TOWN - TowneBank Reports Third Quarter 2019 Earnings

October, 24 2019 08:30 AM Towne Bank

SUFFOLK, Va., Oct. 24, 2019 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (NASDAQ: TOWN) today reported earnings for the quarter ended September 30, 2019 of $37.66 million, or $0.52 per diluted share, compared to $38.29 million, or $0.53 per diluted share, for the quarter ended September 30, 2018.

“Our third quarter continued the trend of solid growth in top-line revenues which climbed to $145.88 million, or a 5.78% increase, over the same period in 2018 driven by strong performances in our noninterest income sources. Noninterest bearing deposits increased 10.74% on an annualized basis during the quarter and represents 32.11% of our total deposits. During the past year, we continued to increase our deposit market share and remain the market leader in the Hampton Roads, Virginia MSA while our leadership teams in Richmond and the North Carolina markets provided an outstanding deposit growth rate of 19.67% and 27.70%, respectively, compared to the quarter ended September 30, 2018," said G. Robert Aston, Jr., Executive Chairman. “The year 2019 has been a year of significant investment in the future, as we have absorbed the expense related to enhancements in company infrastructure driven by changing industry standards and increased regulatory expectations due to crossing the $10 billion asset threshold. Additionally, we have successfully recruited 27 new staff members on the production and revenue side of the bank, expanding Towne’s presence into Greensboro and Greenville, North Carolina as well as adding an eight person Corporate Banking team in the Hampton Roads market,” added Aston.

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

Total revenues were $145.88 million, an increase of $7.97 million, or 5.78%.
Loans held for investment increased $301.14 million, or 3.82%, from September 30, 2018, and $56.10 million, or 0.69%, from June 30, 2019, or 2.74% on an annualized basis.
Total deposits were $9.44 billion, an increase of $1.14 billion, or 13.72%, compared to prior year and $0.17 billion, or 1.83%, from June 30, 2019, or 7.24% on an annualized basis. In comparison to September 30, 2018, total deposits increased 8.52% in our Hampton Roads region, 19.67% in our Richmond region, and 27.70% in our North Carolina region.
Noninterest bearing deposits increased by 13.44%, to $3.03 billion, representing 32.11% of total deposits. Compared to the linked quarter, noninterest bearing deposits increased 2.71%, or 10.74% on an annualized basis.
Annualized return on common shareholders' equity was 9.29% and annualized return on average tangible common shareholders' equity was 14.36% (non-GAAP).
Net interest margin for the quarter was 3.41% and taxable equivalent net interest margin was 3.43% (non-GAAP).
Effective tax rate of 16.95% in the quarter compared to 19.30% in the third quarter of 2018.

“Continued diversity in our revenue composition has been a consistent objective of our Company for many years. As pressures on net interest margin and required infrastructure investments continue to challenge our bottom line returns, it is important to keep our focus on growing top-line revenues. We were pleased to announce the completion of a strategic insurance acquisition in Charlotte, North Carolina, which will serve to strengthen our product delivery in one of our key growth markets,” stated J. Morgan Davis, President and Chief Executive Officer.

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

Net interest income was $91.10 million compared to $88.70 million at September 30, 2018.
Taxable equivalent net interest margin (non-GAAP) was 3.43%, including accretion of 11 basis points, compared to 3.64%, including accretion of 18 basis points, for 2018.
Average loans held for investment, with an average yield of 5.02%, represented 76.35% of average earning assets at September 30, 2019 compared to an average yield of 4.95% and 80.45% of average earning assets in the third quarter of 2018.
Total cost of deposits increased to 1.01% from 0.72% at September 30, 2018.
Average interest-earning assets totaled $10.60 billion at September 30, 2019 compared to $9.73 billion at September 30, 2018, an increase of 9.03%.
Average interest-bearing liabilities totaled $7.03 billion, an increase of $0.46 billion from prior year.

Quarterly Provision for Loan Losses:

Recorded a provision for loan losses of $1.51 million compared to $1.24 million one year ago and $2.82 million in the linked quarter.
Net charge-offs were $0.61 million compared to $0.54 million one year prior. The ratio of net charge-offs to average loans on an annualized basis was 0.03% compared to 0.08% in the prior quarter and 0.03% in the third quarter of 2018.
The allowance for loan losses represented 0.68% of total loans compared to 0.67% at June 30, 2019 and 0.64% at September 30, 2018. Loan loss reserve as a percentage of total loans, excluding purchased loans, was 0.81% at September 30, 2019, and June 30, 2019, compared to 0.82% at September 30, 2018. The allowance for loan losses was 3.95 times nonperforming loans compared to 3.00 times at June 30, 2019 and 7.25 times at September 30, 2018.

Quarterly Noninterest Income Compared to the Third Quarter of 2018:

Total noninterest income was $54.78 million compared to $49.22 million in 2018, an increase of $5.56 million, or 11.29%. Residential mortgage banking income increased $3.05 million in the quarter, insurance commissions and other title fees increased $2.19 million, real estate brokerage and property management income increased $0.90 million, while service charges on deposit accounts decreased $0.78 million.
Residential mortgage banking income was $18.86 million compared to $15.80 million in third quarter 2018. Loan volume in the current quarter was $963.66 million, with purchase activity comprising 68.83% of that volume. Loan volume in third quarter 2018 was $811.50 million, with purchase activity of 89.72%.
Total Insurance segment revenue increased 16.59% to $19.62 million in the third quarter due primarily to additional commission income from insurance agencies that were acquired in November 2018 and January 2019. An additional insurance agency, Angel Insurance and Financial Services, Inc., was acquired, effective September 1, 2019.
Property management fee revenue increased 13.47%, or $0.78 million, as compared to third quarter 2018 due to increases in reservation levels.

Quarterly Noninterest Expense Compared to the Third Quarter of 2018:

Total noninterest expense was $97.29 million compared to $88.26 million in 2018, an increase of $9.03 million, or 10.23%. This reflects increases of $5.29 million in salary and benefits expense, $1.66 million in professional fees, $0.94 million in occupancy expense, and $0.56 million in advertising and marketing expenses.
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.
Noninterest expense included operational expenses of $1.86 million related to insurance agencies acquired subsequent to third quarter 2018.

Quarterly Income Taxes Compared to the Third Quarter of 2018:

Income tax expense was $7.68 million compared to $9.16 million one year prior. This represents an effective tax rate of 16.95% compared to 19.30% in the third quarter of 2018.

Consolidated Balance Sheet September 30, 2019 Compared to September 30, 2018

Total assets were $12.02 billion for the quarter ended September 30, 2019, an increase of 7.69%, or 10.28% on an annualized basis, compared to $11.16 billion at December 31, 2018. Total assets increased $0.90 billion, or 8.09%, from $11.12 billion at September 30, 2018. This increase was driven primarily by growth in cash and cash equivalents, available for sale securities, and loans held for investment. Year-over-year, other assets increased $49.66 million due to the adoption of the leasing standard.
Loans held for investment increased $0.16 billion, or 2.05%, or 2.74% on an annualized basis, compared to year end 2018, and $0.30 billion, or 3.82% compared to September 30, 2018.
Total liabilities were $10.38 billion at September 30, 2019, an increase of $758.15 million, or 7.88%, compared to December 31, 2018 and $761.35 million, or 7.91%, compared to September 30, 2018.
Total deposits increased $1.07 billion, or 12.75%, or 17.05% on an annualized basis, over December 31, 2018 and $1.14 billion, or 13.72%, over September 30, 2018.
Total borrowings declined $0.42 billion, or 38.49%, or 51.46% on an annualized basis from December 31, 2018 and $0.49 billion from September 30, 2018.

Investment Securities:

Total investment securities were $1.41 billion compared to $1.35 billion at June 30, 2019 and $1.16 billion at September 30, 2018. The weighted average duration of the portfolio at September 30, 2019 was 3.6 years. The carrying value of the available-for-sale portfolio included $26.07 million of net unrealized gains compared to $19.66 million at June 30, 2019 and $26.22 million in net unrealized losses at September 30, 2018. The increase in net unrealized gains was primarily due to further declines in interest rates. The carrying value of the held-to-maturity portfolio does not reflect $1.68 million in net unrealized gains compared to $1.58 million in net unrealized gains at June 30, 2019 and $0.17 million in net unrealized gains at September 30, 2018.

Loans and Asset Quality:

Total loans held for investment were $8.18 billion at September 30, 2019 compared to $8.13 billion at June 30, 2019 and $7.88 billion at September 30, 2018.
Nonperforming assets were $31.04 million, or 0.26% of total assets, compared to $27.33 million, or 0.25%, at September 30, 2018.
Nonperforming loans were 0.17% of period end loans.
Foreclosed property decreased to $15.52 million from $18.15 million at September 30, 2018.

Deposits and Borrowings:

Total deposits were $9.44 billion compared to $9.27 billion at June 30, 2019 and $8.30 billion at September 30, 2018.
Total loans to deposits were 86.70% compared to 87.68% at June 30, 2019 and 94.97% at September 30, 2018.
Non-interest bearing deposits were 32.11% of total deposits at September 30, 2019 compared to 31.83% at June 30, 2019 and 32.19% at September 30, 2018.
Total borrowings were $0.67 billion compared to $0.84 billion and $1.17 billion at June 30, 2019 and September 30, 2018, respectively.

Capital:

Common equity tier 1 capital ratio of 11.52%.
Tier 1 leverage capital ratio of 9.84%.
Tier 1 risk-based capital ratio of 11.55%.
Total risk-based capital ratio of 14.70%.
Book value was $22.38 compared to $21.95 at June 30, 2019 and $20.54 at September 30, 2018.
Tangible book value (non-GAAP)was $15.44 compared to $15.05 at June 30, 2019 and $13.83 at September 30, 2018.

Outlook:
Management reforecasts on a quarterly basis and anticipates:

Annualized loan growth to be in the low-to-mid single digits for the remainder of 2019.
Our quarterly noninterest expense run rate will range between $94 - $96 million for 2019.

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 41 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, 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 $12.02 billion as of September 30, 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 GAAP. The Company's management uses these non-GAAP financial measures in its analysis of the Company's performance. These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that are infrequent in nature. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP disclosures are included as tables at the end of this release.

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

September 30,

June 30,

March 31,

December 31,

September 30,

2019

2019

2019

2018

2018
Income and Performance Ratios:

Total Revenue
$
145,879


$
144,537


$
133,854


$
131,417


$
137,914


Net income
39,400


36,242


32,082


36,440


39,252


Net income attributable to TowneBank
37,659


34,638


31,409


35,990


38,293


Net income per common share - diluted
0.52


0.48


0.44


0.50


0.53


Book value per common share
22.38


21.95


21.40


21.05


20.54


Book value per common share - tangible ^(non-GAAP)
15.44


15.05


14.46


14.26


13.83


Return on average assets
1.26
%

1.20
%

1.14
%

1.28
%

1.40
%

Return on average assets - tangible ^(non-GAAP)
1.40
%

1.35
%

1.29
%

1.43
%

1.56
%

Return on average equity
9.22
%

8.83
%

8.24
%

9.44
%

10.21
%

Return on average equity - tangible ^(non-GAAP)
14.20
%

13.90
%

13.24
%

14.91
%

16.08
%

Return on average common equity
9.29
%

8.89
%

8.30
%

9.53
%

10.30
%

Return on average common equity - tangible ^(non-GAAP)
14.36
%

14.05
%

13.39
%

15.11
%

16.30
%

Noninterest income as a percentage of total revenue
37.55
%

37.86
%

34.65
%

32.12
%

35.69
%











Regulatory Capital Ratios (1):










Common equity tier 1
11.52
%

11.58
%

11.49
%

11.51
%

11.53
%

Tier 1
11.55
%

11.62
%

11.52
%

11.54
%

11.57
%

Total
14.70
%

14.85
%

14.79
%

14.83
%

14.90
%

Tier 1 leverage ratio
9.84
%

9.86
%

9.92
%

9.87
%

9.98
%











Asset Quality:

Allowance for loan losses to nonperforming loans
3.95
x

3.00
x

9.36
x

10.97
x

7.25
x

Allowance for loan losses to period end loans
0.68
%

0.67
%

0.66
%

0.65
%

0.64
%

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

0.81
%

0.81
%

0.82
%

0.82
%

Nonperforming loans to period end loans
0.17
%

0.22
%

0.07
%

0.06
%

0.09
%

Nonperforming assets to period end assets
0.26
%

0.29
%

0.22
%

0.22
%

0.25
%

Net charge-offs to average loans (annualized)
0.03
%

0.08
%

0.01
%

0.02
%

0.03
%












Nonperforming loans
$
14,016


$
18,202


$
5,696


$
4,749


$
6,926


Former bank premises
1,510


1,510


2,223


2,253


2,253


Foreclosed property
15,517


14,517


17,071


17,163


18,153


Total nonperforming assets
$
31,043


$
34,229


$
24,990


$
24,165


$
27,332


Loans past due 90 days and still accruing interest
$
636


$
415


$
117


$
394


$
153













Allowance for loan losses
$
55,428


$
54,527


$
53,303


$
52,094


$
50,236












Mortgage Banking:










Loans originated, mortgage
$
703,922


$
574,638


$
366,643


$
407,787


$
561,543


Loans originated, joint venture
259,742


246,491


146,884


192,280


249,956


Total loans originated
$
963,664


$
821,129


$
513,527


$
600,067


$
811,499


Number of loans originated
3,360


3,121


1,977


2,304


3,068


Number of originators
225


229


240


293


303


Purchase %
68.83
%

84.97
%

86.08
%

88.64
%

89.72
%

Loans sold
$
925,058


$
694,832


$
473,068


$
694,341


$
852,205


Gross realized gain on sales and fees as a % of loans originated
3.45
%

3.43
%

3.58
%

3.37
%

3.36
%











Other Ratios:










Net interest margin
3.41
%

3.49
%

3.54
%

3.53
%

3.62
%

Net interest margin-fully tax equivalent ^(nonGAAP)
3.43
%

3.52
%

3.57
%

3.55
%

3.64
%

Average earning assets/total average assets
89.53
%

89.46
%

89.50
%

89.91
%

89.69
%

Average loans/average deposits
87.63
%

91.60
%

95.83
%

95.32
%

97.55
%

Average noninterest deposits/total average deposits
31.82
%

31.63
%

31.39
%

31.90
%

32.61
%

Period end equity/period end total assets
13.63
%

13.45
%

13.53
%

13.78
%

13.49
%

Efficiency ratio
66.66
%

66.80
%

68.43
%

62.65
%

64.00
%












(1) Current reporting period regulatory capital ratios are preliminary

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)











Investment Securities






% Change

Q3

Q3

Q2

Q3 19 vs.

Q3 19 vs.
*Available-for-sale securities, at fair value*
2019

2018

2019

Q3 18

Q2 19
U.S. agency securities
$
152,581


$
388,904


$
261,960


(60.77
)%

(41.75
)%
U.S. Treasury notes
999


1,245


2,241


(19.76
)%

(55.42
)%
Municipal securities
173,519


72,818


167,466


138.29
%

3.61
%
Trust preferred and other corporate securities
52,006


30,648


43,799


69.69
%

18.74
%
Mortgage-backed securities issued by GSE and GNMA
958,290


558,158


785,355


71.69
%

22.02
%
Total
$
1,337,395


$
1,051,773


$
1,260,821


27.16
%

6.07
%










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









Municipal securities
$
29,166


$
35,007


$
34,458


(16.69
)%

(15.36
)%
Trust preferred corporate securities
2,381


500


2,393


376.20
%

(0.50
)%
Mortgage-backed securities issued by GSE and GNMA
12,947


16,495


13,723


(21.51
)%

(5.65
)%
Total
$
44,494


$
52,002


$
50,574


(14.44
)%

(12.02
)%




















Loans Held For Investment






% Change

Q3

Q3

Q2

Q3 19 vs.

Q3 19 vs.

2019

2018

2019

Q3 18

Q2 19
Real estate - construction and development
$
1,142,225


$
1,016,120


$
1,107,762


12.41
%

3.11
%
Commercial real estate - investment related properties
2,070,317


1,957,297


1,985,990


5.77
%

4.25
%
Commercial real estate - owner occupied
1,286,137


1,259,368


1,288,478


2.13
%

(0.18
)%
Real estate - multifamily
219,901


284,423


267,528


(22.69
)%

(17.80
)%
Real estate - residential 1-4 family
1,621,175


1,608,517


1,639,547


0.79
%

(1.12
)%
Commercial and industrial business
1,527,515


1,447,794


1,523,607


5.51
%

0.26
%
Consumer and other loans
315,559


308,173


313,817


2.40
%

0.56
%
Total
$
8,182,829


$
7,881,692


$
8,126,729


3.82
%

0.69
%




















Deposits






% Change

Q3

Q3

Q2

Q3 19 vs.

Q3 19 vs.

2019

2018

2019

Q3 18

Q2 19
Noninterest-bearing demand
$
3,030,505


$
2,671,558


$
2,950,615


13.44
%

2.71
%
Interest-bearing:









Demand and money market accounts
3,534,252


3,096,317


3,409,322


14.14
%

3.66
%
Savings
280,552


298,368


277,495


(5.97
)%

1.10
%
Certificates of deposits
2,592,705


2,233,188


2,631,386


16.10
%

(1.47
)%
Total
$
9,438,014


$
8,299,431


$
9,268,818


13.72
%

1.83
%

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

Discount Accretion (Premium Amortization)

For the three months ended

December 31,

2019

Assets:

(74

)

Investment Securities

1,403

Loans

Liabilities:

Deposits

Total estimated effect on net interest income

1,282

Note: This information is intended for informational purposes only and is not necessarily indicative of future results. Actual results may differ due to

factors such as changes in estimated prepayment speeds or projected credit loss rates.

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


Three Months Ended

Three Months Ended

Three Months Ended

September 30, 2019

June 30, 2019

September 30, 2018

Average Balance

Interest Income/ Expense

Average Yield/ Rate

Average Balance

Interest Income/ Expense

Average Yield/ Rate

Average Balance

Interest Income/ Expense

Average Yield/ Rate
Assets:
































Loans (net of unearned income and deferred costs), excluding nonaccrual loans
$
8,096,908


$
102,495


5.02
%

$
8,075,054


$
102,366


5.08
%

$
7,825,065


$
97,705


4.95
%
Taxable investment securities
1,266,447


9,087


2.87
%

1,170,215


8,346


2.85
%

1,022,051


6,402


2.51
%
Tax-exempt investment securities
121,738


997


3.28
%

90,942


756


3.33
%

82,235


766


3.73
%
Total securities
1,388,185


10,084


2.91
%

1,261,157


9,102


2.89
%

1,104,286


7,168


2.60
%
Interest-bearing deposits
711,030


3,745


2.09
%

698,649


4,016


2.31
%

450,455


2,148


1.89
%
Loans held for sale
408,377


3,956


3.87
%

281,775


3,007


4.27
%

346,806


4,012


4.63
%
Total earning assets
10,604,500


120,280


4.50
%

10,316,635


118,491


4.61
%

9,726,612


111,033


4.53
%
Less: allowance for loan losses
(54,858
)





(53,386
)





(50,144
)




Total nonearning assets
1,295,640






1,269,029






1,168,102





Total assets
$
11,845,282






$
11,532,278






$
10,844,570





Liabilities and Equity:

















Interest-bearing deposits

















Demand and money market
$
3,379,888


$
7,223


0.85
%

$
3,312,313


$
7,025


0.85
%

$
2,957,037


$
4,217


0.57
%
Savings
278,048


702


1.00
%

281,221


929


1.33
%

301,311


984


1.30
%
Certificates of deposit
2,641,681


15,627


2.35
%

2,433,479


13,830


2.28
%

2,147,338


9,339


1.73
%
Total interest-bearing deposits
6,299,617


23,552


1.48
%

6,027,013


21,784


1.45
%

5,405,686


14,540


1.07
%
Borrowings
486,644


2,020


1.62
%

678,799


3,318


1.93
%

920,380


4,195


1.78
%
Subordinated debt, net
248,210


2,962


4.77
%

248,064


2,962


4.78
%

247,615


2,962


4.78
%
Total interest-bearing liabilities
7,034,471


28,534


1.61
%

6,953,876


28,064


1.62
%

6,573,681


21,697


1.31
%
Demand deposits
2,940,370






2,788,596






2,615,946





Other noninterest-bearing liabilities
250,371






215,951






166,575





Total liabilities
10,225,212






9,958,423






9,356,202





Shareholders’ equity
1,620,070






1,573,855






1,488,368





Total liabilities and equity
$
11,845,282






$
11,532,278






$
10,844,570





Net interest income (tax-equivalent basis)


$
91,746






$
90,427






$
89,336



Reconcilement of Non-GAAP Financial Measures
















Tax-equivalent basis adjustment


(643
)





(608
)





(639
)


Net interest income (GAAP)


$
91,103






$
89,819






$
88,697





















Interest rate spread (1)(3)




2.89
%





2.99
%





3.22
%
Interest expense as a percent of average earning assets



1.07
%





1.09
%





0.89
%
Net interest margin (tax equivalent basis) (2)(3)



3.43
%





3.52
%





3.64
%
Total cost of deposits




1.01
%





0.99
%





0.72
%

(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)


Nine Months Ended September 30, 2019

Nine Months Ended September 30, 2018

Nine Months Ended September 30, 2019 Compared with 2018

Average

Interest Income/

Average Yield/

Average

Interest Income/

Average 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
$
8,067,894


$
305,007


5.05
%

$
7,447,463


$
273,162


4.90
%

$
31,845


$
8,578


$
23,267

Taxable investment securities
1,158,611


24,962


2.87
%

971,117


17,214


2.36
%

7,748


4,086


3,662

Tax-exempt investment securities
97,485


2,519


3.45
%

79,404


2,174


3.65
%

345


(128
)

473

Total securities
1,256,096


27,481


2.92
%

1,050,521


19,388


2.46
%

8,093


3,958


4,135

Interest-bearing deposits
700,840


11,758


2.24
%

521,361


6,670


1.71
%

5,088


2,416


2,672

Loans held for sale
290,384


8,966


4.12
%

302,102


9,948


4.39
%

(982
)

(605
)

(377
)
Total earning assets
10,315,214


353,212


4.58
%

9,321,447


309,168


4.43
%

44,044


14,347


29,697

Less: allowance for loan losses
(53,703
)





(48,044
)










Total nonearning assets
1,264,976






1,140,173











Total assets
$
11,526,487






$
10,413,576











Liabilities and Equity:

















Interest-bearing deposits

















Demand and money market
$
3,289,539


$
20,488


0.83
%

$
2,893,096


$
10,788


0.50
%

$
9,700


$
8,053


$
1,647

Savings
281,562


2,658


1.26
%

305,570


2,802


1.23
%

(144
)

81


(225
)
Certificates of deposit
2,456,360


41,364


2.25
%

1,998,427


22,057


1.48
%

19,307


13,447


5,860

Total interest-bearing deposits
6,027,461


64,510


1.43
%

5,197,093


35,647


0.92
%

28,863


21,581


7,282

Borrowings
661,216


9,559


1.91
%

889,885


10,899


1.62
%

(1,340
)

1,757


(3,097
)
Subordinated debt, net
248,064


8,885


4.78
%

252,220


9,105


4.81
%

(220
)

(71
)

(149
)
Total interest-bearing liabilities
6,936,741


82,954


1.60
%

6,339,198


55,651


1.17
%

27,303


23,267


4,036

Demand deposits
2,787,727






2,471,906











Other noninterest-bearing liabilities
221,806






166,928











Total liabilities
9,946,274






8,978,032











Shareholders’ equity
1,580,213






1,435,544











Total liabilities and equity
$
11,526,487






$
10,413,576











Net interest income (tax-equivalent basis)


$
270,258






$
253,517




$
16,741


$
(8,920
)

$
25,661

Reconcilement of Non-GAAP Financial Measures
















Tax-equivalent basis adjustment


(1,862
)





(1,652
)



(210
)




Net interest income (GAAP)


$
268,396






$
251,865




$
16,531























Interest rate spread (1)(3)




2.98
%





3.26
%






Interest expense as a percent of average earning assets




1.08
%





0.80
%






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




3.50
%





3.64
%






Total cost of deposits




0.98
%





0.62
%

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



September 30,

December 31,

2019

2018

(unaudited)

(audited)
ASSETS



Cash and due from banks
$
124,439


$
94,604

Interest-bearing deposits at Federal Reserve Bank
675,288


570,425

Interest-bearing deposits in financial institutions
21,663


21,667

Total Cash and Cash Equivalents
821,390


686,696

Securities available for sale, at fair value
1,337,395


1,095,339

Securities held to maturity, at amortized cost
44,494


50,598

Other equity securities
5,697


4,797

Federal Home Loan Bank stock
26,282


43,229

Total Securities
1,413,868


1,193,963

Mortgage loans held for sale
456,719


220,986

Loans, net of unearned income and deferred costs
8,182,829


8,018,233

Less: allowance for loan losses
(55,428
)

(52,094
)
Net Loans
8,127,401


7,966,139

Premises and equipment, net
231,060


211,796

Goodwill
446,423


433,658

Other intangible assets, net
57,404


58,752

Bank-owned life insurance policies
241,652


237,371

Other assets
225,374


153,669

TOTAL ASSETS
$
12,021,291


$
11,163,030





LIABILITIES AND EQUITY



Deposits:



Noninterest-bearing demand
$
3,030,505


$
2,622,761

Interest-bearing:



Demand and money market accounts
3,534,252


3,223,215

Savings
280,552


286,684

Certificates of deposit
2,592,705


2,237,762

Total Deposits
9,438,014


8,370,422

Advances from the Federal Home Loan Bank
381,846


799,315

Subordinated debt, net
248,309


247,861

Repurchase agreements and other borrowings
42,971


47,156

Total Borrowings
673,126


1,094,332

Other liabilities
271,617


159,856

TOTAL LIABILITIES
10,382,757


9,624,610

Preferred stock



Authorized and unissued shares - 2,000,000
—


—

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



72,633,517 and 72,465,923 shares issued at



September 30, 2019 and December 31, 2018, respectively
121,080


120,801

Capital surplus
1,039,156


1,034,676

Retained earnings
445,186


379,239

Common stock issued to deferred compensation trust, at cost



811,340 and 769,200 shares at



September 30, 2019 and December 31, 2018, respectively
(15,317
)

(13,955
)
Deferred compensation trust
15,317


13,955

Accumulated other comprehensive income (loss)
19,958


(9,190
)
TOTAL SHAREHOLDERS’ EQUITY
1,625,380


1,525,526

Noncontrolling interest
13,154


12,894

TOTAL EQUITY
1,638,534


1,538,420

TOTAL LIABILITIES AND EQUITY
$
12,021,291


$
11,163,030

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









Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018
INTEREST INCOME:















Loans, including fees
$
102,047


$
97,215


$
303,616


$
271,897

Investment securities
9,889


7,019


27,010


19,001

Interest-bearing deposits in financial institutions and federal funds sold
3,745


2,148


11,758


6,670

Mortgage loans held for sale
3,956


4,012


8,966


9,948

Total interest income
119,637


110,394


351,350


307,516

INTEREST EXPENSE:







Deposits
23,552


14,540


64,510


35,647

Advances from the Federal Home Loan Bank
1,935


4,153


9,288


10,755

Subordinated debt, net
2,962


2,962


8,885


9,105

Repurchase agreements and other borrowings
85


42


271


144

Total interest expense
28,534


21,697


82,954


55,651

Net interest income
91,103


88,697


268,396


251,865









PROVISION FOR LOAN LOSSES
1,508


1,241


5,770


6,249

Net interest income after provision for loan losses
89,595


87,456


262,626


245,616

NONINTEREST INCOME:







Residential mortgage banking income, net
18,855


15,804


50,929


52,152

Insurance commissions and other title fees and income, net
16,681


14,493


49,477


42,952

Real estate brokerage and property management income, net
9,444


8,542


27,555


25,881

Service charges on deposit accounts
2,253


3,028


8,299


8,880

Credit card merchant fees, net
1,514


1,563


3,357


4,174

Bank owned life insurance
2,117


1,657


5,350


4,822

Other income
3,981


4,130


11,754


10,520

Net gain/(loss) on investment securities
(69
)

—


(845
)

3

Total noninterest income
54,776


49,217


155,876


149,384

NONINTEREST EXPENSE:







Salaries and employee benefits
55,784


50,497


162,907


151,606

Occupancy expense
7,953


7,013


23,866


20,292

Furniture and equipment
3,805


3,646


10,753


10,890

Amortization - intangibles
3,059


2,996


9,364


8,587

Software expense
3,208


2,940


8,742


7,927

Outside data processing
2,533


2,917


9,316


7,898

Professional fees
3,566


1,908


9,952


6,295

Advertising and marketing
3,429


2,874


9,440


8,649

Other expenses
13,950


13,471


41,627


47,643

Total noninterest expense
97,287


88,262


285,967


269,787

Income before income tax expense and noncontrolling interest
47,084


48,411


132,535


125,213

Provision for income tax expense
7,684


9,159


24,810


23,879

Net income
$
39,400


$
39,252


$
107,725


$
101,334

Net income attributable to noncontrolling interest
(1,741
)

(959
)

(4,018
)

(3,531
)
Net income attributable to TowneBank
$
37,659


$
38,293


$
103,707


$
97,803

Per common share information







Basic earnings
$
0.52


$
0.53


$
1.44


$
1.38

Diluted earnings
$
0.52


$
0.53


$
1.44


$
1.38

Cash dividends declared
$
0.18


$
0.16


$
0.52


$
0.46

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


September 30,

June 30,

March 31,

December 31,

September 30,

2019

2019

2019

2018

2018

(unaudited)

(unaudited)

(unaudited)

(audited)

(unaudited)
ASSETS:









Cash and due from banks
$
124,439


$
110,580


$
104,091


$
94,604


$
106,485

Interest-bearing deposits at Federal Reserve Bank
675,288


834,505


775,208


570,425


582,099

Interest-bearing deposits in financial institutions
21,663


21,527


21,001


21,667


20,910

Total Cash and Cash Equivalents
821,390


966,612


900,300


686,696


709,494

Securities available for sale, at fair value
1,337,395


1,260,821


1,099,777


1,095,339


1,051,773

Securities held to maturity, at amortized cost
44,494


50,574


49,687


50,598


52,002

Other equity securities
5,697


5,396


5,022


4,797


5,519

Federal Home Loan Bank stock
26,282


32,657


41,464


43,229


46,393

Total Securities
1,413,868


1,349,448


1,195,950


1,193,963


1,155,687

Mortgage loans held for sale
456,719


362,773


247,021


220,986


333,354

Loans, net of unearned income and deferred costs
8,182,829


8,126,729


8,105,370


8,018,233


7,881,692

Less: allowance for loan losses
(55,428
)

(54,527
)

(53,303
)

(52,094
)

(50,236
)
Net Loans
8,127,401


8,072,202


8,052,067


7,966,139


7,831,456

Premises and equipment, net
231,060


230,177


227,458


211,796


210,724

Goodwill
446,423


442,881


442,881


433,658


427,117

Other intangible assets, net
57,404


58,391


61,333


58,752


58,165

Bank-owned life insurance policies
241,652


240,621


238,977


237,371


235,348

Other assets
225,374


219,375


202,276


153,669


159,887

TOTAL ASSETS
$
12,021,291


$
11,942,480


$
11,568,263


$
11,163,030


$
11,121,232

LIABILITIES AND EQUITY









Deposits:









Noninterest-bearing demand
$
3,030,505


$
2,950,615


$
2,813,857


$
2,622,761


$
2,671,558

Interest-bearing:









Demand and money market accounts
3,534,252


3,409,322


3,290,907


3,223,215


3,096,317

Savings
280,552


277,495


285,790


286,684


298,368

Certificates of deposit
2,592,705


2,631,386


2,341,134


2,237,762


2,233,188

Total Deposits
9,438,014


9,268,818


8,731,688


8,370,422


8,299,431

Advances from the Federal Home Loan Bank
381,846


532,004


739,160


799,315


873,469

Subordinated debt, net
248,309


248,160


248,010


247,861


247,712

Repurchase agreements and other borrowings
42,971


56,355


44,775


47,156


45,591

Total Borrowings
673,126


836,519


1,031,945


1,094,332


1,166,772

Other liabilities
271,617


230,691


238,974


159,856


155,205

TOTAL LIABILITIES
10,382,757


10,336,028


10,002,607


9,624,610


9,621,408

Preferred stock









Authorized shares - 2,000,000
—


—


—


—


—











Common stock, $1.667 par value
121,080


121,038


121,047


120,801


120,613

Capital surplus
1,039,156


1,036,982


1,035,563


1,034,676


1,032,863

Retained earnings
445,186


420,600


399,030


379,239


354,842

Common stock issued to deferred compensation









trust, at cost
(15,317
)

(15,160
)

(14,067
)

(13,955
)

(13,780
)
Deferred compensation trust
15,317


15,160


14,067


13,955


13,780

Accumulated other comprehensive income (loss)
19,958


15,143


(1,792
)

(9,190
)

(22,348
)
TOTAL SHAREHOLDERS’ EQUITY
1,625,380


1,593,763


1,553,848


1,525,526


1,485,970

Noncontrolling interest
13,154


12,689


11,808


12,894


13,854

TOTAL EQUITY
1,638,534


1,606,452


1,565,656


1,538,420


1,499,824

TOTAL LIABILITIES AND EQUITY
$
12,021,291


$
11,942,480


$
11,568,263


$
11,163,030


$
11,121,232

TOWNEBANK

Consolidated Statements of Income - Five Quarter Trend (unaudited)

(dollars in thousands, except share data)




Three Months Ended













September 30, 2019

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

INTEREST INCOME:




















Loans, including fees
$
102,047


$
101,874


$
99,695


$
99,446


$
97,215


Investment securities
9,889


8,987


8,134


8,126


7,019


Interest-bearing deposits in financial institutions and federal funds sold
3,745


4,015


3,998


3,559


2,148


Mortgage loans held for sale
3,956


3,007


2,003


3,176


4,012


Total interest income
119,637


117,883


113,830


114,307


110,394


INTEREST EXPENSE:










Deposits
23,552


21,784


19,174


17,495


14,540


Advances from the Federal Home Loan Bank
1,935


3,201


4,153


4,585


4,153


Subordinated debt
2,962


2,962


2,962


2,961


2,962


Repurchase agreements and other borrowings
85


117


68


58


42


Total interest expense
28,534


28,064


26,357


25,099


21,697


Net interest income
91,103


89,819


87,473


89,208


88,697













PROVISION FOR LOAN LOSSES
1,508


2,824


1,438


2,292


1,241


Net interest income after provision for loan losses
89,595


86,995


86,035


86,916


87,456


NONINTEREST INCOME:










Residential mortgage banking income, net
18,855


18,565


13,508


12,951


15,804


Insurance commissions and other title fees and income, net
16,681


17,213


15,582


13,212


14,493


Real estate brokerage and property management income, net
9,444


8,843


9,268


5,982


8,542


Service charges on deposit accounts
2,253


3,185


2,861


2,928


3,028


Credit card merchant fees, net
1,514


660


1,183


1,298


1,563


Bank owned life insurance
2,117


1,635


1,598


2,014


1,657


Other income
3,981


4,617


3,157


3,824


4,130


Net gain/(loss) on investment securities
(69
)

—


(776
)

—


—


Total noninterest income
54,776


54,718


46,381


42,209


49,217


NONINTEREST EXPENSE:










Salaries and employee benefits
55,784


54,263


52,860


50,233


50,497


Occupancy expense
7,953


7,662


8,251


7,352


7,013


Furniture and equipment
3,805


3,578


3,371


3,587


3,646


Amortization - intangibles
3,059


3,113


3,192


3,123


2,996


Software expense
3,208


2,788


2,745


2,694


2,940


Outside data processing
2,533


3,616


3,166


2,466


2,917


Professional fees
3,566


3,707


2,679


2,028


1,908


Advertising and marketing
3,429


3,182


2,829


2,546


2,874


Other expenses
13,950


14,647


13,030


8,308


13,471


Total noninterest expense
97,287


96,556


92,123


82,337


88,262


Income before income tax expense and noncontrolling interest
47,084


45,157


40,293


46,788


48,411


Provision for income tax expense
7,684


8,915


8,211


10,348


9,159


Net income
39,400


36,242


32,082


36,440


39,252


Net income attributable to noncontrolling interest
(1,741
)

(1,604
)

(673
)

(450
)

(959
)

Net income attributable to TowneBank
$
37,659


$
34,638


$
31,409


$
35,990


$
38,293


Per common share information










Basic earnings
$
0.52


$
0.48


$
0.44


$
0.50


$
0.53


Diluted earnings
$
0.52


$
0.48


$
0.44


$
0.50


$
0.53


Basic weighted average shares outstanding
72,091,221


72,044,817


71,992,330


71,905,956


71,875,085


Diluted weighted average shares outstanding
72,222,934


$
72,145,600


72,099,558


72,043,369


72,044,355


Cash dividends declared
$
0.18


$
0.18


$
0.16


$
0.16


$
0.16

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


Three Months Ended

Nine Months Ended

Increase/(Decrease)

September 30,

June 30,

September 30,

2019 over 2018

2019

2018

2019

2019

2018

Amount

Percent
Revenue













Net interest income
$
89,490


$
85,423


$
88,442


$
264,332


$
243,151


$
21,181


8.71
%
Service charges on deposit













accounts
2,253


3,028


3,185


8,299


8,880


(581
)

(6.54
)%
Credit card merchant fees
1,514


1,563


660


3,357


4,174


(817
)

(19.57
)%
Other income
5,152


4,300


5,273


14,350


12,318


2,032


16.50
%
Subtotal
8,919


8,891


9,118


26,006


25,372


634


2.50
%
Net gain/(loss) on investment securities
(69
)

—


—


(845
)

3


(848
)

N/M
Total noninterest income
8,850


8,891


9,118


25,161


25,375


(214
)

(0.84
)%
Total revenue
98,340


94,314


97,560


289,493


268,526


20,967


7.81
%














Provision for loan losses
1,508


1,241


2,824


5,770


6,249


(479
)

(7.67
)%














Expenses













Salaries and employee benefits
33,526


28,329


32,353


96,966


86,372


10,594


12.27
%
Occupancy expense
5,209


4,331


5,007


15,460


12,621


2,839


22.49
%
Furniture and equipment
2,779


2,463


2,517


7,662


7,485


177


2.36
%
Amortization of intangibles
1,265


1,479


1,315


3,946


4,230


(284
)

(6.71
)%
Other expenses
17,098


14,829


18,938


52,218


50,940


1,278


2.51
%
Total expenses
59,877


51,431


60,130


176,252


161,648


14,604


9.03
%
Income before income tax, corporate allocation and noncontrolling interest
36,955


41,642


34,606


107,471


100,629


6,842


6.80
%
Corporate allocation
384


438


546


1,383


1,370


13


0.95
%
Income before income tax provision and noncontrolling interest
37,339


42,080


35,152


108,854


101,999


6,855


6.72
%
Provision for income tax expense
5,495


7,604


6,650


19,337


18,629


708


3.80
%
Net income
31,844


34,476


28,502


89,517


83,370


6,147


7.37
%
Noncontrolling interest
—


(4
)

1


4


(12
)

16


N/M
Net income attributable to TowneBank
$
31,844


$
34,472


$
28,503


$
89,521


$
83,358


$
6,163


7.39
%














Efficiency ratio
60.85
%

54.53
%

61.63
%

60.71
%

60.20
%

0.51
%

0.85
%

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


Three Months Ended

Nine Months Ended

Increase/(Decrease)

September 30,

June 30,

September 30,

2019 over 2018

2019

2018

2019

2019

2018

Amount

Percent
Revenue













Residential mortgage brokerage income, net
$
19,171


$
16,219


$
18,898


$
51,826


$
53,223


$
(1,397
)

(2.62
)%
Real estate brokerage income, net
2,882


2,758


2,873


7,315


7,275


40


0.55
%
Title insurance and settlement fees
617


525


594


1,581


1,420


161


11.34
%
Property management fees, net
6,562


5,783


5,970


20,240


18,606


1,634


8.78
%
Income from unconsolidated subsidiary
185


122


162


441


316


125


39.56
%
Net interest and other income
1,885


4,111


1,677


4,937


9,999


(5,062
)

(50.63
)%
Total revenue
31,302


29,518


30,174


86,340


90,839


(4,499
)

(4.95
)%














Expenses













Salaries and employee benefits
13,474


14,862


13,309


39,678


44,142


(4,464
)

(10.11
)%
Occupancy expense
2,055


2,084


2,028


6,428


5,942


486


8.18
%
Furniture and equipment
754


952


803


2,326


2,768


(442
)

(15.97
)%
Amortization of intangible assets
666


672


695


2,086


2,015


71


3.52
%
Other expenses
7,478


7,543


7,234


20,953


21,996


(1,043
)

(4.74
)%
Total expenses
24,427


26,113


24,069


71,471


76,863


(5,392
)

(7.02
)%














Income before income tax, corporate allocation and noncontrolling interest
6,875


3,405


6,105


14,869


13,976


893


6.39
%
Corporate allocation
(208
)

(270
)

(328
)

(800
)

(853
)

53


(6.21
)%
Income before income tax provision and noncontrolling interest
6,667


3,135


5,777


14,069


13,123


946


7.21
%
Provision for income tax expense
1,454


786


1,287


3,292


2,977


315


10.58
%
Net income
5,213


2,349


4,490


10,777


10,146


631


6.22
%
Noncontrolling interest
(1,496
)

(756
)

(1,248
)

(2,997
)

(2,268
)

(729
)

32.14
%
Net income attributable to TowneBank
$
3,717


$
1,593


$
3,242


$
7,780


$
7,878


$
(98
)

(1.24
)%














Efficiency ratio
78.04
%

88.46
%

79.77
%

82.78
%

84.61
%

(1.83
)%

(2.16
)%

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


Three Months Ended

Nine Months Ended

Increase/(Decrease)

September 30,

June 30,

September 30,

2019 over 2018

2019

2018

2019

2019

2018

Amount

Percent
Commission and fee income













Property and casualty
$
13,481


$
10,762


$
13,067


$
38,421


$
31,178


$
7,243


23.23
%
Employee benefits
3,629


3,813


3,833


10,968


10,463


505


4.83
%
Travel insurance
834


871


1,169


3,292


4,028


(736
)

(18.27
)%
Specialized benefit services
166


166


163


499


506


(7
)

(1.38
)%
Total commissions and fees
18,110


15,612


18,232


53,180


46,175


7,005


15.17
%














Contingency and bonus revenue
1,431


1,137


1,893


4,910


3,703


1,207


32.60
%
Other income
74


75


79


227


215


12


5.58
%
Total revenue
19,615


16,824


20,204


58,317


50,093


8,224


16.42
%














Employee commission expense
3,378


2,742


3,401


9,878


8,209


1,669


20.33
%
Revenue, net of commission expense
16,237


14,082


16,803


48,439


41,884


6,555


15.65
%














Salaries and employee benefits
8,784


7,306


8,601


26,263


21,092


5,171


24.52
%
Occupancy expense
689


598


627


1,978


1,729


249


14.40
%
Furniture and equipment
272


232


258


765


637


128


20.09
%
Amortization of intangible assets
1,128


845


1,103


3,332


2,342


990


42.27
%
Other expenses
2,110


1,737


1,768


5,906


5,476


430


7.85
%
Total operating expenses
12,983


10,718


12,357


38,244


31,276


6,968


22.28
%
Income before income tax, corporate allocation and noncontrolling interest
3,254


3,364


4,446


10,195


10,608


(413
)

(3.89
)%
Corporate allocation
(176
)

(168
)

(218
)

(583
)

(517
)

(66
)

12.77
%
Income before income tax provision and noncontrolling interest
3,078


3,196


4,228


9,612


10,091


(479
)

(4.75
)%
Provision for income tax expense
735


769


978


2,181


2,273


(92
)

(4.05
)%
Net income
2,343


2,427


3,250


7,431


7,818


(387
)

(4.95
)%
Noncontrolling interest
(245
)

(199
)

(357
)

(1,025
)

(1,251
)

226


(18.07
)%
Net income attributable to TowneBank
$
2,098


$
2,228


$
2,893


$
6,406


$
6,567


$
(161
)

(2.45
)%














Provision for income taxes
735


769


978


2,181


2,273


(92
)

(4.05
)%
Depreciation, amortization and interest expense
1,325


1,068


1,309


3,943


2,982


961


32.23
%
EBITDA (non-GAAP)
$
4,158


$
4,065


$
5,180


$
12,530


$
11,822


$
708


5.99
%














Efficiency ratio
79.96
%

76.11
%

73.54
%

78.95
%

74.67
%

4.28
%

5.73
%

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






Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2018

June 30, 2019

September 30, 2019

September 30, 2018
Return on average assets (GAAP)
1.26
%

1.40
%

1.20
%

1.20
%

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

0.16
%

0.15
%

0.15
%

0.15
%
Return on average tangible assets (non-GAAP)
1.40
%

1.56
%

1.35
%

1.35
%

1.41
%










Return on average equity (GAAP)
9.22
%

10.21
%

8.83
%

8.77
%

9.11
%
Impact of excluding average goodwill and other intangibles and amortization
4.98
%

5.87
%

5.07
%

5.02
%

5.27
%
Return on average tangible equity (non-GAAP)
14.20
%

16.08
%

13.90
%

13.79
%

14.38
%










Return on average common equity (GAAP)
9.29
%

10.30
%

8.89
%

8.84
%

9.18
%
Impact of excluding average goodwill and other intangibles and amortization
5.07
%

6.00
%

5.16
%

5.11
%

5.37
%
Return on average tangible common equity (non-GAAP)
14.36
%

16.30
%

14.05
%

13.95
%

14.55
%










Book value (GAAP)
$
22.38


$
20.54


$
21.95


$
22.38


$
20.54

Impact of excluding average goodwill and other intangibles and amortization
(6.94
)

(6.71
)

(6.90
)

(6.94
)

(6.71
)
Tangible book value (non-GAAP)
$
15.44


$
13.83


$
15.05


$
15.44


$
13.83











Average assets (GAAP)
$
11,845,282


$
10,844,570


$
11,532,278


$
11,526,487


$
10,413,575

Less: average goodwill
442,919


425,725


442,881


442,890


405,726

Less: average intangible assets
57,327


59,492


60,339


60,333


57,251

Average tangible assets (non-GAAP)
$
11,345,036


$
10,359,353


$
11,029,058


$
11,023,264


$
9,950,598











Average equity (GAAP)
$
1,620,070


$
1,488,368


$
1,573,855


$
1,580,213


$
1,435,544

Less: average goodwill
442,919


425,725


442,881


442,890


405,726

Less: average intangible assets
57,327


59,492


60,339


60,333


57,251

Average tangible equity (non-GAAP)
$
1,119,824


$
1,003,151


$
1,070,635


$
1,076,990


$
972,567











Average common equity (GAAP)
$
1,607,853


$
1,474,833


$
1,562,214


$
1,568,336


$
1,423,787

Less: average goodwill
442,919


425,725


442,881


442,890


405,726

Less: average intangible assets
57,327


59,492


60,339


60,333


57,251

Average tangible common equity (non-GAAP)
$
1,107,607


$
989,616


$
1,058,994


$
1,065,113


$
960,810

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


September 30, 2019

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018
Net income (GAAP)

$
37,659


$
34,638


$
31,409


$
35,990


$
38,293












Acquisition-related expenses

207


20


411


(1,518
)

424

Income tax expense -tax reform legislation

—


—


—


696


—

Income tax expense (benefit) - other items

(20
)

(3
)

(52
)

355


(44
)
Income tax expense (benefit)

(20
)

(3
)

(52
)

1,051


(44
)
Total charges, net of taxes

187


17


359


(467
)

380

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

$
37,846


$
34,655


$
31,768


$
35,523


$
38,673

Weighted average diluted shares

72,222,934


72,145,600


72,099,558


72,043,369


72,044,355

Diluted EPS (GAAP)

$
0.52


$
0.48


$
0.44


$
0.50


$
0.53

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

$
0.52


$
0.48


$
0.44


$
0.49


$
0.54

Average assets

$
11,845,282


$
11,532,278


$
11,194,753


$
11,149,960


$
10,844,570

Average tangible equity

$
1,119,824


$
1,070,635


1,039,630


$
1,022,982


$
1,003,151

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

1.27
%

1.21
%

1.15
%

1.26
%

1.41
%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)

14.26
%

13.90
%

13.38
%

14.73
%

16.23
%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)

14.42
%

14.06
%

13.53
%

14.93
%

16.45
%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)

66.52
%

66.79
%

68.12
%

63.81
%

63.69
%

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

Nine months ended


September 30, 2019

September 30, 2018
Net income (GAAP)

$
103,707


$
97,803








Acquisition-related expenses

638


9,947

Total charges

638


9,947

Income tax expense (benefit) - other items

(75
)

(1,776
)
Income tax expense (benefit)

(75
)

(1,776
)
Total charges, net of taxes

563


8,171

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

$
104,270


$
105,974

Weighted average diluted shares

72,152,643


71,043,039

Diluted EPS (GAAP)

$
1.44


$
1.38

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

$
1.45


$
1.49

Average assets

$
11,526,487


$
10,413,575

Average tangible equity

$
1,076,990


$
972,567

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

1.21
%

1.36
%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)

13.86
%

15.50
%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)

14.02
%

15.69
%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)

67.12
%

64.76
%

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

Twitter