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CST: 22/08/2019 15:02:37   

TowneBank Reports First Quarter 2019 Earnings

119 Days ago

SUFFOLK, Va., April 25, 2019 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (NASDAQ: TOWN) today reported earnings for the quarter ended March 31, 2019, of $31.41 million, or $0.44 per diluted share, compared to $24.71 million or $0.36 per diluted share for the quarter ended March 31, 2018.  Excluding acquisition-related expenses, earnings for the quarter ended March 31, 2019 were $31.77 million (non-GAAP), or $0.44 (non-GAAP) per diluted share, compared to $31.79 million (non-GAAP), or $0.46 (non-GAAP) per diluted share for the quarter ended March 31, 2018.

“As we celebrate our twentieth anniversary since the founding of TowneBank, our consistent financial performance continues to enable us to invest in building a solid pathway to the future through our expansion of our North Carolina and Virginia franchise," said G. Robert Aston, Jr., Executive Chairman.

Highlights for the First Quarter of 2019 Compared to the First Quarter of 2018:

  • Total revenues were $133.85 million, an increase of $7.58 million, or 6.0%.
  • Loans held for investment were $8.11 billion, an increase of $0.64 billion, or 8.50%, from March 31, 2018, and $0.09 billion, or 1.09%, from December 31, 2018, or 4.41% on an annualized basis.
  • Total deposits were $8.73 billion, an increase of $0.91 billion, or 11.58%.
  • Noninterest bearing deposits increased by 12.41%, to $2.81 billion, representing 32.23% of total deposits.
  • Annualized return on common shareholders' equity was 8.30% and annualized return on average tangible common shareholders' equity was 13.39% (non-GAAP).
  • Net interest margin for the quarter was 3.54% and taxable equivalent net interest margin was 3.57% (non-GAAP).
  • Effective tax rate of 20.72% in the quarter compared to 19.74% in the first quarter of 2018.

“Deposit growth was robust in the first quarter.  We continue to add to our production teams in North Carolina.  In addition to 11 member-facing hires in Greensboro and Greenville, North Carolina where we have added over $80 million in new deposits, we have added Jack Clayton in Raleigh as President of Business Strategies for North Carolina.  Jack is a 40-year veteran of Wells Fargo where he led the central and northeastern North Carolina regions.  His proven ability to recruit talent from the national banks and his extensive business contacts will enhance our already strong double-digit growth in North Carolina," said J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to the First Quarter of 2018:

  • Net interest income was $87.47 million compared to $76.34 million at March 31, 2018.
  • Taxable equivalent net interest margin was 3.57%, including accretion of 11 basis points, compared to 3.54%, including accretion of 15 basis points, for 2018.
  • Total cost of deposits increased to 0.93% from 0.53% at March 31, 2018.
  • Average interest-earning assets totaled $10.02 billion at March 31, 2019 compared to $8.81 billion at March 31, 2018, an increase of 13.73%.
  • Average loans held for investment represented 80.16% of average earning assets at March 31, 2019 compared to 78.95% at March 31, 2018.
  • Average interest-bearing liabilities totaled $6.82 billion, an increase of $0.79 billion from prior year.
  • Management periodically reviews the cost of funds charged to TowneBank Mortgage to fund its operations.  Effective January 1, 2019, the line moved a floating-rate structure tied to Federal Home Loan Bank rates.  As a result of the funding change, interest income declined in the Realty Segment.  All intercompany transaction are eliminated in the Banking Segment.

Quarterly Provision for Loan Losses:

  • Recorded a provision for loan losses of $1.44 million compared to $1.95 million one year ago and $2.29 million in the prior quarter.
  • Net charge-offs were $0.23 million compared to $0.35 million one year prior.  The ratio of net charge-offs to average loans on an annualized basis was 0.01% compared to 0.02% in both the prior quarter and the first quarter of 2018.
  • The allowance for loan losses represented 0.66% of total loans compared to 0.65% at December 31, 2018 and 0.63% at March 31, 2018.  Loan loss reserve as a percentage of total loans, excluding purchased loans, decreased to 0.81%, from 0.82% at December 31, 2018 and 0.86% at March 31, 2018.  The allowance for loan losses was 9.36 times nonperforming loans compared to 10.97 times at December 31, 2018 and 10.40 times at March 31, 2018.

Quarterly Noninterest Income Compared to the First Quarter of 2018:

  • Total noninterest income was $46.38 million compared to $49.93 million in 2018.  The increase in insurance commissions and other title fees of $2.21 million was offset by decreases in residential mortgage banking income of $4.10 million and real estate brokerage of $1.16 million.
  • Residential mortgage banking income was $13.51 million compared to $17.60 million in first quarter 2018.  Loan volume in the current quarter was $513.53 million, with purchase loan activity comprising 86.08%, compared to first quarter 2018 loan volume of $662.45 million, and 80.86% purchase loan activity.  Lower volumes and continued pressure on gain on sale margin contributed to the decline in revenue, combined with a reduction in mortgage producers in certain markets as the Company repositions itself to enhance future growth and profitability.
  • Total Insurance segment revenue increased 17.88% to $18.50 million in first quarter due to additional commission income from two insurance agency acquisitions in 2018 and one insurance agency acquisition in January 2019.
  • Property management fee revenue decreased 11.72%, or $1.02 million, due to lower reservation levels in the current year, as compared to first quarter 2018.

Quarterly Noninterest Expense Compared to the First Quarter of 2018:

  • Total noninterest expense was $92.12 million compared to $92.30 million, a decrease of $0.18 million, or 0.20%.  Driving the decrease was a reduction in acquisition-related expenses of $8.32 million, which was partially offset by increases of $2.08 million in salary and benefits expense, $1.05 million in outside processing expenses, $0.78 million in charitable contributions, and $0.71 million in professional fees.
  • Noninterest expense included operational expenses of insurance agencies acquired subsequent to first quarter 2018 of $2.41 million.

Quarterly Income Taxes Compared to the First Quarter of 2018:

  • Income tax expense was $8.21 million compared to $6.08 million, one year prior.  This represents an effective tax rate of 20.72% compared to 19.74% in the first quarter of 2018.

Investment Securities:

  • Total investment securities were $1.20 billion compared to $1.19 billion at December 31, 2018 and $1.34 billion at March 31, 2018.  The weighted average duration of the portfolio at March 31, 2019 was 3.30 years.  The carrying value of the available-for-sale portfolio included $2.22 million of net unrealized losses compared to $11.91 million at December 31, 2018 and $17.95 million in net unrealized losses at March 31, 2018.  The decrease in net unrealized losses was primarily due to interest rate fluctuations.  During the first quarter of 2019, we sold $100.08 million in available-for-sale securities at a loss of $0.78 million, in order to position our portfolio for better yield, going forward.  The carrying value of the held-to-maturity portfolio does not reflect $1.04 million in net unrealized gains compared to $0.67 million in net unrealized gains at December 31, 2018 and $0.88 million in net unrealized gains at March 31, 2018.

Loans and Asset Quality:

  • Total loans held for investment were $8.11 billion at March 31, 2019 compared to $8.02 billion at December 31, 2018 and $7.47 billion at March 31, 2018.
  • Nonperforming assets declined to $24.99 million, or 0.22% of total assets, compared to $28.48 million, or 0.27%, at March 31, 2018.
  • Nonperforming loans were 0.07% of period end loans.
  • Foreclosed property decreased to $17.07 million from $21.73 million at March 31, 2018.

Deposits and Borrowings:

  • Total deposits were $8.73 billion compared to $8.37 billion at December 31, 2018, and $7.83 billion at March 31, 2018.
  • Total loans to total deposits were 92.83% compared to 95.79% at December 31, 2018 and 95.46% at March 31, 2018.
  • Non-interest bearing deposits were 32.23% of total deposits at March 31, 2019 compared to 31.33% at December 31, 2018 and 31.99% at March 31, 2018.
  • Total borrowings were $1.03 billion compared to $1.09 billion and $1.18 billion at December 31, 2018 and March 31, 2018, respectively.

Capital:

  • Common equity tier 1 capital ratio of 11.49%.
  • Tier 1 leverage capital ratio of 9.92%.
  • Tier 1 risk-based capital ratio of 11.52%.
  • Total risk-based capital ratio of 14.79%.
  • Book value was $21.40 compared to $21.05 at December 31, 2018 and $19.90 at March 31, 2018.
  • Tangible book value was $14.46 compared to $14.26 at December 31, 2018 and $13.34 at March 31, 2018.

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 41 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, Greenville, 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 $11.57 billion as of March 31, 2019, TowneBank is one of the largest banks headquartered in Virginia.

Non-GAAP Financial Measures:
This press release contains financial information determined by methods other than in accordance with GAAP.  The Company's management uses these non-GAAP financial measures in 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.  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; and other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation.  TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

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
    March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
Income and Performance Ratios:                  
  Total Revenue $ 133,854     $ 131,417     $ 137,914     $ 137,058     $ 126,276  
  Net income 32,082     36,440     39,252     36,138     25,943  
  Net income attributable to TowneBank 31,409     35,990     38,293     34,804     24,705  
  Net income per common share - diluted 0.44     0.50     0.53     0.48     0.36  
  Book value per common share 21.40     21.05     20.54     20.22     19.90  
  Tangible book value per share (non-GAAP) 14.46     14.26     13.83     13.50     13.34  
  Return on average assets 1.14 %   1.28 %   1.40 %   1.32 %   1.02 %
  Return on average assets - tangible (non-GAAP) 1.29 %   1.43 %   1.56 %   1.48 %   1.15 %
  Return on average equity 8.24 %   9.44 %   10.21 %   9.55 %   7.39 %
  Return on average equity - tangible (non-GAAP) 13.24 %   14.91 %   16.08 %   15.19 %   11.64 %
  Return on average common equity 8.30 %   9.53 %   10.30 %   9.62 %   7.45 %
  Return on average common equity - tangible (non-GAAP) 13.39 %   15.11 %   16.30 %   15.36 %   11.77 %
  Noninterest income as a percentage of total revenue 34.65 %   32.12 %   35.69 %   36.65 %   39.54 %
                     
Regulatory Capital Ratios (1):                  
  Common equity tier 1 11.49 %   11.51 %   11.53 %   11.33 %   11.65 %
  Tier 1 11.52 %   11.54 %   11.57 %   11.36 %   11.68 %
  Total 14.79 %   14.83 %   14.90 %   14.71 %   15.27 %
  Tier 1 leverage ratio 9.92 %   9.87 %   9.98 %   10.00 %   9.97 %
                     
Asset Quality:                  
  Allowance for loan losses to nonperforming loans   9.36x       10.97x       7.25x       12.64x       10.40x  
  Allowance for loan losses to period end loans 0.66 %   0.65 %   0.64 %   0.64 %   0.63 %
  Allowance for loan losses to period end loans excluding purchased loans 0.81 %   0.82 %   0.82 %   0.84 %   0.86 %
  Nonperforming loans to period end loans 0.07 %   0.06 %   0.09 %   0.05 %   0.06 %
  Nonperforming assets to period end assets 0.22 %   0.22 %   0.25 %   0.24 %   0.27 %
  Net charge-offs to average loans (annualized) 0.01 %   0.02 %   0.03 %   0.01 %   0.02 %
                     
  Nonperforming loans $ 5,697     $ 4,749     $ 6,926     $ 3,919     $ 4,495  
  Former bank premises 2,223     2,253     2,253     2,253     2,253  
  Foreclosed property 17,070     17,163     18,153     20,133     21,731  
  Total nonperforming assets $ 24,990     $ 24,165     $ 27,332     $ 26,305     $ 28,479  
  Loans past due 90 days and still accruing interest $ 117     $ 394     $ 153     $ 22     $ 199  
                     
  Allowance for loan losses $ 53,303     $ 52,094     $ 50,236     $ 49,535     $ 46,735  
                     
Mortgage Banking:                  
  Loans originated, mortgage $ 366,643     $ 407,787     $ 561,543     $ 667,189     $ 477,147  
  Loans originated, joint venture 146,884     192,280     249,956     283,933     185,306  
  Total loans originated $ 513,527     $ 600,067     $ 811,499     $ 951,122     $ 662,453  
  Number of loans originated 1,977     2,304     3,068     3,687     2,601  
  Number of originators 240     293     303     324     324  
  Purchase % 86.08 %   88.64 %   89.72 %   91.23 %   80.86 %
  Loans sold $ 473,068     $ 694,341     $ 852,205     $ 825,313     $ 677,114  
  Realized gain on sales and fees as a % of loans closed 3.58 %   3.37 %   3.36 %   3.30 %   3.59 %
                     
Other Ratios:                  
  Net interest margin 3.54 %   3.53 %   3.62 %   3.69 %   3.51 %
  Net interest margin-fully tax equivalent (nonGAAP) 3.57 %   3.55 %   3.64 %   3.71 %   3.54 %
  Average earning assets/total average assets 89.50 %   89.91 %   89.69 %   89.61 %   89.45 %
  Average loans/average deposits 95.83 %   95.32 %   97.55 %   97.79 %   95.89 %
  Average noninterest deposits/total average deposits 31.39 %   31.90 %   32.61 %   32.28 %   31.75 %
  Period end equity/period end total assets 13.53 %   13.78 %   13.49 %   13.63 %   13.65 %
  Efficiency ratio 68.43 %   62.65 %   64.00 %   65.10 %   73.10 %
                     
  (1) Current reporting period regulatory capital ratios are preliminary            


TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
                   
Investment Securities             % Change
  Q1   Q1   Q4   Q1 19 vs.   Q1 19 vs.
Available-for-sale securities, at fair value 2019   2018   2018   Q1 18   Q4 18
U.S. agency securities $ 260,152     $ 428,952     $ 358,542     (39.35 )%   (27.44 )%
U.S. Treasury notes 2,229     301,442     1,246     (99.26 )%   78.89 %
Municipal securities 107,278     56,655     87,308     89.35 %   22.87 %
Trust preferred and other corporate securities 32,439     24,570     30,992     32.03 %   4.67 %
Mortgage-backed securities issued by GSE 697,679     425,560     617,251     63.94 %   13.03 %
Total $ 1,099,777     $ 1,237,179     $ 1,095,339     (11.11 )%   0.41 %
                   
Held-to-maturity securities, at amortized cost                  
Municipal securities $ 34,472     $ 36,056     $ 34,488     (4.39 )%   (0.05 )%
Trust preferred corporate securities 500     500     500     %   %
Mortgage-backed securities issued by GSE 14,715     18,727     15,610     (21.42 )%   (5.73 )%
Total $ 49,687     $ 55,283     $ 50,598     (10.12 )%   (1.80 )%
                   
                   
Loans Held For Investment             % Change
  Q1   Q1   Q4   Q1 19 vs.   Q1 19 vs.
  2019   2018   2018   Q1 18   Q4 18
Real estate-construction and development $ 1,111,360     $ 996,159     $ 1,067,239     11.56 %   4.13 %
Commercial real estate - investment related properties 1,951,292     1,853,737     1,978,592     5.26 %   (1.38 )%
Commercial real estate - owner occupied 1,279,039     1,164,923     1,262,748     9.80 %   1.29 %
Real estate-multifamily 255,649     297,085     260,987     (13.95 )%   (2.05 )%
Real estate-residential 1-4 family 1,637,579     1,566,449     1,626,896     4.54 %   0.66 %
Commercial and industrial business 1,547,623     1,328,357     1,510,364     16.51 %   2.47 %
Consumer and other loans 322,828     263,441     311,407     22.54 %   3.67 %
Total $ 8,105,370     $ 7,470,151     $ 8,018,233     8.50 %   1.09 %
                   
                   
Deposits             % Change
  Q1   Q1   Q4   Q1 19 vs.   Q1 19 vs.
  2019   2018   2018   Q1 18   Q4 18
Noninterest-bearing demand $ 2,813,857     $ 2,503,246     $ 2,622,761     12.41 %   7.29 %
Interest-bearing:                  
Demand and money market accounts 3,290,907     3,001,256     3,223,215     9.65 %   2.10 %
Savings 285,790     309,077     286,684     (7.53 )%   (0.31 )%
Certificates of deposits 2,341,134     2,011,843     2,237,762     16.37 %   4.62 %
Total $ 8,731,688     $ 7,825,422     $ 8,370,422     11.58 %   4.32 %
                   
                   
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:
    Discount Accretion (Premium Amortization)    
    For the three months ended    
    June 30,   September 30,   December 31,    
    2019   2019   2019    
Assets:                
Investment Securities   $ (75 )   $ (74 )   $ (75 )    
Loans   1,837     1,773     1,716      
                 
Liabilities:                
Deposits   54     51     47      
                 
Total estimated effect on net interest income   $ 1,708     $ 1,648     $ 1,594      
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
factors such as changes in estimated prepayment speeds or projected credit loss rates.


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
  Three Months Ended   Three Months Ended   Three Months Ended
  March 31, 2019   December 31, 2018   March 31, 2018
      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
$ 8,030,994     $ 100,146     5.06 %   $ 7,923,978     $ 99,895     5.00 %   $ 6,954,777     $ 81,911     4.78 %
Taxable investment securities 1,036,645     7,529     2.91 %   1,101,892     7,515     2.73 %   902,292     5,041     2.23 %
Tax-exempt investment securities 79,310     765     3.86 %   80,656     747     3.70 %   73,037     672     3.68 %
Total securities 1,115,955     8,294     2.97 %   1,182,548     8,262     2.73 %   975,329     5,713     2.34 %
Interest-bearing deposits 693,365     3,998     2.34 %   652,131     3,559     2.17 %   640,349     2,362     1.50 %
Loans held for sale 178,475     2,003     4.49 %   266,058     3,176     4.77 %   239,103     2,379     3.98 %
Total earning assets 10,018,789     114,441     4.63 %   10,024,715     114,892     4.55 %   8,809,558     92,365     4.25 %
Less: allowance for loan losses (52,844 )           (50,792 )           (46,199 )        
                                   
Total nonearning assets 1,228,808             1,176,037             1,085,005          
                                   
Total assets $ 11,194,753             $ 11,149,960             $ 9,848,364          
                                   
Liabilities and Equity:                                  
Interest-bearing deposits                                  
Demand and money market $ 3,174,157     $ 6,240     0.80 %   $ 3,122,973     $ 5,670     0.72 %   $ 2,774,347     $ 2,969     0.43 %
Savings 285,499     1,027     1.46 %   293,135     1,022     1.38 %   308,539     876     1.15 %
Certificates of deposit 2,290,056     11,907     2.11 %   2,245,039     10,803     1.91 %   1,866,889     5,641     1.23 %
Total interest-bearing deposits 5,749,712     19,174     1.35 %   5,661,147     17,495     1.23 %   4,949,775     9,486     0.78 %
Borrowings 821,889     4,221     2.05 %   920,389     4,643     1.97 %   820,967     2,878     1.40 %
Subordinated debt, net 247,913     2,962     4.78 %   247,769     2,961     4.78 %   259,205     3,158     4.87 %
Total interest-bearing liabilities 6,819,514     26,357     1.57 %   6,829,305     25,099     1.46 %   6,029,947     15,522     1.04 %
Demand deposits 2,630,813             2,651,495             2,303,125          
Other noninterest-bearing liabilities 198,527             157,238             160,308          
Total liabilities 9,648,854             9,638,038             8,493,380          
                                   
Shareholders’ equity 1,545,899             1,511,922             1,354,984          
                                   
Total liabilities and equity $ 11,194,753             $ 11,149,960             $ 9,848,364          
                                   
Net interest income (tax-equivalent basis)     $ 88,084             $ 89,793             $ 76,843      
Reconcilement of Non-GAAP Financial Measures                                
Tax-equivalent basis adjustment     (611 )           (585 )           (499 )    
Net interest income (GAAP)     $ 87,473             $ 89,208             $ 76,344      
                                   
Interest rate spread (1)         3.06 %           3.09 %           3.21 %
Interest expense as a percent of average earning assets       1.07 %           0.99 %           0.71 %
Net interest margin (tax equivalent basis) (2)       3.57 %           3.55 %           3.54 %
Total cost of deposits         0.93 %           0.83 %           0.53 %
                                   

(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)
   
     
  March 31,   December 31,
  2019   2018
  (unaudited)   (audited)
ASSETS      
Cash and due from banks $ 879,299     $ 665,029  
Interest-bearing deposits in financial institutions 21,001     21,667  
Total Cash and Cash Equivalents 900,300     686,696  
Securities available for sale, at fair value 1,099,777     1,095,339  
Securities held to maturity, at amortized cost 49,687     50,598  
Other securities 5,022     4,797  
Federal Home Loan Bank stock, at amortized cost 41,464     43,229  
Total Securities 1,195,950     1,193,963  
Mortgage loans held for sale 247,021     220,986  
Loans, net of unearned income and deferred costs 8,105,370     8,018,233  
Less: allowance for loan losses (53,303 )   (52,094 )
Net Loans 8,052,067     7,966,139  
Premises and equipment, net 227,458     211,796  
Goodwill 442,881     433,658  
Other intangible assets, net 61,333     58,752  
Bank-owned life insurance policies 238,977     237,371  
Other assets 202,276     153,669  
TOTAL ASSETS $ 11,568,263     $ 11,163,030  
       
LIABILITIES AND EQUITY      
Deposits:      
Noninterest-bearing demand $ 2,813,857     $ 2,622,761  
Interest-bearing:      
Demand and money market accounts 3,290,907     3,223,215  
Savings 285,790     286,684  
Certificates of deposit 2,341,134     2,237,762  
Total Deposits 8,731,688     8,370,422  
Advances from the Federal Home Loan Bank 739,160     799,315  
Subordinated debt, net 248,010     247,861  
Repurchase agreements and other borrowings 44,775     47,156  
Total Borrowings 1,031,945     1,094,332  
Other liabilities 238,974     159,856  
TOTAL LIABILITIES 10,002,607     9,624,610  
Preferred stock      
Authorized and unissued shares - 2,000,000      
Common stock, $1.667 par: 150,000,000 shares authorized      
72,613,754 and 72,465,923 shares issued at      
March 31, 2019 and December 31, 2018, respectively 121,047     120,801  
Capital surplus 1,035,563     1,034,676  
Retained earnings 399,030     379,239  
Common stock issued to deferred compensation trust, at cost      
768,274 and 769,200 shares at      
March 31, 2019 and December 31, 2018, respectively (14,067 )   (13,955 )
Deferred compensation trust 14,067     13,955  
Accumulated other comprehensive loss (1,792 )   (9,190 )
TOTAL SHAREHOLDERS’ EQUITY 1,553,848     1,525,526  
Noncontrolling interest 11,808     12,894  
TOTAL EQUITY 1,565,656     1,538,420  
TOTAL LIABILITIES AND EQUITY $ 11,568,263     $ 11,163,030  


TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
       
       
  Three Months Ended
  March 31,
  2019   2018
INTEREST INCOME:      
Loans, including fees $ 99,695     $ 81,533  
Investment securities 8,134     5,592  
Interest-bearing deposits in financial institutions and federal funds sold 3,998     2,362  
Mortgage loans held for sale 2,003     2,379  
Total interest income 113,830     91,866  
INTEREST EXPENSE:      
Deposits 19,174     9,486  
Advances from the Federal Home Loan Bank 4,153     2,838  
Subordinated capital debentures 2,962     3,158  
Repurchase agreements and other borrowings, net of capitalized interest 68     40  
Total interest expense 26,357     15,522  
Net interest income 87,473     76,344  
       
PROVISION FOR LOAN LOSSES 1,438     1,953  
Net interest income after provision for loan losses 86,035     74,391  
NONINTEREST INCOME:      
Residential mortgage banking income, net 13,508     17,604  
Insurance commissions and other title fees and income, net 15,582     13,372  
Real estate brokerage and property management income, net 9,268     10,429  
Service charges on deposit accounts 2,861     2,883  
Credit card merchant fees, net 1,183     1,168  
Bank owned life insurance 1,598     1,532  
Other income 3,157     2,941  
Gain/(loss) on investment securities (776 )   3  
Total noninterest income 46,381     49,932  
NONINTEREST EXPENSE:      
Salaries and employee benefits 52,860     50,784  
Occupancy 8,251     6,477  
Furniture and equipment 3,371     3,698  
Other expenses 27,641     31,344  
Total noninterest expense 92,123     92,303  
Income before income tax expense and noncontrolling interest 40,293     32,020  
Provision for income tax expense 8,211     6,077  
Net income $ 32,082     $ 25,943  
Net income attributable to noncontrolling interest (673 )   (1,238 )
Net income attributable to TowneBank $ 31,409     $ 24,705  
Per common share information      
Basic earnings $ 0.44     $ 0.36  
Diluted earnings $ 0.44     $ 0.36  
Cash dividends declared $ 0.16     $ 0.14  


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
                   
  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
  (unaudited)   (audited)   (unaudited)   (unaudited)   (unaudited)
ASSETS                  
Cash and due from banks $ 879,299     $ 665,029     $ 688,584     $ 440,054     $ 479,453  
Interest-bearing deposits in financial institutions 21,001     21,667     20,910     17,749     17,728  
Total Cash and Cash Equivalents 900,300     686,696     709,494     457,803     497,181  
Securities available for sale, at fair value 1,099,777     1,095,339     1,051,773     1,057,663     1,237,179  
Securities held to maturity, at amortized cost 49,687     50,598     52,002     53,954     55,283  
Other securities 5,022     4,797     5,519     5,206     5,002  
Federal Home Loan Bank stock, at amortized cost 41,464     43,229     46,393     46,393     46,400  
Total Securities 1,195,950     1,193,963     1,155,687     1,163,216     1,343,864  
Mortgage loans held for sale 247,021     220,986     333,354     396,185     293,731  
Loans, net of unearned income and deferred costs 8,105,370     8,018,233     7,881,692     7,774,956     7,470,151  
Less: allowance for loan losses (53,303 )   (52,094 )   (50,236 )   (49,535 )   (46,735 )
Net Loans 8,052,067     7,966,139     7,831,456     7,725,421     7,423,416  
Premises and equipment, net 227,458     211,796     210,724     207,997     207,126  
Goodwill 442,881     433,658     427,117     425,625     416,789  
Other intangible assets, net 61,333     58,752     58,165     60,669     57,493  
Bank-owned life insurance policies 238,977     237,371     235,348     233,682     232,039  
Other assets 202,276     153,669     159,887     161,055     148,776  
TOTAL ASSETS $ 11,568,263     $ 11,163,030     $ 11,121,232     $ 10,831,653     $ 10,620,415  
LIABILITIES AND EQUITY                  
Deposits:                  
Noninterest-bearing demand $ 2,813,857     $ 2,622,761     $ 2,671,558     $ 2,597,320     $ 2,503,246  
Interest-bearing:                  
Demand and money market accounts 3,290,907     3,223,215     3,096,317     3,017,767     3,001,256  
Savings 285,790     286,684     298,368     305,334     309,077  
Certificates of deposit 2,341,134     2,237,762     2,233,188     2,070,790     2,011,843  
Total Deposits 8,731,688     8,370,422     8,299,431     7,991,211     7,825,422  
Advances from the Federal Home Loan Bank 739,160     799,315     873,469     873,622     873,773  
Subordinated debt, net 248,010     247,861     247,712     247,563     257,723  
Repurchase agreements and other borrowings 44,775     47,156     45,591     50,981     52,509  
Total Borrowings 1,031,945     1,094,332     1,166,772     1,172,166     1,184,005  
Other liabilities 238,974     159,856     155,205     191,490     161,638  
TOTAL LIABILITIES 10,002,607     9,624,610     9,621,408     9,354,867     9,171,065  
Preferred stock                  
Authorized shares - 2,000,000                  
                   
Common stock, $1.667 par value 121,047     120,801     120,613     120,615     120,472  
Capital surplus 1,035,563     1,034,676     1,032,863     1,031,965     1,028,985  
Retained earnings 399,030     379,239     354,842     328,125     304,896  
Common stock issued to deferred compensation                  
trust, at cost (14,067 )   (13,955 )   (13,780 )   (13,500 )   (12,612 )
Deferred compensation trust 14,067     13,955     13,780     13,500     12,612  
Accumulated other comprehensive loss (1,792 )   (9,190 )   (22,348 )   (17,944 )   (15,873 )
TOTAL SHAREHOLDERS’ EQUITY 1,553,848     1,525,526     1,485,970     1,462,761     1,438,480  
Noncontrolling interest 11,808     12,894     13,854     14,025     10,870  
TOTAL EQUITY 1,565,656     1,538,420     1,499,824     1,476,786     1,449,350  
TOTAL LIABILITIES AND EQUITY $ 11,568,263     $ 11,163,030     $ 11,121,232     $ 10,831,653     $ 10,620,415  


TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except share data)
   
   
  Three Months Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
INTEREST INCOME:                  
Loans, including fees $ 99,695     $ 99,446     $ 97,215     $ 93,150     $ 81,533  
Investment securities 8,134     8,126     7,019     6,390     5,592  
Interest-bearing deposits in financial institutions and federal funds sold 3,998     3,559     2,148     2,159     2,362  
Mortgage loans held for sale 2,003     3,176     4,012     3,557     2,379  
Total interest income 113,830     114,307     110,394     105,256     91,866  
INTEREST EXPENSE:                  
Deposits 19,174     17,495     14,540     11,620     9,486  
Advances from the Federal Home Loan Bank 4,153     4,585     4,153     3,764     2,838  
Subordinated capital debentures 2,962     2,961     2,962     2,986     3,158  
Repurchase agreements and other borrowings 68     58     42     63     40  
Total interest expense 26,357     25,099     21,697     18,433     15,522  
Net interest income 87,473     89,208     88,697     86,823     76,344  
                   
PROVISION FOR LOAN LOSSES 1,438     2,292     1,241     3,056     1,953  
Net interest income after provision for loan losses 86,035     86,916     87,456     83,767     74,391  
NONINTEREST INCOME:                  
Residential mortgage banking income, net 13,508     12,951     15,804     18,745     17,604  
Insurance commissions and other title fees and income, net 15,582     13,212     14,493     15,087     13,372  
Real estate brokerage and property management income, net 9,268     5,982     8,542     6,910     10,429  
Service charges on deposit accounts 2,861     2,928     3,028     2,969     2,883  
Credit card merchant fees, net 1,183     1,298     1,563     1,443     1,168  
Bank owned life insurance 1,598     2,014     1,657     1,633     1,532  
Other income 3,157     3,824     4,130     3,448     2,941  
Gain/(loss) on investment securities (776 )               3  
Total noninterest income 46,381     42,209     49,217     50,235     49,932  
NONINTEREST EXPENSE:                  
Salaries and employee benefits 52,860     50,233     50,497     50,324     50,784  
Occupancy expense 8,251     7,352     7,013     6,802     6,477  
Furniture and equipment 3,371     3,587     3,646     3,546     3,698  
Other expenses 27,641     21,165     27,106     28,549     31,344  
Total noninterest expense 92,123     82,337     88,262     89,221     92,303  
Income before income tax expense and noncontrolling interest 40,293     46,788     48,411     44,781     32,020  
Provision for income tax expense 8,211     10,348     9,159     8,643     6,077  
Net income 32,082     36,440     39,252     36,138     25,943  
Net income attributable to noncontrolling interest (673 )   (450 )   (959 )   (1,334 )   (1,238 )
Net income attributable to TowneBank $ 31,409     $ 35,990     $ 38,293     $ 34,804     $ 24,705  
Per common share information                  
Basic earnings $ 0.44     $ 0.50     $ 0.53     $ 0.48     $ 0.36  
Diluted earnings $ 0.44     $ 0.50     $ 0.53     $ 0.48     $ 0.36  
Basic weighted average shares outstanding 71,992,330     71,905,956     71,875,085     71,787,980     68,983,745  
Diluted weighted average shares outstanding 72,099,558     $ 72,043,369     72,044,355     71,949,590     69,156,809  
Cash dividends declared $ 0.16     $ 0.16     $ 0.16     $ 0.16     $ 0.14  
                   
                   
                   


TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)
 
           
  Three Months Ended   Increase/(Decrease)
  March 31,   December 31,   2019 over 2018
  2019   2018   2018   Amount   Percent
Revenue                  
Net interest income $ 86,400     $ 74,042     $ 86,433     $ 12,358     16.69 %
Noninterest income                  
Service charges on deposit accounts 2,861     2,883     2,928     (22 )   (0.76 )%
Credit card merchant fees 1,183     1,168     1,298     15     1.28 %
Other income 3,927     3,956     4,660     (29 )   (0.73 )%
Subtotal 7,971     8,007     8,886     (36 )   (0.45 )%
Gain/(loss) on investment securities (776 )   3         (779 )   N/M  
Total noninterest income 7,195     8,010     8,886     (815 )   (10.17 )%
Total revenue 93,595     82,052     95,319     11,543     14.07 %
                   
Provision for loan losses 1,438     1,953     2,292     (515 )   (26.37 )%
                   
Expenses                  
Salaries and employee benefits 31,087     30,202     28,100     885     2.93 %
Occupancy expense 5,244     4,016     4,789     1,228     30.58 %
Furniture and equipment 2,367     2,532     2,426     (165 )   (6.52 )%
Amortization of intangibles 1,366     1,221     1,428     145     11.88 %
Other expenses 16,181     20,748     9,759     (4,567 )   (22.01 )%
Total expenses 56,245     58,719     46,502     (2,474 )   (4.21 )%
Income before income tax, corporate allocation and noncontrolling interest 35,912     21,380     46,525     14,532     67.97 %
Corporate allocation 452     456     367     (4 )   (0.88 )%
Income before income tax provision and noncontrolling interest 36,364     21,836     46,892     14,528     66.53 %
Provision for income tax expense 7,192     3,881     10,252     3,311     85.31 %
Net income 29,172     17,955     36,640     11,217     62.47 %
Noncontrolling interest 2     (2 )   4     4     N/M  
Net income attributable to TowneBank $ 29,174     $ 17,953     $ 36,644     $ 11,221     62.50 %
                   
Efficiency ratio 59.60 %   71.57 %   48.79 %   (11.97 )%   (16.72 )%


TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)
 
     
  Three Months Ended   Increase/(Decrease)
  March 31,   December 31,   2019 over 2018
  2019   2018   2018   Amount   Percent
Revenue                  
Residential mortgage brokerage income, net $ 13,756     $ 17,661     $ 13,472     $ (3,905 )   (22.11 )%
Real estate brokerage income, net 1,561     1,698     2,183     (137 )   (8.07 )%
Title insurance and settlement fees 368     315     458     53     16.83 %
Property management fees, net 7,708     8,731     3,799     (1,023 )   (11.72 )%
Income from unconsolidated subsidiary 94     94     54         %
Net interest and other income 1,372     2,546     3,210     (1,174 )   (46.11 )%
Total revenue 24,859     31,045     23,176     (6,186 )   (19.93 )%
                   
Expenses                  
Salaries and employee benefits 12,895     13,877     14,308     (982 )   (7.08 )%
Occupancy expense 2,345     1,894     1,928     451     23.81 %
Furniture and equipment 768     980     930     (212 )   (21.63 )%
Amortization of intangible assets 725     672     767     53     7.89 %
Other expenses 6,241     6,294     6,419     (53 )   (0.84 )%
Total expenses 22,974     23,717     24,352     (743 )   (3.13 )%
                   
Income/(loss) before income tax, corporate allocation and noncontrolling interest 1,885     7,328     (1,176 )   (5,443 )   (74.28 )%
Corporate allocation (263 )   (289 )   (238 )   26     (9.00 )%
Income before income tax provision and noncontrolling interest 1,622     7,039     (1,414 )   (5,417 )   (76.96 )%
Provision for income tax expense 551     1,559     (86 )   (1,008 )   (64.66 )%
Net income/(loss) 1,071     5,480     (1,328 )   (4,409 )   (80.46 )%
Noncontrolling interest (252 )   (622 )   (130 )   370     (59.49 )%
Net income/(loss) attributable to TowneBank $ 819     $ 4,858     $ (1,458 )   $ (4,039 )   (83.14 )%
                   
Efficiency ratio 92.42 %   76.40 %   105.07 %   16.02 %   20.97 %
                   


TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)
 
           
       
  Three Months Ended   Increase/(Decrease)
  March 31,   December 31,   2019 over 2018
  2019   2018   2018   Amount   Percent
Commission and fee income                  
Property and casualty $ 11,873     $ 9,356     $ 9,770     $ 2,517     26.90 %
Employee benefits 3,506     3,196     3,625     310     9.70 %
Travel insurance 1,289     1,768     1,095     (479 )   (27.09 )%
Specialized benefit services 170     169     168     1     0.59 %
Total commissions and fees 16,838     14,489     14,658     2,349     16.21 %
                   
Contingency and bonus revenue 1,585     1,133     1,185     452     39.89 %
Other income 75     70     79     5     7.14 %
Total revenue 18,498     15,692     15,922     2,806     17.88 %
                   
Employee commission expense 3,098     2,513     3,000     585     23.28 %
Revenue, net of commission expense 15,400     13,179     12,922     2,221     16.85 %
                   
Salaries and employee benefits 8,878     6,705     7,825     2,173     32.41 %
Occupancy expense 662     567     635     95     16.75 %
Furniture and equipment 236     185     231     51     27.57 %
Amortization of intangible assets 1,101     702     928     399     56.84 %
Other expenses 2,027     1,708     1,865     319     18.68 %
Total operating expenses 12,904     9,867     11,484     3,037     30.78 %
Income before income tax, corporate allocation and noncontrolling interest 2,496     3,312     1,438     (816 )   (24.64 )%
Corporate allocation (189 )   (167 )   (128 )   (22 )   13.17 %
Income before income tax provision and noncontrolling interest 2,307     3,145     1,310     (838 )   (26.65 )%
Provision for income tax expense 468     637     182     (169 )   (26.53 )%
Net income 1,839     2,508     1,128     (669 )   (26.67 )%
Noncontrolling interest (423 )   (614 )   (324 )   191     (31.11 )%
Net income attributable to TowneBank $ 1,416     $ 1,894     $ 804     $ (478 )   (25.24 )%
                   
Provision for income taxes 468     637     182     (169 )   (26.53 )%
Depreciation, amortization and interest expense 1,333     906     1,152     427     47.13 %
EBITDA $ 3,217     $ 3,437     $ 2,138     $ (220 )   (6.40 )%
                   
Efficiency ratio 83.79 %   74.87 %   88.87 %   8.92 %   11.91 %


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
 
           
  Three Months Ended
  March 31,   March 31,   December 31,
  2019   2018   2018
           
Return on average assets (GAAP) 1.14 %   1.02 %   1.28 %
Impact of excluding average goodwill and other intangibles and amortization 0.15 %   0.13 %   0.15 %
Return on average tangible assets (non-GAAP) 1.29 %   1.15 %   1.43 %
           
Return on average equity (GAAP) 8.24 %   7.39 %   9.44 %
Impact of excluding average goodwill and other intangibles and amortization 5.00 %   4.25 %   5.47 %
Return on average tangible equity (non-GAAP) 13.24 %   11.64 %   14.91 %
           
Return on average common equity (GAAP) 8.30 %   7.45 %   9.53 %
Impact of excluding average goodwill and other intangibles and amortization 5.09 %   4.32 %   5.58 %
Return on average tangible common equity (non-GAAP) 13.39 %   11.77 %   15.11 %
           
Book value (GAAP) $ 21.40     $ 19.90     $ 21.05  
Impact of excluding average goodwill and other intangibles and amortization (6.94 )   (6.56 )   (6.79 )
Tangible book value (non-GAAP) $ 14.46     $ 13.34     $ 14.26  
           


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
    March 31,   December 31,   September 30,   June 30,   March 31,
    2018   2018   2018   2018   2018
                     
Net income (GAAP)   $ 31,409     $ 35,990     $ 38,293     $ 34,804     $ 24,705  
                     
Acquisition-related expenses   411     (1,518 )   424     797     8,726  
Income tax expense -tax reform legislation       696              
Income tax expense (benefit) - other items   (52 )   355     (44 )   (93 )   (1,639 )
Income tax expense (benefit)   (52 )   1,051     (44 )   (93 )   (1,639 )
Total charges, net of taxes   359     (467 )   380     704     7,087  
Operating earnings, excluding certain items affecting
comparability (non-GAAP)
  $ 31,768     $ 35,523     $ 38,673     $ 35,508     $ 31,792  
                     
Weighted average diluted shares   72,099,558     72,043,369     72,044,355     71,949,590     69,156,809  
                     
Diluted EPS (GAAP)   $ 0.44     $ 0.50     $ 0.53     $ 0.48     $ 0.36  
Diluted EPS, excluding certain items affecting
comparability (non-GAAP)
  $ 0.44     $ 0.49     $ 0.54     $ 0.49     $ 0.46  
                     
Average assets   $ 11,194,753     $ 11,149,960     $ 10,844,570     $ 10,536,847     $ 9,848,364  
Average tangible equity   $ 1,039,630     $ 1,022,982     $ 1,003,151     $ 981,607     $ 932,161  
                     
Return on average assets, excluding certain items
affecting comparability (non-GAAP)
  1.15 %   1.26 %   1.41 %   1.35 %   1.31 %
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)   13.38 %   14.73 %   16.23 %   15.48 %   14.72 %
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)   13.53 %   14.93 %   16.45 %   15.66 %   14.89 %
Efficiency ratio, excluding certain items affecting
comparability (non-GAAP)
  68.12 %   63.81 %   63.69 %   64.52 %   66.19 %
                     

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