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TowneBank Reports Full Year and Fourth Quarter Financial Results for 2015

SUFFOLK, Va., Jan. 29, 2016 (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, 2015.

Record Earnings for Full Year 2015

The Bank reported record annual earnings of $62.38 million for the year ended December 31, 2015, as compared to the $42.17 million reported in 2014, representing a 47.93% increase. Fully diluted earnings per share increased 3.39% to $1.22 per share compared to $1.18 per share for 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 quarterly dividend was increased to $0.12 per share beginning in the second quarter of 2015 resulting in total dividends of $0.47 per share for 2015, an increase of 9.3% over 2014. On an annualized basis, the current annual dividend rate is $0.48 per share.

“We are pleased to announce record annual earnings for the 16th consecutive year since our inception,” said G. Robert Aston, Jr., Chairman and Chief Executive Officer. “We finished 2015 with revenue growth of $55.26 million, or 22.79%, over 2014, while producing a return on average assets of 1.03% and a return on average tangible equity of 10.34%.”

“In December, we announced an agreement to acquire Chesapeake, Virginia based Monarch Financial Holdings, which we see as an exciting opportunity to continue our growth strategy while building a great community asset that will continue to help our communities grow and prosper. We anticipate that the acquisition will generate considerable operating synergies and will result in the only community bank in the top 50 largest MSAs in the United States with a No. 1 market share ranking,” added Aston.

The Company anticipates closing the transaction by the end of the second quarter of 2016, subject to customary closing conditions, including the receipt of regulatory approvals and the approval of each company's shareholders. Based on financials reported on September 30, 2015, the combined companies would have total assets of $7.3 billion, deposits of $5.8 billion and loans of $5.4 billion.

2015 Performance Highlights

  • Total revenues were $297.73 million, an increase of $55.26 million, or 22.79%, compared to 2014
    • Taxable equivalent net interest margin was 3.45%, including accretion of 0.09%, compared to 3.38% for 2014
    • Residential mortgage banking income increased $7.03 million, or 25.87%, on production volume of $1.57 billion
    • Insurance segment total revenue increased 12.47% to $47.54 million

  • Loan growth continued as total loans held for investment increased $955.00 million, or 26.79%, from December 31, 2014 with organic growth of $530.18 million, an increase of 14.87%, including $172.67 million of new loan originations in Richmond

  • Total deposits were $4.91 billion, an increase of $1.07 billion, or 27.75%, from 2014, including organic growth of $402.51 million, or 10.46%
    • Noninterest bearing deposits increased by 13.79%, to $1.39 billion
    • Average interest-bearing deposit costs were 0.57%, up five basis points
    • Noninterest bearing deposits were 28.35% of total deposits compared to 31.83% at December 31, 2014
    • Total cost of deposits increased to 0.40% from 0.36% at December 31, 2014, reflective of a greater mix of savings deposits acquired in the Franklin merger

  • Asset quality showed continued strength
    • Nonperforming assets were $43.09 million, or 0.68% of total assets compared to 0.84% at December 31, 2014
    • Nonperforming loans were $8.67 million or 0.19% of period end loans
    • Foreclosed property decreased to $34.42 million

  • Strategic acquisitions
    • On January 2, 2015, completed the acquisition of Franklin and its wholly owned subsidiary, Franklin Federal Savings Bank, based in Richmond, Virginia
    • On February 1, 2015, acquired two independent insurance agencies, Lackey-Saunders Co., Inc. and Gloucester-Southside Insurance Agency, Inc.
    • On September 1, 2015, acquired Total Insurance Planning, LLC, an independent insurance agency
    • On October 1, 2015, acquired two independent insurance agencies, B.H. Baird Insurance Agency and Invincia Corporation
    • On December 17, 2015, TowneBank announced the signing of a definitive merger agreement to acquire Monarch Financial Holdings, Inc. ("Monarch"), and its wholly-owned bank subsidiary, Monarch Bank, headquartered in Chesapeake, Virginia

  • New banking center
    • On May 14, 2015, opened a new banking office in the Ghent area in Norfolk, Virginia
    • At December 31, 2015, the Ghent banking office had deposits of $54.79 million

  • The Bank remained well-capitalized
    • Common equity tier 1 capital ratio of 12.59%
    • Tier 1 leverage capital ratio of 10.67%
    • Tier 1 risk-based capital ratio of 12.70%
    • Total risk-based capital ratio of 13.44%
    • Tangible book value increased to $12.21 from $11.09 at December 31, 2014

Fourth Quarter 2015 Earnings Compared to Fourth Quarter 2014

Net income for the fourth quarter was $12.47 million versus $7.23 million in 2014, reflecting strong growth in net interest income as compared to the prior year quarter. The fourth quarter of 2014 results included non-recurring, net-of-tax charges of $4.23 million in severance and acquisition-related expenses. Fully diluted earnings per share, including the impact of the non-recurring charges, was $0.24 compared to $0.20 in fourth quarter 2014.

Performance Highlights

  • Total revenues were $71.41 million, an increase of $11.87 million, or 19.94%, compared to the fourth quarter of 2014
    • Taxable equivalent net interest margin was 3.36%, including accretion of 0.09%, compared to 3.35% in the fourth quarter of 2014
    • Residential mortgage banking income increased 11.22% from the fourth quarter of 2014 to $7.25 million on production volume of $353.52 million
    • Insurance commissions increased 16.20% to $9.00 million

  • Asset quality showed continued improvement
    • Net recoveries were 0.01% annualized of average loans versus net charge-offs of 0.03% in fourth quarter 2014

Net Interest Income
Net interest income increased to $46.33 million, a $9.19 million, or 24.75%, increase from the fourth quarter of 2014. The primary driver of the increase was significant growth in earning assets from the Franklin merger along with the restructuring of the Franklin balance sheet. Average earning assets increased $1.19 billion, or 25.82%, while tax-equivalent net interest margin increased slightly to 3.36% in the current quarter from 3.35% in fourth quarter 2014. Accretion income added $1.22 million, or 9 basis points, to margin in the current quarter.

Noninterest Income
Noninterest income, excluding gains or losses on investment securities, was $25.08 million for the fourth quarter of 2015, an increase of $2.68 million, or 11.95%, from the fourth quarter of 2014. A large portion of the increase from the comparative period in 2014 is attributable to insurance commissions, which increased $1.25 million, or 16.20%, primarily due to the acquisition of five insurance agencies in 2015. Additionally, residential mortgage banking income increased $0.73 million, or 11.22%, from the fourth quarter of 2014 primarily due to improved pricing and increased production. Mortgage production was $353.52 million for the fourth quarter of 2015, which was $32.21 million higher than the fourth quarter of 2014. Also contributing to the increase, other income was higher by $0.88 million primarily due to a rise in BOLI income of $0.72 million.

Noninterest Expense
Noninterest expense increased by $3.78 million, or 7.73%, from the fourth quarter of 2014. Driving the increase were operating expenses in our new Richmond region of $2.89 million and operating expenses of $1.85 million related to insurance agencies acquired in 2015. Also contributing to the increase were company-wide annual salary adjustments effective July 1, 2015, combined with increases in employee profit sharing and incentives related to the achievement of the Bank's financial plan for 2015. Fourth quarter 2014 included severance costs of $3.22 million, acquisition-related expenses of $3.10 million, and a reversal of $0.90 million in previously accrued employee incentive compensation unearned for the full 2014 year.

Fourth Quarter 2015 Earnings Compared to Third Quarter 2015
Net income for the fourth quarter was $12.47 million, or $0.24 per diluted share, versus $17.57 million, or $0.34 per diluted share, in third quarter 2015, reflecting the seasonality in our Insurance and Realty segments. The seasonal decline in noninterest revenue was partially offset by an increase in net interest income as strong loan growth continued during the quarter.

Performance Highlights

  • Total revenues were $71.41 million compared to $75.97 million in the third quarter of 2015
    • Taxable equivalent net interest margin was 3.36%, including accretion of 0.09%, compared to 3.40% in the third quarter of 2015
    • Noninterest income, excluding gains on investment securities, decreased $4.49 million due to seasonality in our Insurance and Realty segments

  • Total loans held for investment increased $152.35 million, or 3.49%, from September 30, 2015

  • Total costs of deposits were 0.42% compared to 0.41% for third quarter 2015

  • Asset quality showed continued improvement
    • Nonperforming assets were $43.09 million, a decrease of 10.20% from third quarter 2015
    • Net recoveries were 0.01% annualized of average loans versus net charge-offs of 0.01% in third quarter 2015

Net Interest Income
On a linked quarter basis, net interest income increased $0.66 million or 1.45%, in fourth quarter 2015 versus the third quarter, while tax-equivalent net interest margin was 3.36% versus 3.40% for the third quarter of 2015. Accretion income added $1.22 million, or 9 basis points, to margin in the current quarter, as compared to $0.68 million, or 6 basis points, in the linked quarter.

Noninterest Income
In comparison to the third quarter of 2015, noninterest income, excluding gains or losses on investment securities, decreased $4.49 million, or 15.18%. Residential mortgage banking income decreased by $1.01 million, or 12.19%, from the third quarter of 2015 primarily due to a seasonal decrease in mortgage production of $81.31 million. A seasonal decrease in policy renewals led to the decrease in net insurance commissions, which was partially offset by commissions earned by insurance agencies acquired in fourth quarter 2015. Decreases in real estate brokerage and property management income from the linked quarter also reflected the seasonal nature of those businesses.

Noninterest Expense
Noninterest expense increased by $2.84 million, or 5.68%, from the third quarter of 2015. The increase was driven by additional operating expenses of $1.43 million due to our two insurance acquisitions in fourth quarter 2015 and one in September 2015, including nonrecurring acquisition-related costs of $0.34 million. Additionally, employee salary and benefit costs increased related to the achievement of the Bank's financial plan for 2015.


Noninterest Income % Change
Q4 Q4 Q3 Q4 15 vs. Q4 15 vs.
(dollars in thousands)2015 2014 2015 Q4 14 Q3 15
Residential mortgage banking income, net$7,255 $6,523 $8,262 11.22% (12.19)%
Real estate brokerage and property management, net2,438 2,450 5,349 (0.49)% (54.42)%
Insurance commissions and other title fees and income, net8,997 7,743 9,710 16.20% (7.34)%
Service charges on deposit accounts2,254 2,288 2,388 (1.49)% (5.61)%
Credit card merchant fees, net767 911 823 (15.81)% (6.80)%
Other income3,368 2,486 3,036 35.48% 10.94%
Subtotal before gain on investment securities25,079 22,401 29,568 11.95% (15.18)%
Net gain on investment securities 736 % (100.00)%
Total noninterest income$25,079 $22,401 $30,304 11.95% (17.24)%


Noninterest Expense % Change
Q4 Q4 Q3 Q4 15 vs. Q4 15 vs.
(dollars in thousands)2015 2014 2015 Q4 14 Q3 15
Salaries and benefits$30,826 $25,205 $28,910 22.30% 6.63%
Occupancy expense5,156 4,676 4,703 10.27% 9.63%
Furniture and equipment2,390 2,103 2,211 13.65% 8.10%
Acquisition-related expenses285 3,103 243 (90.82)% 17.28%
Other expenses14,086 13,872 13,839 1.54% 1.78%
Total noninterest expense$52,743 $48,959 $49,906 7.73% 5.68%

Segment Results

$ Change
(in thousands) Q4 Q4 Q3 Q4 15 vs. Q4 15 vs.
Segment Net Income (Loss) 2015 2014 2015 Q4 14 Q3 15
Banking $12,219 $7,193 $14,148 $5,026 $(1,929)
Realty 6 (234) 2,345 $240 $(2,339)
Insurance 241 276 1,073 $(35) $(832)
Total net income $12,466 $7,235 $17,566 $5,231 $(5,100)

Fourth Quarter 2015 Compared to Fourth Quarter 2014

Banking
Net income for the three months ended December 31, 2015 for the Banking segment was $12.22 million, increasing $5.03 million, or 69.87%, from comparative 2014. The increase in earnings was driven by an increase in net interest income of $9.01 million, primarily due to the increase in earning assets acquired in the Franklin merger and 2015 growth in Hampton Roads. Also contributing to the variance is the decrease in fourth quarter 2014 earnings due to severance costs and acquisition-related expenses from the merger with Franklin. These factors were partially offset by an increase in the provision for loan losses and an increase in noninterest expenses.

Realty
For the three months ended December 31, 2015, the Realty segment had $0.01 million of income, an improvement of $0.24 million or 102.56% compared to the loss in fourth quarter 2014. Contributing to the improvement was an increase in noninterest income of $0.98 million as residential mortgage banking income increased by $0.81 million and net interest income increased by $0.18 million as higher production volume led to higher average mortgage loans held for sale. These improvements were offset by an increase in noninterest expense of $1.11 million primarily related to employee expenses, which increased due to the improved performance of the segment businesses.

Insurance
The Insurance segment had net income of $0.24 million for the three months ended December 31, 2015, a decrease of $0.04 million compared to fourth quarter 2014. The decrease in net income was driven by insurance agency acquisitions in the third and fourth quarters of 2015, which resulted in an additional $1.51 million of noninterest expenses, including acquisition-related expenses of $0.34 million, as compared to additional commissions and fee revenue of $0.96 million, as policy renewals are seasonally lower in the fourth quarter of the year.

Fourth Quarter 2015 Compared to Third Quarter 2015

Banking
The decrease in earnings of $1.93 million, or 13.63% from the third quarter of 2015 was driven by a $1.83 million increase in noninterest expenses related to a performance based staff incentives, increased marketing expenses, and nonrecurring acquisition-related expenses of $0.60 million from the announced acquisition of Monarch. Also contributing was an increase of $0.72 million in the provision for loan losses related to strong loan growth in the quarter.

Realty
Net income in the Realty segment decreased by $2.34 million from the linked quarter ended September 30, 2015 due to due to historically seasonal decreases in the Bank's mortgage, real estate brokerage, and resort property management businesses.

Insurance
Net income decreased $0.83 million from the third quarter of 2015 due to the historically seasonal decrease in fourth quarter policy renewals combined with the previously discussed effect of the insurance agency acquisitions in the third and fourth quarters of 2015.

Balance Sheet

At December 31, 2015, total Bank assets reached $6.30 billion, an increase of $1.31 billion, or 26.37%, over December 31, 2014.

Loans

% Change
Q4 Q4 Q3 Q4 15 vs. Q4 15 vs.
(dollars in thousands)2015 2014 2015 Q4 14 Q3 15
Construction and land development$598,875 $452,481 $554,753 32.35% 7.95%
Commercial real estate - investment related properties1,004,393 695,526 1,020,860 44.41% (1.61)%
Commercial real estate - owner occupied780,000 751,552 775,290 3.79% 0.61%
Multifamily real estate167,371 51,472 138,954 225.17% 20.45%
1-4 family residential real estate973,331 837,370 965,559 16.24% 0.80%
Commercial and industrial business loans857,036 700,623 790,614 22.32% 8.40%
Consumer loans and other138,387 75,365 121,009 83.62% 14.36%
Total$4,519,393 $3,564,389 $4,367,039 26.79% 3.49%

The Bank’s loan portfolio ended the period at $4.52 billion representing an increase of 26.79%, or $955.00 million, from December 31, 2014, and an increase of $152.35 million, or 13.65% on an annualized basis, from September 30, 2015. Organic growth in 2015 was $530.18 million, or 14.87% on an annualized basis. Included in this growth were new originations of $172.67 million in our Richmond market.

Deposits

% Change
Q4 Q4 Q3 Q4 15 vs. Q4 15 vs.
(dollars in thousands)2015 2014 2015 Q4 14 Q3 15
Noninterest-bearing demand$1,393,264 $1,224,466 $1,445,978 13.79% (3.65)%
Interest-bearing:
Demand and money market accounts1,824,226 1,365,183 1,676,623 33.63% 8.80%
Savings300,408 301,033 295,952 (0.21)% 1.51%
Certificates of deposits1,396,129 955,920 1,369,325 46.05% 1.96%
Total$4,914,027 $3,846,602 $4,787,878 27.75% 2.63%

The Bank continued to experience solid deposit growth with total deposits increasing to $4.91 billion, up $1.07 billion, or 27.75%, from December 31, 2014. The increase was mostly due to the deposits acquired in the Franklin merger combined with Hampton Roads market growth. Organic growth was $402.51 million, or 10.46%, including growth in the Richmond market of $46.60 million since the date of the merger. The Bank saw continued growth in noninterest-bearing demand deposits, which ended the year at $1.39 billion, a 13.79% increase from the prior comparative period. Noninterest-bearing deposits represented 28.35% of total deposits at December 31, 2015.

Capital Ratios

Q4 Q4 Q3
2015 2014 2015
Common Equity Tier 1 (a) 12.59% N/A 12.52%
Tier 1 (a) 12.70% 12.73% 12.62%
Total (a) 13.44% 13.67% 13.35%
Tier 1 Leverage Ratio (a) 10.67% 9.94% 10.93%
(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 December 31, 2015 rose to $820.19 million, an increase of $201.92 million, or 32.66%, from December 31, 2014. Common equity increased 52.29%, or $278.43 million, as the Bank issued common stock in the amount of $240.27 million for acquisitions 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 13.44%, 12.70%, 10.67%, 12.59%, respectively. All ratios exceed the current regulatory standards for well capitalized status.

Asset Quality

(in thousands)12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014
Nonperforming loans$8,670 $8,477 $7,455 $7,045 $6,741
Foreclosed property34,420 39,509 46,154 51,698 35,116
Total nonperforming assets$43,090 $47,986 $53,609 $58,743 $41,857
Quarterly net loans charged off (recovered)$(156) $69 $339 $333 $261
Year-to-date net loans charged off$585 $741 $672 $333 $2,955


Change
Q4 Q4 Q3 Q4 15 vs. Q4 15 vs.
(dollars in thousands) 2015 2014 2015 Q4 14 Q3 15
Total loans 90 days past due and still accruing $424 $12 $31 $412 $393
Total loans 30-89 days past due $7,477 $13,436 $5,864 $(5,959) $1,613
Allowance for loan losses $38,359 $35,917 $37,351 $2,442 $1,008
Total performing TDRs $29,114 $38,418 $29,920 $(9,304) $(806)
Nonperforming loans to period end loans 0.19% 0.19% 0.19%
Nonperforming assets to period end assets 0.68% 0.84% 0.78% (0.16) (0.10)
Allowance for loan losses to period end loans 0.85% 1.01% 0.86% (0.16) (0.01)
Allowance for loan losses (originated) to originated period end loans 0.94% 1.02% 0.96% (0.08) (0.02)
Net charge-offs (recoveries) to average loans (annualized) (0.01)% 0.03% 0.01% (0.04) (0.02)
Ratio of allowance for loan losses to nonperforming loans 4.42x 5.33x 4.41x (0.91)x .01x

Continued improvements in credit quality contributed to the Bank's financial results as net recoveries were $0.16 million in the fourth quarter of 2015 compared to net charge-offs of $0.26 million in the fourth quarter of 2014 and $0.07 million in the linked quarter. Total nonperforming assets were $43.09 million, or 0.68%, of Bank assets at December 31, 2015, as compared to $41.86 million, or 0.84%, at December 31, 2014, and $47.99 million, or 0.78%, at September 30, 2015. The allowance for loan losses was $38.36 million, increased from $35.92 million at December 31, 2014 and $37.35 million at September 30, 2015.

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 $6.30 billion as of December 31, 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 Bank’s management uses these non-GAAP financial measures in their analysis of the Bank'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 Bank’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. These include statements as to the anticipated benefits of the merger with Monarch, including future financial and operating results, cost savings and enhanced revenues that may be realized from the merger as well as other statements of expectations regarding the merger and any other statements regarding future results or expectations. 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. TowneBank’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, and the resulting company after the merger with Monarch, include but are not limited to: the businesses of TowneBank and Monarch may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; expected revenue synergies and cost savings from the merger or other pending or recently completed acquisitions may not be fully realized or realized within the expected timeframe; revenues following the merger may be lower than expected; customer and employee relationships and business operations may be disrupted by the merger; the ability to obtain required regulatory and stockholder approvals, and the ability to complete the merger on the expected timeframe may be more difficult, time-consuming or costly than expected; 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 TowneBank’s market areas; TowneBank’s implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; and changes in accounting principles, policies and guidelines; and other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation (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.

Additional Information About the Merger and Where to Find It:
In connection with the proposed merger, TowneBank will file with the FDIC a preliminary proxy statement/prospectus and Monarch will file with the Securities and Exchange Commission (the “SEC”) a preliminary proxy statement. TowneBank and Monarch will each deliver a definitive joint proxy statement/prospectus to their respective stockholders seeking approval of the merger and related matters. In addition, each of TowneBank and Monarch may file other relevant documents concerning the proposed merger with the FDIC and SEC.

Investors and stockholders of both companies are urged to read the definitive joint proxy statement/prospectus when it becomes available and any other relevant documents to be filed with the FDIC and SEC in connection with the proposed merger because they will contain important information about TowneBank, Monarch and the proposed transaction. Investors and stockholders may obtain free copies of certain of these documents through the website maintained by the SEC at http://www.sec.gov. Free copies of the definitive joint proxy statement/prospectus, when available, also may be obtained by directing a request by telephone or mail to TowneBank, 6001 Harbour View Boulevard, Suffolk, Virginia 23425, Attention: Investor Relations (telephone: (757) 638-6794), or Monarch Financial Holdings, Inc., 1435 Crossways Boulevard, Suite 301, Chesapeake, Virginia 23320, Attention: Investor Relations (telephone: (757) 389-5112), or by accessing TowneBank’s website at https://townebank.com under “Investor Relations” or Monarch’s website at https://www.monarchbank.com under “Investor Relations.” The information on TowneBank’s and Monarch’s websites is not, and shall not be deemed to be, a part of this release or incorporated into other filings either company makes with the FDIC or SEC.

TowneBank and Monarch, and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies from the stockholders of TowneBank and/or Monarch in connection with the merger. Information about the directors and executive officers of TowneBank is set forth in the proxy statement for TowneBank’s 2015 annual meeting of stockholders filed with the FDIC on April 17, 2015. Information about the directors and executive officers of Monarch is set forth in the proxy statement for Monarch’s 2015 annual meeting of stockholders filed with the SEC on April 2, 2015. Additional information regarding the interests of these participants and other persons who may be deemed participants in the merger may be obtained by reading the definitive joint proxy statement/prospectus regarding the merger when it becomes available.

This release does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any offer, solicitation or sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Selected Financial Highlights (unaudited)
TOWNEBANK
December 31, 2015
(dollars in thousands, except per share data)
Increase/ % Increase/
Three Months Ended December 31,2015 2014 (Decrease) (Decrease)
Results of Operations:
Net interest income$46,331 $37,139 $9,192 24.75%
Noninterest income (1)25,079 22,401 2,678 11.95%
Gain (loss) on investment securities %
Total Revenue71,410 59,540 11,870 19.94%
Noninterest expenses52,743 48,959 3,784 7.73%
Provision for loan losses852 (1) 853 N/M
Income before income tax and noncontrolling interest17,815 10,582 7,233 68.35%
Provision for income tax expense4,846 2,798 2,048 73.20%
Net income12,969 7,784 5,185 66.61%
Net income attributable to noncontrolling interest(503) (549) 46 (8.38)%
Net income attributable to TowneBank12,466 7,235 5,231 72.30%
Preferred stock dividends 191 (191) (100.00)%
Net income available to common shareholders12,466 7,044 5,422 76.97%
Net income per common share - basic (2)0.24 0.20 0.04 20.00%
Net income per common share - diluted (2)0.24 0.20 0.04 20.00%
Period End Data:
Total assets$6,296,574 $4,982,485 $1,314,089 26.37%
Total assets - tangible6,115,579 4,846,816 1,268,763 26.18%
Earning assets (2)5,827,888 4,610,142 1,217,746 26.41%
Loans (net of unearned income)4,519,393 3,564,389 955,004 26.79%
Allowance for loan losses38,359 35,917 2,442 6.80%
Goodwill and other intangibles180,995 135,668 45,327 33.41%
Nonperforming assets43,091 41,857 1,234 2.95%
Noninterest bearing deposits1,393,264 1,224,466 168,798 13.79%
Interest bearing deposits3,520,763 2,622,136 898,627 34.27%
Total deposits4,914,027 3,846,602 1,067,425 27.75%
Total equity820,194 618,276 201,918 32.66%
Total equity - tangible639,199 482,608 156,591 32.45%
Common equity810,921 532,487 278,434 52.29%
Common equity - tangible629,925 396,819 233,106 58.74%
Book value per common share (2)15.71 14.88 0.83 5.58%
Book value per common share - tangible (2)12.21 11.09 1.12 10.10%
Daily Average Balances:
Total assets$6,305,571 $5,005,112 $1,300,459 25.98%
Total assets - tangible6,120,799 4,868,868 1,251,931 25.71%
Earning assets (2)5,800,907 4,610,309 1,190,598 25.82%
Loans (net of unearned income), excluding nonaccrual loans4,426,387 3,526,859 899,528 25.51%
Allowance for loan losses37,918 36,296 1,622 4.47%
Goodwill and other intangibles184,773 136,243 48,530 35.62%
Noninterest bearing deposits1,420,047 1,247,712 172,335 13.81%
Interest bearing deposits3,458,597 2,616,976 841,621 32.16%
Total deposits4,878,644 3,864,688 1,013,956 26.24%
Total equity823,627 621,579 202,048 32.51%
Total equity - tangible638,855 485,335 153,520 31.63%
Common equity814,894 536,091 278,803 52.01%
Common equity - tangible630,121 399,848 230,273 57.59%
Key Ratios:
Return on average assets0.78% 0.57% 0.21% 36.84%
Return on average assets - tangible0.85% 0.63% 0.22% 34.92%
Return on average equity6.00% 4.62% 1.38% 29.87%
Return on average equity - tangible8.11% 6.35% 1.76% 27.72%
Return on average common equity6.07% 5.21% 0.86% 16.51%
Return on average common equity - tangible8.22% 7.52% 0.70% 9.31%
Net interest margin-fully tax equivalent (2)(3)3.36% 3.35% 0.01% 0.30%
Net interest margin (2)3.27% 3.26% 0.01% 0.31%
Average earning assets/total average assets92.00% 92.11% (0.11)% (0.12)%
Average loans/average deposits90.73% 91.26% (0.53)% (0.58)%
Average noninterest deposits/total average deposits29.11% 32.28% (3.17)% (9.82)%
Allowance for loan losses/period end loans0.85% 1.01% (0.16)% (15.84)%
Nonperforming assets to period end assets0.68% 0.84% (0.16)% (19.05)%
Period end equity/period end total assets13.03% 12.41% 0.62% 5.00%
Efficiency ratio (1)73.86% 82.23% (8.37)% (10.18)%
(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, 2015
(dollars in thousands, except per share data)
Increase/ % Increase/
Twelve Months Ended December 31,2015 2014 (Decrease) (Decrease)
Results of Operations:
Net interest income$180,442 $145,736 $34,706 23.81%
Noninterest income (1)116,379 96,744 19,635 20.30%
Gain (loss) on investment securities904 (15) 919 N/M
Total Revenue297,725 242,465 55,260 22.79%
Noninterest expenses202,157 178,864 23,293 13.02%
Provision for loan losses3,027 492 2,535 515.24%
Income before income tax and noncontrolling interest92,541 63,109 29,432 46.64%
Provision for income tax expense26,876 18,179 8,697 47.84%
Net income65,665 44,930 20,735 46.15%
Net income attributable to noncontrolling interest(3,283) (2,761) (522) 18.91%
Net income attributable to TowneBank62,382 42,169 20,213 47.93%
Preferred stock dividends13 765 (752) (98.30)%
Net income available to common shareholders62,369 41,404 20,965 50.64%
Net income per common share - basic1.22 1.18 0.04 3.39%
Net income per common share - diluted1.22 1.18 0.04 3.39%
Period End Data:
Total assets$6,296,574 $4,982,485 $1,314,089 26.37%
Total assets - tangible6,115,579 4,846,816 1,268,763 26.18%
Earning assets (2)5,827,888 4,610,142 1,217,746 26.41%
Loans (net of unearned income)4,519,393 3,564,389 955,004 26.79%
Allowance for loan losses38,359 35,917 2,442 6.80%
Goodwill and other intangibles180,995 135,668 45,327 33.41%
Nonperforming assets43,091 41,857 1,234 2.95%
Noninterest bearing deposits1,393,264 1,224,466 168,798 13.79%
Interest bearing deposits3,520,763 2,622,136 898,627 34.27%
Total deposits4,914,027 3,846,602 1,067,425 27.75%
Total equity820,194 618,276 201,918 32.66%
Total equity - tangible639,199 482,608 156,591 32.45%
Common equity810,921 532,487 278,434 52.29%
Common equity - tangible629,925 396,819 233,106 58.74%
Book value per common share15.71 14.88 0.83 5.58%
Book value per common share - tangible12.21 11.09 1.12 10.10%
Daily Average Balances:
Total assets$6,039,418 $4,866,584 $1,172,834 24.10%
Total assets - tangible5,858,762 4,738,306 1,120,456 23.65%
Earning assets (2)5,528,362 4,472,117 1,056,245 23.62%
Loans (net of unearned income), excluding nonaccrual loans4,239,887 3,450,730 789,157 22.87%
Allowance for loan losses37,194 37,168 26 0.07%
Goodwill and other intangibles180,656 128,278 52,378 40.83%
Noninterest bearing deposits1,343,360 1,158,888 184,472 15.92%
Interest bearing deposits3,324,533 2,590,162 734,371 28.35%
Total deposits4,667,893 3,749,050 918,843 24.51%
Total equity804,744 606,777 197,967 32.63%
Total equity - tangible624,088 478,499 145,589 30.43%
Common equity794,874 521,502 273,372 52.42%
Common equity - tangible614,218 393,224 220,994 56.20%
Key Ratios:
Return on average assets1.03% 0.87% 0.16% 18.39%
Return on average assets - tangible1.10% 0.93% 0.17% 18.28%
Return on average equity7.75% 6.95% 0.80% 11.51%
Return on average equity - tangible10.34% 9.16% 1.18% 12.88%
Return on average common equity7.85% 7.94% (0.09)% (1.13)%
Return on average common equity - tangible10.51% 10.95% (0.44)% (4.02)%
Net interest margin-fully tax equivalent (2)(3)3.45% 3.38% 0.07% 2.07%
Net interest margin (2)3.36% 3.31% 0.05% 1.51%
Average earning assets/total average assets91.54% 91.89% (0.35)% (0.38)%
Average loans/average deposits90.83% 92.04% (1.21)% (1.31)%
Average noninterest deposits/total average deposits28.78% 30.91% (2.13)% (6.89)%
Allowance for loan losses/period end loans0.85% 1.01% (0.16)% (15.84)%
Nonperforming assets to period end assets0.68% 0.84% (0.16)% (19.05)%
Period end equity/period end total assets13.03% 12.41% 0.62% 5.00%
Efficiency ratio (1)68.11% 73.76% (5.65)% (7.66)%
(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, 2015
(dollars in thousands, except per share data)
December 31, September 30, Increase/ % Increase/
Three Months Ended2015 2015 (Decrease) (Decrease)
Results of Operations:
Net interest income$46,331 $45,670 $661 1.45%
Noninterest income (1)25,079 29,568 (4,489) (15.18)%
Gain (loss) on investment securities 736 (736) (100.00)%
Total Revenue71,410 75,974 (4,564) (6.01)%
Noninterest expenses52,743 49,906 2,837 5.68%
Provision for loan losses852 130 722 555.38%
Income before income tax and noncontrolling interest17,815 25,938 (8,123) (31.32)%
Provision for income tax expense4,846 7,444 (2,598) (34.90)%
Net income12,969 18,494 (5,525) (29.87)%
Net income attributable to noncontrolling interest(503) (928) 425 (45.80)%
Net income attributable to TowneBank12,466 17,566 (5,100) (29.03)%
Preferred stock dividends %
Net income available to common shareholders12,466 17,566 (5,100) (29.03)%
Net income per common share - basic0.24 0.34 (0.10) (29.41)%
Net income per common share - diluted0.24 0.34 (0.10) (29.41)%
Period End Data:
Total assets$6,296,574 $6,173,891 $122,683 1.99%
Total assets - tangible6,115,579 5,998,373 117,206 1.95%
Earning assets (2)5,827,888 5,508,341 319,547 5.80%
Loans (net of unearned income)4,519,393 4,367,039 152,354 3.49%
Allowance for loan losses38,359 37,351 1,008 2.70%
Goodwill and other intangibles180,995 175,518 5,477 3.12%
Nonperforming assets43,091 47,986 (4,895) (10.20)%
Noninterest bearing deposits1,393,264 1,445,978 (52,714) (3.65)%
Interest bearing deposits3,520,763 3,341,900 178,863 5.35%
Total deposits4,914,027 4,787,878 126,149 2.63%
Total equity820,194 816,069 4,125 0.51%
Total equity - tangible639,199 640,551 (1,352) (0.21)%
Common equity810,921 807,152 3,769 0.47%
Common equity - tangible629,925 631,634 (1,709) (0.27)%
Book value per common share15.71 15.65 0.06 0.38%
Book value per common share - tangible12.21 12.25 (0.04) (0.33)%
Daily Average Balances:
Total assets$6,305,571 $6,115,681 $189,890 3.10%
Total assets - tangible6,120,799 5,940,258 180,541 3.04%
Earning assets (2)5,800,907 5,604,472 196,435 3.50%
Loans (net of unearned income), excluding nonaccrual loans4,426,387 4,300,751 125,636 2.92%
Allowance for loan losses37,918 37,926 (8) (0.02)%
Goodwill and other intangibles184,773 175,423 9,350 5.33%
Noninterest bearing deposits1,420,047 1,388,002 32,045 2.31%
Interest bearing deposits3,458,597 3,346,874 111,723 3.34%
Total deposits4,878,644 4,734,876 143,768 3.04%
Total equity823,627 812,602 11,025 1.36%
Total equity - tangible638,855 637,179 1,676 0.26%
Common equity814,894 804,090 10,804 1.34%
Common equity - tangible630,121 628,667 1,454 0.23%
Key Ratios:
Return on average assets0.78% 1.14% (0.36)% (31.58)%
Return on average assets - tangible0.85% 1.21% (0.36)% (29.75)%
Return on average equity6.00% 8.58% (2.58)% (30.07)%
Return on average equity - tangible8.11% 11.25% (3.14)% (27.91)%
Return on average common equity6.07% 8.67% (2.60)% (29.99)%
Return on average common equity - tangible8.22% 11.41% (3.19)% (27.96)%
Net interest margin-fully tax equivalent (2)(3)3.36% 3.40% (0.04)% (1.18)%
Net interest margin (2)3.27% 3.32% (0.05)% (1.51)%
Average earning assets/total average assets92.00% 91.64% 0.36% 0.39%
Average loans/average deposits90.73% 90.83% (0.10)% (0.11)%
Average noninterest deposits/total average deposits29.11% 29.31% (0.20)% (0.68)%
Allowance for loan losses/period end loans0.85% 0.86% (0.01)% (1.16)%
Nonperforming assets to period end assets0.68% 0.78% (0.10)% (12.82)%
Period end equity/period end total assets13.03% 13.22% (0.19)% (1.44)%
Efficiency ratio (1)73.86% 66.33% 7.53% 11.35%
(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)
Three Months Ended Three Months Ended Three Months Ended
December 31, 2015 September 30, 2015 December 31, 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$4,426,387 $50,850 4.56% $4,300,751 $49,398 4.56% $3,526,860 $41,216 4.64%
Taxable investment securities782,998 2,987 1.53% 796,062 3,235 1.63% 660,291 1,829 1.11%
Tax-exempt investment securities54,974 428 3.11% 61,048 493 3.23% 67,541 560 3.31%
Interest-bearing deposits292,085 211 0.29% 167,247 107 0.25% 227,773 145 0.25%
Loans held for sale95,932 865 3.61% 132,214 1,246 3.77% 69,496 652 3.75%
Bank-owned life insurance148,531 2,311 6.17% 147,150 1,877 5.06% 58,348 1,200 8.16%
Total earning assets5,800,907 57,652 3.94% 5,604,472 56,356 3.99% 4,610,309 45,602 3.92%
Less: allowance for loan losses(37,918) (37,926) (36,296)
Total nonearning assets542,582 549,135 431,099
Total assets$6,305,571 $6,115,681 $5,005,112
Liabilities and Equity:
Interest-bearing deposits
Demand and money market$1,780,151 $1,265 0.28% $1,693,424 $1,201 0.28% $1,344,262 $772 0.23%
Savings299,503 684 0.91% 297,041 695 0.93% 303,623 699 0.91%
Certificates of deposit1,378,943 3,170 0.91% 1,356,409 2,985 0.87% 969,091 1,837 0.75%
Total interest-bearing deposits3,458,597 5,119 0.59% 3,346,874 4,881 0.58% 2,616,976 3,308 0.50%
Borrowings471,929 3,360 2.79% 472,120 3,435 2.85% 430,374 3,396 3.09%
Total interest-bearing liabilities3,930,526 8,479 0.86% 3,818,994 8,316 0.86% 3,047,350 6,704 0.87%
Demand deposits1,420,047 1,388,002 1,247,712
Other noninterest-bearing liabilities131,371 96,083 88,471
Total liabilities5,481,944 5,303,079 4,383,533
Shareholders’ equity823,627 812,602 621,579
Total liabilities and equity$6,305,571 $6,115,681 $5,005,112
Net interest income (tax-equivalent basis) $49,173 $48,040 $38,898
Reconcilement of Non-GAAP Financial Measures
Bank-owned life insurance (2,311) (1,877) (1,200)
Tax-equivalent basis adjustment (531) (493) (558)
Net interest income (GAAP) $46,331 $45,670 $37,140
Interest rate spread (1) 3.09% 3.13% 3.05%
Interest expense as a percent of average earning assets 0.58% 0.59% 0.58%
Net interest margin (tax equivalent basis) (2) 3.36% 3.40% 3.35%
Total cost of deposits 0.42% 0.41% 0.34%
(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)
Year Ended December 31,
2015 2014 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$4,239,887 $196,868 4.64% $3,450,730 $162,347 4.70% $3,258,562 $161,544 4.96%
Taxable investment securities786,737 11,849 1.51% 574,229 6,895 1.20% 333,952 4,018 1.20%
Tax-exempt investment securities61,489 1,952 3.17% 70,154 2,180 3.11% 76,589 2,346 3.06%
Interest-bearing deposits188,546 499 0.26% 253,416 637 0.25% 300,977 759 0.25%
Mortgage loans held for sale106,149 3,836 3.61% 65,746 2,586 3.93% 100,507 3,469 3.45%
Bank-owned life insurance145,554 7,985 5.49% 57,842 3,290 5.69% 56,212 3,066 5.45%
Total earning assets5,528,362 222,989 4.03% 4,472,117 177,935 3.98% 4,126,799 175,202 4.25%
Less: allowance for loan losses(37,194) (37,168) (39,698)
Total nonearning assets548,250 431,635 420,132
Total assets$6,039,418 $4,866,584 $4,507,233
Liabilities and Equity:
Interest-bearing deposits
Demand and money market$1,689,185 $4,721 0.28% $1,306,738 $3,036 0.23% $1,166,510 $3,146 0.27%
Savings300,620 2,755 0.92% 310,722 2,855 0.92% 323,011 3,117 0.96%
Certificates of deposit1,334,728 11,390 0.85% 972,702 7,461 0.77% 925,657 7,090 0.77%
Total interest-bearing deposits3,324,533 18,866 0.57% 2,590,162 13,352 0.52% 2,415,178 13,353 0.55%
FHLB advances and repurchase agreements463,153 13,565 2.93% 429,249 13,424 3.13% 425,225 13,042 3.07%
Total interest-bearing liabilities3,787,686 32,431 0.86% 3,019,411 26,776 0.89% 2,840,403 26,395 0.93%
Noninterest-bearing liabilities
Demand deposits1,343,360 1,158,888 1,022,168
Other noninterest-bearing liabilities103,628 81,508 70,104
Total liabilities5,234,674 4,259,807 3,932,675
Shareholders' equity804,744 606,777 574,558
Total liabilities and equity$6,039,418 $4,866,584 $4,507,233
Net interest income (tax-equivalent basis) $190,558 $151,159 $148,807
Reconcilement of Non-GAAP Financial Measures
Bank-owned life insurance (7,985) (3,290) (3,066)
Tax-equivalent basis adjustment (2,131) (2,133) (1,846)
Net interest income (GAAP) $180,442 $145,736 $143,895
Interest rate spread (1) 3.17% 3.09% 3.32%
Interest expense as a percent of average earning assets 0.59% 0.60% 0.64%
Net interest margin (tax-equivalent basis) (2) 3.45% 3.38% 3.61%
Total cost of deposits 0.40% 0.36% 0.39%
(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.


TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands)
2015 2014
(unaudited) (audited)
ASSETS
Cash and due from banks$250,836 $212,994
Interest-bearing deposits in financial institutions1,001 1,011
Total Cash and Cash Equivalents251,837 214,005
Securities available for sale, at fair value723,489 603,908
Securities held to maturity, at amortized cost69,045 85,247
Federal Home Loan Bank stock, at amortized cost23,691 22,157
Total Securities816,225 711,312
Mortgage loans held for sale102,346 71,390
Loans, net of unearned income and deferred costs:4,519,393 3,564,389
Less: allowance for loan losses(38,359) (35,917)
Net Loans4,481,034 3,528,472
Premises and equipment, net173,695 155,774
Goodwill154,842 113,159
Other intangible assets, net26,153 22,509
Bank-owned life insurance policies149,452 58,716
Other assets140,990 107,148
TOTAL ASSETS$6,296,574 $4,982,485
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand$1,393,264 $1,224,466
Interest-bearing:
Demand and money market accounts1,824,226 1,365,183
Savings300,408 301,033
Certificates of deposit1,396,129 955,920
Total Deposits4,914,027 3,846,602
Advances from the Federal Home Loan Bank429,080 398,181
Repurchase agreements and other borrowings37,434 31,893
Total Borrowings466,514 430,074
Other liabilities95,839 87,533
TOTAL LIABILITIES5,476,380 4,364,209
Preferred stock
Authorized shares - 2,000,000
Issued and outstanding shares 0 and 76,458 in 2015 and 2014 76,458
Common stock, $1.667 par value
Authorized shares - 90,000,000
Issued and outstanding shares 51,605,521 in 2015 and 35,785,679 in 201486,026 59,655
Capital surplus535,094 317,718
Retained earnings192,795 154,655
Common stock issued to deferred compensation trust, at cost 648,350 and 627,730 shares at December 31, 2015 and 2014(10,172) (9,674)
Deferred compensation trust10,172 9,674
Accumulated other comprehensive income (loss)(2,994) 458
TOTAL SHAREHOLDERS’ EQUITY810,921 608,944
Noncontrolling interest9,273 9,332
TOTAL EQUITY820,194 618,276
TOTAL LIABILITIES AND EQUITY$6,296,574 $4,982,485


TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands)
Three Months Ended Twelve months ended
December 31, December 31,
2015 2014 2015 2014
INTEREST INCOME:
Loans, including fees$50,319 $40,660 $194,737 $160,213
Investment securities3,415 2,387 13,801 9,076
Interest-bearing deposits in financial institutions and federal funds sold212 144 499 637
Mortgage loans held for sale865 652 3,836 2,586
Total interest income54,811 43,843 212,873 172,512
INTEREST EXPENSE:
Deposits5,119 3,308 18,866 13,352
Advances from the Federal Home Loan Bank3,326 3,383 13,486 13,373
Repurchase agreements and other borrowings, net of capitalized interest35 13 79 51
Total interest expense8,480 6,704 32,431 26,776
Net interest income46,331 37,139 180,442 145,736
PROVISION FOR LOAN LOSSES852 (1) 3,027 492
Net interest income after provision for loan losses45,479 37,140 177,415 145,244
NONINTEREST INCOME:
Residential mortgage banking income, net7,255 6,523 34,211 27,179
Real estate brokerage and property management income, net2,438 2,450 16,326 12,634
Insurance commissions and other title fees and income, net8,997 7,743 39,641 34,558
Service charges on deposit accounts2,254 2,288 9,165 9,192
Credit card merchant fees, net767 911 2,588 3,576
Other income3,368 2,486 14,448 9,605
Gain (loss) on investment securities 904 (15)
Total noninterest income25,079 22,401 117,283 96,729
NONINTEREST EXPENSE:
Salaries and employee benefits30,826 25,205 113,959 99,007
Occupancy5,156 4,676 19,645 17,863
Furniture and equipment2,390 2,103 9,339 8,183
Other expenses14,371 16,975 59,214 53,811
Total noninterest expense52,743 48,959 202,157 178,864
Income before income tax expense & noncontrolling interest17,815 10,582 92,541 63,109
Provision for income tax expense4,846 2,798 26,876 18,179
Net income$12,969 $7,784 $65,665 $44,930
Net income attributable to noncontrolling interest(503) (549) (3,283) (2,761)
Net income attributable to TowneBank$12,466 $7,235 $62,382 $42,169
Preferred stock dividends and accretion 191 13 765
Net income available to common shareholders$12,466 $7,044 $62,369 $41,404
Per common share information
Basic earnings$0.24 $0.20 $1.22 $1.18
Diluted earnings$0.24 $0.20 $1.22 $1.18
Cash dividends declared$0.12 $0.11 $0.47 $0.43


TOWNEBANK
Consolidated Statements of Comprehensive Income (unaudited)
(dollars in thousands)
Three Months Ended Twelve months ended
December 31, December 31,
2015 2014 2015 2014
Net income$12,969 $7,784 $65,665 $44,930
Other comprehensive income (loss)
Unrealized gains (losses) on securities
Unrealized holding gains (losses) arising during the period(5,567) 825 (4,031) 2,404
Deferred tax benefit (expense)1,949 (288) 1,411 (844)
Realized (gains) losses reclassified into earnings (785) 15
Deferred tax benefit (expense) 275 (6)
Net unrealized gains (losses)(3,618) 537 (3,130) 1,569
Pension and postretirement benefit plans
Actuarial losses(711) (1,196) (711) (1,196)
Deferred tax benefit249 418 249 418
Amortization77 2 215 17
Deferred tax expense(27) (1) (75) (6)
Change in retirement plans, net of tax(412) (777) (322) (767)
Other comprehensive income (loss), net of tax(4,030) (240) (3,452) 802
Comprehensive income$8,939 $7,544 $62,213 $45,732


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands)
December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
(unaudited) (unaudited) (unaudited) (unaudited) (audited)
ASSETS
Cash and due from banks$250,836 $284,625 $184,099 $144,215 $212,994
Interest-bearing deposits in financial institutions1,001 1,000 1,011 1,000 1,011
Total Cash and Cash Equivalents251,837 285,625 185,110 145,215 214,005
Securities available for sale, at fair value723,489 542,634 759,425 771,208 603,908
Securities held to maturity, at amortized cost69,045 75,154 80,195 83,751 85,247
Federal Home Loan Bank stock, at amortized cost23,691 24,058 24,058 22,366 22,157
Total Securities816,225 641,846 863,678 877,325 711,312
Mortgage loans held for sale102,346 99,330 165,994 102,850 71,390
Loans, net of unearned income and deferred costs:4,519,393 4,367,039 4,228,127 4,095,696 3,564,389
Less: allowance for loan losses(38,359) (37,351) (37,290) (35,907) (35,917)
Net Loans4,481,034 4,329,688 4,190,837 4,059,789 3,528,472
Premises and equipment, net173,695 172,940 172,492 166,164 155,774
Goodwill154,842 152,438 153,191 156,516 113,159
Other intangible assets, net26,153 23,080 22,016 23,090 22,509
Bank-owned life insurance policies149,452 147,949 146,729 145,401 58,716
Other assets140,990 320,995 155,134 152,353 107,148
TOTAL ASSETS$6,296,574 $6,173,891 $6,055,181 $5,828,703 $4,982,485
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand$1,393,264 $1,445,978 $1,363,551 $1,261,482 $1,224,466
Interest-bearing:
Demand and money market accounts1,824,226 1,676,623 1,680,038 1,643,534 1,365,183
Savings300,408 295,952 300,203 303,936 301,033
Certificates of deposit1,396,129 1,369,325 1,342,860 1,296,666 955,920
Total Deposits4,914,027 4,787,878 4,686,652 4,505,618 3,846,602
Advances from the Federal Home Loan Bank429,080 437,282 437,584 397,884 398,181
Repurchase agreements and other borrowings37,434 33,784 35,737 37,202 31,893
Total Borrowings466,514 471,066 473,321 435,086 430,074
Other liabilities95,839 98,878 92,317 96,419 87,533
TOTAL LIABILITIES5,476,380 5,357,822 5,252,290 5,037,123 4,364,209
Preferred stock
Authorized shares - 2,000,000
Issued and outstanding shares 0 and 76,458 in 2015 and 2014 76,458
Common stock, $1.667 par value
Authorized shares - 90,000,000
Issued and outstanding shares 51,605,521 in 2015 and 35,785,679 in 201486,026 85,985 85,936 85,795 59,655
Capital surplus535,094 533,609 532,646 531,483 317,718
Retained earnings192,795 186,522 175,145 163,519 154,655
Common stock issued to deferred compensation trust, at cost; 648,350 and 627,730 shares at December 31, 2015 and 2014(10,172) (10,151) (10,110) (9,816) (9,674)
Deferred compensation trust10,172 10,151 10,110 9,816 9,674
Accumulated other comprehensive income (loss)(2,994) 1,036 291 2,359 458
TOTAL SHAREHOLDERS’ EQUITY810,921 807,152 794,018 783,156 608,944
Noncontrolling interest9,273 8,917 8,873 8,424 9,332
TOTAL EQUITY820,194 816,069 802,891 791,580 618,276
TOTAL LIABILITIES AND EQUITY$6,296,574 $6,173,891 $6,055,181 $5,828,703 $4,982,485


TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands)
Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
INTEREST INCOME:
Loans, including fees$50,319 $48,906 $48,170 $47,341 $40,660
Investment securities3,415 3,728 3,321 3,337 2,387
Interest-bearing deposits in financial institutions and federal funds sold212 107 56 125 144
Mortgage loans held for sale865 1,246 1,161 565 652
Total Interest Income54,811 53,987 52,708 51,368 43,843
INTEREST EXPENSE:
Deposits5,119 4,881 4,442 4,424 3,308
Advances from the Federal Home Loan Bank3,326 3,422 3,365 3,374 3,383
Repurchase agreements and other borrowings35 14 17 14 13
Total Interest Expense8,480 8,317 7,824 7,812 6,704
Net Interest Income46,331 45,670 44,884 43,556 37,139
PROVISION FOR LOAN LOSSES852 130 1,723 323 (1)
Net Interest Income after Provision for Loan Losses45,479 45,540 43,161 43,233 37,140
NONINTEREST INCOME:
Residential mortgage banking income, net7,255 8,262 10,251 8,443 6,523
Real estate brokerage and property management income, net2,438 5,349 4,584 3,955 2,450
Insurance commissions and other title fees and income, net8,997 9,710 9,885 11,049 7,743
Service charges on deposit accounts2,254 2,388 2,326 2,197 2,288
Credit card merchant fees, net767 823 566 432 911
Other income3,368 3,036 5,354 2,691 2,486
Net gain on investment securities 736 119 49
Total Noninterest Income25,079 30,304 33,085 28,816 22,401
NONINTEREST EXPENSE:
Salaries and employee benefits30,826 28,910 26,544 27,679 25,205
Occupancy expense5,156 4,703 4,856 4,930 4,676
Furniture and equipment2,390 2,211 2,369 2,369 2,103
Other expenses14,371 14,082 15,298 15,462 16,975
Total Noninterest Expense52,743 49,906 49,067 50,440 48,959
Income before income tax expense and noncontrolling interest17,815 25,938 27,179 21,609 10,582
Provision for income tax expense4,846 7,444 8,201 6,385 2,798
Net income12,969 18,494 18,978 15,224 7,784
Net income attributable to noncontrolling interest(503) (928) (1,166) (686) (549)
Net income attributable to TowneBank$12,466 $17,566 $17,812 $14,538 $7,235
Preferred stock dividends 13 191
Net income available to common shareholders$12,466 $17,566 $17,812 $14,525 $7,044
Per common share information
Basic earnings$0.24 $0.34 $0.35 $0.29 $0.20
Diluted earnings$0.24 $0.34 $0.35 $0.29 $0.20
Cash dividends declared$0.12 $0.12 $0.12 $0.11 $0.11


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
Increase/(Decrease)
Three Months Ended December 31, 2015 December 31, 2015
December 31, September 30, December 31, 2014 September 30, 2015
2015 2014 2015 Amount Percent Amount Percent
Commission and fee income
Property and casualty$7,371 $6,306 $8,156 $1,065 16.89% $(785) (9.62)%
Employee benefits2,588 2,677 2,578 (89) (3.32)% 10 0.39%
Travel insurance630 460 626 170 36.96% 4 0.64%
Specialized benefit services144 136 145 8 5.88% (1) (0.69)%
Total commissions and fees10,733 9,579 11,505 1,154 12.05% (772) (6.71)%
Contingency and bonus revenue53 66 260 (13) (19.70)% (207) (79.62)%
Other income58 56 53 2 3.57% 5 9.43%
Total revenue$10,844 $9,701 $11,818 $1,143 11.78% $(974) (8.24)%
Employee commission expense2,008 2,079 2,361 (71) (3.42)% (353) (14.95)%
Revenue, net of commission expense$8,836 $7,622 $9,457 $1,214 15.93% $(621) (6.57)%
Salaries and employee benefits5,863 4,433 4,583 1,430 32.26% 1,280 27.93%
Occupancy expense537 456 480 81 17.76% 57 11.88%
Furniture and equipment235 174 202 61 35.06% 33 16.34%
Amortization of intangible assets676 511 543 165 32.29% 133 24.49%
Other expenses892 1,039 1,491 (147) (14.15)% (599) (40.17)%
Total operating expenses8,203 6,613 7,299 1,590 24.04% 904 12.39%
Income before income tax provision and noncontrolling interest$633 $1,009 $2,158 $(376) (37.26)% $(1,525) (70.67)%
Plus: Acquisition related expenses(334) 40 164 (374) N/M (498) N/M
Plus: Amortization of intangible assets676 511 543 165 32.29% 133 24.49%
Operating earnings before income taxes (non-GAAP)$975 $1,560 $2,865 $(585) (37.50)% $(1,890) (65.97)%


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
Year Ended Increase/(Decrease)
December 31, 2015 over 2014
2015 2014 Amount Percent
Commission and fee income
Property and casualty$29,978 $25,067 $4,911 19.59%
Employee benefits10,279 10,732 (453) (4.22)%
Travel insurance3,297 2,353 944 40.12%
Specialized benefit services557 544 13 2.39%
Total commissions and fees44,111 38,696 5,415 13.99%
Contingency and bonus revenue3,223 3,231 (8) (0.25)%
Other income206 343 (137) (39.94)%
Total revenue$47,540 $42,270 $5,270 12.47%
Employee commission expense8,711 8,342 369 4.42%
Revenue, net of commission expense$38,829 $33,928 $4,901 14.45%
Salaries and employee benefits$19,974 $16,073 $3,901 24.27%
Occupancy expense1,954 1,688 266 15.76%
Furniture and equipment904 737 167 22.66%
Amortization of intangible assets2,285 1,879 406 21.61%
Other expenses5,048 4,456 592 13.29%
Total operating expenses30,165 24,833 5,332 21.47%
Income before income tax, corporate allocation and noncontrolling interest$8,664 $9,095 $(431) (4.74)%
Plus: Acquisition related expenses186 255 (69) (27.06)%
Plus: Amortization of intangible assets2,285 1,879 406 21.61%
Operating earnings before income taxes (non-GAAP)$11,135 $11,229 $(94) (0.84)%


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures:
(dollars in thousands)
Three Months Ended Twelve months ended
December 31, September 30, December 31, December 31,
2015 2015 2014 2015 2014
Return on average assets (GAAP basis)0.78% 1.14% 0.57% 1.03% 0.87%
Impact of excluding average goodwill and other intangibles and amortization0.07% 0.07% 0.06% 0.07% 0.06%
Return on average tangible assets (Non-GAAP)0.85% 1.21% 0.63% 1.10% 0.93%
Return on average equity (GAAP basis)6.00% 8.58% 4.62% 7.75% 6.95%
Impact of excluding average goodwill and other intangibles and amortization2.11% 2.67% 1.73% 2.59% 2.21%
Return on average tangible equity (Non-GAAP)8.11% 11.25% 6.35% 10.34% 9.16%
Return on average common equity (GAAP basis)6.07% 8.67% 5.21% 7.85% 7.94%
Impact of excluding average goodwill and other intangibles and amortization2.15% 2.74% 2.31% 2.66% 3.01%
Return on average tangible common equity (Non-GAAP)8.22% 11.41% 7.52% 10.51% 10.95%
Book value (GAAP basis)$15.71 $15.65 $14.88 $15.71 $14.88
Impact of excluding average goodwill and other intangibles and amortization(3.50) (3.40) (3.79) (3.50) (3.79)
Tangible book value$12.21 $12.25 $11.09 $12.21 $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