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TowneBank Reports Third Quarter Earnings

SUFFOLK, Va., Oct. 22, 2015 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank (the “Bank”) (NASDAQ:TOWN) reported earnings of $17.57 million for the quarter ended September 30, 2015, a 44.86% increase, or $5.44 million, over the $12.13 million reported for the comparative period in 2014. Fully diluted earnings per share were $0.34 per share unchanged from $0.34 per share for the comparative period of 2014.

Earnings for the year-to-date period increased 42.89% to $49.92 million as compared to the $34.93 million earned in the same period of 2014, while fully diluted earnings per share were $0.98 per share unchanged from comparative 2014. Earnings per share were affected in 2015 by the issuance of 15.55 million new common shares in conjunction with the acquisition of Franklin Financial Corporation (“Franklin”) on January 2, 2015.

The Bank’s common dividend was $0.12 per share for the quarter with the common dividend totaling $6.19 million. The current dividend represents an increase of 9.1% over the dividend paid during the same quarter of 2014.

“We are pleased to report another quarter of strong earnings, as we continue to see benefits and positive momentum from our entry into the Richmond, Virginia market, coupled with good growth in the Hampton Roads market,” said G. Robert Aston, Jr., Chairman and Chief Executive Officer. “Our revenue increased $12.79 million, or 20.25%, from the third quarter of 2014 while producing a return on average assets of 1.14% and a return on average tangible equity of 11.25%.

Third Quarter 2015 Performance Highlights

  • Total revenues were $75.97 million, an increase of $12.79 million, or 20.25%, compared to the third quarter of 2014
    • Taxable equivalent net interest margin was 3.40%, including accretion of 0.06%, compared to 3.32% for third quarter 2014
    • Residential mortgage banking income increased 5.14% from third quarter 2014 to $8.26 million on production volume of $434.82 million
    • Insurance commissions increased 9.58% to $9.71 million
    • Noninterest income was 39.89% of total revenue in third quarter 2015
  • Loans held for investment increased $845.96 million, or 24.03%, from September 30, 2014 with organic growth of $395.34 million, an increase of 11.23%, including $118.67 million of new loan originations in Richmond
  • Total deposits were $4.79 billion, an increase of $937.95 million, or 24.36%, from the third quarter of 2014
    • Noninterest bearing deposits increased by 16.06%, to $1.45 billion
    • Average interest-bearing deposit costs were 0.58%, up 6 basis points from the prior year
    • Noninterest bearing deposits were 30.20% of total deposits compared to 32.36% at September 30, 2014
    • Total cost of deposits increased to 0.41% from 0.35% at September 30, 2014 reflective of a greater mix of savings deposits acquired in the Franklin merger
  • Asset quality showed continued strength
    • Nonperforming assets were $47.99 million, or 0.78% of total assets compared to 0.88% at September 30, 2014
    • Nonperforming loans of $8.48 million were 0.19% of period end loans
    • Foreclosed property of $39.51 million, including $6.21 million acquired in the Franklin merger
    • Performing troubled debt restructurings decreased $9.86 million
  • The Bank remained well-capitalized
    • Common equity tier 1 capital ratio of 12.52%
    • Tier 1 leverage capital ratio of 10.93%
    • Tier 1 risk-based capital ratio of 12.62%
    • Total risk-based capital ratio of 13.35%
    • Tangible book value increased to $12.25

Net Interest Income

Third Quarter 2015 compared to Third Quarter 2014

Net interest income increased to $45.67 million, an $8.80 million, or 23.88%, increase from the third quarter of 2014. The primary driver of the increase was the significant increase in earning assets from the Franklin merger along with the restructuring of the Franklin balance sheet. Average earning assets increased $1.05 billion, or 22.94%, from the third quarter of 2014. Contributing to the increase was an 8 basis point widening of the tax-equivalent net interest margin to 3.40% in the current quarter from 3.32% in the third quarter of 2014. Accretion income added $0.68 million, or 6 basis points, to margin in the current quarter.

Third Quarter 2015 compared to Second Quarter 2015

On a linked quarter basis, net interest income increased slightly by $0.79 million, or 1.75%, in third quarter 2015 versus second quarter 2015, while tax-equivalent net interest margin was 3.40% down 12 basis points from the second quarter of 2015.

Noninterest Income

% Change
Q3 Q3 Q2 Q3 15 vs. Q3 15 vs.
(in millions)2015 2014 2015 Q3 14 Q2 15
Residential mortgage banking income, net$8,262 $7,858 $10,251 5.14% (19.40)%
Real estate brokerage and property management, net5,349 3,645 4,584 46.75% 16.69%
Insurance commissions and other title fees and income, net9,710 8,861 9,885 9.58% (1.77)%
Service charges on deposit accounts2,388 2,406 2,326 (0.75)% 2.67%
Credit card merchant fees, net823 927 566 (11.22)% 45.41%
Other income3,036 2,572 5,354 18.04% (43.29)%
Subtotal before gain on investment securities29,568 26,269 32,966 12.56% (10.31)%
Net gain on investment securities736 44 119 N/M 518.49%
Total noninterest income$30,304 $26,313 $33,085 15.17% (8.41)%


Third Quarter 2015 compared to Third Quarter 2014

Noninterest income, excluding gains or losses on investment securities, was $29.57 million for the third quarter of 2015, an increase of $3.30 million, or 12.56%, from the third quarter of 2014. The majority of the increase from the comparative period in 2014 is attributable to real estate brokerage and property management income, which increased $1.70 million, or 46.75%, from the third quarter of 2014 primarily due to the acquisition of a resort property management company in Hilton Head, South Carolina in fourth quarter 2014 and was partially offset by the sale of our North Carolina-based property management business on April 1, 2015, which generated management fee revenue of $1.36 million in third quarter 2014. Residential mortgage banking income increased $0.40 million, or 5.14%, from third quarter 2014 due to slightly improved production volumes and pricing. Mortgage production was $434.82 million in the third quarter of 2015, which was $72.28 million greater than third quarter 2014. Also contributing to the increase were insurance commissions, which increased $0.85 million, or 9.58%, primarily due to the acquisition of two insurance agencies in February 2015 and one agency in September 2015.

Third Quarter 2015 compared to Second Quarter 2015

In comparison to the second quarter of 2015, noninterest income, excluding gains or losses on investment securities, decreased $3.40 million, or 10.31%. Residential mortgage banking income decreased by $1.99 million, or 19.40%, from the second quarter of 2015 as mortgage production saw a seasonally driven decrease of $31.41 million and a drop in the value of rate lock commitments of $0.46 million recorded as of September 30, 2015 led to a decrease in mortgage banking income, as compared to an increase due to the value of rate lock commitments of $0.22 million recognized for the quarter ended June 30, 2015. Also contributing to the decrease from the linked quarter were nonrecurring gains recorded in other noninterest income in second quarter of $1.36 million on the sale of our North Carolina-based property management business and $0.57 million on the sale of land in Virginia Beach. Insurance commissions decreased slightly due to seasonal decreases in policy renewals. Partially offsetting the decrease from the linked quarter was an increase in real estate brokerage and property management income, which was positively affected by a seasonal increase related to our resort property management business.

Noninterest Expense

% Change
Q3 Q3 Q2 Q3 15 vs. Q3 15 vs.
(in millions)2015 2014 2015 Q3 14 Q2 15
Salaries and benefits$28,910 $25,080 $26,544 15.27% 8.91%
Occupancy expense4,703 4,618 4,856 1.84% (3.15)%
Furniture and equipment2,211 2,040 2,369 8.38% (6.67)%
Acquisition-related expenses243 1,090 370 (77.71)% (34.32)%
Other13,839 11,326 14,928 22.19% (7.30)%
Total noninterest expense$49,906 $44,154 $49,067 13.03% 1.71%


Third Quarter 2015 compared to Third Quarter 2014

Noninterest expense increased by $5.75 million, or 13.03%, from the comparative quarter of 2014. Driving the increase were operating expenses of $2.75 million related to the Franklin merger. Additionally, operating expenses increased $1.67 million due to our insurance acquisitions in 2015 and resort property management acquisition in fourth quarter 2014. Excluding operating expenses associated with acquired companies and acquisition related expenses our expenses increased $1.13 million, or 2.57%, reflecting our continued focus on operational efficiencies.

Third Quarter 2015 compared to Second Quarter 2015

Noninterest expense increased by $0.84 million, or 1.71%, from the second quarter of 2015. Driving the increase were salary and benefits expenses, which increased by $2.37 million due to higher employee incentive compensation and annual salary adjustments effective July, 1, 2015. These expenses were partially offset by broad decreases in other expenses.

Segment Results

$ Change
(in millions) Q3 Q3 Q2 Q3 15 vs. Q3 15 vs.
Segment Net Income 2015 2014 2015 Q3 14 Q2 15
Banking $14,148 $9,569 $13,067 $4,579 $1,081
Realty 2,345 1,532 3,727 813 (1,382)
Insurance 1,073 1,025 1,018 48 55
Total net income $17,566 $12,126 $17,812 $5,440 $(246)


Banking

Third Quarter 2015 compared to Third Quarter 2014

Net income for the three months ended September 30, 2015 for the Banking segment was $14.15 million, increasing $4.58 million, or 47.85%, from the comparative 2014 quarter. The increase in earnings was driven by an increase in net interest income of $8.40 million, primarily due to the increase in earning assets acquired in the Franklin merger and 2015 growth in Hampton Roads. Also contributing to the increase was a decrease in the loan loss provision driven by a reduction in historical loss ratios and an increase in gains from the sales of investment securities. The increases in income were partially offset by higher noninterest expenses related to the Franklin merger, increases in personnel costs, and the opening of a new banking office in May 2015.

Third Quarter 2015 compared to Second Quarter 2015

The increase in earnings of $1.08 million, or 8.27% from the second quarter of 2015 was driven by an increase in revenue due to a combination of higher net interest income of $0.67 million, which was primarily due to loan growth, and an increase in gains on the sale of investment securities of $0.62 million, partially offset by a second quarter gain of $0.57 million on the sale of land owned by the Bank. Also contributing was a decrease in the loan loss provision primarily due to a reduction in historical loss ratios. The increases were partially offset by an increase in noninterest expenses of $1.07 million as higher personnel costs more than offset decreases in occupancy expenses, charitable contributions, and advertising and marketing expenses.

Realty

Third Quarter 2015 compared to Third Quarter 2014

For the three months ended September 30, 2015, the Realty segment had net income of $2.35 million, an increase of $0.81 million compared to the third quarter of 2014. The improvement was driven by an increase in residential mortgage banking income of $0.61 million, or 7.70%, and an increase in property management fees of $1.66 million, or 97.18%. The increase in property management fees was primarily due to our purchase of Beach Properties on October 1, 2014, which generated management fee revenue of $2.95 million in third quarter 2015 and was partially offset by a decrease in fee revenue of $1.36 million, which was generated in third quarter 2014 by our previously-held North Carolina-based property management business, which was sold on April 1, 2015.

Third Quarter 2015 compared to Second Quarter 2015

Net income in the Realty segment decreased by $1.38 million from the linked quarter ended June 30, 2015. The decrease resulted from a combination of a seasonal reduction in residential mortgage banking income of $1.92 million and the inclusion in second quarter of the nonrecurring gain of $1.36 million on the sale of our North Carolina-based property management business, partially offset by related expenses of $0.24 million. The reduction in earnings was partially offset by an increase in property management fees of $0.74 million.

Insurance

Third Quarter 2015 compared to Third Quarter 2014

The Insurance segment had net income of $1.07 million for the three months ended September 30, 2015, an increase of $0.05 million as compared to the third quarter of 2014. Increases in property and casualty commissions and contingency and bonus revenues outpaced increases in personnel costs and other noninterest expenses. Increases to corporate allocation expenses and noninterest expenses, such as 401(k) expense, acquisition-related expense, amortization expense, and other loss expenses, were responsible for an increase in expenses of $0.34 million and $1.17 million for the three and nine months ended September 30, 2015, respectively. The insurance agency acquisitions in the first and third quarters of 2015 resulted in additional commissions and fee revenue of $0.40 million and additional $0.40 million of noninterest expenses, including acquisition-related expenses.

Third Quarter 2015 compared to Second Quarter 2015

Net income increased $0.06 million from the second quarter of 2015. The increase from the linked quarter was driven by an increase in employee benefits commission income of $0.11 million and an increase in specialized benefit services commission revenue of $0.01 million, which was partially offset by a seasonal decrease in property and casualty commissions of $0.15 million.

As previously announced, the Bank acquired two insurance agencies on October 1, 2015, which in combination with the agency acquired on September 1, 2015, serve to further our expansion in Richmond and the communities of central Virginia.

Balance Sheet

At September 30, 2015, total Bank assets reached $6.17 billion, an increase of $1.20 billion, or 24.16%, over September 30, 2014.

Loans

% Change
Q3 Q3 Q2 Q3 15 vs. Q3 15 vs.
(in thousands)2015 2014 2015 Q3 14 Q2 15
Construction and land development$554,753 $476,379 $554,053 16.45% 0.13%
Commercial real estate - investment related properties1,020,860 701,286 987,945 45.57% 3.33%
Commercial real estate - owner occupied775,290 749,985 760,622 3.37% 1.93%
Multifamily real estate138,954 53,368 137,378 160.37% 1.15%
1-4 family residential real estate965,559 833,208 948,138 15.88% 1.84%
Commercial and industrial business loans790,614 644,528 732,936 22.67% 7.87%
Consumer loans and other121,009 62,321 107,055 94.17% 13.03%
Total$4,367,039 $3,521,075 $4,228,127 24.03% 3.29%


The Bank’s loan portfolio ended the period at $4.37 billion representing an increase of 24.03%, or $845.96 million, from the prior year and an increase of 3.29%, or $138.91 million, from June 30, 2015. Organic growth in 2015, including the effect of loan transfers to OREO, was $349.15 million, or 12.91% on an annualized basis. Included in this growth were new originations of $118.67 million in our Richmond market.

Deposits

% Change
Q3 Q3 Q2 Q3 15 vs. Q3 15 vs.
(in thousands)2015 2014 2015 Q3 14 Q2 15
Noninterest-bearing demand$1,445,978 $1,245,925 $1,363,551 16.06% 6.05%
Interest-bearing:
Demand and money market accounts1,676,623 1,309,085 1,680,038 28.08% (0.20)%
Savings295,952 306,811 300,203 (3.54)% (1.42)%
Certificates of deposits1,369,325 988,111 1,342,860 38.58% 1.97%
Total$4,787,878 $3,849,932 $4,686,652 24.36% 2.16%


The Bank continued to experience solid deposit growth with total deposits increasing to $4.79 billion, up $937.95 million, or 24.36%, from September 30, 2014. The increase was mostly due to the deposits acquired in the Franklin merger and Hampton Roads market growth. The Bank saw continued growth in noninterest bearing demand deposits, which ended the quarter at $1.45 billion, a 16.06% increase from September 30, 2014. Noninterest deposits represented 30.20% of total deposits at September 30, 2015. The slight percentage decline from September 30, 2014 was a result of the funding mix in the acquired Franklin deposits.

Capital Ratios

Q3 Q3 Q2
2015 2014 2015
Common Equity Tier 1 (a) 12.52% N/A 12.96%
Tier 1 (a) 12.62% 12.88% 13.07%
Total (a) 13.35% 13.84% 13.84%
Tier 1 leverage ratio (a) 10.93% 10.04% 11.12%

(a) Basel III rules became effective January 1, 2015, with transitional provisions. All prior year data is based on Basel I rules

The Bank’s total equity at September 30, 2015 rose to $816.07 million, an increase of $202.66 million, or 33.04%, from September 30, 2014. Common equity increased 52.95%, or $279.43 million, as the Bank issued common stock in the amount of $238.66 million in the Franklin merger and redeemed in full its $76.46 million of outstanding Non-Cumulative Convertible Preferred Stock, Series C issued to the U.S. Treasury under the Small Business Lending Fund during first quarter 2015. Total risk-based capital remained strong as total risk-based capital, Tier 1 capital, Tier 1 leverage ratios, and common equity Tier 1 capital ratios were 13.35%, 12.62%, 10.93%, 12.52%, respectively. All ratios exceed the current regulatory standards for well capitalized status.

Asset Quality

(in thousands)9/30/2015 6/30/2015 3/31/2015 12/31/2014 9/30/2014
Nonperforming loans$8,477 $7,455 $7,045 $6,741 $5,853
Foreclosed property39,509 46,154 51,698 35,116 37,951
Total nonperforming assets$47,986 $53,609 $58,743 $41,857 $43,804
Quarterly net loans charged off$69 $339 $333 $262 $602
Year-to-date net loans charged off$741 $672 $333 $2,955 $2,694


Continued improvements in credit quality contributed to the Bank's financial results as net charge-offs decreased to $0.07 million in the third quarter of 2015 compared to $0.60 million in the third quarter of 2014 and $0.34 million in the linked quarter. Total nonperforming assets were $47.99 million, or 0.78%, of Bank assets, including foreclosed property of $6.21 million originally acquired in the Franklin merger, at September 30, 2015, as compared to $43.80 million, or 0.88%, at September 30, 2014, and $53.61 million, or 0.89%, at June 30, 2015. The allowance for loan losses was $37.35 million, increased from $36.18 million at September 30, 2014 and $37.29 million at June 30, 2015.


Change
Q3 Q3 Q2 Q3 15 vs. Q3 15 vs.
(dollars in thousands) 2015 2014 2015 Q3 14 Q2 15
Total loans 90 days past due and still accruing $31 $ $277 $31 $(246)
Total loans 30-89 days past due $5,864 $7,918 $5,283 $(2,054) $581
Allowance for loan losses $37,351 $36,180 $37,290 $1,171 $61
Total performing TDRs $29,920 $39,776 $31,714 $(9,856) $(1,794)
Nonperforming loans to period end loans 0.19% 0.17% 0.18% 0.02% 0.01%
Nonperforming assets to period end assets 0.78% 0.88% 0.89% (0.10)% (0.11)%
Allowance for loan losses to period end loans 0.86% 1.03% 0.88% (0.17)% (0.02)%
Allowance for loan losses (originated) to originated period end loans 0.96% 1.04% 1.00% (0.08)% (0.04)%
Net charge-offs to average loans (annualized) 0.01% 0.07% 0.03% (0.06)% (0.02)%
Ratio of allowance for loan losses to nonperforming loans 4.41x 6.18x 5.00x -1.77x (0.59)x


About TowneBank:

As one of the top community banks in Virginia and North Carolina, TowneBank operates 37 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 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 Beach Properties of Hilton Head. 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 $6.17 billion as of September 30, 2015, 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.


Selected Financial Highlights (unaudited)
TOWNEBANK
September 30, 2015
(dollars in thousands, except per share data)
Increase/ % Increase/
Three months ended September 30,2015 2014 (Decrease) (Decrease)
Results of Operations:
Net interest income$45,670 $36,867 $8,803 23.88%
Noninterest income (1)29,568 26,269 3,299 12.56%
Gain (loss) on investment securities736 44 692 N/M
Total Revenue75,974 63,180 12,794 20.25%
Noninterest expenses49,906 44,154 5,752 13.03%
Provision for loan losses130 996 (866) (86.95)%
Income before income tax and noncontrolling interest25,938 18,030 7,908 43.86%
Provision for income tax expense7,444 5,044 2,400 47.58%
Net income18,494 12,986 5,508 42.41%
Net income attributable to noncontrolling interest(928) (860) (68) 7.91%
Net income attributable to TowneBank17,566 12,126 5,440 44.86%
Preferred stock dividends and accretion 191 (191) (100.00)%
Net income available to common shareholders17,566 11,935 5,631 47.18%
Net income per common share - basic0.34 0.34 %
Net income per common share - diluted0.34 0.34 %
Period End Data:
Total assets$6,173,891 $4,972,448 $1,201,443 24.16%
Total assets - tangible5,998,373 4,842,966 1,155,407 23.86%
Earning assets (2)5,508,341 4,606,030 902,311 19.59%
Loans (net of unearned income)4,367,039 3,521,075 845,964 24.03%
Allowance for loan losses37,351 36,180 1,171 3.24%
Goodwill and other intangibles175,518 129,482 46,036 35.55%
Nonperforming assets47,986 43,804 4,182 9.55%
Noninterest bearing deposits1,445,978 1,245,925 200,053 16.06%
Interest bearing deposits3,341,900 2,604,007 737,893 28.34%
Total deposits4,787,878 3,849,932 937,946 24.36%
Total equity816,069 613,408 202,661 33.04%
Total equity - tangible640,551 483,926 156,625 32.37%
Common equity807,152 527,727 279,425 52.95%
Common equity - tangible631,634 398,245 233,389 58.60%
Book value per common share15.65 14.85 0.80 5.39%
Book value per common share - tangible12.25 11.21 1.04 9.28%
Daily Average Balances:
Total assets$6,115,681 $4,961,204 $1,154,477 23.27%
Total assets - tangible5,940,258 4,831,294 1,108,964 22.95%
Earning assets (2)5,604,472 4,558,857 1,045,615 22.94%
Loans (net of unearned income), excluding nonaccrual loans4,300,751 3,471,206 829,545 23.90%
Allowance for loan losses37,926 36,355 1,571 4.32%
Goodwill and other intangibles175,423 129,910 45,513 35.03%
Noninterest bearing deposits1,388,002 1,228,807 159,195 12.96%
Interest bearing deposits3,346,874 2,610,027 736,847 28.23%
Total deposits4,734,876 3,838,834 896,042 23.34%
Total equity812,602 612,250 200,352 32.72%
Total equity - tangible637,179 482,341 154,838 32.10%
Common equity804,090 526,994 277,096 52.58%
Common equity - tangible628,667 397,084 231,583 58.32%
Key Ratios:
Return on average assets1.14% 0.97% 0.17% 17.53%
Return on average assets - tangible1.21% 1.03% 0.18% 17.48%
Return on average equity8.58% 7.86% 0.72% 9.16%
Return on average equity - tangible11.25% 10.32% 0.93% 9.01%
Return on average common equity8.67% 8.98% (0.31)% (3.45)%
Return on average common equity - tangible11.41% 12.34% (0.93)% (7.54)%
Net interest margin-fully tax equivalent (2)(3)3.40% 3.32% 0.08% 2.41%
Net interest margin (2)3.32% 3.25% 0.07% 2.15%
Average earning assets/total average assets91.64% 91.89% (0.25)% (0.27)%
Average loans/average deposits90.83% 90.42% 0.41% 0.45%
Average noninterest deposits/total average deposits29.31% 32.01% (2.70)% (8.43)%
Allowance for loan losses/period end loans0.86% 1.03% (0.17)% (16.50)%
Nonperforming assets to period end assets0.78% 0.88% (0.10)% (11.36)%
Period end equity/period end total assets13.22% 12.34% 0.88% 7.13%
Efficiency ratio (1)66.33% 69.94% (3.61)% (5.16)%
(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
September 30, 2015
(dollars in thousands)
Increase/ % Increase/
Nine Months Ended September 30, 20152015 2014 (Decrease) (Decrease)
Results of Operations:
Net interest income$134,111 $108,598 $25,513 23.49%
Noninterest income (1)91,301 74,342 16,959 22.81%
Gain (loss) on investment securities904 (15) 919 N/M
Total Revenue226,316 182,925 43,391 23.72%
Noninterest expenses149,414 129,905 19,509 15.02%
Provision for loan losses2,176 493 1,683 341.38%
Income before income tax and noncontrolling interest74,726 52,527 22,199 42.26%
Provision for income tax expense22,030 15,381 6,649 43.23%
Net income52,696 37,146 15,550 41.86%
Net income attributable to noncontrolling interest(2,780) (2,212) (568) 25.68%
Net income attributable to TowneBank49,916 34,934 14,982 42.89%
Preferred stock dividends13 573 (560) (97.73)%
Net income available to common shareholders49,903 34,361 15,542 45.23%
Net income per common share - basic0.98 0.98 %
Net income per common share - diluted0.98 0.98 %
Period End Data:
Total assets$6,173,891 $4,972,448 $1,201,443 24.16%
Total assets - tangible5,998,373 4,842,966 1,155,407 23.86%
Earning assets (2)5,508,341 4,606,030 902,311 19.59%
Loans (net of unearned income)4,367,039 3,521,075 845,964 24.03%
Allowance for loan losses37,351 36,180 1,171 3.24%
Goodwill and other intangibles175,518 129,482 46,036 35.55%
Nonperforming assets47,986 43,804 4,182 9.55%
Noninterest bearing deposits1,445,978 1,245,925 200,053 16.06%
Interest bearing deposits3,341,900 2,604,007 737,893 28.34%
Total deposits4,787,878 3,849,932 937,946 24.36%
Total equity816,069 613,408 202,661 33.04%
Total equity - tangible640,551 483,926 156,625 32.37%
Common equity807,152 527,727 279,425 52.95%
Common equity - tangible631,634 398,245 233,389 58.60%
Book value per common share15.65 14.85 0.80 5.39%
Book value per common share - tangible12.25 11.21 1.04 9.28%
Daily Average Balances:
Total assets$5,949,725 $4,819,901 $1,129,824 23.44%
Total assets - tangible5,770,456 4,694,307 1,076,149 22.92%
Earning assets (2)5,435,333 4,425,547 1,009,786 22.82%
Loans (net of unearned income), excluding nonaccrual loans4,177,038 3,425,074 751,964 21.95%
Allowance for loan losses36,950 37,461 (511) (1.36)%
Goodwill and other intangibles179,269 125,594 53,675 42.74%
Noninterest bearing deposits1,317,517 1,128,954 188,563 16.70%
Interest bearing deposits3,279,354 2,581,126 698,228 27.05%
Total deposits4,596,871 3,710,081 886,790 23.90%
Total equity798,381 601,789 196,592 32.67%
Total equity - tangible619,111 476,195 142,916 30.01%
Common equity788,128 516,586 271,542 52.56%
Common equity - tangible608,858 390,992 217,866 55.72%
Key Ratios:
Return on average assets1.12% 0.97% 0.15% 15.46%
Return on average assets - tangible1.19% 1.03% 0.16% 15.53%
Return on average equity8.36% 7.76% 0.60% 7.73%
Return on average equity - tangible11.12% 10.13% 0.99% 9.77%
Return on average common equity8.47% 8.89% (0.42)% (4.72)%
Return on average common equity - tangible11.30% 12.14% (0.84)% (6.92)%
Net interest margin-fully tax equivalent (2)(3)3.48% 3.39% 0.09% 2.65%
Net interest margin (2)3.39% 3.32% 0.07% 2.11%
Average earning assets/total average assets91.35% 91.82% (0.47)% (0.51)%
Average loans/average deposits90.87% 92.32% (1.45)% (1.57)%
Average noninterest deposits/total average deposits28.66% 30.43% (1.77)% (5.82)%
Allowance for loan losses/period end loans0.86% 1.03% (0.17)% (16.50)%
Nonperforming assets to period end assets0.78% 0.88% (0.10)% (11.36)%
Period end equity/period end total assets13.22% 12.34% 0.88% 7.13%
Efficiency ratio (1)66.28% 71.01% (4.73)% (6.66)%
(1) Excludes gain on investment securities
(2) Includes bank-owned life insurance
(3) Presented on a tax-equivalent basis

Selected Financial Highlights (unaudited)
TOWNEBANK
September 30, 2015
(dollars in thousands, except per share data)
September 30, June 30, Increase/ % Increase/
Three Months Ended2015 2015 (Decrease) (Decrease)
Results of Operations:
Net interest income$45,670 $44,884 $786 1.75%
Noninterest income (1)29,568 32,966 (3,398) (10.31)%
Gain (loss) on investment securities736 119 617 518.49%
Total Revenue75,974 77,969 (1,995) (2.56)%
Noninterest expenses49,906 49,067 839 1.71%
Provision for loan losses130 1,723 (1,593) (92.46)%
Income before income tax and noncontrolling interest25,938 27,179 (1,241) (4.57)%
Provision for income tax expense7,444 8,201 (757) (9.23)%
Net income18,494 18,978 (484) (2.55)%
Net income attributable to noncontrolling interest(928) (1,166) 238 (20.41)%
Net income attributable to TowneBank17,566 17,812 (246) (1.38)%
Preferred stock dividends and accretion %
Net income available to common shareholders17,566 17,812 (246) (1.38)%
Net income per common share - basic0.34 0.35 (0.01) (2.86)%
Net income per common share - diluted0.34 0.35 (0.01) (2.86)%
Period End Data:
Total assets$6,173,891 $6,055,181 $118,710 1.96%
Total assets - tangible5,998,373 5,879,975 118,398 2.01%
Earning assets (2)5,508,341 5,576,243 (67,902) (1.22)%
Loans (net of unearned income)4,367,039 4,228,127 138,912 3.29%
Allowance for loan losses37,351 37,290 61 0.16%
Goodwill and other intangibles175,518 175,207 311 0.18%
Nonperforming assets47,986 53,609 (5,623) (10.49)%
Noninterest bearing deposits1,445,978 1,363,551 82,427 6.05%
Interest bearing deposits3,341,900 3,323,101 18,799 0.57%
Total deposits4,787,878 4,686,652 101,226 2.16%
Total equity816,069 802,891 13,178 1.64%
Total equity - tangible640,551 627,685 12,866 2.05%
Common equity807,152 794,018 13,134 1.65%
Common equity - tangible631,634 618,812 12,822 2.07%
Book value per common share15.65 15.40 0.25 1.62%
Book value per common share - tangible12.25 12.00 0.25 2.08%
Daily Average Balances:
Total assets$6,115,681 $5,900,816 $214,865 3.64%
Total assets - tangible5,940,258 5,724,957 215,301 3.76%
Earning assets (2)5,604,472 5,407,516 196,956 3.64%
Loans (net of unearned income), excluding nonaccrual loans4,300,751 4,161,304 139,447 3.35%
Allowance for loan losses37,926 36,854 1,072 2.91%
Goodwill and other intangibles175,423 175,858 (435) (0.25)%
Noninterest bearing deposits1,388,002 1,307,075 80,927 6.19%
Interest bearing deposits3,346,874 3,241,276 105,598 3.26%
Total deposits4,734,876 4,548,351 186,525 4.10%
Total equity812,602 800,369 12,233 1.53%
Total equity - tangible637,179 624,511 12,668 2.03%
Common equity804,090 791,915 12,175 1.54%
Common equity - tangible628,667 616,057 12,610 2.05%
Key Ratios:
Return on average assets1.14% 1.21% (0.07)% (5.79)%
Return on average assets - tangible1.21% 1.28% (0.07)% (5.47)%
Return on average equity8.58% 8.93% (0.35)% (3.92)%
Return on average equity - tangible11.25% 11.77% (0.52)% (4.42)%
Return on average common equity8.67% 9.02% (0.35)% (3.88)%
Return on average common equity - tangible11.41% 11.93% (0.52)% (4.36)%
Net interest margin-fully tax equivalent (2)(3)3.40% 3.52% (0.12)% (3.41)%
Net interest margin (2)3.32% 3.43% (0.11)% (3.21)%
Average earning assets/total average assets91.64% 91.64% % %
Average loans/average deposits90.83% 91.49% (0.66)% (0.72)%
Average noninterest deposits/total average deposits29.31% 28.74% 0.57% 1.98%
Allowance for loan losses/period end loans0.86% 0.88% (0.02)% (2.27)%
Nonperforming assets to period end assets0.78% 0.89% (0.11)% (12.36)%
Period end equity/period end total assets13.22% 13.26% (0.04)% (0.30)%
Efficiency ratio (1)66.33% 63.03% 3.30% 5.24%
(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 (unaudited)
(dollars in thousands)
Three Months Ended Three Months Ended Three Months Ended
September 30, 2015 June 30, 2015 September 30, 2014
InterestAverage InterestAverage InterestAverage
AverageIncome/Yield/ AverageIncome/Yield/ AverageIncome/Yield/
BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate
Assets:
Loans (net of unearned income and deferred costs), excluding nonaccrual loans$4,300,751 $49,398 4.56% $4,161,304 $48,729 4.70% $3,471,206 $40,961 4.68%
Taxable investment securities796,062 3,235 1.63% 818,000 2,825 1.38% 604,908 1,734 1.15%
Tax-exempt investment securities61,048 493 3.23% 63,255 496 3.14% 70,854 568 3.21%
Interest-bearing deposits167,247 107 0.25% 87,709 56 0.25% 275,634 174 0.25%
Loans held for sale132,214 1,246 3.77% 131,305 1,161 3.54% 78,325 787 4.02%
Bank-owned life insurance147,150 1,877 5.06% 145,943 2,044 5.62% 57,930 674 4.62%
Total earning assets5,604,472 56,356 3.99% 5,407,516 55,311 4.10% 4,558,857 44,898 3.91%
Less: allowance for loan losses(37,926) (36,854) (36,355)
Total nonearning assets549,135 530,154 438,702
Total assets$6,115,681 $5,900,816 $4,961,204
Liabilities and Equity:
Interest-bearing deposits
Demand and money market$1,693,424 $1,201 0.28% $1,646,075 $1,144 0.28% $1,317,611 $717 0.22%
Savings297,041 695 0.93% 301,020 692 0.92% 308,466 707 0.91%
Certificates of deposit1,356,409 2,985 0.87% 1,294,181 2,606 0.81% 983,950 1,981 0.80%
Total interest-bearing deposits3,346,874 4,881 0.58% 3,241,276 4,442 0.55% 2,610,027 3,405 0.52%
Borrowings472,120 3,435 2.85% 460,993 3,381 2.90% 424,746 3,396 3.13%
Total interest-bearing liabilities3,818,994 8,316 0.86% 3,702,269 7,823 0.85% 3,034,773 6,801 0.89%
Demand deposits1,388,002 1,307,075 1,228,807
Other noninterest-bearing liabilities96,083 91,103 85,374
Total liabilities5,303,079 5,100,447 4,348,954
Shareholders’ equity812,602 800,369 612,250
Total liabilities and equity$6,115,681 $5,900,816 $4,961,204
Net interest income (tax-equivalent basis) $48,040 $47,488 $38,097
Reconcilement of Non-GAAP Financial Measures
Bank-owned life insurance (1,877) (2,044) (674)
Tax-equivalent basis adjustment (493) (560) (556)
Net interest income (GAAP) $45,670 $44,884 $36,867
Interest rate spread (1) 3.13% 3.26% 3.02%
Interest expense as a percent of average earning assets 0.59% 0.58% 0.59%
Net interest margin (tax equivalent basis) (2) 3.40% 3.52% 3.32%
Total cost of deposits 0.41% 0.39% 0.35%

(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
Nine Months Ended Nine Months Ended Nine Months Ended September 30, 2015
September 30, 2015 September 30, 2014 Compared with September 30, 2014
InterestAverage InterestAverage
AverageIncome/Yield/ AverageIncome/Yield/ IncreaseChange due to
BalanceExpenseRate BalanceExpenseRate (Decrease)RateVolume
Assets:
Loans (net of unearned income and deferred costs), excluding nonaccrual loans$4,177,038 $146,020 4.67% $3,425,074 $121,129 4.73% $24,891 $(1,411)$26,302
Taxable investment securities787,996 8,862 1.50% 545,226 5,067 1.24% 3,795 1,216 2,578
Tax-exempt investment securities63,684 1,524 3.19% 71,035 1,621 3.04% (97)77 (173)
Interest-bearing deposits152,472 287 0.25% 262,057 493 0.25% (206) (206)
Loans held for sale109,592 2,971 3.62% 64,483 1,934 4.00% 1,037 (201)1,239
Bank-owned life insurance144,551 5,674 5.25% 57,672 2,090 4.85% 3,584 187 3,396
Total earning assets5,435,333 165,338 4.07% 4,425,547 132,334 4.00% 33,004 (132)33,136
Less: allowance for loan losses(36,950) (37,461)
Total nonearning assets$551,342 $431,815
Total assets$5,949,725 $4,819,901
Liabilities and Equity:
Interest-bearing deposits
Demand and money market$1,658,531 $3,456 0.28% $1,294,093 $2,264 0.23% $1,192 $482 $710
Savings300,996 2,071 0.92% 313,114 2,155 0.92% (84)(1)(83)
Certificates of deposit1,319,827 8,220 0.83% 973,919 5,624 0.77% 2,596 471 2,126
Total interest-bearing deposits3,279,354 13,747 0.56% 2,581,126 10,043 0.52% 3,704 952 2,753
Borrowings460,195 10,205 2.92% 428,870 10,028 3.12% 177 (600)776
Total interest-bearing liabilities3,739,549 23,952 0.86% 3,009,996 20,071 0.89% 3,881 352 3,529
Demand deposits1,317,517 1,128,954
Other noninterest-bearing liabilities94,278 79,161
Total liabilities5,151,344 4,218,111
Shareholders’ equity798,381 601,790
Total liabilities and equity$5,949,725 $4,819,901
Net interest income (tax-equivalent basis) $141,386 $112,263 $29,123 $(484)$29,607
Reconcilement of Non-GAAP Financial Measures
Bank-owned life insurance (5,674) (2,090) (3,583)
Tax-equivalent basis adjustment (1,601) (1,575) $(26)
Net interest income (GAAP) $134,111 $108,598 $25,514
Interest rate spread (1) 3.21% 3.11%
Interest expense as a percent of average earning assets 0.59% 0.61%
Net interest margin (tax equivalent basis) (2) 3.48% 3.39%
Total cost of deposits 0.40% 0.36%

(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.

TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
INTEREST INCOME:
Loans, including fees$48,906 $40,404 $144,418 $119,554
Investment securities3,728 2,303 10,386 6,688
Interest-bearing deposits in financial institutions and federal funds sold107 174 287 493
Mortgage loans held for sale1,246 787 2,971 1,934
Total Interest Income53,987 43,668 158,062 128,669
INTEREST EXPENSE:
Deposits4,881 3,405 13,747 10,043
Advances from the Federal Home Loan Bank3,422 3,385 10,160 9,990
Repurchase agreements and other borrowings14 11 44 38
Total Interest Expense8,317 6,801 23,951 20,071
Net Interest Income45,670 36,867 134,111 108,598
PROVISION FOR LOAN LOSSES130 996 2,176 493
Net Interest Income after Provision for Loan Losses45,540 35,871 131,935 108,105
NONINTEREST INCOME:
Residential mortgage banking income, net8,262 7,858 26,956 20,655
Real estate brokerage and property management income, net5,349 3,645 13,888 10,184
Insurance commissions and other title fees and income, net9,710 8,861 30,644 26,815
Service charges on deposit accounts2,388 2,406 6,911 6,904
Credit card merchant fees, net823 927 1,821 2,665
Other income3,036 2,572 11,081 7,119
Net gain (loss) on investment securities736 44 904 (15)
Total Noninterest Income30,304 26,313 92,205 74,327
NONINTEREST EXPENSE:
Salaries and employee benefits28,910 25,080 83,133 73,801
Occupancy expense4,703 4,618 14,489 13,188
Furniture and equipment2,211 2,040 6,949 6,080
Other expenses14,082 12,416 44,843 36,836
Total Noninterest Expense49,906 44,154 149,414 129,905
Income before income tax expense and noncontrolling interest25,938 18,030 74,726 52,527
Provision for income tax expense7,444 5,044 22,030 15,381
Net income18,494 12,986 52,696 37,146
Net income attributable to noncontrolling interest(928) (860) (2,780) (2,212)
Net income attributable to TowneBank$17,566 $12,126 $49,916 $34,934
Preferred stock dividends 191 13 573
Net income available to common shareholders$17,566 $11,935 $49,903 $34,361
Per common share information
Basic earnings$0.34 $0.34 $0.98 $0.98
Diluted earnings$0.34 $0.34 $0.98 $0.98
Cash dividends declared$0.12 $0.11 $0.35 $0.32

TOWNEBANK
Consolidated Statements of Comprehensive Income (unaudited)
(dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Net income$18,494 $12,986 $52,696 $37,146
Other comprehensive income (loss)
Unrealized gains (losses) on securities
Unrealized holding gains (losses) arising during the period1,822 (229) 1,536 1,575
Deferred tax (expense) benefit(638) 80 (538) (552)
Realized (gains) losses reclassified into earnings(736) (44) (785) 15
Deferred tax benefit258 15 275 (6)
Net unrealized gains (losses)706 (178) 488 1,032
Defined benefit retirement plan
Amortization60 15 138 15
Deferred tax expense(21) (5) (48) (5)
Change in defined benefit retirement plan, net of tax39 10 90 10
Other comprehensive income (loss), net of tax745 (168) 578 1,042
Comprehensive income$19,239 $12,818 $53,274 $38,188

TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands)
September 30, December 31,
2015 2014 2014
(unaudited) (1)
ASSETS
Cash and due from banks$284,625 $230,889 $212,994
Interest-bearing deposits in financial institutions1,000 1,000 1,011
Total Cash and Cash Equivalents285,625 231,889 214,005
Securities available for sale, at fair value542,634 607,931 603,908
Securities held to maturity, at amortized cost75,154 86,794 85,247
Federal Home Loan Bank stock, at amortized cost24,058 22,150 22,157
Total Securities641,846 716,875 711,312
Mortgage loans held for sale99,330 86,034 71,390
Loans, net of unearned income and deferred costs:
Real estate - residential 1-4 family965,559 833,208 837,370
Real estate - commercial1,796,150 1,451,271 1,447,078
Real estate - construction and land development554,753 476,379 452,481
Real estate - multifamily138,954 53,368 51,472
Commercial and industrial business790,614 644,528 700,623
Consumer and other loans121,009 62,321 75,365
Loans, net of unearned income and deferred costs4,367,039 3,521,075 3,564,389
Less: Allowance for loan losses(37,351) (36,180) (35,917)
Net Loans4,329,688 3,484,895 3,528,472
Premises and equipment, net172,940 154,343 155,774
Goodwill152,438 111,761 113,159
Other intangible assets, net23,080 17,721 22,509
Bank-owned life insurance policies147,949 58,217 58,716
Other assets320,995 110,713 107,148
TOTAL ASSETS$6,173,891 $4,972,448 $4,982,485
LIABILITIES AND EQUITY
Liabilities
Deposits:
Noninterest-bearing demand$1,445,978 $1,245,925 $1,224,466
Interest-bearing:
Demand and money market accounts1,676,623 1,309,085 1,365,183
Savings295,952 306,811 301,033
Certificates of deposit1,369,325 988,111 955,920
Total Deposits4,787,878 3,849,932 3,846,602
Advances from the Federal Home Loan Bank437,282 398,477 398,181
Repurchase agreements and other borrowings33,784 24,594 31,893
Total Borrowings471,066 423,071 430,074
Other liabilities98,878 86,037 87,533
TOTAL LIABILITIES5,357,822 4,359,040 4,364,209
Shareholders’ Equity
Preferred stock: 2,000,000 shares authorized 0 shares issued at September 30, 2015 and 76,458 shares issued at September 30, 2014 and December 31, 2014 76,458 76,458
Common stock, $1.667 par: 90,000,000 shares authorized 51,580,762; 35,538,144; and 35,785,679 shares issued at September 30, 2015 and 2014 and December 31, 2014, respectively85,985 59,242 59,655
Capital surplus533,609 316,240 317,718
Retained earnings186,522 151,547 154,655
Common stock issued to deferred compensation trust, at cost 651,362; 617,886; and 627,730 shares at September 30, 2015 and 2014 and December 31, 2014, respectively(10,151) (9,508) (9,674)
Deferred compensation trust10,151 9,508 9,674
Accumulated other comprehensive income1,036 698 458
TOTAL SHAREHOLDERS’ EQUITY807,152 604,185 608,944
Noncontrolling interests8,917 9,223 9,332
TOTAL EQUITY816,069 613,408 618,276
TOTAL LIABILITIES AND EQUITY$6,173,891 $4,972,448 $4,982,485


(1) As derived from the audited consolidated financial statements for December 31, 2014.

TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
Increase/(Decrease)
Three Months Ended September 30, 2015 September 30, 2015
September 30, June 30, September 30, 2014 June 30, 2015
2015 2014 2015 Amount Percent Amount Percent
Commission and fee income
Property and casualty$8,156 $7,335 $8,012 $821 11.19% $144 1.80%
Employee benefits2,578 2,723 2,443 (145) (5.33)% 135 5.53%
Travel insurance626 468 910 158 33.76% (284) (31.21)%
Specialized benefit services145 138 135 7 5.07% 10 7.41%
Total commissions and fees11,505 10,664 11,500 841 7.89% 5 0.04%
Contingency and bonus revenue260 56 387 204 364.29% (127) (32.82)%
Other income53 52 47 1 1.92% 6 12.77%
Total revenue$11,818 $10,772 $11,934 $1,046 9.71% $(116) (0.97)%
Employee commission expense2,361 2,165 2,326 196 9.05% 35 1.50%
Revenue, net of commission expense$9,457 $8,607 $9,608 $850 9.88% $(151) (1.57)%
Salaries and employee benefits4,583 4,274 4,734 309 7.23% (151) (3.19)%
Occupancy expense480 454 480 26 5.73% %
Furniture and equipment202 200 225 2 1.00% (23) (10.22)%
Amortization of intangible assets543 510 540 33 6.47% 3 0.56%
Other expenses1,491 1,236 1,424 255 20.63% 67 4.71%
Total operating expenses7,299 6,674 7,403 625 9.36% (104) (1.40)%
Income before income tax provision and noncontrolling interest$2,158 $1,933 $2,205 $225 11.64% $(47) (2.13)%
Plus: Acquisition related expenses164 128 176 36 28.13% (12) (6.82)%
Plus: Amortization of intangible assets543 510 540 33 6.47% 3 0.56%
Operating earnings before income taxes (non-GAAP)$2,865 $2,571 $2,921 $294 11.44% $(56) (1.92)%

TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
Nine Months Ended Increase/(Decrease)
September 30, 2015 over 2014
2015 2014 Amount Percent
Commission and fee income
Property and casualty$22,627 $18,805 $3,822 20.32%
Employee benefits7,690 8,027 (337) (4.20)%
Travel insurance2,668 1,893 775 40.94%
Specialized benefit services414 407 7 1.72%
Total commissions and fees33,399 29,132 4,267 14.65%
Contingency and bonus revenue3,171 3,165 6 0.19%
Other income148 287 (139) (48.43)%
Total revenue$36,718 $32,584 $4,134 12.69%
Employee commission expense6,723 6,278 445 7.09%
Revenue, net of commission expense$29,995 $26,306 $3,689 14.02%
Salaries and employee benefits$14,111 $11,640 2,471 21.23%
Occupancy expense1,417 1,232 185 15.02%
Furniture and equipment669 562 107 19.04%
Amortization of intangible assets1,609 1,368 241 17.62%
Other expenses4,157 3,417 740 21.66%
Total operating expenses21,963 18,219 3,744 20.55%
Income before income tax, corporate allocation and noncontrolling interest$8,032 $8,087 $(55) (0.68)%
Plus: Acquisition related expenses520 214 306 142.99%
Plus: Amortization of intangible assets1,609 1,368 241 17.62%
Operating earnings before income taxes (non-GAAP)$10,161 $9,669 $492 5.09%

TOWNEBANK
September 30, 2015
Reconcilement of Non-GAAP Financial Measures:
(dollars in thousands)
Three Months Ended
September 30, September 30, December 31,
2015 2014 2014
Return on average assets (GAAP basis) 1.14% 0.97% 0.57%
Impact of excluding average goodwill and other intangibles and amortization 0.07% 0.06% 0.06%
Return on average tangible assets (Non-GAAP) 1.21% 1.03% 0.63%
Return on average equity (GAAP basis) 8.58% 7.86% 4.62%
Impact of excluding average goodwill and other intangibles and amortization 2.67% 2.46% 1.73%
Return on average tangible equity (Non-GAAP) 11.25% 10.32% 6.35%
Return on average common equity (GAAP basis) 8.67% 8.98% 5.21%
Impact of excluding average goodwill and other intangibles and amortization 2.74% 3.36% 2.31%
Return on average tangible common equity (Non-GAAP) 11.41% 12.34% 7.52%
Book value (GAAP basis) $15.65 14.85 $14.88
Impact of excluding average goodwill and other intangibles and amortization 3.40 3.64 (3.79)
Tangible book value $12.25 $11.21 $11.09

For more information 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