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TowneBank Reports Record Third Quarter Earnings

SUFFOLK, Va., Oct. 27, 2016 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank (the “Bank” or “Company”) (NASDAQ:TOWN) today reported financial results for the quarter and nine months ended September 30, 2016. Earnings for the quarter ended September 30, 2016 increased 37.63% to a record $24.18 million compared to $17.57 million for the same quarter in 2015. Fully diluted earnings per share were $0.39 compared to $0.34 for the third quarter of 2015. Earnings in the third quarter of 2016 included after-tax acquisition-related expenses of $0.70 million as compared to $0.16 million in the third quarter of 2015.

Excluding after-tax acquisition-related expenses, core earnings for the quarter ended September 30, 2016 were $24.88 million (non-GAAP) compared to $17.72 million (non-GAAP) for the same quarter in 2015. Fully diluted core earnings per share, excluding after-tax acquisition-related expenses, were $0.40 (non-GAAP measure) compared to $0.35 for the third quarter of 2015.

Earnings for the year-to-date period were $48.25 million as compared to the $49.92 million earned in the same period of 2015. Fully diluted earnings per share were $0.87 compared to $0.98 for the nine months ended September 30, 2015. Earnings in 2016 included after-tax acquisition-related expenses of $13.34 million as compared to $0.67 million in 2015. Earnings per share were also affected by the issuance of 10.49 million new common shares in conjunction with the acquisition of Monarch Financial Holdings, Inc. (“Monarch”) on June 24, 2016.

Excluding after-tax acquisition-related expenses, core earnings for the year-to-date period were $61.60 million (non-GAAP) as compared to the $50.58 million (non-GAAP) earned in the same period of 2015. Fully diluted earnings per share were $1.12 (non-GAAP) compared to $0.99 (non-GAAP) for the nine months ended September 30, 2015.

The Bank’s common dividend was $0.13 per share for the quarter with the common dividend totaling $8.11 million. The current dividend represents an increase of 8.3% over the dividend paid during the same quarter of 2015 and a payout ratio of 33.3%.

“We are extremely pleased with our strong operating performance driven in part by our successful merger integration of Monarch Bank into our Towne family. Reflective of our planned merger cost saves, our core return of average assets increased to 1.24%, producing a core return on average tangible equity of 13.23%. On another note of significance, the June 30, 2016 release of Deposit Market Share by the FDIC for the Virginia Beach-Norfolk-Newport News, VA-NC Metropolitan Statistical Area(s) placed TowneBank in a market leading position with a 21.51% market share,” said G. Robert Aston, Jr., Chairman and Chief Executive Officer.

Third Quarter 2016 Performance Highlights

  • Total revenues were a record $109.43 million, an increase of $33.45 million, or 44.03%, from third quarter 2015
    • Taxable equivalent net interest margin was 3.57%, including accretion of 17 basis points, compared to 3.40%, including accretion of 6 basis points, for third quarter 2015
    • Residential mortgage banking income increased $13.17 million, or 159.38%
    • Insurance segment total revenue increased 11.88% from third quarter 2015, to $13.22 million
  • Core net income, excluding after-tax acquisition-related expenses, was $24.88 million, an increase of 40.36% from September 30, 2015
  • Loans held for investment increased $1.28 billion, or 29.42%, from September 30, 2015, which included $808.14 million of loans acquired in the Monarch merger
  • Average loans held for sale increased $349.14 million, or 264.07% from September 30, 2015
  • Total deposits were $6.15 billion, an increase of $1.36 billion, or 28.39%, from third quarter 2015, which included $1.06 billion of deposits acquired in the Monarch merger
    • Noninterest bearing deposits increased by 36.54%, to $1.97 billion and represent 32.12% of total deposits
    • Total cost of deposits decreased to 0.38% from 0.41% at September 30, 2015
  • Asset quality showed continued strength
    • Nonperforming assets declined to $34.22 million, or 0.44% of total assets compared to $47.99 million, or 0.78%, at September 30, 2015
    • Nonperforming loans were 0.20% of period end loans
    • Foreclosed property decreased 42.08% to $22.88 million
  • The Bank remained well-capitalized
    • Common equity tier 1 capital ratio of 11.74%
    • Tier 1 leverage capital ratio of 10.18%
    • Tier 1 risk-based capital ratio of 11.81%
    • Total risk-based capital ratio of 12.42%

Net Interest Income
Net interest income increased to $62.60 million, a $16.94 million, or 37.08%, increase from the third quarter of 2015. The primary driver was the increase in average earning assets, which increased $1.65 billion, or 29.47%, from third quarter 2015. Additionally, tax-equivalent net interest margin increased to 3.57% in the current quarter as compared to 3.40% in third quarter 2015. Accretion income added $2.63 million, or 17 basis points, to margin in the current quarter as compared to $0.68 million, or 6 basis points, in the third quarter of 2015.

Noninterest Income
Noninterest income, excluding gains or losses on investments, was $46.82 million for the third quarter of 2016, an increase of $17.25 million, or 58.35%, from the third quarter of 2015. Residential mortgage banking income increased $13.17 million, or 159.38%, from third quarter 2015 primarily due to higher production volumes resulting from the Monarch merger. Mortgage production was $1.25 billion in the third quarter of 2016, which was $811.86 million greater than third quarter 2015. Insurance commissions and other title fees increased $1.55 million, or 15.94%, primarily due to insurance agency acquisitions in 2015, combined with an increase in commercial lines and travel insurance commissions. Additionally, real estate brokerage and property management income increased $1.30 million, or 24.27%, from the third quarter of 2015 due to the acquisition of a resort property management company in Oak Island, North Carolina ("Oak Island") in first quarter 2016.

Noninterest Expense
Noninterest expense increased by $21.03 million, or 42.13%, from the comparative quarter of 2015. The primary driver was an increase of $11.59 million in salaries and benefits expense due to the addition of staff resulting from the Monarch acquisition, combined with the addition of staff resulting from the acquisitions in our Insurance and Realty segment businesses. Also contributing were increases in occupancy expenses of $1.95 million and furniture and equipment expenses of $0.99 million primarily related to facilities acquired in the Monarch acquisition.

Third Quarter 2016 Earnings Compared to Second Quarter 2016

Core net income for the third quarter, excluding after-tax acquisition-related expenses of $0.70 million, was $24.88 million, or $0.40 per diluted share, versus $18.52 million, or $0.36 per diluted share, excluding after-tax acquisition-related expenses of $12.26 million, for second quarter 2016.

Performance Highlights

  • Record revenues of $109.43 million, a $25.17 million, or 29.88%, increase from second quarter 2016
    • Taxable equivalent net interest margin was 3.57%, including accretion of 17 basis points, compared to 3.36%, including accretion of 5 basis points, for second quarter 2016
    • Noninterest income increased $10.35 million primarily due to merger-related growth in our residential mortgage banking business
  • Loans held for investment increased $91.69 million, or 1.65%, from June 30, 2016
  • Noninterest bearing deposits increased by $23.58 million, or 1.21% during the quarter
  • Nonperforming assets decreased 5.69% during the quarter

Net Interest Income
On a linked quarter basis, net interest income increased by $14.82 million, or 31.02%, in third quarter 2016 versus second quarter 2016, while tax-equivalent net interest margin was 3.57%, an increase of 21 basis points from second quarter 2016. Accretion income added $2.63 million, or 17 basis points, to margin in the current quarter, as compared to $0.61 million, or 5 basis points, in the linked quarter.

Noninterest Income
In comparison to the second quarter of 2016, noninterest income, excluding gains and losses on investment securities, increased $10.35 million, or 28.39%. Residential mortgage banking income increased by $9.28 million, or 76.41%, from the second quarter of 2016 as the Monarch merger was the primary driver of an increase in mortgage production of $654.89 million. Additionally, real estate brokerage and property management income increased due to seasonal improvements in our resort property management businesses. Partially offsetting the increase from the linked quarter was a decline in insurance commissions due to a seasonal decrease in renewals.

Noninterest Expense
Noninterest expense decreased by $0.97 million, or 1.34%, from the second quarter of 2016. Driving the decrease was a decline in acquisition-related expenses of $17.47 million. The decrease was mostly offset by increases in personnel and occupancy expenses due to the addition of staff and facilities resulting from the Monarch merger.

Noninterest Income % Change
Q3 Q3 Q2 Q3 16 vs. Q3 16 vs.
(dollars in thousands)2016 2015 2016 Q3 15 Q2 16
Residential mortgage banking income, net$21,430 $8,262 $12,148 159.38% 76.41%
Insurance commissions and other title fees and income, net11,258 9,710 11,627 15.94% (3.17)%
Real estate brokerage and property management, net6,647 5,349 6,116 24.27% 8.68%
Service charges on deposit accounts2,552 2,388 2,284 6.87% 11.73%
Credit card merchant fees, net1,365 823 1,113 65.86% 22.64%
Other income3,569 3,036 3,180 17.56% 12.23%
Subtotal before gain on investments46,821 29,568 36,468 58.35% 28.39%
Net gain on investment securities 736 (100.00)% N/M
Total noninterest income$46,821 $30,304 $36,468 54.50% 28.39%



Noninterest Expense % Change
Q3 Q3 Q2 Q3 16 vs. Q3 16 vs.
(dollars in thousands)2016 2015 2016 Q3 15 Q2 16
Salaries and benefits$40,497 $28,910 $30,093 40.08% 34.57%
Occupancy expense6,656 4,703 5,157 41.53% 29.07%
Furniture and equipment3,199 2,211 2,381 44.69% 34.36%
Other expenses19,612 13,839 15,833 41.72% 23.87%
Core noninterest expense69,964 49,663 53,464 40.88% 30.86%
Acquisition-related expenses969 243 18,435 298.77% (94.74)%
Total noninterest expense$70,933 $49,906 $71,899 42.13% (1.34)%


Segment Results

The following table presents our segment results:

$ Change
Segment Net Income Q3 Q3 Q2 Q3 16 vs. Q3 16 vs.
(in thousands) 2016 2015 2016 Q3 15 Q2 16
Banking $18,276 $14,148 $1,290 $4,128 $16,986
Realty 4,815 2,345 3,765 2,470 1,050
Insurance 1,085 1,073 1,204 12 (119)
Total net income $24,176 $17,566 $6,259 $6,610 $17,917


Third Quarter 2016 Compared to Third Quarter 2015

Banking
Net income for the three months ended September 30, 2016 for the Banking segment was $18.28 million as compared to $14.15 million in the comparative 2015 quarter, as net interest income climbed by $14.17 million due to the increase in earning assets related to the Monarch merger. Average loan balances saw an increase of $1.28 billion. Partially offsetting the increase was an increase in noninterest expenses of $6.92 million and an increase in the loan loss provision.

Realty
For the three months ended September 30, 2016, the Realty segment had net income of $4.82 million compared to $2.35 million for the third quarter of 2015. The current quarter results were driven by an increase in residential mortgage banking income of $13.16 million, or 154.15%, due to higher production volumes resulting from the Monarch merger. Additionally, property management fees increased by $1.02 million, or 30.39%, primarily due to our purchase of Oak Island in January 2016. The increase in revenue was partially offset by an increase in operational expenses related to the merger with Monarch.

Insurance
The Insurance segment had net income of $1.09 million for the three months ended September 30, 2016, an increase of $0.01 million as compared to the third quarter of 2015. Insurance agencies acquired in 2015 contributed additional revenue, net of commission expense, of $0.97 million in third quarter 2016. Contributing to the increase was an improvement in commercial lines commissions and commissions from travel insurance. The acquired agencies resulted in additional noninterest expenses of $0.95 million, primarily related to personnel expenses.

Third Quarter 2016 Compared to Second Quarter 2016

Banking
The increase in earnings from $1.29 million in the second quarter of 2016 was driven by an increase in net interest income of $12.03 million due to the growth in earning assets resulting from the Monarch merger, combined with a decrease in noninterest expenses of $11.31 million and a decrease in the loan loss provision of $0.41 million. The decrease in noninterest expenses resulted from a decrease in acquisition-related expenses of $17.16 million, partially offset by an increase in personnel costs of $3.39 million.

Realty
Net income in the Realty segment increased by $1.05 million from the linked quarter ended June 30, 2016. The increase resulted primarily from the merger-driven growth in residential mortgage banking income of $9.20 million. Also contributing was a seasonal increase in our resort property management business.

Insurance
Net income decreased $0.12 million from the second quarter of 2016. The variance from the linked quarter was a result of a drop in contingency and bonus revenue of $0.40 million, combined with a seasonal decrease in travel insurance commissions of $0.24 million. Contingent commissions are seasonal in nature and are mostly received during the first quarter of each year. The seasonal decrease in revenue was partially offset by a decline in operating expenses during the current quarter.

Balance Sheet

At September 30, 2016, total Bank assets reached $7.83 billion, an increase of $1.66 billion, or 26.83%, over September 30, 2015.

Loans

% Change
Q3 Q3 Q2 Q3 16 vs. Q3 16 vs.
(dollars in thousands)2016 2015 2016 Q3 15 Q2 16
Construction and land development$820,453 $554,753 $824,609 47.90% (0.50)%
Commercial real estate - investment
related properties
1,283,619 1,020,860 1,221,488 25.74% 5.09%
Commercial real estate - owner occupied905,870 775,290 896,620 16.84% 1.03%
Multifamily real estate206,623 138,954 171,501 48.70% 20.48%
1-4 family residential real estate1,208,001 965,559 1,183,818 25.11% 2.04%
Commercial and industrial business loans1,033,797 790,614 1,075,736 30.76% (3.90)%
Consumer loans and other193,279 121,009 186,177 59.72% 3.81%
Total$5,651,642 $4,367,039 $5,559,949 29.42% 1.65%


The Bank’s loan portfolio ended the period at $5.65 billion representing an increase of 29.42%, or $1.28 billion, from the prior year and an increase of 1.65%, or $91.69 million, from June 30, 2016. In addition to organic growth, the increase in loans from the prior year is related to the acquisition of $808.14 million loans in the Monarch merger on June 24, 2016.

Deposits

% Change
Q3 Q3 Q2 Q3 16 vs. Q3 16 vs.
(dollars in thousands)2016 2015 2016 Q3 15 Q2 16
Noninterest-bearing demand$1,974,395 $1,445,978 $1,950,816 36.54% 1.21%
Interest-bearing:
Demand and money market accounts2,207,962 1,676,623 2,174,154 31.69% 1.55%
Savings315,477 295,952 317,071 6.60% (0.50)%
Certificates of deposits1,649,113 1,369,325 1,744,238 20.43% (5.45)%
Total$6,146,947 $4,787,878 $6,186,279 28.39% (0.64)%


The Bank continued to experience solid deposit growth with total deposits increasing to $6.15 billion, up $1.36 billion, or 28.39%, from September 30, 2015. Growth in total deposits includes $1.06 billion of deposits acquired in the Monarch merger. The Bank saw continued growth in noninterest bearing demand deposits, which ended the quarter at $1.97 billion, a 36.54% increase from September 30, 2015. Noninterest deposits represented 32.12% of total deposits at September 30, 2016.

Capital Ratios

Q3 Q3 Q2
2016 2015 2016
Common Equity Tier 1 11.74% 12.52% 11.82%
Tier 1 11.81% 12.62% 11.89%
Total 12.42% 13.35% 12.50%
Tier 1 leverage ratio 10.18% 10.93% 12.36%


The Bank’s total equity at September 30, 2016 rose to $1.08 billion, an increase of $262.81 million, or 32.20%, from September 30, 2015. Total risk-based capital remained strong as common equity Tier 1, Tier 1 capital, total risk-based capital, and Tier 1 leverage capital ratios were 11.74%, 11.81%, 12.42%, and 10.18%, respectively. All ratios exceed the current regulatory standards for well capitalized status.

Asset Quality

(in thousands)9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
Nonperforming loans$11,337 $10,580 $7,944 $8,670 $8,477
Foreclosed property22,884 25,707 29,740 34,420 39,509
Total nonperforming assets$34,221 $36,287 $37,684 $43,090 $47,986
Quarterly net loans charged off
(recovered)
$649 $241 $340 $(156) $69
Year-to-date net loans charged off$1,230 $581 $340 $585 $741



Change
Q3 Q3 Q2 Q3 16 vs. Q3 16 vs.
(dollars in thousands) 2016 2015 2016 Q3 15 Q2 16
Total loans 90 days past due and still accruing $ $31 $ $(31) $
Total loans 30-89 days past due $6,707 $5,864 $5,041 $843 $1,666
Allowance for loan losses $40,655 $37,351 $39,618 $3,304 $1,037
Total performing TDRs $28,345 $29,920 $28,184 $(1,575) $161
Nonperforming loans to period end loans 0.20% 0.19% 0.19% 0.01% 0.01%
Nonperforming assets to period end assets 0.44% 0.78% 0.46% (0.34)% (0.02)%
Allowance for loan losses to period end loans 0.72% 0.86% 0.71% (0.14)% 0.01%
Allowance for loan losses (originated) to originated period end loans 0.91% 0.96% 0.90% (0.05)% 0.01%
Net charge-offs (recoveries) to average loans (annualized) 0.05% 0.01% 0.02% 0.04% 0.03%
Ratio of allowance for loan losses to nonperforming loans 3.59x 4.41x 3.74x (0.82)x (0.15)x


Continued strength in credit quality contributed to the Bank's financial results as net charge-offs remained low at $0.65 million in the third quarter of 2016 compared to $0.07 million in the third quarter of 2015 and $0.24 million in the linked quarter. Total nonperforming assets were $34.22 million, or 0.44%, of Bank assets at September 30, 2016, as compared to $47.99 million, or 0.78%, at September 30, 2015, and $36.29 million, or 0.46%, at June 30, 2016. The allowance for loan losses was $40.66 million, increased from $37.35 million at September 30, 2015 and $39.62 million at June 30, 2016.

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 38 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, Towne 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 $7.83 billion as of September 30, 2016, 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. 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 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 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. TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.



TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
Increase/ % Increase/
Three months ended September 30,2016 2015 (Decrease) (Decrease)
Results of Operations:
Net interest income$62,605 $45,670 $16,935 37.08%
Noninterest income (1)46,821 29,568 17,253 58.35%
Gain on investment securities 736 (736) (100.00)%
Total Revenue109,426 75,974 33,452 44.03%
Acquisition-related expenses969 243 726 298.77%
Noninterest expenses, excluding acquisition-related expenses69,964 49,663 20,301 40.88%
Provision for loan losses1,686 130 1,556 N/M
Income before income tax and noncontrolling interest36,807 25,938 10,869 41.90%
Provision for income tax expense10,974 7,444 3,530 47.42%
Net income25,833 18,494 7,339 39.68%
Net income attributable to noncontrolling interest(1,657) (928) (729) 78.56%
Net income attributable to TowneBank24,176 17,566 6,610 37.63%
Net income available to common shareholders24,176 17,566 6,610 37.63%
Net income per common share - basic0.39 0.34 0.05 14.71%
Net income per common share - diluted0.39 0.34 0.05 14.71%
Period End Data:
Total assets$7,830,142 $6,173,891 $1,656,251 26.83%
Total assets - tangible7,525,817 5,998,373 1,527,444 25.46%
Earning assets (2)7,197,077 5,508,341 1,688,736 30.66%
Loans (net of unearned income)5,651,642 4,367,039 1,284,603 29.42%
Allowance for loan losses40,655 37,351 3,304 8.85%
Goodwill and other intangibles304,325 175,518 128,807 73.39%
Nonperforming assets34,221 47,986 (13,765) (28.69)%
Noninterest bearing deposits1,974,395 1,445,978 528,417 36.54%
Interest bearing deposits4,172,552 3,341,900 830,652 24.86%
Total deposits6,146,947 4,787,878 1,359,069 28.39%
Total equity1,078,878 816,069 262,809 32.20%
Total equity - tangible774,553 640,551 134,002 20.92%
Common equity1,067,193 807,152 260,041 32.22%
Common equity - tangible762,868 631,634 131,234 20.78%
Book value per common share17.11 15.65 1.46 9.33%
Book value per common share - tangible12.23 12.25 (0.02) (0.16)%
Daily Average Balances:
Total assets$7,991,213 $6,115,681 $1,875,532 30.67%
Total assets - tangible7,689,122 5,940,258 1,748,864 29.44%
Earning assets (2)7,255,956 5,604,472 1,651,484 29.47%
Loans (net of unearned income), excluding nonaccrual loans5,583,711 4,300,751 1,282,960 29.83%
Allowance for loan losses40,004 37,926 2,078 5.48%
Goodwill and other intangibles302,091 175,423 126,668 72.21%
Noninterest bearing deposits1,959,025 1,388,002 571,023 41.14%
Interest bearing deposits4,219,316 3,346,874 872,442 26.07%
Total deposits6,178,341 4,734,876 1,443,465 30.49%
Total equity1,075,023 812,602 262,421 32.29%
Total equity - tangible772,932 637,179 135,753 21.31%
Common equity1,064,179 804,090 260,089 32.35%
Common equity - tangible762,088 628,667 133,421 21.22%
Key Ratios:
Return on average assets1.20% 1.14% 0.06% 5.26%
Return on average assets - tangible1.29% 1.21% 0.08% 6.61%
Return on average equity8.95% 8.58% 0.37% 4.31%
Return on average equity - tangible12.87% 11.25% 1.62% 14.40%
Return on average common equity9.04% 8.67% 0.37% 4.27%
Return on average common equity - tangible13.05% 11.41% 1.64% 14.37%
Net interest margin-fully tax equivalent (2)(3)3.57% 3.40% 0.17% 5.00%
Net interest margin (2)3.50% 3.32% 0.18% 5.42%
Average earning assets/total average assets90.80% 91.64% (0.84)% (0.92)%
Average loans/average deposits90.38% 90.83% (0.45)% (0.50)%
Average noninterest deposits/total average deposits31.71% 29.31% 2.40% 8.19%
Allowance for loan losses/period end loans0.72% 0.86% (0.14)% (16.28)%
Nonperforming assets to period end assets0.44% 0.78% (0.34)% (43.59)%
Period end equity/period end total assets13.78% 13.22% 0.56% 4.24%
Efficiency ratio (1)64.82% 66.33% (1.51)% (2.28)%
(1) Excludes gain on investment securities
(2) Includes bank-owned life insurance
(3) Presented on a tax-equivalent basis



TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
Increase/ % Increase/
Nine Months Ended September 30,2016 2015 (Decrease) (Decrease)
Results of Operations:
Net interest income$156,724 $134,111 $22,613 16.86%
Noninterest income (1)115,704 89,368 26,336 29.47%
Gain on investment securities 904 (904) (100.00)%
Gain on investment properties 1,933 (1,933) (100.00)%
Total Revenue272,428 226,316 46,112 20.38%
Acquisition-related expenses19,817 1,027 18,790 N/M
Noninterest expenses, excluding acquisition-related expenses175,175 148,387 26,788 18.05%
Provision for loan losses3,526 2,176 1,350 62.04%
Income before income tax and noncontrolling interest73,910 74,726 (816) (1.09)%
Provision for income tax expense21,538 22,030 (492) (2.23)%
Net income52,372 52,696 (324) (0.61)%
Net income attributable to noncontrolling interest(4,118) (2,780) (1,338) 48.13%
Net income attributable to TowneBank48,254 49,916 (1,662) (3.33)%
Preferred stock dividends 13 (13) (100.00)%
Net income available to common shareholders48,254 49,903 (1,649) (3.30)%
Net income per common share - basic0.88 0.98 (0.10) (10.20)%
Net income per common share - diluted0.87 0.98 (0.11) (11.22)%
Period End Data:
Total assets$7,830,142 $6,173,891 $1,656,251 26.83%
Total assets - tangible7,525,817 5,998,373 1,527,444 25.46%
Earning assets (2)7,197,077 5,508,341 1,688,736 30.66%
Loans (net of unearned income)5,651,642 4,367,039 1,284,603 29.42%
Allowance for loan losses40,655 37,351 3,304 8.85%
Goodwill and other intangibles304,325 175,518 128,807 73.39%
Nonperforming assets34,221 47,986 (13,765) (28.69)%
Noninterest bearing deposits1,974,395 1,445,978 528,417 36.54%
Interest bearing deposits4,172,552 3,341,900 830,652 24.86%
Total deposits6,146,947 4,787,878 1,359,069 28.39%
Total equity1,078,878 816,069 262,809 32.20%
Total equity - tangible774,553 640,551 134,002 20.92%
Common equity1,067,193 807,152 260,041 32.22%
Common equity - tangible762,868 631,634 131,234 20.78%
Book value per common share17.11 15.65 1.46 9.33%
Book value per common share - tangible12.23 12.25 (0.02) (0.16)%
Daily Average Balances:
Total assets$6,949,985 $5,949,725 $1,000,260 16.81%
Total assets - tangible6,722,029 5,770,456 951,573 16.49%
Earning assets (2)6,368,707 5,435,333 933,374 17.17%
Loans (net of unearned income), excluding nonaccrual loans4,936,641 4,177,038 759,603 18.19%
Allowance for loan losses38,996 36,950 2,046 5.54%
Goodwill and other intangibles227,956 179,269 48,687 27.16%
Noninterest bearing deposits1,638,902 1,317,517 321,385 24.39%
Interest bearing deposits3,756,169 3,279,354 476,815 14.54%
Total deposits5,395,071 4,596,871 798,200 17.36%
Total equity922,272 798,381 123,891 15.52%
Total equity - tangible694,316 619,111 75,205 12.15%
Common equity912,502 788,128 124,374 15.78%
Common equity - tangible684,546 608,858 75,688 12.43%
Key Ratios:
Return on average assets0.93% 1.12% (0.19)% (16.96)%
Return on average assets - tangible1.00% 1.19% (0.19)% (15.97)%
Return on average equity6.99% 8.36% (1.37)% (16.39)%
Return on average equity - tangible9.70% 11.12% (1.42)% (12.77)%
Return on average common equity7.06% 8.47% (1.41)% (16.65)%
Return on average common equity - tangible9.84% 11.30% (1.46)% (12.92)%
Net interest margin-fully tax equivalent (2)(3)3.45% 3.48% (0.03)% (0.86)%
Net interest margin (2)3.36% 3.39% (0.03)% (0.88)%
Average earning assets/total average assets91.64% 91.35% 0.29% 0.32%
Average loans/average deposits91.50% 90.87% 0.63% 0.69%
Average noninterest deposits/total average deposits30.38% 28.66% 1.72% 6.00%
Allowance for loan losses/period end loans0.72% 0.86% (0.14)% (16.28)%
Nonperforming assets to period end assets0.44% 0.78% (0.34)% (43.59)%
Period end equity/period end total assets13.78% 13.22% 0.56% 4.24%
Efficiency ratio (1)71.58% 66.86% 4.72% 7.06%
(1) Excludes gain on investment securities and properties
(2) Includes bank-owned life insurance
(3) Presented on a tax-equivalent basis



TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
September 30, June 30, Increase/ % Increase/
Three Months Ended2016 2016 (Decrease) (Decrease)
Results of Operations:
Net interest income$62,605 $47,784 $14,821 31.02%
Noninterest income (1)46,821 36,468 10,353 28.39%
Total Revenue109,426 84,252 25,174 29.88%
Acquisition-related expenses969 18,435 (17,466) (94.74)%
Noninterest expenses, excluding acquisition-related expenses69,964 53,464 16,500 30.86%
Provision for loan losses1,686 2,099 (413) (19.68)%
Income before income tax and noncontrolling interest36,807 10,254 26,553 258.95%
Provision for income tax expense10,974 2,375 8,599 362.06%
Net income25,833 7,879 17,954 227.87%
Net income attributable to noncontrolling interest(1,657) (1,620) (37) 2.28%
Net income attributable to TowneBank24,176 6,259 17,917 286.26%
Net income available to common shareholders24,176 6,259 17,917 286.26%
Net income per common share - basic0.39 0.12 0.27 225.00%
Net income per common share - diluted0.39 0.12 0.27 225.00%
Period End Data:
Total assets$7,830,142 $7,940,741 $(110,599) (1.39)%
Total assets - tangible7,525,817 7,641,740 (115,923) (1.52)%
Earning assets (2)7,197,077 7,310,561 (113,484) (1.55)%
Loans (net of unearned income)5,651,642 5,559,949 91,693 1.65%
Allowance for loan losses40,655 39,618 1,037 2.62%
Goodwill and other intangibles304,325 299,000 5,325 1.78%
Nonperforming assets34,221 36,287 (2,066) (5.69)%
Noninterest bearing deposits1,974,395 1,950,816 23,579 1.21%
Interest bearing deposits4,172,552 4,235,463 (62,911) (1.49)%
Total deposits6,146,947 6,186,279 (39,332) (0.64)%
Total equity1,078,878 1,061,548 17,330 1.63%
Total equity - tangible774,553 762,548 12,005 1.57%
Common equity1,067,193 1,050,360 16,833 1.60%
Common equity - tangible762,868 751,360 11,508 1.53%
Book value per common share17.11 16.84 0.27 1.60%
Book value per common share - tangible12.23 12.05 0.18 1.49%
Daily Average Balances:
Total assets$7,991,213 $6,534,063 $1,457,150 22.30%
Total assets - tangible7,689,122 6,339,815 1,349,307 21.28%
Earning assets (2)7,255,956 6,025,033 1,230,923 20.43%
Loans (net of unearned income), excluding nonaccrual loans5,583,711 4,702,825 880,886 18.73%
Allowance for loan losses40,004 38,419 1,585 4.13%
Goodwill and other intangibles302,091 194,248 107,843 55.52%
Noninterest bearing deposits1,959,025 1,538,370 420,655 27.34%
Interest bearing deposits4,219,316 3,544,493 674,823 19.04%
Total deposits6,178,341 5,082,863 1,095,478 21.55%
Total equity1,075,023 859,938 215,085 25.01%
Total equity - tangible772,932 665,690 107,242 16.11%
Common equity1,064,179 850,393 213,786 25.14%
Common equity - tangible762,088 656,145 105,943 16.15%
Key Ratios:
Return on average assets1.20% 0.39% 0.81% 207.69%
Return on average assets - tangible1.29% 0.44% 0.85% 193.18%
Return on average equity8.95% 2.93% 6.02% 205.46%
Return on average equity - tangible12.87% 4.19% 8.68% 207.16%
Return on average common equity9.04% 2.96% 6.08% 205.41%
Return on average common equity - tangible13.05% 4.25% 8.80% 207.06%
Net interest margin-fully tax equivalent (2)(3)3.57% 3.36% 0.21% 6.25%
Net interest margin (2)3.50% 3.27% 0.23% 7.03%
Average earning assets/total average assets90.80% 92.21% (1.41)% (1.53)%
Average loans/average deposits90.38% 92.52% (2.14)% (2.31)%
Average noninterest deposits/total average deposits31.71% 30.27% 1.44% 4.76%
Allowance for loan losses/period end loans0.72% 0.71% 0.01% 1.41%
Nonperforming assets to period end assets0.44% 0.46% (0.02)% (4.35)%
Period end equity/period end total assets13.78% 13.37% 0.41% 3.07%
Efficiency ratio (1)64.82% 85.34% (20.52)% (24.04)%
(1) Excludes gain 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, 2016 June 30, 2016 September 30, 2015
InterestAverage InterestAverage InterestAverage
AverageIncome/Yield/ AverageIncome/Yield/ AverageIncome/Yield/
BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate
Assets:
Loans (net of unearned income
and deferred costs), excluding
nonaccrual loans
$5,583,711 $65,245 4.65% $4,702,825 $52,232 4.47% $4,300,751 $49,398 4.56%
Taxable investment securities687,480 2,703 1.57% 671,792 2,734 1.63% 796,062 3,235 1.63%
Tax-exempt investment securities53,180 396 2.98% 52,398 405 3.09% 61,048 493 3.23%
Interest-bearing deposits287,672 (36)(0.05)% 289,698 364 0.51% 167,247 107 0.25%
Loans held for sale481,358 4,137 3.44% 156,425 1,294 3.31% 132,214 1,246 3.77%
Bank-owned life insurance162,555 1,945 4.76% 151,895 1,817 4.81% 147,150 1,877 5.06%
Total earning assets7,255,956 74,390 4.08% 6,025,033 58,846 3.93% 5,604,472 56,356 3.99%
Less: allowance for loan losses(40,004) (38,419) (37,926)
Total nonearning assets775,261 547,449 549,135
Total assets$7,991,213 $6,534,063 $6,115,681
Liabilities and Equity:
Interest-bearing deposits
Demand and money market$2,216,987 $1,674 0.30% $1,813,502 $1,298 0.29% $1,693,424 $1,201 0.28%
Savings318,193 723 0.90% 301,542 709 0.95% 297,041 695 0.93%
Certificates of deposit1,684,136 3,512 0.83% 1,429,449 3,260 0.92% 1,356,409 2,985 0.87%
Total interest-bearing deposits4,219,316 5,909 0.56% 3,544,493 5,267 0.60% 3,346,874 4,881 0.58%
Borrowings512,027 3,309 2.53% 469,939 3,190 2.69% 472,120 3,435 2.85%
Total interest-bearing liabilities4,731,343 9,218 0.78% 4,014,432 8,457 0.85% 3,818,994 8,316 0.86%
Demand deposits1,959,025 1,538,370 1,388,002
Other noninterest-bearing liabilities225,822 121,323 96,083
Total liabilities6,916,190 5,674,125 5,303,079
Shareholders’ equity1,075,023 859,938 812,602
Total liabilities and equity$7,991,213 $6,534,063 $6,115,681
Net interest income (tax-equivalent basis) $65,172 $50,389 $48,040
Reconcilement of Non-GAAP Financial Measures ��
Bank-owned life insurance (1,945) (1,817) (1,877)
Tax-equivalent basis adjustment (622) (788) (493)
Net interest income (GAAP) $62,605 $47,784 $45,670
Interest rate spread (1) 3.30% 3.08% 3.13%
Interest expense as a percent of average earning assets 0.51% 0.56% 0.59%
Net interest margin (tax equivalent basis) (2) 3.57% 3.36% 3.40%
Total cost of deposits 0.38% 0.42% 0.41%

(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, 2016
September 30, 2016 September 30, 2015 Compared with September 30, 2015
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$4,936,641 $168,257 4.55% $4,177,038 $146,020 4.67% $22,309 $(3,787)$26,096
Taxable investment securities704,532 8,492 1.61% 787,996 8,862 1.50% (370)609 (979)
Tax-exempt investment securities52,854 1,211 3.05% 63,684 1,524 3.19% (314)(63)(250)
Interest-bearing deposits280,900 658 0.31% 152,472 287 0.25% 371 83 288
Loans held for sale238,983 6,124 3.42% 109,592 2,971 3.62% 3,153 (172)3,324
Bank-owned life insurance154,796 5,564 4.80% 144,551 5,674 5.25% (110)(853)743
Total earning assets6,368,706 190,306 3.99% 5,435,333 165,338 4.07% 25,039 (4,183)29,222
Less: allowance for loan losses(38,996) (36,950)
Total nonearning assets620,275 551,342
Total assets$6,949,985 $5,949,725
Liabilities and Equity:
Interest-bearing deposits
Demand and money market$1,938,818 $4,300 0.30% $1,658,531 $3,456 0.28% $844 $230 $614
Savings306,644 2,132 0.93% 300,996 2,071 0.92% 61 21 40
Certificates of deposit1,510,707 9,957 0.88% 1,319,827 8,220 0.83% 1,736 492 1,244
Total interest-bearing deposits3,756,169 16,389 0.58% 3,279,354 13,747 0.56% 2,641 743 1,898
Borrowings483,692 9,685 2.63% 460,195 10,205 2.92% (519)(1,018)498
Total interest-bearing liabilities4,239,861 26,074 0.82% 3,739,549 23,952 0.86% 2,122 (275)2,396
Demand deposits1,638,902 1,317,517
Other noninterest-bearing liabilities148,950 94,278
Total liabilities6,027,713 5,151,344
Shareholders’ equity922,272 798,381
Total liabilities and equity$6,949,985 $5,949,725
Net interest income (tax-
equivalent basis)
$164,232 $141,386 $22,846 $(3,908)$26,826
Reconcilement of Non-GAAP Financial Measures
Bank-owned life insurance (5,564) (5,674) 110
Tax-equivalent basis adjustment (1,943) (1,601) (413)
Net interest income (GAAP) $156,725 $134,111 $22,543
Interest rate spread (1) 3.17% 3.21%
Interest expense as a percent of average earning assets 0.55% 0.59%
Net interest margin (tax
equivalent basis) (2)
3.45% 3.48%
Total cost of deposits 0.41% 0.40%
(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest bearing liabilities. Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.



TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
September 30, December 31,
2016 2015 2015
(unaudited) (audited)
ASSETS
Cash and due from banks$147,887 $284,625 $250,836
Interest-bearing deposits in financial institutions6,891 1,000 1,001
Total Cash and Cash Equivalents154,778 285,625 251,837
Securities available for sale, at fair value704,418 542,634 723,489
Securities held to maturity, at amortized cost70,304 75,154 69,045
Federal Home Loan Bank stock, at amortized cost24,888 24,058 23,691
Total Securities799,610 641,846 816,225
Mortgage loans held for sale439,608 99,330 102,346
Loans, net of unearned income and deferred costs:
Real estate - residential 1-4 family1,208,001 965,559 973,331
Real estate - commercial2,189,489 1,796,150 1,784,393
Real estate - construction and land development820,453 554,753 598,875
Real estate - multifamily206,623 138,954 167,371
Commercial and industrial business1,033,797 790,614 857,036
Consumer and other loans193,279 121,009 138,387
Loans, net of unearned income and deferred costs5,651,642 4,367,039 4,519,393
Less: Allowance for loan losses(40,655) (37,351) (38,359)
Net Loans5,610,987 4,329,688 4,481,034
Premises and equipment, net202,955 172,940 173,695
Goodwill264,578 152,438 154,842
Other intangible assets, net39,747 23,080 26,153
Bank-owned life insurance policies163,385 147,949 149,452
Other assets154,494 320,995 140,990
TOTAL ASSETS$7,830,142 $6,173,891 $6,296,574
LIABILITIES AND EQUITY
Liabilities
Deposits:
Noninterest-bearing demand$1,974,395 $1,445,978 $1,393,264
Interest-bearing:
Demand and money market accounts2,207,962 1,676,623 1,824,226
Savings315,477 295,952 300,408
Certificates of deposit1,649,113 1,369,325 1,396,129
Total Deposits6,146,947 4,787,878 4,914,027
Advances from the Federal Home Loan Bank427,655 437,282 429,080
Repurchase agreements and other borrowings31,927 33,784 37,434
Total Borrowings459,582 471,066 466,514
Other liabilities144,735 98,878 95,839
TOTAL LIABILITIES6,751,264 5,357,822 5,476,380
Shareholders’ Equity
Preferred stock:
Authorized and unissued shares - 2,000,000
Common stock, $1.667 par: 90,000,000 shares authorized
62,387,564; 51,580,762; and 51,605,521 shares issued at
September 30, 2016 and 2015 and December 31, 2015, respectively104,000 85,985 86,026
Capital surplus743,223 533,609 535,094
Retained earnings218,631 186,522 192,795
Common stock issued to deferred compensation trust, at cost
683,833; 651,362; and 648,350 shares at
September 30, 2016 and 2015 and December 31, 2015, respectively(10,969) (10,151) (10,172)
Deferred compensation trust10,969 10,151 10,172
Accumulated other comprehensive income (loss)1,339 1,036 (2,994)
TOTAL SHAREHOLDERS’ EQUITY1,067,193 807,152 810,921
Noncontrolling interests11,685 8,917 9,273
TOTAL EQUITY1,078,878 816,069 820,194
TOTAL LIABILITIES AND EQUITY$7,830,142 $6,173,891 $6,296,574



TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
INTEREST INCOME:
Loans, including fees$64,623 $48,906 $166,313 $144,418
Investment securities3,099 3,728 9,703 10,386
Interest-bearing deposits in financial institutions and federal
funds sold
(36) 107 658 287
Mortgage loans held for sale4,137 1,246 6,124 2,971
Total Interest Income71,823 53,987 182,798 158,062
INTEREST EXPENSE:
Deposits5,909 4,881 16,389 13,747
Advances from the Federal Home Loan Bank3,276 3,422 9,606 10,160
Repurchase agreements and other borrowings33 14 79 44
Total Interest Expense9,218 8,317 26,074 23,951
Net Interest Income62,605 45,670 156,724 134,111
PROVISION FOR LOAN LOSSES1,686 130 3,526 2,176
Net Interest Income after Provision for Loan Losses60,919 45,540 153,198 131,935
NONINTEREST INCOME:
Residential mortgage banking income, net21,430 8,262 40,696 26,956
Insurance commissions and other title fees and income, net11,258 9,710 36,918 30,644
Real estate brokerage and property management income, net6,647 5,349 17,591 13,888
Service charges on deposit accounts2,552 2,388 7,012 6,911
Credit card merchant fees, net1,365 823 3,373 1,821
Other income3,569 3,036 10,114 11,081
Net gain on investment securities 736 904
Total Noninterest Income46,821 30,304 115,704 92,205
NONINTEREST EXPENSE:
Salaries and employee benefits40,497 28,910 100,776 83,133
Occupancy expense6,656 4,703 16,831 14,489
Furniture and equipment3,199 2,211 7,937 6,949
Other expenses20,581 14,082 69,448 44,843
Total Noninterest Expense70,933 49,906 194,992 149,414
Income before income tax expense and noncontrolling interest36,807 25,938 73,910 74,726
Provision for income tax expense10,974 7,444 21,538 22,030
Net income25,833 18,494 52,372 52,696
Net income attributable to noncontrolling interest(1,657) (928) (4,118) (2,780)
Net income attributable to TowneBank$24,176 $17,566 $48,254 $49,916
Preferred stock dividends 13
Net income available to common shareholders$24,176 $17,566 $48,254 $49,903
Per common share information
Basic earnings$0.39 $0.34 $0.88 $0.98
Diluted earnings$0.39 $0.34 $0.87 $0.98
Cash dividends declared$0.13 $0.12 $0.38 $0.35



TOWNEBANK
Consolidated Statements of Comprehensive Income (unaudited)
(dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Net income$25,833 $18,494 $52,372 $52,696
Other comprehensive income (loss)
Unrealized gains (losses) on securities
Unrealized holding gains (losses) arising during the period(516) 1,822 6,294 1,536
Deferred tax benefit (expense)180 (638) (2,203) (538)
Realized gains reclassified into earnings (736) (785)
Deferred tax benefit 258 275
Net unrealized gains (losses)(336) 706 4,091 488
Pension and postretirement benefit plans
Actuarial gains 109
Deferred tax expense (38)
Amortization of prior service costs110 263
Deferred tax expense(38) (91)
Amortization of net actuarial (gain) loss(2) 60 (2) 138
Deferred tax benefit (expense)1 (21) 1 (48)
Change in defined benefit retirement plan, net of tax71 39 242 90
Other comprehensive income (loss), net of tax(265) 745 4,333 578
Comprehensive income$25,568 $19,239 $56,705 $53,274



TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
(unaudited) (unaudited) (unaudited) (audited) (unaudited)
ASSETS
Cash and due from banks$147,887 $188,183 $195,161 $250,836 $284,625
Interest-bearing deposits in financial institutions6,891 33,777 1,006 1,001 1,000
Federal funds sold 14
Total Cash and Cash Equivalents154,778 221,974 196,167 251,837 285,625
Securities available for sale, at fair value704,418 812,375 821,551 723,489 542,634
Securities held to maturity, at amortized cost70,304 65,728 66,921 69,045 75,154
Federal Home Loan Bank stock, at amortized cost24,888 28,008 23,903 23,691 24,058
Total Securities799,610 906,111 912,375 816,225 641,846
Mortgage loans held for sale439,608 474,978 97,491 102,346 99,330
Loans, net of unearned income and deferred costs:5,651,642 5,559,949 4,552,260 4,519,393 4,367,039
Less: allowance for loan losses(40,655) (39,618) (37,760) (38,359) (37,351)
Net Loans5,610,987 5,520,331 4,514,500 4,481,034 4,329,688
Premises and equipment, net202,955 202,333 178,154 173,695 172,940
Goodwill264,578 257,485 157,659 154,842 152,438
Other intangible assets, net39,747 41,515 29,286 26,153 23,080
Bank-owned life insurance policies163,385 164,933 150,623 149,452 147,949
Other assets154,494 151,081 128,914 140,990 320,995
TOTAL ASSETS$7,830,142 $7,940,741 $6,365,169 $6,296,574 $6,173,891
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand$1,974,395 $1,950,816 $1,449,660 $1,393,264 $1,445,978
Interest-bearing:
Demand and money market accounts2,207,962 2,174,154 1,769,414 1,824,226 1,676,623
Savings315,477 317,071 302,373 300,408 295,952
Certificates of deposit1,649,113 1,744,238 1,433,679 1,396,129 1,369,325
Total Deposits6,146,947 6,186,279 4,955,126 4,914,027 4,787,878
Advances from the Federal Home Loan Bank427,655 500,798 428,940 429,080 437,282
Repurchase agreements and other borrowings31,927 44,008 39,442 37,434 33,784
Total Borrowings459,582 544,806 468,382 466,514 471,066
Other liabilities144,735 148,108 105,658 95,839 98,878
TOTAL LIABILITIES6,751,264 6,879,193 5,529,166 5,476,380 5,357,822
Preferred stock
Authorized and unissued shares - 2,000,000
Common stock, $1.667 par value104,000 103,963 86,151 86,026 85,985
Capital surplus743,223 742,228 536,294 535,094 533,609
Retained earnings218,631 202,565 204,413 192,795 186,522
Common stock issued to deferred
compensation trust, at cost
(10,969) (10,785) (10,288) (10,172) (10,151)
Deferred compensation trust10,969 10,785 10,288 10,172 10,151
Accumulated other comprehensive income (loss)1,339 1,604 17 (2,994) 1,036
TOTAL SHAREHOLDERS’ EQUITY1,067,193 1,050,360 826,875 810,921 807,152
Noncontrolling interest11,685 11,188 9,128 9,273 8,917
TOTAL EQUITY1,078,878 1,061,548 836,003 820,194 816,069
TOTAL LIABILITIES AND EQUITY$7,830,142 $7,940,741 $6,365,169 $6,296,574 $6,173,891



TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)
Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
INTEREST INCOME:
Loans, including fees$64,623 $51,444 $50,247 $50,319 $48,906
Investment securities3,099 3,139 3,464 3,415 3,728
Interest-bearing deposits in financial institutions and
federal funds sold
(36) 364 330 212 107
Mortgage loans held for sale4,137 1,294 693 865 1,246
Total Interest Income71,823 56,241 54,734 54,811 53,987
INTEREST EXPENSE:
Deposits5,909 5,267 5,213 5,119 4,881
Advances from the Federal Home Loan Bank3,276 3,158 3,163 3,326 3,422
Repurchase agreements and other borrowings33 32 22 35 14
Total Interest Expense9,218 8,457 8,398 8,480 8,317
Net Interest Income62,605 47,784 46,336 46,331 45,670
PROVISION FOR LOAN LOSSES1,686 2,099 (259) 852 130
Net Interest Income after Provision for Loan Losses60,919 45,685 46,595 45,479 45,540
NONINTEREST INCOME:
Residential mortgage banking income, net21,430 12,148 7,118 7,255 8,262
Insurance commissions and other title fees and income, net11,258 11,627 14,033 8,997 9,710
Real estate brokerage and property management income, net6,647 6,116 4,827 2,438 5,349
Service charges on deposit accounts2,552 2,284 2,176 2,254 2,388
Credit card merchant fees, net1,365 1,113 895 767 823
Other income3,569 3,180 3,366 3,368 3,036
Net gain on investment securities 736
Total Noninterest Income46,821 36,468 32,415 25,079 30,304
NONINTEREST EXPENSE:
Salaries and employee benefits40,497 30,093 30,187 30,826 28,910
Occupancy expense6,656 5,157 5,017 5,156 4,703
Furniture and equipment3,199 2,381 2,357 2,390 2,211
Other expenses20,581 34,268 14,600 14,371 14,082
Total Noninterest Expense70,933 71,899 52,161 52,743 49,906
Income before income tax expense and noncontrolling interest36,807 10,254 26,849 17,815 25,938
Provision for income tax expense10,974 2,375 8,188 4,846 7,444
Net income25,833 7,879 18,661 12,969 18,494
Net income attributable to noncontrolling interest(1,657) (1,620) (842) (503) (928)
Net income attributable to TowneBank$24,176 $6,259 $17,819 $12,466 $17,566
Preferred stock dividends
Net income available to common shareholders$24,176 $6,259 $17,819 $12,466 $17,566
Per common share information
Basic earnings$0.39 $0.12 $0.35 $0.24 $0.34
Diluted earnings$0.39 $0.12 $0.35 $0.24 $0.34
Basic weighted average shares outstanding61,908,316 51,994,473 51,290,010 51,267,447 51,153,205
Diluted weighted average shares outstanding62,067,832 52,116,772 51,392,857 51,440,440 51,263,382
Cash dividends declared$0.13 $0.13 $0.12 $0.12 $0.12



TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
Increase/(Decrease)
Three Months Ended September 30, 2016 September 30, 2016
September 30, June 30, September 30, 2015 June 30, 2016
2016 2015 2016 Amount Percent Amount Percent
Commission and fee income
Property and casualty$9,068 $8,156 $8,815 $912 11.18% $253 2.87%
Employee benefits2,947 2,578 2,907 369 14.31% 40 1.38%
Travel insurance926 626 1,163 300 47.92% (237) (20.38)%
Specialized benefit services154 145 152 9 6.21% 2 1.32%
Total commissions and fees13,095 11,505 13,037 1,590 13.82% 58 0.44%
Contingency and bonus revenue45 260 445 (215) (82.69)% (400) (89.89)%
Other income82 53 52 29 54.72% 30 57.69%
Total revenue$13,222 $11,818 $13,534 $1,404 11.88% $(312) (2.31)%
Employee commission
expense
2,482 2,361 2,254 121 5.12% 228 10.12%
Revenue, net of commission
expense
$10,740 $9,457 $11,280 $1,283 13.57% $(540) (4.79)%
Salaries and employee benefits5,790 4,583 5,723 1,207 26.34% 67 1.17%
Occupancy expense537 480 517 57 11.88% 20 3.87%
Furniture and equipment78 202 259 (124) (61.39)% (181) (69.88)%
Amortization of intangible assets706 543 692 163 30.02% 14 2.02%
Other expenses1,385 1,491 1,586 (106) (7.11)% (201) (12.67)%
Total operating expenses8,496 7,299 8,777 1,197 16.40% (281) (3.20)%
Income before income tax provision and noncontrolling interest$2,244 $2,158 $2,503 $86 3.99% $(259) (10.35)%
Plus: Acquisition related
expenses
164 277 (164) (100.00)% (277) (100.00)%
Plus: Amortization of
intangible assets
706 543 692 163 30.02% 14 2.02%
Operating earnings before income taxes (non-GAAP)$2,950 $2,865 $3,472 $85 2.97% $(522) (15.03)%



TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
Nine Months Ended Increase/(Decrease)
September 30, 2016 over 2015
2016 2015 Amount Percent
Net commission and fee income
Property and casualty$26,029 $22,627 $3,402 15.04%
Employee benefits8,753 7,690 1,063 13.82%
Travel insurance3,546 2,668 878 32.91%
Specialized benefit services459 413 46 11.14%
Total commissions and fees38,787 33,398 5,389 16.14%
Contingency and bonus revenue3,842 3,171 671 21.16%
Other income208 148 60 40.54%
Total revenues$42,837 $36,717 $6,120 16.67%
Employee commission
expense
6,903 6,723 180 2.68%
Revenue, net of commission
expense
$35,934 $29,994 $5,940 19.80%
Salaries and employee benefits$17,481 $14,111 $3,370 23.88%
Occupancy expense1,582 1,416 166 11.72%
Furniture and equipment562 669 (107) (15.99)%
Amortization of intangible assets2,083 1,609 474 29.46%
Other expenses4,361 4,157 204 4.91%
Total operating expenses26,069 21,962 4,107 18.70%
Income before income tax provision and noncontrolling interest$9,865 $8,032 $1,833 22.82%
Plus: Acquisition related
expenses
354 520 (166) (31.92)%
Plus: Amortization of
intangible assets
2,083 1,609 474 29.46%
Operating earnings before income taxes (non-GAAP)$12,302 $10,161 $2,141 21.07%



TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
Three Months Ended Nine Months Ended
September 30, September 30, December 31, September 30, September 30,
2016 2015 2015 2016 2015
Return on average assets (GAAP basis) 1.20% 1.14% 0.78% 0.93% 1.12%
Impact of excluding average goodwill and other
intangibles and amortization
0.09% 0.07% 0.07% 0.07% 0.07%
Return on average tangible assets (Non-GAAP) 1.29% 1.21% 0.85% 1.00% 1.19%
Return on average equity (GAAP basis) 8.95% 8.58% 6.00% 6.99% 8.36%
Impact of excluding average goodwill and other
intangibles and amortization
3.92% 2.67% 2.11% 2.71% 2.76%
Return on average tangible equity (Non-GAAP) 12.87% 11.25% 8.11% 9.70% 11.12%
Return on average common equity (GAAP basis) 9.04% 8.67% 6.07% 7.06% 8.47%
Impact of excluding average goodwill and other
intangibles and amortization
4.01% 2.74% 2.15% 2.78% 2.83%
Return on average tangible common equity
(Non-GAAP)
13.05% 11.41% 8.22% 9.84% 11.30%
Book value (GAAP basis) $17.11 15.65 $15.71 $17.11 $15.65
Impact of excluding average goodwill and other
intangibles and amortization
(4.88) (3.40) (3.50) (4.88) (3.40)
Tangible book value $12.23 $12.25 $12.21 $12.23 $12.25



TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands)
Three Months Ended
September 30, June 30, March 31, December 31, September 30,
Reconcilement of GAAP Earnings to Core Operating Earnings 2016 2016 2016 2015 2015
Net income (GAAP) $24,176 $6,259 $17,819 $12,466 $17,566
Acquisition-related expenses 969 18,435 414 285 243
Non-core charges 969 18,435 414 285 243
Income tax expense (267) (6,177) (33) (100) (85)
Non-core charges, net of taxes 702 12,258 381 185 158
Core operating earnings (non-GAAP) $24,878 $18,517 $18,200 $12,651 $17,724
Weighted average diluted shares 62,067,832 52,116,772 51,392,857 51,440,440 51,263,382
Diluted EPS (GAAP) $0.39 $0.12 $0.35 $0.24 $0.34
Core diluted EPS (non-GAAP) $0.40 $0.36 $0.35 $0.25 $0.35
Average assets $7,991,213 $6,534,063 $6,313,238 $6,305,571 $6,115,681
Average tangible equity 772,932 $665,690 $643,464 $638,855 $637,179
Core return on average assets (non-GAAP) 1.24% 1.14% 1.16% 0.80% 1.15%
Core return on average tangible equity (non-GAAP) 13.23% 11.60% 11.80% 8.23% 11.35%


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands)
Nine Months Ended
September 30, September 30,
Reconcilement of GAAP Earnings to Core Operating Earnings 2016 2015
Net income (GAAP) $48,254 $49,916
Acquisition-related expenses 19,817 1,027
Non-core charges 19,817 1,027
Income tax expense (6,476) (359)
Non-core charges, net of taxes 13,341 668
Core operating earnings (non-GAAP) $61,595 $50,584
Weighted average diluted shares 55,238,139 51,046,899
Diluted EPS (GAAP) $0.87 $0.98
Core diluted EPS (non-GAAP) $1.12 $0.99
Average assets $6,949,985 $5,949,725
Average tangible equity $694,316 $619,111
Core return on average assets (non-GAAP) 1.18% 1.14%
Core return on average tangible equity (non-GAAP) 12.27% 11.26%


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 CSO, 757-638-6813

Source:TowneBank