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CST: 20/11/2019 03:19:59   

TowneBank Reports Second Quarter 2019 Earnings

117 Days ago

SUFFOLK, Va., July 25, 2019 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (NASDAQ: TOWN) today reported earnings for the quarter ended June 30, 2019 of $34.64 million, or $0.48 per diluted share, compared to $34.80 million, or $0.48 per diluted share, for the quarter ended June 30, 2018.

“Our second quarter performance was highlighted by record top-line revenues coupled with strong deposit growth. We also continued to strategically invest in recruiting, technology, enhanced services, and infrastructure to support future growth," said G. Robert Aston, Jr., Executive Chairman.

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

  • Total revenues were $144.54 million, an increase of $7.48 million, or 5.46%.
  • Loans held for investment increased $351.77 million, or 4.52%, from June 30, 2018, and $21.36 million, or 0.26%, from March 31, 2019, or 1.06% on an annualized basis.
  • Total deposits were $9.27 billion, an increase of $1.28 billion, or 15.99%, compared to prior year and $0.54 billion, or 6.15% from March 31, 2019, or 24.67% on an annualized basis.  In comparison to June 30, 2018, total deposits increased 11.70% in our Hampton Roads region, 28.14% in our Richmond region, and 23.39% in our North Carolina region.
  • Noninterest bearing deposits increased by 13.60%, to $2.95 billion, representing 31.83% of total deposits.  Compared to the linked quarter, noninterest bearing deposits increased 4.86%, or 19.49% on an annualized basis.
  • Annualized return on common shareholders' equity of 8.89% and annualized return on average tangible common shareholders' equity of 14.05% (non-GAAP).
  • Net interest margin for the quarter was 3.49% and taxable equivalent net interest margin was 3.52% (non-GAAP).
  • Effective tax rate of 20.47% in the quarter compared to 19.89% in the second quarter of 2018.

“In addition to recruiting Jack Clayton as President of Business Strategies for North Carolina in the first quarter of 2019, we continued to build our production teams in Raleigh, Greensboro, and Charlotte adding Private Bankers and Treasury expertise.  We announced that Charity Volman has been appointed President of TowneBank’s newly formed Corporate Banking Group.  Joining her team are Karen Priest, Laura Morgan, and Brian Woodell, who served with her at her former bank.  In addition, Shane Stevens, was recently appointed Director of Merchant and Treasury Services.  Each of these individuals brings a wealth of experience and talent to our HomeTowne Banking platform,” stated J. Morgan Davis, President and Chief Executive Officer.

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

  • Net interest income was $89.82 million compared to $86.82 million at June 30, 2018.
  • Taxable equivalent net interest margin (non-GAAP) was 3.52%, including accretion of 11 basis points, compared to 3.71%, including accretion of 23 basis points, for 2018.
  • Average loans held for investment, with an average yield of 5.08%, represented 78.27% of average earning assets at June 30, 2019 compared to an average yield of 4.97% and 79.99% of average earning assets in the second quarter of 2018.
  • Total cost of deposits increased to 0.99% from 0.60% at June 30, 2018.
  • Average interest-earning assets totaled $10.32 billion at June 30, 2019 compared to $9.44 billion at June 30, 2018, an increase of 9.26%.
  • Average interest-bearing liabilities totaled $6.95 billion, an increase of $0.55 billion from prior year.

Quarterly Provision for Loan Losses:

  • Recorded a provision for loan losses of $2.82 million compared to $3.06 million one year ago and $1.44 million in the linked quarter.
  • Net charge-offs were $1.60 million compared to $0.26 million one year prior.  The ratio of net charge-offs to average loans on an annualized basis was 0.08% compared to 0.01% in the prior quarter and 0.01% in the second quarter of 2018.  This increase was primarily attributable to the charge-off of one credit relationship.
  • The allowance for loan losses represented 0.67% of total loans compared to 0.66% at March 31, 2019 and 0.64% at June 30, 2018.  Loan loss reserve as a percentage of total loans, excluding purchased loans, was 0.81% at June 30, 2019, and March 31, 2019, compared to 0.84% at June 30, 2018.  The allowance for loan losses was 3.00 times nonperforming loans compared to 9.36 times at March 31, 2019 and 12.64 times at June 30, 2018.

Quarterly Noninterest Income Compared to the Second Quarter of 2018:

  • Total noninterest income was $54.72 million compared to $50.24 million in 2018, an increase of $4.48 million, or 8.92%.  Residential mortgage banking income was relatively flat in the quarter, while insurance commissions and other title fees increased $2.13 million, real estate brokerage and property management income increased $1.93 million, and service charges on deposit accounts increased $0.22 million.  Credit card merchant fees declined $0.78 million.
  • Credit card merchant fee income was roughly $0.90 million below normal seasonal levels in second quarter 2019 due to the impact of converting to a new processing platform that will allow us to provide additional services and capabilities.
  • Residential mortgage banking income was $18.57 million compared to $18.75 million in second quarter 2018.  Loan volume in the current quarter was $821.13 million, with purchase activity comprising 84.97% of that volume.  Loan volume in second quarter 2018 was $951.12 million, with purchase activity of 91.23%.  Lower volumes led to the decline in revenue.
  • Total Insurance segment revenue increased 14.95% to $20.20 million in the second quarter due primarily to additional commission income from insurance agencies that were acquired in November 2018 and January 2019.
  • Property management fee revenue increased 45.89%, or $1.88 million, as compared to second quarter 2018 due to increases in reservation levels.

Quarterly Noninterest Expense Compared to the Second Quarter of 2018:

  • Total noninterest expense was $96.56 million compared to $89.22 million in 2018, an increase of $7.34 million, or 8.22%.  This reflects increases of $3.94 million in salary and benefits expense, $1.29 million in professional fees, $0.86 million in occupancy expense, and $0.76 million in outside data processing expenses.
  • The increase in salary and benefits expense was attributable to the continued expansion of our functional support teams to enable us to enhance Company infrastructure and meet increased regulatory expectations related to exceeding $10 billion in assets, as well as keep pace with our growth and changing industry standards.  Specific areas of focus include: information technology, risk and compliance, accounting, and internal audit.
  • In the wake of the May 2019 tragedy in Virginia Beach, Towne's contribution of $0.50 million to "VBStrong" was included in other expenses.
  • Noninterest expense included operational expenses of $1.60 million related to insurance agencies acquired subsequent to second quarter 2018.

Quarterly Income Taxes Compared to the Second Quarter of 2018:

  • Income tax expense was $8.92 million compared to $8.64 million one year prior.  This represents an effective tax rate of 20.47% compared to 19.89% in the second quarter of 2018.

Consolidated Balance Sheet June 30, 2019 Compared to June 30, 2018

  • Total assets were $11.94 billion for the quarter ended June 30, 2019 compared to $11.16 billion at December 31, 2018 and $10.83 billion at June 30, 2018.  This increase was driven primarily by growth in cash and cash equivalents, available for sale securities, and loans held for investment.  Year-over-year, other assets increased $41.40 million due to the adoption of the leasing standard.
  • Loans held for investment increased $0.11 billion, or 1.35%, or 2.73% on an annualized basis, compared to year end 2018, and $0.35 billion, or 4.52% compared to June 30, 2018.
  • Total liabilities were $10.34 billion at June 30, 2019, an increase of $0.71 billion, or 7.39%, compared to December 31, 2018 and $0.98 billion, or 10.49%, compared to June 30, 2018.  Total deposits increased $0.90 billion over December 31, 2018 and $1.28 billion over June 30, 2018.  Total borrowings declined $0.26 billion from December 31, 2018 and $0.34 billion from June 30, 2018.

Investment Securities:

  • Total investment securities were $1.35 billion compared to $1.20 billion at March 31, 2019 and $1.16 billion at June 30, 2018.  The weighted average duration of the portfolio at June 30, 2019 was 3.1 years.  The carrying value of the available-for-sale portfolio included $19.66 million of net unrealized gains compared to $2.22 million at March 31, 2019 and $20.60 million in net unrealized losses at June 30, 2018.  The increase in net unrealized gains was primarily due to interest rate fluctuations.  The carrying value of the held-to-maturity portfolio does not reflect $1.58 million in net unrealized gains compared to $1.04 million in net unrealized gains at March 31, 2019 and $0.64 million in net unrealized gains at June 30, 2018.

Loans and Asset Quality:

  • Total loans held for investment were $8.13 billion at June 30, 2019 compared to $8.11 billion at March 31, 2019 and $7.77 billion at June 30, 2018.
  • Nonperforming assets were $34.23 million, or 0.29% of total assets, compared to $26.31 million, or 0.24%, at June 30, 2018.  This increase was primarily driven by a single commercial relationship of approximately $10 million.
  • Nonperforming loans were 0.22% of period end loans.
  • Foreclosed property decreased to $14.52 million from $20.13 million at June 30, 2018.

Deposits and Borrowings:

  • Total deposits were $9.27 billion compared to $8.73 billion at March 31, 2019 and $7.99 billion at June 30, 2018.
  • Total loans to deposits were 87.68% compared to 92.83% at March 31, 2019 and 97.29% at June 30, 2018.
  • Non-interest bearing deposits were 31.83% of total deposits at June 30, 2019 compared to 32.23% at March 31, 2019 and 32.50% at June 30, 2018.
  • Total borrowings were $0.84 billion compared to $1.03 billion and $1.17 billion at March 31, 2019 and June 30, 2018, respectively.

Capital:

  • Common equity tier 1 capital ratio of 11.58%.
  • Tier 1 leverage capital ratio of 9.86%.
  • Tier 1 risk-based capital ratio of 11.62%.
  • Total risk-based capital ratio of 14.85%.
  • Book value was $21.95 compared to $21.40 at March 31, 2019 and $20.22 at June 30, 2018.
  • Tangible book value (non-GAAP)was $15.05 compared to $14.46 at March 31, 2019 and $13.50 at June 30, 2018.

Outlook:
Management reforecasts on a quarterly basis and anticipates:

  •  Annualized loan growth to be in the low-to-mid single digits for the remainder of 2019.
  • Our quarterly noninterest expense run rate will range between $93 - $94 million for the remainder of 2019.

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, Greenville, 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 $11.94 billion as of June 30, 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, 757-638-681

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
     
    Three Months Ended
    June 30,   March 31,   December 31,   September 30,   June 30,
  2019   2019   2018   2018   2018
Income and Performance Ratios:                  
  Total Revenue $ 144,537     $ 133,854     $ 131,417     $ 137,914     $ 137,058  
  Net income 36,242     32,082     36,440     39,252     36,138  
  Net income attributable to TowneBank 34,638     31,409     35,990     38,293     34,804  
  Net income per common share - diluted 0.48     0.44     0.50     0.53     0.48  
  Book value per common share 21.95     21.40     21.05     20.54     20.22  
  Book value per common share - tangible (non-GAAP) 15.05     14.46     14.26     13.83     13.50  
  Return on average assets 1.20 %   1.14 %   1.28 %   1.40 %   1.32 %
  Return on average assets - tangible (non-GAAP) 1.35 %   1.29 %   1.43 %   1.56 %   1.48 %
  Return on average equity 8.83 %   8.24 %   9.44 %   10.21 %   9.55 %
  Return on average equity - tangible (non-GAAP) 13.90 %   13.24 %   14.91 %   16.08 %   15.19 %
  Return on average common equity 8.89 %   8.30 %   9.53 %   10.30 %   9.62 %
  Return on average common equity - tangible (non-GAAP) 14.05 %   13.39 %   15.11 %   16.30 %   15.36 %
  Noninterest income as a percentage of total revenue 37.86 %   34.65 %   32.12 %   35.69 %   36.65 %
                     
Regulatory Capital Ratios (1):                  
  Common equity tier 1 11.58 %   11.49 %   11.51 %   11.53 %   11.33 %
  Tier 1 11.62 %   11.52 %   11.54 %   11.57 %   11.36 %
  Total 14.85 %   14.79 %   14.83 %   14.90 %   14.71 %
  Tier 1 leverage ratio 9.86 %   9.92 %   9.87 %   9.98 %   10.00 %
                     
Asset Quality:                  
  Allowance for loan losses to nonperforming loans   3.00 x     9.36 x     10.97 x     7.25 x     12.64 x
  Allowance for loan losses to period end loans 0.67 %   0.66 %   0.65 %   0.64 %   0.64 %
  Allowance for loan losses to period end loans excluding purchased loans 0.81 %   0.81 %   0.82 %   0.82 %   0.84 %
  Nonperforming loans to period end loans 0.22 %   0.07 %   0.06 %   0.09 %   0.05 %
  Nonperforming assets to period end assets 0.29 %   0.22 %   0.22 %   0.25 %   0.24 %
  Net charge-offs to average loans (annualized) 0.08 %   0.01 %   0.02 %   0.03 %   0.01 %
                     
  Nonperforming loans $ 18,202     $ 5,696     $ 4,749     $ 6,926     $ 3,919  
  Former bank premises 1,510     2,223     2,253     2,253     2,253  
  Foreclosed property 14,517     17,071     17,163     18,153     20,133  
  Total nonperforming assets $ 34,229     $ 24,990     $ 24,165     $ 27,332     $ 26,305  
  Loans past due 90 days and still accruing interest $ 415     $ 117     $ 394     $ 153     $ 22  
                     
  Allowance for loan losses $ 54,527     $ 53,303     $ 52,094     $ 50,236     $ 49,535  
                     
Mortgage Banking:                  
  Loans originated, mortgage $ 574,638     $ 366,643     $ 407,787     $ 561,543     $ 667,189  
  Loans originated, joint venture 246,491     146,884     192,280     249,956     283,933  
  Total loans originated $ 821,129     $ 513,527     $ 600,067     $ 811,499     $ 951,122  
  Number of loans originated 3,121     1,977     2,304     3,068     3,687  
  Number of originators 234     240     293     303     324  
  Purchase % 84.97 %   86.08 %   88.64 %   89.72 %   91.23 %
  Loans sold $ 694,832     $ 473,068     $ 694,341     $ 852,205     $ 825,313  
  Gross realized gain on sales and fees as a % of loans originated 3.43 %   3.58 %   3.37 %   3.36 %   3.30 %
                     
Other Ratios:                  
  Net interest margin 3.49 %   3.54 %   3.53 %   3.62 %   3.69 %
  Net interest margin-fully tax equivalent (nonGAAP) 3.52 %   3.57 %   3.55 %   3.64 %   3.71 %
  Average earning assets/total average assets 89.46 %   89.50 %   89.91 %   89.69 %   89.61 %
  Average loans/average deposits 91.60 %   95.83 %   95.32 %   97.55 %   97.79 %
  Average noninterest deposits/total average deposits 31.63 %   31.39 %   31.90 %   32.61 %   32.28 %
  Period end equity/period end total assets 13.45 %   13.53 %   13.78 %   13.49 %   13.63 %
  Efficiency ratio 66.80 %   68.43 %   62.65 %   64.00 %   65.10 %
                     
  (1) Current reporting period regulatory capital ratios are preliminary            


TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
                   
Investment Securities             % Change
  Q2   Q2   Q1   Q2 19 vs.   Q2 19 vs.
Available-for-sale securities, at fair value 2019   2018   2019   Q2 18   Q1 19
U.S. agency securities $ 261,960     $ 426,118     $ 260,152     (38.52 )%   0.69 %
U.S. Treasury notes 2,241     101,224     2,229     (97.79 )%   0.54 %
Municipal securities 167,466     55,465     107,278     201.93 %   56.10 %
Trust preferred and other corporate securities 43,799     30,718     35,003     42.58 %   25.13 %
Mortgage-backed securities issued by GSE 785,355     444,138     695,115     76.83 %   12.98 %
Total $ 1,260,821     $ 1,057,663     $ 1,099,777     19.21 %   14.64 %
                   
Held-to-maturity securities, at amortized cost                  
Municipal securities $ 34,458     $ 36,039     $ 34,472     (4.39 )%   (0.04 )%
Trust preferred corporate securities 2,393     500     500     378.60 %   378.60 %
Mortgage-backed securities issued by GSE 13,723     17,415     14,715     (21.20 )%   (6.74 )%
Total $ 50,574     $ 53,954     $ 49,687     (6.26 )%   1.79 %
                   
                   
Loans Held For Investment             % Change
  Q2   Q2   Q1   Q2 19 vs.   Q2 19 vs.
  2019   2018   2019   Q2 18   Q1 19
Real estate-construction and development $ 1,107,762     $ 989,910     $ 1,111,360     11.91 %   (0.32 )%
Commercial real estate - investment related properties 1,985,990     1,935,013     1,951,292     2.63 %   1.78 %
Commercial real estate - owner occupied 1,288,478     1,227,072     1,279,039     5.00 %   0.74 %
Real estate-multifamily 267,528     288,043     255,649     (7.12 )%   4.65 %
Real estate-residential 1-4 family 1,639,547     1,596,264     1,637,579     2.71 %   0.12 %
Commercial and industrial business 1,523,607     1,440,625     1,547,623     5.76 %   (1.55 )%
Consumer and other loans 313,817     298,029     322,828     5.30 %   (2.79 )%
Total $ 8,126,729     $ 7,774,956     $ 8,105,370     4.52 %   0.26 %
                   
                   
Deposits             % Change
  Q2   Q2   Q1   Q2 19 vs.   Q2 19 vs.
  2019   2018   2019   Q2 18   Q1 19
Noninterest-bearing demand $ 2,950,615     $ 2,597,320     $ 2,813,857     13.60 %   4.86 %
Interest-bearing:                  
Demand and money market accounts 3,409,322     2,987,102     3,290,907     14.13 %   3.60 %
Savings 277,495     305,334     285,790     (9.12 )%   (2.90 )%
Certificates of deposits 2,631,386     2,101,455     2,341,134     25.22 %   12.40 %
Total $ 9,268,818     $ 7,991,211     $ 8,731,688     15.99 %   6.15 %
                   
                   
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    
        September 30,   December 31,    
        2019   2019    
Assets:                
Investment Securities       $ (67 )   $ (65 )    
Loans       1,467     1,447      
                 
Liabilities:                
Deposits       51     47      
                 
Total estimated effect on net interest income       $ 1,349     $ 1,335      
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
  June 30, 2019   March 31, 2019   June 30, 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 $ 8,075,054     $ 102,366     5.08 %   $ 8,030,994     $ 100,146     5.06 %   $ 7,552,983     $ 93,548     4.97 %
Taxable investment securities 1,170,215     8,346     2.85 %   1,036,645     7,529     2.91 %   987,693     5,787     2.34 %
Tax-exempt investment securities 90,942     756     3.33 %   79,310     765     3.86 %   82,839     719     3.47 %
Total securities 1,261,157     9,102     2.89 %   1,115,955     8,294     2.97 %   1,070,532     6,506     2.43 %
Interest-bearing deposits 698,649     4,016     2.31 %   693,365     3,998     2.34 %   499,349     2,159     1.73 %
Loans held for sale 281,775     3,007     4.27 %   178,475     2,003     4.49 %   319,214     3,557     4.46 %
Total earning assets 10,316,635     118,491     4.61 %   10,018,789     114,441     4.63 %   9,442,078     105,770     4.49 %
Less: allowance for loan losses (53,386 )           (52,844 )           (47,745 )        
Total nonearning assets 1,269,029             1,228,808             1,142,514          
Total assets $ 11,532,278             $ 11,194,753             $ 10,536,847          
Liabilities and Equity:                                  
Interest-bearing deposits                                  
Demand and money market $ 3,312,313     $ 7,025     0.85 %   $ 3,174,157     $ 6,240     0.80 %   $ 2,945,897     $ 3,602     0.49 %
Savings 281,221     929     1.33 %   285,499     1,027     1.46 %   306,937     941     1.23 %
Certificates of deposit 2,433,479     13,830     2.28 %   2,290,056     11,907     2.11 %   1,977,973     7,077     1.43 %
Total interest-bearing deposits 6,027,013     21,784     1.45 %   5,749,712     19,174     1.35 %   5,230,807     11,620     0.89 %
Borrowings 678,799     3,318     1.93 %   821,889     4,221     2.05 %   927,216     3,827     1.65 %
Subordinated debt, net 248,064     2,962     4.78 %   247,913     2,962     4.78 %   249,966     2,986     4.78 %
Total interest-bearing liabilities 6,953,876     28,064     1.62 %   6,819,514     26,357     1.57 %   6,407,989     18,433     1.15 %
Demand deposits 2,788,596             2,630,813             2,493,211          
Other noninterest-bearing liabilities 215,951             198,527             173,832          
Total liabilities 9,958,423             9,648,854             9,075,032          
Shareholders’ equity 1,573,855             1,545,899             1,461,815          
Total liabilities and equity $ 11,532,278             $ 11,194,753             $ 10,536,847          
Net interest income (tax-equivalent basis)     $ 90,427             $ 88,084             $ 87,337      
Reconcilement of Non-GAAP Financial Measures                                
Tax-equivalent basis adjustment     (608 )           (611 )           (514 )    
Net interest income (GAAP)     $ 89,819             $ 87,473             $ 86,823      
                                   
Interest rate spread (1)(3)         2.99 %           3.06 %           3.34 %
Interest expense as a percent of average earning assets       1.09 %           1.07 %           0.78 %
Net interest margin (tax equivalent basis) (2)(3)       3.52 %           3.57 %           3.71 %
Total cost of deposits         0.99 %           0.93 %           0.60 %
                                   

(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.
(3) Non-GAAP.

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
  Six Months Ended   Six Months Ended   Six Months Ended June 30,
  June 30, 2019   June 30, 2018   2019 Compared with 2018
      Interest   Average       Interest   Average        
  Average   Income/   Yield/   Average   Income/   Yield/   Increase   Change due to
  Balance   Expense   Rate   Balance   Expense   Rate   (Decrease)   Rate   Volume
Assets:                                  
Loans (net of unearned income and deferred costs), excluding nonaccrual loans $ 8,053,146     $ 202,512     5.07 %   $ 7,255,533     $ 175,458     4.88 %   $ 27,054     $ 7,201     $ 19,853  
Taxable investment securities 1,103,799     15,875     2.88 %   945,229     10,811     2.29 %   5,064     3,066     1,998  
Tax-exempt investment securities 85,158     1,522     3.57 %   77,964     1,408     3.61 %   114     (14 )   128  
Total securities 1,188,957     17,397     2.93 %   1,023,193     12,219     2.39 %   5,178     3,052     2,126  
Interest-bearing deposits 695,999     8,013     2.32 %   564,041     4,522     1.62 %   3,491     2,272     1,219  
Loans held for sale 230,411     5,010     4.35 %   279,380     5,936     4.25 %   (926 )   136     (1,062 )
Total earning assets 10,168,513     232,932     4.62 %   9,122,147     198,135     4.38 %   34,797     12,661     22,136  
Less: allowance for loan losses (53,117 )           (46,976 )                    
Total nonearning assets 1,249,052             1,119,336                      
Total assets $ 11,364,448             $ 10,194,507                      
Liabilities and Equity:                                  
Interest-bearing deposits                                  
Demand and money market $ 3,243,616     $ 13,264     0.82 %   $ 2,860,596     $ 6,571     0.46 %   $ 6,693     $ 5,713     $ 980  
Savings 283,348     1,956     1.39 %   307,734     1,817     1.19 %   139     290     (151 )
Certificates of deposit 2,362,165     25,738     2.20 %   1,922,737     12,718     1.33 %   13,020     9,623     3,397  
Total interest-bearing deposits 5,889,129     40,958     1.40 %   5,091,067     21,106     0.84 %   19,852     15,626     4,226  
Borrowings 749,948     7,540     2.00 %   874,385     6,705     1.53 %   835     1,882     (1,047 )
Subordinated debt, net 247,989     5,923     4.78 %   254,560     6,143     4.83 %   (220 )   (63 )   (157 )
Total interest-bearing liabilities 6,887,066     54,421     1.59 %   6,220,012     33,954     1.10 %   20,467     17,445     3,022  
Demand deposits 2,710,141             2,398,693                      
Other noninterest-bearing
  liabilities
207,287             167,108                      
Total liabilities 9,804,494             8,785,813                      
Shareholders’ equity 1,559,954             1,408,694                      
Total liabilities and equity $ 11,364,448             $ 10,194,507                      
Net interest income (tax-equivalent basis)     $ 178,511             $ 164,181         $ 14,330     $ (4,784 )   $ 19,114  
Reconcilement of Non-GAAP Financial Measures                                
Tax-equivalent basis adjustment     (1,219 )           (1,013 )       (206 )        
Net interest income (GAAP)     $ 177,292             $ 163,168         $ 14,124          
                                   
Interest rate spread (1)(3)         3.03 %           3.28 %            
Interest expense as a percent of average earning assets         1.08 %           0.75 %            
Net interest margin (tax equivalent basis) (2)(3)         3.54 %           3.63 %            
Total cost of deposits         0.96 %           0.57 %            
                                   
(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.
(3) Non-GAAP.


TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
   
     
  June 30,   December 31,
  2019   2018
  (unaudited)   (audited)
ASSETS      
Cash and due from banks $ 110,580     $ 94,604  
Interest-bearing deposits at Federal Reserve Bank 834,505     570,425  
Interest-bearing deposits in financial institutions 21,527     21,667  
Total Cash and Cash Equivalents 966,612     686,696  
Securities available for sale, at fair value 1,260,821     1,095,339  
Securities held to maturity, at amortized cost 50,574     50,598  
Other equity securities 5,396     4,797  
Federal Home Loan Bank stock 32,657     43,229  
Total Securities 1,349,448     1,193,963  
Mortgage loans held for sale 362,773     220,986  
Loans, net of unearned income and deferred costs 8,126,729     8,018,233  
Less: allowance for loan losses (54,527 )   (52,094 )
Net Loans 8,072,202     7,966,139  
Premises and equipment, net 230,177     211,796  
Goodwill 442,881     433,658  
Other intangible assets, net 58,391     58,752  
Bank-owned life insurance policies 240,621     237,371  
Other assets 219,375     153,669  
TOTAL ASSETS $ 11,942,480     $ 11,163,030  
       
LIABILITIES AND EQUITY      
Deposits:      
Noninterest-bearing demand $ 2,950,615     $ 2,622,761  
Interest-bearing:      
Demand and money market accounts 3,409,322     3,223,215  
Savings 277,495     286,684  
Certificates of deposit 2,631,386     2,237,762  
Total Deposits 9,268,818     8,370,422  
Advances from the Federal Home Loan Bank 532,004     799,315  
Subordinated debt, net 248,160     247,861  
Repurchase agreements and other borrowings 56,355     47,156  
Total Borrowings 836,519     1,094,332  
Other liabilities 230,691     159,856  
TOTAL LIABILITIES 10,336,028     9,624,610  
Preferred stock      
Authorized and unissued shares - 2,000,000      
Common stock, $1.667 par: 90,000,000 shares authorized      
72,608,253 and 72,465,923 shares issued at      
June 30, 2019 and December 31, 2018, respectively 121,038     120,801  
Capital surplus 1,036,982     1,034,676  
Retained earnings 420,600     379,239  
Common stock issued to deferred compensation trust, at cost      
807,939 and 769,200 shares at      
June 30, 2019 and December 31, 2018, respectively (15,160 )   (13,955 )
Deferred compensation trust 15,160     13,955  
Accumulated other comprehensive loss 15,143     (9,190 )
TOTAL SHAREHOLDERS’ EQUITY 1,593,763     1,525,526  
Noncontrolling interest 12,689     12,894  
TOTAL EQUITY 1,606,452     1,538,420  
TOTAL LIABILITIES AND EQUITY $ 11,942,480     $ 11,163,030  


TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
               
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2019   2018   2019   2018
INTEREST INCOME:              
Loans, including fees $ 101,874     $ 93,150     $ 201,569     $ 174,682  
Investment securities 8,987     6,390     17,121     11,982  
Interest-bearing deposits in financial institutions and federal funds sold 4,015     2,159     8,013     4,522  
Mortgage loans held for sale 3,007     3,557     5,010     5,936  
Total interest income 117,883     105,256     231,713     197,122  
INTEREST EXPENSE:              
Deposits 21,784     11,620     40,958     21,106  
Advances from the Federal Home Loan Bank 3,201     3,764     7,354     6,602  
Subordinated debt, net 2,962     2,986     5,924     6,143  
Repurchase agreements and other borrowings 117     63     185     103  
Total interest expense 28,064     18,433     54,421     33,954  
Net interest income 89,819     86,823     177,292     163,168  
               
PROVISION FOR LOAN LOSSES 2,824     3,056     4,262     5,009  
Net interest income after provision for loan losses 86,995     83,767     173,030     158,159  
NONINTEREST INCOME:              
Residential mortgage banking income, net 18,565     18,745     32,073     36,348  
Insurance commissions and other title fees and income, net 17,213     15,087     32,795     28,459  
Real estate brokerage and property management income, net 8,843     6,910     18,111     17,340  
Service charges on deposit accounts 3,185     2,969     6,046     5,852  
Credit card merchant fees, net 660     1,443     1,843     2,611  
Bank owned life insurance 1,635     1,633     3,233     3,165  
Other income 4,617     3,448     7,774     6,389  
Net gain/(loss) on investment securities         (776 )   3  
Total noninterest income 54,718     50,235     101,099     100,167  
NONINTEREST EXPENSE:              
Salaries and employee benefits 54,263     50,324     107,123     101,108  
Occupancy expense 7,662     6,802     15,913     13,279  
Furniture and equipment 3,578     3,546     6,949     7,244  
Amortization - intangibles 3,113     2,996     6,305     5,591  
Software expense 2,788     2,648     5,533     4,988  
Outside data processing 3,616     2,859     6,782     4,980  
Professional fees 3,707     2,415     6,386     4,387  
Advertising and marketing 3,182     3,124     6,011     5,774  
Other expenses 14,647     14,507     27,677     34,173  
Total noninterest expense 96,556     89,221     188,679     181,524  
Income before income tax expense and noncontrolling interest 45,157     44,781     85,450     76,802  
Provision for income tax expense 8,915     8,643     17,126     14,720  
Net income $ 36,242     $ 36,138     $ 68,324     $ 62,082  
Net income attributable to noncontrolling interest (1,604 )   (1,334 )   (2,277 )   (2,572 )
Net income attributable to TowneBank $ 34,638     $ 34,804     $ 66,047     $ 59,510  
Per common share information              
Basic earnings $ 0.48     $ 0.48     $ 0.92     $ 0.84  
Diluted earnings $ 0.48     $ 0.48     $ 0.92     $ 0.84  
Cash dividends declared $ 0.18     $ 0.16     $ 0.34     $ 0.30  


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
                   
  June 30,   March 31,   December 31,   September 30,   June 30,
  2019   2019   2018   2018   2018
  (unaudited)   (unaudited)   (audited)   (unaudited)   (unaudited)
ASSETS                  
Cash and due from banks $ 110,580     $ 104,091     $ 94,604     $ 106,485     $ 98,339  
Interest-bearing deposits at Federal Reserve Bank 834,505     775,208     570,425     582,099     341,715  
Interest-bearing deposits in financial institutions 21,527     21,001     21,667     20,910     17,749  
Total Cash and Cash Equivalents 966,612     900,300     686,696     709,494     457,803  
Securities available for sale, at fair value 1,260,821     1,099,777     1,095,339     1,051,773     1,057,663  
Securities held to maturity, at amortized cost 50,574     49,687     50,598     52,002     53,954  
Other equity securities 5,396     5,022     4,797     5,519     5,206  
Federal Home Loan Bank stock 32,657     41,464     43,229     46,393     46,393  
Total Securities 1,349,448     1,195,950     1,193,963     1,155,687     1,163,216  
Mortgage loans held for sale 362,773     247,021     220,986     333,354     396,185  
Loans, net of unearned income and deferred costs 8,126,729     8,105,370     8,018,233     7,881,692     7,774,956  
Less: allowance for loan losses (54,527 )   (53,303 )   (52,094 )   (50,236 )   (49,535 )
Net Loans 8,072,202     8,052,067     7,966,139     7,831,456     7,725,421  
Premises and equipment, net 230,177     227,458     211,796     210,724     207,997  
Goodwill 442,881     442,881     433,658     427,117     425,625  
Other intangible assets, net 58,391     61,333     58,752     58,165     60,669  
Bank-owned life insurance policies 240,621     238,977     237,371     235,348     233,682  
Other assets 219,375     202,276     153,669     159,887     161,055  
                TOTAL ASSETS $ 11,942,480     $ 11,568,263     $ 11,163,030     $ 11,121,232     $ 10,831,653  
LIABILITIES AND EQUITY                  
Deposits:                  
Noninterest-bearing demand $ 2,950,615     $ 2,813,857     $ 2,622,761     $ 2,671,558     $ 2,597,320  
Interest-bearing:                  
Demand and money market accounts 3,409,322     3,290,907     3,223,215     3,096,317     3,017,767  
Savings 277,495     285,790     286,684     298,368     305,334  
Certificates of deposit 2,631,386     2,341,134     2,237,762     2,233,188     2,070,790  
Total Deposits 9,268,818     8,731,688     8,370,422     8,299,431     7,991,211  
Advances from the Federal Home Loan Bank 532,004     739,160     799,315     873,469     873,622  
Subordinated debt, net 248,160     248,010     247,861     247,712     247,563  
Repurchase agreements and other borrowings 56,355     44,775     47,156     45,591     50,981  
Total Borrowings 836,519     1,031,945     1,094,332     1,166,772     1,172,166  
Other liabilities 230,691     238,974     159,856     155,205     191,490  
TOTAL LIABILITIES 10,336,028     10,002,607     9,624,610     9,621,408     9,354,867  
Preferred stock                  
Authorized shares - 2,000,000                  
                   
Common stock, $1.667 par value 121,038     121,047     120,801     120,613     120,615  
Capital surplus 1,036,982     1,035,563     1,034,676     1,032,863     1,031,965  
Retained earnings 420,600     399,030     379,239     354,842     328,125  
Common stock issued to deferred compensation                  
trust, at cost (15,160 )   (14,067 )   (13,955 )   (13,780 )   (13,500 )
Deferred compensation trust 15,160     14,067     13,955     13,780     13,500  
Accumulated other comprehensive loss 15,143     (1,792 )   (9,190 )   (22,348 )   (17,944 )
TOTAL SHAREHOLDERS’ EQUITY 1,593,763     1,553,848     1,525,526     1,485,970     1,462,761  
Noncontrolling interest 12,689     11,808     12,894     13,854     14,025  
TOTAL EQUITY 1,606,452     1,565,656     1,538,420     1,499,824     1,476,786  
TOTAL LIABILITIES AND EQUITY $ 11,942,480     $ 11,568,263     $ 11,163,030     $ 11,121,232     $ 10,831,653  


TOWNEBANK  
Consolidated Statements of Income - Five Quarter Trend (unaudited)  
(dollars in thousands, except share data)  
   
   
  Three Months Ended
  June 30,   March 31,   December 31,   September 30,   June 30,  
  2019   2019   2018   2018   2018  
INTEREST INCOME:                    
Loans, including fees $ 101,874     $ 99,695     $ 99,446     $ 97,215     $ 93,150    
Investment securities 8,987     8,134     8,126     7,019     6,390    
Interest-bearing deposits in financial institutions and federal funds sold 4,015     3,998     3,559     2,148     2,159    
Mortgage loans held for sale 3,007     2,003     3,176     4,012     3,557    
Total interest income 117,883     113,830     114,307     110,394     105,256    
INTEREST EXPENSE:                    
Deposits 21,784     19,174     17,495     14,540     11,620    
Advances from the Federal Home Loan Bank 3,201     4,153     4,585     4,153     3,764    
Subordinated debt 2,962     2,962     2,961     2,962     2,986    
Repurchase agreements and other borrowings 117     68     58     42     63    
Total interest expense 28,064     26,357     25,099     21,697     18,433    
Net interest income 89,819     87,473     89,208     88,697     86,823    
                     
PROVISION FOR LOAN LOSSES 2,824     1,438     2,292     1,241     3,056    
Net interest income after provision for loan losses 86,995     86,035     86,916     87,456     83,767    
NONINTEREST INCOME:                    
Residential mortgage banking income, net 18,565     13,508     12,951     15,804     18,745    
Insurance commissions and other title fees and income, net 17,213     15,582     13,212     14,493     15,087    
Real estate brokerage and property management income, net 8,843     9,268     5,982     8,542     6,910    
Service charges on deposit accounts 3,185     2,861     2,928     3,028     2,969    
Credit card merchant fees, net 660     1,183     1,298     1,563     1,443    
Bank owned life insurance 1,635     1,598     2,014     1,657     1,633    
Other income 4,617     3,157     3,824     4,130     3,448    
Net gain/(loss) on investment securities     (776 )              
Total noninterest income 54,718     46,381     42,209     49,217     50,235    
NONINTEREST EXPENSE:                    
Salaries and employee benefits 54,263     52,860     50,233     50,497     50,324    
Occupancy expense 7,662     8,251     7,352     7,013     6,802    
Furniture and equipment 3,578     3,371     3,587     3,646     3,546    
Amortization - intangibles 3,113     3,192     3,123     2,996     2,996    
Software expense 2,788     2,745     2,694     2,940     2,648    
Outside data processing 3,616     3,166     2,466     2,917     2,859    
Professional fees 3,707     2,679     2,028     1,908     2,415    
Advertising and marketing 3,182     2,829     2,546     2,874     3,124    
Other expenses 14,647     13,030     8,308     13,471     14,507    
Total noninterest expense 96,556     92,123     82,337     88,262     89,221    
Income before income tax expense and noncontrolling interest 45,157     40,293     46,788     48,411     44,781    
Provision for income tax expense 8,915     8,211     10,348     9,159     8,643    
Net income 36,242     32,082     36,440     39,252     36,138    
Net income attributable to noncontrolling interest (1,604 )   (673 )   (450 )   (959 )   (1,334 )  
Net income attributable to TowneBank $ 34,638     $ 31,409     $ 35,990     $ 38,293     $ 34,804    
Per common share information                    
Basic earnings $ 0.48     $ 0.44     $ 0.50     $ 0.53     $ 0.48    
Diluted earnings $ 0.48     $ 0.44     $ 0.50     $ 0.53     $ 0.48    
Basic weighted average shares outstanding 72,044,817     71,992,330     71,905,956     71,875,085     71,787,980    
Diluted weighted average shares outstanding 72,145,600     $ 72,099,558     72,043,369     72,044,355     71,949,590    
Cash dividends declared $ 0.18     $ 0.16     $ 0.16     $ 0.16     $ 0.16    
                     


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
 
                   
  Three Months Ended   Six Months Ended   Increase/(Decrease)
  June 30,   March 31,   June 30,   2019 over 2018
  2019   2018   2019   2019   2018   Amount   Percent
Revenue                          
Net interest income $ 88,442     $ 83,686     $ 86,400     $ 174,842     $ 157,729     $ 17,113     10.85 %
Service charges on deposit                          
accounts 3,185     2,969     2,861     6,046     5,852     194     3.32 %
Credit card merchant fees 660     1,443     1,183     1,843     2,611     (768 )   (29.41 )%
Other income 5,273     4,062     3,927     9,200     8,017     1,183     14.76 %
Subtotal 9,118     8,474     7,971     17,089     16,480     609     3.70 %
Gain/(loss) on investment securities         (776 )   (776 )   3     (779 )   N/M  
Total noninterest income 9,118     8,474     7,195     16,313     16,483     (170 )   (1.03 )%
Total revenue 97,560     92,160     93,595     191,155     174,212     16,943     9.73 %
                           
Provision for loan losses 2,824     3,056     1,438     4,262     5,009     (747 )   (14.91 )%
                           
Expenses                          
Salaries and employee benefits 32,353     27,840     31,087     63,440     58,042     5,398     9.30 %
Occupancy expense 5,007     4,274     5,244     10,251     8,291     1,960     23.64 %
Furniture and equipment 2,517     2,491     2,367     4,884     5,022     (138 )   (2.75 )%
Amortization of intangibles 1,315     1,530     1,366     2,681     2,751     (70 )   (2.54 )%
Other expenses 18,938     15,364     16,181     35,119     36,111     (992 )   (2.75 )%
Total expenses 60,130     51,499     56,245     116,375     110,217     6,158     5.59 %
Income before income tax, corporate allocation and noncontrolling interest 34,606     37,605     35,912     70,518     58,986     11,532     19.55 %
Corporate allocation 546     476     452     998     932     66     7.08 %
Income before income tax provision and noncontrolling interest 35,152     38,081     36,364     71,516     59,918     11,598     19.36 %
Provision for income tax expense 6,650     7,142     7,192     13,842     11,023     2,819     25.57 %
Net income 28,502     30,939     29,172     57,674     48,895     8,779     17.95 %
Noncontrolling interest 1     (6 )   2     3     (8 )   11     N/M  
Net income attributable to TowneBank $ 28,503     $ 30,933     $ 29,174     $ 57,677     $ 48,887     $ 8,790     17.98 %
                           
Efficiency ratio 61.63 %   55.88 %   59.60 %   60.63 %   63.27 %   (2.64 )%   (4.17 )%


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
 
       
  Three Months Ended   Six Months Ended   Increase/(Decrease)
  June 30,   March 31,   June 30,   2019 over 2018
  2019   2018   2019   2019   2018   Amount   Percent
Revenue                          
Residential mortgage brokerage
income, net
$ 18,898     $ 19,344     $ 13,756     $ 32,654     $ 37,005     $ (4,351 )   (11.76 )%
Real estate brokerage income, net 2,873     2,818     1,561     4,434     4,517     (83 )   (1.84 )%
Title insurance and settlement fees 594     579     368     962     895     67     7.49 %
Property management fees, net 5,970     4,092     7,708     13,678     12,823     855     6.67 %
Income from unconsolidated
subsidiary
162     100     94     256     194     62     31.96 %
Net interest and other income 1,677     3,342     1,372     3,049     5,887     (2,838 )   (48.21 )%
Total revenue 30,174     30,275     24,859     55,033     61,321     (6,288 )   (10.25 )%
                           
Expenses                          
Salaries and employee benefits 13,309     15,403     12,895     26,204     29,280     (3,076 )   (10.51 )%
Occupancy expense 2,028     1,964     2,345     4,373     3,858     515     13.35 %
Furniture and equipment 803     835     768     1,571     1,816     (245 )   (13.49 )%
Amortization of intangible assets 695     672     725     1,420     1,343     77     5.73 %
Other expenses 7,234     8,158     6,241     13,475     14,452     (977 )   (6.76 )%
Total expenses 24,069     27,032     22,974     47,043     50,749     (3,706 )   (7.30 )%
                           
Income before income tax, corporate allocation and noncontrolling interest 6,105     3,243     1,885     7,990     10,572     (2,582 )   (24.42 )%
Corporate allocation (328 )   (293 )   (263 )   (591 )   (582 )   (9 )   1.55 %
Income before income tax provision and noncontrolling interest 5,777     2,950     1,622     7,399     9,990     (2,591 )   (25.94 )%
Provision for income tax expense 1,287     633     551     1,838     2,192     (354 )   (16.15 )%
Net income 4,490     2,317     1,071     5,561     7,798     (2,237 )   (28.69 )%
Noncontrolling interest (1,248 )   (891 )   (252 )   (1,500 )   (1,512 )   12     (0.79 )%
Net income attributable to TowneBank $ 3,242     $ 1,426     $ 819     $ 4,061     $ 6,286     $ (2,225 )   (35.40 )%
                           
Efficiency ratio 79.77 %   89.29 %   92.42 %   85.48 %   82.76 %   2.72 %   3.29 %
                           


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
                   
       
  Three Months Ended   Six Months Ended   Increase/(Decrease)
  June 30,   March 31,   June 30,   2019 over 2018
  2019   2018   2019   2019   2018   Amount   Percent
Commission and fee income                          
Property and casualty $ 13,067     $ 11,059     $ 11,873     $ 24,940     $ 20,416     $ 4,524     22.16 %
Employee benefits 3,833     3,454     3,506     7,339     6,650     689     10.36 %
Travel insurance 1,169     1,389     1,289     2,458     3,157     (699 )   (22.14 )%
Specialized benefit services 163     171     170     333     340     (7 )   (2.06 )%
Total commissions and fees 18,232     16,073     16,838     35,070     30,563     4,507     14.75 %
                           
Contingency and bonus revenue 1,893     1,433     1,585     3,479     2,566     913     35.58 %
Other income 79     71     75     154     141     13     9.22 %
Total revenue 20,204     17,577     18,498     38,703     33,270     5,433     16.33 %
                           
Employee commission expense 3,401     2,953     3,098     6,500     5,468     1,032     18.87 %
Revenue, net of commission expense 16,803     14,624     15,400     32,203     27,802     4,401     15.83 %
                           
Salaries and employee benefits 8,601     7,081     8,878     17,479     13,786     3,693     26.79 %
Occupancy expense 627     564     662     1,289     1,130     159     14.07 %
Furniture and equipment 258     220     236     494     406     88     21.67 %
Amortization of intangible assets 1,103     794     1,101     2,204     1,497     707     47.23 %
Other expenses 1,768     2,032     2,027     3,795     3,739     56     1.50 %
Total operating expenses 12,357     10,691     12,904     25,261     20,558     4,703     22.88 %
Income before income tax, corporate allocation and noncontrolling interest 4,446     3,933     2,496     6,942     7,244     (302 )   (4.17 )%
Corporate allocation (218 )   (183 )   (189 )   (407 )   (350 )   (57 )   16.29 %
Income before income tax provision and noncontrolling interest 4,228     3,750     2,307     6,535     6,894     (359 )   (5.21 )%
Provision for income tax expense 978     868     468     1,446     1,505     (59 )   (3.92 )%
Net income 3,250     2,882     1,839     5,089     5,389     (300 )   (5.57 )%
Noncontrolling interest (357 )   (437 )   (423 )   (780 )   (1,052 )   272     (25.86 )%
Net income attributable to TowneBank $ 2,893     $ 2,445     $ 1,416     $ 4,309     $ 4,337     $ (28 )   (0.65 )%
                           
Provision for income taxes 978     868     468     1,446     1,505     (59 )   (3.92 )%
Depreciation, amortization and interest expense 1,309     1,007     1,333     2,642     1,913     729     38.11 %
EBITDA (non-GAAP) $ 5,180     $ 4,320     $ 3,217     $ 8,397     $ 7,755     $ 642     8.28 %
                           
Efficiency ratio 73.54 %   73.11 %   83.79 %   78.44 %   73.94 %   4.50 %   6.09 %


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
         
                   
  Three Months Ended   Six Months Ended
  June 30,   June 30,   March 31,   June 30,   June 30,
  2019   2018   2019   2019   2018
                   
Return on average assets (GAAP) 1.20 %   1.32 %   1.14 %   1.17 %   1.18 %
Impact of excluding average goodwill and other
intangibles and amortization
0.15 %   0.16 %   0.15 %   0.15 %   0.14 %
Return on average tangible assets (non-GAAP) 1.35 %   1.48 %   1.29 %   1.32 %   1.32 %
                   
Return on average equity (GAAP) 8.83 %   9.55 %   8.24 %   8.54 %   8.52 %
Impact of excluding average goodwill and other
intangibles and amortization
5.07 %   5.64 %   5.00 %   5.03 %   4.95 %
Return on average tangible equity (non-GAAP) 13.90 %   15.19 %   13.24 %   13.57 %   13.47 %
                   
Return on average common equity (GAAP) 8.89 %   9.62 %   8.30 %   8.60 %   8.59 %
Impact of excluding average goodwill and other
intangibles and amortization
5.16 %   5.74 %   5.09 %   5.13 %   5.03 %
Return on average tangible common equity
(non-GAAP)
14.05 %   15.36 %   13.39 %   13.73 %   13.62 %
                   
Book value (GAAP) $ 21.95     $ 20.22     $ 21.40     $ 21.95     $ 20.22  
Impact of excluding average goodwill and other
intangibles and amortization
(6.90 )   (6.72 )   (6.94 )   (6.90 )   (6.72 )
Tangible book value (non-GAAP) $ 15.05     $ 13.50     $ 14.46     $ 15.05     $ 13.50  
                   


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
                     
                     
Reconcilement of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability   Three Months Ended
    June 30,   March 31,   December 31,   September 30,   June 30,
    2019   2019   2018   2018   2018
Net income (GAAP)   $ 34,638     $ 31,409     $ 35,990     $ 38,293     $ 34,804  
                     
Acquisition-related expenses   20     411     (1,518 )   424     797  
Income tax expense -tax reform legislation           696          
Income tax expense (benefit) - other items   (3 )   (52 )   355     (44 )   (93 )
Income tax expense (benefit)   (3 )   (52 )   1,051     (44 )   (93 )
Total charges, net of taxes   17     359     (467 )   380     704  
Operating earnings, excluding certain items affecting
comparability (non-GAAP)
  $ 34,655     $ 31,768     $ 35,523     $ 38,673     $ 35,508  
Weighted average diluted shares   72,145,600     72,099,558     72,043,369     72,044,355     71,949,590  
Diluted EPS (GAAP)   $ 0.48     $ 0.44     $ 0.50     $ 0.53     $ 0.48  
Diluted EPS, excluding certain items affecting
comparability (non-GAAP)
  $ 0.48     $ 0.44     $ 0.49     $ 0.54     $ 0.49  
Average assets   $ 11,532,278     $ 11,194,753     $ 11,149,960     $ 10,844,570     $ 10,536,847  
Average tangible equity   $ 1,070,634     $ 1,039,630     1,022,982     $ 1,003,151     $ 981,607  
Return on average assets, excluding certain items
affecting comparability (non-GAAP)
  1.21 %   1.15 %   1.26 %   1.41 %   1.35 %
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)   13.90 %   13.38 %   14.73 %   16.23 %   15.48 %
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)   14.06 %   13.53 %   14.93 %   16.45 %   15.66 %
Efficiency ratio, excluding certain items affecting
comparability (non-GAAP)
  66.79 %   68.12 %   63.81 %   63.69 %   64.52 %
                     


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
         
         
Reconcilement of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability   Six months ended
    June 30,   June 30,
    2019   2018
Net income (GAAP)   $ 66,047     $ 59,510  
         
Acquisition-related expenses   431     9,523  
Total charges   431     9,523  
Income tax expense (benefit) - other items   (55 )   (1,732 )
Income tax expense (benefit)   (55 )   (1,732 )
Total charges, net of taxes   376     7,791  
Operating earnings, excluding certain items affecting
comparability (non-GAAP)
  $ 66,423     $ 67,301  
Weighted average diluted shares   72,122,467     70,551,537  
Diluted EPS (GAAP)   $ 0.92     $ 0.84  
Diluted EPS, excluding certain items affecting
comparability (non-GAAP)
  $ 0.92     $ 0.95  
Average assets   $ 11,364,448     $ 10,194,507  
Average tangible equity   $ 1,055,218     $ 957,021  
Return on average assets, excluding certain items
affecting comparability (non-GAAP)
  1.18 %   1.33 %
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)   13.65 %   15.11 %
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)   13.80 %   15.29 %
Efficiency ratio, excluding certain items affecting
comparability (non-GAAP)
  67.43 %   65.32 %

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