SUFFOLK, Va., Oct. 22, 2020 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (NASDAQ: TOWN) today reported earnings for the quarter ended September 30, 2020 of $34.46 million, or $0.48 per diluted share, compared to $37.66 million, or $0.52 per diluted share, for the quarter ended September 30, 2019.

“Our third quarter results were highlighted by strong performance across our fee-based business lines.  Total revenues exceeded $192 million despite challenges from historically low interest rates.  Credit metrics remained stable reflecting our relationship-based credit culture.  Once again, strong deposit growth led to TowneBank earning the top spot in Hampton Roads market share according to recently released FDIC data,” said G. Robert Aston, Jr., Executive Chairman.

Highlights for Third Quarter 2020 Compared to Third Quarter 2019:

  • Total revenues were a record $192.14 million, an increase of $46.26 million, or 31.71%.
  • Pre-provision, pre-tax, net revenues (non-GAAP) were $73.90 million, an increase of $27.05 million, or 57.74%.
  • Loans held for investment were $9.77 billion, an increase of $1.59 billion, or 19.40%, from September 30, 2019, but a decrease of  $0.03 billion, or 0.32%, from June 30, 2020.  The balance at September 30, 2020 and June 30, 2020 included $1.10 billion and $1.09 billion, respectively, of loans originated under the Small Business Administration’s Paycheck Protection Program (“PPP”).
  • Total deposits were $11.70 billion, an increase of $2.27 billion, or 24.02%, compared to prior year and $0.44 billion, or 3.91%, from June 30, 2020.
  • Noninterest bearing deposits increased by 47.31%, to $4.46 billion, representing 38.14% of total deposits.  Compared to the linked quarter, noninterest bearing deposits increased 5.63%.
  • Annualized return on common shareholders' equity was 7.91% and annualized return on average tangible common shareholders' equity was 11.79% (non-GAAP).
  • Net interest margin for the quarter was 2.70% and taxable equivalent net interest margin (non-GAAP) was 2.72%.
  • Nonperforming assets were $28.74 million, or 0.19% of total assets, compared to $31.04 million, or 0.26%, at September 30, 2019.
  • Effective tax rate of 18.53% in the quarter compared to 16.95% in the third quarter of 2019.

“Despite the many headwinds impacting the nation in 2020, our team at Towne has been working diligently behind the scenes to enhance and improve our member experience through our Towne 20.20 initiative.  In early October, as part of that initiative, we implemented a new robust banking system that sets the stage for new and innovative technology, enhanced digital solutions, and a greater variety of financial services,” stated J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to Third Quarter 2019:

  • Net interest income was $96.76 million compared to $91.10 million at September 30, 2019.
  • Taxable equivalent net interest margin (non-GAAP) was 2.72%, including accretion of 5 basis points, compared to 3.43%, including accretion of 11 basis points, for third quarter 2019.
  • Average loans held for investment, with an average yield of 4.22%, represented 68.38% of average earning assets at September 30, 2020 compared to an average yield of 5.02% and 76.35% of average earning assets in the third quarter of 2019.  Excluding PPP, loan yields were 4.30% in third quarter 2020.
  • Interest and fee income on PPP loans was $9.82 million in third quarter 2020, compared to $5.83 million in the linked quarter, and zero in third quarter 2019.
  • Total cost of deposits decreased to 0.46% from 1.01% at September 30, 2019.
  • Average interest-earning assets totaled $14.26 billion at September 30, 2020 compared to $10.60 billion at September 30, 2019, an increase of 34.49%.
  • Average interest-bearing liabilities totaled $9.21 billion, an increase of $2.18 billion from prior year.
  • Interest expense on the FRB PPP lending facility was $0.91 million in third quarter, compared to $0.54 million in the linked quarter, and zero in third quarter 2019.

Quarterly Provision for Credit Losses:

  • Recorded a quarterly provision for credit losses for on-balance-sheet loans of $28.26 million compared to $1.51 million one year ago and $25.99 million in the linked quarter.  This increase is primarily attributable to a heavier weighting given to adverse economic forecasts in our credit loss models due to expectation of continued economic weakness driven by a number of uncertainties impacting the local and national economy.  These macroeconomic forecasts were impacted by the notable weakening of small businesses in the wake of the extended COVID-19 pandemic, major layoff announcements, and the deterioration in the U.S. trade relationship with China.  Expected loss estimates consider various factors including the impacts of the decreased economic activity and higher unemployment rates, customer specific credit information, and the potential mitigating benefits of government stimulus and industry wide loan modification efforts.
  • Net loan recoveries were $0.33 million compared to charge-offs of $0.61 million one year prior.  The ratio of net loan charge-offs (recoveries) to average loans on an annualized basis was (0.01)% in third quarter 2020 and  0.03% in third quarter  2019.  The Company has proactively supported members by providing payment deferrals when needed, which, combined with government stimulus, has prevented a significant deterioration in asset quality metrics.  We will continue to closely monitor credit quality as the effects of government stimulus lessen and the economic impact of the pandemic becomes clearer over time.
  • Recorded a provision for credit losses on off-balance-sheet commitments of $3.50 million compared to $1.08 million in the linked quarter.
  • The allowance for credit losses on loans represented 1.22% of total loans compared to 0.92% at June 30, 2020 and 0.68% at September 30, 2019.  Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses (non-GAAP) was 1.37%, compared to 1.04% at June 30, 2020.  The allowance for credit losses on loans was 7.31 times nonperforming loans compared to 5.34 times at June 30, 2020 and 3.95 times at September 30, 2019.

Quarterly Noninterest Income Compared to Third Quarter 2019:

  • Total noninterest income was $95.38 million compared to $54.78 million in 2019, an increase of $40.60 million, or 74.12%.  Residential mortgage banking income increased $18.68 million and real estate brokerage and property management income increased $1.86 million.  Also included in noninterest income are net gains on investment securities of $1.70 million as compared to net losses of $0.07 million in the prior year and a gain of $17.63 million on the sale of Red Sky Travel Insurance ("Red Sky"), a travel insurance joint venture.
  • Residential mortgage banking recorded income of $37.53 million compared to $18.86 million in third quarter 2019.  Loan volume in the current quarter was $1.79 billion, with purchase activity comprising 61.18% of that volume.  Loan volume in third quarter 2019 was $0.96 billion, with purchase activity comprising 68.83%.  Though still an increase over the prior year, refinancing activity has declined compared to the linked quarter.  Increased volume and a continued low mortgage rate environment coupled with improved margins were the drivers of improvement compared to the prior year quarter.
  • Total Insurance segment revenue increased 95.11% to $38.27 million in the third quarter due to the sale of a joint venture, organic growth, and expense control measures.  The Company sold Red Sky mid-third quarter 2020.  A gain on the sale of Red Sky totaling $17.63 million was recorded in other income.  After distributions to noncontrolling interests, Towne retained $6.52 million of the pre-tax gain.  In 2019, Red Sky contributed $4.09 million to insurance revenue, with an annual net income after noncontrolling interest of $0.94 million.
  • Property management fee revenue increased 16.02%, or $1.05 million, compared to third quarter 2019.  The lifting of local travel restrictions in second quarter related to COVID-19, coupled with businesses and schools continuing to operate remotely, has resulted in an extended vacation season and increased reservation activity during the quarter.

Quarterly Noninterest Expense Compared to Third Quarter 2019:

  • Total noninterest expense was $101.98 million compared to $97.29 million in 2019, an increase of $4.69 million, or 4.82%.  Increases in salary and benefits expense of $5.62 million, data processing expense of $0.58 million, and software expense of $0.36 million, offset the declines across most other expense categories.
  • During the first three quarters of the year, the Company has been focused on its Towne 20.20 initiative which centered around our early October core conversion.  This core conversion will allow the Company to provide a greater variety of financial services to our members through new technologies and enhanced digital solutions.  Preparation for this conversion began in 2019 and necessitated long hours and dedication from team members, which the Company chose to recognize through one-time bonuses and vacation carry-overs of approximately $2.84 million in the quarter.  Other conversion expenses in the quarter totaled $0.71 million.
  • Other infrastructure enhancements and market expansion, that occurred in 2019, have resulted in generally higher levels of salary and benefits expense and software expense, while quarantines, travel restrictions, and other decreases in business activity related to COVID-19 have resulted in lower general spending.
  • Write-downs related to a Company-owned building and lots in North Carolina totaled $1.06 million in the quarter.

Quarterly Income Taxes Compared to Third Quarter 2019:

  • Income tax expense was $7.84 million compared to $7.68 million one year prior.  This represents an effective tax rate of 18.53% compared to 16.95% in the third quarter of 2019.

Consolidated Balance Sheet Highlights:

  • Total assets were $14.80 billion for the quarter ended September 30, 2020, a decrease of $0.78 billion, or 5.04%, compared to $15.58 billion at June 30, 2020.  Total assets increased $2.77 billion, or 23.08%, from $12.02 billion at September 30, 2019.  The year-over-year increase was driven primarily by growth in cash and cash equivalents and loans held for investment tied to PPP lending activities.
  • Loans held for investment increased $1.59 billion, or 19.40%, compared to prior year but decreased $0.03 billion compared the linked quarter.  Excluding PPP loans of $1.10 billion in the third quarter, and $1.09 billion in the second quarter of 2020, loans held for investment increased $484.60 million, or 5.92%, compared to prior year, but declined $44.47 million, or 0.51%, compared to the linked quarter.
  • Mortgage loans held for sale increased  $212.30 million, or 46.48%, compared to the prior year and $58.65 million, or 9.61%, compared to the linked quarter.
  • Total deposits increased $2.3 billion, or 24.02%, compared to the prior year and $0.44 billion, or 3.91%, compared to the linked quarter.
  • Total borrowings increased $0.37 billion, or 54.23%, from prior year but decreased $1.29 billion, or 55.39%, compared to the linked quarter.  During the third quarter of 2020, the Company repaid $1.11 billion in borrowings under the FRB PPP lending facility, which had initially been used to facilitate funding of the PPP loans.  Additionally, we restructured our FHLB borrowing facilities for future reductions in borrowing costs of approximately $2.66 million over the life of those borrowings.

Investment Securities:

  • Total investment securities were $1.38 billion compared to $1.36 billion at June 30, 2020 and $1.41 billion at September 30, 2019.  The weighted average duration of the portfolio at September 30, 2020 was 4.1 years.  The carrying value of the AFS debt securities portfolio included $61.43 million in net unrealized gains compared to $19.73 million in net unrealized gains at December 31, 2019.  During the third quarter of 2020, we sold $81.8 million in AFS debt securities at a gain of $1.70 million to reposition the portfolio.

Loans and Asset Quality:

  • Total loans held for investment were $9.77 billion at September 30, 2020 compared to $9.80 billion at June 30, 2020 and $8.18 billion at September 30, 2019.
  • Nonperforming assets were $28.74 million, or 0.19% of total assets, compared to $31.04 million, or 0.26%, at September 30, 2019.
  • Nonperforming loans were 0.17% of period end loans, unchanged from September 30, 2019.
  • Foreclosed property decreased to $11.70 million from $15.52 million at September 30, 2019.
  • Expected loss estimates are subject to change based on continuing review of models and assumptions, portfolio performance, changes in forecasted macroeconomic conditions and loan mix which could result in material changes to the reserve in future periods.

Deposits and Borrowings:

  • Total deposits were $11.70 billion compared to $11.26 billion at June 30, 2020 and $9.44 billion at September 30, 2019.
  • Total loans to deposits were 83.47% compared to 87.01% at June 30, 2020 and 86.70% at September 30, 2019.
  • Non-interest bearing deposits were 38.14% of total deposits at September 30, 2020 compared to 37.52% at June 30, 2020 and 32.11% at September 30, 2019.
  • Total borrowings were $1.04 billion compared to $2.33 billion at June 30, 2020 and $0.67 billion at  September 30, 2019.

Capital:

  • Common equity tier 1 capital ratio of 11.75%.
  • Tier 1 leverage capital ratio of 8.89%.
  • Tier 1 risk-based capital ratio of 11.91%.
  • Total risk-based capital ratio of 15.33%.
  • Book value was $23.83 compared to $23.50 at June 30, 2020 and $22.38 at September 30, 2019.
  • Tangible book value (non-GAAP) was $17.06 compared to $16.68 at June 30, 2020 and $15.44 at September 30, 2019.

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 42 banking offices serving Chesapeake, Chesterfield County, Glen Allen, Hampton, James City County, Mechanicsville, Newport News, Norfolk, Portsmouth, Richmond, Suffolk, Virginia Beach, Williamsburg, and York County in Virginia, along with Raleigh, Cary, Charlotte, Greensboro, Greenville, Moyock, Grandy, Camden County, Southern Shores, Corolla, Duck and Nags Head in North Carolina.  TowneBank also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations.  Local decision-making is a hallmark of its hometown banking strategy that is delivered through the leadership of each group’s President and Board of Directors.  With total assets of $14.80 billion as of September 30, 2020, TowneBank is one of the largest banks headquartered in Virginia.

Non-GAAP Financial Measures:
This press release contains financial information determined by methods other than in accordance with GAAP.  The Company's management uses these non-GAAP financial measures in its analysis of the Company's performance.  These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that are infrequent in nature.  Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses.  These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP disclosures are included as tables at the end of this release.

Forward-Looking Statements:
Certain statements contained in this release constitute forward-looking statements within the meaning of U.S. federal securities laws.  These forward-looking statements speak only as of the date of this release, are based on current expectations, and involve a number of assumptions. These include statements regarding TowneBank’s future economic performance, financial condition, prospects, growth, strategies and expectations, and objectives of management, and are generally identified by the use of words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” or “project” or similar expressions.  TowneBank intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. You should not place undue reliance on forward-looking statements, which are subject to assumptions that are subject to change. TowneBank’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ from those indicated or implied in the forward-looking statements and such differences may be material.  Factors which could have a material effect on the operations and future prospects of TowneBank include but are not limited to: the impacts of the ongoing coronavirus (COVID-19) pandemic, changes in interest rates, general economic and business conditions; legislative/regulatory changes; the monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; the quality and composition of TowneBank’s loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBank’s market area; implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; changes in accounting principles, policies and guidelines; and other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation.  TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

Media contact:
G. Robert Aston, Jr., Executive Chairman, 757-638-6780
J. Morgan Davis, President and Chief Executive Officer, 757-673-1673

Investor contact:
William B. Littreal, Chief Financial Officer, 757-638-6813

 
TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
   
  Three Months Ended
  September 30, June 30, March 31, December 31, September 30,
 2020 2020 2020 2019 2019
Income and Performance Ratios:         
 Total Revenue$192,135  $162,656  $137,696  $139,671  $145,879 
 Net income50,715  37,222  27,605  35,948  39,400 
 Net income available to common shareholders34,464  34,605  26,384  35,075  37,659 
 Pre-provision, pre-tax, net revenues (non-GAAP)73,903  69,014  39,587  46,462  46,851 
 Net income per common share - diluted0.48  0.48  0.36  0.49  0.52 
 Book value per common share23.83  23.50  22.77  22.58  22.38 
 Book value per common share - tangible (non-GAAP)17.06  16.68  15.91  15.69  15.44 
 Return on average assets0.89% 0.97% 0.88% 1.16% 1.26%
 Return on average assets - tangible (non-GAAP)0.97% 1.07% 1.00% 1.30% 1.40%
 Return on average equity7.85% 8.18% 6.37% 8.44% 9.22%
 Return on average equity - tangible (non-GAAP)11.66% 12.32% 9.91% 12.97% 14.20%
 Return on average common equity7.91% 8.24% 6.42% 8.51% 9.29%
 Return on average common equity - tangible (non-GAAP)11.79% 12.44% 10.01% 13.12% 14.36%
 Noninterest income as a percentage of total revenue49.64% 42.66% 35.00% 35.59% 37.55%
           
Regulatory Capital Ratios (1):         
 Common equity tier 111.75% 11.54% 11.23% 11.46% 11.52%
 Tier 111.91% 11.67% 11.35% 11.49% 11.55%
 Total15.33% 14.91% 14.40% 14.58% 14.70%
 Tier 1 leverage ratio8.89% 9.05% 10.11% 9.95% 9.84%
           
Asset Quality:         
 Allowance for credit losses on loans to nonperforming loans7.31x  5.34x  3.85x  3.34x  3.95x 
 Allowance for credit losses on loans to period end loans1.22% 0.92% 0.73% 0.69% 0.68%
 Allowance for credit losses on loans to period end loans excluding PPP loans (non-GAAP)1.37% 1.04% 0.73% 0.69% 0.68%
 Nonperforming loans to period end loans0.17% 0.17% 0.19% 0.21% 0.17%
 Nonperforming assets to period end assets0.19% 0.19% 0.24% 0.27% 0.26%
 Net charge-offs (recoveries) to average loans (annualized)(0.01)% % 0.03% 0.04% 0.03%
           
 Nonperforming loans$16,295  $16,935  $16,700  $17,437  $14,016 
 Former bank premises750      1,521  1,510 
 Foreclosed property11,695  12,315  13,053  13,839  15,517 
 Total nonperforming assets$28,740  $29,250  $29,753  $32,797  $31,043 
 Loans past due 90 days and still accruing interest$19  $464  $91  $309  $636 
 Allowance for credit losses on loans$119,058  $90,467  $64,372  $58,234  $55,428 
           
Mortgage Banking:         
 Loans originated, mortgage$1,292,801  $1,116,782  $718,681  $628,279  $703,922 
 Loans originated, joint venture498,100  357,815  204,522  231,879  259,742 
 Total loans originated$1,790,901  $1,474,597  $923,203  $860,158  $963,664 
 Number of loans originated5,817  4,818  3,025  2,984  3,360 
 Number of originators224  216  223  217  225 
 Purchase %61.21% 51.26% 61.31% 70.32% 68.83%
 Loans sold$1,833,590  $1,398,649  $809,834  $879,910  $925,058 
 Gross realized gain on sales and fees as a % of loans originated3.65% 3.17% 1.80% 3.38% 3.45%
Other Ratios:         
 Net interest margin2.70% 2.85% 3.35% 3.33% 3.41%
 Net interest margin-fully tax equivalent (non-GAAP)2.72% 2.87% 3.37% 3.35% 3.43%
 Average earning assets/total average assets92.09% 91.33% 89.15% 89.57% 89.53%
 Average loans/average deposits86.29% 91.81% 92.99% 88.41% 87.63%
 Average noninterest deposits/total average deposits37.76% 36.52% 32.21% 32.14% 31.82%
 Period end equity/period end total assets11.82% 11.05% 13.19% 13.84% 13.63%
 Efficiency ratio (non-GAAP)53.55% 56.99% 73.02% 66.11% 66.66%
           
 (1) Current reporting period regulatory capital ratios are preliminary      


 
TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
Investment Securities      % Change
 Q3 Q3 Q2 Q3 20 vs. Q3 20 vs.
Available-for-sale securities, at fair value2020 2019 2020 Q3 19 Q2 20
U.S. agency securities$167,275   $152,581   $118,176   9.63% 41.55%
U.S. Treasury notes1,006   999   1,010   0.70% (0.40)%
Municipal securities292,792   173,519   313,322   68.74% (6.55)%
Trust preferred and other corporate securities24,236   52,006   59,598   (53.40)% (59.33)%
Mortgage-backed securities issued by GSE and GNMA825,378   958,290   774,658   (13.87)% 6.55%
Allowance for credit losses(4)  n/a (140)  n/a (97.14)%
Total$1,310,683   $1,337,395   $1,266,624   (2.00)% 3.48%
          
Gross unrealized gains (losses) reflected in financial statements               
Total gross unrealized gains$62,206   $28,114   $61,559   121.26% 1.05%
Total gross unrealized losses(773)  (2,046)  (1,674)  (62.22)% (53.82)%
Net unrealized gains (losses) and other adjustments on AFS securities$61,433   $26,068   $59,885      
          
Held-to-maturity securities, at amortized cost         
Municipal securities$2,333   $29,166   $28,855   (92.00)% (91.91)%
Trust preferred corporate securities4,992   2,381   2,345   109.66% 112.88%
Mortgage-backed securities issued by GSE and GNMA9,806   12,947   10,395   (24.26)% (5.67)%
Allowance for credit losses(90)  n/a (121)  n/a (25.62)%
Total$17,041   $44,494   $41,474   (61.70)% (58.91)%
          
Gross unrealized gains (losses) not reflected in financial statements            
Total gross unrealized gains$1,971   $1,688   $1,980   16.77% (0.45)%
Total gross unrealized losses   (5)     (100.00)% %
Net unrealized gains (losses) in HTM securities$1,971   $1,683   $1,980      
          
Loans Held For Investment (1)      % Change
 Q3 Q3 Q2 Q3 20 vs. Q3 20 vs.
 2020 2019 2020 Q3 19 Q2 20
Real estate - construction and development$1,143,202   $1,142,225   $1,178,832   0.09% (3.02)%
Commercial real estate - non owner occupied2,338,532   2,070,317   2,332,447   12.96% 0.26%
Commercial real estate - owner occupied1,378,443   1,286,137   1,383,294   7.18% (0.35)%
Real estate - multifamily289,270   219,901   277,947   31.55% 4.07%
Real estate - residential 1-4 family and HELOC1,660,535   1,621,175   1,670,530   2.43% (0.60)%
Commercial and industrial business2,499,801   1,527,515   2,503,161   63.65% (0.13)%
Consumer and other loans460,787   315,559   455,678   46.02% 1.12%
Total$9,770,570    $8,182,829    $9,801,889    19.40 % (0.32)%
(1) Paycheck Protection Program loans totaling $1.10 billion and $1.09 billion, primarily in C&I, are included in Q3 2020 and Q2 2020, respectively.
          
Deposits      % Change
 Q3 Q3 Q2 Q3 20 vs. Q3 20 vs.
 2020 2019 2020 Q3 19 Q2 20
Noninterest-bearing demand$4,464,178   $3,030,505   $4,226,208   47.31% 5.63%
Interest-bearing:         
Demand and money market accounts4,642,482   3,534,252   4,223,391   31.36% 9.92%
Savings312,444   280,552   298,673   11.37% 4.61%
Certificates of deposits2,285,859   2,592,705   2,516,666   (11.83)% (9.17)%
Total$11,704,963   $9,438,014   $11,264,938   24.02% 3.91%


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Three Months Ended Three Months Ended Three Months Ended
 September 30, 2020 June 30, 2020 September 30, 2019
   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 (1)$9,752,746   $103,401   4.22% $9,619,931   $102,656   4.29% $8,096,908   $102,495   5.02%
Taxable investment securities1,206,679   6,726   2.23% 1,198,776   7,367   2.46% 1,266,447   9,087   2.87%
Tax-exempt investment securities144,999   779   2.15% 147,489   836   2.27% 121,738   997   3.28%
Total securities1,351,678   7,505   2.22% 1,346,265   8,203   2.44% 1,388,185   10,084   2.91%
Interest-bearing deposits2,523,644   632   0.10% 1,729,140   433   0.10% 711,030   3,745   2.09%
Loans held for sale634,309   4,587   2.89% 464,796   3,811   3.28% 408,377   3,956   3.87%
Total earning assets14,262,377   116,125   3.24% 13,160,132   115,103   3.52% 10,604,500   120,280   4.50%
Less: allowance for credit losses(95,594)      (69,451)      (54,858)     
Total nonearning assets1,320,369       1,318,787       1,295,640      
Total assets$15,487,152       $14,409,468       $11,845,282      
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$4,311,920   $2,663   0.25% $3,857,757   $2,491   0.26% $3,379,888   $7,223   0.85%
Savings304,753   555   0.72% 290,201   554   0.77% 278,048   702   1.00%
Certificates of deposit2,417,772   9,747   1.60% 2,503,648   12,027   1.93% 2,641,681   15,627   2.35%
Total interest-bearing deposits7,034,445   12,965   0.73% 6,651,606   15,072   0.91% 6,299,617   23,552   1.48%
Borrowings1,931,120   2,841   0.58% 1,741,832   3,238   0.74% 486,644   2,020   1.62%
Subordinated debt, net248,807   2,962   4.76% 248,660   2,962   4.76% 248,210   2,962   4.77%
Total interest-bearing liabilities9,214,372   18,768   0.81% 8,642,098   21,272   0.99% 7,034,471   28,534   1.61%
Demand deposits4,268,443       3,826,439       2,940,370      
Other noninterest-bearing liabilities257,304       239,154       250,371      
Total liabilities13,740,119       12,707,691       10,225,212      
Shareholders’ equity1,747,033       1,701,777       1,620,070      
Total liabilities and equity$15,487,152       $14,409,468       $11,845,282      
Net interest income (tax-equivalent basis)  $97,357       $93,831       $91,746    
Reconcilement of Non-GAAP Financial Measures                    
Tax-equivalent basis adjustment  (598)      (557)      (643)   
Net interest income (GAAP)  $96,759       $93,274       $91,103    
                  
Interest rate spread (2)(4)    2.43%     2.53%     2.89%
Interest expense as a percent of average earning assets       0.52%     0.65%     1.07%
Net interest margin (tax equivalent basis) (3)(4)       2.72%     2.87%     3.43%
Total cost of deposits    0.46%     0.58%     1.01%
                  

(1) Includes average PPP balances of $1.10 billion and related interest and fee income of $9.82 million.
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.
(4) Non-GAAP.

 
TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
  Nine Months Ended Nine Months Ended Nine Months Ended September 30,
  September 30, 2020 September 30, 2019 2020 Compared with 2019
    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 (1) $9,309,256   $306,622   4.40% $8,067,894   $305,007   5.05% $1,615   $(42,206)  $43,822  
Taxable investment securities 1,253,783   23,304   2.48% 1,158,611   24,962   2.87% (1,658)  (3,603)  1,945  
Tax-exempt investment securities 140,248   2,476   2.35% 97,485   2,519   3.45% (43)  (944)  902  
Total securities 1,394,031   25,780   2.47% 1,256,096   27,481   2.92% (1,701)  (4,547)  2,847  
Interest-bearing deposits 615,466   2,168   0.47% 700,840   11,758   2.24% (9,590)  (8,309)  (1,281) 
Loans held for sale 477,964   11,386   3.18% 290,384   8,966   4.12% 2,420   (2,394)  4,814  
Total earning assets 11,796,717   345,956   3.92% 10,315,214   353,212   4.58% (7,256)  (57,456)  50,202  
Less: allowance for loan losses (73,538)      (53,703)           
Total nonearning assets 2,264,295       1,264,976            
Total assets $13,987,474       $11,526,487            
Liabilities and Equity:                  
Interest-bearing deposits                  
Demand and money market $3,898,642   $10,472   0.36% $3,289,539   $20,488   0.83% $(10,016)  $(13,287)  $3,271  
Savings 290,684   1,702   0.78% 281,562   2,658   1.26% (956)  (1,040)  84  
Certificates of deposit 2,451,715   34,925   1.90% 2,456,360   41,364   2.25% (6,439)  (6,362)  (78) 
Total interest-bearing deposits 6,641,041   47,099   0.95% 6,027,461   64,510   1.43% (17,411)  (20,689)  3,277  
Borrowings 1,452,652   8,661   0.78% 661,216   9,559   1.91% (898)  (7,871)  6,973  
Subordinated debt, net 248,660   8,885   4.76% 248,064   8,885   4.78%    (22)  21  
Total interest-bearing liabilities 8,342,353   64,645   1.04% 6,936,741   82,954   1.60% (18,309)  (28,582)  10,271  
Demand deposits 3,687,791       2,787,727            
Other noninterest-bearing liabilities 252,337       221,806            
Total liabilities 12,282,481       9,946,274            
Shareholders’ equity 1,704,993       1,580,213            
Total liabilities and equity $13,987,474       $11,526,487            
Net interest income (tax-equivalent basis)   $281,311       $270,258     $11,053   $(28,874)  $39,931  
Reconcilement of Non-GAAP Financial Measures                     
Tax-equivalent basis adjustment   (1,781)      (1,862)    81      
Net interest income (GAAP)   $279,530       $268,396     $11,134      
                   
Interest rate spread (2)(4)     2.88%     2.98%      
Interest expense as a percent of average earning assets        0.73%     1.08%      
Net interest margin (tax equivalent basis) (3)(4)        3.19%     3.50%      
Total cost of deposits     0.61%     0.98%      
                   
(1)  Includes average PPP balances of  $0.64 billion and related interest income of $15.65 million
(2)  Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(3)  Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.
(4) Non-GAAP.


 
TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
  
   
 September 30, December 31,
 2020 2019
 (unaudited) (audited)
ASSETS   
Cash and due from banks$114,604   $97,593  
Interest-bearing deposits at FRB - Richmond1,670,186   322,505  
Interest-bearing deposits in financial institutions24,890   22,518  
Total Cash and Cash Equivalents1,809,680   442,616  
Securities available for sale, at fair value (amortized cost $1,249,254, allowance for credit losses of $4) (1)1,310,683   1,441,308  
Securities held to maturity, at amortized cost (fair value $19,102 )(1)17,131   43,688  
Less:  allowance for credit losses(90)    
Securities held to maturity, net of allowance for credit losses17,041   43,688  
Other equity securities6,497   6,462  
FHLB stock41,829   30,094  
Total Securities1,376,050   1,521,552  
Mortgage loans held for sale669,020   419,233  
Loans, net of unearned income and deferred costs9,770,570   8,419,288  
Less: allowance for credit losses(119,058)  (58,234) 
Net Loans9,651,512   8,361,054  
Premises and equipment, net256,909   231,806  
Goodwill446,725   446,816  
Other intangible assets, net45,781   54,399  
BOLI244,103   243,062  
Other assets295,637   227,125  
TOTAL ASSETS$14,795,417   $11,947,663  
LIABILITIES AND EQUITY   
    
Deposits:   
Noninterest-bearing demand$4,464,178   $2,951,225  
Interest-bearing:   
Demand and money market accounts4,642,482   3,586,364  
Savings312,444   276,205  
Certificates of deposit2,285,859   2,457,123  
Total Deposits11,704,963   9,270,917  
Advances from the FHLB731,202   471,687  
Subordinated debt, net248,906   248,458  
Repurchase agreements and other borrowings58,061   52,391  
Total Borrowings1,038,169   772,536  
Other liabilities303,582   250,516  
TOTAL LIABILITIES13,046,714   10,293,969  
Preferred stock   
Authorized and unissued shares - 2,000,000     
Common stock, $1.667 par: 150,000,000 shares authorized 72,656,729 and 72,649,682 shares issued at September 30, 2020 and December 31, 2019, respectively121,115   121,107  
Capital surplus1,045,170   1,041,160  
Retained earnings520,888   467,186  
Common stock issued to deferred compensation trust, at cost 872,498 and 818,578 shares at September 30, 2020 and December 31, 2019, respectively(16,951)  (15,555) 
Deferred compensation trust16,951   15,555  
Accumulated other comprehensive income (loss)44,569   11,302  
TOTAL SHAREHOLDERS’ EQUITY1,731,742   1,640,755  
Noncontrolling interest16,961   12,939  
TOTAL EQUITY1,748,703   1,653,694  
TOTAL LIABILITIES AND EQUITY$14,795,417   $11,947,663  
(1) For 2020, disclosures are presented in compliance with ASC 326.


 
TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
        
        
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2020 2019 2020 2019
INTEREST INCOME:       
Loans, including fees$102,869   $102,047   $305,070   $303,616  
Investment securities7,440   9,889   25,553   27,010  
Interest-bearing deposits in financial institutions and federal funds sold632   3,745   2,168   11,758  
Mortgage loans held for sale4,587   3,956   11,385   8,966  
Total interest income115,528   119,637   344,176   351,350  
INTEREST EXPENSE:       
Deposits12,966   23,552   47,099   64,510  
Advances from the FHLB1,901   1,935   6,990   9,288  
Subordinated debt, net2,962   2,962   8,885   8,885  
Repurchase agreements and other borrowings940   85   1,672   271  
Total interest expense18,769   28,534   64,646   82,954  
Net interest income96,759   91,103   279,530   268,396  
        
PROVISION FOR CREDIT LOSSES31,598   1,508   65,559   5,770  
Net interest income after provision for credit losses65,161   89,595   213,971   262,626  
NONINTEREST INCOME:       
Residential mortgage banking income, net37,531   18,855   74,662   50,929  
Insurance commissions and other title fees and income, net17,468   16,681   51,973   49,477  
Real estate brokerage and property management income, net11,301   9,444   29,020   27,555  
Service charges on deposit accounts1,986   2,253   6,314   8,299  
Credit card merchant fees, net1,506   1,514   3,793   3,357  
BOLI1,605   2,117   6,295   5,350  
Other income22,278   3,981   31,268   11,754  
Net gain/(loss) on investment securities1,701   (69)  9,632   (845) 
Total noninterest income95,376   54,776   212,957   155,876  
NONINTEREST EXPENSE:       
Salaries and employee benefits61,408   55,784   174,201   162,907  
Occupancy expense8,396   7,953   23,124   23,866  
Furniture and equipment3,247   3,805   10,451   10,753  
Amortization - intangibles2,851   3,059   8,702   9,364  
Software expense3,572   3,208   10,556   8,742  
Data processing3,113   2,533   8,622   9,316  
Professional fees2,637   3,566   8,677   9,952  
Advertising and marketing1,870   3,429   7,440   9,440  
Other expenses14,887   13,950   38,121   41,627  
Total noninterest expense101,981   97,287   289,894   285,967  
Income before income tax expense and noncontrolling interest58,556   47,084   137,034   132,535  
Provision for income tax expense7,841   7,684   21,492   24,810  
Net income$50,715   $39,400   $115,542   $107,725  
Net income attributable to noncontrolling interest(16,251)  (1,741)  (20,089)  (4,018) 
Net income attributable to TowneBank$34,464   $37,659   $95,453   $103,707  
Per common share information       
Basic earnings$0.48   $0.52   $1.32   $1.44  
Diluted earnings$0.48   $0.52   $1.32   $1.44  
Cash dividends declared$0.18   $0.18   $0.54   $0.52  


 
TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
          
 September 30, June 30, March 31, December 31, September 30,
 2020 2020 2020 2019 2019
 (unaudited) (unaudited) (unaudited) (audited) (unaudited)
ASSETS         
Cash and due from banks$114,604   $115,724   $108,929   $97,593   $124,439  
Interest-bearing deposits at FRB - Richmond1,670,186   2,511,152   753,643   322,505   675,288  
Interest-bearing deposits in financial institutions24,890   24,374   23,564   22,518   21,663  
Total Cash and Cash Equivalents1,809,680   2,651,250   886,136   442,616   821,390  
Securities available for sale1,310,683   1,266,624   1,248,420   1,441,308   1,337,395  
Securities held to maturity17,131   41,595   42,431   43,688   44,494  
Less:  allowance for credit losses(90)  (121)  (133)       
Securities held to maturity, net of allowance for credit losses17,041   41,474   42,298   43,688   44,494  
Other equity securities6,497   6,497   6,462   6,462   5,697  
FHLB stock41,829   49,277   52,042   30,094   26,282  
Total Securities1,376,050   1,363,872   1,349,222   1,521,552   1,413,868  
Mortgage loans held for sale669,020   610,369   453,143   419,233   456,719  
Loans, net of unearned income and deferred costs9,770,570   9,801,889   8,784,195   8,419,288   8,182,829  
Less: allowance for credit losses(119,058)  (90,467)  (64,372)  (58,234)  (55,428) 
Net Loans9,651,512   9,711,422   8,719,823   8,361,054   8,127,401  
Premises and equipment, net256,909   257,533   236,735   231,806   231,060  
Goodwill446,725   446,725   446,725   446,816   446,423  
Other intangible assets, net45,781   48,632   51,448   54,399   57,404  
BOLI244,103   242,493   240,924   243,062   241,652  
Other assets295,637   247,962   239,670   227,125   225,374  
TOTAL ASSETS$14,795,417   $15,580,258   $12,623,826   $11,947,663   $12,021,291  
LIABILITIES AND EQUITY         
Deposits:         
Noninterest-bearing demand$4,464,178   $4,226,208   $3,060,515   $2,951,225   $3,030,505  
Interest-bearing:         
Demand and money market accounts4,642,482   4,223,391   3,573,926   3,586,364   3,534,252  
Savings312,444   298,673   280,807   276,205   280,552  
Certificates of deposit2,285,859   2,516,666   2,392,744   2,457,123   2,592,705  
Total Deposits11,704,963   11,264,938   9,307,992   9,270,917   9,438,014  
Advances from the FHLB731,202   906,365   971,527   471,687   381,846  
Subordinated debt, net248,906   248,756   248,607   248,458   248,309  
FRB PPP lending facility   1,111,429           
Repurchase agreements and other borrowings58,061   60,913   171,762   52,391   42,971  
Total Borrowings1,038,169   2,327,463   1,391,896   772,536   673,126  
Other liabilities303,582   266,314   258,306   250,516   271,617  
TOTAL LIABILITIES13,046,714   13,858,715   10,958,194   10,293,969   10,382,757  
Preferred stock         
Authorized shares - 2,000,000              
Common stock, $1.667 par value121,115   121,101   121,057   121,107   121,080  
Capital surplus1,045,170   1,043,774   1,041,870   1,041,160   1,039,156  
Retained earnings520,888   499,502   477,972   467,186   445,186  
Common stock issued to deferred compensation trust, at cost(16,951)  (16,776)  (15,562)  (15,555)  (15,317) 
Deferred compensation trust16,951   16,776   15,562   15,555   15,317  
Accumulated other comprehensive income (loss)44,569   43,218   12,301   11,302   19,958  
TOTAL SHAREHOLDERS’ EQUITY1,731,742   1,707,595   1,653,200   1,640,755   1,625,380  
Noncontrolling interest16,961   13,948   12,432   12,939   13,154  
TOTAL EQUITY1,748,703   1,721,543   1,665,632   1,653,694   1,638,534  
TOTAL LIABILITIES AND EQUITY$14,795,417   $15,580,258   $12,623,826   $11,947,663   $12,021,291  


 
TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except share data)
  
  
 Three Months Ended
 September 30, June 30, March 31, December 31, September 30,
 2020 2020 2020 2019 2019
INTEREST INCOME:         
Loans, including fees$102,869   $102,139   $100,062   $100,059   $102,047  
Investment securities7,440   8,163   9,949   9,936   9,889  
Interest-bearing deposits in financial institutions and federal funds sold632   433   1,102   2,067   3,745  
Mortgage loans held for sale4,587   3,811   2,988   4,413   3,956  
Total interest income115,528   114,546   114,101   116,475   119,637  
INTEREST EXPENSE:         
Deposits12,966   15,072   19,062   21,744   23,552  
Advances from the FHLB1,901   2,595   2,492   1,730   1,935  
Subordinated debt2,962   2,962   2,962   2,962   2,962  
Repurchase agreements and other borrowings940   643   89   80   85  
Total interest expense18,769   21,272   24,605   26,516   28,534  
Net interest income96,759   93,274   89,496   89,959   91,103  
          
PROVISION FOR CREDIT LOSSES31,598   26,945   7,016   3,601   1,508  
Net interest income after provision for credit losses65,161   66,329   82,480   86,358   89,595  
NONINTEREST INCOME:         
Residential mortgage banking income, net37,531   29,715   7,416   15,884   18,855  
Insurance commissions and other title fees and income, net17,468   17,612   16,893   15,001   16,681  
Real estate brokerage and property management income, net11,301   10,781   6,938   6,737   9,444  
Service charges on deposit accounts1,986   1,888   2,440   2,245   2,253  
Credit card merchant fees, net1,506   1,109   1,179   1,389   1,514  
BOLI1,605   1,584   3,105   3,865   2,117  
Other income22,278   3,763   5,227   4,591   3,981  
Net gain/(loss) on investment securities1,701   2,930   5,002      (69) 
Total noninterest income95,376   69,382   48,200   49,712   54,776  
NONINTEREST EXPENSE:         
Salaries and employee benefits61,408   56,926   55,867   56,013   55,784  
Occupancy expense8,396   7,227   7,502   7,516   7,953  
Furniture and equipment3,247   3,564   3,640   3,598   3,805  
Amortization - intangibles2,851   2,901   2,950   3,005   3,059  
Software expense3,572   3,492   3,492   2,976   3,208  
Data processing3,113   2,718   2,791   2,510   2,533  
Professional fees2,637   2,972   3,067   2,990   3,566  
Advertising and marketing1,870   1,986   3,584   2,839   3,429  
Other expenses14,887   9,239   13,995   10,889   13,950  
Total noninterest expense101,981   91,025   96,888   92,336   97,287  
Income before income tax expense and noncontrolling interest58,556   44,686   33,792   43,734   47,084  
Provision for income tax expense7,841   7,464   6,187   7,786   7,684  
Net income50,715   37,222   27,605   35,948   39,400  
Net income attributable to noncontrolling interest(16,251)  (2,617)  (1,221)  (873)  (1,741) 
Net income attributable to TowneBank$34,464   $34,605   $26,384   $35,075   $37,659  
Per common share information         
Basic earnings$0.48   $0.48   $0.37   $0.49   $0.52  
Diluted earnings$0.48   $0.48   $0.36   $0.49   $0.52  
Basic weighted average shares outstanding72,307,961   72,280,555   72,206,228   72,122,476   72,091,221  
Diluted weighted average shares outstanding72,344,284   72,317,988   72,299,721   72,302,414   72,222,934  
Cash dividends declared$0.18   $0.18   $0.18   $0.18   $0.18  
          


TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)
 
          
 Three Months Ended Nine Months Ended Increase/(Decrease)
 September 30, June 30, September 30, 2020 over 2019
 2020 2019 2020 2020 2019 Amount Percent
Revenue             
Net interest income$92,869   $89,490   $89,665  $269,941  $264,332   $5,609   2.12%
Service charges on deposit accounts1,986   2,253   1,888  6,315  8,299   (1,984)  (23.91)%
Credit card merchant fees1,506   1,514   1,109  3,793  3,357   436   12.99%
Other income4,876   5,152   3,888  15,826  14,350   1,476   10.29%
Subtotal8,368   8,919   6,885  25,934  26,006   (72)  (0.28)%
Net gain/(loss) on investment securities1,701   (69)  2,930  9,632  (845)  10,477   1,239.88%
Total noninterest income10,069   8,850   9,815  35,566  25,161   10,405   41.35%
Total revenue102,938   98,340   99,480  305,507  289,493   16,014   5.53%
              
Provision for credit losses31,070   1,508   26,059  64,170  5,770   58,400   1,012.13%
              
Expenses             
Salaries and employee benefits36,535   33,526   35,209  104,970  96,966   8,004   8.25%
Occupancy expense5,829   5,209   4,812  15,557  15,460   97   0.63%
Furniture and equipment2,424   2,779   2,715  7,800  7,662   138   1.80%
Amortization of intangibles1,063   1,265   1,114  3,341  3,946   (605)  (15.33)%
Other expenses15,793   17,098   10,718  45,214  52,218   (7,004)  (13.41)%
Total expenses61,644   59,877   54,568  176,882  176,252   630   0.36%
Income before income tax, corporate allocation and noncontrolling interest10,224   36,955   18,853  64,455  107,471   (43,016)  (40.03)%
Corporate allocation595   384   627  1,891  1,383   508   36.73%
Income before income tax provision and noncontrolling interest10,819   37,339   19,480  66,346  108,854   (42,508)  (39.05)%
Provision for income tax expense474   5,495   2,167  9,304  19,337   (10,033)  (51.88)%
Net income10,345   31,844   17,313  57,042  89,517   (32,475)  (36.28)%
Noncontrolling interest(2)     5  2  4   (2)  (50.00)%
Net income attributable to TowneBank$10,343   $31,844   $17,318  $57,044  $89,521   $(32,477)  (36.28)%
              
Efficiency ratio60.89%  60.85%  56.52% 59.78% 60.71%  (0.93)%  (1.53)%


 
TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)
 
    
 Three Months Ended Nine Months Ended Increase/(Decrease)
 September 30, June 30, September 30, 2020 over 2019
 2020 2019 2020 2020 2019 Amount Percent
Revenue             
Residential mortgage brokerage income, net$38,074   $19,171   $30,468   $76,549   $51,826   $24,723   47.70%
Real estate brokerage income, net3,688   2,882   2,659   8,212   7,315   897   12.26%
Title insurance and settlement fees654   617   639   1,728   1,581   147   9.30%
Property management fees, net7,613   6,562   8,122   20,808   20,240   568   2.81%
Income from unconsolidated subsidiary451   185   301   938   441   497   112.70%
Net interest and other income4,101   1,885   3,765   10,262   4,937   5,325   107.86%
Total revenue54,581   31,302   45,954   118,497   86,340   32,157   37.24%
              
Provision for credit losses528      886   1,389      1,389   n/m  
              
Expenses             
Salaries and employee benefits15,744   13,474   13,059   42,095   39,678   2,417   6.09%
Occupancy expense1,906   2,055   1,763   5,595   6,428   (833)  (12.96)%
Furniture and equipment620   754   626   2,007   2,326   (319)  (13.71)%
Amortization of intangible assets658   666   658   1,973   2,086   (113)  (5.42)%
Other expenses9,226   7,478   8,270   24,366   20,953   3,413   16.29%
Total expenses28,154   24,427   24,376   76,036   71,471   4,565   6.39%
              
Income (loss) before income tax, corporate allocation and noncontrolling interest25,899   6,875   20,692   41,072   14,869   26,203   176.23%
Corporate allocation(356)  (208)  (370)  (1,119)  (800)  (319)  39.88%
(Loss) income before income tax provision and noncontrolling interest25,543   6,667   20,322   39,953   14,069   25,884   183.98%
Provision for income tax (benefit) expense4,780   1,454   4,127   7,614   3,292   4,322   131.29%
Net (loss) income20,763   5,213   16,195   32,339   10,777   21,562   200.07%
Noncontrolling interest(4,790)  (1,496)  (2,415)  (7,996)  (2,997)  (4,999)  166.80%
Net (loss) income attributable to TowneBank$15,973   $3,717   $13,780   $24,343   $7,780   $16,563   212.89%
              
Efficiency ratio51.58%  78.04%  53.04%  64.17%  82.78%  (18.61)%  (22.48)%
              


TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)
 
          
 Three Months Ended Nine Months Ended Increase/(Decrease)
 September 30, June 30, September 30, 2020 over 2019
 2020 2019 2020 2020 2019  Amount Percent
Commission and fee income             
Property and casualty$14,072   $13,481   $13,926   $40,784   $38,421   $2,363   6.15%
Employee benefits3,825   3,629   3,791   11,534   10,968   566   5.16%
Travel insurance1,399   834   861   3,526   3,292   234   7.11%
Specialized benefit services165   166   157   489   499   (10)  (2.00)%
Total commissions and fees19,461   18,110   18,735   56,333   53,180   3,153   5.93%
              
Contingency and bonus revenue1,112   1,431   2,009   5,144   4,910   234   4.77%
Other income *17,697   74   127   17,906   227   17,679   7,788.11%
Total revenue38,270   19,615   20,871   79,383   58,317   21,066   36.12%
              
Employee commission expense3,654   3,378   3,649   10,900   9,878   1,022   10.35%
Revenue, net of commission expense34,616   16,237   17,222   68,483   48,439   20,044   41.38%
              
Salaries and employee benefits9,129   8,784   8,658   27,136   26,263   873   3.32%
Occupancy expense661   689   652   1,972   1,978   (6)  (0.30)%
Furniture and equipment203   272   223   644   765   (121)  (15.82)%
Amortization of intangible assets1,130   1,128   1,129   3,388   3,332   56   1.68%
Other expenses1,060   2,110   1,419   3,836   5,906   (2,070)  (35.05)%
Total operating expenses12,183   12,983   12,081   36,976   38,244   (1,268)  (3.32)%
Income before income tax, corporate allocation and noncontrolling interest22,433   3,254   5,141   31,507   10,195   21,312   209.04%
Corporate allocation(239)  (176)  (257)  (772)  (583)  (189)  32.42%
Income before income tax provision and noncontrolling interest22,194   3,078   4,884   30,735   9,612   21,123   219.76%
Provision for income tax expense2,587   735   1,170   4,574   2,181   2,393   109.72%
Net income19,607   2,343   3,714   26,161   7,431   18,730   252.05%
Noncontrolling interest(11,459)  (245)  (207)  (12,095)  (1,025)  (11,070)  1,080.00%
Net income attributable to TowneBank$8,148   $2,098   $3,507   $14,066   $6,406   $7,660   119.58%
              
Provision for income taxes2,587   735   1,170   4,574   2,181   2,393   109.72%
Depreciation, amortization and interest expense1,285   1,325   1,291   3,875   3,943   (68)  (1.72)%
EBITDA (non-GAAP)$12,020   $4,158   $5,968   $22,515   $12,530   $9,985   79.69%
              
Efficiency ratio35.19%  79.96%  70.15%  53.99%  78.95%  $(0.25)  (31.67)%
*Included in other income is the gross gain on the sale of Red Sky$17,626   %  n/m   $17,626   %   n/m    
Efficiency ratio excluding gain71.71%  79.96%  70.15%  72.71%  78.95%  $(0.06)  (7.60)%


 
TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands)
     
          
 Three Months Ended Nine Months Ended
 September 30, September 30, June 30, September 30, September 30,
 2020 2019 2020 2020 2019
          
Return on average assets (GAAP)0.89% 1.26% 0.97% 0.91% 1.17%
Impact of excluding average goodwill and other intangibles and amortization0.08% 0.14% 0.10% 0.10% 0.15%
Return on average tangible assets (non-GAAP)0.97% 1.40% 1.07% 1.01% 1.32%
          
Return on average equity (GAAP)7.85% 9.22% 8.18% 7.48% 8.54%
Impact of excluding average goodwill and other intangibles and amortization3.81% 4.98% 4.14% 3.84% 5.03%
Return on average tangible equity (non-GAAP)11.66% 14.20% 12.32% 11.32% 13.57%
          
Return on average common equity (GAAP)7.91% 9.29% 8.24% 7.53% 8.60%
Impact of excluding average goodwill and other intangibles and amortization3.88% 5.07% 4.20% 3.91% 5.13%
Return on average tangible common equity (non-GAAP)11.79% 14.36% 12.44% 11.44% 13.73%
          
Book value (GAAP)$23.83   $22.38   $23.50   $23.83   $21.95  
Impact of excluding average goodwill and other intangibles and amortization(6.77)  (6.94)  (6.82)  (6.77)  (6.90) 
Tangible book value (non-GAAP)$17.06   $15.44   $16.68   $17.06   $15.05  
          
Efficiency ratio (GAAP)53.08% 55.96% 66.69% 58.86% 67.40%
Impact of excluding gain/loss on investments(0.47)% (1.03)% 0.03% (1.18)% 0.13%
Efficiency ratio (non-GAAP)53.55% 56.99% 66.66% 60.04% 67.27%
          
Average assets (GAAP)$15,487,152   $11,845,282   $14,409,468   $13,987,474   $11,526,487  
Less: average goodwill446,725   442,919   446,725   446,762   442,890  
Less: average intangible assets47,513   57,327   50,352   50,373   60,333  
Average tangible assets (non-GAAP)$14,992,914   $11,345,036   $13,912,391   $13,490,339   $11,023,264  
          
Average equity (GAAP)$1,747,033   $1,620,070   $1,701,777   $1,704,993   $1,580,213  
Less: average goodwill446,725   442,919   446,725   446,762   442,890  
Less: average intangible assets47,513   57,327   50,352   50,373   60,333  
Average tangible equity (non-GAAP)$1,252,795   $1,119,824   $1,204,700   $1,207,858   $1,076,990  
          
Average common equity (GAAP)$1,732,881   $1,607,853   $1,689,603   $1,692,202   1,568,336  
Less: average goodwill446,725   442,919   446,725   446,762   442,890  
Less: average intangible assets47,513   57,327   50,352   50,373   60,333  
Average tangible common equity (non-GAAP)$1,238,643   $1,107,607   $1,192,526   $1,195,067   $1,065,113  
          
Net Income (GAAP)$34,464   $37,659   34,605   95,453   103,707  
Amortization of Intangibles, net of tax2,252   2,417   2,292   6,875   7,398  
Tangible Net Income (non-GAAP)$36,716   $40,076   $36,897   $102,328   $111,105  
          
Net Income (GAAP)$34,464   $37,659   $34,605   $95,453   $103,707  
Provision for credit losses31,598   1,508   26,945   65,559   5,770  
Provision for income tax7,841   7,684   7,464   21,492   24,810  
Pre-provision, pre-tax net revenues (non-GAAP)$73,903   $46,851   $69,014   $182,504   $134,287  
          
Total Revenue (GAAP)$192,135   $162,656   $145,879   $492,487   $424,272  
Net (gain)/loss on investment securities(1,701)  (2,930)  69   (9,632)  845  
Total Revenue for Efficiency calculation (non-GAAP)$190,434   $159,726   $145,948   $482,855   $425,117