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CST: 15/10/2019 01:07:26   

TowneBank Reports Full Year and Fourth Quarter Financial Results for 2018

263 Days ago

19th Consecutive Year of Earnings Improvement

SUFFOLK, Va., Jan. 24, 2019 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (Nasdaq: TOWN) today reported financial results for the full year and the fourth quarter ended December 31, 2018.  For the year ended December 31, 2018, earnings were $133.79 million, or $1.88 per diluted share, compared to $87.66 million, or $1.41 per diluted share for the year ended December 31, 2017.  “2018 was a great year for TowneBank, highlighted by a strong operating performance, continued number one deposit market share in Hampton Roads, and a successful merger with Paragon Commercial Corporation.  At $133.79 million, annual net income increased 52.62% over 2017, credit quality remained strong and our annual return on average assets was 1.26%,” said G. Robert Aston, Jr., Executive Chairman.

Earnings in fourth quarter 2017 included an expense of $10.11 million related to the enactment of the Tax Cuts and Jobs Act of 2017 (“Tax Reform”) and fourth quarter 2018 included an expense of $0.70 million due to the finalization of the provisional component of the impact of Tax Reform.  Excluding acquisition-related expenses and adjustments related to tax reform, earnings for the year ended December 31, 2018 were $141.50 million (non-GAAP), or $1.98 (non-GAAP) per diluted share, compared to $97.18 million (non-GAAP), or $1.56 (non-GAAP) per diluted share for the year ended December 31, 2017.

Earnings for the fourth quarter were $35.99 million, or $0.50 per diluted share, versus $12.33 million, or $0.20 per diluted share,  for the quarter ended December 31, 2017.  Excluding acquisition-related expenses and adjustments related to tax reform, earnings for the quarter ended December 31, 2018 were $35.52 million (non-GAAP), or $0.49 (non-GAAP) per diluted share, compared to $22.87 million (non-GAAP), or $0.37 (non-GAAP) per diluted share for the quarter ended December 31, 2017.

Highlights for the Fourth Quarter of 2018 Compared to the Fourth Quarter of 2017:

  • Total revenues were $131.42 million, an increase of $22.28 million, or 20.41%.
  • Loans held for investment increased $2.07 billion, or 34.83%, from December 31, 2017, and $0.14 billion, or 1.73%, from September 30, 2018, or 6.87% on an annualized basis.  Excluding loans acquired in the Paragon merger of $1.43 billion, loans increased $638.77 million, or 10.74% from December 31, 2017.
  • Total deposits were $8.37 billion, an increase of $1.92 billion, or 29.81%.
  • Noninterest bearing deposits increased by 21.57%, to $2.62 billion, representing 31.33% of total deposits.
  • Annualized return on common shareholders' equity of 9.53% and annualized return on average tangible common shareholders' equity of 15.11% (non-GAAP).
  • Net interest margin of 3.53% and taxable equivalent net interest margin of 3.55% (non-GAAP).
  • Effective tax rate of 22.33% benefiting from the lower federal rate related to Tax Reform, partially offset by the finalization of the provisional component of the Tax Reform impact.

“Our team worked hard in 2018 as is evident by our stellar performance.  Throughout the year we focused our efforts on cultivating the benefits achieved through our successful Paragon merger and organic growth.  These efforts resulted in annual loan growth of 10.74%, balanced across legacy and new markets, excluding loans acquired in the Paragon merger.  We have also been working diligently to identify market opportunities in North Carolina where we can share our unique brand of Hometown Banking,” said J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to the Fourth Quarter of 2017:

  • Net interest income was $89.21 million compared to $65.66 million for the quarter ended December 31, 2017.
  • Taxable equivalent net interest margin was 3.55%, including accretion of 12 basis points, compared to 3.41%, including accretion of 9 basis points, for 2017.
  • Total cost of deposits increased to 0.83% from 0.49% at December 31, 2017.
  • Average interest-earning assets totaled $10.02 billion at December 31, 2018 compared to $7.73 billion at December 31, 2017, an increase of 29.69%.
  • Average loans held for investment represented 79.04% of average earning assets in the fourth quarter of 2018 compared to 76.59% in the fourth quarter of 2017.
  • Average interest-bearing liabilities totaled $6.83 billion, an increase of $1.69 billion from the prior year.

The following table sets forth an estimate of the expected effects of the aggregate acquisition accounting adjustments on pre-tax net interest income for the periods shown (in thousands):

    Discount Accretion (Premium Amortization)
    For the three months ended
    March 31,   June 30,   September 30,   December 31,
    2019   2019   2019   2019
Assets:              
Investment Securities   $ (72 )   $ (72 )   $ (70 )   $ (70 )
Loans   1,730     2,040     1,482     1,469  
                 
Liabilities:                
Deposits   60     54     51     47  
                 
Total estimated effect on net interest income   $ 1,598     $ 1,914     $ 1,361     $ 1,352  
                 
                 
Note:  This information is intended for informational purposes only and is not necessarily indicative of future results.
    Actual results may differ due to factors such as changes in estimated prepayment speeds or projected credit loss rates.

Quarterly Provision for Loan Losses:

  • Recorded a provision for loan losses of $2.29 million compared to $0.87 million one year ago and $1.24 million in the prior quarter.
  • Net charge-offs were $0.43 million compared to $0.14 million one year prior.  The ratio of net charge-offs to average loans on an annualized basis was 0.02% compared to 0.03% in the prior quarter and 0.01% for the fourth quarter of 2017.
  • The allowance for loan losses represented 0.65% of total loans compared to 0.64% at September 30, 2018 and 0.76% at December 31, 2017.  Loan loss reserve as a percentage of total loans, excluding purchased loans, remained unchanged at 0.82%, from September 30, 2018, and decreased from 0.86% at December 31, 2017.  The allowance for loan losses was 10.97 times nonperforming loans compared to 7.25 times at September 30, 2018 and 9.39 times at December 31, 2017.

Quarterly Noninterest Income Compared to the Fourth Quarter of 2017:

  • Total noninterest income was $42.21 million compared to $43.48 million in 2017.  Increases of $1.16 million in real estate brokerage and property management income and $1.10 million in insurance commissions were offset by a decrease in residential mortgage brokerage income of $4.59 million.
  • Property management fee revenue increased 39.08%, or $1.07 million, primarily related to a change in the timing of revenue recognition due to the adoption of new accounting guidance on revenue recognition.  The change in accounting guidance resulted in an increase of property management fee income for the fourth quarter of approximately $0.84 million.
  • Insurance segment total revenue increased $1.75 million or 12.31% to $15.92 million in the fourth quarter.  The increase is primarily attributable to revenue generated by insurance agencies acquired in the second and fourth quarters of 2018, in addition to a rise in revenue from benefit insurance.
  • Residential mortgage banking income was $12.95 million compared to $17.54 million in fourth quarter 2017.  Loan volume in the current quarter was $600.07 million, with purchases comprising $531.87 million and refinancing activity accounting for $68.20 million.  Loan volume in fourth quarter 2017 was $797.74 million, with purchase activity of $657.28 million and refinancing activity of $140.46 million.  Lower volumes and continued pressure on gain on sale margin led to the decline in revenue.

Quarterly Noninterest Expense Compared to the Fourth Quarter of 2017:

  • Total noninterest expense was $82.34 million compared to $73.66 million, an increase of $8.68 million, or 11.78%.  This reflects increases of $8.27 million in salary and benefits expense, $1.29 million in intangible amortization expense, and $0.89 million in outside processing expenses.
  • Noninterest expense included operational expenses of entities acquired subsequent to fourth quarter 2017 of $8.75 million, primarily in our Banking and Insurance segments.  Excluding acquired entity expenses, noninterest expense was $73.59 million for the quarter ended December 31, 2018, or a decrease of 0.09% compared to 2017.

Quarterly Income Taxes Compared to the Fourth Quarter of 2017:

  • Income tax expense was $10.35 million compared to $21.33 million, one year prior.  This represents an effective tax rate of 22.33% compared to 33.31% in the fourth quarter of 2017.
  • The decrease in the effective tax rate from the prior year is due to Tax Reform, signed into law on December 22, 2017.  The reduction from 35% to 21% of the U.S. federal corporate tax rate was among the key changes to U.S. tax law, effective January 1, 2018.  Included in income tax expense in fourth quarter 2017 was $10.11 million related to the revaluation of deferred tax assets due to Tax Reform, and a final adjustment in fourth quarter 2018 to the Tax Reform provision of $0.70 million.

Investment Securities:

  • Total investment securities were $1.19 billion compared to $1.16 billion at September 30, 2018 and $0.96 billion at December 31, 2017.  The weighted average duration of the portfolio at December 31, 2018 was 3.0 years.  The carrying value of the available-for-sale portfolio included $11.91 million of net unrealized losses compared to $26.22 million at September 30, 2018 and $6.43 million in net unrealized losses at December 31, 2017.  The change in net unrealized losses was primarily due to interest rate fluctuations.  The carrying value of the held-to-maturity portfolio does not reflect $0.67 million in net unrealized gains compared to $0.17 million in net unrealized gains at September 30, 2018 and $1.58 million in net unrealized gains at December 31, 2017.

Loans:

  • Total loans held for investment were $8.02 billion at December 31, 2018 compared to $7.88 billion at September 30, 2018 and $5.95 billion at December 31, 2017.
              % Change
                  Annualized
  Q4   Q4   Q3   Q4 18 vs.   Q4 18 vs.
(dollars in thousands) 2018   2017   2018   Q4 17   Q3 18
Construction and land development $ 1,067,239     $ 930,426     $ 1,016,120     14.70 %   19.96 %
Commercial real estate - investment related properties 1,978,592     1,344,774     1,957,297     47.13 %   4.32 %
Commercial real estate - owner occupied 1,262,748     938,767     1,259,368     34.51 %   1.06 %
Multifamily real estate 260,987     198,720     284,423     31.33 %   (32.69 )%
1-4 family residential real estate 1,626,896     1,217,349     1,608,517     33.64 %   4.53 %
Commercial and industrial business loans 1,510,364     1,087,157     1,447,794     38.93 %   17.15 %
Consumer loans and other 311,407     229,772     308,173     35.53 %   4.16 %
Total $ 8,018,233     $ 5,946,965     $ 7,881,692     34.83 %   6.87 %

Asset Quality:

  • Nonperforming assets declined to $24.17 million, or 0.22% of total assets, compared to $28.09 million, or 0.33% of total assets, at December 31, 2017.
  • Nonperforming loans were 0.06% of period end loans.
  • Foreclosed property decreased to $17.16 million from $19.82 million at December 31, 2017.

Deposits and Borrowings:

  • Total deposits were $8.37 billion compared to $8.30 billion at September 30, 2018 and $6.45 billion at December 31, 2017.  The increase in deposits includes $1.25 billion acquired in the Paragon merger.
  • Total loans to total deposits were 95.79% compared to 94.97% at September 30, 2018 and 92.23% at December 31, 2017.
  • Non-interest bearing deposits were 31.33% of total deposits at December 31, 2018 compared to 32.19% at September 30, 2018 and 33.46% at December 31, 2017.  Non-interest bearing deposits were affected by seasonality in the fourth quarter.
  • Total borrowings were $1.09 billion compared to $1.17 billion and $0.80 billion at September 30, 2018 and December 31, 2017, respectively.
              % Change
                  Annualized
  Q4   Q4   Q3   Q4 18 vs.   Q4 18 vs.
(dollars in thousands) 2018   2017   2018   Q4 17   Q3 18
Noninterest-bearing demand $ 2,622,761     $ 2,157,338     $ 2,671,558     21.57 %   (7.25 )%
Interest-bearing:                  
Demand and money market accounts 3,223,215     2,225,211     3,096,317     44.85 %   16.26 %
Savings 286,684     315,889     298,368     (9.25 )%   (15.54 )%
Certificates of deposits 2,237,762     1,749,782     2,233,188     27.89 %   0.81 %
Total $ 8,370,422     $ 6,448,220     $ 8,299,431     29.81 %   3.39 %

Capital:

  • Common equity tier 1 capital ratio of 11.64%.
  • Tier 1 leverage capital ratio of 9.87%.
  • Tier 1 risk-based capital ratio of 11.67%.
  • Total risk-based capital ratio of 15.00%.
  • Book value was $21.05 compared to $20.54 at September 30, 2018 and $18.06 at December 31, 2017.
  • Tangible book value was $14.26 compared to $13.83 at September 30, 2018 and $13.13 at December 31, 2017.

Annual Meeting of Shareholders:
TowneBank announced that its 2019 Annual Meeting of Shareholders would be held at 11:30 a.m. on Wednesday, May 22, 2019 at the Virginia Beach Convention Center, 1000 19th Street in Virginia Beach, Virginia.

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 40 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 Raleigh, Cary, Charlotte, Moyock, Grandy, Camden County, Southern Shores, Corolla and Nags Head in North Carolina.  TowneBank also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, 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 $11.16 billion as of December 31, 2018, 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 accounting principles generally accepted in the United States of America ("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:
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 areas; 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; and other risk factors detailed from time to time in filings made by TowneBank with the FDIC. TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

Media contact:
G. Robert Aston, Jr., Executive Chairman, 757-638-6780
J. Morgan Davis, President and Chief Executive Officer, 757-673-1673

Investor contact:
William B. Littreal, Chief Financial Officer, 757-638-6813

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
     
    Three Months Ended
    December 31,   September 30,   June 30,   March 31,   December 31,
  2018   2018   2018   2018   2017
Income and Performance Ratios:                  
  Total Revenue $ 131,417     $ 137,915     $ 137,058     $ 126,276     $ 109,141  
  Net income 36,440     39,252     36,138     25,943     13,287  
  Net income attributable to TowneBank 35,990     38,293     34,804     24,705     12,333  
  Net income per common share - diluted 0.50     0.53     0.48     0.36     0.20  
  Book value per common share 21.05     20.54     20.22     19.90     18.06  
  Tangible book value per share (non-GAAP) 14.26     13.83     13.50     13.34     13.13  
  Return on average assets 1.28 %   1.40 %   1.32 %   1.02 %   0.57 %
  Return on average assets - tangible (non-GAAP) 1.43 %   1.56 %   1.48 %   1.15 %   0.65 %
  Return on average equity 9.44 %   10.21 %   9.55 %   7.39 %   4.26 %
  Return on average equity - tangible (non-GAAP) 14.91 %   16.08 %   15.19 %   11.64 %   6.39 %
  Return on average common equity 9.53 %   10.30 %   9.62 %   7.45 %   4.30 %
  Return on average common equity - tangible (non-GAAP) 15.11 %   16.30 %   15.36 %   11.77 %   6.47 %
  Noninterest income as a percentage of total revenue 32.12 %   35.69 %   36.65 %   39.54 %   39.84 %
                     
Regulatory Capital Ratios (1):                  
  Common equity tier 1 11.64 %   11.53 %   11.33 %   11.65 %   12.19 %
  Tier 1 11.67 %   11.57 %   11.36 %   11.68 %   12.23 %
  Total 15.00 %   14.90 %   14.71 %   15.27 %   16.48 %
  Tier 1 leverage ratio 9.87 %   9.98 %   10.00 %   9.97 %   10.17 %
                     
Asset Quality:                  
  Allowance for loan losses to nonperforming loans 10.97 x   7.25 x   12.64 x   10.40 x   9.39 x
  Allowance for loan losses to period end loans 0.65 %   0.64 %   0.64 %   0.63 %   0.76 %
  Allowance for loan losses to period end loans excluding purchased loans 0.82 %   0.82 %   0.84 %   0.86 %   0.86 %
  Nonperforming loans to period end loans 0.06 %   0.09 %   0.05 %   0.06 %   0.08 %
  Nonperforming assets to period end assets 0.22 %   0.25 %   0.24 %   0.27 %   0.33 %
  Net charge-offs to average loans (annualized) 0.02 %   0.03 %   0.01 %   0.02 %   0.01 %
                     
  Nonperforming loans $ 4,749     $ 6,926     $ 3,919     $ 4,495     $ 4,807  
  Former bank premises 2,253     2,253     2,253     2,253     3,469  
  Foreclosed property 17,163     18,153     20,133     21,731     19,818  
  Total nonperforming assets $ 24,165     $ 27,332     $ 26,305     $ 28,479     $ 28,094  
  Loans past due 90 days and still accruing interest $ 394     $ 153     $ 22     $ 199     $ 103  
                     
  Allowance for loan losses $ 52,094     $ 50,236     $ 49,535     $ 46,735     $ 45,131  
                     
Mortgage Banking:                  
  Loans originated, mortgage $ 531,871     $ 561,543     $ 667,189     $ 478,039     $ 585,567  
  Loans originated, joint venture 68,196     249,956     284,337     185,306     212,173  
  Total loans originated $ 600,067     $ 811,499     $ 951,526     $ 663,345     $ 797,740  
  Number of loans originated 2,472     3,068     3,687     2,603     3,061  
  Average number of originators 314     329     336     330     302  
  Purchase % 88.89 %   90.00 %   91.50 %   81.80 %   83.10 %
  Loans sold $ 695,521     $ 853,981     $ 827,575     $ 679,167     $ 806,323  
  Realized gain on sales and fees as a % of loans sold 3.18 %   3.18 %   3.11 %   3.38 %   3.45 %
                     
Other Ratios:                  
  Net interest margin 3.53 %   3.62 %   3.69 %   3.51 %   3.37 %
  Net interest margin-fully tax equivalent (non-GAAP) 3.55 %   3.64 %   3.71 %   3.54 %   3.41 %
  Average earning assets/total average assets 89.91 %   89.69 %   89.61 %   89.45 %   90.09 %
  Average loans/average deposits 95.32 %   97.55 %   97.79 %   95.89 %   91.10 %
  Average noninterest deposits/total average deposits 31.90 %   32.61 %   32.28 %   31.75 %   33.27 %
  Period end equity/period end total assets 13.78 %   13.49 %   13.63 %   13.65 %   13.41 %
  Efficiency ratio 62.65 %   64.00 %   65.10 %   73.10 %   67.49 %
                     
  (1) Current reporting period regulatory capital ratios are preliminary.            


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
  Three Months Ended   Three Months Ended   Three Months Ended
  December 31, 2018   September 30, 2018   December 31, 2017
      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
$ 7,923,978     $ 99,895     5.00 %   $ 7,825,065     $ 97,704     4.95 %   $ 5,920,302     $ 70,019     4.69 %
Taxable investment securities 1,101,892     7,515     2.73 %   1,022,051     6,403     2.51 %   644,875     3,237     2.01 %
Tax-exempt investment securities 80,656     747     3.70 %   82,235     766     3.73 %   46,825     386     3.30 %
Interest-bearing deposits 652,131     3,559     2.17 %   450,455     2,149     1.89 %   825,164     2,661     1.28 %
Loans held for sale 266,058     3,176     4.77 %   346,806     4,012     4.63 %   292,697     2,874     3.93 %
Total earning assets 10,024,715     114,892     4.55 %   9,726,612     111,034     4.53 %   7,729,863     79,177     4.06 %
  Less: allowance for loan losses (50,792 )           (50,144 )           (44,704 )        
                                   
Total nonearning assets 1,176,037             1,168,102             894,547          
                                   
  Total assets $ 11,149,960             $ 10,844,570             $ 8,579,706          
                                   
Liabilities and Equity:                                  
Interest-bearing deposits                                  
  Demand and money market $ 3,122,973     $ 5,670     0.72 %   $ 2,957,038     $ 4,217     0.57 %   $ 2,247,745     $ 2,091     0.37 %
  Savings 293,135     1,022     1.38 %   301,311     984     1.30 %   320,218     870     1.08 %
  Certificates of deposit 2,245,039     10,803     1.91 %   2,147,337     9,339     1.73 %   1,768,212     5,141     1.15 %
Total interest-bearing deposits 5,661,147     17,495     1.23 %   5,405,686     14,540     1.07 %   4,336,175     8,102     0.74 %
Borrowings 920,389     4,643     1.97 %   920,380     4,195     1.78 %   554,039     1,819     1.28 %
Subordinated debentures 247,769     2,961     4.78 %   247,615     2,962     4.78 %   247,152     2,880     4.66 %
Total interest-bearing liabilities 6,829,305     25,099     1.46 %   6,573,681     21,697     1.31 %   5,137,366     12,801     0.99 %
Noninterest bearing demand deposits 2,651,495             2,615,946             2,162,271          
Other noninterest-bearing liabilities 157,238             166,575             130,181          
  Total liabilities 9,638,038             9,356,202             7,429,818          
                                   
Shareholders’ equity 1,511,922             1,488,368             1,149,888          
                                   
  Total liabilities and equity $ 11,149,960             $ 10,844,570             $ 8,579,706          
                                   
Net interest income (tax-equivalent basis)     $ 89,793             $ 89,337             $ 66,376      
Reconcilement of Non-GAAP Financial Measures                                
  Tax-equivalent basis adjustment     (585 )           (640 )           (712 )    
Net interest income (GAAP)     $ 89,208             $ 88,697             $ 65,664      
                                   
Interest rate spread (1)         3.09 %           3.22 %           3.07 %
Interest expense as a percent of average earning assets       0.99 %           0.88 %           0.66 %
Net interest margin (tax equivalent basis) (2)       3.55 %           3.64 %           3.41 %
Total cost of deposits         0.83 %           0.72 %           0.49 %
                                   
(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)
 
  Year Ended December 31,
  2018     2017     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
$ 7,567,570     $ 373,057     4.93 %   $ 5,901,797     $ 276,746     4.69 %   $ 5,129,990     $ 234,318     4.57 %
Taxable investment securities 1,004,080     24,729     2.46 %   600,080     11,597     1.93 %   695,082     11,254     1.62 %
Tax-exempt investment securities 79,720     2,920     3.66 %   48,228     1,582     3.28 %   52,689     1,601     3.04 %
Interest-bearing deposits 560,368     10,229     1.83 %   696,507     7,480     1.07 %   300,130     1,145     0.38 %
Mortgage loans held for sale 293,017     13,124     4.48 %   271,281     10,561     3.89 %   264,494     9,152     3.46 %
      Total earning assets 9,504,755     424,059     4.46 %   7,517,893     307,966     4.10 %   6,442,385     257,470     4.00 %
    Less: allowance for loan losses (48,737 )           (43,760 )           (39,547 )        
     Total nonearning assets 1,143,167             860,866             802,398          
  Total assets $ 10,599,185             $ 8,334,999             $ 7,205,236          
                                   
Liabilities and Equity:                                  
Interest-bearing deposits                                  
  Demand and money market $ 2,951,038     $ 16,458     0.56 %   $ 2,260,378     $ 8,020     0.35 %   $ 2,012,061     $ 6,043     0.30 %
  Savings 302,435     3,824     1.26 %   319,940     3,305     1.03 %   309,049     2,859     0.93 %
  Certificates of deposit 2,060,587     32,859     1.59 %   1,668,252     17,467     1.05 %   1,530,990     13,414     0.88 %
Total interest-bearing deposits 5,314,060     53,141     1.00 %   4,248,570     28,792     0.68 %   3,852,100     22,316     0.58 %
FHLB advances and repurchase
  agreements
897,574     15,542     1.71 %   617,720     9,942     1.61 %   523,366     13,424     2.56 %
Subordinated capital debentures 251,097     12,067     4.81 %   113,752     5,249     4.61 %           %
Total interest-bearing liabilities 6,462,731     80,750     1.25 %   4,980,042     43,983     0.88 %   4,375,466     35,740     0.82 %
Noninterest-bearing liabilities                                  
Noninterest bearing demand deposits 2,517,173             2,094,753             1,720,093          
Other noninterest-bearing liabilities 164,486             136,616             145,902          
      Total liabilities 9,144,390             7,211,411             6,241,461          
Shareholders' equity 1,454,795             1,123,588             963,775          
  Total liabilities and equity $ 10,599,185             $ 8,334,999             $ 7,205,236          
Net interest income (tax-equivalent basis)   $ 343,309             $ 263,983             $ 221,730      
Reconcilement of Non-GAAP Financial Measures                                
Tax-equivalent basis adjustment   (2,236 )           (2,862 )           (2,854 )    
Net interest income (GAAP)   $ 341,073             $ 261,121             $ 218,876      
Interest rate spread  (1)       3.21 %           3.22 %           3.18 %
Interest expense as a percent of average earning assets       0.85 %           0.59 %           0.55 %
Net interest margin (tax-equivalent basis) (2)       3.61 %           3.51 %           3.44 %
Total cost of deposits       0.68 %           0.45 %           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)
 
   
  2018   2017
  (unaudited)   (audited)
ASSETS      
Cash and due from banks $ 665,029     $ 504,095  
Interest-bearing deposits in financial institutions 21,667     17,094  
       Total Cash and Cash Equivalents 686,696     521,189  
Securities available for sale, at fair value 1,095,339     866,138  
Securities held to maturity, at amortized cost 50,598     61,304  
Other equity securities 4,797     1,516  
Federal Home Loan Bank stock, at amortized cost 43,229     29,595  
        Total Securities 1,193,963     958,553  
Mortgage loans held for sale 220,986     313,256  
Loans, net of unearned income and deferred costs:      
Real estate-residential 1-4 family 1,626,896     1,217,349  
Real estate-commercial 3,241,340     2,283,541  
Real estate-construction and development 1,067,239     930,426  
Real estate-multi-family 260,987     198,720  
Commercial and industrial business 1,510,364     1,087,157  
Consumer and other loans 311,407     229,772  
Loans, net of unearned income and deferred costs 8,018,233     5,946,965  
  Less: allowance for loan losses (52,094 )   (45,131 )
        Net Loans 7,966,139     5,901,834  
Premises and equipment, net 211,796     194,900  
Goodwill 433,658     270,250  
Other intangible assets, net 58,752     38,568  
Bank-owned life insurance policies 237,371     195,775  
Other assets 153,669     127,851  
TOTAL ASSETS $ 11,163,030     $ 8,522,176  
       
LIABILITIES AND EQUITY      
Deposits:      
Noninterest-bearing demand $ 2,622,761     $ 2,157,338  
Interest-bearing:      
     Demand and money market accounts 3,223,215     2,225,211  
     Savings 286,684     315,889  
     Certificates of deposit 2,237,762     1,749,782  
        Total Deposits 8,370,422     6,448,220  
Advances from the Federal Home Loan Bank 799,315     526,923  
Subordinated debt, net 247,861     247,196  
Repurchase agreements and other borrowings 47,156     24,850  
        Total Borrowings 1,094,332     798,969  
Other liabilities 159,856     132,482  
TOTAL LIABILITIES 9,624,610     7,379,671  
Preferred stock      
Authorized and unissued shares - 2,000,000      
Common stock, $1.667 par: Authorized shares - 120,000,000      
Issued and outstanding shares 72,465,923 in 2018      
  and 62,629,001 in 2017 120,801     104,403  
Capital surplus 1,034,676     749,800  
Retained earnings 379,239     282,729  
Common stock issued to deferred compensation trust, at cost      
769,200 shares in 2018 and 729,919 shares in 2017 (13,955 )   (12,524 )
Deferred compensation trust 13,955     12,524  
Accumulated other comprehensive loss (9,190 )   (5,692 )
TOTAL SHAREHOLDERS’ EQUITY 1,525,526     1,131,240  
Noncontrolling interest 12,894     11,265  
TOTAL EQUITY 1,538,420     1,142,505  
TOTAL LIABILITIES AND EQUITY $ 11,163,030     $ 8,522,176  


TOWNEBANK
Consolidated Statements of Income
(dollars in thousands, except per share data)
     
               
  Three Months Ended   Twelve Months Ended
  December 31,   December 31,
  2018   2017   2018   2017
  (unaudited)   (unaudited)   (unaudited)   (audited)
INTEREST INCOME:              
Loans, including fees $ 99,446     $ 69,332     $ 371,343     $ 273,999  
Investment securities 8,126     3,598     27,127     13,064  
Interest-bearing deposits in financial institutions and
  federal funds sold
3,559     2,661     10,229     7,480  
Mortgage loans held for sale 3,176     2,874     13,124     10,561  
        Total interest income 114,307     78,465     421,823     305,104  
INTEREST EXPENSE:              
Deposits 17,495     8,102     53,141     28,792  
Advances from the Federal Home Loan Bank 4,585     1,791     15,340     9,837  
Subordinated debt, net 2,961     2,880     12,067     5,249  
Repurchase agreements and other borrowings 58     28     202     105  
        Total interest expense 25,099     12,801     80,750     43,983  
Net interest income 89,208     65,664     341,073     261,121  
               
PROVISION FOR LOAN LOSSES 2,292     869     8,541     5,426  
        Net interest income after provision for loan losses 86,916     64,795     332,532     255,695  
NONINTEREST INCOME:              
Residential mortgage banking income, net 12,951     17,537     65,104     75,851  
Insurance commissions and other title fees and income, net 13,212     12,115     56,164     51,933  
Real estate brokerage and property management income, net 5,982     4,823     31,863     27,487  
Service charges on deposit accounts 2,928     2,809     11,808     10,594  
Credit card merchant fees, net 1,298     1,204     5,472     5,008  
Bank owned life insurance 2,014     1,941     6,836     6,262  
Other income 3,824     3,048     14,343     10,987  
Gain (loss) on investment securities         3     (1 )
        Total noninterest income 42,209     43,477     191,593     188,121  
NONINTEREST EXPENSE:              
Salaries and employee benefits 50,233     41,965     201,838     169,449  
Occupancy 7,352     6,878     27,644     26,855  
Furniture and equipment 3,587     3,456     14,477     14,072  
Other expenses 21,165     21,361     108,165     85,838  
        Total noninterest expense 82,337     73,660     352,124     296,214  
Income before income tax expense & noncontrolling interest 46,788     34,612     172,001     147,602  
Provision for income tax expense 10,348     21,325     34,227     54,813  
Net income $ 36,440     $ 13,287     $ 137,774     $ 92,789  
Net income attributable to noncontrolling interest (450 )   (954 )   (3,981 )   (5,126 )
Net income attributable to TowneBank $ 35,990     $ 12,333     $ 133,793     $ 87,663  
               
Per common share information              
Basic earnings $ 0.50     $ 0.20     $ 1.88     $ 1.41  
Diluted earnings $ 0.50     $ 0.20     $ 1.88     $ 1.41  
Cash dividends declared $ 0.16     $ 0.14     $ 0.62     $ 0.55  


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
                   
  December 31,   September 30,   June 30,   March 31,   December 31,
  2018   2018   2018   2018   2017
  (unaudited)   (unaudited)   (unaudited)   (unaudited)   (audited)
ASSETS                  
Cash and due from banks $ 665,029     $ 688,584     $ 440,054     $ 479,453     $ 504,095  
Interest-bearing deposits in financial institutions 21,667     20,910     17,749     17,728     17,094  
       Total Cash and Cash Equivalents 686,696     709,494     457,803     497,181     521,189  
Securities available for sale, at fair value 1,095,339     1,051,773     1,057,663     1,237,179     866,138  
Securities held to maturity, at amortized cost 50,598     52,002     53,954     55,283     61,304  
Other equity securities 4,797     5,519     5,206     5,002     1,516  
Federal Home Loan Bank stock, at amortized cost 43,229     46,393     46,393     46,400     29,595  
       Total Securities 1,193,963     1,155,687     1,163,216     1,343,864     958,553  
Mortgage loans held for sale 220,986     333,354     396,185     293,731     313,256  
Loans, net of unearned income and deferred costs 8,018,233     7,881,692     7,774,956     7,470,151     5,946,965  
  Less: allowance for loan losses (52,094 )   (50,236 )   (49,535 )   (46,735 )   (45,131 )
        Net Loans 7,966,139     7,831,456     7,725,421     7,423,416     5,901,834  
Premises and equipment, net 211,796     210,724     207,997     207,126     194,900  
Goodwill 433,658     427,117     425,625     416,789     270,250  
Other intangible assets, net 58,752     58,165     60,669     57,493     38,568  
Bank-owned life insurance policies 237,371     235,348     233,682     232,039     195,775  
Other assets 153,669     159,887     161,055     148,776     127,851  
TOTAL ASSETS $ 11,163,030     $ 11,121,232     $ 10,831,653     $ 10,620,415     $ 8,522,176  
LIABILITIES AND EQUITY                  
Deposits:                  
Noninterest-bearing demand $ 2,622,761     $ 2,671,558     $ 2,597,320     $ 2,503,246     $ 2,157,338  
Interest-bearing:                  
    Demand and money market accounts 3,223,215     3,096,317     3,017,767     3,001,256     2,225,211  
    Savings 286,684     298,368     305,334     309,077     315,889  
    Certificates of deposit 2,237,762     2,233,188     2,070,790     2,011,843     1,749,782  
         Total Deposits 8,370,422     8,299,431     7,991,211     7,825,422     6,448,220  
Advances from the Federal Home Loan Bank 799,315     873,469     873,622     873,773     526,923  
Subordinated debt, net 247,861     247,712     247,563     257,723     247,196  
Repurchase agreements and other borrowings 47,156     45,591     50,981     52,509     24,850  
         Total Borrowings 1,094,332     1,166,772     1,172,166     1,184,005     798,969  
Other liabilities 159,856     155,205     191,490     161,638     132,482  
TOTAL LIABILITIES 9,624,610     9,621,408     9,354,867     9,171,065     7,379,671  
Preferred stock                  
Authorized shares - 2,000,000                  
                   
Common stock, $1.667 par value 120,801     120,613     120,615     120,472     104,403  
Capital surplus 1,034,676     1,032,863     1,031,965     1,028,985     749,800  
Retained earnings 379,239     354,842     328,125     304,896     282,729  
Common stock issued to deferred compensation trust, at cost (13,955 )   (13,780 )   (13,500 )   (12,612 )   (12,524 )
Deferred compensation trust 13,955     13,780     13,500     12,612     12,524  
Accumulated other comprehensive loss (9,190 )   (22,348 )   (17,944 )   (15,873 )   (5,692 )
TOTAL SHAREHOLDERS’ EQUITY 1,525,526     1,485,970     1,462,761     1,438,480     1,131,240  
Noncontrolling interest 12,894     13,854     14,025     10,870     11,265  
TOTAL EQUITY 1,538,420     1,499,824     1,476,786     1,449,350     1,142,505  
TOTAL LIABILITIES AND EQUITY $ 11,163,030     $ 11,121,232     $ 10,831,653     $ 10,620,415     $ 8,522,176  


TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)
           
           
  Three Months Ended
  December 31,   September 30,   June 30,   March 31,   December 31,
  2018   2018   2018   2018   2017
INTEREST INCOME:                  
Loans, including fees $ 99,446     $ 97,215     $ 93,150     $ 81,533     $ 69,332  
Investment securities 8,126     7,019     6,390     5,592     3,598  
Interest-bearing deposits in financial institutions and
    federal funds sold
3,559     2,148     2,159     2,362     2,661  
Mortgage loans held for sale 3,176     4,012     3,557     2,379     2,874  
            Total interest income 114,307     110,394     105,256     91,866     78,465  
INTEREST EXPENSE:                  
Deposits 17,495     14,540     11,620     9,486     8,102  
Advances from the Federal Home Loan Bank 4,585     4,153     3,764     2,838     1,791  
Subordinated debt 2,961     2,962     2,986     3,158     2,880  
Repurchase agreements and other borrowings 58     42     63     40     28  
            Total interest expense 25,099     21,697     18,433     15,522     12,801  
Net interest income 89,208     88,697     86,823     76,344     65,664  
                   
PROVISION FOR LOAN LOSSES 2,292     1,241     3,056     1,953     869  
            Net interest income after provision for loan losses 86,916     87,456     83,767     74,391     64,795  
NONINTEREST INCOME:                  
Residential mortgage banking income, net 12,951     15,804     18,745     17,604     17,537  
Insurance commissions and other title fees and income, net 13,212     14,493     15,087     13,372     12,115  
Real estate brokerage and property management income, net 5,982     8,542     6,910     10,429     4,823  
Service charges on deposit accounts 2,928     3,028     2,969     2,883     2,809  
Credit card merchant fees, net 1,298     1,563     1,443     1,168     1,204  
Bank owned life insurance 2,014     1,657     1,633     1,532     1,941  
Other income 3,824     4,130     3,448     2,941     3,048  
Gain on investment securities             3      
            Total noninterest income 42,209     49,217     50,235     49,932     43,477  
NONINTEREST EXPENSE:                  
Salaries and employee benefits 50,233     50,497     50,324     50,784     41,965  
Occupancy expense 7,352     7,013     6,802     6,477     6,878  
Furniture and equipment 3,587     3,646     3,546     3,698     3,456  
Other expenses 21,165     27,106     28,549     31,344     21,361  
            Total noninterest expense 82,337     88,262     89,221     92,303     73,660  
Income before income tax expense and noncontrolling interest 46,788     48,411     44,781     32,020     34,612  
Provision for income tax expense 10,348     9,159     8,643     6,077     21,325  
Net income 36,440     39,252     36,138     25,943     13,287  
Net income attributable to noncontrolling interest (450 )   (959 )   (1,334 )   (1,238 )   (954 )
Net income attributable to TowneBank $ 35,990     $ 38,293     $ 34,804     $ 24,705     $ 12,333  
Per common share information                  
Basic earnings $ 0.50     $ 0.53     $ 0.48     $ 0.36     $ 0.20  
Diluted earnings $ 0.50     $ 0.53     $ 0.48     $ 0.36     $ 0.20  
Basic weighted average shares outstanding 71,905,956     71,875,085     71,787,980     68,983,745     62,239,028  
Diluted weighted average shares outstanding 72,043,369     72,044,355     71,949,590     69,156,809     62,462,629  
Cash dividends declared $ 0.16     $ 0.16     $ 0.16     $ 0.14     $ 0.14  


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
 
       
  Three Months Ended   Year Ended   Increase/(Decrease)
  December 31,   September 30,
2018
  December 31,   2018 over 2017
  2018   2017     2018   2017   Amount   Percent
Revenue                          
Net interest income $ 86,433     $ 63,030     $ 85,423     $ 329,584     $ 251,003     $ 78,581     31.31 %
Noninterest income                          
Service charges on deposit accounts 2,928     2,809     3,028     11,808     10,594     1,214     11.46 %
Credit card merchant fees 1,298     1,203     1,563     5,472     5,008     464     9.27 %
Other income 4,660     4,319     4,300     16,833     14,046     2,787     19.84 %
Subtotal 8,886     8,331     8,891     34,113     29,648     4,465     15.06 %
Gain (loss) on investment securities             147     (1 )   148     N/M
Total noninterest income 8,886     8,331     8,891     34,260     29,647     4,613     15.56 %
Total revenue 95,319     71,361     94,314     363,844     280,650     83,194     29.64 %
                           
Provision for loan losses 2,292     869     1,241     8,541     5,426     3,115     57.41 %
                           
Expenses                          
Salaries and employee benefits 28,100     21,134     28,329     114,472     85,654     28,818     33.64 %
Occupancy expense 4,789     4,418     4,331     17,410     16,365     1,045     6.39 %
Furniture and equipment 2,426     2,326     2,463     9,912     9,406     506     5.38 %
Amortization of intangible assets 1,428     536     1,479     5,658     2,288     3,370     147.29 %
Other expenses 9,759     11,571     14,829     60,697     45,141     15,556     34.46 %
Total expenses 46,502     39,985     51,431     208,149     158,854     49,295     31.03 %
Income before income tax, corporate allocation and noncontrolling interest 46,525     30,507     41,642     147,154     116,370     30,784     26.45 %
Corporate allocation 367     533     438     1,736     1,828     (92 )   (5.03 )%
                                         
Income before income tax provision and noncontrolling interest 46,892     31,040     42,080     148,890     118,198     30,692     25.97 %
                                         
Provision for income tax expense 10,252     19,510     7,604     28,880     44,584     (15,704 )   (35.22 )%
Net income 36,640     11,530     34,476     120,010     73,614     46,396     63.03 %
Noncontrolling interest 4         (4 )   (8 )   1     (9 )   N/M
Net income attributable to TowneBank $ 36,644     $ 11,530     $ 34,472     $ 120,002     $ 73,615     $ 46,387     63.01 %
                           
Efficiency ratio 48.79 %   56.03 %   54.53 %   57.21 %   56.60 %        


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
 
       
  Three Months Ended   Year Ended   Increase/(Decrease)
  December 31,   September 30,   December 31,   2018 over 2017
  2018   2017   2018   2018   2017   Amount   Percent
Revenue                          
  Residential mortgage brokerage
      income, net
$ 13,472     $ 17,544     $ 16,219     $ 66,696     $ 76,245     $ (9,549 )   (12.52 )%
  Real estate brokerage income, net 2,183     2,092     2,758     9,458     7,991     1,467     18.36 %
  Title insurance and settlement fees 458     431     525     1,877     1,877         %
  Property management fees, net 3,799     2,731     5,783     22,405     19,496     2,909     14.92 %
  Income from unconsolidated
       subsidiary
54     116     122     370     704     (334 )   (47.44 )%
  Net interest and other income 3,210     3,050     4,111     13,210     11,725     1,485     12.67 %
Total revenue 23,176     25,964     29,518     114,016     118,038     (4,022 )   (3.41 )%
                           
Expenses                          
  Salaries and employee benefits $ 14,308     $ 14,279     $ 14,862     $ 58,450     $ 58,586     $ (136 )   (0.23 )%
  Occupancy expense 1,928     1,894     2,084     7,871     8,171     (300 )   (3.67 )%
  Furniture and equipment 930     960     952     3,697     3,865     (168 )   (4.35 )%
  Amortization of intangible assets 767     571     672     2,782     2,566     216     8.42 %
  Other expenses 6,419     6,259     7,543     28,416     26,742     1,674     6.26 %
Total expenses 24,352     23,963     26,113     101,216     99,930     1,286     1.29 %
                           
Income (loss) before income tax, corporate allocation, and noncontrolling interest (1,176 )   2,001     3,405     12,800     18,108     (5,308 )   (29.31 )%
Corporate allocation (238 )   (370 )   (270 )   (1,091 )   (1,210 )   119     (9.83 )%
Income (loss) before income tax provision and noncontrolling interest (1,414 )   1,631     3,135     11,709     16,898     (5,189 )   (30.71 )%
Provision for income tax (86 )   1,160     786     2,892     5,791     (2,899 )   (50.06 )%
Net income (loss) (1,328 )   471     2,349     8,817     11,107     (2,290 )   (20.62 )%
Noncontrolling interest (130 )   (695 )   (756 )   (2,398 )   (3,756 )   1,358     (36.16 )%
Net income (loss) attributable to TowneBank $ (1,458 )   $ (224 )   $ 1,593     $ 6,419     $ 7,351     $ (932 )   (12.68 )%
                           
Efficiency ratio 105.07 %   92.29 %   88.46 %   88.77 %   84.66 %        


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
                           
  Three Months Ended   Year Ended   Increase/(Decrease)
  December 31,   September 30,   December 31,   2018 over 2017
  2018   2017   2018   2018   2017   Amount   Percent
Commission and fee income                          
Property and casualty $ 9,770     $ 8,198     $ 10,762     $ 40,948     $ 35,694     $ 5,254     14.72 %
Employee benefits 3,625     3,164     3,813     14,088     12,551     1,537     12.25 %
Travel insurance 1,095     912     871     5,123     4,668     455     9.75 %
Specialized benefit services 168     170     166     673     657     16     2.44 %
Total commissions and fees 14,658     12,444     15,612     60,832     53,570     7,262     13.56 %
                           
Contingency and bonus revenue 1,185     1,654     1,137     4,888     6,322     (1,434 )   (22.68 )%
Other income 79     80     75     295     308     (13 )   (4.22 )%
Total revenue 15,922     14,178     16,824     66,015     60,200     5,815     9.66 %
                           
Employee commission
  expense
3,000     2,362     2,742     11,209     9,646     1,563     16.20 %
Revenue, net of commission
  expense
12,922     11,816     14,082     54,806     50,554     4,252     8.41 %
                           
Salaries and employee benefits $ 7,825     $ 6,552     $ 7,306     $ 28,916     $ 25,209     $ 3,707     14.71 %
Occupancy expense 635     566     598     2,363     2,319     44     1.90 %
Furniture and equipment 231     169     232     868     801     67     8.36 %
Amortization of intangible assets 928     726     845     3,269     2,803     466     16.63 %
Other expenses 1,865     1,698     1,737     7,343     6,298     1,045     16.59 %
Total operating expenses 11,484     9,711     10,718     42,759     37,430     5,329     14.24 %
Income before income tax and noncontrolling interest 1,438     2,105     3,364     12,047     13,124     (1,077 )   (8.21 )%
Corporate allocation (128 )   (164 )   (168 )   (645 )   (618 )   (27 )   4.37 %
Income before income tax provision and noncontrolling interest 1,310     1,941     3,196     11,402     12,506     (1,104 )   (8.83 )%
Provision for income tax expense 182     655     769     2,455     4,438     (1,983 )   (44.68 )%
Net income 1,128     1,286     2,427     8,947     8,068     879     10.89 %
Noncontrolling interest (324 )   (259 )   (199 )   (1,575 )   (1,371 )   (204 )   14.88 %
Net income attributable to TowneBank $ 804     $ 1,027     $ 2,228     $ 7,372     $ 6,697     $ 675     10.08 %
                           
Provision for income taxes 182     655     769     2,455     4,438     (1,983 )   (44.68 )%
Depreciation, amortization and interest expense 1,152     934     1,068     4,134     3,593     541     15.06 %
EBITDA $ 2,138     $ 2,616     $ 4,065     $ 13,961     $ 14,728     $ (767 )   (5.21 )%
                           
Efficiency ratio 88.87 %   82.19 %   76.11 %   78.02 %   74.04 %        


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures:
             
               
  Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,   December 31,
  2018   2018   2017   2018   2017
                   
Return on average assets (GAAP) 1.28 %   1.40 %   0.57 %   1.26 %   1.05 %
Impact of excluding average goodwill and other intangibles and amortization 0.15 %   0.16 %   0.08 %   0.15 %   0.10 %
Return on average tangible assets (non-GAAP) 1.43 %   1.56 %   0.65 %   1.41 %   1.15 %
                   
Return on average equity (GAAP) 9.44 %   10.21 %   4.26 %   9.20 %   7.80 %
Impact of excluding average goodwill and other intangibles and amortization 5.47 %   5.87 %   2.13 %   5.32 %   3.55 %
Return on average tangible equity (non-GAAP) 14.91 %   16.08 %   6.39 %   14.52 %   11.35 %
                   
Return on average common equity (GAAP) 9.53 %   10.30 %   4.30 %   9.27 %   7.88 %
Impact of excluding average goodwill and other intangibles and amortization 5.58 %   6.00 %   2.17 %   5.43 %   3.63 %
Return on average tangible common equity (non-GAAP) 15.11 %   16.30 %   6.47 %   14.70 %   11.51 %
                   
Book value (GAAP) $ 21.05     $ 20.54     $ 18.06     $ 21.05     $ 18.06  
Impact of excluding average goodwill and other intangibles and amortization (6.79 )   (6.71 )   (4.93 )   (7.71 )   (4.93 )
Tangible book value (non-GAAP) $ 14.26     $ 13.83     $ 13.13     $ 13.34     $ 13.13  


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
    December 31,   September 30,   June 30,   March 31,   December 31,
    2018   2018   2018   2018   2017
                     
Net income (GAAP)   $ 35,990     $ 38,293     $ 34,804     $ 24,705     $ 12,333  
                     
Acquisition-related expenses   (1,518 )   424     797     8,726     526  
                     
Income tax expense - tax reform legislation   696                 10,112  
Income tax expense (benefit) - other items   355     (44 )   (93 )   (1,639 )   (98 )
Total income tax expense (benefit)   1,051     (44 )   (93 )   (1,639 )   10,014  
Total charges, net of taxes   (467 )   380     704     7,087     10,540  
Operating earnings, excluding certain items affecting
    comparability (non-GAAP)
  $ 35,523     $ 38,673     $ 35,508     $ 31,792     $ 22,873  
                     
Weighted average diluted shares   72,043,369     72,044,355     71,949,590     69,156,809     62,462,629  
                     
Diluted EPS (GAAP)   $ 0.50     $ 0.53     $ 0.48     $ 0.36     $ 0.20  
Diluted EPS, excluding certain items affecting
    comparability (non-GAAP)
  $ 0.49     $ 0.54     $ 0.49     $ 0.46     $ 0.37  
                     
Average assets   $ 11,149,960     $ 10,844,570     $ 10,536,847     $ 9,848,364     $ 8,579,705  
Average tangible equity   $ 1,022,982     $ 1,003,151     $ 981,607     $ 932,161     $ 839,942  
                     
Return on average assets, excluding certain items
    affecting comparability (non-GAAP)
  1.26 %   1.41 %   1.35 %   1.31 %   1.06 %
Return on average tangible equity, excluding certain
    items affecting comparability (non-GAAP)
  14.73 %   16.23 %   15.48 %   14.72 %   11.37 %
Return on average common tangible equity, excluding
    certain items affecting comparability (non-GAAP)
  14.93 %   16.45 %   15.66 %   14.89 %   11.52 %
Efficiency ratio, excluding certain items affecting
    comparability (non-GAAP)
  63.81 %   63.69 %   64.52 %   66.19 %   67.01 %


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   Year Ended
    December 31,   December 31,
    2018   2017
         
Net income (GAAP)   $ 133,793     $ 87,663  
         
Purchase accounting adjustments       (3,889 )
         
Acquisition-related expenses   8,428     2,268  
         
Total charges   8,428     (1,621 )
         
Income tax expense - tax reform legislation   696     10,112  
Income tax expense (benefit) - other items   (1,420 )   1,027  
Total income tax expense (benefit)   (724 )   11,139  
Total charges, net of taxes   7,704     9,518  
Operating earnings, excluding certain items affecting comparability (non-GAAP)   $ 141,497     $ 97,181  
         
Weighted average diluted shares   71,293,129     62,394,282  
         
Diluted EPS (GAAP)   $ 1.88     $ 1.41  
Diluted EPS, excluding certain items affecting comparability (non-GAAP)   $ 1.98     $ 1.56  
         
Average assets   $ 10,599,185     $ 8,334,999  
Average tangible equity   $ 985,274     $ 815,969  
         
Return on average assets, excluding certain items affecting comparability (non-GAAP)   1.33 %   1.17 %
Return on average tangible equity, excluding certain items affecting
    comparability (non-GAAP)
  15.30 %   12.52 %
Return on average common tangible equity, excluding certain items affecting
    comparability (non-GAAP)
  15.49 %   12.69 %
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)   64.52 %   65.43 %

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