TOWN - TowneBank Reports Second Quarter 2020 Earnings

July, 23 2020 08:30 AM Towne Bank

SUFFOLK, Va., July 23, 2020 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (NASDAQ: TOWN) today reported earnings for the quarter ended June 30, 2020 of $34.61 million, or $0.48 per diluted share, compared to $34.64 million, or $0.48 per diluted share, for the quarter ended June 30, 2019.

“Our second quarter performance demonstrated the benefits of our diverse revenue model. Despite the headwinds from economic uncertainty and increased credit provisions, we delivered a solid quarter highlighted by rebounds in noninterest income from our Realty segment. Our deposits climbed to record levels enhancing liquidity and strong capital ratios position us well to navigate the challenging environment. We will also continue to be diligent in our focus on credit risk management,” said G. Robert Aston, Jr., Executive Chairman.

Highlights for Second Quarter 2020 Compared to Second Quarter 2019:

Total revenues were a record $162.66 million, an increase of $18.12 million, or 12.54%.
Loans held for investment were $9.80 billion, an increase of $1.68 billion, or 20.61%, from June 30, 2019, and $1.02 billion, or 11.59%, from March 31, 2020. The balance at June 30, 2020 included $1.09 billion of loans originated under the Small Business Administration’s Paycheck Protection Program (“PPP”).
Total deposits were $11.26 billion, an increase of $2.00 billion, or 21.54%, compared to prior year and $1.96 billion, or 21.02%, from March 31, 2020.
Noninterest bearing deposits increased by 43.23%, to $4.23 billion, representing 37.52% of total deposits. Compared to the linked quarter, noninterest bearing deposits increased 38.09%.
Annualized return on common shareholders' equity was 8.24% and annualized return on average tangible common shareholders' equity was 12.44% (non-GAAP).
Net interest margin for the quarter was 2.85% and taxable equivalent net interest margin (non-GAAP) was 2.87%.
Effective tax rate of 17.74% in the quarter compared to 20.47% in the second quarter of 2019.

“I am especially proud of the outstanding service our teammates delivered to our members and the communities we serve. At Towne, we delivered over $1 billion in PPP funding to support businesses in our communities helping to save nearly 130,000 jobs for local families. In addition, we created more than 650 new relationships out of the PPP process,” stated J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to Second Quarter 2019:

Net interest income was $93.27 million compared to $89.82 million at June 30, 2019.
Taxable equivalent net interest margin (non-GAAP) was 2.87%, including accretion of 8 basis points, compared to 3.52%, including accretion of 11 basis points, for second quarter 2019.
Average loans held for investment, with an average yield of 4.29%, represented 73.10% of average earning assets at June 30, 2020 compared to an average yield of 5.08% and 78.27% of average earning assets in the second quarter of 2019. Excluding PPP, loan yields were 4.42% in second quarter 2020.
Total cost of deposits decreased to 0.58% from 0.99% at June 30, 2019.
Average interest-earning assets totaled $13.16 billion at June 30, 2020 compared to $10.32 billion at June 30, 2019, an increase of 27.56%.
Average interest-bearing liabilities totaled $8.64 billion, an increase of $1.69 billion from prior year.

Quarterly Provision for Credit Losses:

Recorded a quarterly provision for credit losses for on-balance-sheet loans of $25.99 million compared to $2.82 million one year ago and $5.76 million in the linked quarter. This increase is primarily attributable to management's expectation of continued economic weakness driven by the impact of the COVID-19 pandemic. Expected loss estimates consider various factors including the impacts of the decreased economic activity and higher unemployment rates, customer specific credit information, and the potential mitigating benefits of government stimulus and industry wide loan modification efforts.
Net loan recoveries were $0.10 million compared to charge-offs of $1.60 million one year prior. The ratio of net loan charge-offs to average loans on an annualized basis was 0.03% in the linked quarter and 0.08% in the second quarter of 2019.
Recorded a provision for credit losses on off-balance-sheet commitments of $1.08 million compared to $1.10 million in the linked quarter.
Recorded a recovery of credit losses on debt securities of $0.13 million compared to a credit loss of $0.16 million in the linked quarter.
The allowance for credit losses on loans represented 0.92% of total loans compared to 0.73% at March 31, 2020 and 0.67% at June 30, 2019. Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses was 1.04%. The allowance for credit losses on loans was 5.34 times nonperforming loans compared to 3.85 times at March 31, 2020 and 3.00 times at June 30, 2019.

Quarterly Noninterest Income Compared to Second Quarter 2019:

Total noninterest income was $69.38 million compared to $54.72 million in 2019, an increase of $14.66 million, or 26.80%. Residential mortgage banking income increased $11.15 million and real estate brokerage and property management income increased $1.94 million, while service charges on deposit accounts decreased $1.30 million. Also included in noninterest income are net gains on investment securities of $2.93 million as compared to no gains or losses in the prior year.
Residential mortgage banking recorded income of $29.72 million compared to $18.57 million in second quarter 2019. Loan volume in the current quarter was $1.47 billion, with purchase activity comprising 51.26% of that volume. Loan volume in second quarter 2019 was $821.13 million, with purchase activity comprising 84.97%. Increased refinancing activity due to the mortgage rate environment in second quarter 2020, coupled with improved margins were the primary drivers of improvement compared to the prior year quarter.
Total Insurance segment revenue increased 3.30% to $20.87 million in the second quarter due to organic growth and additional income from a third quarter 2019 agency acquisition.
Property management fee revenue increased 36.05%, or $2.15 million, compared to second quarter 2019. Reservations were down significantly in first quarter 2020 due to travel restrictions driven by COVID-19 and the uncertainty surrounding summer travel. The lifting of local travel restrictions, in the areas of our vacation rental companies, drove increased reservation activity during the quarter.
Service charges are down $1.30 million, or 40.72%, compared to second quarter 2019 primarily due to a decrease in interchange fees related to Durbin Amendment compliance, combined with a lower transaction volumes and fees waived for members experiencing financial hardships.

Quarterly Noninterest Expense Compared to Second Quarter 2019:

Total noninterest expense was $91.03 million compared to $96.56 million in 2019, a decrease of $5.53 million, or 5.73%. Declines across most expense categories were partially offset by increases in salary and benefits expense of $2.66 million and software expense of $0.70 million.
Market expansion and infrastructure enhancements, that occurred in 2019, have resulted in generally higher levels of salary and benefits expense and software expense, while quarantines, travel restrictions, and other decreases in business activity related to COVID-19 have resulted in lower general spending.

Quarterly Income Taxes Compared to Second Quarter 2019:

Income tax expense was $7.46 million compared to $8.92 million one year prior. This represents an effective tax rate of 17.74% compared to 20.47% in the second quarter of 2019.

Consolidated Balance Sheet Highlights:

Total assets were $15.58 billion for the quarter ended June 30, 2020, an increase of $3.63 billion, or 30.40%, compared to $12.62 billion at March 31, 2020. Total assets increased $3.64 billion, or 30.46%, from $11.94 billion at June 30, 2019. The year-to-date increase was driven primarily by growth in cash and cash equivalents and loans held for investment tied to PPP lending activities.
Loans held for investment increased $1.68 billion, or 20.61%, compared to prior year and $1.02 billion compared the linked quarter. Excluding PPP loans of $1.09 billion, loans held for investment increased $0.59 billion, or 7.20%, compared to prior year, but declined $72.31 million, or 0.82%, compared to the linked quarter.
Mortgage loans held for sale increased $247.60 million, or 68.25%, compared to the prior year and $157.23 million, or 34.70%, compared to the linked quarter.
Total deposits increased $2.0 billion, or 21.54%, compared to the prior year and $1.96 billion, or 21.02%, compared to the linked quarter.
Total borrowings increased $1.49 billion, or 178.23%, from prior year and $0.94 billion, or 67.22%, compared to the linked quarter. These increases were driven by $1.11 billion in borrowings under the FRB PPP lending facility, which we used to facilitate funding of the PPP loans.

Investment Securities:

Total investment securities were $1.36 billion compared to $1.35 billion at March 31, 2020 and $1.35 billion at June 30, 2019. The weighted average duration of the portfolio at June 30, 2020 was 4.1 years. The carrying value of the AFS debt securities portfolio included $59.89 million in net unrealized gains compared to $19.73 million in net unrealized gains at December 31, 2019. During the second quarter of 2020, we sold $40.0 million in AFS debt securities at a gain of $2.93 million to reposition the portfolio.

Loans and Asset Quality:

Total loans held for investment were $9.80 billion at June 30, 2020 compared to $8.78 billion at March 31, 2020 and $8.13 billion at June 30, 2019.
Nonperforming assets were $29.25 million, or 0.19% of total assets, compared to $34.23 million, or 0.29%, at June 30, 2019.
Nonperforming loans were 0.17% of period end loans compared to 0.22% at June 30, 2019.
Foreclosed property decreased to $12.32 million from $14.52 million at June 30, 2019.
Expected loss estimates are subject to change based on continuing review of models and assumptions, portfolio performance, changes in forecasted macroeconomic conditions and loan mix which could result in material changes to the reserve in future periods.

Deposits and Borrowings:

Total deposits were $11.26 billion compared to $9.31 billion at March 31, 2020 and $9.27 billion at June 30, 2019.
Total loans to deposits were 87.01% compared to 94.37% at March 31, 2020 and 87.68% at June 30, 2019.
Non-interest bearing deposits were 37.52% of total deposits at June 30, 2020 compared to 32.88% at March 31, 2020 and 31.83% at June 30, 2019.
Total borrowings were $2.33 billion compared to $1.39 billion at March 31, 2020 and $0.84 billion at June 30, 2019.

Capital:

Common equity tier 1 capital ratio of 11.54%.
Tier 1 leverage capital ratio of 9.05%.
Tier 1 risk-based capital ratio of 11.67%.
Total risk-based capital ratio of 14.91%.
Book value was $23.50 compared to $22.77 at March 31, 2020 and $21.95 at June 30, 2019.
Tangible book value (non-GAAP) was $16.68 compared to $15.91 at March 31, 2020 and $15.05 at June 30, 2019.

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, Duck 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 $15.58 billion as of June 30, 2020, TowneBank is one of the largest banks headquartered in Virginia.

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

Forward-Looking Statements:
Certain statements contained in this release constitute forward-looking statements within the meaning of U.S. federal securities laws. These forward-looking statements speak only as of the date of this release, are based on current expectations, and involve a number of assumptions. These include statements regarding TowneBank’s future economic performance, financial condition, prospects, growth, strategies and expectations, and objectives of management, and are generally identified by the use of words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” or “project” or similar expressions. TowneBank intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. You should not place undue reliance on forward-looking statements, which are subject to assumptions that are subject to change. TowneBank’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ from those indicated or implied in the forward-looking statements and such differences may be material. Factors which could have a material effect on the operations and future prospects of TowneBank include but are not limited to: the impacts of the ongoing coronavirus (COVID-19) pandemic, changes in interest rates, general economic and business conditions; legislative/regulatory changes; the monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; the quality and composition of TowneBank’s loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBank’s market area; implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; changes in accounting principles, policies and guidelines; and other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation. 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


June 30,

March 31,

December 31,

September 30,

June 30,

2020

2020

2019

2019

2019
Income and Performance Ratios:










Total Revenue
$
162,656


$
137,696


$
139,671


$
145,879


$
144,537


Net income
37,222


27,605


35,948


39,400


36,242


Net income attributable to TowneBank
34,605


26,384


35,075


37,659


34,638


Net income per common share - diluted
0.48


0.36


0.49


0.52


0.48


Book value per common share
23.50


22.77


22.58


22.38


21.95


Book value per common share - tangible ^(non-GAAP)
16.68


15.91


15.69


15.44


15.05


Return on average assets
0.97
%

0.88
%

1.16
%

1.26
%

1.20
%

Return on average assets - tangible ^(non-GAAP)
1.07
%

1.00
%

1.30
%

1.40
%

1.35
%

Return on average equity
8.18
%

6.37
%

8.44
%

9.22
%

8.83
%

Return on average equity - tangible ^(non-GAAP)
12.32
%

9.91
%

12.97
%

14.20
%

13.90
%

Return on average common equity
8.24
%

6.42
%

8.51
%

9.29
%

8.89
%

Return on average common equity - tangible ^(non-GAAP)
12.44
%

10.01
%

13.12
%

14.36
%

14.05
%

Noninterest income as a percentage of total revenue
42.66
%

35.00
%

35.59
%

37.55
%

37.86
%











Regulatory Capital Ratios (1):










Common equity tier 1
11.54
%

11.23
%

11.46
%

11.52
%

11.58
%

Tier 1
11.67
%

11.35
%

11.49
%

11.55
%

11.62
%

Total
14.91
%

14.40
%

14.58
%

14.70
%

14.85
%

Tier 1 leverage ratio
9.05
%

10.11
%

9.95
%

9.84
%

9.86
%











Asset Quality:










Allowance for credit losses on loans to nonperforming loans
5.34x


3.85x


3.34x


3.95x


3.00x


Allowance for credit losses on loans to period end loans
0.92
%

0.73
%

0.69
%

0.68
%

0.67
%

Allowance for credit losses on loans to period end loans excluding PPP loans ^(non-GAAP)
1.04
%

0.73
%

0.69
%

0.68
%

0.67
%

Nonperforming loans to period end loans
0.17
%

0.19
%

0.21
%

0.17
%

0.22
%

Nonperforming assets to period end assets
0.19
%

0.24
%

0.27
%

0.26
%

0.29
%

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

0.03
%

0.04
%

0.03
%

0.08
%












Nonperforming loans
$
16,935


$
16,700


$
17,437


$
14,016


$
18,202


Former bank premises
—


—


1,521


1,510


1,510


Foreclosed property
12,315


13,053


13,839


15,517


14,517


Total nonperforming assets
$
29,250


$
29,753


$
32,797


$
31,043


$
34,229


Loans past due 90 days and still accruing interest
$
464


$
91


$
309


$
636


$
415













Allowance for credit losses on loans
$
90,467


$
64,372


$
58,234


$
55,428


$
54,527












Mortgage Banking:










Loans originated, mortgage
$
1,116,782


$
718,681


$
628,279


$
703,922


$
574,638


Loans originated, joint venture
357,815


204,522


231,879


259,742


246,491


Total loans originated
$
1,474,597


$
923,203


$
860,158


$
963,664


$
821,129


Number of loans originated
4,818


3,025


2,984


3,360


3,121


Number of originators
216


223


217


225


229


Purchase %
51.26
%

61.31
%

70.32
%

68.83
%

84.97
%

Loans sold
$
1,398,649


$
809,834


$
879,910


$
925,058


$
694,832


Gross realized gain on sales and fees as a % of loans originated
3.17
%

1.80
%

3.38
%

3.45
%

3.43
%











Other Ratios:










Net interest margin
2.85
%

3.35
%

3.33
%

3.41
%

3.49
%

Net interest margin-fully tax equivalent ^(non-GAAP)
2.87
%

3.37
%

3.35
%

3.43
%

3.52
%

Average earning assets/total average assets
91.33
%

89.15
%

89.57
%

89.53
%

89.46
%

Average loans/average deposits
91.81
%

92.99
%

88.41
%

87.63
%

91.60
%

Average noninterest deposits/total average deposits
36.52
%

32.21
%

32.14
%

31.82
%

31.63
%

Period end equity/period end total assets
11.05
%

13.19
%

13.84
%

13.63
%

13.45
%

Efficiency ratio
56.99
%

73.02
%

66.11
%

66.66
%

66.80
%












(1) Current reporting period regulatory capital ratios are preliminary

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)

Investment Securities






% Change

Q2

Q2

Q1

Q2 20 vs.

Q2 20 vs.
*Available-for-sale securities, at fair value*
2020

2019

2020

Q2 19

Q1 20
U.S. agency securities
$
118,176


$
261,960


$
121,857


(54.89
)%

(3.02
)%
U.S. Treasury notes
1,010


2,241


1,014


(54.93
)%

(0.39
)%
Municipal securities
313,322


167,466


266,489


87.10
%

17.57
%
Trust preferred and other corporate securities
59,598


43,799


59,606


36.07
%

(0.01
)%
Mortgage-backed securities issued by GSE and GNMA
774,658


785,355


799,713


(1.36
)%

(3.13
)%
Allowance for credit losses
(140
)

n/a

(259
)

n/a

(45.95
)%
Total
$
1,266,624


$
1,260,821


$
1,248,420


0.46
%

1.46
%










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






Total gross unrealized gains
$
61,559


$
22,119


$
30,545


178.31
%

101.54
%
Total gross unrealized losses
(1,674
)

(2,456
)

(9,848
)

(31.84
)%

(83.00
)%
Net unrealized gains (losses) and other adjustments on AFS securities
$
59,885


$
19,663


$
20,697















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









Municipal securities
$
28,855


$
34,458


$
28,852


(16.26
)%

0.01
%
Trust preferred corporate securities
2,345


2,393


2,357


(2.01
)%

(0.51
)%
Mortgage-backed securities issued by GSE and GNMA
10,395


13,723


11,222


(24.25
)%

(7.37
)%
Less: Allowance for credit losses
(121
)

n/a

(133
)

n/a

(9.02
)%
Total
$
41,474


$
50,574


$
42,298


(17.99
)%

(1.95
)%










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








Total gross unrealized gains
$
1,980


$
1,636


$
964


21.03
%

105.39
%
Total gross unrealized losses
—


(57
)

—


(100.00
)%

—
%
Net unrealized gains (losses) in HTM securities
$
1,980


$
1,579


$
964















Loans Held For Investment (1)






% Change

Q2

Q2

Q1

Q2 20 vs.

Q2 20 vs.

2020

2019

2020

Q2 19

Q1 20
Real estate - construction and development
$
1,178,832


$
1,107,762


$
1,060,834


6.42
%

11.12
%
Commercial real estate - non owner occupied
2,332,447


1,985,990


2,305,971


17.45
%

1.15
%
Commercial real estate - owner occupied
1,383,294


1,288,478


1,398,216


7.36
%

(1.07
)%
Real estate - multifamily
277,947


267,528


283,514


3.89
%

(1.96
)%
Real estate - residential 1-4 family and HELOC
1,670,530


1,639,547


1,693,562


1.89
%

(1.36
)%
Commercial and industrial business
2,503,161


1,523,607


1,636,244


64.29
%

52.98
%
Consumer and other loans
455,678


313,817


405,854


45.21
%

12.28
%
Total
$
9,801,889


$
8,126,729


$
8,784,195


20.61
%

11.59
%
(1) Paycheck Protection Program loans totaling $1.09 billion, primarily in C&I, are included in Q2 2020.










Deposits






% Change

Q2

Q2

Q1

Q2 20 vs.

Q2 20 vs.

2020

2019

2020

Q2 19

Q1 20
Noninterest-bearing demand
$
4,226,208


$
2,950,615


$
3,060,515


43.23
%

38.09
%
Interest-bearing:









Demand and money market accounts
4,223,391


3,409,322


3,573,926


23.88
%

18.17
%
Savings
298,673


277,495


280,807


7.63
%

6.36
%
Certificates of deposits
2,516,666


2,631,386


2,392,744


(4.36
)%

5.18
%
Total
$
11,264,938


$
9,268,818


$
9,307,992


21.54
%

21.02
%

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


Three Months Ended

Three Months Ended

Three Months Ended

June 30, 2020

March 31, 2020

June 30, 2019



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 (1)
$
9,619,931


$
102,656


4.29
%

$
8,550,216


$
100,566


4.73
%

$
8,075,054


$
102,366


5.08
%
Taxable investment securities
1,198,776


7,367


2.46
%

1,356,411


9,211


2.72
%

1,170,215


8,346


2.85
%
Tax-exempt investment securities
147,489


836


2.27
%

128,204


861


2.69
%

90,942


756


3.33
%
Total securities
1,346,265


8,203


2.44
%

1,484,615


10,072


2.71
%

1,261,157


9,102


2.89
%
Interest-bearing deposits
1,729,140


433


0.10
%

373,984


1,102


1.19
%

698,649


4,016


2.31
%
Loans held for sale
464,796


3,811


3.28
%

333,070


2,988


3.59
%

281,775


3,007


4.27
%
Total earning assets
13,160,132


115,103


3.52
%

10,741,885


114,728


4.30
%

10,316,635


118,491


4.61
%
Less: allowance for credit losses
(69,451
)





(55,331
)





(53,386
)




Total nonearning assets
1,318,787






1,362,769






1,269,029





Total assets
$
14,409,468






$
12,049,323






$
11,532,278





Liabilities and Equity:

















Interest-bearing deposits

















Demand and money market
$
3,857,757


$
2,491


0.26
%

$
3,521,707


$
5,319


0.61
%

$
3,312,313


$
7,025


0.85
%
Savings
290,201


554


0.77
%

276,947


593


0.86
%

281,221


929


1.33
%
Certificates of deposit
2,503,648


12,027


1.93
%

2,434,098


13,150


2.17
%

2,433,479


13,830


2.28
%
Total interest-bearing deposits
6,651,606


15,072


0.91
%

6,232,752


19,062


1.23
%

6,027,013


21,784


1.45
%
Borrowings
1,741,832


3,238


0.74
%

679,745


2,581


1.50
%

678,799


3,318


1.93
%
Subordinated debt, net
248,660


2,962


4.76
%

248,510


2,962


4.77
%

248,064


2,962


4.78
%
Total interest-bearing liabilities
8,642,098


21,272


0.99
%

7,161,007


24,605


1.38
%

6,953,876


28,064


1.62
%
Demand deposits
3,826,439






2,962,110






2,788,596





Other noninterest-bearing liabilities
239,154






260,500






215,951





Total liabilities
12,707,691






10,383,617






9,958,423





Shareholders’ equity
1,701,777






1,665,706






1,573,855





Total liabilities and equity
$
14,409,468






$
12,049,323






$
11,532,278





Net interest income (tax-equivalent basis)


$
93,831






$
90,123






$
90,427



Reconcilement of Non-GAAP Financial Measures
















Tax-equivalent basis adjustment


(557
)





(627
)





(608
)


Net interest income (GAAP)


$
93,274






$
89,496






$
89,819





















Interest rate spread (2)(4)




2.53
%





2.92
%





2.99
%
Interest expense as a percent of average earning assets



0.65
%





0.92
%





1.09
%
Net interest margin (tax equivalent basis) (3)(4)



2.87
%





3.37
%





3.52
%
Total cost of deposits




0.58
%





0.83
%





0.99
%

(1) Includes average PPP balances of $0.81 billion and related interest and fee income of $5.8 million.
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4) Non-GAAP.

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


Six Months Ended

Six Months Ended

Six Months Ended June 30,

June 30, 2020

June 30, 2019

2020 Compared with 2019



Interest

Average



Interest

Average





Average

Income/

Yield/

Average

Income/

Yield/

Increase

Change Due to

Balance

Expense

Rate

Balance

Expense

Rate

(Decrease)

Rate

Volume
Assets:

















Loans (net of unearned income and deferred costs), excluding nonaccrual loans (1)
$
9,085,074


$
203,221


4.50
%

$
8,053,146


$
202,512


5.07
%

$
709


$
(24,050
)

$
24,759

Taxable investment securities
1,277,593


16,578


2.60
%

1,103,799


15,875


2.88
%

703


(1,646
)

2,349

Tax-exempt investment securities
137,846


1,698


2.46
%

85,158


1,522


3.57
%

176


(571
)

747

Total securities
1,415,439


18,276


2.58
%

1,188,957


17,397


2.93
%

879


(2,217
)

3,096

Interest-bearing deposits
472,589


1,535


0.65
%

695,999


8,013


2.32
%

(6,478
)

(4,478
)

(2,000
)
Loans held for sale
398,933


6,799


3.41
%

230,411


5,010


4.35
%

1,789


(1,264
)

3,053

Total earning assets
11,372,035


229,831


4.06
%

10,168,513


232,932


4.62
%

(3,101
)

(32,009
)

28,908

Less: allowance for loan losses
(62,390
)





(53,117
)










Total nonearning assets
1,919,751






1,249,052











Total assets
$
13,229,396






$
11,364,448











Liabilities and Equity:

















Interest-bearing deposits

















Demand and money market
$
3,689,732


$
7,809


0.43
%

$
3,243,616


$
13,264


0.82
%

$
(5,455
)

$
(7,097
)

$
1,642

Savings
283,574


1,147


0.81
%

283,348


1,956


1.39
%

(809
)

(811
)

2

Certificates of deposit
2,468,873


25,177


2.05
%

2,362,165


25,738


2.20
%

(561
)

(1,724
)

1,163

Total interest-bearing deposits
6,442,179


34,133


1.07
%

5,889,129


40,958


1.40
%

(6,825
)

(9,632
)

2,807

Borrowings
1,210,789


5,820


0.95
%

749,948


7,540


2.00
%

(1,720
)

(5,083
)

3,363

Subordinated debt, net
248,585


5,923


4.77
%

247,989


5,923


4.78
%

—


(14
)

14

Total interest-bearing liabilities
7,901,553


45,876


1.17
%

6,887,066


54,421


1.59
%

(8,545
)

(14,729
)

6,184

Demand deposits
3,394,275






2,710,141











Other noninterest-bearing liabilities
249,827






207,287











Total liabilities
11,545,655






9,804,494











Shareholders’ equity
1,683,741






1,559,954











Total liabilities and equity
$
13,229,396






$
11,364,448











Net interest income (tax-equivalent basis)


$
183,955






$
178,511




$
5,444


$
(17,280
)

$
22,724

Reconcilement of Non-GAAP Financial Measures
















Tax-equivalent basis adjustment


(1,185
)





(1,219
)



34





Net interest income (GAAP)


$
182,770






$
177,292




$
5,478























Interest rate spread (2)(4)




2.90
%





3.03
%






Interest expense as a percent of average earning assets



0.81
%





1.08
%






Net interest margin (tax equivalent basis) (3)(4)



3.25
%





3.54
%






Total cost of deposits




0.70
%





0.96
%
























(1) Includes average PPP balances of $0.40 billion and related interest income of $5.8 million
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4) Non-GAAP.

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






June 30,

December 31,

2020

2019

(unaudited)

(audited)
ASSETS



Cash and due from banks
$
115,724


$
97,593

Interest-bearing deposits at FRB - Richmond
2,511,152


322,505

Interest-bearing deposits in financial institutions
24,374


22,518

Total Cash and Cash Equivalents
2,651,250


442,616

Securities available for sale, at fair value (amortized cost $1,206,878, allowance for credit losses of $140) (1)
1,266,624


1,441,308

Securities held to maturity, at amortized cost (fair value $43,575 )(1)
41,595


43,688

Less: allowance for credit losses
(121
)

—

Securities held to maturity, net of allowance for credit losses
41,474


43,688

Other equity securities
6,497


6,462

FHLB stock
49,277


30,094

Total Securities
1,363,872


1,521,552

Mortgage loans held for sale
610,369


419,233

Loans, net of unearned income and deferred costs
9,801,889


8,419,288

Less: allowance for credit losses
(90,467
)

(58,234
)
Net Loans
9,711,422


8,361,054

Premises and equipment, net
257,533


231,806

Goodwill
446,725


446,816

Other intangible assets, net
48,632


54,399

BOLI
242,493


243,062

Other assets
247,962


227,125

TOTAL ASSETS
$
15,580,258


$
11,947,663





LIABILITIES AND EQUITY



Deposits:



Noninterest-bearing demand
$
4,226,208


$
2,951,225

Interest-bearing:



Demand and money market accounts
4,223,391


3,586,364

Savings
298,673


276,205

Certificates of deposit
2,516,666


2,457,123

Total Deposits
11,264,938


9,270,917

Advances from the FHLB
906,365


471,687

Subordinated debt, net
248,756


248,458

FRB PPP lending facility
1,111,429


—

Repurchase agreements and other borrowings
60,913


52,391

Total Borrowings
2,327,463


772,536

Other liabilities
266,314


250,516

TOTAL LIABILITIES
13,858,715


10,293,969

Preferred stock



Authorized and unissued shares - 2,000,000
—


—

Common stock, $1.667 par: 150,000,000 shares authorized



72,645,987 and 72,649,682 shares issued at June 30, 2020 and December 31, 2019, respectively
121,101


121,107

Capital surplus
1,043,774


1,041,160

Retained earnings
499,502


467,186

Common stock issued to deferred compensation trust, at cost



871,634 and 818,578 shares at June 30, 2020 and December 31, 2019, respectively
(16,776
)

(15,555
)
Deferred compensation trust
16,776


15,555

Accumulated other comprehensive income (loss)
43,218


11,302

TOTAL SHAREHOLDERS’ EQUITY
1,707,595


1,640,755

Noncontrolling interest
13,948


12,939

TOTAL EQUITY
1,721,543


1,653,694

TOTAL LIABILITIES AND EQUITY
$
15,580,258


$
11,947,663

(1) For 2020, disclosures are presented in compliance with ASC 326.

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

















Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019
INTEREST INCOME:







Loans, including fees
$
102,139


$
101,874


$
202,201


$
201,569

Investment securities
8,163


8,987


18,112


17,121

Interest-bearing deposits in financial institutions and federal funds sold
433


4,015


1,535


8,013

Mortgage loans held for sale
3,811


3,007


6,799


5,010

Total interest income
114,546


117,883


228,647


231,713

INTEREST EXPENSE:







Deposits
15,072


21,784


34,134


40,958

Advances from the FHLB
2,595


3,201


5,088


7,354

Subordinated debt, net
2,962


2,962


5,923


5,924

Repurchase agreements and other borrowings
643


117


732


185

Total interest expense
21,272


28,064


45,877


54,421

Net interest income
93,274


89,819


182,770


177,292









PROVISION FOR CREDIT LOSSES
26,945


2,824


33,961


4,262

Net interest income after provision for credit losses
66,329


86,995


148,809


173,030

NONINTEREST INCOME:







Residential mortgage banking income, net
29,715


18,565


37,131


32,073

Insurance commissions and other title fees and income, net
17,612


17,213


34,505


32,795

Real estate brokerage and property management income, net
10,781


8,843


17,719


18,111

Service charges on deposit accounts
1,888


3,185


4,328


6,046

Credit card merchant fees, net
1,109


660


2,287


1,843

BOLI
1,584


1,635


4,690


3,233

Other income
3,763


4,617


8,990


7,774

Net gain/(loss) on investment securities
2,930


—


7,932


(776
)
Total noninterest income
69,382


54,718


117,582


101,099

NONINTEREST EXPENSE:







Salaries and employee benefits
56,926


54,263


112,793


107,123

Occupancy expense
7,227


7,662


14,728


15,913

Furniture and equipment
3,564


3,578


7,205


6,949

Amortization - intangibles
2,901


3,113


5,851


6,305

Software expense
3,492


2,788


6,984


5,533

Data processing
2,718


3,616


5,509


6,782

Professional fees
2,972


3,707


6,040


6,386

Advertising and marketing
1,986


3,182


5,570


6,011

Other expenses
9,239


14,647


23,233


27,677

Total noninterest expense
91,025


96,556


187,913


188,679

Income before income tax expense and noncontrolling interest
44,686


45,157


78,478


85,450

Provision for income tax expense
7,464


8,915


13,651


17,126

Net income
$
37,222


$
36,242


$
64,827


$
68,324

Net income attributable to noncontrolling interest
(2,617
)

(1,604
)

(3,838
)

(2,277
)
Net income attributable to TowneBank
$
34,605


$
34,638


$
60,989


$
66,047

Per common share information







Basic earnings
$
0.48


$
0.48


$
0.84


$
0.92

Diluted earnings
$
0.48


$
0.48


$
0.84


$
0.92

Cash dividends declared
$
0.18


$
0.18


$
0.36


$
0.34

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












June 30,

March 31,

December 31,

September 30,

June 30,

2020

2020

2019

2019

2019

(unaudited)

(unaudited)

(audited)

(unaudited)

(unaudited)
ASSETS









Cash and due from banks
$
115,724


$
108,929


$
97,593


$
124,439


$
110,580

Interest-bearing deposits at FRB - Richmond
2,511,152


753,643


322,505


675,288


834,505

Interest-bearing deposits in financial institutions
24,374


23,564


22,518


21,663


21,527

Total Cash and Cash Equivalents
2,651,250


886,136


442,616


821,390


966,612

Securities available for sale
1,266,624


1,248,420


1,441,308


1,337,395


1,260,821

Securities held to maturity
41,595


42,431


43,688


44,494


50,574

Less: allowance for credit losses
(121
)

(133
)

—


—


—

Securities held to maturity, net of allowance for credit losses
41,474


42,298


43,688


44,494


50,574

Other equity securities
6,497


6,462


6,462


5,697


5,396

FHLB stock
49,277


52,042


30,094


26,282


32,657

Total Securities
1,363,872


1,349,222


1,521,552


1,413,868


1,349,448

Mortgage loans held for sale
610,369


453,143


419,233


456,719


362,773

Loans, net of unearned income and deferred costs
9,801,889


8,784,195


8,419,288


8,182,829


8,126,729

Less: allowance for credit losses
(90,467
)

(64,372
)

(58,234
)

(55,428
)

(54,527
)
Net Loans
9,711,422


8,719,823


8,361,054


8,127,401


8,072,202

Premises and equipment, net
257,533


236,735


231,806


231,060


230,177

Goodwill
446,725


446,725


446,816


446,423


442,881

Other intangible assets, net
48,632


51,448


54,399


57,404


58,391

BOLI
242,493


240,924


243,062


241,652


240,621

Other assets
247,962


239,670


227,125


225,374


219,375

TOTAL ASSETS
$
15,580,258


$
12,623,826


$
11,947,663


$
12,021,291


$
11,942,480

LIABILITIES AND EQUITY









Deposits:









Noninterest-bearing demand
$
4,226,208


$
3,060,515


$
2,951,225


$
3,030,505


$
2,950,615

Interest-bearing:









Demand and money market accounts
4,223,391


3,573,926


3,586,364


3,534,252


3,409,322

Savings
298,673


280,807


276,205


280,552


277,495

Certificates of deposit
2,516,666


2,392,744


2,457,123


2,592,705


2,631,386

Total Deposits
11,264,938


9,307,992


9,270,917


9,438,014


9,268,818

Advances from the FHLB
906,365


971,527


471,687


381,846


532,004

Subordinated debt, net
248,756


248,607


248,458


248,309


248,160

FRB PPP lending facility
1,111,429


—


—


—


—

Repurchase agreements and other borrowings
60,913


171,762


52,391


42,971


56,355

Total Borrowings
2,327,463


1,391,896


772,536


673,126


836,519

Other liabilities
266,314


258,306


250,516


271,617


230,691

TOTAL LIABILITIES
13,858,715


10,958,194


10,293,969


10,382,757


10,336,028

Preferred stock









Authorized shares - 2,000,000
—


—


—


—


—

Common stock, $1.667 par value
121,101


121,057


121,107


121,080


121,038

Capital surplus
1,043,774


1,041,870


1,041,160


1,039,156


1,036,982

Retained earnings
499,502


477,972


467,186


445,186


420,600

Common stock issued to deferred compensation trust, at cost
(16,776
)

(15,562
)

(15,555
)

(15,317
)

(15,160
)
Deferred compensation trust
16,776


15,562


15,555


15,317


15,160

Accumulated other comprehensive income (loss)
43,218


12,301


11,302


19,958


15,143

TOTAL SHAREHOLDERS’ EQUITY
1,707,595


1,653,200


1,640,755


1,625,380


1,593,763

Noncontrolling interest
13,948


12,432


12,939


13,154


12,689

TOTAL EQUITY
1,721,543


1,665,632


1,653,694


1,638,534


1,606,452

TOTAL LIABILITIES AND EQUITY
$
15,580,258


$
12,623,826


$
11,947,663


$
12,021,291


$
11,942,480

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





Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2020

2020

2019

2019

2019
INTEREST INCOME:









Loans, including fees
$
102,139


$
100,062


$
100,059


$
102,047


$
101,874

Investment securities
8,163


9,949


9,936


9,889


8,987

Interest-bearing deposits in financial institutions and federal funds sold
433


1,102


2,067


3,745


4,015

Mortgage loans held for sale
3,811


2,988


4,413


3,956


3,007

Total interest income
114,546


114,101


116,475


119,637


117,883

INTEREST EXPENSE:









Deposits
15,072


19,062


21,744


23,552


21,784

Advances from the FHLB
2,595


2,492


1,730


1,935


3,201

Subordinated debt
2,962


2,962


2,962


2,962


2,962

Repurchase agreements and other borrowings
643


89


80


85


117

Total interest expense
21,272


24,605


26,516


28,534


28,064

Net interest income
93,274


89,496


89,959


91,103


89,819











PROVISION FOR CREDIT LOSSES
26,945


7,016


3,601


1,508


2,824

Net interest income after provision for credit losses
66,329


82,480


86,358


89,595


86,995

NONINTEREST INCOME:









Residential mortgage banking income, net
29,715


7,416


15,884


18,855


18,565

Insurance commissions and other title fees and income, net
17,612


16,893


15,001


16,681


17,213

Real estate brokerage and property management income, net
10,781


6,938


6,737


9,444


8,843

Service charges on deposit accounts
1,888


2,440


2,245


2,253


3,185

Credit card merchant fees, net
1,109


1,179


1,389


1,514


660

BOLI
1,584


3,105


3,865


2,117


1,635

Other income
3,763


5,227


4,591


3,981


4,617

Net gain/(loss) on investment securities
2,930


5,002


—


(69
)

—

Total noninterest income
69,382


48,200


49,712


54,776


54,718

NONINTEREST EXPENSE:









Salaries and employee benefits
56,926


55,867


56,013


55,784


54,263

Occupancy expense
7,227


7,502


7,516


7,953


7,662

Furniture and equipment
3,564


3,640


3,598


3,805


3,578

Amortization - intangibles
2,901


2,950


3,005


3,059


3,113

Software expense
3,492


3,492


2,976


3,208


2,788

Data processing
2,718


2,791


2,510


2,533


3,616

Professional fees
2,972


3,067


2,990


3,566


3,707

Advertising and marketing
1,986


3,584


2,839


3,429


3,182

Other expenses
9,239


13,995


10,889


13,950


14,647

Total noninterest expense
91,025


96,888


92,336


97,287


96,556

Income before income tax expense and noncontrolling interest
44,686


33,792


43,734


47,084


45,157

Provision for income tax expense
7,464


6,187


7,786


7,684


8,915

Net income
37,222


27,605


35,948


39,400


36,242

Net income attributable to noncontrolling interest
(2,617
)

(1,221
)

(873
)

(1,741
)

(1,604
)
Net income attributable to TowneBank
$
34,605


$
26,384


$
35,075


$
37,659


$
34,638

Per common share information









Basic earnings
$
0.48


$
0.37


$
0.49


$
0.52


$
0.48

Diluted earnings
$
0.48


$
0.36


$
0.49


$
0.52


$
0.48

Basic weighted average shares outstanding
72,280,555


72,206,228


72,122,476


72,091,221


72,044,817

Diluted weighted average shares outstanding
72,317,988


$
72,299,721


72,302,414


72,222,934


72,145,600

Cash dividends declared
$
0.18


$
0.18


$
0.18


$
0.18


$
0.18

TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)












Three Months Ended

Six Months Ended

Increase/(Decrease)

June 30,

March 31,

June 30,

2020 over 2019

2020

2019

2020

2020

2019

Amount

Percent
Revenue













Net interest income
$
89,665


$
88,442


$
87,406


$
177,071


$
174,842


$
2,229


1.27
%
Service charges on deposit accounts
1,888


3,185


2,440


4,328


6,046


(1,718
)

(28.42
)%
Credit card merchant fees
1,109


660


1,179


2,287


1,843


444


24.09
%
Other income
3,888


5,273


7,061


10,950


9,200


1,750


19.02
%
Subtotal
6,885


9,118


10,680


17,565


17,089


476


2.79
%
Net gain/(loss) on investment securities
2,930


—


5,002


7,932


(776
)

8,708


1,122.16
%
Total noninterest income
9,815


9,118


15,682


25,497


16,313


9,184


56.30
%
Total revenue
99,480


97,560


103,088


202,568


191,155


11,413


5.97
%














Provision for credit losses
26,059


2,824


7,041


33,100


4,262


28,838


676.63
%














Expenses













Salaries and employee benefits
35,209


32,353


33,225


68,434


63,440


4,994


7.87
%
Occupancy expense
4,812


5,007


4,916


9,728


10,251


(523
)

(5.10
)%
Furniture and equipment
2,715


2,517


2,660


5,375


4,884


491


10.05
%
Amortization of intangibles
1,114


1,315


1,164


2,278


2,681


(403
)

(15.03
)%
Other expenses
10,718


18,938


18,705


29,423


35,119


(5,696
)

(16.22
)%
Total expenses
54,568


60,130


60,670


115,238


116,375


(1,137
)

(0.98
)%
Income before income tax, corporate allocation and noncontrolling interest
18,853


34,606


35,377


54,230


70,518


(16,288
)

(23.10
)%
Corporate allocation
627


546


670


1,297


998


299


29.96
%
Income before income tax provision and noncontrolling interest
19,480


35,152


36,047


55,527


71,516


(15,989
)

(22.36
)%
Provision for income tax expense
2,167


6,650


6,663


8,830


13,842


(5,012
)

(36.21
)%
Net income
17,313


28,502


29,384


46,697


57,674


(10,977
)

(19.03
)%
Noncontrolling interest
5


1


(1
)

4


3


1


33.33
%
Net income attributable to TowneBank
$
17,318


$
28,503


$
29,383


$
46,701


$
57,677


(10,976
)

(19.03
)%














Efficiency ratio
56.52
%

61.63
%

61.85
%

59.21
%

60.63
%

(1.42
)%

(2.34
)%

TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)






Three Months Ended

Six Months Ended

Increase/(Decrease)

June 30,

March 31,

June 30,

2020 over 2019

2020

2019

2020

2020

2019

Amount

Percent
Revenue













Residential mortgage brokerage income, net
$
30,468


$
18,898


$
8,007


$
38,475


$
32,654


$
5,821


17.83
%
Real estate brokerage income, net
2,659


2,873


1,865


4,524


4,434


90


2.03
%
Title insurance and settlement fees
639


594


436


1,075


962


113


11.75
%
Property management fees, net
8,122


5,970


5,073


13,195


13,678


(483
)

(3.53
)%
Income from unconsolidated subsidiary
301


162


186


487


256


231


90.23
%
Net interest and other income
3,765


1,677


2,396


6,161


3,049


3,112


102.07
%
Total revenue
45,954


30,174


17,963


63,917


55,033


8,884


16.14
%














Provision for credit losses
886


—


(25
)

861


—


861


n/m















Expenses













Salaries and employee benefits
13,059


13,309


13,293


26,352


26,204


148


0.56
%
Occupancy expense
1,763


2,028


1,927


3,690


4,373


(683
)

(15.62
)%
Furniture and equipment
626


803


762


1,388


1,571


(183
)

(11.65
)%
Amortization of intangible assets
658


695


657


1,315


1,420


(105
)

(7.39
)%
Other expenses
8,270


7,234


6,867


15,137


13,475


1,662


12.33
%
Total expenses
24,376


24,069


23,506


47,882


47,043


839


1.78
%














Income (loss) before income tax, corporate allocation and noncontrolling interest
20,692


6,105


(5,518
)

15,174


7,990


7,184


89.91
%
Corporate allocation
(370
)

(328
)

(393
)

(763
)

(591
)

(172
)

29.10
%
(Loss) income before income tax provision and noncontrolling interest
20,322


5,777


(5,911
)

14,411


7,399


7,012


94.77
%
Provision for income tax (benefit) expense
4,127


1,287


(1,292
)

2,835


1,838


997


54.24
%
Net (loss) income
16,195


4,490


(4,619
)

11,576


5,561


6,015


108.16
%
Noncontrolling interest
(2,415
)

(1,248
)

(791
)

(3,206
)

(1,500
)

(1,706
)

113.73
%
Net (loss) income attributable to TowneBank
$
13,780


$
3,242


$
(5,410
)

$
8,370


$
4,061


4,309


106.11
%














Efficiency ratio
53.04
%

79.77
%

130.86
%

74.91
%

85.48
%

(10.57
)%

(12.37
)%

TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)












Three Months Ended

Six Months Ended

Increase/(Decrease)

June 30,

March 31,

June 30,

2020 over 2019

2020

2019

2020

2020

2019

Amount

Percent
Commission and fee income













Property and casualty
$
13,926


$
13,067


$
12,786


$
26,712


$
24,940


$
1,772


7.11
%
Employee benefits
3,791


3,833


3,918


7,709


7,339


370


5.04
%
Travel insurance
861


1,169


1,266


2,127


2,458


(331
)

(13.47
)%
Specialized benefit services
157


163


168


325


333


(8
)

(2.40
)%
Total commissions and fees
18,735


18,232


18,138


36,873


35,070


1,803


5.14
%














Contingency and bonus revenue
2,009


1,893


2,022


4,031


3,479


552


15.87
%
Other income
127


79


81


208


154


54


35.06
%
Total revenue
20,871


20,204


20,241


41,112


38,703


2,409


6.22
%














Employee commission expense
3,649


3,401


3,596


7,245


6,500


745


11.46
%
Revenue, net of commission expense
17,222


16,803


16,645


33,867


32,203


1,664


5.17
%














Salaries and employee benefits
8,658


8,601


9,349


18,007


17,479


528


3.02
%
Occupancy expense
652


627


659


1,311


1,289


22


1.71
%
Furniture and equipment
223


258


218


441


494


(53
)

(10.73
)%
Amortization of intangible assets
1,129


1,103


1,129


2,258


2,204


54


2.45
%
Other expenses
1,419


1,768


1,357


2,776


3,795


(1,019
)

(26.85
)%
Total operating expenses
12,081


12,357


12,712


24,793


25,261


(468
)

(1.85
)%
Income before income tax, corporate allocation and noncontrolling interest
5,141


4,446


3,933


9,074


6,942


2,132


30.71
%
Corporate allocation
(257
)

(218
)

(277
)

(533
)

(407
)

(126
)

30.96
%
Income before income tax provision and noncontrolling interest
4,884


4,228


3,656


8,541


6,535


2,006


30.70
%
Provision for income tax expense
1,170


978


816


1,987


1,446


541


37.41
%
Net income
3,714


3,250


2,840


6,554


5,089


1,465


28.79
%
Noncontrolling interest
(207
)

(357
)

(429
)

(636
)

(780
)

144


(18.46
)%
Net income attributable to TowneBank
$
3,507


$
2,893


$
2,411


$
5,918


$
4,309


$
1,609


37.34
%














Provision for income taxes
1,170


978


816


1,987


1,446


541


37.41
%
Depreciation, amortization and interest expense
1,291


1,309


1,300


2,591


2,982


(391
)

(13.11
)%
EBITDA (non-GAAP)
$
5,968


$
5,180


$
4,527


$
10,496


$
8,737


$
1,759


20.13
%














Efficiency ratio
70.15
%

73.54
%

76.37
%

73.21
%

78.44
%

(5.23
)%

(6.67
)%

TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands)
















Three Months Ended

Six Months Ended

June 30,

June 30,

March 31,

June 30,

June 30,

2020

2019

2020

2020

2019










Return on average assets (GAAP)
0.97
%

1.20
%

0.88
%

0.93
%

1.17
%
Impact of excluding average goodwill and other intangibles and amortization
0.10
%

0.15
%

0.12
%

0.11
%

0.15
%
Return on average tangible assets (non-GAAP)
1.07
%

1.35
%

1.00
%

1.04
%

1.32
%










Return on average equity (GAAP)
8.18
%

8.83
%

6.37
%

7.28
%

8.54
%
Impact of excluding average goodwill and other intangibles and amortization
4.14
%

5.07
%

3.54
%

3.85
%

5.03
%
Return on average tangible equity (non-GAAP)
12.32
%

13.90
%

9.91
%

11.13
%

13.57
%










Return on average common equity (GAAP)
8.24
%

8.89
%

6.42
%

7.34
%

8.60
%
Impact of excluding average goodwill and other intangibles and amortization
4.20
%

5.16
%

3.59
%

3.91
%

5.13
%
Return on average tangible common equity (non-GAAP)
12.44
%

14.05
%

10.01
%

11.25
%

13.73
%










Book value (GAAP)
$
23.50


$
21.95


$
22.77


$
23.50


$
21.95

Impact of excluding average goodwill and other intangibles and amortization
(6.82
)

(6.90
)

(6.86
)

(6.82
)

(6.90
)
Tangible book value (non-GAAP)
$
16.68


$
15.05


$
15.91


$
16.68


$
15.05











Average assets (GAAP)
$
14,409,468


$
11,532,278


$
12,049,323


$
13,229,396


$
11,364,448

Less: average goodwill
446,725


442,881


446,838


446,781


442,875

Less: average intangible assets
50,352


60,339


53,285


51,819


61,861

Average tangible assets (non-GAAP)
$
13,912,391


$
11,029,058


$
11,549,200


$
12,730,796


$
10,859,712











Average equity (GAAP)
$
1,701,777


$
1,573,855


$
1,665,706


$
1,683,742


$
1,559,954

Less: average goodwill
446,725


442,881


446,838


446,781


442,875

Less: average intangible assets
50,352


60,339


53,285


51,819


61,861

Average tangible equity (non-GAAP)
$
1,204,700


$
1,070,635


$
1,165,583


$
1,185,142


$
1,055,218











Average common equity (GAAP)
$
1,689,603


$
1,562,214


$
1,653,676


$
1,671,640


1,548,250

Less: average goodwill
446,725


442,881


446,838


446,781


442,875

Less: average intangible assets
50,352


60,339


53,285


51,819


61,861

Average tangible common equity (non-GAAP)
$
1,192,526


$
1,058,994


$
1,153,553


$
1,173,040


$
1,043,514











Net Income (GAAP)
$
34,605


$
34,638


26,384


60,989


66,047

Amortization of Intangibles, net of tax
2,292


2,460


2,331


4,622


4,981

Tangible Net Income (non-GAAP)
$
36,897


$
37,098


$
28,715


$
65,611


$
71,028

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

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