TowneBank Reports Record Second Quarter Earnings

| Source: TowneBank TowneBank

SUFFOLK, Va., July 27, 2017 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank (the “Bank” or “Company”) (NASDAQ:TOWN) today reported record financial results for the three and six months ended June 30, 2017.  Earnings for the quarter ended June 30, 2017 were $26.21 million compared to the $6.26 million for the same quarter in 2016.  Fully diluted earnings per share were $0.42 per share compared to $0.12 per share in second quarter 2016.  Earnings in the second quarter of 2016 included after-tax acquisition-related expenses of $12.26 million, mostly related to the Monarch Financial Holdings, Inc. (“Monarch”) merger, as compared to $1.09 million in the current quarter.

Excluding certain items affecting comparability, earnings for the quarter ended June 30, 2017 were $24.77 million (non-GAAP), or $0.40 (non-GAAP) per diluted share, compared to $18.52 million (non-GAAP), or $0.36 (non-GAAP) per diluted share, for the same quarter in 2016.

Earnings for the year-to-date period were $48.18 million as compared to $24.08 million earned in the same period of 2016.  Fully diluted earnings per share were $0.77 compared to $0.47 for the six months ended June 30, 2016.

Excluding certain items affecting comparability, earnings for the year-to-date period were $46.81 million (non-GAAP), or $0.75 (non-GAAP) per diluted share, as compared to the $36.72 million (non-GAAP), or $0.71 (non-GAAP) per diluted share, earned in the same period of 2016.

The Bank’s quarterly dividend was $0.14 per share resulting in total common dividends of $8.77 million.  The current dividend represents an increase of 7.7% over the dividend paid during the same quarter of 2016.

“We are pleased to announce another quarter of strong earnings with solid deposit growth and continued strong growth in both net interest income and noninterest income, while producing a return on average assets of 1.29% and a return on average tangible equity of 13.67%,” said G. Robert Aston, Jr., Chairman and Chief Executive Officer.  “In addition, we were pleased with the overwhelming response to our $250 million subordinated debt offering completed in July, which will result in increases to our risk-based capital ratios and a reduction in our CRE concentration ratio.”


The following items affected comparability of our second quarter 2017 earnings (in thousands):


Three Months Ended June 30, 2017       Consolidated
  Banking Realty Insurance Totals
         
Purchase accounting adjustments (1) $3,889  $—  $—  $3,889 
Acquisition-related expenses (699) (87) (495) (1,281)
         
Total, before taxes $3,190  $(87) $(495) $2,608 
Income taxes (1,331) 12  152  (1,167)
Total impact, net of taxes (2) $1,859  $(75) $(343) $1,441 
         
(1) Relates to the effects of non-recurring reclassification and recovery of certain purchased loans  
(2) Non-GAAP measures are defined in the “Reconcilement of Non-GAAP Measures”  


The following table shows the aggregate acquisition accounting impact on net interest margin for the quarter ended June 30, 2017:


Three Months Ended June 30, 2017 Net Interest Margin (1)
   
Net Interest Margin, as presented 3.84%
Purchase accounting adjustments (2) 0.21%
   
Net interest margin, excluding one-time adjustments 3.63%
Acquisition accounting accretion, other 0.10%
Net interest margin, excluding purchase accounting impact 3.53%
   
(1) Presented on a tax-equivalent basis  
(2) Relates to the effects of non-recurring reclassification of purchased loans  


On July 17, 2017, the Company issued $250.0 million of fixed to variable rate subordinated notes due July 30, 2027.  The Company received $247.10 million after deducting discounts and issuance costs. The notes accrue interest at a fixed rate of 4.50% for the first five years until July 2022.  After this date and for the remaining five years of the notes' term, interest will accrue at a variable rate of three-month LIBOR plus 2.550%. The Company may redeem the subordinated notes in whole or in part, on or after July 30, 2022.  Subject to the speed of deployment into higher earning assets, we expect the issuance of these notes to result in a reduction of up to 12 basis points to net interest margin in third quarter 2017.

Second Quarter 2017 Performance Highlights

  • Total revenues were $119.60 million, an increase of $35.34 million, or 41.95% from second quarter 2016 
    • Taxable equivalent net interest margin was 3.84%, including accretion of 31 basis points, compared to 3.33%, including accretion of 5 basis points, for 2016
    • Excluding one-time purchase accounting adjustments of $3.89 million, or 21 basis points, taxable equivalent net interest margin was 3.63%
    • Residential mortgage banking income increased $9.45 million, or 77.76%
    • Insurance segment total revenue increased 10.03% to $14.89 million
       
  • Loans held for investment increased $389.11 million, or 7.00% from June 30, 2016
     
  • Total deposits were $6.60 billion, an increase of $409.49 million, or 6.62%, from second quarter 2016
    • Noninterest bearing deposits increased by 13.77%, to $2.22 billion, representing 33.65% of total deposits
    • Total cost of deposits increased slightly to 0.44% from 0.42% at June 30, 2016
       
  • Asset quality showed continued strength
    • Nonperforming assets declined to $35.69 million, or 0.42% of total assets compared to $36.29 million, or 0.46%, at June 30, 2016
    • Nonperforming loans were 0.16% of period end loans
    • Foreclosed property decreased to $23.25 million
       
  • The Bank remained well-capitalized
    • Common equity tier 1 capital ratio of 11.98%
    • Tier 1 leverage capital ratio of 10.43%
    • Tier 1 risk-based capital ratio of 12.03%
    • Total risk-based capital ratio of 12.68%
    • Tangible book value increased to $12.81

Second Quarter 2017 Earnings Compared to Second Quarter 2016

Net income for the second quarter was $26.21 million, or $0.42 per diluted share, versus $6.26 million, or $0.12 per diluted share, in 2016, reflecting strong growth in net interest income as compared to the prior year period.  Excluding after-tax acquisition-related expenses of $12.26 million, net income for the second quarter of 2016 was $18.52 million (non-GAAP), or $0.36 per diluted share.

Net Interest Income
Net interest income increased to $69.25 million, a $21.47 million, or 44.93%, increase from the second quarter of 2016.  The primary driver was the growth in average earning assets, which increased $1.45 billion, or 24.65%, while tax-equivalent net interest margin increased to 3.84% in the current quarter from 3.33% in second quarter 2016.  Accretion income added $5.57 million, or 31 basis points, to margin in the current quarter as compared to $0.61 million, or 5 basis points, in the second quarter of 2016.  Net interest income included a cumulative one-time adjustment to accretion income of a $3.89 million, or 21 basis points, due to the effects of a reclassification of purchased revolving credits.

Noninterest Income
Noninterest income was $50.34 million for the second quarter of 2017, an increase of $13.88 million, or 38.05%, from the second quarter of 2016.  Residential mortgage banking income increased $9.45 million, or 77.76%, from the second quarter of 2016 primarily due to higher production volumes resulting from the Monarch merger.  Mortgage production was $1.08 billion in second quarter 2017, which was $486.59 million higher than second quarter 2016 production of $591.79 million.  Insurance commissions and other title fees increased $1.28 million, or 10.97%, primarily due to organic growth in property and casualty and employee benefits lines of business.  Additionally, real estate brokerage and property management income increased $1.51 million, or 24.74%, from the second quarter of 2016 primarily due to our acquisition of a resort property management company at Deep Creek Lake, Maryland (“Deep Creek”) in second quarter 2017.

Noninterest Expense
Noninterest expense increased by $6.22 million, or 8.65%, from the comparative quarter of 2016.  The primary driver was an increase of $14.74 million in salaries and benefits expense due to the addition of staff related to the Monarch acquisition, incentive compensation, and organic growth.  Also contributing were increases in occupancy expenses of $1.50 million and furniture and equipment expenses of $1.18 million, primarily related to mortgage facilities acquired in the Monarch acquisition.  Partially offsetting the increase was a reduction in acquisition-related expenses of $17.15 million.

Second Quarter 2017 Earnings Compared to First Quarter 2017
Net income for the second quarter was $26.21 million, or $0.42 per diluted share, versus $21.97 million, or $0.35 per diluted share, in first quarter 2017, reflecting the increase in net interest income and seasonal improvements in our Realty segment.

Performance Highlights

  • Total revenues were $119.60 million compared to $105.17 million in the first quarter of 2017
    • Taxable equivalent net interest margin was 3.84%, including accretion of 31 basis points, compared to 3.45%, including accretion of 9 basis points, in the first quarter of 2017
    • Excluding one-time purchase accounting adjustments of $3.89 million, or 21 basis points, taxable equivalent net interest margin was 3.63%
    • Noninterest income increased $5.46 million due to seasonality in our Realty segment
       
  • Total loans held for investment increased $35.98 million from March 31, 2017
  • Total deposits increased $405.00 million, or 6.54%, from March 31, 2017, including an additional $175 million of brokered certificates of deposit
    • Noninterest bearing deposits increased by $166.81 million, or 8.13%

Net Interest Income
On a linked quarter basis, net interest income increased by $8.97 million or 14.88%, in second quarter 2017 versus first quarter 2017, while tax-equivalent net interest margin was 3.84% versus 3.45% for the first quarter of 2017.  The increase in net interest income was primarily due to the previously discussed increase in accretion income, combined with a seasonal increase in average balances of loans held for sale and decreased borrowing costs.  Accretion income added $5.57 million, or 31 basis points, to margin in the current quarter, as compared to $1.13 million, or 9 basis points, in the linked quarter.  Net interest income included a cumulative one-time adjustment to accretion income of a $3.89 million, or 21 basis points, due to the effects of a reclassification of purchased revolving credits.

Noninterest Income
In comparison to the first quarter of 2017, noninterest income increased $5.46 million, or 12.16%.  The increase was driven by residential mortgage banking income, which grew by $3.96 million, or 22.47%, due to a seasonal increase in mortgage production of $372.32 million, from $706.06 million in first quarter 2017 to $1.08 billion in second quarter 2017.  Additionally, real estate brokerage and property management income was higher by $2.64 million, or 52.79% due to a seasonal increase in real estate brokerage and the Deep Creek acquisition.  Partially offsetting the increase from the linked quarter was a decline in insurance commissions due to lower contingent commission revenue, which is primarily received during the first quarter of each year.

Noninterest Expense
Noninterest expense increased by $7.87 million, or 11.20%, from the first quarter of 2017.  The primary drivers were increases in salaries and benefits expenses of $4.63 million and acquisition-related expenses of $1.29 million.  Salaries and benefits expenses were higher due to the accrual of expenses related to our profit sharing plan, which requires the achievement of certain performance thresholds and a targeted level of earnings, combined with the effects of the Deep Creek acquisition.

Noninterest Income      % Change
 Q2 Q2 Q1 Q2 17 vs. Q2 17 vs.
(dollars in thousands)2017 2016 2017 Q2 16 Q1 17
Residential mortgage banking income, net$21,594  $12,148  $17,632  77.76% 22.47%
Insurance commissions and other title fees and  income, net12,902  11,627  14,800  10.97% (12.82)%
Real estate brokerage and property management, net7,629  6,116  4,993  24.74% 52.79%
Service charges on deposit accounts2,644  2,284  2,472  15.76% 6.96%
Credit card merchant fees, net1,298  1,113  1,118  16.62% 16.10%
Bank owned life insurance1,421  1,181  1,474  20.32% (3.60)%
Other income2,856  1,999  2,397  42.87% 19.15%
Subtotal before loss on investment securities50,344  36,468  44,886  38.05% 12.16%
Net loss on investment securities(1) —  —  N/M  N/M 
Total noninterest income$50,343  $36,468  $44,886  38.05% 12.16%


Noninterest Expense      % Change
 Q2 Q2 Q1 Q2 17 vs.  Q2 17 vs.
(dollars in thousands)2017 2016 2017 Q2 16 Q1 17
Salaries and benefits$44,834  $30,093  $40,208  48.98% 11.51%
Occupancy expense6,658  5,157  6,684  29.11% (0.39)%
Furniture and equipment3,563  2,381  3,343  49.64% 6.58%
Acquisition-related expenses1,281  18,435  (5) (93.05)% N/M 
Other expenses21,783  15,833  20,018  37.58% 8.82%
Total noninterest expense$78,119  $71,899  $70,248  8.65% 11.20%

Segment Results

        $ Change
(in thousands) Q2 Q2 Q1 Q2 17 vs.  Q2 17 vs.
Segment Net Income (Loss) 2017 2016 2017 Q2 16 Q1 17
Banking $21,546  $1,290  $17,967  $20,256  $3,579 
Realty 3,204  3,765  926  (561) 2,278 
Insurance 1,463  1,204  3,075  259  (1,612)
Total net income $26,213  $6,259  $21,968  $19,954  $4,245 

Second Quarter 2017 Compared to Second Quarter 2016

Banking
Net income for the three months ended June 30, 2017 for the Banking segment was $21.55 million, increasing $20.26 million from comparative 2016, as net interest income climbed by $19.55 million primarily due to the increase in earning assets from the Monarch merger and increased accretion income.  Also contributing to the variance was a decrease in the provision for loan losses of $0.78 million and an increase in noninterest income of $1.76 million, which included increases in wealth management income, service charges and credit card merchant fees.  Additionally, noninterest expenses declined by $8.0 million, as the decrease in acquisition-related expenses of $17.32 million was partially offset by increases in personnel costs and other expenses.

Realty
For the three months ended June 30, 2017, the Realty segment net income was $3.20 million as compared to $3.77 million in second quarter 2016.  The variance was driven by increased noninterest expenses of $13.56 million primarily due to an increase in mortgage operational expenses related to the merger with Monarch, including an increase in personnel costs of $7.97 million.  The decrease was mostly offset by an increase in residential mortgage banking income of $9.24 million, or 73.98%, due to higher production volumes resulting from the Monarch merger.  Additionally, net interest and other income increased by $2.06 million as higher production volume led to higher average mortgage loans held for sale.

Insurance
The Insurance segment had net income of $1.46 million for the three months ended June 30, 2017, an increase of $0.26 million compared to second quarter 2016.  The increase in net income was primarily driven by organic growth in property and casualty insurance and employee benefit insurance lines.

Second Quarter 2017 Compared to First Quarter 2017

Banking
Earnings increased by $3.58 million, or 19.92% from the first quarter of 2017 as an increase in net interest income of $7.99 million was partially offset by increases in personnel costs of $3.18 million and acquisition-related expenses of $0.58 million.  Additionally, there was also a decrease of $1.22 million in the provision for loan losses.

Realty
Net income in the Realty segment increased by $2.28 million from the linked quarter ended March 31, 2017.  The increase was primarily a result of a seasonal increase in residential mortgage banking income of $3.96 million and real estate brokerage income of $0.88 million.

Insurance
Net income decreased $1.61 million from the first quarter of 2017 driven by a reduction in contingency and bonus revenue of $2.59 million.  Contingent commissions are seasonal in nature and are primarily received during the first quarter of each year.  Additionally, commissions from travel insurance decreased by $0.47 million but were offset by an increases in property and casualty commissions of $0.81 million and employee benefits commissions of $0.31 million.

Balance Sheet

At June 30, 2017, total Bank assets reached $8.43 billion, an increase of $0.49 billion, or 6.12%, over June 30, 2016.

Loans

       % Change
 Q2 Q2 Q1 Q2 17 vs. Q2 17 vs.
(dollars in thousands)2017 2016 2017 Q2 16 Q1 17
Construction and land development$888,566  $824,609  $898,540  7.76% (1.11)%
Commercial real estate - investment related properties1,339,270  1,221,488  1,362,184  9.64% (1.68)%
Commercial real estate - owner occupied956,333  896,620  907,049  6.66% 5.43%
Multifamily real estate206,894  171,501  236,782  20.64% (12.62)%
1-4 family residential real estate1,227,389  1,183,818  1,215,278  3.68% 1.00%
Commercial and industrial business loans1,110,822  1,075,736  1,086,273  3.26% 2.26%
Consumer loans and other219,787  186,177  206,974  18.05% 6.19%
Total$5,949,061  $5,559,949  $5,913,080  7.00% 0.61%

The Bank’s loan portfolio ended the period at $5.95 billion representing an increase of 7.00%, or $389.11 million, from the prior year, and an increase of $35.98 million, or 0.61%, from March 31, 2017.

Deposits

       % Change
 Q2 Q2 Q1 Q2 17 vs. Q2 17 vs.
(dollars in thousands)2017 2016 2017 Q2 16 Q1 17
Noninterest-bearing demand$2,219,406  $1,950,816  $2,052,598  13.77% 8.13%
Interest-bearing:         
Demand and money market accounts2,292,978  2,174,154  2,270,025  5.47% 1.01%
Savings318,714  317,071  320,104  0.52% (0.43)%
Certificates of deposits1,764,671  1,744,238  1,548,045  1.17% 13.99%
Total$6,595,769  $6,186,279  $6,190,772  6.62% 6.54%

The Bank continued to experience solid deposit growth with total deposits increasing to $6.60 billion, up $0.41 billion, or 6.62%, from June 30, 2016.  The Bank saw continued growth in noninterest-bearing demand deposits, which ended the quarter at $2.22 billion, a 13.77% increase from the prior year.  Noninterest-bearing deposits represented 33.65% of total deposits at June 30, 2017.

Capital Ratios

  Q2 Q2 Q1
  2017 2016 2017
Common Equity Tier 1 11.98% 11.82% 11.94%
Tier 1 12.03% 11.89% 11.98%
Total 12.68% 12.50% 12.62%
Tier 1 Leverage Ratio 10.43% 12.36% 10.49%

The Bank’s total equity at June 30, 2017 rose to $1.12 billion, an increase of $61.45 million, or 5.79%, from June 30, 2016.  Total risk-based capital remained strong as common equity Tier 1, Tier 1 capital, total risk-based capital, and Tier 1 leverage capital ratios were 11.98%, 12.03%, 12.68%, 10.43%, respectively.  All ratios exceed the current regulatory standards for well capitalized status.

Asset Quality

          
(in thousands)6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016
          
Nonperforming loans$9,645  $11,538  $13,099  $11,337  $10,580 
Former bank premises2,798  2,798  3,494  —  — 
Foreclosed property23,249  21,473  21,011  22,884  25,707 
       —   
Total nonperforming assets$35,692  $35,809  $37,604  $34,221  $36,287 
          
Quarterly net loans charged off$384  $1,347  $485  $649  $241 
          
Year-to-date net loans charged off$1,731  $1,347  $1,715  $1,230  $581 


        Change
  Q2 Q2 Q1 Q2 17 vs. Q2 17 vs.
(dollars in thousands) 2017 2016 2017 Q2 16 Q1 17
Total loans 90 days past due and still accruing $206  $—  $35  $206  $171 
Total loans 30-89 days past due $4,193  $5,041  $11,424  $(848) $(7,231)
Allowance for loan losses $44,131  $39,618  $43,195  $4,513  $936 
Total performing TDRs $24,663  $28,184  $26,659  $(3,521) $(1,996)
           
Nonperforming loans to period end loans 0.16% 0.19% 0.20% (0.03) (0.04)
Nonperforming assets to period end assets 0.42% 0.46% 0.44% (0.04) (0.02)
Allowance for loan losses to period end loans 0.74% 0.71% 0.73% 0.03  0.01 
Allowance for loan losses (originated) to originated period end loans 0.86% 0.90% 0.86% (0.04) — 
Net charge-offs to average loans (annualized) 0.03% 0.02% 0.09% 0.01  (0.06)
Ratio of allowance for loan losses to nonperforming loans 4.58x   3.74x   3.74x     0.84x  0.84x


Continued strength in credit quality contributed to the Bank's financial results as net charge-offs totaled $0.38 million in the second quarter of 2017 compared to $0.24 million in the second quarter of 2016 and $1.35 million in the linked quarter.  Total nonperforming assets were $35.69 million, or 0.42%, of Bank assets at June 30, 2017, as compared to $36.29 million, or 0.46%, at June 30, 2016, and $35.81 million, or 0.44%, at March 31, 2017.  The allowance for loan losses was $44.13 million, increased from $39.62 million at June 30, 2016 and $43.20 million at March 31, 2017.

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 37 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 Moyock, Grandy, Camden County, Southern Shores, Corolla and Nags Head in North Carolina.  Towne also offers a full range of financial services through its controlled divisions and subsidiaries that include 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 $8.43 billion as of June 30, 2017, TowneBank is one of the largest banks headquartered in Virginia.

On April 27, 2017, TowneBank announced the signing of a definitive agreement to acquire Paragon Commercial Corporation (“Paragon”) and its wholly-owned bank subsidiary, Paragon Commercial Bank.  Founded in Raleigh, North Carolina in 1999, Paragon Commercial Bank provides banking services through highly responsive professionals, an extensive courier service, online and mobile technologies, free worldwide ATM access and a select number of strategically placed offices in Raleigh, Cary and Charlotte, North Carolina.  Pending customary regulatory and shareholder approvals, the merger is scheduled to close in January 2018. Based on financial data as of March 31, 2017, the combined company would have total assets of $9.7 billion, gross loans of $7.1 billion and total deposits of $7.5 billion.

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.  Since the presentation of these GAAP performance measures and their impact differ between companies, management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses.  These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP disclosures are included as tables at the end of this release.

Forward-Looking Statements:
Certain statements contained in this release constitute forward-looking statements within the meaning of U.S. federal securities laws.  These forward-looking statements speak only as of the date of this release, are based on current expectations, and involve a number of assumptions. These include statements regarding TowneBank’s future economic performance, financial condition, prospects, growth, strategies and expectations, and objectives of management, and are generally identified by the use of words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” or “project” or similar expressions.  TowneBank intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. You should not place undue reliance on forward-looking statements, which are subject to assumptions that are subject to change. TowneBank’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ from those indicated or implied in the forward-looking statements and such differences may be material.  Factors which could have a material effect on the operations and future prospects of TowneBank include but are not limited to: changes in interest rates, general economic and business conditions; legislative/regulatory changes; the monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; the quality and composition of TowneBank’s loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBank’s market 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; TowneBank’s ability to complete and successfully integrate the business of Paragon Commercial Bank in the expected timeframe, if at all, and to achieve expected revenue synergies and cost savings from the merger; and other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation (the “FDIC”).  TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

Additional Information About the Merger and Where to Find It:
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.  In connection with the merger, Paragon will file with the Securities and Exchange Commission (“SEC”) a preliminary proxy statement. Paragon will deliver a definitive proxy statement/prospectus to its stockholders seeking approval of the merger and related matters.  In addition, each of TowneBank and Paragon may file other relevant documents concerning the proposed merger with the FDIC and SEC.

Paragon, TowneBank and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Paragon’s stockholders in connection with the proposed merger.  Information about the directors and executive officers of Paragon and TowneBank and other persons who may be deemed participants in the solicitation, including their interests in the merger, will be included in the definitive proxy statement/prospectus when it becomes available. Additional information about Paragon’s executive officers and directors can be found in Paragon’s final prospectus filed with the SEC on June 17, 2016.  Additional information regarding TowneBank’s executive officers and directors can be found in TowneBank’s definitive proxy statement in connection with its 2017 Annual Meeting of Stockholders filed with the FDIC on April 21, 2017.  You may obtain free copies of each document from Paragon by directing a request by telephone or mail to Paragon Commercial Corporation, 3535 Glenwood Avenue, Raleigh, North Carolina 27612, Attention: Investor Relations (telephone: (919) 788-7770), or by accessing Paragon’s website at https://www.paragonbank.com under “About Us-Investor Relations.”  You may obtain free copies of each document from TowneBank by directing a request by telephone or mail to TowneBank, 6001 Harbour View Boulevard, Suffolk, Virginia 23425, Attention: Investor Relations (telephone: (757) 638-6794), or by accessing TowneBank’s website at https://townebank.com under “Investor Relations.”  The information on TowneBank’s and Paragon’s websites is not, and shall not be deemed to be, a part of this release or incorporated into other filings either company makes with the FDIC or SEC. 


TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
 
        Increase/  % Increase/
Three Months Ended June 30,2017 2016  (Decrease)  (Decrease)
         
Results of Operations:       
 Net interest income$69,253  $47,784  $21,469  44.93%
 Noninterest income50,343  36,468  13,875  38.05%
 Total Revenue119,596  84,252  35,344  41.95%
 Acquisition-related expenses1,281  18,435  (17,154) (93.05)%
 Noninterest expenses, excluding acquisition-related expenses76,838  53,464  23,374  43.72%
 Provision for loan losses1,320  2,099  (779) (37.11)%
 Income before income tax and noncontrolling interest40,157  10,254  29,903  291.62%
 Provision for income tax expense12,240  2,375  9,865  415.37%
 Net income27,917  7,879  20,038  254.32%
 Net income attributable to noncontrolling interest(1,704) (1,620) (84) 5.19%
 Net income attributable to TowneBank26,213  6,259  19,954  318.80%
 Net income available to common shareholders26,213  6,259  19,954  318.80%
 Net income per common share - basic0.42  0.12  0.30  250.00%
 Net income per common share - diluted0.42  0.12  0.30  250.00%
Period End Data:       
 Total assets$8,427,042  $7,940,741  $486,301  6.12%
 Total assets - tangible8,118,730  7,641,740  476,990  6.24%
 Earning assets7,590,796  7,143,797  446,999  6.26%
 Loans (net of unearned income)5,949,061  5,559,949  389,112  7.00%
 Allowance for loan losses44,131  39,618  4,513  11.39%
 Goodwill and other intangibles308,312  299,000  9,312  3.11%
 Nonperforming assets35,692  36,287  (595) (1.64)%
 Noninterest bearing deposits2,219,406  1,950,816  268,590  13.77%
 Interest bearing deposits4,376,363  4,235,463  140,900  3.33%
   Total deposits6,595,769  6,186,279  409,490  6.62%
 Total equity1,122,998  1,061,548  61,450  5.79%
 Total equity - tangible814,686  762,548  52,138  6.84%
 Common equity1,110,681  1,050,360  60,321  5.74%
 Common equity - tangible802,369  751,360  51,009  6.79%
 Book value per common share17.74  16.84  0.90  5.34%
 Book value per common share - tangible12.81  12.05  0.76  6.31%
Daily Average Balances:       
 Total assets$8,180,959  $6,534,063  $1,646,896  25.20%
 Total assets - tangible7,873,036  6,339,815  1,533,221  24.18%
 Earning assets7,318,667  5,871,197  1,447,470  24.65%
 Loans (net of unearned income), excluding nonaccrual loans5,926,336  4,702,825  1,223,511  26.02%
 Allowance for loan losses43,501  38,419  5,082  13.23%
 Goodwill and other intangibles307,923  194,248  113,675  58.52%
 Noninterest bearing deposits2,081,819  1,538,370  543,449  35.33%
 Interest bearing deposits4,186,319  3,544,493  641,826  18.11%
   Total deposits6,268,138  5,082,863  1,185,275  23.32%
 Total equity1,115,008  859,938  255,070  29.66%
 Total equity - tangible807,085  665,690  141,395  21.24%
 Common equity1,103,813  850,393  253,420  29.80%
 Common equity - tangible795,891  656,145  139,746  21.30%
Key Ratios:       
 Return on average assets1.29% 0.39% 0.90% 230.77%
 Return on average assets - tangible1.40% 0.44% 0.96% 218.18%
 Return on average equity9.43% 2.93% 6.50% 221.84%
 Return on average equity - tangible13.67% 4.21% 9.46% 224.70%
 Return on average common equity9.53% 2.96% 6.57% 221.96%
 Return on average common equity - tangible13.87% 4.28% 9.59% 224.07%
 Net interest margin-fully tax equivalent (1)3.84% 3.33% 0.51% 15.32%
 Net interest margin3.80% 3.27% 0.53% 16.21%
 Average earning assets/total average assets89.46% 89.88% (0.42)% (0.47)%
 Average loans/average deposits94.55% 92.52% 2.03% 2.19%
 Average noninterest deposits/total average deposits33.21% 30.27% 2.94% 9.71%
 Allowance for loan losses/period end loans0.74% 0.71% 0.03% 4.23%
 Nonperforming assets to period end assets0.42% 0.46% (0.04)% (8.70)%
 Period end equity/period end total assets13.33% 13.37% (0.04)% (0.30)%
 Efficiency ratio65.32% 85.34% (20.02)% (23.46)%
         
(1) Presented on a tax-equivalent basis       
        
        
        


 
TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
 
        Increase/  % Increase/
Six Months Ended June 30,2017 2016  (Decrease)  (Decrease)
         
Results of Operations:       
 Net interest income$129,533  $94,120  $35,413  37.63%
 Noninterest income95,228  68,882  26,346  38.25%
 Total Revenue224,761  163,002  61,759  37.89%
 Acquisition-related expenses1,276  18,849  (17,573) (93.23)%
 Noninterest expenses, excluding acquisition-related expenses147,091  105,211  41,880  39.81%
 Provision for loan losses3,861  1,840  2,021  109.84%
 Income before income tax and noncontrolling interest72,533  37,102  35,431  95.50%
 Provision for income tax expense21,626  10,563  11,063  104.73%
 Net income50,907  26,539  24,368  91.82%
 Net income attributable to noncontrolling interest(2,727) (2,461) (266) 10.81%
 Net income attributable to TowneBank48,180  24,078  24,102  100.10%
 Net income available to common shareholders48,180  24,078  24,102  100.10%
 Net income per common share - basic0.78  0.47  0.31  65.96%
 Net income per common share - diluted0.77  0.47  0.30  63.83%
Period End Data:       
 Total assets$8,427,042  $7,940,741  $486,301  6.12%
 Total assets - tangible8,118,730  7,641,740  476,990  6.24%
 Earning assets7,590,796  7,143,797  446,999  6.26%
 Loans (net of unearned income)5,949,061  5,559,949  389,112  7.00%
 Allowance for loan losses44,131  39,618  4,513  11.39%
 Goodwill and other intangibles308,312  299,000  9,312  3.11%
 Nonperforming assets35,692  36,287  (595) (1.64)%
 Noninterest bearing deposits2,219,406  1,950,816  268,590  13.77%
 Interest bearing deposits4,376,363  4,235,463  140,900  3.33%
   Total deposits6,595,769  6,186,279  409,490  6.62%
 Total equity1,122,998  1,061,548  61,450  5.79%
 Total equity - tangible814,686  762,548  52,138  6.84%
 Common equity1,110,681  1,050,360  60,321  5.74%
 Common equity - tangible802,369  751,360  51,009  6.79%
 Book value per common share17.74  16.84  0.90  5.34%
 Book value per common share - tangible12.81  12.05  0.76  6.31%
Daily Average Balances:       
 Total assets$8,091,161  $6,423,650  $1,667,511  25.96%
 Total assets - tangible7,786,156  6,233,169  1,552,987  24.91%
 Earning assets7,248,947  5,767,829  1,481,118  25.68%
 Loans (net of unearned income), excluding nonaccrual loans5,894,743  4,609,551  1,285,192  27.88%
 Allowance for loan losses43,058  38,487  4,571  11.88%
 Goodwill and other intangibles305,006  190,481  114,525  60.12%
 Noninterest bearing deposits2,020,195  1,477,081  543,114  36.77%
 Interest bearing deposits4,144,447  3,522,050  622,397  17.67%
   Total deposits6,164,642  4,999,131  1,165,511  23.31%
 Total equity1,104,308  845,058  259,250  30.68%
 Total equity - tangible799,303  654,577  144,726  22.11%
 Common equity1,093,128  835,830  257,298  30.78%
 Common equity - tangible788,122  645,349  142,773  22.12%
Key Ratios:       
 Return on average assets1.20% 0.75% 0.45% 60.00%
 Return on average assets - tangible1.31% 0.82% 0.49% 59.76%
 Return on average equity8.80% 5.73% 3.07% 53.58%
 Return on average equity - tangible12.79% 7.84% 4.95% 63.14%
 Return on average common equity8.89% 5.79% 3.10% 53.54%
 Return on average common equity - tangible12.97% 7.95% 5.02% 63.14%
 Net interest margin-fully tax equivalent (1)3.64% 3.33% 0.31% 9.31%
 Net interest margin3.60% 3.28% 0.32% 9.76%
 Average earning assets/total average assets89.59% 89.79% (0.20)% (0.22)%
 Average loans/average deposits95.62% 92.21% 3.41% 3.70%
 Average noninterest deposits/total average deposits32.77% 29.55% 3.22% 10.90%
 Allowance for loan losses/period end loans0.74% 0.71% 0.03% 4.23%
 Nonperforming assets to period end assets0.42% 0.46% (0.04)% (8.70)%
 Period end equity/period end total assets13.33% 13.37% (0.04)% (0.30)%
 Efficiency ratio66.01% 76.11% (10.10)% (13.27)%
         
(1) Presented on a tax-equivalent basis       
        
        


TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
 
  June 30, March 31, Increase/  % Increase/
Three Months Ended2017 2017 (Decrease)  (Decrease)
         
Results of Operations:       
 Net interest income$69,253  $60,281  $8,972  14.88%
 Noninterest income50,343  44,886  5,457  12.16%
 Total Revenue119,596  105,167  14,429  13.72%
 Acquisition-related expenses1,281  (5) 1,286  N/M 
 Noninterest expenses, excluding acquisition-related expenses76,838  70,253  6,585  9.37%
 Provision for loan losses1,320  2,541  (1,221) (48.05)%
 Income before income tax and noncontrolling interest40,157  32,378  7,779  24.03%
 Provision for income tax expense12,240  9,386  2,854  30.41%
 Net income27,917  22,992  4,925  21.42%
 Net income attributable to noncontrolling interest(1,704) (1,024) (680) 66.41%
 Net income attributable to TowneBank26,213  21,968  4,245  19.32%
 Net income available to common shareholders26,213  21,968  4,245  19.32%
 Net income per common share - basic0.42  0.35  0.07  20.00%
 Net income per common share - diluted0.42  0.35  0.07  20.00%
Period End Data:       
 Total assets$8,427,042  $8,174,786  $252,256  3.09%
 Total assets - tangible8,118,730  7,872,823  245,907  3.12%
 Earning assets7,590,796  7,362,550  228,246  3.10%
 Loans (net of unearned income)5,949,061  5,913,080  35,981  0.61%
 Allowance for loan losses44,131  43,195  936  2.17%
 Goodwill and other intangibles308,312  301,962  6,350  2.10%
 Nonperforming assets35,692  35,809  (117) (0.33)%
 Noninterest bearing deposits2,219,406  2,052,598  166,808  8.13%
 Interest bearing deposits4,376,363  4,138,174  238,189  5.76%
   Total deposits6,595,769  6,190,772  404,997  6.54%
 Total equity1,122,998  1,101,245  21,753  1.98%
 Total equity - tangible814,686  799,283  15,403  1.93%
 Common equity1,110,681  1,089,760  20,921  1.92%
 Common equity - tangible802,369  787,798  14,571  1.85%
 Book value per common share17.74  17.42  0.32  1.84%
 Book value per common share - tangible12.81  12.59  0.22  1.75%
Daily Average Balances:       
 Total assets$8,180,959  $8,000,366  $180,593  2.26%
 Total assets - tangible7,873,036  7,698,310  174,726  2.27%
 Earning assets7,318,667  7,177,697  140,970  1.96%
 Loans (net of unearned income), excluding nonaccrual loans5,926,336  5,862,799  63,537  1.08%
 Allowance for loan losses43,501  42,610  891  2.09%
 Goodwill and other intangibles307,923  302,056  5,867  1.94%
 Noninterest bearing deposits2,081,819  1,957,887  123,932  6.33%
 Interest bearing deposits4,186,319  4,102,109  84,210  2.05%
   Total deposits6,268,138  6,059,996  208,142  3.43%
 Total equity1,115,008  1,093,490  21,518  1.97%
 Total equity - tangible807,085  791,433  15,652  1.98%
 Common equity1,103,813  1,082,324  21,489  1.99%
 Common equity - tangible795,891  780,268  15,623  2.00%
Key Ratios:       
 Return on average assets1.29% 1.11% 0.18% 16.22%
 Return on average assets - tangible1.40% 1.22% 0.18% 14.75%
 Return on average equity9.43% 8.15% 1.28% 15.71%
 Return on average equity - tangible13.67% 11.88% 1.79% 15.07%
 Return on average common equity9.53% 8.23% 1.30% 15.80%
 Return on average common equity - tangible13.87% 12.05% 1.82% 15.10%
 Net interest margin-fully tax equivalent (1)3.84% 3.45% 0.39% 11.30%
 Net interest margin3.80% 3.41% 0.39% 11.44%
 Average earning assets/total average assets89.46% 89.72% (0.26)% (0.29)%
 Average loans/average deposits94.55% 96.75% (2.20)% (2.27)%
 Average noninterest deposits/total average deposits33.21% 32.31% 0.90% 2.79%
 Allowance for loan losses/period end loans0.74% 0.73% 0.01% 1.37%
 Nonperforming assets to period end assets0.42% 0.44% (0.02)% (4.55)%
 Period end equity/period end total assets13.33% 13.47% (0.14)% (1.04)%
 Efficiency ratio65.32% 66.80% (1.48)% (2.22)%
         
(1) Presented on a tax-equivalent basis       
        
        


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Three Months Ended Three Months Ended Three Months Ended
 June 30, 2017 March 31, 2017 June 30, 2016
   Interest Average   Interest Average   Interest Average
 Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets:                 
Loans (net of unearned income
  and deferred costs), excluding 
  nonaccrual loans		$5,926,336  $72,167  4.88% $5,862,799  $64,979  4.49% $4,702,825  $52,232  4.47%
Taxable investment securities597,231  2,801  1.88% 627,338  2,843  1.81% 671,791  2,734  1.63%
Tax-exempt investment securities48,560  370  3.05% 50,485  375  2.97% 52,398  405  3.09%
Interest-bearing deposits455,489  1,188  1.05% 450,076  887  0.80% 289,699  364  0.51%
Loans held for sale291,051  2,879  3.96% 186,999  1,727  3.69% 154,484  1,294  3.31%
Total earning assets7,318,667  79,405  4.35% 7,177,697  70,811  4.00% 5,871,197  57,029  3.91%
  Less: allowance for loan losses(43,501)     (42,610)     (38,419)    
                  
Total nonearning assets905,793      865,279      701,285     
                  
  Total assets$8,180,959      $8,000,366      $6,534,063     
                  
Liabilities and Equity:                 
Interest-bearing deposits                 
  Demand and money market$2,235,869  $1,957  0.35% $2,272,911  $1,865  0.33% $1,813,502  $1,298  0.29%
  Savings318,323  815  1.03% 320,319  757  0.96% 301,542  709  0.95%
  Certificates of deposit1,632,127  4,105  1.01% 1,508,879  3,381  0.91% 1,429,449  3,260  0.92%
Total interest-bearing deposits4,186,319  6,877  0.66% 4,102,109  6,003  0.59% 3,544,493  5,267  0.60%
Borrowings641,748  2,551  1.57% 723,506  3,803  2.10% 471,392  3,190  2.69%
Total interest-bearing liabilities4,828,067  9,428  0.78% 4,825,615  9,806  0.82% 4,015,885  8,457  0.85%
Demand deposits2,081,819      1,957,887      1,538,370     
Other noninterest-bearing liabilities156,065      123,374      119,870     
  Total liabilities7,065,951      6,906,876      5,674,125     
                  
Shareholders’ equity1,115,008      1,093,490      859,938     
                  
  Total liabilities and equity$8,180,959      $8,000,366      $6,534,063     
                  
Net interest income (tax-equivalent basis)  $69,977      $61,005      $48,572   
Reconcilement of Non-GAAP Financial Measures                
  Tax-equivalent basis adjustment  (724)     (724)     (788)  
Net interest income (GAAP)  $69,253      $60,281      $47,784   
                  
Interest rate spread (1)    3.57%     3.18%     3.06%
Interest expense as a percent of average earning assets   0.52%     0.55%     0.58%
Net interest margin (tax equivalent basis) (2)   3.84%     3.45%     3.33%
Total cost of deposits    0.44%     0.40%     0.42%
                  

(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Six Months Ended Six Months Ended Six Months Ended June 30, 2017
 June 30, 2017 June 30, 2016 Compared with June 30, 2016
   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$5,894,743  $137,146  4.69% $4,609,551  $103,013  4.49% $34,133  $4,650  $29,483 
Taxable investment securities612,196  5,644  1.84% 713,152  5,790  1.62% (146) 730  (876)
Tax-exempt investment securities49,522  746  3.01% 52,689  814  3.09% (68) (20) (48)
Interest-bearing deposits453,174  2,074  0.92% 277,477  694  0.50% 1,380  785  595 
Loans held for sale239,312  4,606  3.85% 114,960  1,987  3.46% 2,619  249  2,370 
Total earning assets7,248,947  150,216  4.18% 5,767,829  112,298  3.92% 37,918  6,394  31,524 
  Less: allowance for loan losses(43,058)     (38,487)          
                  
Total nonearning assets$885,272      $694,308           
                  
  Total assets$8,091,161      $6,423,650           
                  
Liabilities and Equity:                 
Interest-bearing deposits                 
  Demand and money market$2,254,288  $3,822  0.34% $1,798,205  $2,626  0.29% $1,196  $470  $726 
  Savings319,315  1,573  0.99% 300,806  1,409  0.94% 164  77  87 
  Certificates of deposit1,570,844  7,485  0.96% 1,423,039  6,445  0.91% 1,040  360  680 
Total interest-bearing deposits4,144,447  12,880  0.63% 3,522,050  10,480  0.60% 2,400  907  1,493 
Borrowings682,401  6,354  1.85% 470,497  6,375  2.69% (22) (2,348) 2,326 
Total interest-bearing liabilities4,826,848  19,234  0.80% 3,992,547  16,855  0.85% 2,378  (1,441) 3,819 
Demand deposits2,020,195      1,477,081           
Other noninterest-bearing liabilities139,810      108,964           
  Total liabilities6,986,853      5,578,592           
                  
Shareholders’ equity1,104,308      845,058           
                  
  Total liabilities and equity$8,091,161      $6,423,650           
                  
Net interest income (tax-
equivalent basis)		  $130,982      $95,442    $35,540  $7,835  $27,705 
Reconcilement of Non-GAAP Financial Measures                
  Tax-equivalent basis adjustment  (1,449)     (1,322)   (127)    
Net interest income (GAAP)  $129,533      $94,120    $35,413     
                  
Interest rate spread (1)    3.38%     3.07%      
Interest expense as a percent of average
earning assets		   0.54%     0.59%      
Net interest margin (tax equivalent
basis) (2)		    3.64%     3.33%      
Total cost of deposits    0.42%     0.42%      
                  

(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest bearing liabilities.  Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.


TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
   
    
 June 30, December 31,
 2017 2016 2016
 (unaudited) (unaudited) (audited)
ASSETS     
Cash and due from banks$468,455  $188,183  $130,967 
Interest-bearing deposits in financial institutions5,071  33,777  5,581 
Federal funds sold—  14  — 
Total Cash and Cash Equivalents473,526  221,974  136,548 
Securities available for sale, at fair value700,354  812,375  812,974 
Securities held to maturity, at amortized cost63,937  65,728  66,490 
Federal Home Loan Bank stock, at amortized cost29,586  28,008  35,937 
Total Securities793,877  906,111  915,401 
Mortgage loans held for sale388,523  473,147  314,046 
Loans, net of unearned income and deferred costs:     
Real estate-residential 1-4 family1,227,389  1,183,818  1,215,823 
Real estate-commercial2,295,603  2,118,108  2,251,312 
Real estate-construction and development888,566  824,609  826,027 
Real estate-multi-family206,894  171,501  222,791 
Commercial1,110,822  1,075,736  1,089,539 
Consumer and other loans219,787  186,177  201,729 
Loans, net of unearned income and deferred costs5,949,061  5,559,949  5,807,221 
  Less: allowance for loan losses(44,131) (39,618) (42,001)
Net Loans5,904,930  5,520,331  5,765,220 
Premises and equipment, net199,926  202,333  198,568 
Goodwill268,246  257,485  264,910 
Other intangible assets, net40,066  41,515  37,856 
Bank-owned life insurance policies192,339  164,933  189,499 
Other assets165,609  152,912  151,867 
TOTAL ASSETS$8,427,042  $7,940,741  $7,973,915 
      
LIABILITIES AND EQUITY     
Deposits:     
Noninterest-bearing demand$2,219,406  $1,950,816  $1,947,312 
Interest-bearing:     
Demand and money market accounts2,292,978  2,174,154  2,263,894 
Savings318,714  317,071  319,611 
Certificates of deposit1,764,671  1,744,238  1,504,380 
Total Deposits6,595,769  6,186,279  6,035,197 
Advances from the Federal Home Loan Bank527,219  500,798  687,511 
Repurchase agreements and other borrowings28,571  44,008  32,540 
Total Borrowings555,790  544,806  720,051 
Other liabilities152,485  148,108  132,109 
TOTAL LIABILITIES7,304,044  6,879,193  6,887,357 
Preferred stock     
Authorized and unissued shares - 2,000,000—  —  — 
Common stock, $1.667 par: 90,000,000 shares authorized     
  62,619,045; 62,365,197; and 62,492,168 shares issued at     
  June 30, 2017 and 2016 and December 31, 2016, respectively104,386  103,963  104,174 
Capital surplus747,867  742,228  745,411 
Retained earnings260,783  202,565  229,503 
Common stock issued to deferred compensation trust, at cost     
  697,606; 674,899; and 692,431 shares at     
  June 30, 2017 and 2016 and December 31, 2016, respectively(11,492) (10,785) (11,168)
Deferred compensation trust11,492  10,785  11,168 
Accumulated other comprehensive income (loss)(2,355) 1,604  (3,986)
TOTAL SHAREHOLDERS’ EQUITY1,110,681  1,050,360  1,075,102 
Noncontrolling interest12,317  11,188  11,456 
TOTAL EQUITY1,122,998  1,061,548  1,086,558 
TOTAL LIABILITIES AND EQUITY$8,427,042  $7,940,741  $7,973,915 


TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
        
        
 Three Months Ended Six Months Ended
 June 30, June 30,
 2017 2016 2017 2016
INTEREST INCOME:       
Loans, including fees$71,443  $51,444  $135,698  $101,690 
Investment securities3,171  3,139  6,389  6,604 
Interest-bearing deposits in financial institutions and
  federal funds sold		1,188  364  2,074  694 
Mortgage loans held for sale2,879  1,294  4,606  1,987 
Total interest income78,681  56,241  148,767  110,975 
INTEREST EXPENSE:       
Deposits6,877  5,267  12,879  10,480 
Advances from the Federal Home Loan Bank2,521  3,158  6,294  6,321 
Repurchase agreements and other borrowings, net of capitalized interest30  32  61  54 
Total interest expense9,428  8,457  19,234  16,855 
Net interest income69,253  47,784  129,533  94,120 
        
PROVISION FOR LOAN LOSSES1,320  2,099  3,861  1,840 
Net interest income after provision for loan losses67,933  45,685  125,672  92,280 
NONINTEREST INCOME:       
Residential mortgage banking income, net21,594  12,148  39,226  19,266 
Insurance commissions and other title fees and income, net12,902  11,627  27,702  25,660 
Real estate brokerage and property management income, net7,629  6,116  12,623  10,943 
Service charges on deposit accounts2,644  2,284  5,115  4,460 
Credit card merchant fees, net1,298  1,113  2,416  2,008 
Bank owned life insurance1,421  1,181  2,896  2,352 
Other income2,856  1,999  5,251  4,193 
Loss on investment securities(1) —  (1) — 
Total noninterest income50,343  36,468  95,228  68,882 
NONINTEREST EXPENSE:       
Salaries and employee benefits44,834  30,093  85,042  60,279 
Occupancy6,658  5,157  13,342  10,174 
Furniture and equipment3,563  2,381  6,906  4,739 
Other expenses23,064  34,268  43,077  48,868 
Total noninterest expense78,119  71,899  148,367  124,060 
Income before income tax expense & noncontrolling interest40,157  10,254  72,533  37,102 
Provision for income tax expense12,240  2,375  21,626  10,563 
Net income$27,917  $7,879  $50,907  $26,539 
Net income attributable to noncontrolling interest(1,704) (1,620) (2,727) (2,461)
Net income attributable to TowneBank$26,213  $6,259  $48,180  $24,078 
Net income available to common shareholders$26,213  $6,259  $48,180  $24,078 
Per common share information       
Basic earnings$0.42  $0.12  $0.78  $0.47 
Diluted earnings$0.42  $0.12  $0.77  $0.47 
Cash dividends declared$0.14  $0.13  $0.27  $0.25 


TOWNEBANK
Consolidated Statements of Comprehensive Income
(dollars in thousands)
        
        
 Three Months Ended Six Months Ended
 June 30, June 30,
 2017 2016 2017 2016
 (unaudited) (unaudited) (unaudited) (unaudited)
        
Net income$27,917  $7,879  $50,907  $26,539 
        
Other comprehensive income (loss)       
        
Unrealized gains on securities       
Unrealized holding gains arising during the period2,571  2,329  2,733  6,809 
Deferred tax expense(900) (815) (957) (2,383)
Realized losses reclassified into earnings1  —  1  — 
Net unrealized gains1,672  1,514  1,777  4,426 
        
Pension and postretirement benefit plans       
Actuarial gain (loss)143  —  (395) 109 
Deferred tax benefit (expense)(49) —  139  (38)
Amortization of prior service costs41  115  92  153 
Deferred tax expense(14) (40) (32) (53)
Amortization of actuarial loss (gain)39  (2) 78  2 
Deferred tax expense(14) 1  (28) (1)
Change in retirement plans, net of tax146  74  (146) 172 
        
Other comprehensive income (loss), net of tax1,818  1,588  1,631  4,598 
        
Comprehensive income$29,735  $9,467  $52,538  $31,137 


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
          
 June 30, March 31, December 31, September 30, June 30,
 2017 2017 2016 2016 2016
 (unaudited) (unaudited) (audited) (unaudited) (unaudited)
ASSETS         
Cash and due from banks$468,455  $420,192  $130,967  $147,887  $188,183 
Interest-bearing deposits in financial institutions5,071  5,335  5,581  6,891  33,777 
Federal funds sold—  —  —  —  14 
Total Cash and Cash Equivalents473,526  425,527  136,548  154,778  221,974 
Securities available for sale, at fair value700,354  720,667  812,974  704,418  812,375 
Securities held to maturity, at amortized cost63,937  65,117  66,490  70,304  65,728 
Federal Home Loan Bank stock, at amortized cost29,586  36,402  35,937  24,888  28,008 
Total Securities793,877  822,186  915,401  799,610  906,111 
Mortgage loans held for sale388,523  214,047  314,046  439,451  473,147 
Loans, net of unearned income and deferred costs:5,949,061  5,913,080  5,807,221  5,651,642  5,559,949 
  Less: allowance for loan losses(44,131) (43,195) (42,001) (40,655) (39,618)
Net Loans5,904,930  5,869,885  5,765,220  5,610,987  5,520,331 
Premises and equipment, net199,926  198,664  198,568  202,955  202,333 
Goodwill268,246  264,910  264,910  264,578  257,485 
Other intangible assets, net40,066  37,052  37,856  39,747  41,515 
Bank-owned life insurance policies192,339  190,917  189,499  163,385  164,933 
Other assets165,609  151,598  151,867  154,651  152,912 
TOTAL ASSETS$8,427,042  $8,174,786  $7,973,915  $7,830,142  $7,940,741 
LIABILITIES AND EQUITY         
Deposits:         
Noninterest-bearing demand$2,219,406  $2,052,598  $1,947,312  $1,974,395  $1,950,816 
Interest-bearing:         
Demand and money market accounts2,292,978  2,270,025  2,263,894  2,207,962  2,174,154 
Savings318,714  320,104  319,611  315,477  317,071 
Certificates of deposit1,764,671  1,548,045  1,504,380  1,649,113  1,744,238 
Total Deposits6,595,769  6,190,772  6,035,197  6,146,947  6,186,279 
Advances from the Federal Home Loan Bank527,219  687,366  687,511  427,655  500,798 
Repurchase agreements and other borrowings28,571  35,318  32,540  31,927  44,008 
Total Borrowings555,790  722,684  720,051  459,582  544,806 
Other liabilities152,485  160,085  132,109  144,735  148,108 
TOTAL LIABILITIES7,304,044  7,073,541  6,887,357  6,751,264  6,879,193 
Preferred stock         
Authorized shares - 2,000,000—  —  —  —  — 
          
Common stock, $1.667 par value104,386  104,307  104,174  104,000  103,963 
Capital surplus747,867  746,289  745,411  743,223  742,228 
Retained earnings260,783  243,337  229,503  218,631  202,565 
Common stock issued to deferred compensation trust, at cost(11,492) (11,294) (11,168) (10,969) (10,785)
Deferred compensation trust11,492  11,294  11,168  10,969  10,785 
Accumulated other comprehensive income (loss)(2,355) (4,173) (3,986) 1,339  1,604 
TOTAL SHAREHOLDERS’ EQUITY1,110,681  1,089,760  1,075,102  1,067,193  1,050,360 
Noncontrolling interest12,317  11,485  11,456  11,685  11,188 
TOTAL EQUITY1,122,998  1,101,245  1,086,558  1,078,878  1,061,548 
TOTAL LIABILITIES AND EQUITY$8,427,042  $8,174,786  $7,973,915  $7,830,142  $7,940,741 


TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)
    
    
 Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
 2017 2017 2016 2016 2016
INTEREST INCOME:         
Loans, including fees$71,443  $64,255  $65,151  $64,623  $51,444 
Investment securities3,171  3,218  3,152  3,099  3,139 
Interest-bearing deposits in financial institutions and
federal funds sold		1,188  887  487  (36) 364 
Mortgage loans held for sale2,879  1,727  3,028  4,137  1,294 
Total Interest Income78,681  70,087  71,818  71,823  56,241 
INTEREST EXPENSE:         
Deposits6,877  6,003  5,928  5,909  5,267 
Advances from the Federal Home Loan Bank2,521  3,772  3,546  3,276  3,158 
Repurchase agreements and other borrowings30  31  193  33  32 
Total Interest Expense9,428  9,806  9,667  9,218  8,457 
Net Interest Income69,253  60,281  62,151  62,605  47,784 
          
PROVISION FOR LOAN LOSSES1,320  2,541  1,831  1,686  2,099 
Net Interest Income after Provision for Loan Losses67,933  57,740  60,320  60,919  45,685 
NONINTEREST INCOME:         
Residential mortgage banking income, net21,594  17,632  18,096  21,430  12,148 
Insurance commissions and other title fees and income, net12,902  14,800  9,823  11,258  11,627 
Real estate brokerage and property management income, net7,629  4,993  2,925  6,647  6,116 
Service charges on deposit accounts2,644  2,472  2,535  2,552  2,284 
Credit card merchant fees, net1,298  1,118  1,135  1,365  1,113 
Bank owned life insurance1,421  1,474  2,377  1,264  1,181 
Other income2,856  2,397  2,621  2,305  1,999 
Net gain (loss) on investment securities(1) —  6  —  — 
Total Noninterest Income50,343  44,886  39,518  46,821  36,468 
NONINTEREST EXPENSE:         
Salaries and employee benefits44,834  40,208  43,071  40,497  30,093 
Occupancy expense6,658  6,684  6,885  6,656  5,157 
Furniture and equipment3,563  3,343  3,378  3,199  2,381 
Other expenses23,064  20,013  19,500  20,581  34,268 
Total Noninterest Expense78,119  70,248  72,834  70,933  71,899 
Income before income tax expense and noncontrolling interest40,157  32,378  27,004  36,807  10,254 
Provision for income tax expense12,240  9,386  7,160  10,974  2,375 
Net income27,917  22,992  19,844  25,833  7,879 
Net income attributable to noncontrolling interest(1,704) (1,024) (848) (1,657) (1,620)
Net income attributable to TowneBank$26,213  $21,968  $18,996  $24,176  $6,259 
Net income available to common shareholders$26,213  $21,968  $18,996  $24,176  $6,259 
Per common share information         
Basic earnings$0.42  $0.35  $0.31  $0.39  $0.12 
Diluted earnings$0.42  $0.35  $0.31  $0.39  $0.12 
Basic weighted average shares outstanding62,145,045  62,075,983  61,963,948  61,908,316  51,994,473 
Diluted weighted average shares outstanding62,364,260  62,262,789  62,175,705  62,067,832  52,116,772 
Cash dividends declared$0.14  $0.13  $0.13  $0.13  $0.13 


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
 
    
   Increase/(Decrease)
 Three Months Ended June 30, 2017 June 30, 2017
 June 30, March 31, 2017 June 30, 2016 March 31, 2017
 2017 2016  Amount Percent Amount Percent
Revenue             
Net interest income$66,434  $46,888  $58,444  $19,546  41.69% $7,990  13.67%
Service charges on deposit accounts2,644  2,284  2,472  360  15.76% 172  6.96%
Credit card merchant fees1,297  1,113  1,118  184  16.53% 179  16.01%
Other income3,362  2,148  3,106  1,214  56.52% 256  8.24%
Total noninterest income7,303  5,545  6,696  1,758  31.70% 607  9.07%
Total revenue73,737  52,433  65,140  21,304  40.63% 8,597  13.20%
              
Provision for loan losses1,320  2,099  2,541  (779) (37.11)% (1,221) (48.05)%
              
Expenses             
Salaries and employee benefits23,519  17,119  20,341  6,400  37.39% 3,178  15.62%
Occupancy expense3,828  3,588  4,128  240  6.69% (300) (7.27)%
Furniture and equipment2,372  1,847  2,274  525  28.42% 98  4.31%
Advertising and marketing1,207  933  1,041  274  29.37% 166  15.95%
Charitable contributions1,647  1,295  1,313  352  27.18% 334  25.44%
Outside processing1,112  842  1,154  270  32.07% (42) (3.64)%
Foreclosed property expenses135  454  130  (319) (70.26)% 5  3.85%
FDIC and other insurance1,131  1,122  987  9  0.80% 144  14.59%
Professional fees748  885  1,280  (137) (15.48)% (532) (41.56)%
Telephone and postage963  715  904  248  34.69% 59  6.53%
Other expenses5,311  21,177  4,797  (15,866) (74.92)% 514  10.72%
Total expenses41,973  49,977  38,349  (8,004) (16.02)% 3,624  9.45%
Income before income tax, corporate allocation and noncontrolling interest30,444  357  24,250  30,087  8,427.73% 6,194  25.54%
Corporate allocation410  255  484  155  60.78% (74) (15.29)%
Income before income tax provision and noncontrolling interest30,854  612  24,734  30,242  4,941.50% 6,120  24.74%
Provision for income tax expense9,307  (678) 6,765  9,985  (1,472.71)% 2,542  37.58%
Net income21,547  1,290  17,969  20,257  1,570.31% 3,578  19.91%
Noncontrolling interest(1) —  (2) (1) N/M  1  (50.00)%
Net income attributable to TowneBank$21,546  $1,290  $17,967  $20,256  1,570.23% $3,579  19.92%
              
Efficiency ratio56.92% 95.32% 58.87% (38.40)% (40.29)% (1.95)% (3.31)%


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
 
    
 Six Months Ended Increase/(Decrease)
 June 30, 2017 over 2016
 2017 2016 Amount Percent
Net interest income$124,878  $92,711  $32,167  34.70%
  Service charges on deposit accounts5,115  4,460  655  14.69%
  Credit card merchant fees2,416  2,008  408  20.32%
  Other income6,468  4,676  1,792  38.32%
  Total noninterest income13,999  11,144   2,855  25.62%
  Total revenue138,877  103,855   35,022  33.72%
        
  Provision for loan losses3,861  1,840  2,021  109.84%
        
Salaries and employee benefits43,860  34,631  9,229  26.65%
Occupancy expense7,955  7,063  892  12.63%
Furniture and equipment4,646  3,712  934  25.16%
Advertising and marketing2,249  1,807  442  24.46%
Charitable contributions2,960  2,262  698  30.86%
Outside processing2,266  1,772  494  27.88%
Foreclosed property expenses253  566  (313) (55.30)%
FDIC and other insurance2,118  2,172  (54) (2.49)%
Professional fees2,028  1,934  94  4.86%
Telephone and postage1,868  1,460  408  27.95%
Other expenses10,120  24,778  (14,658) (59.16)%
  Total expenses80,323  82,157  (1,834) (2.23)%
Income before income tax and
  corporate allocation		54,693  19,858  34,835  175.42%
Corporate allocation895  614  281  45.77%
Income before income tax provision55,588  20,472  35,116  171.53%
Provision for income tax expense16,072  5,051  11,021  218.19%
Net income$39,516  $15,421  24,095  156.25%
Noncontrolling interest$(3) $—  (3) N/M 
Net income attributable to TowneBank$39,513  $15,421  24,092  156.23%
        
Efficiency ratio57.84% 79.11% (21.27)% (26.89)%


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
 
    
   Increase/(Decrease)
 Three Months Ended June 30, 2017 June 30, 2017
 June 30, March 31, June 30, 2016 March 31, 2017
 2017 2016 2017 Amount Percent Amount Percent
Revenue             
Residential mortgage brokerage
income, net		$21,730  $12,490  $17,775  $9,240  73.98% $3,955  22.25%
Real estate brokerage income, net2,337  2,393  1,460  (56) (2.34)% 877  60.07%
Title insurance and settlement fees582  550  355  32  5.82% 227  63.94%
Property management fees, net5,293  3,723  3,533  1,570  42.17% 1,760  49.82%
Income from unconsolidated
subsidiary		250  216  124  34  15.74% 126  101.61%
Net interest and other income3,229  1,167  2,203  2,062  176.69% 1,026  46.57%
Total revenue33,421  20,539  25,450  12,882  62.72% 7,971  31.32%
              
Expenses             
Salaries and employee benefits15,220  7,250  13,708  7,970  109.93% 1,512  11.03%
Occupancy expense2,269  1,053  1,964  1,216  115.48% 305  15.53%
Furniture and equipment999  275  869  724  263.27% 130  14.96%
Amortization of intangible assets718  353  559  365  103.40% 159  28.44%
Other expenses7,495  4,214  5,978  3,281  77.86% 1,517  25.38%
Total expenses26,701  13,145  23,078  13,556  103.13% 3,623  15.70%
              
Income before income tax, corporate allocation and noncontrolling interest6,720  7,394  2,372  (674) (9.12)% 4,348  183.31%
Corporate allocation(266) (123) (307) (143) 116.26% 41  (13.36)%
Income before income tax provision and noncontrolling interest6,454  7,271  2,065  (817) (11.24)% 4,389  212.54%
Provision for income tax expense1,889  2,249  627  (360) (16.01)% 1,262  201.28%
Net income4,565  5,022  1,438  (457) (9.10)% 3,127  217.45%
Noncontrolling interest(1,361) (1,257) (512) (104) 8.27% (849) 165.82%
Net income attributable to TowneBank$3,204  $3,765  $926  $(561) (14.90)% $2,278  246.00%
              
Efficiency ratio79.89% 64.00% 90.68% 15.89% 24.83% (10.79)% (11.90)%


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
        
    
 Six Months Ended Increase/(Decrease)
 June 30, 2017 over 2016
 2017 2016 Amount Percent
Residential mortgage banking income, net$39,505  $19,800  $19,705  99.52%
Real estate brokerage income, net3,797  3,805  (8) (0.21)%
Title insurance and settlement fees936  899  37  4.12%
Property management fees, net8,826  7,138  1,688  23.65%
Income from unconsolidated subsidiary374  380  (6) (1.58)%
Net interest and other income5,431  1,930  3,501  181.40%
Total revenue58,869  33,952  24,917  73.39%
        
Salaries and employee benefits28,928  13,957  14,971  107.27%
Occupancy expense4,233  2,066  2,167  104.89%
Furniture and equipment1,868  544  1,324  243.38%
Amortization of intangible assets1,277  705  572  81.13%
Other expenses13,472  7,058  6,414  90.88%
Total expenses49,778  24,330  25,448  104.60%
Income before income tax, corporate allocation and noncontrolling interest9,091  9,622  (531) (5.52)%
Corporate allocation(574) (292) (282) 96.58%
Income before income tax provision and noncontrolling interest8,517  9,330  (813) (8.71)%
Provision for income tax2,516  2,908  (392) (13.48)%
Net income6,001  6,422  (421) (6.56)%
Noncontrolling interest(1,872) (1,625) (247) 15.20%
Net income attributable to TowneBank$4,129  $4,797  $(668) (13.93)%
        
Efficiency ratio84.56% 71.66% 12.90% 18.00%


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
          
   Increase/(Decrease)
 Three Months Ended June 30, 2017 June 30, 2017
 June 30, March 31, June 30, 2016 March 31, 2017
 2017 2016 2017 Amount Percent Amount Percent
Commission and fee income             
Property and casualty$9,271  $8,793  $8,457  $478  5.44% $814  9.63%
Employee benefits3,280  2,907  2,974  373  12.83% 306  10.29%
Travel insurance1,159  1,163  1,627  (4) (0.34)% (468) (28.76)%
Specialized benefit services158  152  165  6  3.95% (7) (4.24)%
Total commissions and fees13,868  13,015  13,223  853  6.55% 645  4.88%
              
Contingency and bonus revenue948  467  3,539  481  103.00% (2,591) (73.21)%
Other income76  52  88  24  46.15% (12) (13.64)%
Total revenue14,892  13,534  16,850  1,358  10.03% (1,958) (11.62)%
              
Employee commission expense2,454  2,254  2,273  200  8.87% 181  7.96%
Revenue, net of commission expense12,438  11,280  14,577  1,158  10.27% (2,139) (14.67)%
              
Salaries and employee benefits6,095  5,723  6,159  372  6.50% (64) (1.04)%
Occupancy expense562  517  592  45  8.70% (30) (5.07)%
Furniture and equipment192  259  200  (67) (25.87)% (8) (4.00)%
Amortization of intangible assets704  692  697  12  1.73% 7  1.00%
Other expenses1,892  1,586  1,173  306  19.29% 719  61.30%
Total operating expenses9,445  8,777  8,821  668  7.61% 624  7.07%
Income before income tax, corporate allocation and noncontrolling interest2,993  2,503  5,756  490  19.58% (2,763) (48.00)%
Corporate allocation(144) (132) (177) (12) 9.09% 33  (18.64)%
Income before income tax provision and noncontrolling interest2,849  2,371  5,579  478  20.16% (2,730) (48.93)%
Provision for income tax expense1,044  804  1,994  240  29.85% (950) (47.64)%
Net income1,805  1,567  3,585  238  15.19% (1,780) (49.65)%
Noncontrolling interest(342) (363) (510) 21  (5.79)% 168  (32.94)%
Net income attributable to TowneBank$1,463  $1,204  $3,075  $259  21.51% $(1,612) (52.42)%
              
Efficiency ratio75.94% 77.81% 60.51% (1.87)% (2.40)% 15.43% 25.50%


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
        
        
 Six Months EndedIncrease/(Decrease)
 June 30, 2017 over 2016
 2017 2016 Amount Percent
Net commission and fee income       
Property and casualty$17,728  $16,878  $850  5.04%
Employee benefits6,254  5,806  448  7.72%
Travel insurance2,786  2,619  167  6.38%
Specialized benefit services323  305  18  5.90%
Total net commissions and fees27,091  25,608  1,483  5.79%
        
Contingency and bonus revenue4,488  3,879  609  15.70%
Other income162  129  33  25.58%
Total revenues31,741  29,616  2,125  7.18%
        
Employee commission expense4,726  4,421  305  6.90%
Revenue, net of commission expense27,015  25,195  1,820  7.22%
        
Salaries and employee benefits12,255  11,692  563  4.82%
Occupancy expense1,154  1,045  109  10.43%
Furniture and equipment392  483  (91) (18.84)%
Amortization of intangible assets1,401  1,377  24  1.74%
Other expenses3,064  2,976  88  2.96%
Total operating expenses18,266  17,573  693  3.94%
Income before income tax, corporate allocation and noncontrolling interest8,749  7,622  1,127  14.79%
Corporate allocation(321) (322) 1  (0.31)%
Income before income tax provision and noncontrolling interest8,428  7,300  1,128  15.45%
Provision for income tax3,038  2,604  434  16.67%
Net income5,390  4,696  694  14.78%
Noncontrolling interest(852) (836) (16) 1.91%
Net income attributable to TowneBank$4,538  $3,860  $678  17.56%
        
Efficiency ratio67.61% 69.75% (2.14)% (3.07)%


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
          
          
 Three Months Ended Six Months Ended
 June 30, June 30, March 31, June 30, June 30,
 2017 2016 2017 2017 2016
          
Return on average assets (GAAP)1.29% 0.39% 1.11% 1.20% 0.75%
Impact of excluding average goodwill and other
intangibles and amortization		0.11% 0.05% 0.11% 0.11% 0.07%
Return on average tangible assets (non-GAAP)1.40% 0.44% 1.22% 1.31% 0.82%
          
Return on average equity (GAAP)9.43% 2.93% 8.15% 8.80% 5.73%
Impact of excluding average goodwill and other
intangibles and amortization		4.24% 1.28% 3.73% 3.99% 2.11%
Return on average tangible equity (non-GAAP)13.67% 4.21% 11.88% 12.79% 7.84%
          
Return on average common equity (GAAP)9.53% 2.96% 8.23% 8.89% 5.79%
Impact of excluding average goodwill and other
intangibles and amortization		4.34% 1.32% 3.82% 4.08% 2.16%
Return on average tangible common equity
(non-GAAP)		13.87% 4.28% 12.05% 12.97% 7.95%
          
Book value (GAAP)$17.74  $16.84  $17.42  $17.74  $16.84 
Impact of excluding average goodwill and other
intangibles and amortization		(4.93) (4.79) (4.83) (4.93) (4.79)
Tangible book value (non-GAAP)$12.81  $12.05  $12.59  $12.81  $12.05 


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,
  2017 2017 2016 2016 2016
           
Net income (GAAP) $26,213  $21,968  $18,996  $24,176  $6,259 
           
Purchase accounting corrections (3,889) —  —  —  — 
           
Acquisition-related expenses 1,281  (5) (707) 969  18,435 
           
Total charges (2,608) (5) (707) 969  18,435 
Income tax expense (benefit) 1,167  75  264  (267) (6,177)
Total charges, net of taxes (1,441) 70  (443) 702  12,258 
Operating earnings, excluding certain items affecting
comparability (non-GAAP)		 $24,772  $22,038  $18,553  $24,878  $18,517 
           
Weighted average diluted shares 62,364,260  62,262,789  62,175,705  62,067,832  52,116,772 
           
Diluted EPS (GAAP) $0.42  $0.35  $0.31  $0.39  $0.12 
Diluted EPS, excluding certain items affecting
comparability (non-GAAP)		 $0.40  $0.35  $0.30  $0.40  $0.36 
           
Average assets $8,180,959  $8,000,366  $7,965,438  $7,991,213  $6,534,063 
Average tangible equity $807,085  $791,433  $783,789  $772,932  $665,690 
           
Return on average assets, excluding certain items
affecting comparability (non-GAAP)		 1.21% 1.12% 0.93% 1.24% 1.14%
Return on average tangible equity, excluding certain items
affecting comparability (non-GAAP)		 12.96% 11.91% 10.04% 13.45% 11.62%
Efficiency ratio, excluding certain items affecting
comparability (Non-GAAP)		 66.41% 66.80% 72.34% 63.94% 63.46%


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,
  2017 2016
     
Net income (GAAP) $48,180  $24,078 
     
Purchase accounting adjustments (3,889) — 
     
Acquisition-related expenses 1,276  18,849 
     
Total charges (2,613) 18,849 
Income tax expense (benefit) 1,242  (6,210)
Total charges, net of taxes (1,371) 12,639 
Operating earnings, excluding certain items affecting comparability (non-GAAP) $46,809  $36,717 
     
Weighted average diluted shares 62,351,215  51,711,472 
     
Diluted EPS (GAAP) $0.77  $0.47 
Diluted EPS, excluding certain items affecting comparability (non-GAAP) $0.75  $0.71 
     
Average assets $8,091,161  $6,423,650 
Average tangible equity $799,303  $654,577 
     
Return on average assets, excluding certain items affecting comparability (non-GAAP) 1.16% 1.15%
Return on average tangible equity, excluding certain items affecting
comparability (non-GAAP)		 12.44% 11.72%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP) 66.60% 64.55%

 


            











    

        

        
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