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CST: 20/11/2019 03:50:42   

TowneBank Reports Third Quarter 2019 Earnings

26 Days ago

SUFFOLK, Va., Oct. 24, 2019 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (NASDAQ: TOWN) today reported earnings for the quarter ended September 30, 2019 of $37.66 million, or $0.52 per diluted share, compared to $38.29 million, or $0.53 per diluted share, for the quarter ended September 30, 2018.

“Our third quarter continued the trend of solid growth in top-line revenues which climbed to $145.88 million, or a 5.78% increase, over the same period in 2018 driven by strong performances in our noninterest income sources.  Noninterest bearing deposits increased 10.74% on an annualized basis during the quarter and represents 32.11% of our total deposits.  During the past year, we continued to increase our deposit market share and remain the market leader in the Hampton Roads, Virginia MSA while our leadership teams in Richmond and the North Carolina markets provided an outstanding deposit growth rate of 19.67% and 27.70%, respectively, compared to the quarter ended September 30, 2018," said G. Robert Aston, Jr., Executive Chairman.  “The year 2019 has been a year of significant investment in the future, as we have absorbed the expense related to enhancements in company infrastructure driven by changing industry standards and increased regulatory expectations due to crossing the $10 billion asset threshold.  Additionally, we have successfully recruited 27 new staff members on the production and revenue side of the bank, expanding Towne’s presence into Greensboro and Greenville, North Carolina as well as adding an eight person Corporate Banking team in the Hampton Roads market,” added Aston.

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

  • Total revenues were $145.88 million, an increase of $7.97 million, or 5.78%.
  • Loans held for investment increased $301.14 million, or 3.82%, from September 30, 2018, and $56.10 million, or 0.69%, from June 30, 2019, or 2.74% on an annualized basis.
  • Total deposits were $9.44 billion, an increase of $1.14 billion, or 13.72%, compared to prior year and $0.17 billion, or 1.83%, from June 30, 2019, or 7.24% on an annualized basis.  In comparison to September 30, 2018, total deposits increased 8.52% in our Hampton Roads region, 19.67% in our Richmond region, and 27.70% in our North Carolina region.
  • Noninterest bearing deposits increased by 13.44%, to $3.03 billion, representing 32.11% of total deposits.  Compared to the linked quarter, noninterest bearing deposits increased 2.71%, or 10.74% on an annualized basis.
  • Annualized return on common shareholders' equity was 9.29% and annualized return on average tangible common shareholders' equity was 14.36% (non-GAAP).
  • Net interest margin for the quarter was 3.41% and taxable equivalent net interest margin was 3.43% (non-GAAP).
  • Effective tax rate of 16.95% in the quarter compared to 19.30% in the third quarter of 2018.

“Continued diversity in our revenue composition has been a consistent objective of our Company for many years.  As pressures on net interest margin and required infrastructure investments continue to challenge our bottom line returns, it is important to keep our focus on growing top-line revenues.  We were pleased to announce the completion of a strategic insurance acquisition in Charlotte, North Carolina, which will serve to strengthen our product delivery in one of our key growth markets,” stated J. Morgan Davis, President and Chief Executive Officer.

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

  • Net interest income was $91.10 million compared to $88.70 million at September 30, 2018.
  • Taxable equivalent net interest margin (non-GAAP) was 3.43%, including accretion of 11 basis points, compared to 3.64%, including accretion of 18 basis points, for 2018.
  • Average loans held for investment, with an average yield of 5.02%, represented 76.35% of average earning assets at September 30, 2019 compared to an average yield of 4.95% and 80.45% of average earning assets in the third quarter of 2018.
  • Total cost of deposits increased to 1.01% from 0.72% at September 30, 2018.
  • Average interest-earning assets totaled $10.60 billion at September 30, 2019 compared to $9.73 billion at September 30, 2018, an increase of 9.03%.
  • Average interest-bearing liabilities totaled $7.03 billion, an increase of $0.46 billion from prior year.

Quarterly Provision for Loan Losses:

  • Recorded a provision for loan losses of $1.51 million compared to $1.24 million one year ago and $2.82 million in the linked quarter.
  • Net charge-offs were $0.61 million compared to $0.54 million one year prior.  The ratio of net charge-offs to average loans on an annualized basis was 0.03% compared to 0.08% in the prior quarter and 0.03% in the third quarter of 2018.
  • The allowance for loan losses represented 0.68% of total loans compared to 0.67% at June 30, 2019 and 0.64% at September 30, 2018.  Loan loss reserve as a percentage of total loans, excluding purchased loans, was 0.81% at September 30, 2019, and June 30, 2019, compared to 0.82% at September 30, 2018.  The allowance for loan losses was 3.95 times nonperforming loans compared to 3.00 times at June 30, 2019 and 7.25 times at September 30, 2018.

Quarterly Noninterest Income Compared to the Third Quarter of 2018:

  • Total noninterest income was $54.78 million compared to $49.22 million in 2018, an increase of $5.56 million, or 11.29%.  Residential mortgage banking income increased $3.05 million in the quarter, insurance commissions and other title fees increased $2.19 million, real estate brokerage and property management income increased $0.90 million, while service charges on deposit accounts decreased $0.78 million.
  • Residential mortgage banking income was $18.86 million compared to $15.80 million in third quarter 2018.  Loan volume in the current quarter was $963.66 million, with purchase activity comprising 68.83% of that volume.  Loan volume in third quarter 2018 was $811.50 million, with purchase activity of 89.72%. 
  • Total Insurance segment revenue increased 16.59% to $19.62 million in the third quarter due primarily to additional commission income from insurance agencies that were acquired in November 2018 and January 2019.  An additional insurance agency, Angel Insurance and Financial Services, Inc., was acquired, effective September 1, 2019.
  • Property management fee revenue increased 13.47%, or $0.78 million, as compared to third quarter 2018 due to increases in reservation levels.

Quarterly Noninterest Expense Compared to the Third Quarter of 2018:

  • Total noninterest expense was $97.29 million compared to $88.26 million in 2018, an increase of $9.03 million, or 10.23%.  This reflects increases of $5.29 million in salary and benefits expense, $1.66 million in professional fees, $0.94 million in occupancy expense, and $0.56 million in advertising and marketing expenses.
  • In addition to growth in production related expenses, changing industry standards and increased regulatory expectations related to exceeding $10 billion in assets, have resulted in enhancements to Company infrastructure, resulting in increased salary and benefits expense and professional fees. Areas of enhancement include: information technology, risk and compliance, accounting, and internal audit.
  • Noninterest expense included operational expenses of $1.86 million related to insurance agencies acquired subsequent to third quarter 2018.

Quarterly Income Taxes Compared to the Third Quarter of 2018:

  • Income tax expense was $7.68 million compared to $9.16 million one year prior.  This represents an effective tax rate of 16.95% compared to 19.30% in the third quarter of 2018.

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

  • Total assets were $12.02 billion for the quarter ended September 30, 2019, an increase of 7.69%, or 10.28% on an annualized basis, compared to $11.16 billion at December 31, 2018.  Total assets increased $0.90 billion, or 8.09%, from $11.12 billion at September 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 $49.66 million due to the adoption of the leasing standard.
  • Loans held for investment increased $0.16 billion, or 2.05%, or 2.74% on an annualized basis, compared to year end 2018, and $0.30 billion, or 3.82% compared to September 30, 2018.
  • Total liabilities were $10.38 billion at September 30, 2019, an increase of $758.15 million, or 7.88%, compared to December 31, 2018 and $761.35 million, or 7.91%, compared to September 30, 2018.
  • Total deposits increased $1.07 billion, or 12.75%, or 17.05% on an annualized basis, over December 31, 2018 and $1.14 billion, or 13.72%, over September 30, 2018.
  • Total borrowings declined $0.42 billion, or 38.49%, or 51.46% on an annualized basis from December 31, 2018 and $0.49 billion from September 30, 2018.

Investment Securities:

  • Total investment securities were $1.41 billion compared to $1.35 billion at June 30, 2019 and $1.16 billion at September 30, 2018.  The weighted average duration of the portfolio at September 30, 2019 was 3.6 years.  The carrying value of the available-for-sale portfolio included $26.07 million of net unrealized gains compared to $19.66 million at June 30, 2019 and $26.22 million in net unrealized losses at September 30, 2018.  The increase in net unrealized gains was primarily due to further declines in interest rates.  The carrying value of the held-to-maturity portfolio does not reflect $1.68 million in net unrealized gains compared to $1.58 million in net unrealized gains at June 30, 2019 and $0.17 million in net unrealized gains at September 30, 2018.

Loans and Asset Quality:

  • Total loans held for investment were $8.18 billion at September 30, 2019 compared to $8.13 billion at June 30, 2019 and $7.88 billion at September 30, 2018.
  • Nonperforming assets were $31.04 million, or 0.26% of total assets, compared to $27.33 million, or 0.25%, at September 30, 2018.
  • Nonperforming loans were 0.17% of period end loans.
  • Foreclosed property decreased to $15.52 million from $18.15 million at September 30, 2018.

Deposits and Borrowings:

  • Total deposits were $9.44 billion compared to $9.27 billion at June 30, 2019 and $8.30 billion at September 30, 2018.
  • Total loans to deposits were 86.70% compared to 87.68% at June 30, 2019 and 94.97% at September 30, 2018.
  • Non-interest bearing deposits were 32.11% of total deposits at September 30, 2019 compared to 31.83% at June 30, 2019 and 32.19% at September 30, 2018.
  • Total borrowings were $0.67 billion compared to $0.84 billion and $1.17 billion at June 30, 2019 and September 30, 2018, respectively.

Capital:

  • Common equity tier 1 capital ratio of 11.52%.
  • Tier 1 leverage capital ratio of 9.84%.
  • Tier 1 risk-based capital ratio of 11.55%.
  • Total risk-based capital ratio of 14.70%.
  • Book value was $22.38 compared to $21.95 at June 30, 2019 and $20.54 at September 30, 2018.
  • Tangible book value (non-GAAP)was $15.44 compared to $15.05 at June 30, 2019 and $13.83 at September 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 $94 - $96 million for 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 $12.02 billion as of September 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, 757-638-6813

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
 
  Three Months Ended
  September 30,
  June 30, 
  March 31,
  December 31,
  September 30,
  2019
  2019
  2019
  2018
  2018
Income and Performance Ratios:
  Total Revenue $ 145,879     $ 144,537     $ 133,854     $ 131,417     $ 137,914  
  Net income 39,400     36,242     32,082     36,440     39,252  
  Net income attributable to TowneBank 37,659     34,638     31,409     35,990     38,293  
  Net income per common share - diluted 0.52     0.48     0.44     0.50     0.53  
  Book value per common share 22.38     21.95     21.40     21.05     20.54  
  Book value per common share - tangible (non-GAAP) 15.44     15.05     14.46     14.26     13.83  
  Return on average assets 1.26 %   1.20 %   1.14 %   1.28 %   1.40 %
  Return on average assets - tangible (non-GAAP) 1.40 %   1.35 %   1.29 %   1.43 %   1.56 %
  Return on average equity 9.22 %   8.83 %   8.24 %   9.44 %   10.21 %
  Return on average equity - tangible (non-GAAP) 14.20 %   13.90 %   13.24 %   14.91 %   16.08 %
  Return on average common equity 9.29 %   8.89 %   8.30 %   9.53 %   10.30 %
  Return on average common equity - tangible (non-GAAP) 14.36 %   14.05 %   13.39 %   15.11 %   16.30 %
  Noninterest income as a percentage of total revenue 37.55 %   37.86 %   34.65 %   32.12 %   35.69 %
                     
Regulatory Capital Ratios (1):                  
  Common equity tier 1 11.52 %   11.58 %   11.49 %   11.51 %   11.53 %
  Tier 1 11.55 %   11.62 %   11.52 %   11.54 %   11.57 %
  Total 14.70 %   14.85 %   14.79 %   14.83 %   14.90 %
  Tier 1 leverage ratio 9.84 %   9.86 %   9.92 %   9.87 %   9.98 %
                     
Asset Quality: 
  Allowance for loan losses to nonperforming loans 3.95 x   3.00 x   9.36 x   10.97 x   7.25 x
  Allowance for loan losses to period end loans 0.68 %   0.67 %   0.66 %   0.65 %   0.64 %
  Allowance for loan losses to period end loans excluding purchased loans 0.81 %   0.81 %   0.81 %   0.82 %   0.82 %
  Nonperforming loans to period end loans 0.17 %   0.22 %   0.07 %   0.06 %   0.09 %
  Nonperforming assets to period end assets 0.26 %   0.29 %   0.22 %   0.22 %   0.25 %
  Net charge-offs to average loans (annualized) 0.03 %   0.08 %   0.01 %   0.02 %   0.03 %
                     
  Nonperforming loans $ 14,016     $ 18,202     $ 5,696     $ 4,749     $ 6,926  
  Former bank premises 1,510     1,510     2,223     2,253     2,253  
  Foreclosed property 15,517     14,517     17,071     17,163     18,153  
  Total nonperforming assets $ 31,043     $ 34,229     $ 24,990     $ 24,165     $ 27,332  
  Loans past due 90 days and still accruing interest $ 636     $ 415     $ 117     $ 394     $ 153  
                     
  Allowance for loan losses $ 55,428     $ 54,527     $ 53,303     $ 52,094     $ 50,236  
                     
Mortgage Banking:                  
  Loans originated, mortgage $ 703,922     $ 574,638     $ 366,643     $ 407,787     $ 561,543  
  Loans originated, joint venture 259,742     246,491     146,884     192,280     249,956  
  Total loans originated $ 963,664     $ 821,129     $ 513,527     $ 600,067     $ 811,499  
  Number of loans originated 3,360     3,121     1,977     2,304     3,068  
  Number of originators 225     229     240     293     303  
  Purchase % 68.83 %   84.97 %   86.08 %   88.64 %   89.72 %
  Loans sold $ 925,058     $ 694,832     $ 473,068     $ 694,341     $ 852,205  
  Gross realized gain on sales and fees as a % of loans originated 3.45 %   3.43 %   3.58 %   3.37 %   3.36 %
                     
Other Ratios:                  
  Net interest margin 3.41 %   3.49 %   3.54 %   3.53 %   3.62 %
  Net interest margin-fully tax equivalent (nonGAAP) 3.43 %   3.52 %   3.57 %   3.55 %   3.64 %
  Average earning assets/total average assets 89.53 %   89.46 %   89.50 %   89.91 %   89.69 %
  Average loans/average deposits 87.63 %   91.60 %   95.83 %   95.32 %   97.55 %
  Average noninterest deposits/total average deposits 31.82 %   31.63 %   31.39 %   31.90 %   32.61 %
  Period end equity/period end total assets 13.63 %   13.45 %   13.53 %   13.78 %   13.49 %
  Efficiency ratio 66.66 %   66.80 %   68.43 %   62.65 %   64.00 %
                     
  (1) Current reporting period regulatory capital ratios are preliminary            


TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
                   
Investment Securities             % Change
  Q3   Q3   Q2   Q3 19 vs.   Q3 19 vs.
Available-for-sale securities, at fair value 2019   2018   2019   Q3 18   Q2 19
U.S. agency securities $ 152,581     $ 388,904     $ 261,960     (60.77 )%   (41.75 )%
U.S. Treasury notes 999     1,245     2,241     (19.76 )%   (55.42 )%
Municipal securities 173,519     72,818     167,466     138.29  %   3.61  %
Trust preferred and other corporate securities 52,006     30,648     43,799     69.69  %   18.74  %
Mortgage-backed securities issued by GSE and GNMA 958,290     558,158     785,355     71.69  %   22.02  %
Total $ 1,337,395     $ 1,051,773     $ 1,260,821     27.16  %   6.07  %
                   
Held-to-maturity securities, at amortized cost                  
Municipal securities $ 29,166     $ 35,007     $ 34,458     (16.69 )%   (15.36 )%
Trust preferred corporate securities 2,381     500     2,393     376.20  %   (0.50 )%
Mortgage-backed securities issued by GSE and GNMA 12,947     16,495     13,723     (21.51 )%   (5.65 )%
Total $ 44,494     $ 52,002     $ 50,574     (14.44 )%   (12.02 )%
                   
                   
Loans Held For Investment             % Change
  Q3   Q3   Q2   Q3 19 vs.   Q3 19 vs.
  2019   2018   2019   Q3 18   Q2 19
Real estate - construction and development $ 1,142,225     $ 1,016,120     $ 1,107,762     12.41  %   3.11  %
Commercial real estate - investment related properties 2,070,317     1,957,297     1,985,990     5.77  %   4.25  %
Commercial real estate - owner occupied 1,286,137     1,259,368     1,288,478     2.13  %   (0.18 )%
Real estate - multifamily 219,901     284,423     267,528     (22.69 )%   (17.80 )%
Real estate - residential 1-4 family 1,621,175     1,608,517     1,639,547     0.79  %   (1.12 )%
Commercial and industrial business 1,527,515     1,447,794     1,523,607     5.51  %   0.26  %
Consumer and other loans 315,559     308,173     313,817     2.40  %   0.56  %
Total $ 8,182,829     $ 7,881,692     $ 8,126,729     3.82  %   0.69  %
                   
                   
Deposits             % Change
  Q3   Q3   Q2   Q3 19 vs.   Q3 19 vs.
  2019   2018   2019   Q3 18   Q2 19
Noninterest-bearing demand $ 3,030,505     $ 2,671,558     $ 2,950,615     13.44  %   2.71  %
Interest-bearing:                  
Demand and money market accounts 3,534,252     3,096,317     3,409,322     14.14  %   3.66  %
Savings 280,552     298,368     277,495     (5.97 )%   1.10  %
Certificates of deposits 2,592,705     2,233,188     2,631,386     16.10  %   (1.47 )%
Total $ 9,438,014     $ 8,299,431     $ 9,268,818     13.72  %   1.83  %
                   


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 
    December 31,
    2019
Assets:   $ (74 )
Investment Securities   1,403  
Loans    
     
Liabilities:    
Deposits   47  
Total estimated effect on net interest income   $ 1,282  
     
Note:  This information is intended for informational purposes only and is not necessarily indicative of future results.  Actual results may differ due to
factors such as changes in estimated prepayment speeds or projected credit loss rates.


TOWNEBANK 
Average Balances, Yields and Rate Paid (unaudited) 
(dollars in thousands) 
 
  Three Months Ended
  Three Months Ended
  Three Months Ended
  September 30, 2019
  June 30, 2019
  September 30, 2018
  Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
  Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
  Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
Assets:                                                                
Loans (net of unearned income
  and deferred costs), excluding 
  nonaccrual loans
$ 8,096,908     $ 102,495     5.02 %   $ 8,075,054     $ 102,366     5.08 %   $ 7,825,065     $ 97,705     4.95 %
Taxable investment securities 1,266,447     9,087     2.87 %   1,170,215     8,346     2.85 %   1,022,051     6,402     2.51 %
Tax-exempt investment securities 121,738     997     3.28 %   90,942     756     3.33 %   82,235     766     3.73 %
Total securities 1,388,185     10,084     2.91 %   1,261,157     9,102     2.89 %   1,104,286     7,168     2.60 %
Interest-bearing deposits 711,030     3,745     2.09 %   698,649     4,016     2.31 %   450,455     2,148     1.89 %
Loans held for sale 408,377     3,956     3.87 %   281,775     3,007     4.27 %   346,806     4,012     4.63 %
Total earning assets 10,604,500     120,280     4.50 %   10,316,635     118,491     4.61 %   9,726,612     111,033     4.53 %
Less: allowance for loan losses (54,858 )           (53,386 )           (50,144 )        
Total nonearning assets 1,295,640             1,269,029             1,168,102          
Total assets $ 11,845,282             $ 11,532,278             $ 10,844,570          
Liabilities and Equity:                                  
Interest-bearing deposits                                  
Demand and money market $ 3,379,888     $ 7,223     0.85 %   $ 3,312,313     $ 7,025     0.85 %   $ 2,957,037     $ 4,217     0.57 %
Savings 278,048     702     1.00 %   281,221     929     1.33 %   301,311     984     1.30 %
Certificates of deposit 2,641,681     15,627     2.35 %   2,433,479     13,830     2.28 %   2,147,338     9,339     1.73 %
Total interest-bearing deposits 6,299,617     23,552     1.48 %   6,027,013     21,784     1.45 %   5,405,686     14,540     1.07 %
Borrowings 486,644     2,020     1.62 %   678,799     3,318     1.93 %   920,380     4,195     1.78 %
Subordinated debt, net 248,210     2,962     4.77 %   248,064     2,962     4.78 %   247,615     2,962     4.78 %
Total interest-bearing liabilities 7,034,471     28,534     1.61 %   6,953,876     28,064     1.62 %   6,573,681     21,697     1.31 %
Demand deposits 2,940,370             2,788,596             2,615,946          
Other noninterest-bearing liabilities 250,371             215,951             166,575          
Total liabilities 10,225,212             9,958,423             9,356,202          
Shareholders’ equity 1,620,070             1,573,855             1,488,368          
Total liabilities and equity $ 11,845,282             $ 11,532,278             $ 10,844,570          
Net interest income (tax-equivalent basis)     $ 91,746             $ 90,427             $ 89,336      
Reconcilement of Non-GAAP Financial Measures                                
Tax-equivalent basis adjustment     (643 )           (608 )           (639 )    
Net interest income (GAAP)     $ 91,103             $ 89,819             $ 88,697      
                                   
Interest rate spread (1)(3)         2.89 %           2.99 %           3.22 %
Interest expense as a percent of average earning assets       1.07 %           1.09 %           0.89 %
Net interest margin (tax equivalent basis) (2)(3)       3.43 %           3.52 %           3.64 %
Total cost of deposits         1.01 %           0.99 %           0.72 %
                                   

(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) 
 
  Nine Months Ended
September 30, 2019
  Nine Months Ended
September 30, 2018
  Nine Months Ended September 30,
2019 Compared with 2018
  Average   Interest 
Income/
  Average
Yield/
  Average   Interest 
Income/
  Average
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
$ 8,067,894     $ 305,007     5.05 %   $ 7,447,463     $ 273,162     4.90 %   $ 31,845     $ 8,578     $ 23,267  
Taxable investment securities 1,158,611     24,962     2.87 %   971,117     17,214     2.36 %   7,748     4,086     3,662  
Tax-exempt investment securities 97,485     2,519     3.45 %   79,404     2,174     3.65 %   345     (128 )   473  
Total securities 1,256,096     27,481     2.92 %   1,050,521     19,388     2.46 %   8,093     3,958     4,135  
Interest-bearing deposits 700,840     11,758     2.24 %   521,361     6,670     1.71 %   5,088     2,416     2,672  
Loans held for sale 290,384     8,966     4.12 %   302,102     9,948     4.39 %   (982 )   (605 )   (377 )
Total earning assets 10,315,214     353,212     4.58 %   9,321,447     309,168     4.43 %   44,044     14,347     29,697  
Less: allowance for loan losses (53,703 )           (48,044 )                    
Total nonearning assets 1,264,976             1,140,173                      
Total assets $ 11,526,487             $ 10,413,576                      
Liabilities and Equity:                                  
Interest-bearing deposits                                  
Demand and money market $ 3,289,539     $ 20,488     0.83 %   $ 2,893,096     $ 10,788     0.50 %   $ 9,700     $ 8,053     $ 1,647  
Savings 281,562     2,658     1.26 %   305,570     2,802     1.23 %   (144 )   81     (225 )
Certificates of deposit 2,456,360     41,364     2.25 %   1,998,427     22,057     1.48 %   19,307     13,447     5,860  
Total interest-bearing deposits 6,027,461     64,510     1.43 %   5,197,093     35,647     0.92 %   28,863     21,581     7,282  
Borrowings 661,216     9,559     1.91 %   889,885     10,899     1.62 %   (1,340 )   1,757     (3,097 )
Subordinated debt, net 248,064     8,885     4.78 %   252,220     9,105     4.81 %   (220 )   (71 )   (149 )
Total interest-bearing liabilities 6,936,741     82,954     1.60 %   6,339,198     55,651     1.17 %   27,303     23,267     4,036  
Demand deposits 2,787,727             2,471,906                      
Other noninterest-bearing
  liabilities
221,806             166,928                      
Total liabilities 9,946,274             8,978,032                      
Shareholders’ equity 1,580,213             1,435,544                      
Total liabilities and equity $ 11,526,487             $ 10,413,576                      
Net interest income (tax-equivalent basis)     $ 270,258             $ 253,517         $ 16,741     $ (8,920 )   $ 25,661  
Reconcilement of Non-GAAP Financial Measures                                
Tax-equivalent basis adjustment     (1,862 )           (1,652 )       (210 )        
Net interest income (GAAP)     $ 268,396             $ 251,865         $ 16,531          
                                   
Interest rate spread (1)(3)         2.98 %           3.26 %            
Interest expense as a percent of average earning assets         1.08 %           0.80 %            
Net interest margin (tax equivalent basis) (2)(3)         3.50 %           3.64 %            
Total cost of deposits         0.98 %           0.62 %            
                                   

(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)
   
  September 30,   December 31,
  2019   2018
  (unaudited)   (audited)
ASSETS
     
Cash and due from banks $ 124,439     $ 94,604  
Interest-bearing deposits at Federal Reserve Bank 675,288     570,425  
Interest-bearing deposits in financial institutions 21,663     21,667  
Total Cash and Cash Equivalents 821,390     686,696  
Securities available for sale, at fair value 1,337,395     1,095,339  
Securities held to maturity, at amortized cost 44,494     50,598  
Other equity securities 5,697     4,797  
Federal Home Loan Bank stock 26,282     43,229  
Total Securities 1,413,868     1,193,963  
Mortgage loans held for sale 456,719     220,986  
Loans, net of unearned income and deferred costs 8,182,829     8,018,233  
Less: allowance for loan losses (55,428 )   (52,094 )
Net Loans 8,127,401     7,966,139  
Premises and equipment, net 231,060     211,796  
Goodwill 446,423     433,658  
Other intangible assets, net 57,404     58,752  
Bank-owned life insurance policies 241,652     237,371  
Other assets 225,374     153,669  
TOTAL ASSETS $ 12,021,291     $ 11,163,030  
       
LIABILITIES AND EQUITY      
Deposits:      
Noninterest-bearing demand $ 3,030,505     $ 2,622,761  
Interest-bearing:      
Demand and money market accounts 3,534,252     3,223,215  
Savings 280,552     286,684  
Certificates of deposit 2,592,705     2,237,762  
Total Deposits 9,438,014     8,370,422  
Advances from the Federal Home Loan Bank 381,846     799,315  
Subordinated debt, net 248,309     247,861  
Repurchase agreements and other borrowings 42,971     47,156  
Total Borrowings 673,126     1,094,332  
Other liabilities 271,617     159,856  
TOTAL LIABILITIES 10,382,757     9,624,610  
Preferred stock      
Authorized and unissued shares - 2,000,000      
Common stock, $1.667 par: 150,000,000 shares authorized      
72,633,517 and 72,465,923 shares issued at      
September 30, 2019 and December 31, 2018, respectively 121,080     120,801  
Capital surplus 1,039,156     1,034,676  
Retained earnings 445,186     379,239  
Common stock issued to deferred compensation trust, at cost      
811,340 and 769,200 shares at      
September 30, 2019 and December 31, 2018, respectively (15,317 )   (13,955 )
Deferred compensation trust 15,317     13,955  
Accumulated other comprehensive income (loss) 19,958     (9,190 )
TOTAL SHAREHOLDERS’ EQUITY 1,625,380     1,525,526  
Noncontrolling interest 13,154     12,894  
TOTAL EQUITY 1,638,534     1,538,420  
TOTAL LIABILITIES AND EQUITY $ 12,021,291     $ 11,163,030  


TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
               
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019
  2018
  2019
  2018
INTEREST INCOME:                              
Loans, including fees $ 102,047     $ 97,215     $ 303,616     $ 271,897  
Investment securities 9,889     7,019     27,010     19,001  
Interest-bearing deposits in financial institutions and federal funds sold 3,745     2,148     11,758     6,670  
Mortgage loans held for sale 3,956     4,012     8,966     9,948  
Total interest income 119,637     110,394     351,350     307,516  
INTEREST EXPENSE:              
Deposits 23,552     14,540     64,510     35,647  
Advances from the Federal Home Loan Bank 1,935     4,153     9,288     10,755  
Subordinated debt, net 2,962     2,962     8,885     9,105  
Repurchase agreements and other borrowings 85     42     271     144  
Total interest expense 28,534     21,697     82,954     55,651  
Net interest income 91,103     88,697     268,396     251,865  
               
PROVISION FOR LOAN LOSSES 1,508     1,241     5,770     6,249  
Net interest income after provision for loan losses 89,595     87,456     262,626     245,616  
NONINTEREST INCOME:              
Residential mortgage banking income, net 18,855     15,804     50,929     52,152  
Insurance commissions and other title fees and income, net 16,681     14,493     49,477     42,952  
Real estate brokerage and property management income, net 9,444     8,542     27,555     25,881  
Service charges on deposit accounts 2,253     3,028     8,299     8,880  
Credit card merchant fees, net 1,514     1,563     3,357     4,174  
Bank owned life insurance 2,117     1,657     5,350     4,822  
Other income 3,981     4,130     11,754     10,520  
Net gain/(loss) on investment securities (69 )       (845 )   3  
Total noninterest income 54,776     49,217     155,876     149,384  
NONINTEREST EXPENSE:              
Salaries and employee benefits 55,784     50,497     162,907     151,606  
Occupancy expense 7,953     7,013     23,866     20,292  
Furniture and equipment 3,805     3,646     10,753     10,890  
Amortization - intangibles 3,059     2,996     9,364     8,587  
Software expense 3,208     2,940     8,742     7,927  
Outside data processing 2,533     2,917     9,316     7,898  
Professional fees 3,566     1,908     9,952     6,295  
Advertising and marketing 3,429     2,874     9,440     8,649  
Other expenses 13,950     13,471     41,627     47,643  
Total noninterest expense 97,287     88,262     285,967     269,787  
Income before income tax expense and noncontrolling interest 47,084     48,411     132,535     125,213  
Provision for income tax expense 7,684     9,159     24,810     23,879  
Net income $ 39,400     $ 39,252     $ 107,725     $ 101,334  
Net income attributable to noncontrolling interest (1,741 )   (959 )   (4,018 )   (3,531 )
Net income attributable to TowneBank $ 37,659     $ 38,293     $ 103,707     $ 97,803  
Per common share information              
Basic earnings $ 0.52     $ 0.53     $ 1.44     $ 1.38  
Diluted earnings $ 0.52     $ 0.53     $ 1.44     $ 1.38  
Cash dividends declared $ 0.18     $ 0.16     $ 0.52     $ 0.46  


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
  September 30,   June 30,   March 31,   December 31,   September 30,
  2019   2019   2019   2018   2018
  (unaudited)   (unaudited)   (unaudited)   (audited)   (unaudited)
ASSETS:                  
Cash and due from banks $ 124,439     $ 110,580     $ 104,091     $ 94,604     $ 106,485  
Interest-bearing deposits at Federal Reserve Bank 675,288     834,505     775,208     570,425     582,099  
Interest-bearing deposits in financial institutions 21,663     21,527     21,001     21,667     20,910  
Total Cash and Cash Equivalents 821,390     966,612     900,300     686,696     709,494  
Securities available for sale, at fair value 1,337,395     1,260,821     1,099,777     1,095,339     1,051,773  
Securities held to maturity, at amortized cost 44,494     50,574     49,687     50,598     52,002  
Other equity securities 5,697     5,396     5,022     4,797     5,519  
Federal Home Loan Bank stock 26,282     32,657     41,464     43,229     46,393  
Total Securities 1,413,868     1,349,448     1,195,950     1,193,963     1,155,687  
Mortgage loans held for sale 456,719     362,773     247,021     220,986     333,354  
Loans, net of unearned income and deferred costs 8,182,829     8,126,729     8,105,370     8,018,233     7,881,692  
Less: allowance for loan losses (55,428 )   (54,527 )   (53,303 )   (52,094 )   (50,236 )
Net Loans 8,127,401     8,072,202     8,052,067     7,966,139     7,831,456  
Premises and equipment, net 231,060     230,177     227,458     211,796     210,724  
Goodwill 446,423     442,881     442,881     433,658     427,117  
Other intangible assets, net 57,404     58,391     61,333     58,752     58,165  
Bank-owned life insurance policies 241,652     240,621     238,977     237,371     235,348  
Other assets 225,374     219,375     202,276     153,669     159,887  
TOTAL ASSETS $ 12,021,291     $ 11,942,480     $ 11,568,263     $ 11,163,030     $ 11,121,232  
LIABILITIES AND EQUITY                  
Deposits:                  
Noninterest-bearing demand $ 3,030,505     $ 2,950,615     $ 2,813,857     $ 2,622,761     $ 2,671,558  
Interest-bearing:                  
Demand and money market accounts 3,534,252     3,409,322     3,290,907     3,223,215     3,096,317  
Savings 280,552     277,495     285,790     286,684     298,368  
Certificates of deposit 2,592,705     2,631,386     2,341,134     2,237,762     2,233,188  
Total Deposits 9,438,014     9,268,818     8,731,688     8,370,422     8,299,431  
Advances from the Federal Home Loan Bank 381,846     532,004     739,160     799,315     873,469  
Subordinated debt, net 248,309     248,160     248,010     247,861     247,712  
Repurchase agreements and other borrowings 42,971     56,355     44,775     47,156     45,591  
Total Borrowings 673,126     836,519     1,031,945     1,094,332     1,166,772  
Other liabilities 271,617     230,691     238,974     159,856     155,205  
TOTAL LIABILITIES 10,382,757     10,336,028     10,002,607     9,624,610     9,621,408  
Preferred stock                  
Authorized shares - 2,000,000                  
                   
Common stock, $1.667 par value 121,080     121,038     121,047     120,801     120,613  
Capital surplus 1,039,156     1,036,982     1,035,563     1,034,676     1,032,863  
Retained earnings 445,186     420,600     399,030     379,239     354,842  
Common stock issued to deferred compensation                  
trust, at cost (15,317 )   (15,160 )   (14,067 )   (13,955 )   (13,780 )
Deferred compensation trust 15,317     15,160     14,067     13,955     13,780  
Accumulated other comprehensive income (loss) 19,958     15,143     (1,792 )   (9,190 )   (22,348 )
TOTAL SHAREHOLDERS’ EQUITY 1,625,380     1,593,763     1,553,848     1,525,526     1,485,970  
Noncontrolling interest 13,154     12,689     11,808     12,894     13,854  
TOTAL EQUITY 1,638,534     1,606,452     1,565,656     1,538,420     1,499,824  
TOTAL LIABILITIES AND EQUITY $ 12,021,291     $ 11,942,480     $ 11,568,263     $ 11,163,030     $ 11,121,232  


TOWNEBANK  
Consolidated Statements of Income - Five Quarter Trend (unaudited)  
(dollars in thousands, except share data)  
   
  Three Months Ended  
                     
  September 30,
2019
  June 30,
2019
  March 31,
2019
  December 31,
2018
  September 30,
2018
 
INTEREST INCOME:                                        
Loans, including fees $ 102,047     $ 101,874     $ 99,695     $ 99,446     $ 97,215    
Investment securities 9,889     8,987     8,134     8,126     7,019    
Interest-bearing deposits in financial institutions and federal funds sold 3,745     4,015     3,998     3,559     2,148    
Mortgage loans held for sale 3,956     3,007     2,003     3,176     4,012    
Total interest income 119,637     117,883     113,830     114,307     110,394    
INTEREST EXPENSE:                    
Deposits 23,552     21,784     19,174     17,495     14,540    
Advances from the Federal Home Loan Bank 1,935     3,201     4,153     4,585     4,153    
Subordinated debt 2,962     2,962     2,962     2,961     2,962    
Repurchase agreements and other borrowings 85     117     68     58     42    
Total interest expense 28,534     28,064     26,357     25,099     21,697    
Net interest income 91,103     89,819     87,473     89,208     88,697    
                     
PROVISION FOR LOAN LOSSES 1,508     2,824     1,438     2,292     1,241    
Net interest income after provision for loan losses 89,595     86,995     86,035     86,916     87,456    
NONINTEREST INCOME:                    
Residential mortgage banking income, net 18,855     18,565     13,508     12,951     15,804    
Insurance commissions and other title fees and income, net 16,681     17,213     15,582     13,212     14,493    
Real estate brokerage and property management income, net 9,444     8,843     9,268     5,982     8,542    
Service charges on deposit accounts 2,253     3,185     2,861     2,928     3,028    
Credit card merchant fees, net 1,514     660     1,183     1,298     1,563    
Bank owned life insurance 2,117     1,635     1,598     2,014     1,657    
Other income 3,981     4,617     3,157     3,824     4,130    
Net gain/(loss) on investment securities (69 )       (776 )          
Total noninterest income 54,776     54,718     46,381     42,209     49,217    
NONINTEREST EXPENSE:                    
Salaries and employee benefits 55,784     54,263     52,860     50,233     50,497    
Occupancy expense 7,953     7,662     8,251     7,352     7,013    
Furniture and equipment 3,805     3,578     3,371     3,587     3,646    
Amortization - intangibles 3,059     3,113     3,192     3,123     2,996    
Software expense 3,208     2,788     2,745     2,694     2,940    
Outside data processing 2,533     3,616     3,166     2,466     2,917    
Professional fees 3,566     3,707     2,679     2,028     1,908    
Advertising and marketing 3,429     3,182     2,829     2,546     2,874    
Other expenses 13,950     14,647     13,030     8,308     13,471    
Total noninterest expense 97,287     96,556     92,123     82,337     88,262    
Income before income tax expense and noncontrolling interest 47,084     45,157     40,293     46,788     48,411    
Provision for income tax expense 7,684     8,915     8,211     10,348     9,159    
Net income 39,400     36,242     32,082     36,440     39,252    
Net income attributable to noncontrolling interest (1,741 )   (1,604 )   (673 )   (450 )   (959 )  
Net income attributable to TowneBank $ 37,659     $ 34,638     $ 31,409     $ 35,990     $ 38,293    
Per common share information                    
Basic earnings $ 0.52     $ 0.48     $ 0.44     $ 0.50     $ 0.53    
Diluted earnings $ 0.52     $ 0.48     $ 0.44     $ 0.50     $ 0.53    
Basic weighted average shares outstanding 72,091,221     72,044,817     71,992,330     71,905,956     71,875,085    
Diluted weighted average shares outstanding 72,222,934     $ 72,145,600     72,099,558     72,043,369     72,044,355    
Cash dividends declared $ 0.18     $ 0.18     $ 0.16     $ 0.16     $ 0.16    
                     


TOWNEBANK
Banking Segment Financial Information (unaudited) 
(dollars in thousands)
 
  Three Months Ended   Nine Months Ended   Increase/(Decrease)
  September 30,   June 30,   September 30,   2019 over 2018
  2019   2018   2019   2019   2018   Amount   Percent
Revenue                          
Net interest income $ 89,490     $ 85,423     $ 88,442     $ 264,332     $ 243,151     $ 21,181     8.71 %
Service charges on deposit                          
accounts 2,253     3,028     3,185     8,299     8,880     (581 )   (6.54 )%
Credit card merchant fees 1,514     1,563     660     3,357     4,174     (817 )   (19.57 )%
Other income 5,152     4,300     5,273     14,350     12,318     2,032     16.50 %
Subtotal 8,919     8,891     9,118     26,006     25,372     634     2.50 %
Net gain/(loss) on investment securities (69 )           (845 )   3     (848 )   N/M
Total noninterest income 8,850     8,891     9,118     25,161     25,375     (214 )   (0.84 )%
Total revenue 98,340     94,314     97,560     289,493     268,526     20,967     7.81 %
                           
Provision for loan losses 1,508     1,241     2,824     5,770     6,249     (479 )   (7.67 )%
                           
Expenses                          
Salaries and employee benefits 33,526     28,329     32,353     96,966     86,372     10,594     12.27 %
Occupancy expense 5,209     4,331     5,007     15,460     12,621     2,839     22.49 %
Furniture and equipment 2,779     2,463     2,517     7,662     7,485     177     2.36 %
Amortization of intangibles 1,265     1,479     1,315     3,946     4,230     (284 )   (6.71 )%
Other expenses 17,098     14,829     18,938     52,218     50,940     1,278     2.51 %
Total expenses 59,877     51,431     60,130     176,252     161,648     14,604     9.03 %
Income before income tax, corporate allocation and noncontrolling interest 36,955     41,642     34,606     107,471     100,629     6,842     6.80 %
Corporate allocation 384     438     546     1,383     1,370     13     0.95 %
Income before income tax provision and noncontrolling interest 37,339     42,080     35,152     108,854     101,999     6,855     6.72 %
Provision for income tax expense 5,495     7,604     6,650     19,337     18,629     708     3.80 %
Net income 31,844     34,476     28,502     89,517     83,370     6,147     7.37 %
Noncontrolling interest     (4 )   1     4     (12 )   16     N/M
Net income attributable to TowneBank $ 31,844     $ 34,472     $ 28,503     $ 89,521     $ 83,358     $ 6,163     7.39 %
                           
Efficiency ratio 60.85 %   54.53 %   61.63 %   60.71 %   60.20 %   0.51 %   0.85 %


TOWNEBANK
Realty Segment Financial Information (unaudited) 
(dollars in thousands) 
 
  Three Months Ended   Nine Months Ended   Increase/(Decrease)
  September 30,   June 30,   September 30,   2019 over 2018
  2019   2018   2019   2019   2018   Amount   Percent
Revenue                          
Residential mortgage brokerage
income, net
$ 19,171     $ 16,219     $ 18,898     $ 51,826     $ 53,223     $ (1,397 )   (2.62 )%
Real estate brokerage income, net 2,882     2,758     2,873     7,315     7,275     40     0.55 %
Title insurance and settlement fees 617     525     594     1,581     1,420     161     11.34 %
Property management fees, net 6,562     5,783     5,970     20,240     18,606     1,634     8.78 %
Income from unconsolidated
subsidiary
185     122     162     441     316     125     39.56 %
Net interest and other income 1,885     4,111     1,677     4,937     9,999     (5,062 )   (50.63 )%
Total revenue 31,302     29,518     30,174     86,340     90,839     (4,499 )   (4.95 )%
                           
Expenses                          
Salaries and employee benefits 13,474     14,862     13,309     39,678     44,142     (4,464 )   (10.11 )%
Occupancy expense 2,055     2,084     2,028     6,428     5,942     486     8.18 %
Furniture and equipment 754     952     803     2,326     2,768     (442 )   (15.97 )%
Amortization of intangible assets 666     672     695     2,086     2,015     71     3.52 %
Other expenses 7,478     7,543     7,234     20,953     21,996     (1,043 )   (4.74 )%
Total expenses 24,427     26,113     24,069     71,471     76,863     (5,392 )   (7.02 )%
                           
Income before income tax, corporate allocation and noncontrolling interest 6,875     3,405     6,105     14,869     13,976     893     6.39 %
Corporate allocation (208 )   (270 )   (328 )   (800 )   (853 )   53     (6.21 )%
Income before income tax provision and noncontrolling interest 6,667     3,135     5,777     14,069     13,123     946     7.21 %
Provision for income tax expense 1,454     786     1,287     3,292     2,977     315     10.58 %
Net income 5,213     2,349     4,490     10,777     10,146     631     6.22 %
Noncontrolling interest (1,496 )   (756 )   (1,248 )   (2,997 )   (2,268 )   (729 )   32.14 %
Net income attributable to TowneBank $ 3,717     $ 1,593     $ 3,242     $ 7,780     $ 7,878     $ (98 )   (1.24 )%
                           
Efficiency ratio 78.04 %   88.46 %   79.77 %   82.78 %   84.61 %   (1.83 )%   (2.16 )%
                           


TOWNEBANK
Insurance Segment Financial Information (unaudited) 
(dollars in thousands) 
 
  Three Months Ended   Nine Months Ended   Increase/(Decrease)
  September 30,   June 30,   September 30,   2019 over 2018
  2019   2018   2019   2019   2018   Amount   Percent
Commission and fee income                          
Property and casualty $ 13,481     $ 10,762     $ 13,067     $ 38,421     $ 31,178     $ 7,243     23.23 %
Employee benefits 3,629     3,813     3,833     10,968     10,463     505     4.83 %
Travel insurance 834     871     1,169     3,292     4,028     (736 )   (18.27 )%
Specialized benefit services 166     166     163     499     506     (7 )   (1.38 )%
Total commissions and fees 18,110     15,612     18,232     53,180     46,175     7,005     15.17 %
                           
Contingency and bonus revenue 1,431     1,137     1,893     4,910     3,703     1,207     32.60 %
Other income 74     75     79     227     215     12     5.58 %
Total revenue 19,615     16,824     20,204     58,317     50,093     8,224     16.42 %
                           
Employee commission expense 3,378     2,742     3,401     9,878     8,209     1,669     20.33 %
Revenue, net of commission expense 16,237     14,082     16,803     48,439     41,884     6,555     15.65 %
                           
Salaries and employee benefits 8,784     7,306     8,601     26,263     21,092     5,171     24.52 %
Occupancy expense 689     598     627     1,978     1,729     249     14.40 %
Furniture and equipment 272     232     258     765     637     128     20.09 %
Amortization of intangible assets 1,128     845     1,103     3,332     2,342     990     42.27 %
Other expenses 2,110     1,737     1,768     5,906     5,476     430     7.85 %
Total operating expenses 12,983     10,718     12,357     38,244     31,276     6,968     22.28 %
Income before income tax, corporate allocation and noncontrolling interest 3,254     3,364     4,446     10,195     10,608     (413 )   (3.89 )%
Corporate allocation (176 )   (168 )   (218 )   (583 )   (517 )   (66 )   12.77 %
Income before income tax provision and noncontrolling interest 3,078     3,196     4,228     9,612     10,091     (479 )   (4.75 )%
Provision for income tax expense 735     769     978     2,181     2,273     (92 )   (4.05 )%
Net income 2,343     2,427     3,250     7,431     7,818     (387 )   (4.95 )%
Noncontrolling interest (245 )   (199 )   (357 )   (1,025 )   (1,251 )   226     (18.07 )%
Net income attributable to TowneBank $ 2,098     $ 2,228     $ 2,893     $ 6,406     $ 6,567     $ (161 )   (2.45 )%
                           
Provision for income taxes 735     769     978     2,181     2,273     (92 )   (4.05 )%
Depreciation, amortization and interest expense 1,325     1,068     1,309     3,943     2,982     961     32.23 %
EBITDA (non-GAAP) $ 4,158     $ 4,065     $ 5,180     $ 12,530     $ 11,822     $ 708     5.99 %
                           
Efficiency ratio 79.96 %   76.11 %   73.54 %   78.95 %   74.67 %   4.28 %   5.73 %


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands)
         
  Three Months Ended   Nine Months Ended
  September 30,
2019
  September 30,
2018
  June 30,
2019
  September 30,
2019
  September 30,
2018
Return on average assets (GAAP) 1.26 %   1.40 %   1.20 %   1.20 %   1.26 %
Impact of excluding average goodwill and other intangibles and amortization 0.14 %   0.16 %   0.15 %   0.15 %   0.15 %
Return on average tangible assets (non-GAAP) 1.40 %   1.56 %   1.35 %   1.35 %   1.41 %
                   
Return on average equity (GAAP) 9.22 %   10.21 %   8.83 %   8.77 %   9.11 %
Impact of excluding average goodwill and other intangibles and amortization 4.98 %   5.87 %   5.07 %   5.02 %   5.27 %
Return on average tangible equity (non-GAAP) 14.20 %   16.08 %   13.90 %   13.79 %   14.38 %
                   
Return on average common equity (GAAP) 9.29 %   10.30 %   8.89 %   8.84 %   9.18 %
Impact of excluding average goodwill and other intangibles and amortization 5.07 %   6.00 %   5.16 %   5.11 %   5.37 %
Return on average tangible common equity (non-GAAP) 14.36 %   16.30 %   14.05 %   13.95 %   14.55 %
                   
Book value (GAAP) $ 22.38     $ 20.54     $ 21.95     $ 22.38     $ 20.54  
Impact of excluding average goodwill and other intangibles and amortization (6.94 )   (6.71 )   (6.90 )   (6.94 )   (6.71 )
Tangible book value (non-GAAP) $ 15.44     $ 13.83     $ 15.05     $ 15.44     $ 13.83  
                   
Average assets (GAAP) $ 11,845,282     $ 10,844,570     $ 11,532,278     $ 11,526,487     $ 10,413,575  
Less: average goodwill 442,919     425,725     442,881     442,890     405,726  
Less: average intangible assets 57,327     59,492     60,339     60,333     57,251  
Average tangible assets (non-GAAP) $ 11,345,036     $ 10,359,353     $ 11,029,058     $ 11,023,264     $ 9,950,598  
                   
Average equity (GAAP) $ 1,620,070     $ 1,488,368     $ 1,573,855     $ 1,580,213     $ 1,435,544  
Less: average goodwill 442,919     425,725     442,881     442,890     405,726  
Less: average intangible assets 57,327     59,492     60,339     60,333     57,251  
Average tangible equity (non-GAAP) $ 1,119,824     $ 1,003,151     $ 1,070,635     $ 1,076,990     $ 972,567  
                   
Average common equity (GAAP) $ 1,607,853     $ 1,474,833     $ 1,562,214     $ 1,568,336     $ 1,423,787  
Less: average goodwill 442,919     425,725     442,881     442,890     405,726  
Less: average intangible assets 57,327     59,492     60,339     60,333     57,251  
Average tangible common equity (non-GAAP) $ 1,107,607     $ 989,616     $ 1,058,994     $ 1,065,113     $ 960,810  


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 
    September 30,
2019
  June 30,
2019
  March 31,
2019
  December 31,
2018
  September 30,
2018
Net income (GAAP)   $ 37,659     $ 34,638     $ 31,409     $ 35,990     $ 38,293  
                     
Acquisition-related expenses   207     20     411     (1,518 )   424  
Income tax expense -tax reform legislation               696      
Income tax expense (benefit) - other items   (20 )   (3 )   (52 )   355     (44 )
Income tax expense (benefit)   (20 )   (3 )   (52 )   1,051     (44 )
Total charges, net of taxes   187     17     359     (467 )   380  
Operating earnings, excluding certain items affecting comparability (non-GAAP)   $ 37,846     $ 34,655     $ 31,768     $ 35,523     $ 38,673  
Weighted average diluted shares   72,222,934     72,145,600     72,099,558     72,043,369     72,044,355  
Diluted EPS (GAAP)   $ 0.52     $ 0.48     $ 0.44     $ 0.50     $ 0.53  
Diluted EPS, excluding certain items affecting comparability (non-GAAP)   $ 0.52     $ 0.48     $ 0.44     $ 0.49     $ 0.54  
Average assets   $ 11,845,282     $ 11,532,278     $ 11,194,753     $ 11,149,960     $ 10,844,570  
Average tangible equity   $ 1,119,824     $ 1,070,635     1,039,630     $ 1,022,982     $ 1,003,151  
Return on average assets, excluding certain items affecting comparability (non-GAAP)   1.27 %   1.21 %   1.15 %   1.26 %   1.41 %
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)   14.26 %   13.90 %   13.38 %   14.73 %   16.23 %
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)   14.42 %   14.06 %   13.53 %   14.93 %   16.45 %
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)   66.52 %   66.79 %   68.12 %   63.81 %   63.69 %
                     


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   Nine months ended
    September 30,
2019
  September 30,
2018
Net income (GAAP)   $ 103,707     $ 97,803  
             
Acquisition-related expenses   638     9,947  
Total charges   638     9,947  
Income tax expense (benefit) - other items   (75 )   (1,776 )
Income tax expense (benefit)   (75 )   (1,776 )
Total charges, net of taxes   563     8,171  
Operating earnings, excluding certain items affecting comparability (non-GAAP)   $ 104,270     $ 105,974  
Weighted average diluted shares   72,152,643     71,043,039  
Diluted EPS (GAAP)   $ 1.44     $ 1.38  
Diluted EPS, excluding certain items affecting comparability (non-GAAP)   $ 1.45     $ 1.49  
Average assets   $ 11,526,487     $ 10,413,575  
Average tangible equity   $ 1,076,990     $ 972,567  
Return on average assets, excluding certain items affecting comparability (non-GAAP)   1.21 %   1.36 %
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)   13.86 %   15.50 %
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)   14.02 %   15.69 %
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)   67.12 %   64.76 %

 

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