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TowneBank Reports Full Year and Fourth Quarter Financial Results for 2014

SUFFOLK, Va., Feb. 2, 2015 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank (the "Bank") (Nasdaq:TOWN) today reported financial results for the full year and the fourth quarter ended December 31, 2014.

Record Earnings for Full Year 2014

The Bank reported record annual earnings of $42.17 million for the year ended December 31, 2014, as compared to the $41.76 million earned in 2013. The Bank's annual earnings for 2014 included a net of tax charge of $5.49 million in non-recurring severance and acquisition-related charges recorded during the year.

Net income available to common shareholders increased 10.31% to $41.40 million after preferred dividend payments of $0.76 million. Fully diluted earnings per share, including the non-recurring charges, increased 3.51% to $1.18 per share compared to $1.14 per share for 2013.

The Bank's quarterly dividend was increased to $0.11 per share beginning in the second quarter of 2014 resulting in total dividends of $0.43 per share for 2014, an increase of 13% over 2013. On an annualized basis, the current annual dividend rate is $0.44 per share.

"We are pleased to announce our 15th consecutive year of record annual earnings," said G. Robert Aston, Jr., Chairman and Chief Executive Officer. "These earnings were a result of increased revenue growth, control of core operating expenses, and solid balance sheet growth. Additionally, TowneBank's deposit market share in Hampton Roads reached a record level of 16.70%, elevating our hometown bank into a number two position among all banks serving our home market."

"On January 2, 2015, we successfully completed the acquisition and integration of the $1.1 billion Richmond, Virginia-based Franklin Financial Corporation. This strategic merger will enable us to enter the Richmond and central Virginia market with eight banking centers plus an assemblage of an exceptional group of hometown bankers to help us build a community asset for Virginia's capital city," added Aston.

2014 Performance Highlights

  • Total revenues were $242.46 million, an increase of $8.04 million, or 3.43%, compared to 2013
    • Taxable equivalent net interest margin was 3.38% compared to 3.61% for 2013
    • Insurance commissions increased 22.02% to $34.56 million
  • Core noninterest expense discipline demonstrated as noninterest expense increase of $10.07 million includes the following:
    • Non-recurring charges of $7.83 million, before tax, in severance and acquisition-related expenses
    • Additional operational noninterest expenses of $2.67 million related to insurance agency acquired in 2014
    • Additional operational noninterest expenses of $0.81 million related to resort property management company acquired in 2014
  • Loan growth continued as total loans held for investment increased $161.28 million, or 4.98%, from December 31, 2013
    • Commercial and industrial loans increased by $32.75 million, or 6.54%
    • Owner occupied commercial real estate loans increased $15.40 million, or 2.09%
    • Income producing commercial real estate loans increased $66.11 million, or 10.50%
    • Construction and development loans decreased $17.20 million, or 3.66%
    • Consumer and other loans increased $26.67 million, or 54.76%
  • Total deposits were $3.85 billion, an increase of $279.50 million, or 7.84%, from 2013
    • Noninterest bearing deposits increased by 18.07%, to $1.22 billion
    • Average interest-bearing deposit costs were 0.52%, down three basis points
    • Noninterest bearing deposits were 31.83% of total deposits compared to 29.07% at December 31, 2013
    • Total cost of deposits declined to 0.36% from 0.39% at December 31, 2013.
  • Asset quality showed continued improvement
    • Nonperforming assets were $41.86 million, a decrease of 19.95% from 2013
    • Nonperforming loans decreased 47.14% to $6.74 million
    • Foreclosed property decreased by 11.18% to $35.12 million
  • Strategic acquisitions
    • On May 1, 2014, acquired Southern Insurance Agency, Inc. ("Southern"), an independent insurance agency
    • On October 1, 2014, acquired Beach Properties of Hilton Head ("Beach Properties"), a resort property management company in Hilton Head, South Carolina
    • On January 2, 2015, completed the acquisition of Franklin Financial Corporation ("Franklin") and its wholly owned subsidiary, Franklin Federal Savings Bank, based in Richmond, Virginia
  • New banking center
    • On June 13, 2014, opened a new banking office in the Wards Corner area in Norfolk, Virginia
    • At December 31, 2014, the Wards Corner banking office had deposits of $42.88 million
  • The Bank remained well-capitalized
    • Tier 1 leverage capital ratio of 9.94%
    • Tier 1 risk-based capital ratio of 12.73%
    • Total risk-based capital ratio of 13.67%

Fourth Quarter 2014 Earnings

Net income for the fourth quarter was $7.23 million versus $9.67 million in 2013, reflecting a non-recurring, net-of-tax charge of $4.23 million in severance and acquisition-related expenses. These one-time charges were partially offset by a reversal of previously accrued incentive compensation of $0.59 million, on an after-tax basis, that was unearned for the full calendar year. Fully diluted earnings per share, including the impact of the non-recurring charges, was $0.20 compared to $0.27 in fourth quarter 2013.

Fourth Quarter 2014 Performance Highlights

  • Total revenues were $59.54 million, an increase of $4.31 million, or 7.80%, compared to the fourth quarter of 2013
    • Taxable equivalent net interest margin was 3.35% compared to 3.53% for the fourth quarter of 2013
    • Residential mortgage banking income increased 18.26% from the fourth quarter of 2013 to $6.52 million on production volume of $321.31 million
    • Insurance commissions increased 28.51% to $7.74 million
  • Core noninterest expense discipline demonstrated as noninterest expense increase of $7.96 million includes the following:
    • Non-recurring charge of $6.32 million, before tax, in severance and acquisition-related expenses
    • Additional operational noninterest expenses of $1.08 million related to Southern acquisition in 2014
    • Additional operational noninterest expenses of $0.81 million related to Beach Properties acquisition in 2014
  • Total loans held for investment increased $38.73 million, or 1.15%, from September 30, 2014
  • Average interest-bearing deposit costs were 0.50%, down two basis points from third quarter 2014
  • Asset quality showed continued improvement
    • Nonperforming assets were $41.86 million, a decrease of 4.44% from third quarter 2014
    • Net charge-offs were 0.03% annualized of average loans versus 0.09% in fourth quarter 2013 and 0.07% in third quarter 2014

Net Interest Income

Net interest income increased to $37.14 million, a $0.68 million, or 1.87%, increase from the fourth quarter of 2013. The primary driver of the increase was growth in average earning assets of $333.31 million, which was partially offset by an 18 basis point narrowing of the tax-equivalent net interest margin to 3.35% in the current quarter from 3.53% in fourth quarter 2013.

On a linked quarter basis, net interest income increased $0.27 million or 0.74%, in fourth quarter 2014 versus the third quarter, while tax-equivalent net interest margin was 3.35% versus 3.32% for the third quarter of 2014.

Noninterest Income

% Change
Q4 Q4 Q3 Q4 14 vs. Q4 14 vs.
(in millions) 2014 2013 2014 Q4 13 Q3 14
Residential mortgage banking income, net $ 6,523 $ 5,516 $ 7,858 18.26% (16.99)%
Real estate brokerage and property management, net 2,450 1,908 3,645 28.41% (32.78)%
Insurance commissions and other title fees and income, net 7,743 6,025 8,861 28.51% (12.62)%
Service charges on deposit accounts 2,288 2,211 2,406 3.48% (4.90)%
Credit card merchant fees, net 911 745 927 22.28% (1.73)%
Other income 2,486 2,306 2,572 7.81% (3.34)%
Subtotal before gain on investment securities 22,401 18,711 26,269 19.72% (14.72)%
Net gain on investment securities 66 44 (100.00)% (100.00)%
Total noninterest income $ 22,401 $ 18,777 $ 26,313 19.30% (14.87)%

Noninterest income, excluding gains or losses on investment securities, was $22.40 million for the fourth quarter of 2014, an increase of $3.69 million, or 19.72%, from the fourth quarter of 2013. A large portion of the increase from the comparative period in 2013 is attributable to insurance commissions, which increased $1.72 million, or 28.51%, primarily due to the acquisition of Southern in May 2014. Additionally, the acquisition of Beach Properties in fourth quarter 2014 led to an increase in real estate brokerage and property management income. Also contributing to the increase, residential mortgage banking income increased $1.01 million, or 18.26%, from the fourth quarter of 2013 primarily due to improved pricing and increased production. Mortgage production was $321.31 million for the fourth quarter of 2014, which was $47.63 million higher than the fourth quarter of 2013.

In comparison to the third quarter of 2014, noninterest income, excluding gains or losses on investment securities, decreased $3.87 million, or 14.73%. Residential mortgage banking income decreased by $1.34 million, or 16.99%, from the third quarter of 2014 primarily due to a seasonal decrease in mortgage production of $41.24 million. Decreases in real estate brokerage and property management income and insurance commissions from the linked quarter period also reflected the seasonal nature of those businesses.

Noninterest Expense

% Change
Q4 Q4 Q3 Q4 14 vs. Q4 14 vs.
(in millions) 2014 2013 2014 Q4 13 Q3 14
Salaries and benefits $ 25,205 $ 22,596 $ 25,080 11.55% 0.50%
Occupancy expense 4,676 4,424 4,618 5.70% 1.26%
Furniture and equipment 2,103 1,983 2,040 6.05% 3.09%
Acquisition-related expenses 3,103 87 1,090 N/M 184.68%
Other 13,872 11,910 11,326 16.47% 22.48%
Total noninterest expense $ 48,959 $ 41,000 $ 44,154 19.41% 10.88%

Noninterest expense increased by $7.96 million, or 19.41%, from the fourth quarter of 2013. Driving the increase was the Company incurring $3.10 million of nonrecurring merger expense in the fourth quarter of 2014 related to the acquisition of Southern in the second quarter of 2014 and the merger with Franklin. Additionally, severance costs resulted in pre-tax salaries and benefits expenses of $2.54 million and legal fees of $0.68 million. Occupancy expense increased 5.70% as the opening of a new banking office in June 2014 led to additional expenses. Excluding the above-mentioned separation costs, salaries and benefits expenses were essentially flat due to previously announced cost-control initiatives launched by the Company in the first quarter of 2014.

Noninterest expense increased by $4.81 million, or 10.88%, from the third quarter of 2014. Driving the increase were merger expenses of $3.10 million up from $1.09 million in the third quarter, combined with the above-mentioned severance costs. Included in fourth quarter 2014 is a reversal of $0.90 million, pre-tax, in previously accrued employee incentive compensation unearned for the full 2014 year. Excluding the severance costs, salaries and benefits expense decreased 9.62% from the previous quarter.

Segment Results

$ Change
(in millions) Q4 Q4 Q3 Q4 14 vs. Q4 14 vs.
Segment Net Income (Loss) 2014 2013 2014 Q4 13 Q3 14
Banking $ 7,193 $ 9,687 $ 9,569 $ (2,494) $ (2,376)
Realty (234) (407) 1,532 $ 173 $ (1,766)
Insurance 276 396 1,025 $ (120) $ (749)
Total net income $ 7,235 $ 9,676 $ 12,126 $ (2,441) $ (4,891)

Banking

Net income for the three months ended December 31, 2014 for the Banking segment was $7.19 million, decreasing $2.49 million, or 25.75%, from comparative 2013. The decrease in earnings was driven by an increase in noninterest expenses of $5.57 million primarily caused by acquisition-related expenses from the merger with Franklin and the previously discussed severance costs. These factors were partially offset by a decrease in the provision for loan losses and an increase in net interest income.

The decrease in earnings of $2.38 million, or 24.83% from the third quarter of 2014 was primarily driven by an increase in noninterest expenses of $4.60 million primarily caused by the aforementioned acquisition-related expenses from the merger with Franklin and severance costs. Also contributing to the decrease was an increase in foreclosed property expenses of $0.54 million. These factors were partially offset by a decrease in the provision for loan losses of $1.04 million.

Realty

For the three months ended December 31, 2014, the Realty segment had a net loss of $0.23 million, an improvement of $0.17 million or 42.51% compared to the fourth quarter of 2013. Contributing to the improvement was an increase in noninterest income of $1.55 million as residential mortgage banking income increased by $0.98 million and the previously discussed acquisition of a resort property management company in fourth quarter 2014 contributed to a rise of $0.54 million in real estate brokerage and property management income. These improvements were offset by an increase in noninterest expense of $0.88 million primarily related to the resort property acquisition.

Net income in the Realty segment decreased by $1.77 million from the linked quarter ended September 30, 2014. Residential mortgage banking income decreased $1.29 million due to a seasonal decrease in production volume, and a seasonal decrease also led to a reduction in real estate brokerage and property management income.

Insurance

The Insurance segment had net income of $0.28 million for the three months ended December 31, 2014, a decrease of $0.12 million compared to fourth quarter 2013. The decrease in net income was driven by a one-time adjustment of $0.19 million in state income tax provision.

Net income decreased $0.75 million from the third quarter of 2014. The decline from the linked quarter was driven by a decrease in net commissions and fees of $0.99 million due to expected seasonality of the business.

Balance Sheet

At December 31, 2014, total Bank assets reached $4.98 billion, an increase of $309.49 million, or 6.62%, over December 31, 2013.

Loans

% Change
Q4 Q4 Q3 Q4 14 vs. Q4 14 vs.
(in thousands) 2014 2013 2014 Q4 13 Q3 14
Construction and land development $ 452,481 $ 469,679 $ 476,379 (3.66)% (5.02)%
Commercial real estate - investment related properties 695,526 629,418 701,286 10.50% (0.82)%
Commercial real estate - owner occupied 751,552 736,154 749,985 2.09% 0.21%
Multifamily real estate 51,472 53,562 53,368 (3.90)% (3.55)%
1-4 family residential real estate 837,370 797,723 833,208 4.97% 0.50%
Commercial and industrial business loans 533,500 500,755 481,985 6.54% 10.69%
Consumer loans and other 75,365 48,698 62,321 54.76% 20.93%
Total $ 3,397,266 $ 3,235,989 $ 3,358,532 4.98% 1.15%

The Bank's loan portfolio ended the period at $3.40 billion representing an increase of 4.98%, or $161.28 million, from December 31, 2013, and an increase of 1.15%, or $38.73 million, from September 30, 2014.

Deposits

% Change
Q4 Q4 Q3 Q4 14 vs. Q4 14 vs.
(in thousands) 2014 2013 2014 Q4 13 Q3 14
Noninterest-bearing demand $ 1,224,466 $ 1,037,028 $ 1,245,925 18.07% (1.72)%
Interest-bearing:
Demand and money market accounts 1,365,183 1,240,949 1,309,085 10.01% 4.29%
Savings 301,033 321,103 306,811 (6.25)% (1.88)%
Certificates of deposits 955,920 968,024 988,111 (1.25)% (3.26)%
Total $ 3,846,602 $ 3,567,104 $ 3,849,932 7.84% (0.09)%

The Bank continued to experience solid deposit growth with total deposits increasing to $3.85 billion, up $279.50 million, or 7.84%, from December 31, 2013. The Bank saw continued growth in noninterest bearing demand deposits, which ended the year at $1.22 billion, an 18.07% increase from the prior comparative period. Noninterest bearing deposits represented 31.83% of total deposits at December 31, 2014.

Capital Ratios

Q4 Q4 Q3
2014 2013 2014
Tier 1 12.73% 12.93% 12.88%
Total 13.67% 14.00% 13.84%
Tier 1 leverage ratio 9.94% 10.29% 10.04%

The Bank's total equity at December 31, 2014 rose to $618.28 million, an increase of $32.96 million, or 5.63%, from December 31, 2013. Common equity increased 6.53%, or $32.64 million, from December 31, 2013. Total risk-based capital remained strong as total risk-based capital, Tier 1 capital, Tier 1 leverage ratios, and Tier 1 common capital ratios were 13.67%, 12.73%, 9.94%, 10.47%, respectively. All ratios exceed the current regulatory standards for well capitalized status.

Asset Quality

(in thousands) 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013
Nonperforming loans $ 6,741 $ 5,853 $ 7,501 $ 10,977 $ 12,753
Foreclosed property 35,116 37,951 42,404 41,510 39,534
Total nonperforming assets $ 41,857 $ 43,804 $ 49,905 $ 52,487 $ 52,287
Quarterly net loans charged off $ 261 $ 602 $ 925 $ 1,167 $ 732
Year-to-date net loans charged off $ 2,955 $ 2,694 $ 2,092 $ 1,167 $ 6,295
$ Change
Q4 Q4 Q3 Q4 14 vs. Q4 14 vs.
(dollars in thousands) 2014 2013 2014 Q4 13 Q3 14
Total loans 90 days past due and still accruing $ 12 $ — $ — $ 12 $ 12
Total loans 30-89 days past due $ 13,436 $ 13,851 $ 7,918 $ (415) $ 5,518
Allowance for loan losses $ 35,917 $ 38,380 $ 36,180 $ (2,463) $ (263)
Total performing TDRs $ 38,418 $ 46,410 $ 39,776 $ (7,992) $ (1,358)
Nonperforming loans to period end loans 0.20% 0.39% 0.17% (0.19) 0.03
Nonperforming assets to period end assets 0.84% 1.12% 0.88% (0.28) (0.04)
Allowance for loan losses to period end loans 1.06% 1.19% 1.08% (0.13) (0.02)
Net charge-offs to average loans (annualized) 0.03% 0.09% 0.07% (0.06) (0.04)
Ratio of allowance for loan losses to nonperforming loans 5.33x 3.01x 6.18x 2.32x (.85)x

Continued improvements in credit quality contributed to the Bank's financial results as nonperforming loans decreased to $6.74 million from $12.75 million, at December 31, 2013 and up slightly from $5.85 million at September 30, 2014. Net charge-offs were $0.26 million in the fourth quarter of 2014 compared to $0.73 million in the fourth quarter of 2013 and $0.60 million in the linked quarter. Total nonperforming assets were $41.86 million, or 0.84%, of Bank assets at December 31, 2014, as compared to $52.29 million, or 1.12%, at December 31, 2013, and $41.86 million, or 0.88%, at September 30, 2014.

About TowneBank:

As one of the top community banks in Virginia and North Carolina, TowneBank operates 36 banking offices serving Richmond, Glen Allen, Mechanicsville, Chesterfield County, Chesapeake, Hampton, Newport News, Norfolk, Portsmouth, Suffolk, Virginia Beach, Williamsburg, James City County and York County in Virginia along with Moyock, Grandy, Camden County, Southern Shores, Corolla and Nags Head in North Carolina. Towne also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Insurance Agency, TFA Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Corolla Classic 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 $4.98 billion as of December 31, 2014, 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 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:

Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions. 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. The Company's ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. 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; the quality and composition of the loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in the companies' respective market areas; implementation of new technologies; ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; changes in accounting principles, policies and guidelines; mergers and acquisitions; 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.

TOWNEBANK
December 31, 2014
Consolidated Balance Sheets
(dollars in thousands)
2014 2013
(unaudited) (audited)
ASSETS
Cash and due from banks $ 212,994 $ 203,782
Interest-bearing deposits in financial institutions 1,011 1,011
Total Cash and Cash Equivalents 214,005 204,793
Securities available for sale, at fair value 603,908 543,521
Securities held to maturity, at amortized cost 252,370 204,348
Federal Home Loan Bank stock, at amortized cost 22,157 23,069
Total Securities 878,435 770,938
Mortgage loans held for sale 71,390 58,642
Loans, net of unearned income and deferred costs: 3,397,266 3,235,989
Less: allowance for loan losses (35,917) (38,380)
Net Loans 3,361,349 3,197,609
Premises and equipment, net 155,774 153,436
Goodwill 113,159 104,446
Other intangible assets, net 22,509 15,615
Bank-owned life insurance policies 58,716 57,372
Other assets 107,148 110,146
TOTAL ASSETS $ 4,982,485 $ 4,672,997
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand $ 1,224,466 $ 1,037,028
Interest-bearing:
Demand and money market accounts 1,365,183 1,240,949
Savings 301,033 321,103
Certificates of deposit 955,920 968,024
Total Deposits 3,846,602 3,567,104
Advances from the Federal Home Loan Bank 398,181 395,087
Repurchase agreements and other borrowings 31,893 47,659
Total Borrowings 430,074 442,746
Other liabilities 87,533 77,829
TOTAL LIABILITIES 4,364,209 4,087,679
Preferred stock
Authorized shares - 2,000,000
Issued and outstanding shares 76,458 in 2014 and 76,458 in 2013 76,458 76,458
Common stock, $1.667 par value
Authorized shares - 90,000,000
Issued and outstanding shares 35,785,679 in 2014 and 35,306,281 in 2013 59,655 58,856
Capital surplus 317,718 312,811
Retained earnings 154,655 128,527
Common stock issued to deferred compensation trust, at cost 627,730 and 558,638 shares at December 31, 2014 and 2013 (9,674) (8,595)
Deferred compensation trust 9,674 8,595
Accumulated other comprehensive income (loss) 458 (344)
TOTAL SHAREHOLDERS' EQUITY 608,944 576,308
Noncontrolling interest 9,332 9,010
TOTAL EQUITY 618,276 585,318
TOTAL LIABILITIES AND EQUITY $ 4,982,485 $ 4,672,997
TOWNEBANK
December 31, 2014
Consolidated Statements of Income (unaudited)
(dollars in thousands)
Three Months Ended Twelve months ended
December 31, December 31,
2014 2013 2014 2013
INTEREST INCOME:
Loans, including fees $ 39,474 $ 39,669 $ 155,894 $ 156,592
Investment securities 3,573 2,606 13,395 9,470
Interest-bearing deposits in financial institutions and federal funds sold 144 233 637 759
Mortgage loans held for sale 652 593 2,586 3,469
Total interest income 43,843 43,101 172,512 170,290
INTEREST EXPENSE:
Deposits 3,308 3,390 13,352 13,353
Advances from the Federal Home Loan Bank 3,383 3,335 13,373 13,057
Repurchase agreements and other borrowings, net of capitalized interest 13 (80) 51 (15)
Total interest expense 6,704 6,645 26,776 26,395
Net interest income 37,139 36,456 145,736 143,895
PROVISION FOR LOAN LOSSES (1) 551 492 4,248
Net interest income after provision for loan losses 37,140 35,905 145,244 139,647
NONINTEREST INCOME:
Residential mortgage banking income, net 6,523 5,516 27,179 28,977
Real estate brokerage and property management income, net 2,450 1,908 12,634 12,316
Insurance commissions and other title fees and income, net 7,743 6,025 34,558 28,322
Service charges on deposit accounts 2,288 2,211 9,192 8,682
Credit card merchant fees, net 911 745 3,576 3,471
Other income 2,486 2,306 9,605 8,149
Gain on investment securities 66 (15) 611
Total noninterest income 22,401 18,777 96,729 90,528
NONINTEREST EXPENSE:
Salaries and employee benefits 25,205 22,596 99,007 97,108
Occupancy 4,676 4,424 17,863 16,298
Furniture and equipment 2,103 1,983 8,183 7,458
Other expenses 16,975 11,997 53,811 47,928
Total noninterest expense 48,959 41,000 178,864 168,792
Income before income tax expense & noncontrolling interest 10,582 13,682 63,109 61,383
Provision for income tax expense 2,798 3,655 18,179 17,135
Net income $ 7,784 $ 10,027 $ 44,930 $ 44,248
Net income attributable to noncontrolling interest (549) (353) (2,761) (2,486)
Net income attributable to TowneBank $ 7,235 $ 9,674 $ 42,169 $ 41,762
Preferred stock dividends and accretion 191 191 765 4,227
Net income available to common shareholders $ 7,044 $ 9,483 $ 41,404 $ 37,535
Per common share information
Basic earnings $ 0.20 $ 0.27 $ 1.18 $ 1.14
Diluted earnings $ 0.20 $ 0.27 $ 1.18 $ 1.14
Cash dividends declared $ 0.11 $ 0.10 $ 0.43 $ 0.38
TOWNEBANK
December 31, 2014
Consolidated Statements of Comprehensive Income (unaudited)
(dollars in thousands)
Three Months Ended Twelve months ended
December 31, December 31,
2014 2013 2014 2013
Net income $ 7,784 $ 10,027 $ 44,930 $ 44,248
Other comprehensive income (loss)
Unrealized gains (losses) on securities
Unrealized holding gains (losses) arising during the period 825 294 2,400 (2,905)
Deferred tax benefit (expense) (288) (102) (840) 1,017
Realized (gains) losses reclassified into earnings 5 15 (84)
Deferred tax expense (2) (6) 29
Net unrealized gains (losses) 537 195 1,569 (1,943)
Defined benefit retirement plan
Actuarial gains (losses) (1,196) (15) (1,196) 962
Deferred tax benefit (expense) 418 6 418 (336)
Amortization 2 87 17 242
Deferred tax expense (1) (31) (6) (85)
Change in defined benefit retirement plan, net of tax (777) 47 (767) 783
Other comprehensive income (loss), net of tax (240) 242 802 (1,160)
Comprehensive income $ 7,544 $ 10,269 $ 45,732 $ 43,088
Selected Financial Highlights (unaudited)
TOWNEBANK
December 31, 2014
(dollars in thousands, except per share data)
Increase/ % Increase/
Twelve Months Ended December 31, 2014 2013 (Decrease) (Decrease)
Results of Operations:
Net interest income $ 145,736 $ 143,895 $ 1,841 1.28%
Noninterest income (1) 96,744 89,916 6,828 7.59%
Gain (loss) on investment securities (15) 611 (626) (102.45)%
Total Revenue 242,465 234,422 8,043 3.43%
Noninterest expenses 178,864 168,792 10,072 5.97%
Provision for loan losses 492 4,248 (3,756) (88.42)%
Income before income tax and noncontrolling interest 63,109 61,383 1,726 2.81%
Provision for income tax expense 18,179 17,135 1,044 6.09%
Net income 44,930 44,248 682 1.54%
Net income attributable to noncontrolling interest (2,761) (2,486) (275) 11.06%
Net income attributable to TowneBank 42,169 41,762 407 0.97%
Preferred stock dividends 765 4,227 (3,462) (81.90)%
Net income available to common shareholders 41,404 37,535 3,869 10.31%
Net income per common share - basic 1.18 1.14 0.04 3.51%
Net income per common share - diluted 1.18 1.14 0.04 3.51%
Period End Data:
Total assets $ 4,982,485 $ 4,672,997 $ 309,488 6.62%
Total assets - tangible 4,846,816 4,552,935 293,881 6.45%
Earning assets (2) 4,610,142 4,296,486 313,656 7.30%
Loans (net of unearned income) 3,397,266 3,235,989 161,277 4.98%
Allowance for loan losses 35,917 38,380 (2,463) (6.42)%
Goodwill and other intangibles 135,668 120,061 15,607 13.00%
Nonperforming assets 41,857 52,287 (10,430) (19.95)%
Noninterest bearing deposits 1,224,466 1,037,028 187,438 18.07%
Interest bearing deposits 2,622,136 2,530,076 92,060 3.64%
Total deposits 3,846,602 3,567,104 279,498 7.84%
Total equity 618,276 585,318 32,958 5.63%
Total equity - tangible 482,608 465,257 17,351 3.73%
Common equity 532,487 499,850 32,637 6.53%
Common equity - tangible 396,819 379,789 17,030 4.48%
Book value per common share 14.88 14.16 0.72 5.08%
Book value per common share - tangible 11.09 10.76 0.33 3.07%
Daily Average Balances:
Total assets $ 4,866,584 $ 4,507,233 $ 359,351 7.97%
Total assets - tangible 4,738,306 4,387,578 350,728 7.99%
Earning assets (2) 4,472,117 4,123,527 348,590 8.45%
Loans (net of unearned income), excluding nonaccrual loans 3,298,740 3,158,448 140,292 4.44%
Allowance for loan losses 37,168 39,698 (2,530) (6.37)%
Goodwill and other intangibles 128,278 119,655 8,623 7.21%
Noninterest bearing deposits 1,158,888 1,022,168 136,720 13.38%
Interest bearing deposits 2,590,162 2,415,178 174,984 7.25%
Total deposits 3,749,050 3,437,346 311,704 9.07%
Total equity 606,777 574,558 32,219 5.61%
Total equity - tangible 478,499 454,903 23,596 5.19%
Common equity 521,502 451,912 69,590 15.40%
Common equity - tangible 393,224 332,257 60,967 18.35%
Key Ratios:
Return on average assets 0.87% 0.93% (0.06)% (6.45)%
Return on average assets - tangible 0.93% 0.95% (0.02)% (2.11)%
Return on average equity 6.95% 7.27% (0.32)% (4.40)%
Return on average equity - tangible 9.16% 9.18% (0.02)% (0.22)%
Return on average common equity 7.94% 8.31% (0.37)% (4.45)%
Return on average common equity - tangible 10.95% 11.30% (0.35)% (3.10)%
Net interest margin-fully tax equivalent (2)(3) 3.38% 3.61% (0.23)% (6.37)%
Net interest margin (2) 3.31% 3.54% (0.23)% (6.50)%
Average earning assets/total average assets 91.89% 91.49% 0.40% 0.44%
Average loans/average deposits 87.99% 91.89% (3.90)% (4.24)%
Average noninterest deposits/total average deposits 30.91% 29.74% 1.17% 3.93%
Allowance for loan losses/period end loans 1.06% 1.19% (0.13)% (10.92)%
Nonperforming assets to period end assets 0.84% 1.12% (0.28)% (25.00)%
Period end equity/period end total assets 12.41% 12.53% (0.12)% (0.96)%
Efficiency ratio (1) 73.76% 72.19% 1.57% 2.17%
(1) Excludes gain (loss) on investment securities
(2) Includes bank-owned life insurance
(3) Presented on a tax-equivalent basis
Selected Financial Highlights (unaudited)
TOWNEBANK
December 31, 2014
(dollars in thousands, except per share data)
Increase/ % Increase/
Three Months Ended December 31, 2014 2013 (Decrease) (Decrease)
Results of Operations:
Net interest income $ 37,139 $ 36,456 $ 683 1.87%
Noninterest income (1) 22,401 18,711 3,690 19.72%
Gain (loss) on investment securities 66 (66) (100.00)%
Total Revenue 59,540 55,233 4,307 7.80%
Noninterest expenses 48,959 41,000 7,959 19.41%
Provision for loan losses (1) 551 (552) (100.18)%
Income before income tax and noncontrolling interest 10,582 13,682 (3,100) (22.66)%
Provision for income tax expense 2,798 3,655 (857) (23.45)%
Net income 7,784 10,027 (2,243) (22.37)%
Net income attributable to noncontrolling interest (549) (353) (196) 55.52%
Net income attributable to TowneBank 7,235 9,674 (2,439) (25.21)%
Preferred stock dividends 191 191 —%
Net income available to common shareholders 7,044 9,483 (2,439) (25.72)%
Net income per common share - basic (2) 0.20 0.27 (0.07) (25.93)%
Net income per common share - diluted (2) 0.20 0.27 (0.07) (25.93)%
Period End Data:
Total assets $ 4,982,485 $ 4,672,997 $ 309,488 6.62%
Total assets - tangible 4,846,816 4,552,935 293,881 6.45%
Earning assets (2) 4,610,142 4,296,486 313,656 7.30%
Loans (net of unearned income) 3,397,266 3,235,989 161,277 4.98%
Allowance for loan losses 35,917 38,380 (2,463) (6.42)%
Goodwill and other intangibles 135,668 120,061 15,607 13.00%
Nonperforming assets 41,857 52,287 (10,430) (19.95)%
Noninterest bearing deposits 1,224,466 1,037,028 187,438 18.07%
Interest bearing deposits 2,622,136 2,530,076 92,060 3.64%
Total deposits 3,846,602 3,567,104 279,498 7.84%
Total equity 618,276 585,318 32,958 5.63%
Total equity - tangible 482,608 465,257 17,351 3.73%
Common equity 532,487 499,850 32,637 6.53%
Common equity - tangible 396,819 379,789 17,030 4.48%
Book value per common share (2) 14.88 14.16 0.72 5.08%
Book value per common share - tangible (2) 11.09 10.76 0.33 3.07%
Daily Average Balances:
Total assets $ 5,005,112 $ 4,660,930 $ 344,182 7.38%
Total assets - tangible 4,868,868 4,540,448 328,420 7.23%
Earning assets (2) 4,610,309 4,276,999 333,310 7.79%
Loans (net of unearned income), excluding nonaccrual loans 3,362,814 3,211,658 151,156 4.71%
Allowance for loan losses 36,296 38,772 (2,476) (6.39)%
Goodwill and other intangibles 136,243 120,482 15,761 13.08%
Noninterest bearing deposits 1,247,712 1,058,660 189,052 17.86%
Interest bearing deposits 2,616,976 2,502,260 114,716 4.58%
Total deposits 3,864,688 3,560,920 303,768 8.53%
Total equity 621,579 583,932 37,647 6.45%
Total equity - tangible 485,335 463,450 21,885 4.72%
Common equity 536,091 499,106 36,985 7.41%
Common equity - tangible 399,848 378,624 21,224 5.61%
Key Ratios:
Return on average assets 0.57% 0.82% (0.25)% (30.49)%
Return on average assets - tangible 0.63% 0.85% (0.22)% (25.88)%
Return on average equity 4.62% 6.57% (1.95)% (29.68)%
Return on average equity - tangible 6.35% 8.28% (1.93)% (23.31)%
Return on average common equity 5.21% 7.54% (2.33)% (30.90)%
Return on average common equity - tangible 7.52% 9.94% (2.42)% (24.35)%
Net interest margin-fully tax equivalent (2)(3) 3.35% 3.53% (0.18)% (5.10)%
Net interest margin (2) 3.26% 3.45% (0.19)% (5.51)%
Average earning assets/total average assets 92.11% 91.76% 0.35% 0.38%
Average loans/average deposits 87.01% 90.19% (3.18)% (3.53)%
Average noninterest deposits/total average deposits 32.28% 29.73% 2.55% 8.58%
Allowance for loan losses/period end loans 1.06% 1.19% (0.13)% (10.92)%
Nonperforming assets to period end assets 0.84% 1.12% (0.28)% (25.00)%
Period end equity/period end total assets 12.41% 12.53% (0.12)% (0.96)%
Efficiency ratio (1) 82.23% 74.32% 7.91% 10.64%
(1) Excludes gain (loss) on investment securities
(2) Includes bank-owned life insurance
(3) Presented on a tax-equivalent basis
Selected Financial Highlights (unaudited)
TOWNEBANK
(dollars in thousands, except per share data)
December 31, September 30, Increase/ % Increase/
Three Months Ended 2014 2014 (Decrease) (Decrease)
Results of Operations:
Net interest income $ 37,139 $ 36,867 $ 272 0.74%
Noninterest income (1) 22,401 26,269 (3,868) (14.72)%
Gain (loss) on investment securities 44 (44) (100.00)%
Total Revenue 59,540 63,180 (3,640) (5.76)%
Noninterest expenses 48,959 44,154 4,805 10.88%
Provision for loan losses (1) 996 (997) (100.10)%
Income before income tax and noncontrolling interest 10,582 18,030 (7,448) (41.31)%
Provision for income tax expense 2,798 5,044 (2,246) (44.53)%
Net income 7,784 12,986 (5,202) (40.06)%
Net income attributable to noncontrolling interest (549) (860) 311 (36.16)%
Net income attributable to TowneBank 7,235 12,126 (4,891) (40.33)%
Preferred stock dividends 191 191 —%
Net income available to common shareholders 7,044 11,935 (4,891) (40.98)%
Net income per common share - basic 0.20 0.34 (0.14) (41.18)%
Net income per common share - diluted 0.20 0.34 (0.14) (41.18)%
Period End Data:
Total assets $ 4,982,485 $ 4,972,448 $ 10,037 0.20%
Total assets - tangible 4,846,816 4,842,966 3,850 0.08%
Earning assets (2) 4,610,142 4,606,030 4,112 0.09%
Loans (net of unearned income) 3,397,266 3,358,532 38,734 1.15%
Allowance for loan losses 35,917 36,180 (263) (0.73)%
Goodwill and other intangibles 135,668 129,482 6,186 4.78%
Nonperforming assets 41,857 43,804 (1,947) (4.44)%
Noninterest bearing deposits 1,224,466 1,245,925 (21,459) (1.72)%
Interest bearing deposits 2,622,136 2,604,007 18,129 0.70%
Total deposits 3,846,602 3,849,932 (3,330) (0.09)%
Total equity 618,276 613,408 4,868 0.79%
Total equity - tangible 482,608 483,926 (1,318) (0.27)%
Common equity 532,487 527,727 4,760 0.90%
Common equity - tangible 396,819 398,245 (1,426) (0.36)%
Book value per common share 14.88 14.85 0.03 0.20%
Book value per common share - tangible 11.09 11.21 (0.12) (1.07)%
Daily Average Balances:
Total assets $ 5,005,112 $ 4,961,204 $ 43,908 0.89%
Total assets - tangible 4,868,868 4,831,294 37,574 0.78%
Earning assets (2) 4,610,309 4,558,857 51,452 1.13%
Loans (net of unearned income), excluding nonaccrual loans 3,362,814 3,314,756 48,058 1.45%
Allowance for loan losses 36,296 36,355 (59) (0.16)%
Goodwill and other intangibles 136,243 129,910 6,333 4.87%
Noninterest bearing deposits 1,247,712 1,228,807 18,905 1.54%
Interest bearing deposits 2,616,976 2,610,027 6,949 0.27%
Total deposits 3,864,688 3,838,834 25,854 0.67%
Total equity 621,579 612,250 9,329 1.52%
Total equity - tangible 485,335 482,341 2,994 0.62%
Common equity 536,091 526,994 9,097 1.73%
Common equity - tangible 399,848 397,084 2,764 0.70%
Key Ratios:
Return on average assets 0.57% 0.97% (0.40)% (41.24)%
Return on average assets - tangible 0.63% 1.03% (0.40)% (38.83)%
Return on average equity 4.62% 7.86% (3.24)% (41.22)%
Return on average equity - tangible 6.35% 10.32% (3.97)% (38.47)%
Return on average common equity 5.21% 8.98% (3.77)% (41.98)%
Return on average common equity - tangible 7.52% 12.34% (4.82)% (39.06)%
Net interest margin-fully tax equivalent (2)(3) 3.35% 3.32% 0.03% 0.90%
Net interest margin (2) 3.26% 3.25% 0.01% 0.31%
Average earning assets/total average assets 92.11% 91.89% 0.22% 0.24%
Average loans/average deposits 87.01% 86.35% 0.66% 0.76%
Average noninterest deposits/total average deposits 32.28% 32.01% 0.27% 0.84%
Allowance for loan losses/period end loans 1.06% 1.08% (0.02)% (1.85)%
Nonperforming assets to period end assets 0.84% 0.88% (0.04)% (4.55)%
Period end equity/period end total assets 12.41% 12.34% 0.07% 0.57%
Efficiency ratio (1) 82.23% 69.94% 12.29% 17.57%
(1) Excludes gain (loss) on investment securities
(2) Includes bank-owned life insurance
(3) Presented on a tax-equivalent basis
TOWNEBANK
Average Balances, Yields and Rate Paid
(dollars in thousands)
Year Ended December 31,
2014 2013 2012
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 (2) $ 3,298,740 $ 155,980 4.73% $ 3,158,448 $ 156,652 4.96% $ 2,910,406 $ 157,053 5.40%
Taxable investment securities 622,479 8,028 1.29% 341,279 4,263 1.25% 260,630 6,163 2.36%
Tax-exempt investment securities 173,894 7,414 4.26% 169,376 6,993 4.13% 159,322 7,248 4.55%
Interest-bearing deposits 253,416 638 0.25% 300,977 759 0.25% 309,098 783 0.25%
Mortgage loans held for sale 65,746 2,586 3.93% 97,235 3,469 3.57% 118,206 4,173 3.53%
Bank-owned life insurance 57,842 3,290 5.69% 56,212 3,066 5.45% 54,184 3,175 5.86%
Total earning assets 4,472,117 177,935 3.98% 4,123,527 175,202 4.25% 3,811,846 178,595 4.69%
Less: allowance for loan losses (37,168) (39,698) (40,100)
Total nonearning assets 431,635 423,404 429,706
Total assets $ 4,866,584 $ 4,507,233 $ 4,201,452
Liabilities and Equity:
Interest-bearing deposits
Demand and money market $ 1,306,738 $ 3,036 0.23% $ 1,166,510 $ 3,146 0.27% $ 1,064,840 $ 4,242 0.40%
Savings 310,722 2,854 0.92% 323,011 3,117 0.96% 300,235 3,202 1.07%
Certificates of deposit 972,702 7,461 0.77% 925,657 7,090 0.77% 1,004,928 9,305 0.93%
Total interest-bearing deposits 2,590,162 13,351 0.52% 2,415,178 13,353 0.55% 2,370,003 16,749 0.71%
FHLB advances and repurchase agreements 429,249 13,425 3.13% 425,225 13,042 3.07% 318,494 12,236 3.84%
Convertible subordinated capital debentures —% —% 2,950 237 8.03%
Total interest-bearing liabilities 3,019,411 26,776 0.89% 2,840,403 26,395 0.93% 2,691,447 29,222 1.09%
Noninterest-bearing liabilities
Demand deposits 1,158,888 1,022,168 904,512
Other noninterest-bearing liabilities 81,508 70,104 59,927
Total liabilities 4,259,807 3,932,675 3,655,886
Shareholders' equity 606,777 574,558 545,566
Total liabilities and equity $ 4,866,584 $ 4,507,233 $ 4,201,452
Net interest income (tax-equivalent basis) $ 151,159 $ 148,807 $ 149,373
Reconcilement of Non-GAAP Financial Measures
Bank-owned life insurance (3,290) (3,066) (3,175)
Tax-equivalent basis adjustment (2,133) (1,846) (1,914)
Net interest income (GAAP) $ 145,736 $ 143,895 $ 144,284
Interest rate spread (3) 3.09% 3.32% 3.60%
Interest expense as a percent of average earning assets 0.60% 0.64% 0.77%
Net interest margin (tax-equivalent basis) (4) 3.38% 3.61% 3.92%
Total cost of deposits 0.36% 0.39% 0.51%
(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
(dollars in thousands)
Three Months Ended Three Months Ended Three Months Ended
December 31, 2014 September 30, 2014 December 31, 2013
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 $ 3,362,814 $ 39,508 4.66% $ 3,314,756 $ 39,291 4.70% $ 3,211,658 $ 39,690 4.90%
Taxable investment securities 714,991 2,178 1.22% 656,438 2,059 1.25% 415,194 1,290 1.24%
Tax-exempt investment securities 176,887 1,919 4.34% 175,774 1,913 4.35% 171,320 1,775 4.15%
Interest-bearing deposits 227,773 145 0.25% 275,634 174 0.25% 367,338 233 0.25%
Loans held for sale 69,496 652 3.75% 78,325 787 4.02% 54,511 593 4.35%
Bank-owned life insurance 58,348 1,200 8.16% 57,930 674 4.62% 56,979 1,086 7.56%
Total earning assets 4,610,309 45,602 3.92% 4,558,857 44,898 3.91% 4,276,999 44,667 4.14%
Less: allowance for loan losses (36,296) (36,355) (38,772)
Total nonearning assets 431,099 438,702 422,703
Total assets $ 5,005,112 $ 4,961,204 $ 4,660,930
Liabilities and Equity:
Interest-bearing deposits
Demand and money market $ 1,344,262 $ 772 0.23% $ 1,317,611 $ 717 0.22% $ 1,207,070 $ 747 0.25%
Savings 303,623 699 0.91% 308,466 707 0.91% 321,752 748 0.92%
Certificates of deposit 969,091 1,837 0.75% 983,950 1,981 0.80% 973,438 1,895 0.77%
Total interest-bearing deposits 2,616,976 3,308 0.50% 2,610,027 3,405 0.52% 2,502,260 3,390 0.54%
Borrowings 430,374 3,396 3.09% 424,746 3,396 3.13% 443,455 3,255 2.94%
Total interest-bearing liabilities 3,047,350 6,704 0.87% 3,034,773 6,801 0.89% 2,945,715 6,645 0.91%
Demand deposits 1,247,712 1,228,807 1,058,660
Other noninterest-bearing liabilities 88,471 85,374 72,623
Total liabilities 4,383,533 4,348,954 4,076,998
Shareholders' equity 621,579 612,250 583,932
Total liabilities and equity $ 5,005,112 $ 4,961,204 $ 4,660,930
Net interest income (tax-equivalent basis) $ 38,898 $ 38,097 $ 38,022
Reconcilement of Non-GAAP Financial Measures
Bank-owned life insurance (1,200) (674) (1,086)
Tax-equivalent basis adjustment (558) (556) (480)
Net interest income (GAAP) $ 37,140 $ 36,867 $ 36,456
Interest rate spread (1) 3.05% 3.02% 3.23%
Interest expense as a percent of average earning assets 0.58% 0.59% 0.62%
Net interest margin (tax equivalent basis) (2) 3.35% 3.32% 3.53%
Total cost of deposits 0.34% 0.35% 0.38%
TOWNEBANK
December 31, 2014
Reconcilement of Non-GAAP Financial Measures:
(dollars in thousands)
Three Months Ended Twelve months ended
December 31, September 30, December 31, December 31,
2014 2014 2013 2014 2013
Return on average assets (GAAP basis) 0.57% 0.97% 0.82% 0.87% 0.93%
Impact of excluding average goodwill and other intangibles and amortization 0.06% 0.06% 0.03% 0.06% 0.02%
Return on average tangible assets (Non-GAAP) 0.63% 1.03% 0.85% 0.93% 0.95%
Return on average equity (GAAP basis) 4.62% 7.86% 6.57% 6.95% 7.27%
Impact of excluding average goodwill and other intangibles and amortization 1.73% 2.46% 1.71% 2.21% 1.91%
Return on average tangible equity (Non-GAAP) 6.35% 10.32% 8.28% 9.16% 9.18%
Return on average common equity (GAAP basis) 5.21% 8.98% 7.54% 7.94% 8.31%
Impact of excluding average goodwill and other intangibles and amortization 2.31% 3.36% 2.40% 3.01% 2.99%
Return on average tangible common equity (Non-GAAP) 7.52% 12.34% 9.94% 10.95% 11.30%
Book value (GAAP basis) $ 14.88 $ 14.85 $ 14.16 $ 14.88 $ 14.16
Impact of excluding average goodwill and other intangibles and amortization (3.79) (3.64) (3.40) (3.79) (3.40)
Tangible book value $ 11.09 $ 11.21 $ 10.76 $ 11.09 $ 10.76

CONTACT: G. Robert Aston, Jr., Chairman and CEO 757-638-6780 Clyde E. McFarland, Jr., Senior Executive Vice President and CFO 757-638-6801 William B. Littreal, Chief Investment Relations Officer and COO, 757-638-6813

Source: TowneBank