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TowneBank Reports Record Second Quarter Earnings

SUFFOLK, Va., July 27, 2017 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank (the “Bank” or “Company”) (NASDAQ:TOWN) today reported record financial results for the three and six months ended June 30, 2017. Earnings for the quarter ended June 30, 2017 were $26.21 million compared to the $6.26 million for the same quarter in 2016. Fully diluted earnings per share were $0.42 per share compared to $0.12 per share in second quarter 2016. Earnings in the second quarter of 2016 included after-tax acquisition-related expenses of $12.26 million, mostly related to the Monarch Financial Holdings, Inc. (“Monarch”) merger, as compared to $1.09 million in the current quarter.

Excluding certain items affecting comparability, earnings for the quarter ended June 30, 2017 were $24.77 million (non-GAAP), or $0.40 (non-GAAP) per diluted share, compared to $18.52 million (non-GAAP), or $0.36 (non-GAAP) per diluted share, for the same quarter in 2016.

Earnings for the year-to-date period were $48.18 million as compared to $24.08 million earned in the same period of 2016. Fully diluted earnings per share were $0.77 compared to $0.47 for the six months ended June 30, 2016.

Excluding certain items affecting comparability, earnings for the year-to-date period were $46.81 million (non-GAAP), or $0.75 (non-GAAP) per diluted share, as compared to the $36.72 million (non-GAAP), or $0.71 (non-GAAP) per diluted share, earned in the same period of 2016.

The Bank’s quarterly dividend was $0.14 per share resulting in total common dividends of $8.77 million. The current dividend represents an increase of 7.7% over the dividend paid during the same quarter of 2016.

“We are pleased to announce another quarter of strong earnings with solid deposit growth and continued strong growth in both net interest income and noninterest income, while producing a return on average assets of 1.29% and a return on average tangible equity of 13.67%,” said G. Robert Aston, Jr., Chairman and Chief Executive Officer. “In addition, we were pleased with the overwhelming response to our $250 million subordinated debt offering completed in July, which will result in increases to our risk-based capital ratios and a reduction in our CRE concentration ratio.”


The following items affected comparability of our second quarter 2017 earnings (in thousands):


Three Months Ended June 30, 2017 Consolidated
Banking Realty Insurance Totals
Purchase accounting adjustments (1) $3,889 $ $ $3,889
Acquisition-related expenses (699) (87) (495) (1,281)
Total, before taxes $3,190 $(87) $(495) $2,608
Income taxes (1,331) 12 152 (1,167)
Total impact, net of taxes (2) $1,859 $(75) $(343) $1,441
(1) Relates to the effects of non-recurring reclassification and recovery of certain purchased loans
(2) Non-GAAP measures are defined in the “Reconcilement of Non-GAAP Measures


The following table shows the aggregate acquisition accounting impact on net interest margin for the quarter ended June 30, 2017:


Three Months Ended June 30, 2017 Net Interest Margin (1)
Net Interest Margin, as presented 3.84%
Purchase accounting adjustments (2) 0.21%
Net interest margin, excluding one-time adjustments 3.63%
Acquisition accounting accretion, other 0.10%
Net interest margin, excluding purchase accounting impact 3.53%
(1) Presented on a tax-equivalent basis
(2) Relates to the effects of non-recurring reclassification of purchased loans


On July 17, 2017, the Company issued $250.0 million of fixed to variable rate subordinated notes due July 30, 2027. The Company received $247.10 million after deducting discounts and issuance costs. The notes accrue interest at a fixed rate of 4.50% for the first five years until July 2022. After this date and for the remaining five years of the notes' term, interest will accrue at a variable rate of three-month LIBOR plus 2.550%. The Company may redeem the subordinated notes in whole or in part, on or after July 30, 2022. Subject to the speed of deployment into higher earning assets, we expect the issuance of these notes to result in a reduction of up to 12 basis points to net interest margin in third quarter 2017.

Second Quarter 2017 Performance Highlights

  • Total revenues were $119.60 million, an increase of $35.34 million, or 41.95% from second quarter 2016
    • Taxable equivalent net interest margin was 3.84%, including accretion of 31 basis points, compared to 3.33%, including accretion of 5 basis points, for 2016
    • Excluding one-time purchase accounting adjustments of $3.89 million, or 21 basis points, taxable equivalent net interest margin was 3.63%
    • Residential mortgage banking income increased $9.45 million, or 77.76%
    • Insurance segment total revenue increased 10.03% to $14.89 million
  • Loans held for investment increased $389.11 million, or 7.00% from June 30, 2016
  • Total deposits were $6.60 billion, an increase of $409.49 million, or 6.62%, from second quarter 2016
    • Noninterest bearing deposits increased by 13.77%, to $2.22 billion, representing 33.65% of total deposits
    • Total cost of deposits increased slightly to 0.44% from 0.42% at June 30, 2016
  • Asset quality showed continued strength
    • Nonperforming assets declined to $35.69 million, or 0.42% of total assets compared to $36.29 million, or 0.46%, at June 30, 2016
    • Nonperforming loans were 0.16% of period end loans
    • Foreclosed property decreased to $23.25 million
  • The Bank remained well-capitalized
    • Common equity tier 1 capital ratio of 11.98%
    • Tier 1 leverage capital ratio of 10.43%
    • Tier 1 risk-based capital ratio of 12.03%
    • Total risk-based capital ratio of 12.68%
    • Tangible book value increased to $12.81

Second Quarter 2017 Earnings Compared to Second Quarter 2016

Net income for the second quarter was $26.21 million, or $0.42 per diluted share, versus $6.26 million, or $0.12 per diluted share, in 2016, reflecting strong growth in net interest income as compared to the prior year period. Excluding after-tax acquisition-related expenses of $12.26 million, net income for the second quarter of 2016 was $18.52 million (non-GAAP), or $0.36 per diluted share.

Net Interest Income
Net interest income increased to $69.25 million, a $21.47 million, or 44.93%, increase from the second quarter of 2016. The primary driver was the growth in average earning assets, which increased $1.45 billion, or 24.65%, while tax-equivalent net interest margin increased to 3.84% in the current quarter from 3.33% in second quarter 2016. Accretion income added $5.57 million, or 31 basis points, to margin in the current quarter as compared to $0.61 million, or 5 basis points, in the second quarter of 2016. Net interest income included a cumulative one-time adjustment to accretion income of a $3.89 million, or 21 basis points, due to the effects of a reclassification of purchased revolving credits.

Noninterest Income
Noninterest income was $50.34 million for the second quarter of 2017, an increase of $13.88 million, or 38.05%, from the second quarter of 2016. Residential mortgage banking income increased $9.45 million, or 77.76%, from the second quarter of 2016 primarily due to higher production volumes resulting from the Monarch merger. Mortgage production was $1.08 billion in second quarter 2017, which was $486.59 million higher than second quarter 2016 production of $591.79 million. Insurance commissions and other title fees increased $1.28 million, or 10.97%, primarily due to organic growth in property and casualty and employee benefits lines of business. Additionally, real estate brokerage and property management income increased $1.51 million, or 24.74%, from the second quarter of 2016 primarily due to our acquisition of a resort property management company at Deep Creek Lake, Maryland (“Deep Creek”) in second quarter 2017.

Noninterest Expense
Noninterest expense increased by $6.22 million, or 8.65%, from the comparative quarter of 2016. The primary driver was an increase of $14.74 million in salaries and benefits expense due to the addition of staff related to the Monarch acquisition, incentive compensation, and organic growth. Also contributing were increases in occupancy expenses of $1.50 million and furniture and equipment expenses of $1.18 million, primarily related to mortgage facilities acquired in the Monarch acquisition. Partially offsetting the increase was a reduction in acquisition-related expenses of $17.15 million.

Second Quarter 2017 Earnings Compared to First Quarter 2017
Net income for the second quarter was $26.21 million, or $0.42 per diluted share, versus $21.97 million, or $0.35 per diluted share, in first quarter 2017, reflecting the increase in net interest income and seasonal improvements in our Realty segment.

Performance Highlights

  • Total revenues were $119.60 million compared to $105.17 million in the first quarter of 2017
    • Taxable equivalent net interest margin was 3.84%, including accretion of 31 basis points, compared to 3.45%, including accretion of 9 basis points, in the first quarter of 2017
    • Excluding one-time purchase accounting adjustments of $3.89 million, or 21 basis points, taxable equivalent net interest margin was 3.63%
    • Noninterest income increased $5.46 million due to seasonality in our Realty segment
  • Total loans held for investment increased $35.98 million from March 31, 2017
  • Total deposits increased $405.00 million, or 6.54%, from March 31, 2017, including an additional $175 million of brokered certificates of deposit
    • Noninterest bearing deposits increased by $166.81 million, or 8.13%

Net Interest Income
On a linked quarter basis, net interest income increased by $8.97 million or 14.88%, in second quarter 2017 versus first quarter 2017, while tax-equivalent net interest margin was 3.84% versus 3.45% for the first quarter of 2017. The increase in net interest income was primarily due to the previously discussed increase in accretion income, combined with a seasonal increase in average balances of loans held for sale and decreased borrowing costs. Accretion income added $5.57 million, or 31 basis points, to margin in the current quarter, as compared to $1.13 million, or 9 basis points, in the linked quarter. Net interest income included a cumulative one-time adjustment to accretion income of a $3.89 million, or 21 basis points, due to the effects of a reclassification of purchased revolving credits.

Noninterest Income
In comparison to the first quarter of 2017, noninterest income increased $5.46 million, or 12.16%. The increase was driven by residential mortgage banking income, which grew by $3.96 million, or 22.47%, due to a seasonal increase in mortgage production of $372.32 million, from $706.06 million in first quarter 2017 to $1.08 billion in second quarter 2017. Additionally, real estate brokerage and property management income was higher by $2.64 million, or 52.79% due to a seasonal increase in real estate brokerage and the Deep Creek acquisition. Partially offsetting the increase from the linked quarter was a decline in insurance commissions due to lower contingent commission revenue, which is primarily received during the first quarter of each year.

Noninterest Expense
Noninterest expense increased by $7.87 million, or 11.20%, from the first quarter of 2017. The primary drivers were increases in salaries and benefits expenses of $4.63 million and acquisition-related expenses of $1.29 million. Salaries and benefits expenses were higher due to the accrual of expenses related to our profit sharing plan, which requires the achievement of certain performance thresholds and a targeted level of earnings, combined with the effects of the Deep Creek acquisition.

Noninterest Income % Change
Q2 Q2 Q1 Q2 17 vs. Q2 17 vs.
(dollars in thousands)2017 2016 2017 Q2 16 Q1 17
Residential mortgage banking income, net$21,594 $12,148 $17,632 77.76% 22.47%
Insurance commissions and other title fees and income, net12,902 11,627 14,800 10.97% (12.82)%
Real estate brokerage and property management, net7,629 6,116 4,993 24.74% 52.79%
Service charges on deposit accounts2,644 2,284 2,472 15.76% 6.96%
Credit card merchant fees, net1,298 1,113 1,118 16.62% 16.10%
Bank owned life insurance1,421 1,181 1,474 20.32% (3.60)%
Other income2,856 1,999 2,397 42.87% 19.15%
Subtotal before loss on investment securities50,344 36,468 44,886 38.05% 12.16%
Net loss on investment securities(1) N/M N/M
Total noninterest income$50,343 $36,468 $44,886 38.05% 12.16%


Noninterest Expense % Change
Q2 Q2 Q1 Q2 17 vs. Q2 17 vs.
(dollars in thousands)2017 2016 2017 Q2 16 Q1 17
Salaries and benefits$44,834 $30,093 $40,208 48.98% 11.51%
Occupancy expense6,658 5,157 6,684 29.11% (0.39)%
Furniture and equipment3,563 2,381 3,343 49.64% 6.58%
Acquisition-related expenses1,281 18,435 (5) (93.05)% N/M
Other expenses21,783 15,833 20,018 37.58% 8.82%
Total noninterest expense$78,119 $71,899 $70,248 8.65% 11.20%

Segment Results

$ Change
(in thousands) Q2 Q2 Q1 Q2 17 vs. Q2 17 vs.
Segment Net Income (Loss) 2017 2016 2017 Q2 16 Q1 17
Banking $21,546 $1,290 $17,967 $20,256 $3,579
Realty 3,204 3,765 926 (561) 2,278
Insurance 1,463 1,204 3,075 259 (1,612)
Total net income $26,213 $6,259 $21,968 $19,954 $4,245

Second Quarter 2017 Compared to Second Quarter 2016

Banking
Net income for the three months ended June 30, 2017 for the Banking segment was $21.55 million, increasing $20.26 million from comparative 2016, as net interest income climbed by $19.55 million primarily due to the increase in earning assets from the Monarch merger and increased accretion income. Also contributing to the variance was a decrease in the provision for loan losses of $0.78 million and an increase in noninterest income of $1.76 million, which included increases in wealth management income, service charges and credit card merchant fees. Additionally, noninterest expenses declined by $8.0 million, as the decrease in acquisition-related expenses of $17.32 million was partially offset by increases in personnel costs and other expenses.

Realty
For the three months ended June 30, 2017, the Realty segment net income was $3.20 million as compared to $3.77 million in second quarter 2016. The variance was driven by increased noninterest expenses of $13.56 million primarily due to an increase in mortgage operational expenses related to the merger with Monarch, including an increase in personnel costs of $7.97 million. The decrease was mostly offset by an increase in residential mortgage banking income of $9.24 million, or 73.98%, due to higher production volumes resulting from the Monarch merger. Additionally, net interest and other income increased by $2.06 million as higher production volume led to higher average mortgage loans held for sale.

Insurance
The Insurance segment had net income of $1.46 million for the three months ended June 30, 2017, an increase of $0.26 million compared to second quarter 2016. The increase in net income was primarily driven by organic growth in property and casualty insurance and employee benefit insurance lines.

Second Quarter 2017 Compared to First Quarter 2017

Banking
Earnings increased by $3.58 million, or 19.92% from the first quarter of 2017 as an increase in net interest income of $7.99 million was partially offset by increases in personnel costs of $3.18 million and acquisition-related expenses of $0.58 million. Additionally, there was also a decrease of $1.22 million in the provision for loan losses.

Realty
Net income in the Realty segment increased by $2.28 million from the linked quarter ended March 31, 2017. The increase was primarily a result of a seasonal increase in residential mortgage banking income of $3.96 million and real estate brokerage income of $0.88 million.

Insurance
Net income decreased $1.61 million from the first quarter of 2017 driven by a reduction in contingency and bonus revenue of $2.59 million. Contingent commissions are seasonal in nature and are primarily received during the first quarter of each year. Additionally, commissions from travel insurance decreased by $0.47 million but were offset by an increases in property and casualty commissions of $0.81 million and employee benefits commissions of $0.31 million.

Balance Sheet

At June 30, 2017, total Bank assets reached $8.43 billion, an increase of $0.49 billion, or 6.12%, over June 30, 2016.

Loans

% Change
Q2 Q2 Q1 Q2 17 vs. Q2 17 vs.
(dollars in thousands)2017 2016 2017 Q2 16 Q1 17
Construction and land development$888,566 $824,609 $898,540 7.76% (1.11)%
Commercial real estate - investment related properties1,339,270 1,221,488 1,362,184 9.64% (1.68)%
Commercial real estate - owner occupied956,333 896,620 907,049 6.66% 5.43%
Multifamily real estate206,894 171,501 236,782 20.64% (12.62)%
1-4 family residential real estate1,227,389 1,183,818 1,215,278 3.68% 1.00%
Commercial and industrial business loans1,110,822 1,075,736 1,086,273 3.26% 2.26%
Consumer loans and other219,787 186,177 206,974 18.05% 6.19%
Total$5,949,061 $5,559,949 $5,913,080 7.00% 0.61%

The Bank’s loan portfolio ended the period at $5.95 billion representing an increase of 7.00%, or $389.11 million, from the prior year, and an increase of $35.98 million, or 0.61%, from March 31, 2017.

Deposits

% Change
Q2 Q2 Q1 Q2 17 vs. Q2 17 vs.
(dollars in thousands)2017 2016 2017 Q2 16 Q1 17
Noninterest-bearing demand$2,219,406 $1,950,816 $2,052,598 13.77% 8.13%
Interest-bearing:
Demand and money market accounts2,292,978 2,174,154 2,270,025 5.47% 1.01%
Savings318,714 317,071 320,104 0.52% (0.43)%
Certificates of deposits1,764,671 1,744,238 1,548,045 1.17% 13.99%
Total$6,595,769 $6,186,279 $6,190,772 6.62% 6.54%

The Bank continued to experience solid deposit growth with total deposits increasing to $6.60 billion, up $0.41 billion, or 6.62%, from June 30, 2016. The Bank saw continued growth in noninterest-bearing demand deposits, which ended the quarter at $2.22 billion, a 13.77% increase from the prior year. Noninterest-bearing deposits represented 33.65% of total deposits at June 30, 2017.

Capital Ratios

Q2 Q2 Q1
2017 2016 2017
Common Equity Tier 1 11.98% 11.82% 11.94%
Tier 1 12.03% 11.89% 11.98%
Total 12.68% 12.50% 12.62%
Tier 1 Leverage Ratio 10.43% 12.36% 10.49%

The Bank’s total equity at June 30, 2017 rose to $1.12 billion, an increase of $61.45 million, or 5.79%, from June 30, 2016. 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 11.98%, 12.03%, 12.68%, 10.43%, respectively. All ratios exceed the current regulatory standards for well capitalized status.

Asset Quality

(in thousands)6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016
Nonperforming loans$9,645 $11,538 $13,099 $11,337 $10,580
Former bank premises2,798 2,798 3,494
Foreclosed property23,249 21,473 21,011 22,884 25,707
Total nonperforming assets$35,692 $35,809 $37,604 $34,221 $36,287
Quarterly net loans charged off$384 $1,347 $485 $649 $241
Year-to-date net loans charged off$1,731 $1,347 $1,715 $1,230 $581


Change
Q2 Q2 Q1 Q2 17 vs. Q2 17 vs.
(dollars in thousands) 2017 2016 2017 Q2 16 Q1 17
Total loans 90 days past due and still accruing $206 $ $35 $206 $171
Total loans 30-89 days past due $4,193 $5,041 $11,424 $(848) $(7,231)
Allowance for loan losses $44,131 $39,618 $43,195 $4,513 $936
Total performing TDRs $24,663 $28,184 $26,659 $(3,521) $(1,996)
Nonperforming loans to period end loans 0.16% 0.19% 0.20% (0.03) (0.04)
Nonperforming assets to period end assets 0.42% 0.46% 0.44% (0.04) (0.02)
Allowance for loan losses to period end loans 0.74% 0.71% 0.73% 0.03 0.01
Allowance for loan losses (originated) to originated period end loans 0.86% 0.90% 0.86% (0.04)
Net charge-offs to average loans (annualized) 0.03% 0.02% 0.09% 0.01 (0.06)
Ratio of allowance for loan losses to nonperforming loans 4.58x 3.74x 3.74x 0.84x 0.84x


Continued strength in credit quality contributed to the Bank's financial results as net charge-offs totaled $0.38 million in the second quarter of 2017 compared to $0.24 million in the second quarter of 2016 and $1.35 million in the linked quarter. Total nonperforming assets were $35.69 million, or 0.42%, of Bank assets at June 30, 2017, as compared to $36.29 million, or 0.46%, at June 30, 2016, and $35.81 million, or 0.44%, at March 31, 2017. The allowance for loan losses was $44.13 million, increased from $39.62 million at June 30, 2016 and $43.20 million at March 31, 2017.

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 Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations. Local decision-making is a hallmark of its hometown banking strategy that is delivered through the leadership of each group’s President and Board of Directors. With total assets of $8.43 billion as of June 30, 2017, TowneBank is one of the largest banks headquartered in Virginia.

On April 27, 2017, TowneBank announced the signing of a definitive agreement to acquire Paragon Commercial Corporation (“Paragon”) and its wholly-owned bank subsidiary, Paragon Commercial Bank. Founded in Raleigh, North Carolina in 1999, Paragon Commercial Bank provides banking services through highly responsive professionals, an extensive courier service, online and mobile technologies, free worldwide ATM access and a select number of strategically placed offices in Raleigh, Cary and Charlotte, North Carolina. Pending customary regulatory and shareholder approvals, the merger is scheduled to close in January 2018. Based on financial data as of March 31, 2017, the combined company would have total assets of $9.7 billion, gross loans of $7.1 billion and total deposits of $7.5 billion.

Non-GAAP Financial Measures:
This press release contains financial information determined by methods other than in accordance with GAAP. The Company's management uses these non-GAAP financial measures in its analysis of the Company's performance. These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that are infrequent in nature. 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:
Certain statements contained in this release constitute forward-looking statements within the meaning of U.S. federal securities laws. These forward-looking statements speak only as of the date of this release, are based on current expectations, and involve a number of assumptions. These include statements regarding TowneBank’s future economic performance, financial condition, prospects, growth, strategies and expectations, and objectives of management, and are generally identified by the use of words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” or “project” or similar expressions. TowneBank intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. You should not place undue reliance on forward-looking statements, which are subject to assumptions that are subject to change. TowneBank’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ from those indicated or implied in the forward-looking statements and such differences may be material. Factors which could have a material effect on the operations and future prospects of TowneBank include but are not limited to: changes in interest rates, general economic and business conditions; legislative/regulatory changes; the monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; the quality and composition of TowneBank’s loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBank’s market area; implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; changes in accounting principles, policies and guidelines; TowneBank’s ability to complete and successfully integrate the business of Paragon Commercial Bank in the expected timeframe, if at all, and to achieve expected revenue synergies and cost savings from the merger; 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:
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the merger, Paragon will file with the Securities and Exchange Commission (“SEC”) a preliminary proxy statement. Paragon will deliver a definitive proxy statement/prospectus to its stockholders seeking approval of the merger and related matters. In addition, each of TowneBank and Paragon may file other relevant documents concerning the proposed merger with the FDIC and SEC.

Paragon, TowneBank and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Paragon’s stockholders in connection with the proposed merger. Information about the directors and executive officers of Paragon and TowneBank and other persons who may be deemed participants in the solicitation, including their interests in the merger, will be included in the definitive proxy statement/prospectus when it becomes available. Additional information about Paragon’s executive officers and directors can be found in Paragon’s final prospectus filed with the SEC on June 17, 2016. Additional information regarding TowneBank’s executive officers and directors can be found in TowneBank’s definitive proxy statement in connection with its 2017 Annual Meeting of Stockholders filed with the FDIC on April 21, 2017. You may obtain free copies of each document from Paragon by directing a request by telephone or mail to Paragon Commercial Corporation, 3535 Glenwood Avenue, Raleigh, North Carolina 27612, Attention: Investor Relations (telephone: (919) 788-7770), or by accessing Paragon’s website at https://www.paragonbank.com under “About Us-Investor Relations.” You may obtain free copies of each document from TowneBank 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 by accessing TowneBank’s website at https://townebank.com under “Investor Relations.” The information on TowneBank’s and Paragon’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
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
Increase/ % Increase/
Three Months Ended June 30,2017 2016 (Decrease) (Decrease)
Results of Operations:
Net interest income$69,253 $47,784 $21,469 44.93%
Noninterest income50,343 36,468 13,875 38.05%
Total Revenue119,596 84,252 35,344 41.95%
Acquisition-related expenses1,281 18,435 (17,154) (93.05)%
Noninterest expenses, excluding acquisition-related expenses76,838 53,464 23,374 43.72%
Provision for loan losses1,320 2,099 (779) (37.11)%
Income before income tax and noncontrolling interest40,157 10,254 29,903 291.62%
Provision for income tax expense12,240 2,375 9,865 415.37%
Net income27,917 7,879 20,038 254.32%
Net income attributable to noncontrolling interest(1,704) (1,620) (84) 5.19%
Net income attributable to TowneBank26,213 6,259 19,954 318.80%
Net income available to common shareholders26,213 6,259 19,954 318.80%
Net income per common share - basic0.42 0.12 0.30 250.00%
Net income per common share - diluted0.42 0.12 0.30 250.00%
Period End Data:
Total assets$8,427,042 $7,940,741 $486,301 6.12%
Total assets - tangible8,118,730 7,641,740 476,990 6.24%
Earning assets7,590,796 7,143,797 446,999 6.26%
Loans (net of unearned income)5,949,061 5,559,949 389,112 7.00%
Allowance for loan losses44,131 39,618 4,513 11.39%
Goodwill and other intangibles308,312 299,000 9,312 3.11%
Nonperforming assets35,692 36,287 (595) (1.64)%
Noninterest bearing deposits2,219,406 1,950,816 268,590 13.77%
Interest bearing deposits4,376,363 4,235,463 140,900 3.33%
Total deposits6,595,769 6,186,279 409,490 6.62%
Total equity1,122,998 1,061,548 61,450 5.79%
Total equity - tangible814,686 762,548 52,138 6.84%
Common equity1,110,681 1,050,360 60,321 5.74%
Common equity - tangible802,369 751,360 51,009 6.79%
Book value per common share17.74 16.84 0.90 5.34%
Book value per common share - tangible12.81 12.05 0.76 6.31%
Daily Average Balances:
Total assets$8,180,959 $6,534,063 $1,646,896 25.20%
Total assets - tangible7,873,036 6,339,815 1,533,221 24.18%
Earning assets7,318,667 5,871,197 1,447,470 24.65%
Loans (net of unearned income), excluding nonaccrual loans5,926,336 4,702,825 1,223,511 26.02%
Allowance for loan losses43,501 38,419 5,082 13.23%
Goodwill and other intangibles307,923 194,248 113,675 58.52%
Noninterest bearing deposits2,081,819 1,538,370 543,449 35.33%
Interest bearing deposits4,186,319 3,544,493 641,826 18.11%
Total deposits6,268,138 5,082,863 1,185,275 23.32%
Total equity1,115,008 859,938 255,070 29.66%
Total equity - tangible807,085 665,690 141,395 21.24%
Common equity1,103,813 850,393 253,420 29.80%
Common equity - tangible795,891 656,145 139,746 21.30%
Key Ratios:
Return on average assets1.29% 0.39% 0.90% 230.77%
Return on average assets - tangible1.40% 0.44% 0.96% 218.18%
Return on average equity9.43% 2.93% 6.50% 221.84%
Return on average equity - tangible13.67% 4.21% 9.46% 224.70%
Return on average common equity9.53% 2.96% 6.57% 221.96%
Return on average common equity - tangible13.87% 4.28% 9.59% 224.07%
Net interest margin-fully tax equivalent (1)3.84% 3.33% 0.51% 15.32%
Net interest margin3.80% 3.27% 0.53% 16.21%
Average earning assets/total average assets89.46% 89.88% (0.42)% (0.47)%
Average loans/average deposits94.55% 92.52% 2.03% 2.19%
Average noninterest deposits/total average deposits33.21% 30.27% 2.94% 9.71%
Allowance for loan losses/period end loans0.74% 0.71% 0.03% 4.23%
Nonperforming assets to period end assets0.42% 0.46% (0.04)% (8.70)%
Period end equity/period end total assets13.33% 13.37% (0.04)% (0.30)%
Efficiency ratio65.32% 85.34% (20.02)% (23.46)%
(1) Presented on a tax-equivalent basis


TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
Increase/ % Increase/
Six Months Ended June 30,2017 2016 (Decrease) (Decrease)
Results of Operations:
Net interest income$129,533 $94,120 $35,413 37.63%
Noninterest income95,228 68,882 26,346 38.25%
Total Revenue224,761 163,002 61,759 37.89%
Acquisition-related expenses1,276 18,849 (17,573) (93.23)%
Noninterest expenses, excluding acquisition-related expenses147,091 105,211 41,880 39.81%
Provision for loan losses3,861 1,840 2,021 109.84%
Income before income tax and noncontrolling interest72,533 37,102 35,431 95.50%
Provision for income tax expense21,626 10,563 11,063 104.73%
Net income50,907 26,539 24,368 91.82%
Net income attributable to noncontrolling interest(2,727) (2,461) (266) 10.81%
Net income attributable to TowneBank48,180 24,078 24,102 100.10%
Net income available to common shareholders48,180 24,078 24,102 100.10%
Net income per common share - basic0.78 0.47 0.31 65.96%
Net income per common share - diluted0.77 0.47 0.30 63.83%
Period End Data:
Total assets$8,427,042 $7,940,741 $486,301 6.12%
Total assets - tangible8,118,730 7,641,740 476,990 6.24%
Earning assets7,590,796 7,143,797 446,999 6.26%
Loans (net of unearned income)5,949,061 5,559,949 389,112 7.00%
Allowance for loan losses44,131 39,618 4,513 11.39%
Goodwill and other intangibles308,312 299,000 9,312 3.11%
Nonperforming assets35,692 36,287 (595) (1.64)%
Noninterest bearing deposits2,219,406 1,950,816 268,590 13.77%
Interest bearing deposits4,376,363 4,235,463 140,900 3.33%
Total deposits6,595,769 6,186,279 409,490 6.62%
Total equity1,122,998 1,061,548 61,450 5.79%
Total equity - tangible814,686 762,548 52,138 6.84%
Common equity1,110,681 1,050,360 60,321 5.74%
Common equity - tangible802,369 751,360 51,009 6.79%
Book value per common share17.74 16.84 0.90 5.34%
Book value per common share - tangible12.81 12.05 0.76 6.31%
Daily Average Balances:
Total assets$8,091,161 $6,423,650 $1,667,511 25.96%
Total assets - tangible7,786,156 6,233,169 1,552,987 24.91%
Earning assets7,248,947 5,767,829 1,481,118 25.68%
Loans (net of unearned income), excluding nonaccrual loans5,894,743 4,609,551 1,285,192 27.88%
Allowance for loan losses43,058 38,487 4,571 11.88%
Goodwill and other intangibles305,006 190,481 114,525 60.12%
Noninterest bearing deposits2,020,195 1,477,081 543,114 36.77%
Interest bearing deposits4,144,447 3,522,050 622,397 17.67%
Total deposits6,164,642 4,999,131 1,165,511 23.31%
Total equity1,104,308 845,058 259,250 30.68%
Total equity - tangible799,303 654,577 144,726 22.11%
Common equity1,093,128 835,830 257,298 30.78%
Common equity - tangible788,122 645,349 142,773 22.12%
Key Ratios:
Return on average assets1.20% 0.75% 0.45% 60.00%
Return on average assets - tangible1.31% 0.82% 0.49% 59.76%
Return on average equity8.80% 5.73% 3.07% 53.58%
Return on average equity - tangible12.79% 7.84% 4.95% 63.14%
Return on average common equity8.89% 5.79% 3.10% 53.54%
Return on average common equity - tangible12.97% 7.95% 5.02% 63.14%
Net interest margin-fully tax equivalent (1)3.64% 3.33% 0.31% 9.31%
Net interest margin3.60% 3.28% 0.32% 9.76%
Average earning assets/total average assets89.59% 89.79% (0.20)% (0.22)%
Average loans/average deposits95.62% 92.21% 3.41% 3.70%
Average noninterest deposits/total average deposits32.77% 29.55% 3.22% 10.90%
Allowance for loan losses/period end loans0.74% 0.71% 0.03% 4.23%
Nonperforming assets to period end assets0.42% 0.46% (0.04)% (8.70)%
Period end equity/period end total assets13.33% 13.37% (0.04)% (0.30)%
Efficiency ratio66.01% 76.11% (10.10)% (13.27)%
(1) Presented on a tax-equivalent basis


TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
June 30, March 31, Increase/ % Increase/
Three Months Ended2017 2017 (Decrease) (Decrease)
Results of Operations:
Net interest income$69,253 $60,281 $8,972 14.88%
Noninterest income50,343 44,886 5,457 12.16%
Total Revenue119,596 105,167 14,429 13.72%
Acquisition-related expenses1,281 (5) 1,286 N/M
Noninterest expenses, excluding acquisition-related expenses76,838 70,253 6,585 9.37%
Provision for loan losses1,320 2,541 (1,221) (48.05)%
Income before income tax and noncontrolling interest40,157 32,378 7,779 24.03%
Provision for income tax expense12,240 9,386 2,854 30.41%
Net income27,917 22,992 4,925 21.42%
Net income attributable to noncontrolling interest(1,704) (1,024) (680) 66.41%
Net income attributable to TowneBank26,213 21,968 4,245 19.32%
Net income available to common shareholders26,213 21,968 4,245 19.32%
Net income per common share - basic0.42 0.35 0.07 20.00%
Net income per common share - diluted0.42 0.35 0.07 20.00%
Period End Data:
Total assets$8,427,042 $8,174,786 $252,256 3.09%
Total assets - tangible8,118,730 7,872,823 245,907 3.12%
Earning assets7,590,796 7,362,550 228,246 3.10%
Loans (net of unearned income)5,949,061 5,913,080 35,981 0.61%
Allowance for loan losses44,131 43,195 936 2.17%
Goodwill and other intangibles308,312 301,962 6,350 2.10%
Nonperforming assets35,692 35,809 (117) (0.33)%
Noninterest bearing deposits2,219,406 2,052,598 166,808 8.13%
Interest bearing deposits4,376,363 4,138,174 238,189 5.76%
Total deposits6,595,769 6,190,772 404,997 6.54%
Total equity1,122,998 1,101,245 21,753 1.98%
Total equity - tangible814,686 799,283 15,403 1.93%
Common equity1,110,681 1,089,760 20,921 1.92%
Common equity - tangible802,369 787,798 14,571 1.85%
Book value per common share17.74 17.42 0.32 1.84%
Book value per common share - tangible12.81 12.59 0.22 1.75%
Daily Average Balances:
Total assets$8,180,959 $8,000,366 $180,593 2.26%
Total assets - tangible7,873,036 7,698,310 174,726 2.27%
Earning assets7,318,667 7,177,697 140,970 1.96%
Loans (net of unearned income), excluding nonaccrual loans5,926,336 5,862,799 63,537 1.08%
Allowance for loan losses43,501 42,610 891 2.09%
Goodwill and other intangibles307,923 302,056 5,867 1.94%
Noninterest bearing deposits2,081,819 1,957,887 123,932 6.33%
Interest bearing deposits4,186,319 4,102,109 84,210 2.05%
Total deposits6,268,138 6,059,996 208,142 3.43%
Total equity1,115,008 1,093,490 21,518 1.97%
Total equity - tangible807,085 791,433 15,652 1.98%
Common equity1,103,813 1,082,324 21,489 1.99%
Common equity - tangible795,891 780,268 15,623 2.00%
Key Ratios:
Return on average assets1.29% 1.11% 0.18% 16.22%
Return on average assets - tangible1.40% 1.22% 0.18% 14.75%
Return on average equity9.43% 8.15% 1.28% 15.71%
Return on average equity - tangible13.67% 11.88% 1.79% 15.07%
Return on average common equity9.53% 8.23% 1.30% 15.80%
Return on average common equity - tangible13.87% 12.05% 1.82% 15.10%
Net interest margin-fully tax equivalent (1)3.84% 3.45% 0.39% 11.30%
Net interest margin3.80% 3.41% 0.39% 11.44%
Average earning assets/total average assets89.46% 89.72% (0.26)% (0.29)%
Average loans/average deposits94.55% 96.75% (2.20)% (2.27)%
Average noninterest deposits/total average deposits33.21% 32.31% 0.90% 2.79%
Allowance for loan losses/period end loans0.74% 0.73% 0.01% 1.37%
Nonperforming assets to period end assets0.42% 0.44% (0.02)% (4.55)%
Period end equity/period end total assets13.33% 13.47% (0.14)% (1.04)%
Efficiency ratio65.32% 66.80% (1.48)% (2.22)%
(1) 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
June 30, 2017 March 31, 2017 June 30, 2016
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
$5,926,336 $72,167 4.88% $5,862,799 $64,979 4.49% $4,702,825 $52,232 4.47%
Taxable investment securities597,231 2,801 1.88% 627,338 2,843 1.81% 671,791 2,734 1.63%
Tax-exempt investment securities48,560 370 3.05% 50,485 375 2.97% 52,398 405 3.09%
Interest-bearing deposits455,489 1,188 1.05% 450,076 887 0.80% 289,699 364 0.51%
Loans held for sale291,051 2,879 3.96% 186,999 1,727 3.69% 154,484 1,294 3.31%
Total earning assets7,318,667 79,405 4.35% 7,177,697 70,811 4.00% 5,871,197 57,029 3.91%
Less: allowance for loan losses(43,501) (42,610) (38,419)
Total nonearning assets905,793 865,279 701,285
Total assets$8,180,959 $8,000,366 $6,534,063
Liabilities and Equity:
Interest-bearing deposits
Demand and money market$2,235,869 $1,957 0.35% $2,272,911 $1,865 0.33% $1,813,502 $1,298 0.29%
Savings318,323 815 1.03% 320,319 757 0.96% 301,542 709 0.95%
Certificates of deposit1,632,127 4,105 1.01% 1,508,879 3,381 0.91% 1,429,449 3,260 0.92%
Total interest-bearing deposits4,186,319 6,877 0.66% 4,102,109 6,003 0.59% 3,544,493 5,267 0.60%
Borrowings641,748 2,551 1.57% 723,506 3,803 2.10% 471,392 3,190 2.69%
Total interest-bearing liabilities4,828,067 9,428 0.78% 4,825,615 9,806 0.82% 4,015,885 8,457 0.85%
Demand deposits2,081,819 1,957,887 1,538,370
Other noninterest-bearing liabilities156,065 123,374 119,870
Total liabilities7,065,951 6,906,876 5,674,125
Shareholders’ equity1,115,008 1,093,490 859,938
Total liabilities and equity$8,180,959 $8,000,366 $6,534,063
Net interest income (tax-equivalent basis) $69,977 $61,005 $48,572
Reconcilement of Non-GAAP Financial Measures
Tax-equivalent basis adjustment (724) (724) (788)
Net interest income (GAAP) $69,253 $60,281 $47,784
Interest rate spread (1) 3.57% 3.18% 3.06%
Interest expense as a percent of average earning assets 0.52% 0.55% 0.58%
Net interest margin (tax equivalent basis) (2) 3.84% 3.45% 3.33%
Total cost of deposits 0.44% 0.40% 0.42%

(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)
Six Months Ended Six Months Ended Six Months Ended June 30, 2017
June 30, 2017 June 30, 2016 Compared with June 30, 2016
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/ Increase Change due to
Balance Expense Rate Balance Expense Rate (Decrease) Rate Volume
Assets:
Loans (net of unearned income and deferred costs), excluding nonaccrual loans$5,894,743 $137,146 4.69% $4,609,551 $103,013 4.49% $34,133 $4,650 $29,483
Taxable investment securities612,196 5,644 1.84% 713,152 5,790 1.62% (146) 730 (876)
Tax-exempt investment securities49,522 746 3.01% 52,689 814 3.09% (68) (20) (48)
Interest-bearing deposits453,174 2,074 0.92% 277,477 694 0.50% 1,380 785 595
Loans held for sale239,312 4,606 3.85% 114,960 1,987 3.46% 2,619 249 2,370
Total earning assets7,248,947 150,216 4.18% 5,767,829 112,298 3.92% 37,918 6,394 31,524
Less: allowance for loan losses(43,058) (38,487)
Total nonearning assets$885,272 $694,308
Total assets$8,091,161 $6,423,650
Liabilities and Equity:
Interest-bearing deposits
Demand and money market$2,254,288 $3,822 0.34% $1,798,205 $2,626 0.29% $1,196 $470 $726
Savings319,315 1,573 0.99% 300,806 1,409 0.94% 164 77 87
Certificates of deposit1,570,844 7,485 0.96% 1,423,039 6,445 0.91% 1,040 360 680
Total interest-bearing deposits4,144,447 12,880 0.63% 3,522,050 10,480 0.60% 2,400 907 1,493
Borrowings682,401 6,354 1.85% 470,497 6,375 2.69% (22) (2,348) 2,326
Total interest-bearing liabilities4,826,848 19,234 0.80% 3,992,547 16,855 0.85% 2,378 (1,441) 3,819
Demand deposits2,020,195 1,477,081
Other noninterest-bearing liabilities139,810 108,964
Total liabilities6,986,853 5,578,592
Shareholders’ equity1,104,308 845,058
Total liabilities and equity$8,091,161 $6,423,650
Net interest income (tax-
equivalent basis)
$130,982 $95,442 $35,540 $7,835 $27,705
Reconcilement of Non-GAAP Financial Measures
Tax-equivalent basis adjustment (1,449) (1,322) (127)
Net interest income (GAAP) $129,533 $94,120 $35,413
Interest rate spread (1) 3.38% 3.07%
Interest expense as a percent of average
earning assets
0.54% 0.59%
Net interest margin (tax equivalent
basis) (2)
3.64% 3.33%
Total cost of deposits 0.42% 0.42%

(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)
June 30, December 31,
2017 2016 2016
(unaudited) (unaudited) (audited)
ASSETS
Cash and due from banks$468,455 $188,183 $130,967
Interest-bearing deposits in financial institutions5,071 33,777 5,581
Federal funds sold 14
Total Cash and Cash Equivalents473,526 221,974 136,548
Securities available for sale, at fair value700,354 812,375 812,974
Securities held to maturity, at amortized cost63,937 65,728 66,490
Federal Home Loan Bank stock, at amortized cost29,586 28,008 35,937
Total Securities793,877 906,111 915,401
Mortgage loans held for sale388,523 473,147 314,046
Loans, net of unearned income and deferred costs:
Real estate-residential 1-4 family1,227,389 1,183,818 1,215,823
Real estate-commercial2,295,603 2,118,108 2,251,312
Real estate-construction and development888,566 824,609 826,027
Real estate-multi-family206,894 171,501 222,791
Commercial1,110,822 1,075,736 1,089,539
Consumer and other loans219,787 186,177 201,729
Loans, net of unearned income and deferred costs5,949,061 5,559,949 5,807,221
Less: allowance for loan losses(44,131) (39,618) (42,001)
Net Loans5,904,930 5,520,331 5,765,220
Premises and equipment, net199,926 202,333 198,568
Goodwill268,246 257,485 264,910
Other intangible assets, net40,066 41,515 37,856
Bank-owned life insurance policies192,339 164,933 189,499
Other assets165,609 152,912 151,867
TOTAL ASSETS$8,427,042 $7,940,741 $7,973,915
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand$2,219,406 $1,950,816 $1,947,312
Interest-bearing:
Demand and money market accounts2,292,978 2,174,154 2,263,894
Savings318,714 317,071 319,611
Certificates of deposit1,764,671 1,744,238 1,504,380
Total Deposits6,595,769 6,186,279 6,035,197
Advances from the Federal Home Loan Bank527,219 500,798 687,511
Repurchase agreements and other borrowings28,571 44,008 32,540
Total Borrowings555,790 544,806 720,051
Other liabilities152,485 148,108 132,109
TOTAL LIABILITIES7,304,044 6,879,193 6,887,357
Preferred stock
Authorized and unissued shares - 2,000,000
Common stock, $1.667 par: 90,000,000 shares authorized
62,619,045; 62,365,197; and 62,492,168 shares issued at
June 30, 2017 and 2016 and December 31, 2016, respectively104,386 103,963 104,174
Capital surplus747,867 742,228 745,411
Retained earnings260,783 202,565 229,503
Common stock issued to deferred compensation trust, at cost
697,606; 674,899; and 692,431 shares at
June 30, 2017 and 2016 and December 31, 2016, respectively(11,492) (10,785) (11,168)
Deferred compensation trust11,492 10,785 11,168
Accumulated other comprehensive income (loss)(2,355) 1,604 (3,986)
TOTAL SHAREHOLDERS’ EQUITY1,110,681 1,050,360 1,075,102
Noncontrolling interest12,317 11,188 11,456
TOTAL EQUITY1,122,998 1,061,548 1,086,558
TOTAL LIABILITIES AND EQUITY$8,427,042 $7,940,741 $7,973,915


TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
INTEREST INCOME:
Loans, including fees$71,443 $51,444 $135,698 $101,690
Investment securities3,171 3,139 6,389 6,604
Interest-bearing deposits in financial institutions and
federal funds sold
1,188 364 2,074 694
Mortgage loans held for sale2,879 1,294 4,606 1,987
Total interest income78,681 56,241 148,767 110,975
INTEREST EXPENSE:
Deposits6,877 5,267 12,879 10,480
Advances from the Federal Home Loan Bank2,521 3,158 6,294 6,321
Repurchase agreements and other borrowings, net of capitalized interest30 32 61 54
Total interest expense9,428 8,457 19,234 16,855
Net interest income69,253 47,784 129,533 94,120
PROVISION FOR LOAN LOSSES1,320 2,099 3,861 1,840
Net interest income after provision for loan losses67,933 45,685 125,672 92,280
NONINTEREST INCOME:
Residential mortgage banking income, net21,594 12,148 39,226 19,266
Insurance commissions and other title fees and income, net12,902 11,627 27,702 25,660
Real estate brokerage and property management income, net7,629 6,116 12,623 10,943
Service charges on deposit accounts2,644 2,284 5,115 4,460
Credit card merchant fees, net1,298 1,113 2,416 2,008
Bank owned life insurance1,421 1,181 2,896 2,352
Other income2,856 1,999 5,251 4,193
Loss on investment securities(1) (1)
Total noninterest income50,343 36,468 95,228 68,882
NONINTEREST EXPENSE:
Salaries and employee benefits44,834 30,093 85,042 60,279
Occupancy6,658 5,157 13,342 10,174
Furniture and equipment3,563 2,381 6,906 4,739
Other expenses23,064 34,268 43,077 48,868
Total noninterest expense78,119 71,899 148,367 124,060
Income before income tax expense & noncontrolling interest40,157 10,254 72,533 37,102
Provision for income tax expense12,240 2,375 21,626 10,563
Net income$27,917 $7,879 $50,907 $26,539
Net income attributable to noncontrolling interest(1,704) (1,620) (2,727) (2,461)
Net income attributable to TowneBank$26,213 $6,259 $48,180 $24,078
Net income available to common shareholders$26,213 $6,259 $48,180 $24,078
Per common share information
Basic earnings$0.42 $0.12 $0.78 $0.47
Diluted earnings$0.42 $0.12 $0.77 $0.47
Cash dividends declared$0.14 $0.13 $0.27 $0.25


TOWNEBANK
Consolidated Statements of Comprehensive Income
(dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
(unaudited) (unaudited) (unaudited) (unaudited)
Net income$27,917 $7,879 $50,907 $26,539
Other comprehensive income (loss)
Unrealized gains on securities
Unrealized holding gains arising during the period2,571 2,329 2,733 6,809
Deferred tax expense(900) (815) (957) (2,383)
Realized losses reclassified into earnings1 1
Net unrealized gains1,672 1,514 1,777 4,426
Pension and postretirement benefit plans
Actuarial gain (loss)143 (395) 109
Deferred tax benefit (expense)(49) 139 (38)
Amortization of prior service costs41 115 92 153
Deferred tax expense(14) (40) (32) (53)
Amortization of actuarial loss (gain)39 (2) 78 2
Deferred tax expense(14) 1 (28) (1)
Change in retirement plans, net of tax146 74 (146) 172
Other comprehensive income (loss), net of tax1,818 1,588 1,631 4,598
Comprehensive income$29,735 $9,467 $52,538 $31,137


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
June 30, March 31, December 31, September 30, June 30,
2017 2017 2016 2016 2016
(unaudited) (unaudited) (audited) (unaudited) (unaudited)
ASSETS
Cash and due from banks$468,455 $420,192 $130,967 $147,887 $188,183
Interest-bearing deposits in financial institutions5,071 5,335 5,581 6,891 33,777
Federal funds sold 14
Total Cash and Cash Equivalents473,526 425,527 136,548 154,778 221,974
Securities available for sale, at fair value700,354 720,667 812,974 704,418 812,375
Securities held to maturity, at amortized cost63,937 65,117 66,490 70,304 65,728
Federal Home Loan Bank stock, at amortized cost29,586 36,402 35,937 24,888 28,008
Total Securities793,877 822,186 915,401 799,610 906,111
Mortgage loans held for sale388,523 214,047 314,046 439,451 473,147
Loans, net of unearned income and deferred costs:5,949,061 5,913,080 5,807,221 5,651,642 5,559,949
Less: allowance for loan losses(44,131) (43,195) (42,001) (40,655) (39,618)
Net Loans5,904,930 5,869,885 5,765,220 5,610,987 5,520,331
Premises and equipment, net199,926 198,664 198,568 202,955 202,333
Goodwill268,246 264,910 264,910 264,578 257,485
Other intangible assets, net40,066 37,052 37,856 39,747 41,515
Bank-owned life insurance policies192,339 190,917 189,499 163,385 164,933
Other assets165,609 151,598 151,867 154,651 152,912
TOTAL ASSETS$8,427,042 $8,174,786 $7,973,915 $7,830,142 $7,940,741
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand$2,219,406 $2,052,598 $1,947,312 $1,974,395 $1,950,816
Interest-bearing:
Demand and money market accounts2,292,978 2,270,025 2,263,894 2,207,962 2,174,154
Savings318,714 320,104 319,611 315,477 317,071
Certificates of deposit1,764,671 1,548,045 1,504,380 1,649,113 1,744,238
Total Deposits6,595,769 6,190,772 6,035,197 6,146,947 6,186,279
Advances from the Federal Home Loan Bank527,219 687,366 687,511 427,655 500,798
Repurchase agreements and other borrowings28,571 35,318 32,540 31,927 44,008
Total Borrowings555,790 722,684 720,051 459,582 544,806
Other liabilities152,485 160,085 132,109 144,735 148,108
TOTAL LIABILITIES7,304,044 7,073,541 6,887,357 6,751,264 6,879,193
Preferred stock
Authorized shares - 2,000,000
Common stock, $1.667 par value104,386 104,307 104,174 104,000 103,963
Capital surplus747,867 746,289 745,411 743,223 742,228
Retained earnings260,783 243,337 229,503 218,631 202,565
Common stock issued to deferred compensation trust, at cost(11,492) (11,294) (11,168) (10,969) (10,785)
Deferred compensation trust11,492 11,294 11,168 10,969 10,785
Accumulated other comprehensive income (loss)(2,355) (4,173) (3,986) 1,339 1,604
TOTAL SHAREHOLDERS’ EQUITY1,110,681 1,089,760 1,075,102 1,067,193 1,050,360
Noncontrolling interest12,317 11,485 11,456 11,685 11,188
TOTAL EQUITY1,122,998 1,101,245 1,086,558 1,078,878 1,061,548
TOTAL LIABILITIES AND EQUITY$8,427,042 $8,174,786 $7,973,915 $7,830,142 $7,940,741


TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)
Three Months Ended
June 30, March 31, December 31, September 30, June 30,
2017 2017 2016 2016 2016
INTEREST INCOME:
Loans, including fees$71,443 $64,255 $65,151 $64,623 $51,444
Investment securities3,171 3,218 3,152 3,099 3,139
Interest-bearing deposits in financial institutions and
federal funds sold
1,188 887 487 (36) 364
Mortgage loans held for sale2,879 1,727 3,028 4,137 1,294
Total Interest Income78,681 70,087 71,818 71,823 56,241
INTEREST EXPENSE:
Deposits6,877 6,003 5,928 5,909 5,267
Advances from the Federal Home Loan Bank2,521 3,772 3,546 3,276 3,158
Repurchase agreements and other borrowings30 31 193 33 32
Total Interest Expense9,428 9,806 9,667 9,218 8,457
Net Interest Income69,253 60,281 62,151 62,605 47,784
PROVISION FOR LOAN LOSSES1,320 2,541 1,831 1,686 2,099
Net Interest Income after Provision for Loan Losses67,933 57,740 60,320 60,919 45,685
NONINTEREST INCOME:
Residential mortgage banking income, net21,594 17,632 18,096 21,430 12,148
Insurance commissions and other title fees and income, net12,902 14,800 9,823 11,258 11,627
Real estate brokerage and property management income, net7,629 4,993 2,925 6,647 6,116
Service charges on deposit accounts2,644 2,472 2,535 2,552 2,284
Credit card merchant fees, net1,298 1,118 1,135 1,365 1,113
Bank owned life insurance1,421 1,474 2,377 1,264 1,181
Other income2,856 2,397 2,621 2,305 1,999
Net gain (loss) on investment securities(1) 6
Total Noninterest Income50,343 44,886 39,518 46,821 36,468
NONINTEREST EXPENSE:
Salaries and employee benefits44,834 40,208 43,071 40,497 30,093
Occupancy expense6,658 6,684 6,885 6,656 5,157
Furniture and equipment3,563 3,343 3,378 3,199 2,381
Other expenses23,064 20,013 19,500 20,581 34,268
Total Noninterest Expense78,119 70,248 72,834 70,933 71,899
Income before income tax expense and noncontrolling interest40,157 32,378 27,004 36,807 10,254
Provision for income tax expense12,240 9,386 7,160 10,974 2,375
Net income27,917 22,992 19,844 25,833 7,879
Net income attributable to noncontrolling interest(1,704) (1,024) (848) (1,657) (1,620)
Net income attributable to TowneBank$26,213 $21,968 $18,996 $24,176 $6,259
Net income available to common shareholders$26,213 $21,968 $18,996 $24,176 $6,259
Per common share information
Basic earnings$0.42 $0.35 $0.31 $0.39 $0.12
Diluted earnings$0.42 $0.35 $0.31 $0.39 $0.12
Basic weighted average shares outstanding62,145,045 62,075,983 61,963,948 61,908,316 51,994,473
Diluted weighted average shares outstanding62,364,260 62,262,789 62,175,705 62,067,832 52,116,772
Cash dividends declared$0.14 $0.13 $0.13 $0.13 $0.13


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
Increase/(Decrease)
Three Months Ended June 30, 2017 June 30, 2017
June 30, March 31, 2017 June 30, 2016 March 31, 2017
2017 2016 Amount Percent Amount Percent
Revenue
Net interest income$66,434 $46,888 $58,444 $19,546 41.69% $7,990 13.67%
Service charges on deposit accounts2,644 2,284 2,472 360 15.76% 172 6.96%
Credit card merchant fees1,297 1,113 1,118 184 16.53% 179 16.01%
Other income3,362 2,148 3,106 1,214 56.52% 256 8.24%
Total noninterest income7,303 5,545 6,696 1,758 31.70% 607 9.07%
Total revenue73,737 52,433 65,140 21,304 40.63% 8,597 13.20%
Provision for loan losses1,320 2,099 2,541 (779) (37.11)% (1,221) (48.05)%
Expenses
Salaries and employee benefits23,519 17,119 20,341 6,400 37.39% 3,178 15.62%
Occupancy expense3,828 3,588 4,128 240 6.69% (300) (7.27)%
Furniture and equipment2,372 1,847 2,274 525 28.42% 98 4.31%
Advertising and marketing1,207 933 1,041 274 29.37% 166 15.95%
Charitable contributions1,647 1,295 1,313 352 27.18% 334 25.44%
Outside processing1,112 842 1,154 270 32.07% (42) (3.64)%
Foreclosed property expenses135 454 130 (319) (70.26)% 5 3.85%
FDIC and other insurance1,131 1,122 987 9 0.80% 144 14.59%
Professional fees748 885 1,280 (137) (15.48)% (532) (41.56)%
Telephone and postage963 715 904 248 34.69% 59 6.53%
Other expenses5,311 21,177 4,797 (15,866) (74.92)% 514 10.72%
Total expenses41,973 49,977 38,349 (8,004) (16.02)% 3,624 9.45%
Income before income tax, corporate allocation and noncontrolling interest30,444 357 24,250 30,087 8,427.73% 6,194 25.54%
Corporate allocation410 255 484 155 60.78% (74) (15.29)%
Income before income tax provision and noncontrolling interest30,854 612 24,734 30,242 4,941.50% 6,120 24.74%
Provision for income tax expense9,307 (678) 6,765 9,985 (1,472.71)% 2,542 37.58%
Net income21,547 1,290 17,969 20,257 1,570.31% 3,578 19.91%
Noncontrolling interest(1) (2) (1) N/M 1 (50.00)%
Net income attributable to TowneBank$21,546 $1,290 $17,967 $20,256 1,570.23% $3,579 19.92%
Efficiency ratio56.92% 95.32% 58.87% (38.40)% (40.29)% (1.95)% (3.31)%


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
Six Months Ended Increase/(Decrease)
June 30, 2017 over 2016
2017 2016 Amount Percent
Net interest income$124,878 $92,711 $32,167 34.70%
Service charges on deposit accounts5,115 4,460 655 14.69%
Credit card merchant fees2,416 2,008 408 20.32%
Other income6,468 4,676 1,792 38.32%
Total noninterest income13,999 11,144 2,855 25.62%
Total revenue138,877 103,855 35,022 33.72%
Provision for loan losses3,861 1,840 2,021 109.84%
Salaries and employee benefits43,860 34,631 9,229 26.65%
Occupancy expense7,955 7,063 892 12.63%
Furniture and equipment4,646 3,712 934 25.16%
Advertising and marketing2,249 1,807 442 24.46%
Charitable contributions2,960 2,262 698 30.86%
Outside processing2,266 1,772 494 27.88%
Foreclosed property expenses253 566 (313) (55.30)%
FDIC and other insurance2,118 2,172 (54) (2.49)%
Professional fees2,028 1,934 94 4.86%
Telephone and postage1,868 1,460 408 27.95%
Other expenses10,120 24,778 (14,658) (59.16)%
Total expenses80,323 82,157 (1,834) (2.23)%
Income before income tax and
corporate allocation
54,693 19,858 34,835 175.42%
Corporate allocation895 614 281 45.77%
Income before income tax provision55,588 20,472 35,116 171.53%
Provision for income tax expense16,072 5,051 11,021 218.19%
Net income$39,516 $15,421 24,095 156.25%
Noncontrolling interest$(3) $ (3) N/M
Net income attributable to TowneBank$39,513 $15,421 24,092 156.23%
Efficiency ratio57.84% 79.11% (21.27)% (26.89)%


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
Increase/(Decrease)
Three Months Ended June 30, 2017 June 30, 2017
June 30, March 31, June 30, 2016 March 31, 2017
2017 2016 2017 Amount Percent Amount Percent
Revenue
Residential mortgage brokerage
income, net
$21,730 $12,490 $17,775 $9,240 73.98% $3,955 22.25%
Real estate brokerage income, net2,337 2,393 1,460 (56) (2.34)% 877 60.07%
Title insurance and settlement fees582 550 355 32 5.82% 227 63.94%
Property management fees, net5,293 3,723 3,533 1,570 42.17% 1,760 49.82%
Income from unconsolidated
subsidiary
250 216 124 34 15.74% 126 101.61%
Net interest and other income3,229 1,167 2,203 2,062 176.69% 1,026 46.57%
Total revenue33,421 20,539 25,450 12,882 62.72% 7,971 31.32%
Expenses
Salaries and employee benefits15,220 7,250 13,708 7,970 109.93% 1,512 11.03%
Occupancy expense2,269 1,053 1,964 1,216 115.48% 305 15.53%
Furniture and equipment999 275 869 724 263.27% 130 14.96%
Amortization of intangible assets718 353 559 365 103.40% 159 28.44%
Other expenses7,495 4,214 5,978 3,281 77.86% 1,517 25.38%
Total expenses26,701 13,145 23,078 13,556 103.13% 3,623 15.70%
Income before income tax, corporate allocation and noncontrolling interest6,720 7,394 2,372 (674) (9.12)% 4,348 183.31%
Corporate allocation(266) (123) (307) (143) 116.26% 41 (13.36)%
Income before income tax provision and noncontrolling interest6,454 7,271 2,065 (817) (11.24)% 4,389 212.54%
Provision for income tax expense1,889 2,249 627 (360) (16.01)% 1,262 201.28%
Net income4,565 5,022 1,438 (457) (9.10)% 3,127 217.45%
Noncontrolling interest(1,361) (1,257) (512) (104) 8.27% (849) 165.82%
Net income attributable to TowneBank$3,204 $3,765 $926 $(561) (14.90)% $2,278 246.00%
Efficiency ratio79.89% 64.00% 90.68% 15.89% 24.83% (10.79)% (11.90)%


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
Six Months Ended Increase/(Decrease)
June 30, 2017 over 2016
2017 2016 Amount Percent
Residential mortgage banking income, net$39,505 $19,800 $19,705 99.52%
Real estate brokerage income, net3,797 3,805 (8) (0.21)%
Title insurance and settlement fees936 899 37 4.12%
Property management fees, net8,826 7,138 1,688 23.65%
Income from unconsolidated subsidiary374 380 (6) (1.58)%
Net interest and other income5,431 1,930 3,501 181.40%
Total revenue58,869 33,952 24,917 73.39%
Salaries and employee benefits28,928 13,957 14,971 107.27%
Occupancy expense4,233 2,066 2,167 104.89%
Furniture and equipment1,868 544 1,324 243.38%
Amortization of intangible assets1,277 705 572 81.13%
Other expenses13,472 7,058 6,414 90.88%
Total expenses49,778 24,330 25,448 104.60%
Income before income tax, corporate allocation and noncontrolling interest9,091 9,622 (531) (5.52)%
Corporate allocation(574) (292) (282) 96.58%
Income before income tax provision and noncontrolling interest8,517 9,330 (813) (8.71)%
Provision for income tax2,516 2,908 (392) (13.48)%
Net income6,001 6,422 (421) (6.56)%
Noncontrolling interest(1,872) (1,625) (247) 15.20%
Net income attributable to TowneBank$4,129 $4,797 $(668) (13.93)%
Efficiency ratio84.56% 71.66% 12.90% 18.00%


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
Increase/(Decrease)
Three Months Ended June 30, 2017 June 30, 2017
June 30, March 31, June 30, 2016 March 31, 2017
2017 2016 2017 Amount Percent Amount Percent
Commission and fee income
Property and casualty$9,271 $8,793 $8,457 $478 5.44% $814 9.63%
Employee benefits3,280 2,907 2,974 373 12.83% 306 10.29%
Travel insurance1,159 1,163 1,627 (4) (0.34)% (468) (28.76)%
Specialized benefit services158 152 165 6 3.95% (7) (4.24)%
Total commissions and fees13,868 13,015 13,223 853 6.55% 645 4.88%
Contingency and bonus revenue948 467 3,539 481 103.00% (2,591) (73.21)%
Other income76 52 88 24 46.15% (12) (13.64)%
Total revenue14,892 13,534 16,850 1,358 10.03% (1,958) (11.62)%
Employee commission expense2,454 2,254 2,273 200 8.87% 181 7.96%
Revenue, net of commission expense12,438 11,280 14,577 1,158 10.27% (2,139) (14.67)%
Salaries and employee benefits6,095 5,723 6,159 372 6.50% (64) (1.04)%
Occupancy expense562 517 592 45 8.70% (30) (5.07)%
Furniture and equipment192 259 200 (67) (25.87)% (8) (4.00)%
Amortization of intangible assets704 692 697 12 1.73% 7 1.00%
Other expenses1,892 1,586 1,173 306 19.29% 719 61.30%
Total operating expenses9,445 8,777 8,821 668 7.61% 624 7.07%
Income before income tax, corporate allocation and noncontrolling interest2,993 2,503 5,756 490 19.58% (2,763) (48.00)%
Corporate allocation(144) (132) (177) (12) 9.09% 33 (18.64)%
Income before income tax provision and noncontrolling interest2,849 2,371 5,579 478 20.16% (2,730) (48.93)%
Provision for income tax expense1,044 804 1,994 240 29.85% (950) (47.64)%
Net income1,805 1,567 3,585 238 15.19% (1,780) (49.65)%
Noncontrolling interest(342) (363) (510) 21 (5.79)% 168 (32.94)%
Net income attributable to TowneBank$1,463 $1,204 $3,075 $259 21.51% $(1,612) (52.42)%
Efficiency ratio75.94% 77.81% 60.51% (1.87)% (2.40)% 15.43% 25.50%


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
Six Months EndedIncrease/(Decrease)
June 30, 2017 over 2016
2017 2016 Amount Percent
Net commission and fee income
Property and casualty$17,728 $16,878 $850 5.04%
Employee benefits6,254 5,806 448 7.72%
Travel insurance2,786 2,619 167 6.38%
Specialized benefit services323 305 18 5.90%
Total net commissions and fees27,091 25,608 1,483 5.79%
Contingency and bonus revenue4,488 3,879 609 15.70%
Other income162 129 33 25.58%
Total revenues31,741 29,616 2,125 7.18%
Employee commission expense4,726 4,421 305 6.90%
Revenue, net of commission expense27,015 25,195 1,820 7.22%
Salaries and employee benefits12,255 11,692 563 4.82%
Occupancy expense1,154 1,045 109 10.43%
Furniture and equipment392 483 (91) (18.84)%
Amortization of intangible assets1,401 1,377 24 1.74%
Other expenses3,064 2,976 88 2.96%
Total operating expenses18,266 17,573 693 3.94%
Income before income tax, corporate allocation and noncontrolling interest8,749 7,622 1,127 14.79%
Corporate allocation(321) (322) 1 (0.31)%
Income before income tax provision and noncontrolling interest8,428 7,300 1,128 15.45%
Provision for income tax3,038 2,604 434 16.67%
Net income5,390 4,696 694 14.78%
Noncontrolling interest(852) (836) (16) 1.91%
Net income attributable to TowneBank$4,538 $3,860 $678 17.56%
Efficiency ratio67.61% 69.75% (2.14)% (3.07)%


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
Three Months Ended Six Months Ended
June 30, June 30, March 31, June 30, June 30,
2017 2016 2017 2017 2016
Return on average assets (GAAP)1.29% 0.39% 1.11% 1.20% 0.75%
Impact of excluding average goodwill and other
intangibles and amortization
0.11% 0.05% 0.11% 0.11% 0.07%
Return on average tangible assets (non-GAAP)1.40% 0.44% 1.22% 1.31% 0.82%
Return on average equity (GAAP)9.43% 2.93% 8.15% 8.80% 5.73%
Impact of excluding average goodwill and other
intangibles and amortization
4.24% 1.28% 3.73% 3.99% 2.11%
Return on average tangible equity (non-GAAP)13.67% 4.21% 11.88% 12.79% 7.84%
Return on average common equity (GAAP)9.53% 2.96% 8.23% 8.89% 5.79%
Impact of excluding average goodwill and other
intangibles and amortization
4.34% 1.32% 3.82% 4.08% 2.16%
Return on average tangible common equity
(non-GAAP)
13.87% 4.28% 12.05% 12.97% 7.95%
Book value (GAAP)$17.74 $16.84 $17.42 $17.74 $16.84
Impact of excluding average goodwill and other
intangibles and amortization
(4.93) (4.79) (4.83) (4.93) (4.79)
Tangible book value (non-GAAP)$12.81 $12.05 $12.59 $12.81 $12.05


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
Reconcilement of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability Three Months Ended
June 30, March 31, December 31, September 30, June 30,
2017 2017 2016 2016 2016
Net income (GAAP) $26,213 $21,968 $18,996 $24,176 $6,259
Purchase accounting corrections (3,889)
Acquisition-related expenses 1,281 (5) (707) 969 18,435
Total charges (2,608) (5) (707) 969 18,435
Income tax expense (benefit) 1,167 75 264 (267) (6,177)
Total charges, net of taxes (1,441) 70 (443) 702 12,258
Operating earnings, excluding certain items affecting
comparability (non-GAAP)
$24,772 $22,038 $18,553 $24,878 $18,517
Weighted average diluted shares 62,364,260 62,262,789 62,175,705 62,067,832 52,116,772
Diluted EPS (GAAP) $0.42 $0.35 $0.31 $0.39 $0.12
Diluted EPS, excluding certain items affecting
comparability (non-GAAP)
$0.40 $0.35 $0.30 $0.40 $0.36
Average assets $8,180,959 $8,000,366 $7,965,438 $7,991,213 $6,534,063
Average tangible equity $807,085 $791,433 $783,789 $772,932 $665,690
Return on average assets, excluding certain items
affecting comparability (non-GAAP)
1.21% 1.12% 0.93% 1.24% 1.14%
Return on average tangible equity, excluding certain items
affecting comparability (non-GAAP)
12.96% 11.91% 10.04% 13.45% 11.62%
Efficiency ratio, excluding certain items affecting
comparability (Non-GAAP)
66.41% 66.80% 72.34% 63.94% 63.46%


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
Reconcilement of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability Six Months Ended
June 30, June 30,
2017 2016
Net income (GAAP) $48,180 $24,078
Purchase accounting adjustments (3,889)
Acquisition-related expenses 1,276 18,849
Total charges (2,613) 18,849
Income tax expense (benefit) 1,242 (6,210)
Total charges, net of taxes (1,371) 12,639
Operating earnings, excluding certain items affecting comparability (non-GAAP) $46,809 $36,717
Weighted average diluted shares 62,351,215 51,711,472
Diluted EPS (GAAP) $0.77 $0.47
Diluted EPS, excluding certain items affecting comparability (non-GAAP) $0.75 $0.71
Average assets $8,091,161 $6,423,650
Average tangible equity $799,303 $654,577
Return on average assets, excluding certain items affecting comparability (non-GAAP) 1.16% 1.15%
Return on average tangible equity, excluding certain items affecting
comparability (non-GAAP)
12.44% 11.72%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP) 66.60% 64.55%


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 Investor Relations Officer and CSO, 757-638-6813

Source:TowneBank