TowneBank Reports Higher Earnings for Third Quarter 2009

• Press Release
• Source: TowneBank
• On 2:07 pm EST, Thursday November 5, 2009

SUFFOLK, Va., Nov. 5, 2009 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank (Nasdaq:TOWN - News) reported record net income of $7.12 million for the quarter ended September 30, 2009 representing a 11.01% increase over the third quarter results in 2008.

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Symbol	Price	Change
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Net income available to common shareholders was $4.78 million after accretion and preferred dividend payments of $2.34 million on the Bank's preferred equity issued during the third and fourth quarters of 2008. Accordingly fully diluted earnings per common share were reduced to $0.19 per share as compared to $0.25 for the prior year. The Bank's common dividend remained at $0.08 per share with the common dividend payout totaling $2.03 million.

For the third quarter, net interest income was $26.36 million, an increase of 14.98% over last year. The increase in net interest income was driven primarily by loan growth of $298.54 million, representing a 13.57% increase over last year. The Bank's net interest margin was 3.24% as compared to 3.12% in the linked quarter and 3.52% for the same period last year.

Noninterest income increased 32.38% to $15.52 million. This significant growth can be partially attributed to the rise in residential mortgage brokerage income, which increased $1.61 million or 120.86% from the comparative period in 2008. Real estate brokerage and property management revenue increased 50.69% to $4.17 million due largely to the formation of Prudential Towne Realty in the first quarter of 2009. Third quarter 2009 income also included a gain of $1.18 million on the sale of available-for-sale securities as a result of the continuation of management's strategy to shorten duration in the investment portfolio.

Noninterest expense increased $3.83 million or 15.92% over the prior year quarter, while decreasing from the linked quarter by $684 thousand or 2.40%. The Bank's second quarter results included a $1.57 million special assessment expense as the FDIC imposed an additional insurance premium on the banking industry to replenish the deposit insurance fund.

Balance Sheet

Total Bank assets grew to a record level of $3.58 billion, an increase of $560.38 million over third quarter 2008. Towne continues to meet the credit needs of the community with total loans reaching $2.50 billion, an increase of 13.57% over the prior year. Total deposits climbed to $2.65 billion, representing a 20.54% increase over the comparable period of 2008. The Bank's risk-based and tangible capital ratios remain well above regulatory standards for well-capitalized banks.

Asset Quality

The Bank's loan portfolio continues to perform well compared to the overall banking industry. Non-performing assets at September 30, 2009 were $27.51 million or 0.77% of total assets, up from a negligible 0.09% last year. Net losses for the quarter were $3.32 million or 0.54% of average loans. The loan loss provision, which increased in part due to loan growth, was $3.47 million as compared to $1.57 million for the same period last year. The Bank's loan loss reserve ended the quarter at 1.17%, up slightly from 1.16% for the comparable period last year.

"Our favorable operating results can be attributed to a great team effort on the part of our hometown bankers," stated G. Robert Aston, Jr., Chairman and CEO. "I am particularly proud of the caring our bankers are demonstrating in working with our community businesses to help restore their financial health. During these challenging economic conditions, it is a responsibility we take very seriously."

As one of Virginia's top community banks, TowneBank now operates 18 banking offices in Chesapeake, Hampton, Portsmouth, Newport News, Virginia Beach, Norfolk, Williamsburg and York County. Towne also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Insurance Agency, TFA Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Prudential Towne Realty, Towne 1031 Exchange, LLC, Corolla Classic Vacations and Corolla Real Estate. Through its strategic partnership with William E. Wood and Associates, the bank also offers mortgage services in all of their offices in Hampton Roads and Northeastern North Carolina. 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 $3.58 billion as of September 30, 2009, TowneBank is one of the largest banks headquartered in Virginia.

Forward-Looking Statements:

This release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include competitive pressures in the banking industry that may increase significantly; changes in the interest rate environment may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit or other services; changes in the legislative or regulatory environment, including changes in accounting standards, may adversely affect our business; costs or difficulties; related to the integration of the business and the businesses we have acquired may be greater than expected; expected cost savings associated with pending or recently completed acquisitions may not be fully realized or realized within the expected time frame; our competitors may have greater financial resources and develop products that enable them to compete more successfully; changes in business conditions, changes in the securities market and changes in our local economy with regards to our market area and its heavy concentration of U. S. military bases and related personnel. We assume no obligation to update information contained in this release.

TowneBank
G. Robert Aston, Chairman and CEO
  757-638-6780
Clyde E. McFarland, Jr., Senior Executive Vice President
 and CFO
  757-638-6801