SUFFOLK, Va., July 26, 2013 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank (the "Bank") (Nasdaq:TOWN) reported record earnings of $11.20 million for the quarter ended June 30, 2013, a 17.54% increase, or $1.67 million, over the $9.53 million reported for the comparative period in 2012. Earnings for the year-to-date period increased 14.26% to $21.67 million as compared to the $18.97 million earned in the same period last year.
Net income available to common shareholders increased 24.31% to $9.86 million after preferred dividend payments of $1.34 million. Fully diluted earnings per share increased 19.23% to $0.31 per share compared to $0.26 per share for the comparative period of 2012. For the six-month period ended June 30, 2013, fully diluted earnings per share increased 22.0% to $0.61 from $0.50 in the comparative prior year period.
The Bank's common dividend was $0.09 per share for the quarter with the common dividend totaling $2.89 million. The current dividend represents an increase of 12.5% over the dividend paid during the same quarter of 2012.
Earnings Highlights
Net interest income increased to $36.08 million, a $173,000, a slight improvement over the second quarter of 2012. The increase in net interest income was driven by a combination of the growth in the Bank's earning assets and the continued reduction in funding costs. The Bank's net interest margin on a fully tax equivalent basis decreased to 3.67%, down from 3.99% in the same period in 2012, and 3.72% in the first quarter of 2013. The declines in net interest margin are primarily due to yield declines on earning assets and are consistent with the continued low interest rate environment.
Noninterest income, excluding gains or losses on investment securities, increased by $3.72 million, or 17.93%, to $24.46 million for the second quarter of 2013, compared to the second quarter of 2012. The majority of the increase is attributable to residential mortgage brokerage income, which increased $2.39 million or 36.63% from the comparative period in 2012 and insurance commissions, which increased $819,000, or 13.61%, from the comparative period in 2012. The increase in residential mortgage brokerage income was due to the continued expansion of our mortgage operations, while the increase in insurance commissions is largely due to the acquisition of an insurance agency in December 2012.
Noninterest expense increased by $3.18 million, or 7.82%, compared to the comparative quarter of 2012, and increased $3.22 million, or 7.93%, compared to the first quarter of 2013. A significant portion of the increase from the comparative period in 2012 is related to expansions of our mortgage operations and the December 2012 insurance agency acquisition.
Balance Sheet
At June 30, 2013, total Bank assets reached $4.60 billion, an increase of $364.09 million, or 8.61%, over 2012. The Bank's loan portfolio ended the period at $3.18 billion representing an increase of 5.91%, or $177.60 million, from the prior year, while earning assets increased to $4.23 billion, a 9.68%, or $373.44 million, increase over June 30, 2012. Loan growth has moderated during the current year as loans increased $46.60 million, or 1.49%, since December 31, 2012.
Total deposits increased to $3.51 billion, up $180.43 million, or 5.42%, from June 30, 2012. The Bank saw continued growth in noninterest bearing demand deposits, which ended the quarter at $1.08 billion, a 16.76% increase from June 30, 2012. Noninterest deposits represented 30.68% of total deposits at June 30, 2013. Retail deposits, excluding noncore CDARS and brokered deposits, increased by $221.39 million, or 7.18%, while noncore CDARS and brokered deposits decreased by $40.96 million, or 16.61%.
Capital Strength
The Bank's total equity at June 30, 2013 rose to $571.39 million, an increase of $24.39 million, or 4.46%, from June 30, 2012. Common equity increased 5.89%, or $23.91 million, and will be positively affected by the Bank's intention to enact a mandatory conversion of the Bank's 8% Series A Preferred Stock to common stock on September 1, 2013. The balance of the 8% Series A Preferred Stock was $57.38 million at June 30, 2013. Total risk-based capital remained strong as total risk-based capital, Tier 1 capital, and Tier 1 leverage ratios were 13.95%, 12.85% and 10.54%, respectively. All ratios exceed the current regulatory standards for well capitalized status.
Credit Quality
The Bank's asset quality continued to improve as nonperforming assets totaled $59.34 million, or 1.29%, of Bank assets at June 30, 2013, as compared to $80.89 million, or 1.91%, at June 30, 2012, and $64.01 million, or 1.46%, at March 31, 2013. At June 30, 2013, nonperforming loans decreased to $11.75 million, or 0.37% of total period-end loans, from $51.12 million, or 1.70%, at June 30, 2012, and $17.39 million, or 0.55%, at March 31, 2013.
As a result of consistent improvements in credit quality, combined with a reduction in historical loss ratios and healthier economic conditions, a negative provision for loan losses of $202,000 was recorded in the second quarter 2013. The provision for loan losses decreased $4.32 million compared to the second quarter of 2012 and $3.77 million compared to the linked quarter. Net charge-offs were $1.41 million compared to $3.79 million in the comparative period of 2012 and $3.35 million in the linked quarter. The decreases in net charge-offs from the prior quarter and second quarter of last year were driven primarily by lower commercial real estate and construction and development loan charge-offs.
| Asset Quality Indicators | |||||
| (in thousands) | 6/30/2013 | 3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 |
| Nonperforming loans | $11,746 | $17,389 | $40,691 | $51,519 | $51,117 |
| Foreclosed property | 47,596 | 46,622 | 30,297 | 30,910 | 29,775 |
| Total nonperforming assets | $59,342 | $64,011 | $70,988 | $82,429 | $80,892 |
| Quarterly net loans charged off | $1,410 | $3,349 | $1,868 | $6,010 | $3,787 |
| Year-to-date net loans charged off | $4,759 | $3,349 | $15,468 | $13,600 | $7,590 |
"We are pleased to report another solid quarter of financial performance. We were particularly pleased with the 19% increase in earnings per share to $0.31 per share," said G. Robert Aston, Jr., Chairman and Chief Executive Officer. "I am proud of the efforts of our staff members and directors as they strive every day to provide exquisite service to our clients, our members, and our community."
As one of the top community banks in Virginia and North Carolina, TowneBank operates 26 banking offices serving Chesapeake, Hampton, Newport News, Norfolk, Portsmouth, Suffolk, Virginia Beach, Williamsburg, James City County and York County in Virginia along with Moyock, Grandy, Camden, Southern Shores, Corolla and Kill Devil Hills in North Carolina. Towne also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Insurance Agency, TFA Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Prudential Towne Realty, Towne 1031 Exchange, LLC, and Corolla Classic Vacations. Through its strategic partnership with William E. Wood and Associates, the Bank also offers mortgage services in all of their offices in Hampton Roads and Northeastern North Carolina. 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 $4.60 billion as of June 30, 2013, TowneBank is one of the largest banks headquartered in Virginia.
Forward-Looking Statements:
This release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include competitive pressures in the banking industry that may increase significantly; changes in the interest rate environment may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit or other services; changes in the legislative or regulatory environment, including changes in accounting standards, may adversely affect our business; costs or difficulties related to the integration of the business and the businesses we have acquired may be greater than expected; expected cost savings associated with pending or recently completed acquisitions may not be fully realized or realized within the expected time frame; our competitors may have greater financial resources and develop products that enable them to compete more successfully; changes in business conditions, changes in the securities market and changes in our local economy with regards to our market area and its heavy concentration of U. S. military bases and related personnel. We assume no obligation to update information contained in this release.
| Selected Financial Highlights (unaudited) | ||||
| TOWNEBANK | ||||
| June 30, 2013 | ||||
| (dollars in thousands) | ||||
| Increase/ | % Increase/ | |||
| Three Months Ended June 30, | 2013 | 2012 | (Decrease) | (Decrease) |
| Results of Operations: | ||||
| Net interest income | $ 36,077 | $ 35,904 | $ 173 | 0.48% |
| Noninterest income (1) | 24,463 | 20,743 | 3,720 | 17.93% |
| Gain (loss) on investment securities | (208) | 1,753 | (1,961) | (111.87%) |
| Noninterest expenses | 43,817 | 40,640 | 3,177 | 7.82% |
| Provision for loan losses | (202) | 4,122 | (4,324) | (104.90%) |
| Income before income tax and noncontrolling interest | 16,717 | 13,638 | 3,079 | 22.58% |
| Provision for income tax expense | 4,707 | 3,401 | 1,306 | 38.40% |
| Net income | 12,010 | 10,237 | 1,773 | 17.32% |
| Net income attributable to noncontrolling interest | (811) | (709) | (102) | (14.39%) |
| Net income attributable to TowneBank | 11,199 | 9,528 | 1,671 | 17.54% |
| Preferred stock dividends | 1,344 | 1,600 | (256) | (16.00%) |
| Net income available to common shareholders | 9,855 | 7,928 | 1,927 | 24.31% |
| Net income per common share - basic | 0.32 | 0.26 | 0.06 | 23.08% |
| Net income per common share - diluted | 0.31 | 0.26 | 0.05 | 19.23% |
| Period End Data: | ||||
| Total assets | $ 4,595,087 | $ 4,230,993 | $ 364,094 | 8.61% |
| Total assets - tangible | 4,477,114 | 4,117,289 | 359,825 | 8.74% |
| Earning assets (2) | 4,230,005 | 3,856,565 | 373,440 | 9.68% |
| Loans (net of unearned income) | 3,180,110 | 3,002,513 | 177,597 | 5.91% |
| Allowance for loan losses | 39,037 | 40,370 | (1,333) | (3.30%) |
| Goodwill and other intangibles | 117,973 | 113,704 | 4,269 | 3.75% |
| Nonperforming assets | 59,342 | 80,892 | (21,550) | (26.64%) |
| Noninterest bearing deposits | 1,076,898 | 922,294 | 154,604 | 16.76% |
| Interest bearing deposits | 2,433,169 | 2,407,345 | 25,824 | 1.07% |
| Total deposits | 3,510,067 | 3,329,639 | 180,428 | 5.42% |
| Total equity | 571,388 | 546,995 | 24,393 | 4.46% |
| Total equity - tangible | 453,415 | 433,291 | 20,124 | 4.64% |
| Common equity | 429,636 | 405,724 | 23,912 | 5.89% |
| Common equity - tangible | 311,663 | 292,020 | 19,643 | 6.73% |
| Book value per common share | 13.61 | 12.93 | 0.68 | 5.26% |
| Book value per common share - tangible | 9.87 | 9.31 | 0.56 | 6.02% |
| Daily Average Balances: | ||||
| Total assets | $ 4,439,414 | $ 4,128,116 | $ 311,298 | 7.54% |
| Total assets - tangible | 4,321,112 | 4,014,039 | 307,073 | 7.65% |
| Earning assets (2) | 4,064,556 | 3,735,432 | 329,124 | 8.81% |
| Loans (net of unearned income), excluding nonaccrual loans | 3,150,527 | 2,879,798 | 270,729 | 9.40% |
| Allowance for loan losses | 40,127 | 40,428 | (301) | (0.74%) |
| Goodwill and other intangibles | 118,302 | 114,078 | 4,224 | 3.70% |
| Noninterest bearing deposits | 1,023,045 | 878,114 | 144,931 | 16.50% |
| Interest bearing deposits | 2,354,032 | 2,357,483 | (3,451) | (0.15%) |
| Total deposits | 3,377,077 | 3,235,597 | 141,480 | 4.37% |
| Total equity | 571,955 | 544,561 | 27,394 | 5.03% |
| Total equity - tangible | 453,653 | 430,484 | 23,169 | 5.38% |
| Common equity | 430,652 | 403,709 | 26,943 | 6.67% |
| Common equity - tangible | 312,350 | 289,632 | 22,718 | 7.84% |
| Key Ratios: | ||||
| Return on average assets | 1.01% | 0.93% | 0.08% | 8.60% |
| Return on average assets - tangible | 1.04% | 0.95% | 0.09% | 9.47% |
| Return on average equity | 7.85% | 7.04% | 0.81% | 11.51% |
| Return on average equity - tangible | 9.90% | 8.90% | 1.00% | 11.24% |
| Return on average common equity | 9.18% | 7.90% | 1.28% | 16.20% |
| Return on average common equity - tangible | 12.66% | 11.01% | 1.65% | 14.99% |
| Net interest margin-fully tax equivalent (2)(3) | 3.67% | 3.99% | (0.32%) | (8.02%) |
| Net interest margin (2) | 3.60% | 3.91% | (0.31%) | (7.93%) |
| Average earning assets/total average assets | 91.56% | 90.49% | 1.07% | 1.18% |
| Average loans/average deposits | 93.29% | 89.00% | 4.29% | 4.82% |
| Average noninterest deposits/total average deposits | 30.29% | 27.14% | 3.15% | 11.61% |
| Allowance for loan losses/period end loans | 1.23% | 1.34% | (0.11%) | (8.21%) |
| Nonperforming assets to period end assets | 1.29% | 1.91% | (0.62%) | (32.46%) |
| Period end equity/period end total assets | 12.43% | 12.93% | (0.50%) | (3.87%) |
| Efficiency ratio (1) | 72.38% | 71.74% | 0.64% | 0.89% |
| (1) Excludes gain on investment securities | ||||
| (2) Includes bank-owned life insurance | ||||
| (3) Presented on a tax-equivalent basis | ||||
| Selected Financial Highlights (unaudited) | ||||
| TOWNEBANK | ||||
| June 30, 2013 | ||||
| (dollars in thousands) | ||||
| Increase/ | % Increase/ | |||
| Six Months Ended June 30, | 2013 | 2012 | (Decrease) | (Decrease) |
| Results of Operations: | ||||
| Net interest income | $ 71,287 | $ 70,689 | $ 598 | 0.85% |
| Noninterest income (1) | 48,218 | 40,515 | 7,703 | 19.01% |
| Gain on investment securities | 396 | 2,531 | (2,135) | (84.35%) |
| Noninterest expenses | 84,414 | 78,173 | 6,241 | 7.98% |
| Provision for loan losses | 3,369 | 8,220 | (4,851) | (59.01%) |
| Income before income tax and noncontrolling interest | 32,118 | 27,342 | 4,776 | 17.47% |
| Provision for income tax expense | 9,073 | 7,454 | 1,619 | 21.72% |
| Net income | 23,045 | 19,888 | 3,157 | 15.87% |
| Net income attributable to noncontrolling interest | (1,375) | (923) | (452) | (48.97%) |
| Net income attributable to TowneBank | 21,670 | 18,965 | 2,705 | 14.26% |
| Preferred stock dividends | 2,696 | 3,517 | (821) | (23.34%) |
| Net income available to common shareholders | 18,974 | 15,448 | 3,526 | 22.82% |
| Net income per common share - basic | 0.61 | 0.51 | 0.10 | 19.61% |
| Net income per common share - diluted | 0.61 | 0.50 | 0.11 | 22.00% |
| Period End Data: | ||||
| Total assets | $ 4,595,087 | $ 4,230,993 | $ 364,094 | 8.61% |
| Total assets - tangible | 4,477,114 | 4,117,289 | 359,825 | 8.74% |
| Earning assets (2) | 4,230,005 | 3,856,565 | 373,440 | 9.68% |
| Loans (net of unearned income) | 3,180,110 | 3,002,513 | 177,597 | 5.91% |
| Allowance for loan losses | 39,037 | 40,370 | (1,333) | (3.30%) |
| Goodwill and other intangibles | 117,973 | 113,704 | 4,269 | 3.75% |
| Nonperforming assets | 59,342 | 80,892 | (21,550) | (26.64%) |
| Noninterest bearing deposits | 1,076,898 | 922,294 | 154,604 | 16.76% |
| Interest bearing deposits | 2,433,169 | 2,407,345 | 25,824 | 1.07% |
| Total deposits | 3,510,067 | 3,329,639 | 180,428 | 5.42% |
| Total equity | 571,388 | 546,995 | 24,393 | 4.46% |
| Total equity - tangible | 453,415 | 433,291 | 20,124 | 4.64% |
| Common equity | 429,636 | 405,724 | 23,912 | 5.89% |
| Common equity - tangible | 311,663 | 292,020 | 19,643 | 6.73% |
| Book value per common share | 13.61 | 12.93 | 0.68 | 5.26% |
| Book value per common share - tangible | 9.87 | 9.31 | 0.56 | 6.02% |
| Daily Average Balances: | ||||
| Total assets | $ 4,392,022 | $ 4,100,637 | $ 291,385 | 7.11% |
| Total assets - tangible | 4,273,464 | 3,986,247 | 287,217 | 7.21% |
| Earning assets (2) | 4,014,059 | 3,709,192 | 304,867 | 8.22% |
| Loans (net of unearned income), excluding nonaccrual loans | 3,126,525 | 2,830,280 | 296,245 | 10.47% |
| Allowance for loan losses | 40,465 | 40,144 | 321 | 0.80% |
| Goodwill and other intangibles | 118,558 | 114,389 | 4,169 | 3.64% |
| Noninterest bearing deposits | 987,648 | 854,370 | 133,278 | 15.60% |
| Interest bearing deposits | 2,358,406 | 2,354,899 | 3,507 | 0.15% |
| Total deposits | 3,346,054 | 3,209,269 | 136,785 | 4.26% |
| Total equity | 568,930 | 535,621 | 33,309 | 6.22% |
| Total equity - tangible | 450,372 | 421,232 | 29,140 | 6.92% |
| Common equity | 427,788 | 394,812 | 32,976 | 8.35% |
| Common equity - tangible | 309,230 | 280,422 | 28,808 | 10.27% |
| Key Ratios: | ||||
| Return on average assets | 0.99% | 0.93% | 0.06% | 6.45% |
| Return on average assets - tangible | 1.02% | 0.96% | 0.06% | 6.25% |
| Return on average equity | 7.68% | 7.12% | 0.56% | 7.87% |
| Return on average equity - tangible | 9.70% | 9.05% | 0.65% | 7.18% |
| Return on average common equity | 8.94% | 7.87% | 1.07% | 13.60% |
| Return on average common equity - tangible | 12.37% | 11.08% | 1.29% | 11.64% |
| Net interest margin-fully tax equivalent (2)(3) | 3.69% | 3.96% | (0.27%) | (6.82%) |
| Net interest margin (2) | 3.62% | 3.88% | (0.26%) | (6.70%) |
| Average earning assets/total average assets | 91.39% | 90.45% | 0.94% | 1.04% |
| Average loans/average deposits | 93.44% | 88.19% | 5.25% | 5.95% |
| Average noninterest deposits/total average deposits | 29.52% | 26.62% | 2.90% | 10.89% |
| Allowance for loan losses/period end loans | 1.23% | 1.34% | (0.11%) | (8.21%) |
| Nonperforming assets to period end assets | 1.29% | 1.91% | (0.62%) | (32.46%) |
| Period end equity/period end total assets | 12.43% | 12.93% | (0.50%) | (3.87%) |
| Efficiency ratio (1) | 70.64% | 70.30% | 0.34% | 0.48% |
| (1) Excludes gain on investment securities | ||||
| (2) Includes bank-owned life insurance | ||||
| (3) Presented on a tax-equivalent basis | ||||