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TowneBank Reports Full Year and Fourth Quarter Financial Results for 2018

19th Consecutive Year of Earnings Improvement

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

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

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

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

  • Total revenues were $131.42 million, an increase of $22.28 million, or 20.41%.

  • Loans held for investment increased $2.07 billion, or 34.83%, from December 31, 2017, and $0.14 billion, or 1.73%, from September 30, 2018, or 6.87% on an annualized basis. Excluding loans acquired in the Paragon merger of $1.43 billion, loans increased $638.77 million, or 10.74% from December 31, 2017.

  • Total deposits were $8.37 billion, an increase of $1.92 billion, or 29.81%.

  • Noninterest bearing deposits increased by 21.57%, to $2.62 billion, representing 31.33% of total deposits.

  • Annualized return on common shareholders' equity of 9.53% and annualized return on average tangible common shareholders' equity of 15.11% (non-GAAP).

  • Net interest margin of 3.53% and taxable equivalent net interest margin of 3.55% (non-GAAP).

  • Effective tax rate of 22.33% benefiting from the lower federal rate related to Tax Reform, partially offset by the finalization of the provisional component of the Tax Reform impact.

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

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

  • Net interest income was $89.21 million compared to $65.66 million for the quarter ended December 31, 2017.

  • Taxable equivalent net interest margin was 3.55%, including accretion of 12 basis points, compared to 3.41%, including accretion of 9 basis points, for 2017.

  • Total cost of deposits increased to 0.83% from 0.49% at December 31, 2017.

  • Average interest-earning assets totaled $10.02 billion at December 31, 2018 compared to $7.73 billion at December 31, 2017, an increase of 29.69%.

  • Average loans held for investment represented 79.04% of average earning assets in the fourth quarter of 2018 compared to 76.59% in the fourth quarter of 2017.

  • Average interest-bearing liabilities totaled $6.83 billion, an increase of $1.69 billion from the prior year.

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

Discount Accretion (Premium Amortization)

For the three months ended

March 31,

June 30,

September 30,

December 31,

2019

2019

2019

2019

Assets:

Investment Securities

$

(72

)

$

(72

)

$

(70

)

$

(70

)

Loans

1,730

2,040

1,482

1,469

Liabilities:

Deposits

60

54

51

47

Total estimated effect on net interest income

$

1,598

$

1,914

$

1,361

$

1,352

Note: This information is intended for informational purposes only and is not necessarily indicative of future results.

Actual results may differ due to factors such as changes in estimated prepayment speeds or projected credit loss rates.

Quarterly Provision for Loan Losses:

  • Recorded a provision for loan losses of $2.29 million compared to $0.87 million one year ago and $1.24 million in the prior quarter.

  • Net charge-offs were $0.43 million compared to $0.14 million one year prior. The ratio of net charge-offs to average loans on an annualized basis was 0.02% compared to 0.03% in the prior quarter and 0.01% for the fourth quarter of 2017.

  • The allowance for loan losses represented 0.65% of total loans compared to 0.64% at September 30, 2018 and 0.76% at December 31, 2017. Loan loss reserve as a percentage of total loans, excluding purchased loans, remained unchanged at 0.82%, from September 30, 2018, and decreased from 0.86% at December 31, 2017. The allowance for loan losses was 10.97 times nonperforming loans compared to 7.25 times at September 30, 2018 and 9.39 times at December 31, 2017.

Quarterly Noninterest Income Compared to the Fourth Quarter of 2017:

  • Total noninterest income was $42.21 million compared to $43.48 million in 2017. Increases of $1.16 million in real estate brokerage and property management income and $1.10 million in insurance commissions were offset by a decrease in residential mortgage brokerage income of $4.59 million.

  • Property management fee revenue increased 39.08%, or $1.07 million, primarily related to a change in the timing of revenue recognition due to the adoption of new accounting guidance on revenue recognition. The change in accounting guidance resulted in an increase of property management fee income for the fourth quarter of approximately $0.84 million.

  • Insurance segment total revenue increased $1.75 million or 12.31% to $15.92 million in the fourth quarter. The increase is primarily attributable to revenue generated by insurance agencies acquired in the second and fourth quarters of 2018, in addition to a rise in revenue from benefit insurance.

  • Residential mortgage banking income was $12.95 million compared to $17.54 million in fourth quarter 2017. Loan volume in the current quarter was $600.07 million, with purchases comprising $531.87 million and refinancing activity accounting for $68.20 million. Loan volume in fourth quarter 2017 was $797.74 million, with purchase activity of $657.28 million and refinancing activity of $140.46 million. Lower volumes and continued pressure on gain on sale margin led to the decline in revenue.

Quarterly Noninterest Expense Compared to the Fourth Quarter of 2017:

  • Total noninterest expense was $82.34 million compared to $73.66 million, an increase of $8.68 million, or 11.78%. This reflects increases of $8.27 million in salary and benefits expense, $1.29 million in intangible amortization expense, and $0.89 million in outside processing expenses.

  • Noninterest expense included operational expenses of entities acquired subsequent to fourth quarter 2017 of $8.75 million, primarily in our Banking and Insurance segments. Excluding acquired entity expenses, noninterest expense was $73.59 million for the quarter ended December 31, 2018, or a decrease of 0.09% compared to 2017.

Quarterly Income Taxes Compared to the Fourth Quarter of 2017:

  • Income tax expense was $10.35 million compared to $21.33 million, one year prior. This represents an effective tax rate of 22.33% compared to 33.31% in the fourth quarter of 2017.

  • The decrease in the effective tax rate from the prior year is due to Tax Reform, signed into law on December 22, 2017. The reduction from 35% to 21% of the U.S. federal corporate tax rate was among the key changes to U.S. tax law, effective January 1, 2018. Included in income tax expense in fourth quarter 2017 was $10.11 million related to the revaluation of deferred tax assets due to Tax Reform, and a final adjustment in fourth quarter 2018 to the Tax Reform provision of $0.70 million.

Investment Securities:

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

Loans:

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

% Change

Annualized

Q4

Q4

Q3

Q4 18 vs.

Q4 18 vs.

(dollars in thousands)

2018

2017

2018

Q4 17

Q3 18

Construction and land development

$

1,067,239

$

930,426

$

1,016,120

14.70

%

19.96

%

Commercial real estate - investment related properties

1,978,592

1,344,774

1,957,297

47.13

%

4.32

%

Commercial real estate - owner occupied

1,262,748

938,767

1,259,368

34.51

%

1.06

%

Multifamily real estate

260,987

198,720

284,423

31.33

%

(32.69

)%

1-4 family residential real estate

1,626,896

1,217,349

1,608,517

33.64

%

4.53

%

Commercial and industrial business loans

1,510,364

1,087,157

1,447,794

38.93

%

17.15

%

Consumer loans and other

311,407

229,772

308,173

35.53

%

4.16

%

Total

$

8,018,233

$

5,946,965

$

7,881,692

34.83

%

6.87

%

Asset Quality:

  • Nonperforming assets declined to $24.17 million, or 0.22% of total assets, compared to $28.09 million, or 0.33% of total assets, at December 31, 2017.

  • Nonperforming loans were 0.06% of period end loans.

  • Foreclosed property decreased to $17.16 million from $19.82 million at December 31, 2017.

Deposits and Borrowings:

  • Total deposits were $8.37 billion compared to $8.30 billion at September 30, 2018 and $6.45 billion at December 31, 2017. The increase in deposits includes $1.25 billion acquired in the Paragon merger.

  • Total loans to total deposits were 95.79% compared to 94.97% at September 30, 2018 and 92.23% at December 31, 2017.

  • Non-interest bearing deposits were 31.33% of total deposits at December 31, 2018 compared to 32.19% at September 30, 2018 and 33.46% at December 31, 2017. Non-interest bearing deposits were affected by seasonality in the fourth quarter.

  • Total borrowings were $1.09 billion compared to $1.17 billion and $0.80 billion at September 30, 2018 and December 31, 2017, respectively.

% Change

Annualized

Q4

Q4

Q3

Q4 18 vs.

Q4 18 vs.

(dollars in thousands)

2018

2017

2018

Q4 17

Q3 18

Noninterest-bearing demand

$

2,622,761

$

2,157,338

$

2,671,558

21.57

%

(7.25

)%

Interest-bearing:

Demand and money market accounts

3,223,215

2,225,211

3,096,317

44.85

%

16.26

%

Savings

286,684

315,889

298,368

(9.25

)%

(15.54

)%

Certificates of deposits

2,237,762

1,749,782

2,233,188

27.89

%

0.81

%

Total

$

8,370,422

$

6,448,220

$

8,299,431

29.81

%

3.39

%

Capital:

  • Common equity tier 1 capital ratio of 11.64%.

  • Tier 1 leverage capital ratio of 9.87%.

  • Tier 1 risk-based capital ratio of 11.67%.

  • Total risk-based capital ratio of 15.00%.

  • Book value was $21.05 compared to $20.54 at September 30, 2018 and $18.06 at December 31, 2017.

  • Tangible book value was $14.26 compared to $13.83 at September 30, 2018 and $13.13 at December 31, 2017.

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

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 40 banking offices serving Chesapeake, Chesterfield County, Glen Allen, Hampton, James City County, Mechanicsville, Newport News, Norfolk, Portsmouth, Richmond, Suffolk, Virginia Beach, Williamsburg, and York County in Virginia, along with Raleigh, Cary, Charlotte, Moyock, Grandy, Camden County, Southern Shores, Corolla and Nags Head in North Carolina. TowneBank also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations. Local decision-making is a hallmark of its hometown banking strategy that is delivered through the leadership of each group’s President and Board of Directors. With total assets of $11.16 billion as of December 31, 2018, TowneBank is one of the largest banks headquartered in Virginia.

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

Forward-Looking Statements:
Certain statements contained in this release constitute forward-looking statements within the meaning of U.S. federal securities laws. These forward-looking statements speak only as of the date of this release, are based on current expectations, and involve a number of assumptions. These include statements regarding TowneBank’s future economic performance, financial condition, prospects, growth, strategies and expectations, and objectives of management, and are generally identified by the use of words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” or “project” or similar expressions. TowneBank intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. You should not place undue reliance on forward-looking statements, which are subject to assumptions that are subject to change. TowneBank’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ from those indicated or implied in the forward-looking statements and such differences may be material. Factors which could have a material effect on the operations and future prospects of TowneBank include but are not limited to: changes in interest rates, general economic and business conditions; legislative/regulatory changes; the monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; the quality and composition of TowneBank’s loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBank’s market areas; implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; changes in accounting principles, policies and guidelines; and other risk factors detailed from time to time in filings made by TowneBank with the FDIC. TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

Media contact:
G. Robert Aston, Jr., Executive Chairman, 757-638-6780
J. Morgan Davis, President and Chief Executive Officer, 757-673-1673

Investor contact:
William B. Littreal, Chief Financial Officer, 757-638-6813

TOWNEBANK

Selected Financial Highlights (unaudited)

(dollars in thousands, except per share data)

Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

2018

2018

2018

2018

2017

Income and Performance Ratios:

Total Revenue

$

131,417

$

137,915

$

137,058

$

126,276

$

109,141

Net income

36,440

39,252

36,138

25,943

13,287

Net income attributable to TowneBank

35,990

38,293

34,804

24,705

12,333

Net income per common share - diluted

0.50

0.53

0.48

0.36

0.20

Book value per common share

21.05

20.54

20.22

19.90

18.06

Tangible book value per share (non-GAAP)

14.26

13.83

13.50

13.34

13.13

Return on average assets

1.28

%

1.40

%

1.32

%

1.02

%

0.57

%

Return on average assets - tangible (non-GAAP)

1.43

%

1.56

%

1.48

%

1.15

%

0.65

%

Return on average equity

9.44

%

10.21

%

9.55

%

7.39

%

4.26

%

Return on average equity - tangible (non-GAAP)

14.91

%

16.08

%

15.19

%

11.64

%

6.39

%

Return on average common equity

9.53

%

10.30

%

9.62

%

7.45

%

4.30

%

Return on average common equity - tangible (non-GAAP)

15.11

%

16.30

%

15.36

%

11.77

%

6.47

%

Noninterest income as a percentage of total revenue

32.12

%

35.69

%

36.65

%

39.54

%

39.84

%

Regulatory Capital Ratios (1):

Common equity tier 1

11.64

%

11.53

%

11.33

%

11.65

%

12.19

%

Tier 1

11.67

%

11.57

%

11.36

%

11.68

%

12.23

%

Total

15.00

%

14.90

%

14.71

%

15.27

%

16.48

%

Tier 1 leverage ratio

9.87

%

9.98

%

10.00

%

9.97

%

10.17

%

Asset Quality:

Allowance for loan losses to nonperforming loans

10.97

x

7.25

x

12.64

x

10.40

x

9.39

x

Allowance for loan losses to period end loans

0.65

%

0.64

%

0.64

%

0.63

%

0.76

%

Allowance for loan losses to period end loans excluding purchased loans

0.82

%

0.82

%

0.84

%

0.86

%

0.86

%

Nonperforming loans to period end loans

0.06

%

0.09

%

0.05

%

0.06

%

0.08

%

Nonperforming assets to period end assets

0.22

%

0.25

%

0.24

%

0.27

%

0.33

%

Net charge-offs to average loans (annualized)

0.02

%

0.03

%

0.01

%

0.02

%

0.01

%

Nonperforming loans

$

4,749

$

6,926

$

3,919

$

4,495

$

4,807

Former bank premises

2,253

2,253

2,253

2,253

3,469

Foreclosed property

17,163

18,153

20,133

21,731

19,818

Total nonperforming assets

$

24,165

$

27,332

$

26,305

$

28,479

$

28,094

Loans past due 90 days and still accruing interest

$

394

$

153

$

22

$

199

$

103

Allowance for loan losses

$

52,094

$

50,236

$

49,535

$

46,735

$

45,131

Mortgage Banking:

Loans originated, mortgage

$

531,871

$

561,543

$

667,189

$

478,039

$

585,567

Loans originated, joint venture

68,196

249,956

284,337

185,306

212,173

Total loans originated

$

600,067

$

811,499

$

951,526

$

663,345

$

797,740

Number of loans originated

2,472

3,068

3,687

2,603

3,061

Average number of originators

314

329

336

330

302

Purchase %

88.89

%

90.00

%

91.50

%

81.80

%

83.10

%

Loans sold

$

695,521

$

853,981

$

827,575

$

679,167

$

806,323

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

3.18

%

3.18

%

3.11

%

3.38

%

3.45

%

Other Ratios:

Net interest margin

3.53

%

3.62

%

3.69

%

3.51

%

3.37

%

Net interest margin-fully tax equivalent (non-GAAP)

3.55

%

3.64

%

3.71

%

3.54

%

3.41

%

Average earning assets/total average assets

89.91

%

89.69

%

89.61

%

89.45

%

90.09

%

Average loans/average deposits

95.32

%

97.55

%

97.79

%

95.89

%

91.10

%

Average noninterest deposits/total average deposits

31.90

%

32.61

%

32.28

%

31.75

%

33.27

%

Period end equity/period end total assets

13.78

%

13.49

%

13.63

%

13.65

%

13.41

%

Efficiency ratio

62.65

%

64.00

%

65.10

%

73.10

%

67.49

%

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


TOWNEBANK

Average Balances, Yields and Rate Paid (unaudited)

(dollars in thousands)

Three Months Ended

Three Months Ended

Three Months Ended

December 31, 2018

September 30, 2018

December 31, 2017

Interest

Average

Interest

Average

Interest

Average

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets:

Loans (net of unearned income
and deferred costs), excluding
nonaccrual loans

$

7,923,978

$

99,895

5.00

%

$

7,825,065

$

97,704

4.95

%

$

5,920,302

$

70,019

4.69

%

Taxable investment securities

1,101,892

7,515

2.73

%

1,022,051

6,403

2.51

%

644,875

3,237

2.01

%

Tax-exempt investment securities

80,656

747

3.70

%

82,235

766

3.73

%

46,825

386

3.30

%

Interest-bearing deposits

652,131

3,559

2.17

%

450,455

2,149

1.89

%

825,164

2,661

1.28

%

Loans held for sale

266,058

3,176

4.77

%

346,806

4,012

4.63

%

292,697

2,874

3.93

%

Total earning assets

10,024,715

114,892

4.55

%

9,726,612

111,034

4.53

%

7,729,863

79,177

4.06

%

Less: allowance for loan losses

(50,792

)

(50,144

)

(44,704

)

Total nonearning assets

1,176,037

1,168,102

894,547

Total assets

$

11,149,960

$

10,844,570

$

8,579,706

Liabilities and Equity:

Interest-bearing deposits

Demand and money market

$

3,122,973

$

5,670

0.72

%

$

2,957,038

$

4,217

0.57

%

$

2,247,745

$

2,091

0.37

%

Savings

293,135

1,022

1.38

%

301,311

984

1.30

%

320,218

870

1.08

%

Certificates of deposit

2,245,039

10,803

1.91

%

2,147,337

9,339

1.73

%

1,768,212

5,141

1.15

%

Total interest-bearing deposits

5,661,147

17,495

1.23

%

5,405,686

14,540

1.07

%

4,336,175

8,102

0.74

%

Borrowings

920,389

4,643

1.97

%

920,380

4,195

1.78

%

554,039

1,819

1.28

%

Subordinated debentures

247,769

2,961

4.78

%

247,615

2,962

4.78

%

247,152

2,880

4.66

%

Total interest-bearing liabilities

6,829,305

25,099

1.46

%

6,573,681

21,697

1.31

%

5,137,366

12,801

0.99

%

Noninterest bearing demand deposits

2,651,495

2,615,946

2,162,271

Other noninterest-bearing liabilities

157,238

166,575

130,181

Total liabilities

9,638,038

9,356,202

7,429,818

Shareholders’ equity

1,511,922

1,488,368

1,149,888

Total liabilities and equity

$

11,149,960

$

10,844,570

$

8,579,706

Net interest income (tax-equivalent basis)

$

89,793

$

89,337

$

66,376

Reconcilement of Non-GAAP Financial Measures

Tax-equivalent basis adjustment

(585

)

(640

)

(712

)

Net interest income (GAAP)

$

89,208

$

88,697

$

65,664

Interest rate spread (1)

3.09

%

3.22

%

3.07

%

Interest expense as a percent of average earning assets

0.99

%

0.88

%

0.66

%

Net interest margin (tax equivalent basis) (2)

3.55

%

3.64

%

3.41

%

Total cost of deposits

0.83

%

0.72

%

0.49

%

(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.

(2) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.


TOWNEBANK

Average Balances, Yields and Rate Paid (unaudited)

(dollars in thousands)

Year Ended December 31,

2018

2017

2016

Interest

Average

Interest

Average

Interest

Average

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets:

Loans (net of unearned income
and deferred costs), excluding
nonaccrual loans

$

7,567,570

$

373,057

4.93

%

$

5,901,797

$

276,746

4.69

%

$

5,129,990

$

234,318

4.57

%

Taxable investment securities

1,004,080

24,729

2.46

%

600,080

11,597

1.93

%

695,082

11,254

1.62

%

Tax-exempt investment securities

79,720

2,920

3.66

%

48,228

1,582

3.28

%

52,689

1,601

3.04

%

Interest-bearing deposits

560,368

10,229

1.83

%

696,507

7,480

1.07

%

300,130

1,145

0.38

%

Mortgage loans held for sale

293,017

13,124

4.48

%

271,281

10,561

3.89

%

264,494

9,152

3.46

%

Total earning assets

9,504,755

424,059

4.46

%

7,517,893

307,966

4.10

%

6,442,385

257,470

4.00

%

Less: allowance for loan losses

(48,737

)

(43,760

)

(39,547

)

Total nonearning assets

1,143,167

860,866

802,398

Total assets

$

10,599,185

$

8,334,999

$

7,205,236

Liabilities and Equity:

Interest-bearing deposits

Demand and money market

$

2,951,038

$

16,458

0.56

%

$

2,260,378

$

8,020

0.35

%

$

2,012,061

$

6,043

0.30

%

Savings

302,435

3,824

1.26

%

319,940

3,305

1.03

%

309,049

2,859

0.93

%

Certificates of deposit

2,060,587

32,859

1.59

%

1,668,252

17,467

1.05

%

1,530,990

13,414

0.88

%

Total interest-bearing deposits

5,314,060

53,141

1.00

%

4,248,570

28,792

0.68

%

3,852,100

22,316

0.58

%

FHLB advances and repurchase
agreements

897,574

15,542

1.71

%

617,720

9,942

1.61

%

523,366

13,424

2.56

%

Subordinated capital debentures

251,097

12,067

4.81

%

113,752

5,249

4.61

%

%

Total interest-bearing liabilities

6,462,731

80,750

1.25

%

4,980,042

43,983

0.88

%

4,375,466

35,740

0.82

%

Noninterest-bearing liabilities

Noninterest bearing demand deposits

2,517,173

2,094,753

1,720,093

Other noninterest-bearing liabilities

164,486

136,616

145,902

Total liabilities

9,144,390

7,211,411

6,241,461

Shareholders' equity

1,454,795

1,123,588

963,775

Total liabilities and equity

$

10,599,185

$

8,334,999

$

7,205,236

Net interest income (tax-equivalent basis)

$

343,309

$

263,983

$

221,730

Reconcilement of Non-GAAP Financial Measures

Tax-equivalent basis adjustment

(2,236

)

(2,862

)

(2,854

)

Net interest income (GAAP)

$

341,073

$

261,121

$

218,876

Interest rate spread (1)

3.21

%

3.22

%

3.18

%

Interest expense as a percent of average earning assets

0.85

%

0.59

%

0.55

%

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

3.61

%

3.51

%

3.44

%

Total cost of deposits

0.68

%

0.45

%

0.40

%

(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.

(2) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.


TOWNEBANK

Consolidated Balance Sheets

(dollars in thousands, except share data)

2018

2017

(unaudited)

(audited)

ASSETS

Cash and due from banks

$

665,029

$

504,095

Interest-bearing deposits in financial institutions

21,667

17,094

Total Cash and Cash Equivalents

686,696

521,189

Securities available for sale, at fair value

1,095,339

866,138

Securities held to maturity, at amortized cost

50,598

61,304

Other equity securities

4,797

1,516

Federal Home Loan Bank stock, at amortized cost

43,229

29,595

Total Securities

1,193,963

958,553

Mortgage loans held for sale

220,986

313,256

Loans, net of unearned income and deferred costs:

Real estate-residential 1-4 family

1,626,896

1,217,349

Real estate-commercial

3,241,340

2,283,541

Real estate-construction and development

1,067,239

930,426

Real estate-multi-family

260,987

198,720

Commercial and industrial business

1,510,364

1,087,157

Consumer and other loans

311,407

229,772

Loans, net of unearned income and deferred costs

8,018,233

5,946,965

Less: allowance for loan losses

(52,094

)

(45,131

)

Net Loans

7,966,139

5,901,834

Premises and equipment, net

211,796

194,900

Goodwill

433,658

270,250

Other intangible assets, net

58,752

38,568

Bank-owned life insurance policies

237,371

195,775

Other assets

153,669

127,851

TOTAL ASSETS

$

11,163,030

$

8,522,176

LIABILITIES AND EQUITY

Deposits:

Noninterest-bearing demand

$

2,622,761

$

2,157,338

Interest-bearing:

Demand and money market accounts

3,223,215

2,225,211

Savings

286,684

315,889

Certificates of deposit

2,237,762

1,749,782

Total Deposits

8,370,422

6,448,220

Advances from the Federal Home Loan Bank

799,315

526,923

Subordinated debt, net

247,861

247,196

Repurchase agreements and other borrowings

47,156

24,850

Total Borrowings

1,094,332

798,969

Other liabilities

159,856

132,482

TOTAL LIABILITIES

9,624,610

7,379,671

Preferred stock

Authorized and unissued shares - 2,000,000

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

Issued and outstanding shares 72,465,923 in 2018

and 62,629,001 in 2017

120,801

104,403

Capital surplus

1,034,676

749,800

Retained earnings

379,239

282,729

Common stock issued to deferred compensation trust, at cost

769,200 shares in 2018 and 729,919 shares in 2017

(13,955

)

(12,524

)

Deferred compensation trust

13,955

12,524

Accumulated other comprehensive loss

(9,190

)

(5,692

)

TOTAL SHAREHOLDERS’ EQUITY

1,525,526

1,131,240

Noncontrolling interest

12,894

11,265

TOTAL EQUITY

1,538,420

1,142,505

TOTAL LIABILITIES AND EQUITY

$

11,163,030

$

8,522,176


TOWNEBANK

Consolidated Statements of Income

(dollars in thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2018

2017

2018

2017

(unaudited)

(unaudited)

(unaudited)

(audited)

INTEREST INCOME:

Loans, including fees

$

99,446

$

69,332

$

371,343

$

273,999

Investment securities

8,126

3,598

27,127

13,064

Interest-bearing deposits in financial institutions and
federal funds sold

3,559

2,661

10,229

7,480

Mortgage loans held for sale

3,176

2,874

13,124

10,561

Total interest income

114,307

78,465

421,823

305,104

INTEREST EXPENSE:

Deposits

17,495

8,102

53,141

28,792

Advances from the Federal Home Loan Bank

4,585

1,791

15,340

9,837

Subordinated debt, net

2,961

2,880

12,067

5,249

Repurchase agreements and other borrowings

58

28

202

105

Total interest expense

25,099

12,801

80,750

43,983

Net interest income

89,208

65,664

341,073

261,121

PROVISION FOR LOAN LOSSES

2,292

869

8,541

5,426

Net interest income after provision for loan losses

86,916

64,795

332,532

255,695

NONINTEREST INCOME:

Residential mortgage banking income, net

12,951

17,537

65,104

75,851

Insurance commissions and other title fees and income, net

13,212

12,115

56,164

51,933

Real estate brokerage and property management income, net

5,982

4,823

31,863

27,487

Service charges on deposit accounts

2,928

2,809

11,808

10,594

Credit card merchant fees, net

1,298

1,204

5,472

5,008

Bank owned life insurance

2,014

1,941

6,836

6,262

Other income

3,824

3,048

14,343

10,987

Gain (loss) on investment securities

3

(1

)

Total noninterest income

42,209

43,477

191,593

188,121

NONINTEREST EXPENSE:

Salaries and employee benefits

50,233

41,965

201,838

169,449

Occupancy

7,352

6,878

27,644

26,855

Furniture and equipment

3,587

3,456

14,477

14,072

Other expenses

21,165

21,361

108,165

85,838

Total noninterest expense

82,337

73,660

352,124

296,214

Income before income tax expense & noncontrolling interest

46,788

34,612

172,001

147,602

Provision for income tax expense

10,348

21,325

34,227

54,813

Net income

$

36,440

$

13,287

$

137,774

$

92,789

Net income attributable to noncontrolling interest

(450

)

(954

)

(3,981

)

(5,126

)

Net income attributable to TowneBank

$

35,990

$

12,333

$

133,793

$

87,663

Per common share information

Basic earnings

$

0.50

$

0.20

$

1.88

$

1.41

Diluted earnings

$

0.50

$

0.20

$

1.88

$

1.41

Cash dividends declared

$

0.16

$

0.14

$

0.62

$

0.55


TOWNEBANK

Consolidated Balance Sheets - Five Quarter Trend

(dollars in thousands, except share data)

December 31,

September 30,

June 30,

March 31,

December 31,

2018

2018

2018

2018

2017

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(audited)

ASSETS

Cash and due from banks

$

665,029

$

688,584

$

440,054

$

479,453

$

504,095

Interest-bearing deposits in financial institutions

21,667

20,910

17,749

17,728

17,094

Total Cash and Cash Equivalents

686,696

709,494

457,803

497,181

521,189

Securities available for sale, at fair value

1,095,339

1,051,773

1,057,663

1,237,179

866,138

Securities held to maturity, at amortized cost

50,598

52,002

53,954

55,283

61,304

Other equity securities

4,797

5,519

5,206

5,002

1,516

Federal Home Loan Bank stock, at amortized cost

43,229

46,393

46,393

46,400

29,595

Total Securities

1,193,963

1,155,687

1,163,216

1,343,864

958,553

Mortgage loans held for sale

220,986

333,354

396,185

293,731

313,256

Loans, net of unearned income and deferred costs

8,018,233

7,881,692

7,774,956

7,470,151

5,946,965

Less: allowance for loan losses

(52,094

)

(50,236

)

(49,535

)

(46,735

)

(45,131

)

Net Loans

7,966,139

7,831,456

7,725,421

7,423,416

5,901,834

Premises and equipment, net

211,796

210,724

207,997

207,126

194,900

Goodwill

433,658

427,117

425,625

416,789

270,250

Other intangible assets, net

58,752

58,165

60,669

57,493

38,568

Bank-owned life insurance policies

237,371

235,348

233,682

232,039

195,775

Other assets

153,669

159,887

161,055

148,776

127,851

TOTAL ASSETS

$

11,163,030

$

11,121,232

$

10,831,653

$

10,620,415

$

8,522,176

LIABILITIES AND EQUITY

Deposits:

Noninterest-bearing demand

$

2,622,761

$

2,671,558

$

2,597,320

$

2,503,246

$

2,157,338

Interest-bearing:

Demand and money market accounts

3,223,215

3,096,317

3,017,767

3,001,256

2,225,211

Savings

286,684

298,368

305,334

309,077

315,889

Certificates of deposit

2,237,762

2,233,188

2,070,790

2,011,843

1,749,782

Total Deposits

8,370,422

8,299,431

7,991,211

7,825,422

6,448,220

Advances from the Federal Home Loan Bank

799,315

873,469

873,622

873,773

526,923

Subordinated debt, net

247,861

247,712

247,563

257,723

247,196

Repurchase agreements and other borrowings

47,156

45,591

50,981

52,509

24,850

Total Borrowings

1,094,332

1,166,772

1,172,166

1,184,005

798,969

Other liabilities

159,856

155,205

191,490

161,638

132,482

TOTAL LIABILITIES

9,624,610

9,621,408

9,354,867

9,171,065

7,379,671

Preferred stock

Authorized shares - 2,000,000

Common stock, $1.667 par value

120,801

120,613

120,615

120,472

104,403

Capital surplus

1,034,676

1,032,863

1,031,965

1,028,985

749,800

Retained earnings

379,239

354,842

328,125

304,896

282,729

Common stock issued to deferred compensation trust, at cost

(13,955

)

(13,780

)

(13,500

)

(12,612

)

(12,524

)

Deferred compensation trust

13,955

13,780

13,500

12,612

12,524

Accumulated other comprehensive loss

(9,190

)

(22,348

)

(17,944

)

(15,873

)

(5,692

)

TOTAL SHAREHOLDERS’ EQUITY

1,525,526

1,485,970

1,462,761

1,438,480

1,131,240

Noncontrolling interest

12,894

13,854

14,025

10,870

11,265

TOTAL EQUITY

1,538,420

1,499,824

1,476,786

1,449,350

1,142,505

TOTAL LIABILITIES AND EQUITY

$

11,163,030

$

11,121,232

$

10,831,653

$

10,620,415

$

8,522,176


TOWNEBANK

Consolidated Statements of Income - Five Quarter Trend (unaudited)

(dollars in thousands, except per share data)

Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

2018

2018

2018

2018

2017

INTEREST INCOME:

Loans, including fees

$

99,446

$

97,215

$

93,150

$

81,533

$

69,332

Investment securities

8,126

7,019

6,390

5,592

3,598

Interest-bearing deposits in financial institutions and
federal funds sold

3,559

2,148

2,159

2,362

2,661

Mortgage loans held for sale

3,176

4,012

3,557

2,379

2,874

Total interest income

114,307

110,394

105,256

91,866

78,465

INTEREST EXPENSE:

Deposits

17,495

14,540

11,620

9,486

8,102

Advances from the Federal Home Loan Bank

4,585

4,153

3,764

2,838

1,791

Subordinated debt

2,961

2,962

2,986

3,158

2,880

Repurchase agreements and other borrowings

58

42

63

40

28

Total interest expense

25,099

21,697

18,433

15,522

12,801

Net interest income

89,208

88,697

86,823

76,344

65,664

PROVISION FOR LOAN LOSSES

2,292

1,241

3,056

1,953

869

Net interest income after provision for loan losses

86,916

87,456

83,767

74,391

64,795

NONINTEREST INCOME:

Residential mortgage banking income, net

12,951

15,804

18,745

17,604

17,537

Insurance commissions and other title fees and income, net

13,212

14,493

15,087

13,372

12,115

Real estate brokerage and property management income, net

5,982

8,542

6,910

10,429

4,823

Service charges on deposit accounts

2,928

3,028

2,969

2,883

2,809

Credit card merchant fees, net

1,298

1,563

1,443

1,168

1,204

Bank owned life insurance

2,014

1,657

1,633

1,532

1,941

Other income

3,824

4,130

3,448

2,941

3,048

Gain on investment securities

3

Total noninterest income

42,209

49,217

50,235

49,932

43,477

NONINTEREST EXPENSE:

Salaries and employee benefits

50,233

50,497

50,324

50,784

41,965

Occupancy expense

7,352

7,013

6,802

6,477

6,878

Furniture and equipment

3,587

3,646

3,546

3,698

3,456

Other expenses

21,165

27,106

28,549

31,344

21,361

Total noninterest expense

82,337

88,262

89,221

92,303

73,660

Income before income tax expense and noncontrolling interest

46,788

48,411

44,781

32,020

34,612

Provision for income tax expense

10,348

9,159

8,643

6,077

21,325

Net income

36,440

39,252

36,138

25,943

13,287

Net income attributable to noncontrolling interest

(450

)

(959

)

(1,334

)

(1,238

)

(954

)

Net income attributable to TowneBank

$

35,990

$

38,293

$

34,804

$

24,705

$

12,333

Per common share information

Basic earnings

$

0.50

$

0.53

$

0.48

$

0.36

$

0.20

Diluted earnings

$

0.50

$

0.53

$

0.48

$

0.36

$

0.20

Basic weighted average shares outstanding

71,905,956

71,875,085

71,787,980

68,983,745

62,239,028

Diluted weighted average shares outstanding

72,043,369

72,044,355

71,949,590

69,156,809

62,462,629

Cash dividends declared

$

0.16

$

0.16

$

0.16

$

0.14

$

0.14


TOWNEBANK

Banking Segment Financial Information

(dollars in thousands)

Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30,
2018

December 31,

2018 over 2017

2018

2017

2018

2017

Amount

Percent

Revenue

Net interest income

$

86,433

$

63,030

$

85,423

$

329,584

$

251,003

$

78,581

31.31

%

Noninterest income

Service charges on deposit accounts

2,928

2,809

3,028

11,808

10,594

1,214

11.46

%

Credit card merchant fees

1,298

1,203

1,563

5,472

5,008

464

9.27

%

Other income

4,660

4,319

4,300

16,833

14,046

2,787

19.84

%

Subtotal

8,886

8,331

8,891

34,113

29,648

4,465

15.06

%

Gain (loss) on investment securities

147

(1

)

148

N/M

Total noninterest income

8,886

8,331

8,891

34,260

29,647

4,613

15.56

%

Total revenue

95,319

71,361

94,314

363,844

280,650

83,194

29.64

%

Provision for loan losses

2,292

869

1,241

8,541

5,426

3,115

57.41

%

Expenses

Salaries and employee benefits

28,100

21,134

28,329

114,472

85,654

28,818

33.64

%

Occupancy expense

4,789

4,418

4,331

17,410

16,365

1,045

6.39

%

Furniture and equipment

2,426

2,326

2,463

9,912

9,406

506

5.38

%

Amortization of intangible assets

1,428

536

1,479

5,658

2,288

3,370

147.29

%

Other expenses

9,759

11,571

14,829

60,697

45,141

15,556

34.46

%

Total expenses

46,502

39,985

51,431

208,149

158,854

49,295

31.03

%

Income before income tax, corporate allocation and noncontrolling interest

46,525

30,507

41,642

147,154

116,370

30,784

26.45

%

Corporate allocation

367

533

438

1,736

1,828

(92

)

(5.03

)%

Income before income tax provision and noncontrolling interest

46,892

31,040

42,080

148,890

118,198

30,692

25.97

%

Provision for income tax expense

10,252

19,510

7,604

28,880

44,584

(15,704

)

(35.22

)%

Net income

36,640

11,530

34,476

120,010

73,614

46,396

63.03

%

Noncontrolling interest

4

(4

)

(8

)

1

(9

)

N/M

Net income attributable to TowneBank

$

36,644

$

11,530

$

34,472

$

120,002

$

73,615

$

46,387

63.01

%

Efficiency ratio

48.79

%

56.03

%

54.53

%

57.21

%

56.60

%


TOWNEBANK

Realty Segment Financial Information

(dollars in thousands)

Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30,

December 31,

2018 over 2017

2018

2017

2018

2018

2017

Amount

Percent

Revenue

Residential mortgage brokerage
income, net

$

13,472

$

17,544

$

16,219

$

66,696

$

76,245

$

(9,549

)

(12.52

)%

Real estate brokerage income, net

2,183

2,092

2,758

9,458

7,991

1,467

18.36

%

Title insurance and settlement fees

458

431

525

1,877

1,877

%

Property management fees, net

3,799

2,731

5,783

22,405

19,496

2,909

14.92

%

Income from unconsolidated
subsidiary

54

116

122

370

704

(334

)

(47.44

)%

Net interest and other income

3,210

3,050

4,111

13,210

11,725

1,485

12.67

%

Total revenue

23,176

25,964

29,518

114,016

118,038

(4,022

)

(3.41

)%

Expenses

Salaries and employee benefits

$

14,308

$

14,279

$

14,862

$

58,450

$

58,586

$

(136

)

(0.23

)%

Occupancy expense

1,928

1,894

2,084

7,871

8,171

(300

)

(3.67

)%

Furniture and equipment

930

960

952

3,697

3,865

(168

)

(4.35

)%

Amortization of intangible assets

767

571

672

2,782

2,566

216

8.42

%

Other expenses

6,419

6,259

7,543

28,416

26,742

1,674

6.26

%

Total expenses

24,352

23,963

26,113

101,216

99,930

1,286

1.29

%

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

(1,176

)

2,001

3,405

12,800

18,108

(5,308

)

(29.31

)%

Corporate allocation

(238

)

(370

)

(270

)

(1,091

)

(1,210

)

119

(9.83

)%

Income (loss) before income tax provision and noncontrolling interest

(1,414

)

1,631

3,135

11,709

16,898

(5,189

)

(30.71

)%

Provision for income tax

(86

)

1,160

786

2,892

5,791

(2,899

)

(50.06

)%

Net income (loss)

(1,328

)

471

2,349

8,817

11,107

(2,290

)

(20.62

)%

Noncontrolling interest

(130

)

(695

)

(756

)

(2,398

)

(3,756

)

1,358

(36.16

)%

Net income (loss) attributable to TowneBank

$

(1,458

)

$

(224

)

$

1,593

$

6,419

$

7,351

$

(932

)

(12.68

)%

Efficiency ratio

105.07

%

92.29

%

88.46

%

88.77

%

84.66

%


TOWNEBANK

Insurance Segment Financial Information

(dollars in thousands)

Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30,

December 31,

2018 over 2017

2018

2017

2018

2018

2017

Amount

Percent

Commission and fee income

Property and casualty

$

9,770

$

8,198

$

10,762

$

40,948

$

35,694

$

5,254

14.72

%

Employee benefits

3,625

3,164

3,813

14,088

12,551

1,537

12.25

%

Travel insurance

1,095

912

871

5,123

4,668

455

9.75

%

Specialized benefit services

168

170

166

673

657

16

2.44

%

Total commissions and fees

14,658

12,444

15,612

60,832

53,570

7,262

13.56

%

Contingency and bonus revenue

1,185

1,654

1,137

4,888

6,322

(1,434

)

(22.68

)%

Other income

79

80

75

295

308

(13

)

(4.22

)%

Total revenue

15,922

14,178

16,824

66,015

60,200

5,815

9.66

%

Employee commission
expense

3,000

2,362

2,742

11,209

9,646

1,563

16.20

%

Revenue, net of commission
expense

12,922

11,816

14,082

54,806

50,554

4,252

8.41

%

Salaries and employee benefits

$

7,825

$

6,552

$

7,306

$

28,916

$

25,209

$

3,707

14.71

%

Occupancy expense

635

566

598

2,363

2,319

44

1.90

%

Furniture and equipment

231

169

232

868

801

67

8.36

%

Amortization of intangible assets

928

726

845

3,269

2,803

466

16.63

%

Other expenses

1,865

1,698

1,737

7,343

6,298

1,045

16.59

%

Total operating expenses

11,484

9,711

10,718

42,759

37,430

5,329

14.24

%

Income before income tax and noncontrolling interest

1,438

2,105

3,364

12,047

13,124

(1,077

)

(8.21

)%

Corporate allocation

(128

)

(164

)

(168

)

(645

)

(618

)

(27

)

4.37

%

Income before income tax provision and noncontrolling interest

1,310

1,941

3,196

11,402

12,506

(1,104

)

(8.83

)%

Provision for income tax expense

182

655

769

2,455

4,438

(1,983

)

(44.68

)%

Net income

1,128

1,286

2,427

8,947

8,068

879

10.89

%

Noncontrolling interest

(324

)

(259

)

(199

)

(1,575

)

(1,371

)

(204

)

14.88

%

Net income attributable to TowneBank

$

804

$

1,027

$

2,228

$

7,372

$

6,697

$

675

10.08

%

Provision for income taxes

182

655

769

2,455

4,438

(1,983

)

(44.68

)%

Depreciation, amortization and interest expense

1,152

934

1,068

4,134

3,593

541

15.06

%

EBITDA

$

2,138

$

2,616

$

4,065

$

13,961

$

14,728

$

(767

)

(5.21

)%

Efficiency ratio

88.87

%

82.19

%

76.11

%

78.02

%

74.04

%


TOWNEBANK

Reconcilement of Non-GAAP Financial Measures:

Three Months Ended

Twelve Months Ended

December 31,

September 30,

December 31,

December 31,

2018

2018

2017

2018

2017

Return on average assets (GAAP)

1.28

%

1.40

%

0.57

%

1.26

%

1.05

%

Impact of excluding average goodwill and other intangibles and amortization

0.15

%

0.16

%

0.08

%

0.15

%

0.10

%

Return on average tangible assets (non-GAAP)

1.43

%

1.56

%

0.65

%

1.41

%

1.15

%

Return on average equity (GAAP)

9.44

%

10.21

%

4.26

%

9.20

%

7.80

%

Impact of excluding average goodwill and other intangibles and amortization

5.47

%

5.87

%

2.13

%

5.32

%

3.55

%

Return on average tangible equity (non-GAAP)

14.91

%

16.08

%

6.39

%

14.52

%

11.35

%

Return on average common equity (GAAP)

9.53

%

10.30

%

4.30

%

9.27

%

7.88

%

Impact of excluding average goodwill and other intangibles and amortization

5.58

%

6.00

%

2.17

%

5.43

%

3.63

%

Return on average tangible common equity (non-GAAP)

15.11

%

16.30

%

6.47

%

14.70

%

11.51

%

Book value (GAAP)

$

21.05

$

20.54

$

18.06

$

21.05

$

18.06

Impact of excluding average goodwill and other intangibles and amortization

(6.79

)

(6.71

)

(4.93

)

(7.71

)

(4.93

)

Tangible book value (non-GAAP)

$

14.26

$

13.83

$

13.13

$

13.34

$

13.13


TOWNEBANK

Reconcilement of Non-GAAP Financial Measures

(dollars in thousands, except per share data)

Reconcilement of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability

Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

2018

2018

2018

2018

2017

Net income (GAAP)

$

35,990

$

38,293

$

34,804

$

24,705

$

12,333

Acquisition-related expenses

(1,518

)

424

797

8,726

526

Income tax expense - tax reform legislation

696

10,112

Income tax expense (benefit) - other items

355

(44

)

(93

)

(1,639

)

(98

)

Total income tax expense (benefit)

1,051

(44

)

(93

)

(1,639

)

10,014

Total charges, net of taxes

(467

)

380

704

7,087

10,540

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

$

35,523

$

38,673

$

35,508

$

31,792

$

22,873

Weighted average diluted shares

72,043,369

72,044,355

71,949,590

69,156,809

62,462,629

Diluted EPS (GAAP)

$

0.50

$

0.53

$

0.48

$

0.36

$

0.20

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

$

0.49

$

0.54

$

0.49

$

0.46

$

0.37

Average assets

$

11,149,960

$

10,844,570

$

10,536,847

$

9,848,364

$

8,579,705

Average tangible equity

$

1,022,982

$

1,003,151

$

981,607

$

932,161

$

839,942

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

1.26

%

1.41

%

1.35

%

1.31

%

1.06

%

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

14.73

%

16.23

%

15.48

%

14.72

%

11.37

%

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

14.93

%

16.45

%

15.66

%

14.89

%

11.52

%

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

63.81

%

63.69

%

64.52

%

66.19

%

67.01

%


TOWNEBANK

Reconcilement of Non-GAAP Financial Measures

(dollars in thousands, except per share data)

Reconcilement of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability

Year Ended

December 31,

December 31,

2018

2017

Net income (GAAP)

$

133,793

$

87,663

Purchase accounting adjustments

(3,889

)

Acquisition-related expenses

8,428

2,268

Total charges

8,428

(1,621

)

Income tax expense - tax reform legislation

696

10,112

Income tax expense (benefit) - other items

(1,420

)

1,027

Total income tax expense (benefit)

(724

)

11,139

Total charges, net of taxes

7,704

9,518

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

$

141,497

$

97,181

Weighted average diluted shares

71,293,129

62,394,282

Diluted EPS (GAAP)

$

1.88

$

1.41

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

$

1.98

$

1.56

Average assets

$

10,599,185

$

8,334,999

Average tangible equity

$

985,274

$

815,969

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

1.33

%

1.17

%

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

15.30

%

12.52

%

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

15.49

%

12.69

%

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

64.52

%

65.43

%