TOWN - TowneBank Reports Full Year and Fourth Quarter financial Results for 2019

January, 23 2020 08:30 AM Towne Bank

SUFFOLK, Va., Jan. 23, 2020 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (Nasdaq: TOWN) today reported financial results for the full year and the fourth quarter ended December 31, 2019. For the year ended December 31, 2019, earnings were $138.78 million, or $1.92 per diluted share, compared to $133.79 million, or $1.88 per diluted share for the year ended December 31, 2018. Earnings in the fourth quarter of 2019 were $35.08 million, or $0.49 per diluted share, compared to fourth quarter 2018 earnings of $35.99 million, or $0.50 per diluted share.

“In spite of downward pressure on interest rates our Company grew total revenues by 6% climbing to a record $564 million. Our continued focus on attracting noninterest bearing deposits produced an increase of 13% or $328 million during the year and represents approximately 32% of our total deposits. We are excited about the momentum we are building in North Carolina with our newest office in Greensboro recently opened and several new sites planned for the Charlotte market in 2020,” said G. Robert Aston, Jr., Executive Chairman.

Highlights for the Fourth Quarter of 2019 Compared to the Fourth Quarter of 2018:

Total revenues were $139.67 million, an increase of $8.25 million, or 6.28%.
Loans held for investment increased $401.06 million, or 5.00%, from December 31, 2018, and $236.46 million, or 2.89%, from September 30, 2019, or 11.46% on an annualized basis.
Total deposits were $9.27 billion, an increase of $0.90 billion, or 10.76%, compared to prior year but a decrease, due to expected runoff and seasonality, of $0.17 billion, or 1.77%, from September 30, 2019, or a decline of 7.02% on an annualized basis.
Noninterest bearing deposits increased by 12.52%, to $2.95 billion, representing 31.83% of total deposits. Compared to the linked quarter, noninterest bearing deposits decreased 2.62%, or 10.38% on an annualized basis.
In the quarter comparison, annualized return on average common shareholders' equity was 8.51% and annualized return on average tangible common shareholders' equity was 13.12% (non-GAAP). For the full 12 months, return on average common shareholders' equity was 8.75% and return on average tangible common shareholders' equity was 13.73% (non-GAAP).
Net interest margin of 3.33% and taxable equivalent net interest margin of 3.35% (non-GAAP).
Effective tax rate of 18.17% compared to 22.33% at December 31, 2018.

“We ended 2019 on a positive note with a strong loan growth across our footprint. We are excited about the planned expansion in North Carolina and opportunities to add Banking, Wealth Management, Mortgage and Insurance talent in each of the markets we serve. 2020 will be an exciting year as we implement a state of the art banking platform to better serve the needs of our members,” said J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to the Fourth Quarter of 2018:

Net interest income was $89.96 million compared to $89.21 million for the quarter ended December 31, 2018.
Taxable equivalent net interest margin was 3.35%, including accretion of 9 basis points, compared to 3.55%, including accretion of 12 basis points, for 2018.
Average loans held for investment, with an average yield of 4.81%, represented 77.25% of average earning assets in the fourth quarter of 2019 compared to an average yield of 5.00% and 79.04% of average earning assets in the fourth quarter of 2018.
Total cost of deposits increased to 0.92% from 0.83% at December 31, 2018.
Average interest-earning assets totaled $10.72 billion at December 31, 2019 compared to $10.02 billion at December 31, 2018, an increase of 6.96%.
Average interest-bearing liabilities totaled $7.06 billion, an increase of $0.23 billion from the prior year.
Total interest expense increased 5.65%, to $26.52 million in fourth quarter 2019 compared to $25.10 million in fourth quarter 2018, but decreased $2.02 million, or 7.07%, compared to the linked quarter. The average cost of deposits declined in fourth quarter 2019 after peaking in the third quarter.

Quarterly Provision for Loan Losses:

Recorded a provision for loan losses of $3.60 million compared to $2.29 million one year ago and $1.51 million in the linked quarter, driven by strong fourth quarter 2019 growth.
Net charge-offs were $0.80 million compared to $0.43 million one year prior. The ratio of net charge-offs to average loans on an annualized basis was 0.04% compared to 0.03% in the prior quarter and 0.02% for the fourth quarter of 2018.
The allowance for loan losses represented 0.69% of total loans compared to 0.68% at September 30, 2019 and 0.65% at December 31, 2018. Loan loss reserve as a percentage of total loans, excluding purchased loans, remained unchanged at 0.81%, from September 30, 2019, and decreased from 0.82% at December 31, 2018. The allowance for loan losses was 3.34 times nonperforming loans compared to 3.95 times at September 30, 2019 and 10.97 times at December 31, 2018.

Quarterly Noninterest Income Compared to the Fourth Quarter of 2018:

Total noninterest income was $49.71 million compared to $42.21 million in 2018, an increase of $7.50 million, or 17.78%. Residential mortgage brokerage income increased $2.93 million, insurance commissions increased $1.79 million, and real estate brokerage and property management income increased $0.76 million.
Residential mortgage banking income was $15.88 million compared to $12.95 million in fourth quarter 2018. Loan volume in the current quarter was $860.16 million, with purchase activity comprising 70.32%. Loan volume in fourth quarter 2018 was $600.07 million, with purchase activity of 88.64%. Loan volume in the linked quarter was $963.66 million with purchase activity of 68.83%.
Total Insurance segment revenue increased $3.96 million, or 24.88%, to $19.88 million in the fourth quarter of 2019. Revenue generated by insurance agencies acquired in January 2019 and September 2019 totaled $1.40 million in the fourth quarter of 2019.
Property management fee revenue increased 10.21%, or $0.39 million, as compared to fourth quarter 2018 due to increases in reservation levels.
Bank owned life insurance and other noninterest income increased $2.62 million, or 44.84%, as compared to fourth quarter 2018 due to proceeds from life insurance policies and investment commission income.

Quarterly Noninterest Expense Compared to the Fourth Quarter of 2018:

Total noninterest expense was $92.34 million compared to $82.34 million, an increase of $10.00 million, or 12.14%. This reflects increases of $5.78 million in salary and benefits expense, $0.96 million in professional fees expense, and $0.29 million in advertising and marketing expenses.
The Bank recorded small bank assessment credits from the FDIC of $1.66 million in the fourth quarter of 2019.
In addition to growth in production related expenses, changing industry standards and increased regulatory expectations related to exceeding $10 billion in assets, have resulted in enhancements to Company infrastructure, resulting in increased salary and benefits expense and professional fees. Areas of enhancement include: information technology, risk and compliance, accounting, and internal audit.

Quarterly Income Taxes Compared to the Fourth Quarter of 2018:

Income tax expense was $7.79 million compared to $10.35 million, one year prior. This represents an effective tax rate of 18.17% compared to 22.33% in the fourth quarter of 2018.

Consolidated Balance Sheet December 31, 2019 Compared to December 31, 2018

Total assets were $11.95 billion for the quarter ended December 31, 2019, an increase of 7.03%, compared to $11.16 billion at December 31, 2018. This increase was driven primarily by growth in available for sale securities, mortgage loans held for sale, and loans held for investment. Year-over-year, other assets increased $47.52 million due to the adoption of the leasing standard.
Loans held for investment increased $0.40 billion, or 5.00% compared to year end 2018.
Total deposits increased $0.90 billion, or 10.76%, over December 31, 2018.
Total borrowings declined $0.32 billion, or 29.41%, from December 31, 2018.

Investment Securities:

Total investment securities were $1.52 billion compared to $1.41 billion at September 30, 2019 and $1.19 billion at December 31, 2018. The weighted average duration of the portfolio at December 31, 2019 was 3.90 years.

Loans and Asset Quality:

Total loans held for investment were $8.42 billion at December 31, 2019 compared to $8.18 billion at September 30, 2019 and $8.02 billion at December 31, 2018.
Nonperforming assets were $32.80 million, or 0.27% of total assets, compared to $24.17 million, or 0.22% of total assets, at December 31, 2018.
Nonperforming loans were 0.21% of period end loans.
Foreclosed property decreased to $13.84 million from $17.16 million at December 31, 2018.

Deposits and Borrowings:

Total deposits were $9.27 billion compared to $9.44 billion at September 30, 2019 and $8.37 billion at December 31, 2018.
Total loans to total deposits were 90.81% compared to 86.70% at September 30, 2019 and 95.79% at December 31, 2018.
Non-interest bearing deposits were 31.83% of total deposits at December 31, 2019 compared to 32.11% at September 30, 2019 and 31.33% at December 31, 2018. Non-interest bearing deposits experienced typical seasonality during the fourth quarter.
Total borrowings were $0.77 billion compared to $0.67 billion and $1.09 billion at September 30, 2019 and December 31, 2018, respectively.

Capital:

Common equity tier 1 capital ratio of 11.45%.
Tier 1 leverage capital ratio of 9.95%.
Tier 1 risk-based capital ratio of 11.49%.
Total risk-based capital ratio of 14.58%.
Book value was $22.58 compared to $22.38 at September 30, 2019 and $21.05 at December 31, 2018.
Tangible book value was $15.69 compared to $15.44 at September 30, 2019 and $14.26 at December 31, 2018.

Current Expected Credit Losses ("CECL"):
Effective January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. We currently estimate our loss reserves may increase up to 10% upon the finalization of our adoption of the new ASU.

This increase is driven by:

The change in the timing of potential loss recognition from an incurred loss methodology to an expected loss methodology on loans and off-balance sheet commitments,
the establishment of life-of-asset loss reserves,
the change in accounting for purchased assets,
utilization of reasonable and supportable forecasts.

Outlook:
Management reforecasts on a quarterly basis and anticipates:

Annual loan growth to be in the mid-single digits in 2020.
Our quarterly noninterest expense run rate will range between $94 - $97 million for 2020.

Annual Meeting of Shareholders:
TowneBank will hold its 2020 Annual Meeting of Shareholders at 11:30 a.m. on Wednesday, May 20, 2020 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 42 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, Greensboro, Greenville, 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 $11.95 billion as of December 31, 2019, 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 Federal Deposit Insurance Corporation. 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,

2019

2019

2019

2019

2018
Income and Performance Ratios:










Total Revenue
$
139,671


$
145,879


$
144,537


$
133,854


$
131,417


Net income
35,948


39,400


36,242


32,082


36,440


Net income attributable to TowneBank
35,075


37,659


34,638


31,409


35,990


Net income per common share - diluted
0.49


0.52


0.48


0.44


0.50


Book value per common share
22.58


22.38


21.95


21.40


21.05


Book value per share - tangible ^(non-GAAP)
15.69


15.44


15.05


14.46


14.26


Return on average assets
1.16
%

1.26
%

1.20
%

1.14
%

1.28
%

Return on average assets - tangible ^(non-GAAP)
1.30
%

1.40
%

1.35
%

1.29
%

1.43
%

Return on average equity
8.44
%

9.22
%

8.83
%

8.24
%

9.44
%

Return on average equity - tangible ^(non-GAAP)
12.97
%

14.20
%

13.90
%

13.24
%

14.91
%

Return on average common equity
8.51
%

9.29
%

8.89
%

8.30
%

9.53
%

Return on average common equity - tangible ^(non-GAAP)
13.12
%

14.36
%

14.05
%

13.39
%

15.11
%

Noninterest income as a percentage of total revenue
35.59
%

37.55
%

37.86
%

34.65
%

32.12
%











Regulatory Capital Ratios (1):










Common equity tier 1
11.45
%

11.52
%

11.58
%

11.49
%

11.51
%

Tier 1
11.49
%

11.55
%

11.62
%

11.52
%

11.54
%

Total
14.58
%

14.70
%

14.85
%

14.79
%

14.83
%

Tier 1 leverage ratio
9.95
%

9.84
%

9.86
%

9.92
%

9.87
%











Asset Quality:










Allowance for loan losses to nonperforming loans

3.34
x


3.95
x


3.00
x


9.36
x


10.97
x

Allowance for loan losses to period end loans
0.69
%

0.68
%

0.67
%

0.66
%

0.65
%

Allowance for loan losses to period end loans excluding purchased loans
0.81
%

0.81
%

0.81
%

0.81
%

0.82
%

Nonperforming loans to period end loans
0.21
%

0.17
%

0.22
%

0.07
%

0.06
%

Nonperforming assets to period end assets
0.27
%

0.26
%

0.29
%

0.22
%

0.22
%

Net charge-offs to average loans (annualized)
0.04
%

0.03
%

0.08
%

0.01
%

0.02
%












Nonperforming loans
$
17,437


$
14,016


$
18,202


$
5,696


$
4,749


Former bank premises
1,521


1,510


1,510


2,223


2,253


Foreclosed property
13,839


15,517


14,517


17,071


17,163


Total nonperforming assets
$
32,797


$
31,043


$
34,229


$
24,990


$
24,165


Loans past due 90 days and still accruing interest
$
309


$
636


$
415


$
117


$
394













Allowance for loan losses
$
58,234


$
55,428


$
54,527


$
53,303


$
52,094












Mortgage Banking:










Loans originated, mortgage
$
628,279


$
703,922


$
574,638


$
366,643


$
407,787


Loans originated, joint venture
231,879


259,742


246,491


146,884


192,280


Total loans originated
$
860,158


$
963,664


$
821,129


$
513,527


$
600,067


Number of loans originated
2,984


3,360


3,121


1,977


2,304


Number of originators
228


225


229


240


293


Purchase %
70.32
%

68.83
%

84.97
%

86.08
%

88.64
%

Loans sold
$
879,910


$
925,058


$
694,832


$
473,068


$
694,341


Gross realized gain on sales and fees as a % of loans originated
3.38
%

3.45
%

3.43
%

3.58
%

3.37
%











Other Ratios:










Net interest margin
3.33
%

3.41
%

3.49
%

3.54
%

3.53
%

Net interest margin-fully tax equivalent ^(non-GAAP)
3.35
%

3.43
%

3.52
%

3.57
%

3.55
%

Average earning assets/total average assets
89.57
%

89.53
%

89.46
%

89.50
%

89.91
%

Average loans/average deposits
88.41
%

87.63
%

91.60
%

95.83
%

95.32
%

Average noninterest deposits/total average deposits
32.14
%

31.82
%

31.63
%

31.39
%

31.90
%

Period end equity/period end total assets
13.84
%

13.63
%

13.45
%

13.53
%

13.78
%

Efficiency ratio
66.11
%

66.66
%

66.80
%

68.43
%

62.65
%












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


TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)











Investment Securities






% Change

Q4

Q4

Q3

Q4 19 vs.

Q4 19 vs.
*Available-for-sale securities, at fair value*
2019

2018

2019

Q4 18

Q3 19
U.S. agency securities
$
129,038


$
358,542


$
152,581


(64.01
)%

(15.43
)%
U.S. Treasury notes
1,000


1,246


999


(19.74
)%

0.10
%
Municipal securities
223,106


87,308


173,519


155.54
%

28.58
%
Trust preferred and other corporate securities
53,367


30,992


52,006


72.20
%

2.62
%
Mortgage-backed securities issued by GSE and GNMA
1,034,797


617,251


958,290


67.65
%

7.98
%
Total
$
1,441,308


$
1,095,339


$
1,337,395


31.59
%

7.77
%










*Gross unrealized gains (losses) reflected in financial statements*









Total gross unrealized gains
$
23,950


$
3,423


$
28,114


599.68
%

(14.81
)%
Total gross unrealized losses
(4,215
)

(15,333
)

(2,046
)

(72.51
)%

106.01
%
Net unrealized gain (loss) on AFS securities
$
19,735


$
(11,910
)

$
26,068


(265.70
)%

(24.29
)%










*Held-to-maturity securities, at amortized cost*









Municipal securities
$
29,167


$
34,488


$
29,166


(15.43
)%

—
%
Trust preferred corporate securities
2,369


500


2,381


373.80
%

(0.50
)%
Mortgage-backed securities issued by GSE and GNMA
12,152


15,610


12,947


(22.15
)%

(6.14
)%
Total
$
43,688


$
50,598


$
44,494


(13.66
)%

(1.81
)%










*Gross unrealized gains (losses) not reflected in financial statements*









Total gross unrealized gains
$
1,520


$
1,271


$
1,688


19.59
%

(9.95
)%
Total gross unrealized losses
(37
)

(601
)

(5
)

(93.84
)%

640.00
%
Net unrealized gain (loss) on HTM securities
$
1,483


$
670


$
1,683


121.34
%

(11.88
)%










Loans Held For Investment






% Change

Q4

Q4

Q3

Q4 19 vs.

Q4 19 vs.

2019

2018

2019

Q4 18

Q3 19
Real estate - construction and development
$
1,120,533


$
1,067,239


$
1,142,225


4.99
%

(1.90
)%
Commercial real estate - investment related properties
2,183,232


1,978,592


2,070,317


10.34
%

5.45
%
Commercial real estate - owner occupied
1,329,144


1,262,748


1,286,137


5.26
%

3.34
%
Real estate - multifamily
243,041


260,987


219,901


(6.88
)%

10.52
%
Real estate - residential 1-4 family
1,653,084


1,626,896


1,621,175


1.61
%

1.97
%
Commercial and industrial business
1,574,275


1,510,364


1,527,515


4.23
%

3.06
%
Consumer and other loans
315,979


311,407


315,559


1.47
%

0.13
%
Total
$
8,419,288


$
8,018,233


$
8,182,829


5.00
%

2.89
%










Deposits






% Change

Q4

Q4

Q3

Q4 19 vs.

Q4 19 vs.

2019

2018

2019

Q4 18

Q3 19
Noninterest-bearing demand
$
2,951,225


$
2,622,761


$
3,030,505


12.52
%

(2.62
)%
Interest-bearing:









Demand and money market accounts
3,586,364


3,223,215


3,534,252


11.27
%

1.47
%
Savings
276,205


286,684


280,552


(3.66
)%

(1.55
)%
Certificates of deposits
2,457,123


2,237,762


2,592,705


9.80
%

(5.23
)%
Total
$
9,270,917


$
8,370,422


$
9,438,014


10.76
%

(1.77
)%


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


Three Months Ended

Three Months Ended

Three Months Ended

December 31, 2019

September 30, 2019

December 31, 2018



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
$
8,283,388


$
100,504


4.81
%

$
8,096,908


$
102,495


5.02
%

$
7,923,978


$
99,895


5.00
%
Taxable investment securities
1,331,175


9,179


2.76
%

1,266,447


9,087


2.87
%

1,101,892


7,515


2.73
%
Tax-exempt investment securities
118,298


908


3.07
%

121,738


997


3.28
%

80,656


747


3.70
%
Total securities
1,449,473


10,087


2.78
%

1,388,185


10,084


2.91
%

1,182,548


8,262


2.79
%
Interest-bearing deposits
519,737


2,067


1.58
%

711,030


3,745


2.09
%

652,131


3,559


2.17
%
Loans held for sale
469,725


4,413


3.76
%

408,377


3,956


3.87
%

266,058


3,176


4.77
%
Total earning assets
10,722,323


117,071


4.33
%

10,604,500


120,280


4.50
%

10,024,715


114,892


4.55
%
Less: allowance for loan losses
(56,766
)





(54,858
)





(50,792
)




Total nonearning assets
1,305,036






1,295,640






1,176,037





Total assets
$
11,970,593






$
11,845,282






$
11,149,960





Liabilities and Equity:

















Interest-bearing deposits

















Demand and money market
$
3,533,912


$
6,421


0.72
%

$
3,379,888


$
7,223


0.85
%

$
3,122,973


$
5,670


0.72
%
Savings
278,910


638


0.91
%

278,048


702


1.00
%

293,135


1,022


1.38
%
Certificates of deposit
2,544,845


14,685


2.29
%

2,641,681


15,627


2.35
%

2,245,039


10,803


1.91
%
Total interest-bearing deposits
6,357,667


21,744


1.36
%

6,299,617


23,552


1.48
%

5,661,147


17,495


1.23
%
Borrowings
454,621


1,810


1.56
%

486,644


2,020


1.62
%

920,389


4,643


1.97
%
Subordinated debt, net
248,361


2,962


4.77
%

248,210


2,962


4.77
%

247,769


2,961


4.78
%
Total interest-bearing liabilities
7,060,649


26,516


1.49
%

7,034,471


28,534


1.61
%

6,829,305


25,099


1.46
%
Demand deposits
3,011,688






2,940,370






2,651,495





Other noninterest-bearing liabilities
250,327






250,371






157,238





Total liabilities
10,322,664






10,225,212






9,638,038





Shareholders’ equity
1,647,929






1,620,070






1,511,922





Total liabilities and equity
$
11,970,593






$
11,845,282






$
11,149,960





Net interest income (tax-equivalent basis)


$
90,555






$
91,746






$
89,793



Reconcilement of Non-GAAP Financial Measures



















Tax-equivalent basis adjustment


(596
)





(643
)





(585
)


Net interest income (GAAP)


$
89,959






$
91,103






$
89,208



Interest rate spread (1)(3)




2.84
%





2.89
%





3.09
%
Interest expense as a percent of average earning assets






0.98
%





1.07
%





0.99
%
Net interest margin (tax equivalent basis) (2)(3)






3.35
%





3.43
%





3.55
%
Total cost of deposits




0.92
%





1.01
%





0.83
%


















(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.
(3) Non-GAAP.


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


Year Ended December 31,

2019

2018

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
$
8,122,210


$
405,511


4.99
%

$
7,567,570


$
373,057


4.93
%

$
5,901,797


$
276,747


4.69
%
Taxable investment securities
1,202,107


34,141


2.84
%

1,004,080


24,729


2.46
%

600,080


11,597


1.93
%
Tax-exempt investment securities
102,731


3,426


3.34
%

79,720


2,920


3.66
%

48,228


1,590


3.28
%
Total securities
1,304,838


37,567


2.88
%

1,083,800


27,649


2.55
%

648,308


13,187


2.03
%
Interest-bearing deposits
665,903


13,825


2.08
%

560,368


10,229


1.83
%

696,507


7,480


1.07
%
Mortgage loans held for sale
335,588


13,379


3.99
%

293,017


13,124


4.48
%

271,281


10,561


3.89
%
Total earning assets
10,428,539


470,282


4.51
%

9,504,755


424,059


4.46
%

7,517,893


307,975


4.10
%
Less: allowance for loan losses
(54,476
)





(48,737
)





(43,760
)




Total nonearning assets
1,264,363






1,143,167






860,866





Total assets
$
11,638,426






$
10,599,185






$
8,334,999





Liabilities and Equity:

















Interest-bearing deposits

















Demand and money market
$
3,351,135


$
26,909


0.80
%

$
2,951,038


$
16,458


0.56
%

$
2,260,378


$
8,020


0.35
%
Savings
280,894


3,296


1.17
%

302,435


3,824


1.26
%

319,940


3,305


1.03
%
Certificates of deposit
2,478,663


56,050


2.26
%

2,060,587


32,859


1.59
%

1,668,252


17,467


1.05
%
Total interest-bearing deposits
6,110,692


86,255


1.41
%

5,314,060


53,141


1.00
%

4,248,570


28,792


0.68
%
Borrowings
609,142


11,368


1.84
%

897,574


15,542


1.71
%

617,720


9,942


1.61
%
Subordinated debt, net
248,139


11,847


4.77
%

251,097


12,067


4.81
%

113,752


5,249


4.61
%
Total interest-bearing liabilities
6,967,973


109,470


1.57
%

6,462,731


80,750


1.25
%

4,980,042


43,983


0.88
%
Demand deposits
2,844,178






2,517,173






2,094,753





Other noninterest-bearing liabilities
228,994






164,486






136,616





Total liabilities
10,041,145






9,144,390






7,211,411





Shareholders' equity
1,597,281






1,454,795






1,123,588





Total liabilities and equity
$
11,638,426






$
10,599,185






$
8,334,999





Net interest income (tax-equivalent basis)




$
360,812






$
343,309






$
263,992



Reconcilement of Non-GAAP Financial Measures



















Tax-equivalent basis adjustment




(2,457
)





(2,236
)





(2,871
)


Net interest income (GAAP)




$
358,355






$
341,073






$
261,121



Interest rate spread (1)(3)






2.94
%





3.21
%





3.22
%
Interest expense as a percent of average earning assets






1.05
%





0.85
%





0.59
%
Net interest margin (tax-equivalent basis) (2)(3)






3.46
%





3.61
%





3.51
%
Total cost of deposits






0.96
%





0.68
%





0.45
%


















(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.
(3) Non-GAAP.


TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except per share data)





2019

2018

(unaudited)

(audited)
ASSETS



Cash and due from banks
$
97,593


$
94,604

Interest-bearing deposits at Federal Reserve Bank
322,505


570,425

Interest-bearing deposits in financial institutions
22,518


21,667

Total Cash and Cash Equivalents
442,616


686,696

Securities available for sale, at fair value
1,441,308


1,095,339

Securities held to maturity, at amortized cost
43,688


50,598

Other equity securities
6,462


4,797

Federal Home Loan Bank stock
30,094


43,229

Total Securities
1,521,552


1,193,963

Mortgage loans held for sale
419,233


220,986

Loans, net of unearned income and deferred costs
8,419,288


8,018,233

Less: allowance for loan losses
(58,234
)

(52,094
)
Net Loans
8,361,054


7,966,139

Premises and equipment, net
231,806


211,796

Goodwill
446,816


433,658

Other intangible assets, net
54,399


58,752

Bank-owned life insurance policies
243,062


237,371

Other assets
227,125


153,669

TOTAL ASSETS
$
11,947,663


$
11,163,030

LIABILITIES AND EQUITY



Deposits:



Noninterest-bearing demand
$
2,951,225


$
2,622,761

Interest-bearing:



Demand and money market accounts
3,586,364


3,223,215

Savings
276,205


286,684

Certificates of deposit
2,457,123


2,237,762

Total Deposits
9,270,917


8,370,422

Advances from the Federal Home Loan Bank
471,687


799,315

Subordinated debt, net
248,458


247,861

Repurchase agreements and other borrowings
52,391


47,156

Total Borrowings
772,536


1,094,332

Other liabilities
250,516


159,856

TOTAL LIABILITIES
10,293,969


9,624,610

Preferred stock



Authorized and unissued shares - 2,000,000
—


—

Common stock, $1.667 par: Authorized shares - 150,000,000



Issued and outstanding shares 72,649,682 in 2019 and 72,465,923 in 2018
121,107


120,801

Capital surplus
1,041,160


1,034,676

Retained earnings
467,186


379,239

Common stock issued to deferred compensation trust, at cost



818,578 shares in 2019 and 769,200 shares in 2018
(15,555
)

(13,955
)
Deferred compensation trust
15,555


13,955

Accumulated other comprehensive income (loss)
11,302


(9,190
)
TOTAL SHAREHOLDERS’ EQUITY
1,640,755


1,525,526

Noncontrolling interest
12,939


12,894

TOTAL EQUITY
1,653,694


1,538,420

TOTAL LIABILITIES AND EQUITY
$
11,947,663


$
11,163,030


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




Three Months Ended

Twelve Months Ended

December 31,

December 31,

2019

2018

2019

2018

(unaudited)

(unaudited)

(unaudited)

(audited)
INTEREST INCOME:







Loans, including fees
$
100,059


$
99,446


$
403,675


$
371,343

Investment securities
9,936


8,126


36,946


27,127

Interest-bearing deposits in financial institutions and federal funds sold
2,067


3,559


13,825


10,229

Mortgage loans held for sale
4,413


3,176


13,379


13,124

Total interest income
116,475


114,307


467,825


421,823

INTEREST EXPENSE:







Deposits
21,744


17,495


86,255


53,141

Advances from the Federal Home Loan Bank
1,730


4,585


11,018


15,340

Subordinated debt, net
2,962


2,961


11,847


12,067

Repurchase agreements and other borrowings
80


58


350


202

Total interest expense
26,516


25,099


109,470


80,750

Net interest income
89,959


89,208


358,355


341,073

PROVISION FOR LOAN LOSSES
3,601


2,292


9,371


8,541

Net interest income after provision for loan losses
86,358


86,916


348,984


332,532

NONINTEREST INCOME:







Residential mortgage banking income, net
15,884


12,951


66,812


65,104

Insurance commissions and other title fees and income, net
15,001


13,212


64,478


56,164

Real estate brokerage and property management income, net
6,737


5,982


34,292


31,863

Service charges on deposit accounts
2,245


2,928


10,544


11,808

Credit card merchant fees, net
1,389


1,298


4,746


5,472

Bank owned life insurance
3,865


2,014


9,215


6,836

Other income
4,591


3,824


16,346


14,343

Gain (loss) on investment securities
—


—


(845
)

3

Total noninterest income
49,712


42,209


205,588


191,593

NONINTEREST EXPENSE:







Salaries and employee benefits
56,013


50,233


218,920


201,838

Occupancy
7,516


7,352


31,381


27,644

Furniture and equipment
3,598


3,587


14,351


14,477

Amortization - intangibles
3,005


3,123


12,370


11,710

Software expense
2,976


2,694


11,717


10,621

Data processing
2,510


2,466


11,825


10,364

Professional fees
2,990


2,028


12,943


8,323

Advertising and marketing
2,839


2,546


12,279


11,194

Other expenses
10,889


8,308


52,516


55,953

Total noninterest expense
92,336


82,337


378,302


352,124

Income before income tax expense & noncontrolling interest
43,734


46,788


176,270


172,001

Provision for income tax expense
7,786


10,348


32,596


34,227

Net income
$
35,948


$
36,440


$
143,674


$
137,774

Net income attributable to noncontrolling interest
(873
)

(450
)

(4,891
)

(3,981
)
Net income attributable to TowneBank
$
35,075


$
35,990


$
138,783


$
133,793









Per common share information







Basic earnings
$
0.49


$
0.50


$
1.93


$
1.88

Diluted earnings
$
0.49


$
0.50


$
1.92


$
1.88

Cash dividends declared
$
0.18


$
0.16


$
0.70


$
0.62


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












December 31,

September 30,

June 30,

March 31,

December 31,

2019

2019

2019

2019

2018

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(audited)
ASSETS









Cash and due from banks
$
97,593


$
124,439


$
110,580


$
104,091


$
94,604

Interest-bearing deposits at Federal Reserve Bank
322,505


675,288


834,505


775,208


570,425

Interest-bearing deposits in financial institutions
22,518


21,663


21,527


21,001


21,667

Total Cash and Cash Equivalents
442,616


821,390


966,612


900,300


686,696

Securities available for sale, at fair value
1,441,308


1,337,395


1,260,821


1,099,777


1,095,339

Securities held to maturity, at amortized cost
43,688


44,494


50,574


49,687


50,598

Other equity securities
6,462


5,697


5,396


5,022


4,797

Federal Home Loan Bank stock
30,094


26,282


32,657


41,464


43,229

Total Securities
1,521,552


1,413,868


1,349,448


1,195,950


1,193,963

Mortgage loans held for sale
419,233


456,719


362,773


247,021


220,986

Loans, net of unearned income and deferred costs
8,419,288


8,182,829


8,126,729


8,105,370


8,018,233

Less: allowance for loan losses
(58,234
)

(55,428
)

(54,527
)

(53,303
)

(52,094
)
Net Loans
8,361,054


8,127,401


8,072,202


8,052,067


7,966,139

Premises and equipment, net
231,806


231,060


230,177


227,458


211,796

Goodwill
446,816


446,423


442,881


442,881


433,658

Other intangible assets, net
54,399


57,404


58,391


61,333


58,752

Bank-owned life insurance policies
243,062


241,652


240,621


238,977


237,371

Other assets
227,125


225,374


219,375


202,276


153,669

TOTAL ASSETS
$
11,947,663


$
12,021,291


$
11,942,480


$
11,568,263


$
11,163,030

LIABILITIES AND EQUITY









Deposits:









Noninterest-bearing demand
$
2,951,225


$
3,030,505


$
2,950,615


$
2,813,857


$
2,622,761

Interest-bearing:









Demand and money market accounts
3,586,364


3,534,252


3,409,322


3,290,907


3,223,215

Savings
276,205


280,552


277,495


285,790


286,684

Certificates of deposit
2,457,123


2,592,705


2,631,386


2,341,134


2,237,762

Total Deposits
9,270,917


9,438,014


9,268,818


8,731,688


8,370,422

Advances from the Federal Home Loan Bank
471,687


381,846


532,004


739,160


799,315

Subordinated debt, net
248,458


248,309


248,160


248,010


247,861

Repurchase agreements and other borrowings
52,391


42,971


56,355


44,775


47,156

Total Borrowings
772,536


673,126


836,519


1,031,945


1,094,332

Other liabilities
250,516


271,617


230,691


238,974


159,856

TOTAL LIABILITIES
10,293,969


10,382,757


10,336,028


10,002,607


9,624,610

Preferred stock









Authorized shares - 2,000,000
—


—


—


—


—

Common stock, $1.667 par value
121,107


121,080


121,038


121,047


120,801

Capital surplus
1,041,160


1,039,156


1,036,982


1,035,563


1,034,676

Retained earnings
467,186


445,186


420,600


399,030


379,239

Common stock issued to deferred compensation trust, at cost
(15,555
)

(15,317
)

(15,160
)

(14,067
)

(13,955
)
Deferred compensation trust
15,555


15,317


15,160


14,067


13,955

Accumulated other comprehensive income (loss)
11,302


19,958


15,143


(1,792
)

(9,190
)
TOTAL SHAREHOLDERS’ EQUITY
1,640,755


1,625,380


1,593,763


1,553,848


1,525,526

Noncontrolling interest
12,939


13,154


12,689


11,808


12,894

TOTAL EQUITY
1,653,694


1,638,534


1,606,452


1,565,656


1,538,420

TOTAL LIABILITIES AND EQUITY
$
11,947,663


$
12,021,291


$
11,942,480


$
11,568,263


$
11,163,030


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,

2019

2019

2019

2019

2018
INTEREST INCOME:









Loans, including fees
$
100,059


$
102,047


$
101,874


$
99,695


$
99,446

Investment securities
9,936


9,889


8,987


8,134


8,126

Interest-bearing deposits in financial institutions and federal funds sold
2,067


3,745


4,015


3,998


3,559

Mortgage loans held for sale
4,413


3,956


3,007


2,003


3,176

Total interest income
116,475


119,637


117,883


113,830


114,307

INTEREST EXPENSE:









Deposits
21,744


23,552


21,784


19,174


17,495

Advances from the Federal Home Loan Bank
1,730


1,935


3,201


4,153


4,585

Subordinated debt
2,962


2,962


2,962


2,962


2,961

Repurchase agreements and other borrowings
80


85


117


68


58

Total interest expense
26,516


28,534


28,064


26,357


25,099

Net interest income
89,959


91,103


89,819


87,473


89,208

PROVISION FOR LOAN LOSSES
3,601


1,508


2,824


1,438


2,292

Net interest income after provision for loan losses
86,358


89,595


86,995


86,035


86,916

NONINTEREST INCOME:









Residential mortgage banking income, net
15,884


18,855


18,565


13,508


12,951

Insurance commissions and other title fees and income, net
15,001


16,681


17,213


15,582


13,212

Real estate brokerage and property management income, net
6,737


9,444


8,843


9,268


5,982

Service charges on deposit accounts
2,245


2,253


3,185


2,861


2,928

Credit card merchant fees, net
1,389


1,514


660


1,183


1,298

Bank owned life insurance
3,865


2,117


1,635


1,598


2,014

Other income
4,591


3,981


4,617


3,157


3,824

Loss on investment securities
—


(69
)

—


(776
)

—

Total noninterest income
49,712


54,776


54,718


46,381


42,209

NONINTEREST EXPENSE:









Salaries and employee benefits
56,013


55,784


54,263


52,860


50,233

Occupancy expense
7,516


7,953


7,662


8,251


7,352

Furniture and equipment
3,598


3,805


3,578


3,371


3,587

Amortization - intangibles
3,005


3,059


3,113


3,192


3,123

Software expense
2,976


3,208


2,788


2,745


2,694

Data processing
2,510


2,533


3,616


3,166


2,466

Professional fees
2,990


3,566


3,707


2,679


2,028

Advertising and marketing
2,839


3,429


3,182


2,829


2,546

Other expenses
10,889


13,950


14,647


13,030


8,308

Total noninterest expense
92,336


97,287


96,556


92,123


82,337

Income before income tax expense and noncontrolling interest
43,734


47,084


45,157


40,293


46,788

Provision for income tax expense
7,786


7,684


8,915


8,211


10,348

Net income
35,948


39,400


36,242


32,082


36,440

Net income attributable to noncontrolling interest
(873
)

(1,741
)

(1,604
)

(673
)

(450
)
Net income attributable to TowneBank
$
35,075


$
37,659


$
34,638


$
31,409


$
35,990

Per common share information









Basic earnings
$
0.49


$
0.52


$
0.48


$
0.44


$
0.50

Diluted earnings (1)
$
0.49


$
0.52


$
0.48


$
0.44


$
0.50

Basic weighted average shares outstanding
72,132,041


72,091,221


72,044,817


71,992,330


71,905,956

Diluted weighted average shares outstanding
72,311,979


72,222,934


72,145,600


72,099,558


72,043,369

Cash dividends declared
$
0.18


$
0.18


$
0.18


$
0.16


$
0.16

(1) The quarterly diluted EPS do not sum to the total year diluted EPS due to rounding.


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)






Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30,

December 31,

2019 over 2018

2019

2018

2019

2019

2018

Amount

Percent
Revenue













Net interest income
$
87,637


$
86,433


$
89,490


$
351,969


$
329,584


$
22,385


6.79
%
Noninterest income













Service charges on deposit accounts
2,245


2,928


2,253


10,544


11,808


(1,264
)

(10.70
)%
Credit card merchant fees
1,389


1,298


1,514


4,746


5,472


(726
)

(13.27
)%
Other income
5,271


4,660


5,152


19,620


16,977


2,643


15.57
%
Subtotal
8,905


8,886


8,919


34,910


34,257


653


1.91
%
Gain (loss) on investment securities
—


—


(69
)

(845
)

3


(848
)

N/M

Total noninterest income
8,905


8,886


8,850


34,065


34,260


(195
)

(0.57
)%
Total revenue
96,542


95,319


98,340


386,034


363,844


22,190


6.10
%














Provision for loan losses
3,601


2,292


1,508


9,371


8,541


830


9.72
%














Expenses













Salaries and employee benefits
34,183


28,100


33,526


131,149


114,472


16,677


14.57
%
Occupancy expense
4,959


4,789


5,209


20,419


17,410


3,009


17.28
%
Furniture and equipment
2,577


2,426


2,779


10,240


9,912


328


3.31
%
Amortization of intangible assets
1,214


1,428


1,265


5,160


5,658


(498
)

(8.80
)%
Other expenses
14,078


9,759


17,098


66,295


60,697


5,598


9.22
%
Total expenses
57,011


46,502


59,877


233,263


208,149


25,114


12.07
%
Income before income tax, corporate allocation and noncontrolling interest
35,930


46,525


36,955


143,400


147,154


(3,754
)

(2.55
)%
Corporate allocation
627


367


384


2,011


1,736


275


15.84
%
Income before income tax provision and noncontrolling interest
36,557


46,892


37,339


145,411


148,890


(3,479
)

(2.34
)%
Provision for income tax expense
6,368


10,252


5,495


25,706


28,880


(3,174
)

(10.99
)%
Net income
30,189


36,640


31,844


119,705


120,010


(305
)

(0.25
)%
Noncontrolling interest
(1
)

4


—


2


(8
)

10


N/M

Net income attributable to TowneBank
$
30,188


$
36,644


$
31,844


$
119,707


$
120,002


$
(295
)

(0.25
)%














Efficiency ratio
59.05
%

48.79
%

60.85
%

60.43
%

57.21
%


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)






Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30,

December 31,

2019 over 2018

2019

2018

2019

2019

2018

Amount

Percent
Revenue













Residential mortgage brokerage income, net
$
16,617


$
13,472


$
19,171


$
68,443


$
66,696


$
1,747


2.62
%
Real estate brokerage income, net
2,550


2,183


2,882


9,865


9,458


407


4.30
%
Title insurance and settlement fees
531


458


617


2,111


1,877


234


12.47
%
Property management fees, net
4,187


3,799


6,562


24,427


22,405


2,022


9.02
%
Income from unconsolidated subsidiary
75


54


185


516


370


146


39.46
%
Net interest and other income
2,787


3,210


1,885


7,724


13,210


(5,486
)

(41.53
)%
Total revenue
26,747


23,176


31,302


113,086


114,016


(930
)

(0.82
)%














Expenses













Salaries and employee benefits
$
12,941


$
14,308


$
13,474


$
52,619


$
58,450


$
(5,831
)

(9.98
)%
Occupancy expense
1,857


1,928


2,055


8,285


7,871


414


5.26
%
Furniture and equipment
773


930


754


3,099


3,697


(598
)

(16.18
)%
Amortization of intangible assets
655


767


666


2,741


2,782


(41
)

(1.47
)%
Other expenses
7,030


6,419


7,478


27,982


28,416


(434
)

(1.53
)%
Total expenses
23,256


24,352


24,427


94,726


101,216


(6,490
)

(6.41
)%














Income (loss) before income tax, corporate allocation, and noncontrolling interest
3,491


(1,176
)

6,875


18,360


12,800


5,560


43.44
%
Corporate allocation
(362
)

(238
)

(208
)

(1,163
)

(1,091
)

(72
)

6.60
%
Income (loss) before income tax provision and noncontrolling interest
3,129


(1,414
)

6,667


17,197


11,709


5,488


46.87
%
Provision for income tax
416


(86
)

1,454


3,707


2,892


815


28.18
%
Net income (loss)
2,713


(1,328
)

5,213


13,490


8,817


4,673


53.00
%
Noncontrolling interest
(715
)

(130
)

(1,496
)

(3,711
)

(2,398
)

(1,313
)

54.75
%
Net income (loss) attributable to TowneBank
$
1,998


$
(1,458
)

$
3,717


$
9,779


$
6,419


$
3,360


52.34
%














Efficiency ratio
86.95
%

105.07
%

78.04
%

83.76
%

88.77
%


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
















Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30,

December 31,

2019 over 2018

2019

2018

2019

2019

2018

Amount

Percent
Commission and fee income













Property and casualty
$
11,957


$
9,770


$
13,481


$
50,380


$
40,948


$
9,432


23.03
%
Employee benefits
3,758


3,625


3,629


14,726


14,088


638


4.53
%
Travel insurance
794


1,095


834


4,085


5,123


(1,038
)

(20.26
)%
Specialized benefit services
173


168


166


672


673


(1
)

(0.15
)%
Total commissions and fees
16,682


14,658


18,110


69,863


60,832


9,031


14.85
%
Contingency and bonus revenue
1,396


1,185


1,431


6,307


4,888


1,419


29.03
%
Other income
1,805


79


74


2,032


295


1,737


588.81
%
Total revenue
19,883


15,922


19,615


78,202


66,015


12,187


18.46
%
Employee commission expense
3,501


3,000


3,378


13,379


11,209


2,170


19.36
%
Revenue, net of commission expense
16,382


12,922


16,237


64,823


54,806


10,017


18.28
%














Expenses













Salaries and employee benefits
$
8,889


$
7,825


$
8,784


$
35,152


$
28,916


$
6,236


21.57
%
Occupancy expense
700


635


689


2,677


2,363


314


13.29
%
Furniture and equipment
248


231


272


1,012


868


144


16.59
%
Amortization of intangible assets
1,136


928


1,128


4,469


3,269


1,200


36.71
%
Other expenses
1,096


1,865


2,110


7,003


7,343


(340
)

(4.63
)%
Total operating expenses
12,069


11,484


12,983


50,313


42,759


7,554


17.67
%
Income before income tax and noncontrolling interest
4,313


1,438


3,254


14,510


12,047


2,463


20.44
%
Corporate allocation
(265
)

(128
)

(176
)

(848
)

(645
)

(203
)

31.47
%
Income before income tax provision and noncontrolling interest
4,048


1,310


3,078


13,662


11,402


2,260


19.82
%
Provision for income tax expense
1,002


182


735


3,183


2,455


728


29.65
%
Net income
3,046


1,128


2,343


10,479


8,947


1,532


17.12
%
Noncontrolling interest
(157
)

(324
)

(245
)

(1,182
)

(1,575
)

393


(24.95
)%
Net income attributable to TowneBank
$
2,889


$
804


$
2,098


$
9,297


$
7,372


$
1,925


26.11
%














Provision for income taxes
1,002


182


735


3,183


2,455


728


29.65
%
Depreciation, amortization and interest expense
1,333


1,152


1,325


5,312


4,134


1,178


28.50
%
EBITDA (non-GAAP)
$
5,224


$
2,138


$
4,158


$
17,792


$
13,961


$
3,831


27.44
%














Efficiency ratio
73.67
%

88.87
%

79.96
%

77.62
%

78.02
%


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures:
















Three Months Ended

Twelve Months Ended

December 31,

September 30,

December 31,

December 31,

2019

2019

2018

2019

2018










Return on average assets (GAAP)
1.16
%

1.26
%

1.28
%

1.19
%

1.26
%
Impact of excluding average goodwill and other intangibles and amortization
0.14
%

0.14
%

0.15
%

0.14
%

0.15
%
Return on average tangible assets (non-GAAP)
1.30
%

1.40
%

1.43
%

1.33
%

1.41
%










Return on average equity (GAAP)
8.44
%

9.22
%

9.44
%

8.69
%

9.20
%
Impact of excluding average goodwill and other intangibles and amortization
4.53
%

4.98
%

5.47
%

4.89
%

5.32
%
Return on average tangible equity (non-GAAP)
12.97
%

14.20
%

14.91
%

13.58
%

14.52
%










Return on average common equity (GAAP)
8.51
%

9.29
%

9.53
%

8.75
%

9.27
%
Impact of excluding average goodwill and other intangibles and amortization
4.61
%

5.07
%

5.58
%

4.98
%

5.43
%
Return on average tangible common equity (non-GAAP)
13.12
%

14.36
%

15.11
%

13.73
%

14.70
%










Book value (GAAP)
$
22.58


$
22.38


$
21.05


$
22.58


$
21.05

Impact of excluding average goodwill and other intangibles and amortization
(6.89
)

(6.94
)

(6.79
)

(6.89
)

(7.71
)
Tangible book value (non-GAAP)
$
15.69


$
15.44


$
14.26


$
15.69


13.34











Average assets (GAAP)
$
11,970,593


$
11,845,282


$
11,149,960


$
11,638,426


$
10,599,185

Less: average goodwill
446,428


442,919


429,931


443,781


411,827

Less: average intangible assets
56,339


57,327


59,009


59,327


57,694

Average tangible assets (non-GAAP)
$
11,467,826


$
11,345,036


$
10,661,020


$
11,135,318


$
10,129,664











Average equity (GAAP)
$
1,647,929


$
1,620,070


$
1,511,922


$
1,597,281


$
1,454,795

Less: average goodwill
446,428


442,919


429,931


443,781


411,827

Less: average intangible assets
56,339


57,327


59,009


59,327


57,694

Average tangible equity (non-GAAP)
$
1,145,162


$
1,119,824


$
1,022,982


$
1,094,173


$
985,274











Average common equity (GAAP)
$
1,635,394


$
1,607,853


$
1,498,594


$
1,585,238


$
1,442,642

Less: average goodwill
446,428


442,919


429,931


443,781


411,827

Less: average intangible assets
56,339


57,327


59,009


59,327


57,694

Average tangible common equity (non-GAAP)
$
1,132,627


$
1,107,607


$
1,009,654


$
1,082,130


$
973,121


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,


2019

2019

2019

2019

2018
Net income (GAAP)

$
35,075


$
37,659


$
34,638


$
31,409


$
35,990

Acquisition-related expenses

19


207


20


411


(1,518
)
Income tax expense - tax reform legislation

—


—


—


—


696

Income tax expense (benefit) - other items

(3
)

(20
)

(3
)

(52
)

355

Total income tax expense (benefit)

(3
)

(20
)

(3
)

(52
)

1,051

Total charges, net of taxes

16


187


17


359


(467
)
Operating earnings, excluding certain items affecting comparability (non-GAAP)

$
35,091


$
37,846


$
34,655


$
31,768


$
35,523

















Weighted average diluted shares

72,311,979


72,222,934


72,145,600


72,099,558


72,043,369

















Diluted EPS (GAAP)

$
0.49


$
0.52


$
0.48


$
0.44


$
0.50

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

$
0.49


$
0.52


$
0.48


$
0.44


$
0.49






















Average assets

$
11,970,593


$
11,845,282


$
11,532,278


$
11,194,753


$
11,149,960

Average tangible equity

$
1,145,162


$
1,119,824


$
1,070,635


$
1,039,630


$
1,022,982

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

1.16
%

1.27
%

1.21
%

1.15
%

1.26
%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)

12.98
%

14.26
%

13.90
%

13.38
%

14.73
%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)

13.12
%

14.42
%

14.06
%

13.53
%

14.93
%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)

66.10
%

66.52
%

66.79
%

68.12
%

63.81
%


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

Year Ended


December 31,

December 31,


2019

2018
Net income (GAAP)

$
138,783


$
133,793

Acquisition-related expenses

657


8,428

Income tax expense - tax reform legislation

—


696

Income tax expense (benefit) - other items

(78
)

(1,420
)
Total income tax expense (benefit)

(78
)

(724
)
Total charges, net of taxes

579


7,704

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

$
139,362


$
141,497








Weighted average diluted shares

72,172,635


71,293,129








Diluted EPS (GAAP)

$
1.92


$
1.88

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

$
1.93


$
1.98










Average assets

$
11,638,426


$
10,599,185

Average tangible equity

$
1,094,173


$
985,274

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

1.20
%

1.33
%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)

13.63
%

15.30
%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)

13.78
%

15.49
%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)

66.86
%

64.52
%

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

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