949,590


69,156,809


62,462,629

Cash dividends declared
$
0.16


$
0.16


$
0.16


$
0.14


$
0.14

TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)






Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30, 2018

December 31,

2018 over 2017

2018

2017


2018

2017

Amount

Percent
Revenue













Net interest income
$
86,433


$
63,030


$
85,423


$
329,584


$
251,003


$
78,581


31.31
%
Noninterest income













Service charges on deposit accounts
2,928


2,809


3,028


11,808


10,594


1,214


11.46
%
Credit card merchant fees
1,298


1,203


1,563


5,472


5,008


464


9.27
%
Other income
4,660


4,319


4,300


16,833


14,046


2,787


19.84
%
Subtotal
8,886


8,331


8,891


34,113


29,648


4,465


15.06
%
Gain (loss) on investment securities
–


–


–


147


(1
)

148


N/M
Total noninterest income
8,886


8,331


8,891


34,260


29,647


4,613


15.56
%
Total revenue
95,319


71,361


94,314


363,844


280,650


83,194


29.64
%














Provision for loan losses
2,292


869


1,241


8,541


5,426


3,115


57.41
%














Expenses













Salaries and employee benefits
28,100


21,134


28,329


114,472


85,654


28,818


33.64
%
Occupancy expense
4,789


4,418


4,331


17,410


16,365


1,045


6.39
%
Furniture and equipment
2,426


2,326


2,463


9,912


9,406


506


5.38
%
Amortization of intangible assets
1,428


536


1,479


5,658


2,288


3,370


147.29
%
Other expenses
9,759


11,571


14,829


60,697


45,141


15,556


34.46
%
Total expenses
46,502


39,985


51,431


208,149


158,854


49,295


31.03
%
Income before income tax, corporate allocation and noncontrolling interest
46,525


30,507


41,642


147,154


116,370


30,784


26.45
%
Corporate allocation
367


533


438


1,736


1,828


(92
)

(5.03
)%





















Income before income tax provision and noncontrolling interest
46,892


31,040


42,080


148,890


118,198


30,692


25.97
%





















Provision for income tax expense
10,252


19,510


7,604


28,880


44,584


(15,704
)

(35.22
)%
Net income
36,640


11,530


34,476


120,010


73,614


46,396


63.03
%
Noncontrolling interest
4


–


(4
)

(8
)

1


(9
)

N/M
Net income attributable to TowneBank
$
36,644


$
11,530


$
34,472


$
120,002


$
73,615


$
46,387


63.01
%














Efficiency ratio
48.79
%

56.03
%

54.53
%

57.21
%

56.60
%

TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)






Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30,

December 31,

2018 over 2017

2018

2017

2018

2018

2017

Amount

Percent
Revenue













Residential mortgage brokerage income, net
$
13,472


$
17,544


$
16,219


$
66,696


$
76,245


$
(9,549
)

(12.52
)%
Real estate brokerage income, net
2,183


2,092


2,758


9,458


7,991


1,467


18.36
%
Title insurance and settlement fees
458


431


525


1,877


1,877


–


–
%
Property management fees, net
3,799


2,731


5,783


22,405


19,496


2,909


14.92
%
Income from unconsolidated subsidiary
54


116


122


370


704


(334
)

(47.44
)%
Net interest and other income
3,210


3,050


4,111


13,210


11,725


1,485


12.67
%
Total revenue
23,176


25,964


29,518


114,016


118,038


(4,022
)

(3.41
)%














Expenses













Salaries and employee benefits
$
14,308


$
14,279


$
14,862


$
58,450


$
58,586


$
(136
)

(0.23
)%
Occupancy expense
1,928


1,894


2,084


7,871


8,171


(300
)

(3.67
)%
Furniture and equipment
930


960


952


3,697


3,865


(168
)

(4.35
)%
Amortization of intangible assets
767


571


672


2,782


2,566


216


8.42
%
Other expenses
6,419


6,259


7,543


28,416


26,742


1,674


6.26
%
Total expenses
24,352


23,963


26,113


101,216


99,930


1,286


1.29
%














Income (loss) before income tax, corporate allocation, and noncontrolling interest
(1,176
)

2,001


3,405


12,800


18,108


(5,308
)

(29.31
)%
Corporate allocation
(238
)

(370
)

(270
)

(1,091
)

(1,210
)

119


(9.83
)%
Income (loss) before income tax provision and noncontrolling interest
(1,414
)

1,631


3,135


11,709


16,898


(5,189
)

(30.71
)%
Provision for income tax
(86
)

1,160


786


2,892


5,791


(2,899
)

(50.06
)%
Net income (loss)
(1,328
)

471


2,349


8,817


11,107


(2,290
)

(20.62
)%
Noncontrolling interest
(130
)

(695
)

(756
)

(2,398
)

(3,756
)

1,358


(36.16
)%
Net income (loss) attributable to TowneBank
$
(1,458
)

$
(224
)

$
1,593


$
6,419


$
7,351


$
(932
)

(12.68
)%














Efficiency ratio
105.07
%

92.29
%

88.46
%

88.77
%

84.66
%

TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
















Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30,

December 31,

2018 over 2017

2018

2017

2018

2018

2017

Amount

Percent
Commission and fee income













Property and casualty
$
9,770


$
8,198


$
10,762


$
40,948


$
35,694


$
5,254


14.72
%
Employee benefits
3,625


3,164


3,813


14,088


12,551


1,537


12.25
%
Travel insurance
1,095


912


871


5,123


4,668


455


9.75
%
Specialized benefit services
168


170


166


673


657


16


2.44
%
Total commissions and fees
14,658


12,444


15,612


60,832


53,570


7,262


13.56
%














Contingency and bonus revenue
1,185


1,654


1,137


4,888


6,322


(1,434
)

(22.68
)%
Other income
79


80


75


295


308


(13
)

(4.22
)%
Total revenue
15,922


14,178


16,824


66,015


60,200


5,815


9.66
%














Employee commission expense
3,000


2,362


2,742


11,209


9,646


1,563


16.20
%
Revenue, net of commission expense
12,922


11,816


14,082


54,806


50,554


4,252


8.41
%














Salaries and employee benefits
$
7,825


$
6,552


$
7,306


$
28,916


$
25,209


$
3,707


14.71
%
Occupancy expense
635


566


598


2,363


2,319


44


1.90
%
Furniture and equipment
231


169


232


868


801


67


8.36
%
Amortization of intangible assets
928


726


845


3,269


2,803


466


16.63
%
Other expenses
1,865


1,698


1,737


7,343


6,298


1,045


16.59
%
Total operating expenses
11,484


9,711


10,718


42,759


37,430


5,329


14.24
%
Income before income tax and noncontrolling interest
1,438


2,105


3,364


12,047


13,124


(1,077
)

(8.21
)%
Corporate allocation
(128
)

(164
)

(168
)

(645
)

(618
)

(27
)

4.37
%
Income before income tax provision and noncontrolling interest
1,310


1,941


3,196


11,402


12,506


(1,104
)

(8.83
)%
Provision for income tax expense
182


655


769


2,455


4,438


(1,983
)

(44.68
)%
Net income
1,128


1,286


2,427


8,947


8,068


879


10.89
%
Noncontrolling interest
(324
)

(259
)

(199
)

(1,575
)

(1,371
)

(204
)

14.88
%
Net income attributable to TowneBank
$
804


$
1,027


$
2,228


$
7,372


$
6,697


$
675


10.08
%














Provision for income taxes
182


655


769


2,455


4,438


(1,983
)

(44.68
)%
Depreciation, amortization and interest expense
1,152


934


1,068


4,134


3,593


541


15.06
%
EBITDA
$
2,138


$
2,616


$
4,065


$
13,961


$
14,728


$
(767
)

(5.21
)%














Efficiency ratio
88.87
%

82.19
%

76.11
%

78.02
%

74.04
%

TOWNEBANK
Reconcilement of Non-GAAP Financial Measures:
















Three Months Ended

Twelve Months Ended

December 31,

September 30,

December 31,

December 31,

2018

2018

2017

2018

2017










Return on average assets (GAAP)
1.28
%

1.40
%

0.57
%

1.26
%

1.05
%
Impact of excluding average goodwill and other intangibles and amortization
0.15
%

0.16
%

0.08
%

0.15
%

0.10
%
Return on average tangible assets (non-GAAP)
1.43
%

1.56
%

0.65
%

1.41
%

1.15
%










Return on average equity (GAAP)
9.44
%

10.21
%

4.26
%

9.20
%

7.80
%
Impact of excluding average goodwill and other intangibles and amortization
5.47
%

5.87
%

2.13
%

5.32
%

3.55
%
Return on average tangible equity (non-GAAP)
14.91
%

16.08
%

6.39
%

14.52
%

11.35
%










Return on average common equity (GAAP)
9.53
%

10.30
%

4.30
%

9.27
%

7.88
%
Impact of excluding average goodwill and other intangibles and amortization
5.58
%

6.00
%

2.17
%

5.43
%

3.63
%
Return on average tangible common equity (non-GAAP)
15.11
%

16.30
%

6.47
%

14.70
%

11.51
%










Book value (GAAP)
$
21.05


$
20.54


$
18.06


$
21.05


$
18.06

Impact of excluding average goodwill and other intangibles and amortization
(6.79
)

(6.71
)

(4.93
)

(7.71
)

(4.93
)
Tangible book value (non-GAAP)
$
14.26


$
13.83


$
13.13


$
13.34


$
13.13

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


December 31,

September 30,

June 30,

March 31,

December 31,


2018

2018

2018

2018

2017











Net income (GAAP)

$
35,990


$
38,293


$
34,804


$
24,705


$
12,333












Acquisition-related expenses

(1,518
)

424


797


8,726


526












Income tax expense - tax reform legislation

696


–


–


–


10,112

Income tax expense (benefit) - other items

355


(44
)

(93
)

(1,639
)

(98
)
Total income tax expense (benefit)

1,051


(44
)

(93
)

(1,639
)

10,014

Total charges, net of taxes

(467
)

380


704


7,087


10,540

Operating earnings, excluding certain items affecting comparability (non-GAAP)

$
35,523


$
38,673


$
35,508


$
31,792


$
22,873












Weighted average diluted shares

72,043,369


72,044,355


71,949,590


69,156,809


62,462,629












Diluted EPS (GAAP)

$
0.50


$
0.53


$
0.48


$
0.36


$
0.20

Diluted EPS, excluding certain items affecting comparability (non-GAAP)

$
0.49


$
0.54


$
0.49


$
0.46


$
0.37












Average assets

$
11,149,960


$
10,844,570


$
10,536,847


$
9,848,364


$
8,579,705

Average tangible equity

$
1,022,982


$
1,003,151


$
981,607


$
932,161


$
839,942












Return on average assets, excluding certain items affecting comparability (non-GAAP)

1.26
%

1.41
%

1.35
%

1.31
%

1.06
%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)

14.73
%

16.23
%

15.48
%

14.72
%

11.37
%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)

14.93
%

16.45
%

15.66
%

14.89
%

11.52
%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)

63.81
%

63.69
%

64.52
%

66.19
%

67.01
%

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

Year Ended


December 31,

December 31,


2018

2017





Net income (GAAP)

$
133,793


$
87,663






Purchase accounting adjustments

–


(3,889
)





Acquisition-related expenses

8,428


2,268






Total charges

8,428


(1,621
)





Income tax expense - tax reform legislation

696


10,112

Income tax expense (benefit) - other items

(1,420
)

1,027

Total income tax expense (benefit)

(724
)

11,139

Total charges, net of taxes

7,704


9,518

Operating earnings, excluding certain items affecting comparability (non-GAAP)

$
141,497


$
97,181






Weighted average diluted shares

71,293,129


62,394,282






Diluted EPS (GAAP)

$
1.88


$
1.41

Diluted EPS, excluding certain items affecting comparability (non-GAAP)

$
1.98


$
1.56






Average assets

$
10,599,185


$
8,334,999

Average tangible equity

$
985,274


$
815,969






Return on average assets, excluding certain items affecting comparability (non-GAAP)

1.33
%

1.17
%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)

15.30
%

12.52
%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)

15.49
%

12.69
%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)

64.52
%

65.43
%

Company Name:	Towne Bank
Stock Symbol:	TOWN
Market:	NASDAQ
Website:	townebank.com

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