TowneBank Reports Second Quarter 2020 Earnings

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

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

Highlights for Second Quarter 2020 Compared to Second Quarter 2019:

• Total revenues were a record $162.66 million, an increase of $18.12 million, or 12.54%.

• Loans held for investment were $9.80 billion, an increase of $1.68 billion, or 20.61%, from June 30, 2019, and $1.02 billion, or 11.59%, from March 31, 2020.  The balance at June 30, 2020 included $1.09 billion of loans originated under the Small Business Administrations Paycheck Protection Program (PPP).

• Total deposits were $11.26 billion, an increase of $2.00 billion, or 21.54%, compared to prior year and $1.96 billion, or 21.02%, from March 31, 2020.

• Noninterest bearing deposits increased by 43.23%, to $4.23 billion, representing 37.52% of total deposits.  Compared to the linked quarter, noninterest bearing deposits increased 38.09%.

• Annualized return on common shareholders' equity was 8.24% and annualized return on average tangible common shareholders' equity was 12.44% (non-GAAP).

• Net interest margin for the quarter was 2.85% and taxable equivalent net interest margin (non-GAAP) was 2.87%.

• Effective tax rate of 17.74% in the quarter compared to 20.47% in the second quarter of 2019.

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

Quarterly Net Interest Income Compared to Second Quarter 2019:

• Net interest income was $93.27 million compared to $89.82 million at June 30, 2019.

• Taxable equivalent net interest margin (non-GAAP) was 2.87%, including accretion of 8 basis points, compared to 3.52%, including accretion of 11 basis points, for second quarter 2019.

• Average loans held for investment, with an average yield of 4.29%, represented 73.10% of average earning assets at June 30, 2020 compared to an average yield of 5.08% and 78.27% of average earning assets in the second quarter of 2019.  Excluding PPP, loan yields were 4.42% in second quarter 2020.

• Total cost of deposits decreased to 0.58% from 0.99% at June 30, 2019.

• Average interest-earning assets totaled $13.16 billion at June 30, 2020 compared to $10.32 billion at June 30, 2019, an increase of 27.56%.

• Average interest-bearing liabilities totaled $8.64 billion, an increase of $1.69 billion from prior year.

Quarterly Provision for Credit Losses:

• Recorded a quarterly provision for credit losses for on-balance-sheet loans of $25.99 million compared to $2.82 million one year ago and $5.76 million in the linked quarter.  This increase is primarily attributable to management's expectation of continued economic weakness driven by the impact of the COVID-19 pandemic.  Expected loss estimates consider various factors including the impacts of the decreased economic activity and higher unemployment rates, customer specific credit information, and the potential mitigating benefits of government stimulus and industry wide loan modification efforts.

• Net loan recoveries were $0.10 million compared to charge-offs of $1.60 million one year prior.  The ratio of net loan charge-offs to average loans on an annualized basis was 0.03% in the linked quarter and 0.08% in the second quarter of 2019.

• Recorded a provision for credit losses on off-balance-sheet commitments of $1.08 million compared to $1.10 million in the linked quarter.

• Recorded a recovery of credit losses on debt securities of $0.13 million compared to a credit loss of $0.16 million in the linked quarter.

• The allowance for credit losses on loans represented 0.92% of total loans compared to 0.73% at March 31, 2020 and 0.67% at June 30, 2019.  Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses was 1.04%.  The allowance for credit losses on loans was 5.34 times nonperforming loans compared to 3.85 times at March 31, 2020 and 3.00 times at June 30, 2019.

Quarterly Noninterest Income Compared to Second Quarter 2019:

• Total noninterest income was $69.38 million compared to $54.72 million in 2019, an increase of $14.66 million, or 26.80%.  Residential mortgage banking income increased $11.15 million and real estate brokerage and property management income increased $1.94 million, while service charges on deposit accounts decreased $1.30 million.  Also included in noninterest income are net gains on investment securities of $2.93 million as compared to no gains or losses in the prior year.
  

• Residential mortgage banking recorded income of $29.72 million compared to $18.57 million in second quarter 2019.  Loan volume in the current quarter was $1.47 billion, with purchase activity comprising 51.26% of that volume.  Loan volume in second quarter 2019 was $821.13 million, with purchase activity comprising 84.97%.  Increased refinancing activity due to the mortgage rate environment in second quarter 2020, coupled with improved margins were the primary drivers of improvement compared to the prior year quarter.
  

• Total Insurance segment revenue increased 3.30% to $20.87 million in the second quarter due to organic growth and additional income from a third quarter 2019 agency acquisition.
  

• Property management fee revenue increased 36.05%, or $2.15 million, compared to second quarter 2019.  Reservations were down significantly in first quarter 2020 due to travel restrictions driven by COVID-19 and the uncertainty surrounding summer travel.  The lifting of local travel restrictions, in the areas of our vacation rental companies, drove increased reservation activity during the quarter.
  

• Service charges are down $1.30 million, or 40.72%, compared to second quarter 2019 primarily due to a decrease in interchange fees related to Durbin Amendment compliance, combined with a lower transaction volumes and fees waived for members experiencing financial hardships.

Quarterly Noninterest Expense Compared to Second Quarter 2019:

• Total noninterest expense was $91.03 million compared to $96.56 million in 2019, a decrease of $5.53 million, or 5.73%.  Declines across most expense categories were partially offset by increases in salary and benefits expense of $2.66 million and software expense of $0.70 million.

• Market expansion and infrastructure enhancements, that occurred in 2019, have resulted in generally higher levels of salary and benefits expense and software expense, while quarantines, travel restrictions, and other decreases in business activity related to COVID-19 have resulted in lower general spending.

Quarterly Income Taxes Compared to Second Quarter 2019:

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

Consolidated Balance Sheet Highlights:

• Total assets were $15.58 billion for the quarter ended June 30, 2020, an increase of $3.63 billion, or 30.40%, compared to $12.62 billion at March 31, 2020.  Total assets increased $3.64 billion, or 30.46%, from $11.94 billion at June 30, 2019.  The year-to-date increase was driven primarily by growth in cash and cash equivalents and loans held for investment tied to PPP lending activities.

• Loans held for investment increased $1.68 billion, or 20.61%, compared to prior year and $1.02 billion compared the linked quarter.  Excluding PPP loans of $1.09 billion, loans held for investment increased $0.59 billion, or 7.20%, compared to prior year, but declined $72.31 million, or 0.82%, compared to the linked quarter.

• Mortgage loans held for sale increased  $247.60 million, or 68.25%, compared to the prior year and $157.23 million, or 34.70%, compared to the linked quarter.

• Total deposits increased $2.0 billion, or 21.54%, compared to the prior year and $1.96 billion, or 21.02%, compared to the linked quarter.

• Total borrowings increased $1.49 billion, or 178.23%, from prior year and $0.94 billion, or 67.22%, compared to the linked quarter.  These increases were driven by $1.11 billion in borrowings under the FRB PPP lending facility, which we used to facilitate funding of the PPP loans.

Investment Securities:

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

Loans and Asset Quality:

• Total loans held for investment were $9.80 billion at June 30, 2020 compared to $8.78 billion at March 31, 2020 and $8.13 billion at June 30, 2019.

• Nonperforming assets were $29.25 million, or 0.19% of total assets, compared to $34.23 million, or 0.29%, at June 30, 2019.

• Nonperforming loans were 0.17% of period end loans compared to 0.22% at June 30, 2019.

• Foreclosed property decreased to $12.32 million from $14.52 million at June 30, 2019.

• Expected loss estimates are subject to change based on continuing review of models and assumptions, portfolio performance, changes in forecasted macroeconomic conditions and loan mix which could result in material changes to the reserve in future periods.

Deposits and Borrowings:

• Total deposits were $11.26 billion compared to $9.31 billion at March 31, 2020 and $9.27 billion at June 30, 2019.

• Total loans to deposits were 87.01% compared to 94.37% at March 31, 2020 and 87.68% at June 30, 2019.

• Non-interest bearing deposits were 37.52% of total deposits at June 30, 2020 compared to 32.88% at March 31, 2020 and 31.83% at June 30, 2019.

• Total borrowings were $2.33 billion compared to $1.39 billion at March 31, 2020 and $0.84 billion at  June 30, 2019.

Capital:

• Common equity tier 1 capital ratio of 11.54%.

• Tier 1 leverage capital ratio of 9.05%.

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

• Total risk-based capital ratio of 14.91%.

• Book value was $23.50 compared to $22.77 at March 31, 2020 and $21.95 at June 30, 2019.

• Tangible book value (non-GAAP) was $16.68 compared to $15.91 at March 31, 2020 and $15.05 at June 30, 2019.

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 42 banking offices serving Chesapeake, Chesterfield County, Glen Allen, Hampton, James City County, Mechanicsville, Newport News, Norfolk, Portsmouth, Richmond, Suffolk, Virginia Beach, Williamsburg, and York County in Virginia, along with Raleigh, Cary, Charlotte, Greensboro, Greenville, Moyock, Grandy, Camden County, Southern Shores, Corolla, Duck and Nags Head in North Carolina.  TowneBank also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations.  Local decision-making is a hallmark of its hometown banking strategy that is delivered through the leadership of each groups President and Board of Directors.  With total assets of $15.58 billion as of June 30, 2020, TowneBank is one of the largest banks headquartered in Virginia.

Non-GAAP Financial Measures:
This press release contains financial information determined by methods other than in accordance with GAAP.  The Company's management uses these non-GAAP financial measures in its analysis of the Company's performance.  These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that are infrequent in nature.  Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Companys 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 TowneBanks 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. TowneBanks ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ from those indicated or implied in the forward-looking statements and such differences may be material.  Factors which could have a material effect on the operations and future prospects of TowneBank include but are not limited to: the impacts of the ongoing coronavirus (COVID-19) pandemic, changes in interest rates, general economic and business conditions; legislative/regulatory changes; the monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; the quality and composition of TowneBanks loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBanks market area; implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; changes in accounting principles, policies and guidelines; and other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation.  TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

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

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

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
		Three Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
		2020				2020				2019				2019				2019
Income and Performance Ratios:
	Total Revenue	$	162,656			$	137,696			$	139,671			$	145,879			$	144,537
	Net income	37,222				27,605				35,948				39,400				36,242
	Net income attributable to TowneBank	34,605				26,384				35,075				37,659				34,638
	Net income per common share - diluted	0.48				0.36				0.49				0.52				0.48
	Book value per common share	23.50				22.77				22.58				22.38				21.95
	Book value per common share - tangible (non-GAAP)	16.68				15.91				15.69				15.44				15.05
	Return on average assets	0.97		%		0.88		%		1.16		%		1.26		%		1.20		%
	Return on average assets - tangible (non-GAAP)	1.07		%		1.00		%		1.30		%		1.40		%		1.35		%
	Return on average equity	8.18		%		6.37		%		8.44		%		9.22		%		8.83		%
	Return on average equity - tangible (non-GAAP)	12.32		%		9.91		%		12.97		%		14.20		%		13.90		%
	Return on average common equity	8.24		%		6.42		%		8.51		%		9.29		%		8.89		%
	Return on average common equity - tangible (non-GAAP)	12.44		%		10.01		%		13.12		%		14.36		%		14.05		%
	Noninterest income as a percentage of total revenue	42.66		%		35.00		%		35.59		%		37.55		%		37.86		%
Regulatory Capital Ratios (1):
	Common equity tier 1	11.54		%		11.23		%		11.46		%		11.52		%		11.58		%
	Tier 1	11.67		%		11.35		%		11.49		%		11.55		%		11.62		%
	Total	14.91		%		14.40		%		14.58		%		14.70		%		14.85		%
	Tier 1 leverage ratio	9.05		%		10.11		%		9.95		%		9.84		%		9.86		%
Asset Quality:
	Allowance for credit losses on loans to nonperforming loans	5.34x				3.85x				3.34x				3.95x				3.00x
	Allowance for credit losses on loans to period end loans	0.92		%		0.73		%		0.69		%		0.68		%		0.67		%
	Allowance for credit losses on loans to period end loans excluding PPP loans (non-GAAP)	1.04		%		0.73		%		0.69		%		0.68		%		0.67		%
	Nonperforming loans to period end loans	0.17		%		0.19		%		0.21		%		0.17		%		0.22		%
	Nonperforming assets to period end assets	0.19		%		0.24		%		0.27		%		0.26		%		0.29		%
	Net charge-offs to average loans (annualized)			%		0.03		%		0.04		%		0.03		%		0.08		%
	Nonperforming loans	$	16,935			$	16,700			$	17,437			$	14,016			$	18,202
	Former bank premises									1,521				1,510				1,510
	Foreclosed property	12,315				13,053				13,839				15,517				14,517
	Total nonperforming assets	$	29,250			$	29,753			$	32,797			$	31,043			$	34,229
	Loans past due 90 days and still accruing interest	$	464			$	91			$	309			$	636			$	415
	Allowance for credit losses on loans	$	90,467			$	64,372			$	58,234			$	55,428			$	54,527
Mortgage Banking:
	Loans originated, mortgage	$	1,116,782			$	718,681			$	628,279			$	703,922			$	574,638
	Loans originated, joint venture	357,815				204,522				231,879				259,742				246,491
	Total loans originated	$	1,474,597			$	923,203			$	860,158			$	963,664			$	821,129
	Number of loans originated	4,818				3,025				2,984				3,360				3,121
	Number of originators	216				223				217				225				229
	Purchase %	51.26		%		61.31		%		70.32		%		68.83		%		84.97		%
	Loans sold	$	1,398,649			$	809,834			$	879,910			$	925,058			$	694,832
	Gross realized gain on sales and fees as a % of loans originated	3.17		%		1.80		%		3.38		%		3.45		%		3.43		%
Other Ratios:
	Net interest margin	2.85		%		3.35		%		3.33		%		3.41		%		3.49		%
	Net interest margin-fully tax equivalent (non-GAAP)	2.87		%		3.37		%		3.35		%		3.43		%		3.52		%
	Average earning assets/total average assets	91.33		%		89.15		%		89.57		%		89.53		%		89.46		%
	Average loans/average deposits	91.81		%		92.99		%		88.41		%		87.63		%		91.60		%
	Average noninterest deposits/total average deposits	36.52		%		32.21		%		32.14		%		31.82		%		31.63		%
	Period end equity/period end total assets	11.05		%		13.19		%		13.84		%		13.63		%		13.45		%
	Efficiency ratio	56.99		%		73.02		%		66.11		%		66.66		%		66.80		%
	(1) Current reporting period regulatory capital ratios are preliminary

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
Investment Securities													% Change
	Q2				Q2				Q1				Q2 20 vs.			Q2 20 vs.
Available-for-sale securities, at fair value	2020				2019				2020				Q2 19			Q1 20
U.S. agency securities	$	118,176			$	261,960			$	121,857			(54.89	)%		(3.02	)%
U.S. Treasury notes	1,010				2,241				1,014				(54.93	)%		(0.39	)%
Municipal securities	313,322				167,466				266,489				87.10	%		17.57	%
Trust preferred and other corporate securities	59,598				43,799				59,606				36.07	%		(0.01	)%
Mortgage-backed securities issued by GSE and GNMA	774,658				785,355				799,713				(1.36	)%		(3.13	)%
Allowance for credit losses	(140		)		n/a				(259		)		n/a			(45.95	)%
Total	$	1,266,624			$	1,260,821			$	1,248,420			0.46	%		1.46	%
Gross unrealized gains (losses) reflected in financial statements
Total gross unrealized gains	$	61,559			$	22,119			$	30,545			178.31	%		101.54	%
Total gross unrealized losses	(1,674		)		(2,456		)		(9,848		)		(31.84	)%		(83.00	)%
Net unrealized gains (losses) and other adjustments on AFS securities	$	59,885			$	19,663			$	20,697
Held-to-maturity securities, at amortized cost
Municipal securities	$	28,855			$	34,458			$	28,852			(16.26	)%		0.01	%
Trust preferred corporate securities	2,345				2,393				2,357				(2.01	)%		(0.51	)%
Mortgage-backed securities issued by GSE and GNMA	10,395				13,723				11,222				(24.25	)%		(7.37	)%
Less: Allowance for credit losses	(121		)		n/a				(133		)		n/a			(9.02	)%
Total	$	41,474			$	50,574			$	42,298			(17.99	)%		(1.95	)%
Gross unrealized gains (losses) not reflected in financial statements
Total gross unrealized gains	$	1,980			$	1,636			$	964			21.03	%		105.39	%
Total gross unrealized losses					(57		)						(100.00	)%			%
Net unrealized gains (losses) in HTM securities	$	1,980			$	1,579			$	964
Loans Held For Investment (1)													% Change
	Q2				Q2				Q1				Q2 20 vs.			Q2 20 vs.
	2020				2019				2020				Q2 19			Q1 20
Real estate - construction and development	$	1,178,832			$	1,107,762			$	1,060,834			6.42	%		11.12	%
Commercial real estate - non owner occupied	2,332,447				1,985,990				2,305,971				17.45	%		1.15	%
Commercial real estate - owner occupied	1,383,294				1,288,478				1,398,216				7.36	%		(1.07	)%
Real estate - multifamily	277,947				267,528				283,514				3.89	%		(1.96	)%
Real estate - residential 1-4 family and HELOC	1,670,530				1,639,547				1,693,562				1.89	%		(1.36	)%
Commercial and industrial business	2,503,161				1,523,607				1,636,244				64.29	%		52.98	%
Consumer and other loans	455,678				313,817				405,854				45.21	%		12.28	%
Total	$	9,801,889			$	8,126,729			$	8,784,195			20.61	%		11.59	%
(1) Paycheck Protection Program loans totaling $1.09 billion, primarily in C&I, are included in Q2 2020.
Deposits													% Change
	Q2				Q2				Q1				Q2 20 vs.			Q2 20 vs.
	2020				2019				2020				Q2 19			Q1 20
Noninterest-bearing demand	$	4,226,208			$	2,950,615			$	3,060,515			43.23	%		38.09	%
Interest-bearing:
Demand and money market accounts	4,223,391				3,409,322				3,573,926				23.88	%		18.17	%
Savings	298,673				277,495				280,807				7.63	%		6.36	%
Certificates of deposits	2,516,666				2,631,386				2,392,744				(4.36	)%		5.18	%
Total	$	11,264,938			$	9,268,818			$	9,307,992			21.54	%		21.02	%

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
	Three Months Ended											Three Months Ended											Three Months Ended
	June 30, 2020											March 31, 2020											June 30, 2019
					Interest				Average							Interest				Average							Interest				Average
	Average				Income/				Yield/			Average				Income/				Yield/			Average				Income/				Yield/
	Balance				Expense				Rate			Balance				Expense				Rate			Balance				Expense				Rate
Assets:
Loans (net of unearned income and deferred costs), excluding nonaccrual loans (1)	$	9,619,931			$	102,656			4.29	%		$	8,550,216			$	100,566			4.73	%		$	8,075,054			$	102,366			5.08	%
Taxable investment securities	1,198,776				7,367				2.46	%		1,356,411				9,211				2.72	%		1,170,215				8,346				2.85	%
Tax-exempt investment securities	147,489				836				2.27	%		128,204				861				2.69	%		90,942				756				3.33	%
Total securities	1,346,265				8,203				2.44	%		1,484,615				10,072				2.71	%		1,261,157				9,102				2.89	%
Interest-bearing deposits	1,729,140				433				0.10	%		373,984				1,102				1.19	%		698,649				4,016				2.31	%
Loans held for sale	464,796				3,811				3.28	%		333,070				2,988				3.59	%		281,775				3,007				4.27	%
Total earning assets	13,160,132				115,103				3.52	%		10,741,885				114,728				4.30	%		10,316,635				118,491				4.61	%
Less: allowance for credit losses	(69,451		)									(55,331		)									(53,386		)
Total nonearning assets	1,318,787											1,362,769											1,269,029
Total assets	$	14,409,468										$	12,049,323										$	11,532,278
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	3,857,757			$	2,491			0.26	%		$	3,521,707			$	5,319			0.61	%		$	3,312,313			$	7,025			0.85	%
Savings	290,201				554				0.77	%		276,947				593				0.86	%		281,221				929				1.33	%
Certificates of deposit	2,503,648				12,027				1.93	%		2,434,098				13,150				2.17	%		2,433,479				13,830				2.28	%
Total interest-bearing deposits	6,651,606				15,072				0.91	%		6,232,752				19,062				1.23	%		6,027,013				21,784				1.45	%
Borrowings	1,741,832				3,238				0.74	%		679,745				2,581				1.50	%		678,799				3,318				1.93	%
Subordinated debt, net	248,660				2,962				4.76	%		248,510				2,962				4.77	%		248,064				2,962				4.78	%
Total interest-bearing liabilities	8,642,098				21,272				0.99	%		7,161,007				24,605				1.38	%		6,953,876				28,064				1.62	%
Demand deposits	3,826,439											2,962,110											2,788,596
Other noninterest-bearing liabilities	239,154											260,500											215,951
Total liabilities	12,707,691											10,383,617											9,958,423
Shareholders equity	1,701,777											1,665,706											1,573,855
Total liabilities and equity	$	14,409,468										$	12,049,323										$	11,532,278
Net interest income (tax-equivalent basis)					$	93,831										$	90,123										$	90,427
Reconcilement of Non-GAAP Financial Measures
Tax-equivalent basis adjustment					(557		)									(627		)									(608		)
Net interest income (GAAP)					$	93,274										$	89,496										$	89,819
Interest rate spread (2)(4)									2.53	%										2.92	%										2.99	%
Interest expense as a percent of average earning assets									0.65	%										0.92	%										1.09	%
Net interest margin (tax equivalent basis) (3)(4)									2.87	%										3.37	%										3.52	%
Total cost of deposits									0.58	%										0.83	%										0.99	%

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

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
	Six Months Ended											Six Months Ended											Six Months Ended June 30,
	June 30, 2020											June 30, 2019											2020 Compared with 2019
					Interest				Average							Interest				Average
	Average				Income/				Yield/			Average				Income/				Yield/			Increase				Change Due to
	Balance				Expense				Rate			Balance				Expense				Rate			(Decrease)				Rate				Volume
Assets:
Loans (net of unearned income and deferred costs), excluding nonaccrual loans (1)	$	9,085,074			$	203,221			4.50	%		$	8,053,146			$	202,512			5.07	%		$	709			$	(24,050	)		$	24,759
Taxable investment securities	1,277,593				16,578				2.60	%		1,103,799				15,875				2.88	%		703				(1,646		)		2,349
Tax-exempt investment securities	137,846				1,698				2.46	%		85,158				1,522				3.57	%		176				(571		)		747
Total securities	1,415,439				18,276				2.58	%		1,188,957				17,397				2.93	%		879				(2,217		)		3,096
Interest-bearing deposits	472,589				1,535				0.65	%		695,999				8,013				2.32	%		(6,478		)		(4,478		)		(2,000		)
Loans held for sale	398,933				6,799				3.41	%		230,411				5,010				4.35	%		1,789				(1,264		)		3,053
Total earning assets	11,372,035				229,831				4.06	%		10,168,513				232,932				4.62	%		(3,101		)		(32,009		)		28,908
Less: allowance for loan losses	(62,390		)									(53,117		)
Total nonearning assets	1,919,751											1,249,052
Total assets	$	13,229,396										$	11,364,448
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	3,689,732			$	7,809			0.43	%		$	3,243,616			$	13,264			0.82	%		$	(5,455	)		$	(7,097	)		$	1,642
Savings	283,574				1,147				0.81	%		283,348				1,956				1.39	%		(809		)		(811		)		2
Certificates of deposit	2,468,873				25,177				2.05	%		2,362,165				25,738				2.20	%		(561		)		(1,724		)		1,163
Total interest-bearing deposits	6,442,179				34,133				1.07	%		5,889,129				40,958				1.40	%		(6,825		)		(9,632		)		2,807
Borrowings	1,210,789				5,820				0.95	%		749,948				7,540				2.00	%		(1,720		)		(5,083		)		3,363
Subordinated debt, net	248,585				5,923				4.77	%		247,989				5,923				4.78	%						(14		)		14
Total interest-bearing liabilities	7,901,553				45,876				1.17	%		6,887,066				54,421				1.59	%		(8,545		)		(14,729		)		6,184
Demand deposits	3,394,275											2,710,141
Other noninterest-bearing liabilities	249,827											207,287
Total liabilities	11,545,655											9,804,494
Shareholders equity	1,683,741											1,559,954
Total liabilities and equity	$	13,229,396										$	11,364,448
Net interest income (tax-equivalent basis)					$	183,955										$	178,511						$	5,444			$	(17,280	)		$	22,724
Reconcilement of Non-GAAP Financial Measures
Tax-equivalent basis adjustment					(1,185		)									(1,219		)					34
Net interest income (GAAP)					$	182,770										$	177,292						$	5,478
Interest rate spread (2)(4)									2.90	%										3.03	%
Interest expense as a percent of average earning assets									0.81	%										1.08	%
Net interest margin (tax equivalent basis) (3)(4)									3.25	%										3.54	%
Total cost of deposits									0.70	%										0.96	%
(1) Includes average PPP balances of  $0.40 billion and related interest income of $5.8 million
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.
(4) Non-GAAP.

TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
	June 30,				December 31,
	2020				2019
	(unaudited)				(audited)
ASSETS
Cash and due from banks	$	115,724			$	97,593
Interest-bearing deposits at FRB - Richmond	2,511,152				322,505
Interest-bearing deposits in financial institutions	24,374				22,518
Total Cash and Cash Equivalents	2,651,250				442,616
Securities available for sale, at fair value (amortized cost $1,206,878, allowance for credit losses of $140) (1)	1,266,624				1,441,308
Securities held to maturity, at amortized cost (fair value $43,575 )(1)	41,595				43,688
Less:  allowance for credit losses	(121		)
Securities held to maturity, net of allowance for credit losses	41,474				43,688
Other equity securities	6,497				6,462
FHLB stock	49,277				30,094
Total Securities	1,363,872				1,521,552
Mortgage loans held for sale	610,369				419,233
Loans, net of unearned income and deferred costs	9,801,889				8,419,288
Less: allowance for credit losses	(90,467		)		(58,234		)
Net Loans	9,711,422				8,361,054
Premises and equipment, net	257,533				231,806
Goodwill	446,725				446,816
Other intangible assets, net	48,632				54,399
BOLI	242,493				243,062
Other assets	247,962				227,125
TOTAL ASSETS	$	15,580,258			$	11,947,663
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	4,226,208			$	2,951,225
Interest-bearing:
Demand and money market accounts	4,223,391				3,586,364
Savings	298,673				276,205
Certificates of deposit	2,516,666				2,457,123
Total Deposits	11,264,938				9,270,917
Advances from the FHLB	906,365				471,687
Subordinated debt, net	248,756				248,458
FRB PPP lending facility	1,111,429
Repurchase agreements and other borrowings	60,913				52,391
Total Borrowings	2,327,463				772,536
Other liabilities	266,314				250,516
TOTAL LIABILITIES	13,858,715				10,293,969
Preferred stock
Authorized and unissued shares - 2,000,000
Common stock, $1.667 par: 150,000,000 shares authorized
72,645,987 and 72,649,682 shares issued at June 30, 2020 and December 31, 2019, respectively	121,101				121,107
Capital surplus	1,043,774				1,041,160
Retained earnings	499,502				467,186
Common stock issued to deferred compensation trust, at cost
871,634 and 818,578 shares at June 30, 2020 and December 31, 2019, respectively	(16,776		)		(15,555		)
Deferred compensation trust	16,776				15,555
Accumulated other comprehensive income (loss)	43,218				11,302
TOTAL SHAREHOLDERS EQUITY	1,707,595				1,640,755
Noncontrolling interest	13,948				12,939
TOTAL EQUITY	1,721,543				1,653,694
TOTAL LIABILITIES AND EQUITY	$	15,580,258			$	11,947,663
(1) For 2020, disclosures are presented in compliance with ASC 326.

TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2020				2019				2020				2019
INTEREST INCOME:
Loans, including fees	$	102,139			$	101,874			$	202,201			$	201,569
Investment securities	8,163				8,987				18,112				17,121
Interest-bearing deposits in financial institutions and federal funds sold	433				4,015				1,535				8,013
Mortgage loans held for sale	3,811				3,007				6,799				5,010
Total interest income	114,546				117,883				228,647				231,713
INTEREST EXPENSE:
Deposits	15,072				21,784				34,134				40,958
Advances from the FHLB	2,595				3,201				5,088				7,354
Subordinated debt, net	2,962				2,962				5,923				5,924
Repurchase agreements and other borrowings	643				117				732				185
Total interest expense	21,272				28,064				45,877				54,421
Net interest income	93,274				89,819				182,770				177,292
PROVISION FOR CREDIT LOSSES	26,945				2,824				33,961				4,262
Net interest income after provision for credit losses	66,329				86,995				148,809				173,030
NONINTEREST INCOME:
Residential mortgage banking income, net	29,715				18,565				37,131				32,073
Insurance commissions and other title fees and income, net	17,612				17,213				34,505				32,795
Real estate brokerage and property management income, net	10,781				8,843				17,719				18,111
Service charges on deposit accounts	1,888				3,185				4,328				6,046
Credit card merchant fees, net	1,109				660				2,287				1,843
BOLI	1,584				1,635				4,690				3,233
Other income	3,763				4,617				8,990				7,774
Net gain/(loss) on investment securities	2,930								7,932				(776		)
Total noninterest income	69,382				54,718				117,582				101,099
NONINTEREST EXPENSE:
Salaries and employee benefits	56,926				54,263				112,793				107,123
Occupancy expense	7,227				7,662				14,728				15,913
Furniture and equipment	3,564				3,578

7,205 6,949 Amortization - intangibles2,901 3,113 5,851 6,305 Software expense3,492 2,788 6,984 5,533 Data processing2,718 3,616 5,509 6,782 Professional fees2,972 3,707 6,040 6,386 Advertising and marketing1,986 3,182 5,570 6,011 Other expenses9,239 14,647 23,233 27,677 Total noninterest expense91,025 96,556 187,913 188,679 Income before income tax expense and noncontrolling interest44,686 45,157 78,478 85,450 Provision for income tax expense7,464 8,915 13,651 17,126 Net income$37,222 $36,242 $64,827 $68,324 Net income attributable to noncontrolling interest(2,617) (1,604) (3,838) (2,277)Net income attributable to TowneBank$34,605 $34,638 $60,989 $66,047 Per common share information Basic earnings$0.48 $0.48 $0.84 $0.92 Diluted earnings$0.48 $0.48 $0.84 $0.92 Cash dividends declared$0.18 $0.18 $0.36 $0.34

TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
	June 30,				March 31,				December 31,				September 30,				June 30,
	2020				2020				2019				2019				2019
	(unaudited)				(unaudited)				(audited)				(unaudited)				(unaudited)
ASSETS
Cash and due from banks	$	115,724			$	108,929			$	97,593			$	124,439			$	110,580
Interest-bearing deposits at FRB - Richmond	2,511,152				753,643				322,505				675,288				834,505
Interest-bearing deposits in financial institutions	24,374				23,564				22,518				21,663				21,527
Total Cash and Cash Equivalents	2,651,250				886,136				442,616				821,390				966,612
Securities available for sale	1,266,624				1,248,420				1,441,308				1,337,395				1,260,821
Securities held to maturity	41,595				42,431				43,688				44,494				50,574
Less: allowance for credit losses	(121		)		(133		)		—				—				—
Securities held to maturity, net of allowance for credit losses	41,474				42,298				43,688				44,494				50,574
Other equity securities	6,497				6,462				6,462				5,697				5,396
FHLB stock	49,277				52,042				30,094				26,282				32,657
Total Securities	1,363,872				1,349,222				1,521,552				1,413,868				1,349,448
Mortgage loans held for sale	610,369				453,143				419,233				456,719				362,773
Loans, net of unearned income and deferred costs	9,801,889				8,784,195				8,419,288				8,182,829				8,126,729
Less: allowance for credit losses	(90,467		)		(64,372		)		(58,234		)		(55,428		)		(54,527		)
Net Loans	9,711,422				8,719,823				8,361,054				8,127,401				8,072,202
Premises and equipment, net	257,533				236,735				231,806				231,060				230,177
Goodwill	446,725				446,725				446,816				446,423				442,881
Other intangible assets, net	48,632				51,448				54,399				57,404				58,391
BOLI	242,493				240,924				243,062				241,652				240,621
Other assets	247,962				239,670				227,125				225,374				219,375
TOTAL ASSETS	$	15,580,258			$	12,623,826			$	11,947,663			$	12,021,291			$	11,942,480
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	4,226,208			$	3,060,515			$	2,951,225			$	3,030,505			$	2,950,615
Interest-bearing:
Demand and money market accounts	4,223,391				3,573,926				3,586,364				3,534,252				3,409,322
Savings	298,673				280,807				276,205				280,552				277,495
Certificates of deposit	2,516,666				2,392,744				2,457,123				2,592,705				2,631,386
Total Deposits	11,264,938				9,307,992				9,270,917				9,438,014				9,268,818
Advances from the FHLB	906,365				971,527				471,687				381,846				532,004
Subordinated debt, net	248,756				248,607				248,458				248,309				248,160
FRB PPP lending facility	1,111,429				—				—				—				—
Repurchase agreements and other borrowings	60,913				171,762				52,391				42,971				56,355
Total Borrowings	2,327,463				1,391,896				772,536				673,126				836,519
Other liabilities	266,314				258,306				250,516				271,617				230,691
TOTAL LIABILITIES	13,858,715				10,958,194				10,293,969				10,382,757				10,336,028
Preferred stock
Authorized shares - 2,000,000	—				—				—				—				—
Common stock, $1.667 par value	121,101				121,057				121,107				121,080				121,038
Capital surplus	1,043,774				1,041,870				1,041,160				1,039,156				1,036,982
Retained earnings	499,502				477,972				467,186				445,186				420,600
Common stock issued to deferred compensation trust, at cost	(16,776		)		(15,562		)		(15,555		)		(15,317		)		(15,160		)
Deferred compensation trust	16,776				15,562				15,555				15,317				15,160
Accumulated other comprehensive income (loss)	43,218				12,301				11,302				19,958				15,143
TOTAL SHAREHOLDERS’ EQUITY	1,707,595				1,653,200				1,640,755				1,625,380				1,593,763
Noncontrolling interest	13,948				12,432				12,939				13,154				12,689
TOTAL EQUITY	1,721,543				1,665,632				1,653,694				1,638,534				1,606,452
TOTAL LIABILITIES AND EQUITY	$	15,580,258			$	12,623,826			$	11,947,663			$	12,021,291			$	11,942,480

TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except share data)
	Three Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,
	2020				2020				2019				2019				2019
INTEREST INCOME:
Loans, including fees	$	102,139			$	100,062			$	100,059			$	102,047			$	101,874
Investment securities	8,163				9,949				9,936				9,889				8,987
Interest-bearing deposits in financial institutions and federal funds sold	433				1,102				2,067				3,745				4,015
Mortgage loans held for sale	3,811				2,988				4,413				3,956				3,007
Total interest income	114,546				114,101				116,475				119,637				117,883
INTEREST EXPENSE:
Deposits	15,072				19,062				21,744				23,552				21,784
Advances from the FHLB	2,595				2,492				1,730				1,935				3,201
Subordinated debt	2,962				2,962				2,962				2,962				2,962
Repurchase agreements and other borrowings	643				89				80				85				117
Total interest expense	21,272				24,605				26,516				28,534				28,064
Net interest income	93,274				89,496				89,959				91,103				89,819
PROVISION FOR CREDIT LOSSES	26,945				7,016				3,601				1,508				2,824
Net interest income after provision for credit losses	66,329				82,480				86,358				89,595				86,995
NONINTEREST INCOME:
Residential mortgage banking income, net	29,715				7,416				15,884				18,855				18,565
Insurance commissions and other title fees and income, net	17,612				16,893				15,001				16,681				17,213
Real estate brokerage and property management income, net	10,781				6,938				6,737				9,444				8,843
Service charges on deposit accounts	1,888				2,440				2,245				2,253				3,185
Credit card merchant fees, net	1,109				1,179				1,389				1,514				660
BOLI	1,584				3,105				3,865				2,117				1,635
Other income	3,763				5,227				4,591				3,981				4,617
Net gain/(loss) on investment securities	2,930				5,002				—				(69		)		—
Total noninterest income	69,382				48,200				49,712				54,776				54,718
NONINTEREST EXPENSE:
Salaries and employee benefits	56,926				55,867				56,013				55,784				54,263
Occupancy expense	7,227				7,502				7,516				7,953				7,662
Furniture and equipment	3,564				3,640				3,598				3,805				3,578
Amortization - intangibles	2,901				2,950				3,005				3,059				3,113
Software expense	3,492				3,492				2,976				3,208				2,788
Data processing	2,718				2,791				2,510				2,533				3,616
Professional fees	2,972				3,067				2,990				3,566				3,707
Advertising and marketing	1,986				3,584				2,839				3,429				3,182
Other expenses	9,239				13,995				10,889				13,950				14,647
Total noninterest expense	91,025				96,888				92,336				97,287				96,556
Income before income tax expense and noncontrolling interest	44,686				33,792				43,734				47,084				45,157
Provision for income tax expense	7,464				6,187				7,786				7,684				8,915
Net income	37,222				27,605				35,948				39,400				36,242
Net income attributable to noncontrolling interest	(2,617		)		(1,221		)		(873		)		(1,741		)		(1,604		)
Net income attributable to TowneBank	$	34,605			$	26,384			$	35,075			$	37,659			$	34,638
Per common share information
Basic earnings	$	0.48			$	0.37			$	0.49			$	0.52			$	0.48
Diluted earnings	$	0.48			$	0.36			$	0.49			$	0.52			$	0.48
Basic weighted average shares outstanding	72,280,555				72,206,228				72,122,476				72,091,221				72,044,817
Diluted weighted average shares outstanding	72,317,988				$	72,299,721			72,302,414				72,222,934				72,145,600
Cash dividends declared	$	0.18			$	0.18			$	0.18			$	0.18			$	0.18

TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)
	Three Months Ended												Six Months Ended								Increase/(Decrease)
	June 30,								March 31,				June 30,								2020 over 2019
	2020				2019				2020				2020				2019				Amount				Percent
Revenue
Net interest income	$	89,665			$	88,442			$	87,406			$	177,071			$	174,842			$	2,229			1.27	%
Service charges on deposit accounts	1,888				3,185				2,440				4,328				6,046				(1,718		)		(28.42	)%
Credit card merchant fees	1,109				660				1,179				2,287				1,843				444				24.09	%
Other income	3,888				5,273				7,061				10,950				9,200				1,750				19.02	%
Subtotal	6,885				9,118				10,680				17,565				17,089				476				2.79	%
Net gain/(loss) on investment securities	2,930				—				5,002				7,932				(776		)		8,708				1,122.16	%
Total noninterest income	9,815				9,118				15,682				25,497				16,313				9,184				56.30	%
Total revenue	99,480				97,560				103,088				202,568				191,155				11,413				5.97	%
Provision for credit losses	26,059				2,824				7,041				33,100				4,262				28,838				676.63	%
Expenses
Salaries and employee benefits	35,209				32,353				33,225				68,434				63,440				4,994				7.87	%
Occupancy expense	4,812				5,007				4,916				9,728				10,251				(523		)		(5.10	)%
Furniture and equipment	2,715				2,517				2,660				5,375				4,884				491				10.05	%
Amortization of intangibles	1,114				1,315				1,164				2,278				2,681				(403		)		(15.03	)%
Other expenses	10,718				18,938				18,705				29,423				35,119				(5,696		)		(16.22	)%
Total expenses	54,568				60,130				60,670				115,238				116,375				(1,137		)		(0.98	)%
Income before income tax, corporate allocation and noncontrolling interest	18,853				34,606				35,377				54,230				70,518				(16,288		)		(23.10	)%
Corporate allocation	627				546				670				1,297				998				299				29.96	%
Income before income tax provision and noncontrolling interest	19,480				35,152				36,047				55,527				71,516				(15,989		)		(22.36	)%
Provision for income tax expense	2,167				6,650				6,663				8,830				13,842				(5,012		)		(36.21	)%
Net income	17,313				28,502				29,384				46,697				57,674				(10,977		)		(19.03	)%
Noncontrolling interest	5				1				(1		)		4				3				1				33.33	%
Net income attributable to TowneBank	$	17,318			$	28,503			$	29,383			$	46,701			$	57,677			(10,976		)		(19.03	)%
Efficiency ratio	56.52		%		61.63		%		61.85		%		59.21		%		60.63		%		(1.42		)%		(2.34	)%

TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)
	Three Months Ended												Six Months Ended								Increase/(Decrease)
	June 30,								March 31,				June 30,								2020 over 2019
	2020				2019				2020				2020				2019				Amount				Percent
Revenue
Residential mortgage brokerage income, net	$	30,468			$	18,898			$	8,007			$	38,475			$	32,654			$	5,821			17.83	%
Real estate brokerage income, net	2,659				2,873				1,865				4,524				4,434				90				2.03	%
Title insurance and settlement fees	639				594				436				1,075				962				113				11.75	%
Property management fees, net	8,122				5,970				5,073				13,195				13,678				(483		)		(3.53	)%
Income from unconsolidated subsidiary	301				162				186				487				256				231				90.23	%
Net interest and other income	3,765				1,677				2,396				6,161				3,049				3,112				102.07	%
Total revenue	45,954				30,174				17,963				63,917				55,033				8,884				16.14	%
Provision for credit losses	886				—				(25		)		861				—				861				n/m
Expenses
Salaries and employee benefits	13,059				13,309				13,293				26,352				26,204				148				0.56	%
Occupancy expense	1,763				2,028				1,927				3,690				4,373				(683		)		(15.62	)%
Furniture and equipment	626				803				762				1,388				1,571				(183		)		(11.65	)%
Amortization of intangible assets	658				695				657				1,315				1,420				(105		)		(7.39	)%
Other expenses	8,270				7,234				6,867				15,137				13,475				1,662				12.33	%
Total expenses	24,376				24,069				23,506				47,882				47,043				839				1.78	%
Income (loss) before income tax, corporate allocation and noncontrolling interest	20,692				6,105				(5,518		)		15,174				7,990				7,184				89.91	%
Corporate allocation	(370		)		(328		)		(393		)		(763		)		(591		)		(172		)		29.10	%
(Loss) income before income tax provision and noncontrolling interest	20,322				5,777				(5,911		)		14,411				7,399				7,012				94.77	%
Provision for income tax (benefit) expense	4,127				1,287				(1,292		)		2,835				1,838				997				54.24	%
Net (loss) income	16,195				4,490				(4,619		)		11,576				5,561				6,015				108.16	%
Noncontrolling interest	(2,415		)		(1,248		)		(791		)		(3,206		)		(1,500		)		(1,706		)		113.73	%
Net (loss) income attributable to TowneBank	$	13,780			$	3,242			$	(5,410	)		$	8,370			$	4,061			4,309				106.11	%
Efficiency ratio	53.04		%		79.77		%		130.86		%		74.91		%		85.48		%		(10.57		)%		(12.37	)%

TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)
	Three Months Ended												Six Months Ended								Increase/(Decrease)
	June 30,								March 31,				June 30,								2020 over 2019
	2020				2019				2020				2020				2019				Amount				Percent
Commission and fee income
Property and casualty	$	13,926			$	13,067			$	12,786			$	26,712			$	24,940			$	1,772			7.11	%
Employee benefits	3,791				3,833				3,918				7,709				7,339				370				5.04	%
Travel insurance	861				1,169				1,266				2,127				2,458				(331		)		(13.47	)%
Specialized benefit services	157				163				168				325				333				(8		)		(2.40	)%
Total commissions and fees	18,735				18,232				18,138				36,873				35,070				1,803				5.14	%
Contingency and bonus revenue	2,009				1,893				2,022				4,031				3,479				552				15.87	%
Other income	127				79				81				208				154				54				35.06	%
Total revenue	20,871				20,204				20,241				41,112				38,703				2,409				6.22	%
Employee commission expense	3,649				3,401				3,596				7,245				6,500				745				11.46	%
Revenue, net of commission expense	17,222				16,803				16,645				33,867				32,203				1,664				5.17	%
Salaries and employee benefits	8,658				8,601				9,349				18,007				17,479				528				3.02	%
Occupancy expense	652				627				659				1,311				1,289				22				1.71	%
Furniture and equipment	223				258				218				441				494				(53		)		(10.73	)%
Amortization of intangible assets	1,129				1,103				1,129				2,258				2,204				54				2.45	%
Other expenses	1,419				1,768				1,357				2,776				3,795				(1,019		)		(26.85	)%
Total operating expenses	12,081				12,357				12,712				24,793				25,261				(468		)		(1.85	)%
Income before income tax, corporate allocation and noncontrolling interest	5,141				4,446				3,933				9,074				6,942				2,132				30.71	%
Corporate allocation	(257		)		(218		)		(277		)		(533		)		(407		)		(126		)		30.96	%
Income before income tax provision and noncontrolling interest	4,884				4,228				3,656				8,541				6,535				2,006				30.70	%
Provision for income tax expense	1,170				978				816				1,987				1,446				541				37.41	%
Net income	3,714				3,250				2,840				6,554				5,089				1,465				28.79	%
Noncontrolling interest	(207		)		(357		)		(429		)		(636		)		(780		)		144				(18.46	)%
Net income attributable to TowneBank	$	3,507			$	2,893			$	2,411			$	5,918			$	4,309			$	1,609			37.34	%
Provision for income taxes	1,170				978				816				1,987				1,446				541				37.41	%
Depreciation, amortization and interest expense	1,291				1,309				1,300				2,591				2,982				(391		)		(13.11	)%
EBITDA (non-GAAP)	$	5,968			$	5,180			$	4,527			$	10,496			$	8,737			$	1,759			20.13	%
Efficiency ratio	70.15		%		73.54		%		76.37		%		73.21		%		78.44		%		(5.23		)%		(6.67	)%

TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands)
	Three Months Ended												Six Months Ended
	June 30,				June 30,				March 31,				June 30,				June 30,
	2020				2019				2020				2020				2019
Return on average assets (GAAP)	0.97		%		1.20		%		0.88		%		0.93		%		1.17		%
Impact of excluding average goodwill and other intangibles and amortization	0.10		%		0.15		%		0.12		%		0.11		%		0.15		%
Return on average tangible assets (non-GAAP)	1.07		%		1.35		%		1.00		%		1.04		%		1.32		%
Return on average equity (GAAP)	8.18		%		8.83		%		6.37		%		7.28		%		8.54		%
Impact of excluding average goodwill and other intangibles and amortization	4.14		%		5.07		%		3.54		%		3.85		%		5.03		%
Return on average tangible equity (non-GAAP)	12.32		%		13.90		%		9.91		%		11.13		%		13.57		%
Return on average common equity (GAAP)	8.24		%		8.89		%		6.42		%		7.34		%		8.60		%
Impact of excluding average goodwill and other intangibles and amortization	4.20		%		5.16		%		3.59		%		3.91		%		5.13		%
Return on average tangible common equity (non-GAAP)	12.44		%		14.05		%		10.01		%		11.25		%		13.73		%
Book value (GAAP)	$	23.50			$	21.95			$	22.77			$	23.50			$	21.95
Impact of excluding average goodwill and other intangibles and amortization	(6.82		)		(6.90		)		(6.86		)		(6.82		)		(6.90		)
Tangible book value (non-GAAP)	$	16.68			$	15.05			$	15.91			$	16.68			$	15.05
Average assets (GAAP)	$	14,409,468			$	11,532,278			$	12,049,323			$	13,229,396			$	11,364,448
Less: average goodwill	446,725				442,881				446,838				446,781				442,875
Less: average intangible assets	50,352				60,339				53,285				51,819				61,861
Average tangible assets (non-GAAP)	$	13,912,391			$	11,029,058			$	11,549,200			$	12,730,796			$	10,859,712
Average equity (GAAP)	$	1,701,777			$	1,573,855			$	1,665,706			$	1,683,742			$	1,559,954
Less: average goodwill	446,725				442,881				446,838				446,781				442,875
Less: average intangible assets	50,352				60,339				53,285				51,819				61,861
Average tangible equity (non-GAAP)	$	1,204,700			$	1,070,635			$	1,165,583			$	1,185,142			$	1,055,218
Average common equity (GAAP)	$	1,689,603			$	1,562,214			$	1,653,676			$	1,671,640			1,548,250
Less: average goodwill	446,725				442,881				446,838				446,781				442,875
Less: average intangible assets	50,352				60,339				53,285				51,819				61,861
Average tangible common equity (non-GAAP)	$	1,192,526			$	1,058,994			$	1,153,553			$	1,173,040			$	1,043,514
Net Income (GAAP)	$	34,605			$	34,638			26,384				60,989				66,047
Amortization of Intangibles, net of tax	2,292				2,460				2,331				4,622				4,981
Tangible Net Income (non-GAAP)	$	36,897			$	37,098			$	28,715			$	65,611			$	71,028