TowneBank Reports Second Quarter 2019 Earnings

| Source: TowneBank TowneBank

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

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

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

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

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

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

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

Quarterly Provision for Loan Losses:

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

Quarterly Noninterest Income Compared to the Second Quarter of 2018:

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

Quarterly Noninterest Expense Compared to the Second Quarter of 2018:

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

Quarterly Income Taxes Compared to the Second Quarter of 2018:

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

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

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

Investment Securities:

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

Loans and Asset Quality:

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

Deposits and Borrowings:

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

Capital:

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

Outlook:
Management reforecasts on a quarterly basis and anticipates:

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

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 41 banking offices serving Chesapeake, Chesterfield County, Glen Allen, Hampton, James City County, Mechanicsville, Newport News, Norfolk, Portsmouth, Richmond, Suffolk, Virginia Beach, Williamsburg, and York County in Virginia, along with Raleigh, Cary, Charlotte, Greenville, Moyock, Grandy, Camden County, Southern Shores, Corolla and Nags Head in North Carolina.  TowneBank also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations.  Local decision-making is a hallmark of its hometown banking strategy that is delivered through the leadership of each group’s President and Board of Directors.  With total assets of $11.94 billion as of June 30, 2019, TowneBank is one of the largest banks headquartered in Virginia.

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

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

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

Investor contact:
William B. Littreal, Chief Financial Officer, 757-638-681

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
   
  Three Months Ended
  June 30, March 31, December 31, September 30, June 30,
 2019 2019 2018 2018 2018
Income and Performance Ratios:         
 Total Revenue$144,537  $133,854  $131,417  $137,914  $137,058 
 Net income36,242  32,082  36,440  39,252  36,138 
 Net income attributable to TowneBank34,638  31,409  35,990  38,293  34,804 
 Net income per common share - diluted0.48  0.44  0.50  0.53  0.48 
 Book value per common share21.95  21.40  21.05  20.54  20.22 
 Book value per common share - tangible (non-GAAP)15.05  14.46  14.26  13.83  13.50 
 Return on average assets1.20% 1.14% 1.28% 1.40% 1.32%
 Return on average assets - tangible (non-GAAP)1.35% 1.29% 1.43% 1.56% 1.48%
 Return on average equity8.83% 8.24% 9.44% 10.21% 9.55%
 Return on average equity - tangible (non-GAAP)13.90% 13.24% 14.91% 16.08% 15.19%
 Return on average common equity8.89% 8.30% 9.53% 10.30% 9.62%
 Return on average common equity - tangible (non-GAAP)14.05% 13.39% 15.11% 16.30% 15.36%
 Noninterest income as a percentage of total revenue37.86% 34.65% 32.12% 35.69% 36.65%
           
Regulatory Capital Ratios (1):         
 Common equity tier 111.58% 11.49% 11.51% 11.53% 11.33%
 Tier 111.62% 11.52% 11.54% 11.57% 11.36%
 Total14.85% 14.79% 14.83% 14.90% 14.71%
 Tier 1 leverage ratio9.86% 9.92% 9.87% 9.98% 10.00%
           
Asset Quality:         
 Allowance for loan losses to nonperforming loans 3.00x  9.36x  10.97x  7.25x  12.64x
 Allowance for loan losses to period end loans0.67% 0.66% 0.65% 0.64% 0.64%
 Allowance for loan losses to period end loans excluding purchased loans0.81% 0.81% 0.82% 0.82% 0.84%
 Nonperforming loans to period end loans0.22% 0.07% 0.06% 0.09% 0.05%
 Nonperforming assets to period end assets0.29% 0.22% 0.22% 0.25% 0.24%
 Net charge-offs to average loans (annualized)0.08% 0.01% 0.02% 0.03% 0.01%
           
 Nonperforming loans$18,202  $5,696  $4,749  $6,926  $3,919 
 Former bank premises1,510  2,223  2,253  2,253  2,253 
 Foreclosed property14,517  17,071  17,163  18,153  20,133 
 Total nonperforming assets$34,229  $24,990  $24,165  $27,332  $26,305 
 Loans past due 90 days and still accruing interest$415  $117  $394  $153  $22 
           
 Allowance for loan losses$54,527  $53,303  $52,094  $50,236  $49,535 
           
Mortgage Banking:         
 Loans originated, mortgage$574,638  $366,643  $407,787  $561,543  $667,189 
 Loans originated, joint venture246,491  146,884  192,280  249,956  283,933 
 Total loans originated$821,129  $513,527  $600,067  $811,499  $951,122 
 Number of loans originated3,121  1,977  2,304  3,068  3,687 
 Number of originators234  240  293  303  324 
 Purchase %84.97% 86.08% 88.64% 89.72% 91.23%
 Loans sold$694,832  $473,068  $694,341  $852,205  $825,313 
 Gross realized gain on sales and fees as a % of loans originated3.43% 3.58% 3.37% 3.36% 3.30%
           
Other Ratios:         
 Net interest margin3.49% 3.54% 3.53% 3.62% 3.69%
 Net interest margin-fully tax equivalent (nonGAAP)3.52% 3.57% 3.55% 3.64% 3.71%
 Average earning assets/total average assets89.46% 89.50% 89.91% 89.69% 89.61%
 Average loans/average deposits91.60% 95.83% 95.32% 97.55% 97.79%
 Average noninterest deposits/total average deposits31.63% 31.39% 31.90% 32.61% 32.28%
 Period end equity/period end total assets13.45% 13.53% 13.78% 13.49% 13.63%
 Efficiency ratio66.80% 68.43% 62.65% 64.00% 65.10%
           
 (1) Current reporting period regulatory capital ratios are preliminary      


TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
          
Investment Securities      % Change
 Q2 Q2 Q1 Q2 19 vs. Q2 19 vs.
Available-for-sale securities, at fair value2019 2018 2019 Q2 18 Q1 19
U.S. agency securities$261,960  $426,118  $260,152  (38.52)% 0.69%
U.S. Treasury notes2,241  101,224  2,229  (97.79)% 0.54%
Municipal securities167,466  55,465  107,278  201.93% 56.10%
Trust preferred and other corporate securities43,799  30,718  35,003  42.58% 25.13%
Mortgage-backed securities issued by GSE785,355  444,138  695,115  76.83% 12.98%
Total$1,260,821  $1,057,663  $1,099,777  19.21% 14.64%
          
Held-to-maturity securities, at amortized cost         
Municipal securities$34,458  $36,039  $34,472  (4.39)% (0.04)%
Trust preferred corporate securities2,393  500  500  378.60% 378.60%
Mortgage-backed securities issued by GSE13,723  17,415  14,715  (21.20)% (6.74)%
Total$50,574  $53,954  $49,687  (6.26)% 1.79%
          
          
Loans Held For Investment      % Change
 Q2 Q2 Q1 Q2 19 vs. Q2 19 vs.
 2019 2018 2019 Q2 18 Q1 19
Real estate-construction and development$1,107,762  $989,910  $1,111,360  11.91% (0.32)%
Commercial real estate - investment related properties1,985,990  1,935,013  1,951,292  2.63% 1.78%
Commercial real estate - owner occupied1,288,478  1,227,072  1,279,039  5.00% 0.74%
Real estate-multifamily267,528  288,043  255,649  (7.12)% 4.65%
Real estate-residential 1-4 family1,639,547  1,596,264  1,637,579  2.71% 0.12%
Commercial and industrial business1,523,607  1,440,625  1,547,623  5.76% (1.55)%
Consumer and other loans313,817  298,029  322,828  5.30% (2.79)%
Total$8,126,729  $7,774,956  $8,105,370  4.52% 0.26%
          
          
Deposits      % Change
 Q2 Q2 Q1 Q2 19 vs. Q2 19 vs.
 2019 2018 2019 Q2 18 Q1 19
Noninterest-bearing demand$2,950,615  $2,597,320  $2,813,857  13.60% 4.86%
Interest-bearing:         
Demand and money market accounts3,409,322  2,987,102  3,290,907  14.13% 3.60%
Savings277,495  305,334  285,790  (9.12)% (2.90)%
Certificates of deposits2,631,386  2,101,455  2,341,134  25.22% 12.40%
Total$9,268,818  $7,991,211  $8,731,688  15.99% 6.15%
          
          
The following table sets forth an estimate of the expected effects of the aggregate acquisition accounting adjustments on pre-tax net interest income for the periods shown:
    Discount Accretion (Premium Amortization)  
    For the three months ended  
    September 30, December 31,  
    2019 2019  
Assets:        
Investment Securities   $(67) $(65)  
Loans   1,467  1,447   
         
Liabilities:        
Deposits   51  47   
         
Total estimated effect on net interest income   $1,349  $1,335   
Note:  This information is intended for informational purposes only and is not necessarily indicative of future results.  Actual results may differ due to factors such factors such as changes in estimated prepayment speeds or projected credit loss rates.
 


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Three Months Ended Three Months Ended Three Months Ended
 June 30, 2019 March 31, 2019 June 30, 2018
   Interest Average   Interest Average   Interest Average
 Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets:                 
Loans (net of unearned income and deferred costs), excluding nonaccrual loans$8,075,054  $102,366  5.08% $8,030,994  $100,146  5.06% $7,552,983  $93,548  4.97%
Taxable investment securities1,170,215  8,346  2.85% 1,036,645  7,529  2.91% 987,693  5,787  2.34%
Tax-exempt investment securities90,942  756  3.33% 79,310  765  3.86% 82,839  719  3.47%
Total securities1,261,157  9,102  2.89% 1,115,955  8,294  2.97% 1,070,532  6,506  2.43%
Interest-bearing deposits698,649  4,016  2.31% 693,365  3,998  2.34% 499,349  2,159  1.73%
Loans held for sale281,775  3,007  4.27% 178,475  2,003  4.49% 319,214  3,557  4.46%
Total earning assets10,316,635  118,491  4.61% 10,018,789  114,441  4.63% 9,442,078  105,770  4.49%
Less: allowance for loan losses(53,386)     (52,844)     (47,745)    
Total nonearning assets1,269,029      1,228,808      1,142,514     
Total assets$11,532,278      $11,194,753      $10,536,847     
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$3,312,313  $7,025  0.85% $3,174,157  $6,240  0.80% $2,945,897  $3,602  0.49%
Savings281,221  929  1.33% 285,499  1,027  1.46% 306,937  941  1.23%
Certificates of deposit2,433,479  13,830  2.28% 2,290,056  11,907  2.11% 1,977,973  7,077  1.43%
Total interest-bearing deposits6,027,013  21,784  1.45% 5,749,712  19,174  1.35% 5,230,807  11,620  0.89%
Borrowings678,799  3,318  1.93% 821,889  4,221  2.05% 927,216  3,827  1.65%
Subordinated debt, net248,064  2,962  4.78% 247,913  2,962  4.78% 249,966  2,986  4.78%
Total interest-bearing liabilities6,953,876  28,064  1.62% 6,819,514  26,357  1.57% 6,407,989  18,433  1.15%
Demand deposits2,788,596      2,630,813      2,493,211     
Other noninterest-bearing liabilities215,951      198,527      173,832     
Total liabilities9,958,423      9,648,854      9,075,032     
Shareholders’ equity1,573,855      1,545,899      1,461,815     
Total liabilities and equity$11,532,278      $11,194,753      $10,536,847     
Net interest income (tax-equivalent basis)  $90,427      $88,084      $87,337   
Reconcilement of Non-GAAP Financial Measures                
Tax-equivalent basis adjustment  (608)     (611)     (514)  
Net interest income (GAAP)  $89,819      $87,473      $86,823   
                  
Interest rate spread (1)(3)    2.99%     3.06%     3.34%
Interest expense as a percent of average earning assets   1.09%     1.07%     0.78%
Net interest margin (tax equivalent basis) (2)(3)   3.52%     3.57%     3.71%
Total cost of deposits    0.99%     0.93%     0.60%
                  

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

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Six Months Ended Six Months Ended Six Months Ended June 30,
 June 30, 2019 June 30, 2018 2019 Compared with 2018
   Interest Average   Interest Average    
 Average Income/ Yield/ Average Income/ Yield/ Increase Change due to
 Balance Expense Rate Balance Expense Rate (Decrease) Rate Volume
Assets:                 
Loans (net of unearned income and deferred costs), excluding nonaccrual loans$8,053,146  $202,512  5.07% $7,255,533  $175,458  4.88% $27,054  $7,201  $19,853 
Taxable investment securities1,103,799  15,875  2.88% 945,229  10,811  2.29% 5,064  3,066  1,998 
Tax-exempt investment securities85,158  1,522  3.57% 77,964  1,408  3.61% 114  (14) 128 
Total securities1,188,957  17,397  2.93% 1,023,193  12,219  2.39% 5,178  3,052  2,126 
Interest-bearing deposits695,999  8,013  2.32% 564,041  4,522  1.62% 3,491  2,272  1,219 
Loans held for sale230,411  5,010  4.35% 279,380  5,936  4.25% (926) 136  (1,062)
Total earning assets10,168,513  232,932  4.62% 9,122,147  198,135  4.38% 34,797  12,661  22,136 
Less: allowance for loan losses(53,117)     (46,976)          
Total nonearning assets1,249,052      1,119,336           
Total assets$11,364,448      $10,194,507           
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$3,243,616  $13,264  0.82% $2,860,596  $6,571  0.46% $6,693  $5,713  $980 
Savings283,348  1,956  1.39% 307,734  1,817  1.19% 139  290  (151)
Certificates of deposit2,362,165  25,738  2.20% 1,922,737  12,718  1.33% 13,020  9,623  3,397 
Total interest-bearing deposits5,889,129  40,958  1.40% 5,091,067  21,106  0.84% 19,852  15,626  4,226 
Borrowings749,948  7,540  2.00% 874,385  6,705  1.53% 835  1,882  (1,047)
Subordinated debt, net247,989  5,923  4.78% 254,560  6,143  4.83% (220) (63) (157)
Total interest-bearing liabilities6,887,066  54,421  1.59% 6,220,012  33,954  1.10% 20,467  17,445  3,022 
Demand deposits2,710,141      2,398,693           
Other noninterest-bearing
  liabilities		207,287      167,108           
Total liabilities9,804,494      8,785,813           
Shareholders’ equity1,559,954      1,408,694           
Total liabilities and equity$11,364,448      $10,194,507           
Net interest income (tax-equivalent basis)  $178,511      $164,181    $14,330  $(4,784) $19,114 
Reconcilement of Non-GAAP Financial Measures                
Tax-equivalent basis adjustment  (1,219)     (1,013)   (206)    
Net interest income (GAAP)  $177,292      $163,168    $14,124     
                  
Interest rate spread (1)(3)    3.03%     3.28%      
Interest expense as a percent of average earning assets    1.08%     0.75%      
Net interest margin (tax equivalent basis) (2)(3)    3.54%     3.63%      
Total cost of deposits    0.96%     0.57%      
                  
(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.
(3) Non-GAAP.


TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
  
   
 June 30, December 31,
 2019 2018
 (unaudited) (audited)
ASSETS   
Cash and due from banks$110,580  $94,604 
Interest-bearing deposits at Federal Reserve Bank834,505  570,425 
Interest-bearing deposits in financial institutions21,527  21,667 
Total Cash and Cash Equivalents966,612  686,696 
Securities available for sale, at fair value1,260,821  1,095,339 
Securities held to maturity, at amortized cost50,574  50,598 
Other equity securities5,396  4,797 
Federal Home Loan Bank stock32,657  43,229 
Total Securities1,349,448  1,193,963 
Mortgage loans held for sale362,773  220,986 
Loans, net of unearned income and deferred costs8,126,729  8,018,233 
Less: allowance for loan losses(54,527) (52,094)
Net Loans8,072,202  7,966,139 
Premises and equipment, net230,177  211,796 
Goodwill442,881  433,658 
Other intangible assets, net58,391  58,752 
Bank-owned life insurance policies240,621  237,371 
Other assets219,375  153,669 
TOTAL ASSETS$11,942,480  $11,163,030 
    
LIABILITIES AND EQUITY   
Deposits:   
Noninterest-bearing demand$2,950,615  $2,622,761 
Interest-bearing:   
Demand and money market accounts3,409,322  3,223,215 
Savings277,495  286,684 
Certificates of deposit2,631,386  2,237,762 
Total Deposits9,268,818  8,370,422 
Advances from the Federal Home Loan Bank532,004  799,315 
Subordinated debt, net248,160  247,861 
Repurchase agreements and other borrowings56,355  47,156 
Total Borrowings836,519  1,094,332 
Other liabilities230,691  159,856 
TOTAL LIABILITIES10,336,028  9,624,610 
Preferred stock   
Authorized and unissued shares - 2,000,000—  — 
Common stock, $1.667 par: 90,000,000 shares authorized   
72,608,253 and 72,465,923 shares issued at   
June 30, 2019 and December 31, 2018, respectively121,038  120,801 
Capital surplus1,036,982  1,034,676 
Retained earnings420,600  379,239 
Common stock issued to deferred compensation trust, at cost   
807,939 and 769,200 shares at   
June 30, 2019 and December 31, 2018, respectively(15,160) (13,955)
Deferred compensation trust15,160  13,955 
Accumulated other comprehensive loss15,143  (9,190)
TOTAL SHAREHOLDERS’ EQUITY1,593,763  1,525,526 
Noncontrolling interest12,689  12,894 
TOTAL EQUITY1,606,452  1,538,420 
TOTAL LIABILITIES AND EQUITY$11,942,480  $11,163,030 


TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
        
        
 Three Months Ended Six Months Ended
 June 30, June 30,
 2019 2018 2019 2018
INTEREST INCOME:       
Loans, including fees$101,874  $93,150  $201,569  $174,682 
Investment securities8,987  6,390  17,121  11,982 
Interest-bearing deposits in financial institutions and federal funds sold4,015  2,159  8,013  4,522 
Mortgage loans held for sale3,007  3,557  5,010  5,936 
Total interest income117,883  105,256  231,713  197,122 
INTEREST EXPENSE:       
Deposits21,784  11,620  40,958  21,106 
Advances from the Federal Home Loan Bank3,201  3,764  7,354  6,602 
Subordinated debt, net2,962  2,986  5,924  6,143 
Repurchase agreements and other borrowings117  63  185  103 
Total interest expense28,064  18,433  54,421  33,954 
Net interest income89,819  86,823  177,292  163,168 
        
PROVISION FOR LOAN LOSSES2,824  3,056  4,262  5,009 
Net interest income after provision for loan losses86,995  83,767  173,030  158,159 
NONINTEREST INCOME:       
Residential mortgage banking income, net18,565  18,745  32,073  36,348 
Insurance commissions and other title fees and income, net17,213  15,087  32,795  28,459 
Real estate brokerage and property management income, net8,843  6,910  18,111  17,340 
Service charges on deposit accounts3,185  2,969  6,046  5,852 
Credit card merchant fees, net660  1,443  1,843  2,611 
Bank owned life insurance1,635  1,633  3,233  3,165 
Other income4,617  3,448  7,774  6,389 
Net gain/(loss) on investment securities—  —  (776) 3 
Total noninterest income54,718  50,235  101,099  100,167 
NONINTEREST EXPENSE:       
Salaries and employee benefits54,263  50,324  107,123  101,108 
Occupancy expense7,662  6,802  15,913  13,279 
Furniture and equipment3,578  3,546  6,949  7,244 
Amortization - intangibles3,113  2,996  6,305  5,591 
Software expense2,788  2,648  5,533  4,988 
Outside data processing3,616  2,859  6,782  4,980 
Professional fees3,707  2,415  6,386  4,387 
Advertising and marketing3,182  3,124  6,011  5,774 
Other expenses14,647  14,507  27,677  34,173 
Total noninterest expense96,556  89,221  188,679  181,524 
Income before income tax expense and noncontrolling interest45,157  44,781  85,450  76,802 
Provision for income tax expense8,915  8,643  17,126  14,720 
Net income$36,242  $36,138  $68,324  $62,082 
Net income attributable to noncontrolling interest(1,604) (1,334) (2,277) (2,572)
Net income attributable to TowneBank$34,638  $34,804  $66,047  $59,510 
Per common share information       
Basic earnings$0.48  $0.48  $0.92  $0.84 
Diluted earnings$0.48  $0.48  $0.92  $0.84 
Cash dividends declared$0.18  $0.16  $0.34  $0.30 


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
          
 June 30, March 31, December 31, September 30, June 30,
 2019 2019 2018 2018 2018
 (unaudited) (unaudited) (audited) (unaudited) (unaudited)
ASSETS         
Cash and due from banks$110,580  $104,091  $94,604  $106,485  $98,339 
Interest-bearing deposits at Federal Reserve Bank834,505  775,208  570,425  582,099  341,715 
Interest-bearing deposits in financial institutions21,527  21,001  21,667  20,910  17,749 
Total Cash and Cash Equivalents966,612  900,300  686,696  709,494  457,803 
Securities available for sale, at fair value1,260,821  1,099,777  1,095,339  1,051,773  1,057,663 
Securities held to maturity, at amortized cost50,574  49,687  50,598  52,002  53,954 
Other equity securities5,396  5,022  4,797  5,519  5,206 
Federal Home Loan Bank stock32,657  41,464  43,229  46,393  46,393 
Total Securities1,349,448  1,195,950  1,193,963  1,155,687  1,163,216 
Mortgage loans held for sale362,773  247,021  220,986  333,354  396,185 
Loans, net of unearned income and deferred costs8,126,729  8,105,370  8,018,233  7,881,692  7,774,956 
Less: allowance for loan losses(54,527) (53,303) (52,094) (50,236) (49,535)
Net Loans8,072,202  8,052,067  7,966,139  7,831,456  7,725,421 
Premises and equipment, net230,177  227,458  211,796  210,724  207,997 
Goodwill442,881  442,881  433,658  427,117  425,625 
Other intangible assets, net58,391  61,333  58,752  58,165  60,669 
Bank-owned life insurance policies240,621  238,977  237,371  235,348  233,682 
Other assets219,375  202,276  153,669  159,887  161,055 
                TOTAL ASSETS$11,942,480  $11,568,263  $11,163,030  $11,121,232  $10,831,653 
LIABILITIES AND EQUITY         
Deposits:         
Noninterest-bearing demand$2,950,615  $2,813,857  $2,622,761  $2,671,558  $2,597,320 
Interest-bearing:         
Demand and money market accounts3,409,322  3,290,907  3,223,215  3,096,317  3,017,767 
Savings277,495  285,790  286,684  298,368  305,334 
Certificates of deposit2,631,386  2,341,134  2,237,762  2,233,188  2,070,790 
Total Deposits9,268,818  8,731,688  8,370,422  8,299,431  7,991,211 
Advances from the Federal Home Loan Bank532,004  739,160  799,315  873,469  873,622 
Subordinated debt, net248,160  248,010  247,861  247,712  247,563 
Repurchase agreements and other borrowings56,355  44,775  47,156  45,591  50,981 
Total Borrowings836,519  1,031,945  1,094,332  1,166,772  1,172,166 
Other liabilities230,691  238,974  159,856  155,205  191,490 
TOTAL LIABILITIES10,336,028  10,002,607  9,624,610  9,621,408  9,354,867 
Preferred stock         
Authorized shares - 2,000,000—  —  —  —  — 
          
Common stock, $1.667 par value121,038  121,047  120,801  120,613  120,615 
Capital surplus1,036,982  1,035,563  1,034,676  1,032,863  1,031,965 
Retained earnings420,600  399,030  379,239  354,842  328,125 
Common stock issued to deferred compensation         
trust, at cost(15,160) (14,067) (13,955) (13,780) (13,500)
Deferred compensation trust15,160  14,067  13,955  13,780  13,500 
Accumulated other comprehensive loss15,143  (1,792) (9,190) (22,348) (17,944)
TOTAL SHAREHOLDERS’ EQUITY1,593,763  1,553,848  1,525,526  1,485,970  1,462,761 
Noncontrolling interest12,689  11,808  12,894  13,854  14,025 
TOTAL EQUITY1,606,452  1,565,656  1,538,420  1,499,824  1,476,786 
TOTAL LIABILITIES AND EQUITY$11,942,480  $11,568,263  $11,163,030  $11,121,232  $10,831,653 


TOWNEBANK 
Consolidated Statements of Income - Five Quarter Trend (unaudited) 
(dollars in thousands, except share data) 
  
  
 Three Months Ended
 June 30, March 31, December 31, September 30, June 30, 
 2019 2019 2018 2018 2018 
INTEREST INCOME:          
Loans, including fees$101,874  $99,695  $99,446  $97,215  $93,150  
Investment securities8,987  8,134  8,126  7,019  6,390  
Interest-bearing deposits in financial institutions and federal funds sold4,015  3,998  3,559  2,148  2,159  
Mortgage loans held for sale3,007  2,003  3,176  4,012  3,557  
Total interest income117,883  113,830  114,307  110,394  105,256  
INTEREST EXPENSE:          
Deposits21,784  19,174  17,495  14,540  11,620  
Advances from the Federal Home Loan Bank3,201  4,153  4,585  4,153  3,764  
Subordinated debt2,962  2,962  2,961  2,962  2,986  
Repurchase agreements and other borrowings117  68  58  42  63  
Total interest expense28,064  26,357  25,099  21,697  18,433  
Net interest income89,819  87,473  89,208  88,697  86,823  
           
PROVISION FOR LOAN LOSSES2,824  1,438  2,292  1,241  3,056  
Net interest income after provision for loan losses86,995  86,035  86,916  87,456  83,767  
NONINTEREST INCOME:          
Residential mortgage banking income, net18,565  13,508  12,951  15,804  18,745  
Insurance commissions and other title fees and income, net17,213  15,582  13,212  14,493  15,087  
Real estate brokerage and property management income, net8,843  9,268  5,982  8,542  6,910  
Service charges on deposit accounts3,185  2,861  2,928  3,028  2,969  
Credit card merchant fees, net660  1,183  1,298  1,563  1,443  
Bank owned life insurance1,635  1,598  2,014  1,657  1,633  
Other income4,617  3,157  3,824  4,130  3,448  
Net gain/(loss) on investment securities—  (776) —  —  —  
Total noninterest income54,718  46,381  42,209  49,217  50,235  
NONINTEREST EXPENSE:          
Salaries and employee benefits54,263  52,860  50,233  50,497  50,324  
Occupancy expense7,662  8,251  7,352  7,013  6,802  
Furniture and equipment3,578  3,371  3,587  3,646  3,546  
Amortization - intangibles3,113  3,192  3,123  2,996  2,996  
Software expense2,788  2,745  2,694  2,940  2,648  
Outside data processing3,616  3,166  2,466  2,917  2,859  
Professional fees3,707  2,679  2,028  1,908  2,415  
Advertising and marketing3,182  2,829  2,546  2,874  3,124  
Other expenses14,647  13,030  8,308  13,471  14,507  
Total noninterest expense96,556  92,123  82,337  88,262  89,221  
Income before income tax expense and noncontrolling interest45,157  40,293  46,788  48,411  44,781  
Provision for income tax expense8,915  8,211  10,348  9,159  8,643  
Net income36,242  32,082  36,440  39,252  36,138  
Net income attributable to noncontrolling interest(1,604) (673) (450) (959) (1,334) 
Net income attributable to TowneBank$34,638  $31,409  $35,990  $38,293  $34,804  
Per common share information          
Basic earnings$0.48  $0.44  $0.50  $0.53  $0.48  
Diluted earnings$0.48  $0.44  $0.50  $0.53  $0.48  
Basic weighted average shares outstanding72,044,817  71,992,330  71,905,956  71,875,085  71,787,980  
Diluted weighted average shares outstanding72,145,600  $72,099,558  72,043,369  72,044,355  71,949,590  
Cash dividends declared$0.18  $0.16  $0.16  $0.16  $0.16  
           


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
 
          
 Three Months Ended Six Months Ended Increase/(Decrease)
 June 30, March 31, June 30, 2019 over 2018
 2019 2018 2019 2019 2018 Amount Percent
Revenue             
Net interest income$88,442  $83,686  $86,400  $174,842  $157,729  $17,113  10.85%
Service charges on deposit             
accounts3,185  2,969  2,861  6,046  5,852  194  3.32%
Credit card merchant fees660  1,443  1,183  1,843  2,611  (768) (29.41)%
Other income5,273  4,062  3,927  9,200  8,017  1,183  14.76%
Subtotal9,118  8,474  7,971  17,089  16,480  609  3.70%
Gain/(loss) on investment securities—  —  (776) (776) 3  (779) N/M 
Total noninterest income9,118  8,474  7,195  16,313  16,483  (170) (1.03)%
Total revenue97,560  92,160  93,595  191,155  174,212  16,943  9.73%
              
Provision for loan losses2,824  3,056  1,438  4,262  5,009  (747) (14.91)%
              
Expenses             
Salaries and employee benefits32,353  27,840  31,087  63,440  58,042  5,398  9.30%
Occupancy expense5,007  4,274  5,244  10,251  8,291  1,960  23.64%
Furniture and equipment2,517  2,491  2,367  4,884  5,022  (138) (2.75)%
Amortization of intangibles1,315  1,530  1,366  2,681  2,751  (70) (2.54)%
Other expenses18,938  15,364  16,181  35,119  36,111  (992) (2.75)%
Total expenses60,130  51,499  56,245  116,375  110,217  6,158  5.59%
Income before income tax, corporate allocation and noncontrolling interest34,606  37,605  35,912  70,518  58,986  11,532  19.55%
Corporate allocation546  476  452  998  932  66  7.08%
Income before income tax provision and noncontrolling interest35,152  38,081  36,364  71,516  59,918  11,598  19.36%
Provision for income tax expense6,650  7,142  7,192  13,842  11,023  2,819  25.57%
Net income28,502  30,939  29,172  57,674  48,895  8,779  17.95%
Noncontrolling interest1  (6) 2  3  (8) 11  N/M 
Net income attributable to TowneBank$28,503  $30,933  $29,174  $57,677  $48,887  $8,790  17.98%
              
Efficiency ratio61.63% 55.88% 59.60% 60.63% 63.27% (2.64)% (4.17)%


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
 
    
 Three Months Ended Six Months Ended Increase/(Decrease)
 June 30, March 31, June 30, 2019 over 2018
 2019 2018 2019 2019 2018 Amount Percent
Revenue             
Residential mortgage brokerage
income, net		$18,898  $19,344  $13,756  $32,654  $37,005  $(4,351) (11.76)%
Real estate brokerage income, net2,873  2,818  1,561  4,434  4,517  (83) (1.84)%
Title insurance and settlement fees594  579  368  962  895  67  7.49%
Property management fees, net5,970  4,092  7,708  13,678  12,823  855  6.67%
Income from unconsolidated
subsidiary		162  100  94  256  194  62  31.96%
Net interest and other income1,677  3,342  1,372  3,049  5,887  (2,838) (48.21)%
Total revenue30,174  30,275  24,859  55,033  61,321  (6,288) (10.25)%
              
Expenses             
Salaries and employee benefits13,309  15,403  12,895  26,204  29,280  (3,076) (10.51)%
Occupancy expense2,028  1,964  2,345  4,373  3,858  515  13.35%
Furniture and equipment803  835  768  1,571  1,816  (245) (13.49)%
Amortization of intangible assets695  672  725  1,420  1,343  77  5.73%
Other expenses7,234  8,158  6,241  13,475  14,452  (977) (6.76)%
Total expenses24,069  27,032  22,974  47,043  50,749  (3,706) (7.30)%
              
Income before income tax, corporate allocation and noncontrolling interest6,105  3,243  1,885  7,990  10,572  (2,582) (24.42)%
Corporate allocation(328) (293) (263) (591) (582) (9) 1.55%
Income before income tax provision and noncontrolling interest5,777  2,950  1,622  7,399  9,990  (2,591) (25.94)%
Provision for income tax expense1,287  633  551  1,838  2,192  (354) (16.15)%
Net income4,490  2,317  1,071  5,561  7,798  (2,237) (28.69)%
Noncontrolling interest(1,248) (891) (252) (1,500) (1,512) 12  (0.79)%
Net income attributable to TowneBank$3,242  $1,426  $819  $4,061  $6,286  $(2,225) (35.40)%
              
Efficiency ratio79.77% 89.29% 92.42% 85.48% 82.76% 2.72% 3.29%
              


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
          
    
 Three Months Ended Six Months Ended Increase/(Decrease)
 June 30, March 31, June 30, 2019 over 2018
 2019 2018 2019 2019 2018 Amount Percent
Commission and fee income             
Property and casualty$13,067  $11,059  $11,873  $24,940  $20,416  $4,524  22.16%
Employee benefits3,833  3,454  3,506  7,339  6,650  689  10.36%
Travel insurance1,169  1,389  1,289  2,458  3,157  (699) (22.14)%
Specialized benefit services163  171  170  333  340  (7) (2.06)%
Total commissions and fees18,232  16,073  16,838  35,070  30,563  4,507  14.75%
              
Contingency and bonus revenue1,893  1,433  1,585  3,479  2,566  913  35.58%
Other income79  71  75  154  141  13  9.22%
Total revenue20,204  17,577  18,498  38,703  33,270  5,433  16.33%
              
Employee commission expense3,401  2,953  3,098  6,500  5,468  1,032  18.87%
Revenue, net of commission expense16,803  14,624  15,400  32,203  27,802  4,401  15.83%
              
Salaries and employee benefits8,601  7,081  8,878  17,479  13,786  3,693  26.79%
Occupancy expense627  564  662  1,289  1,130  159  14.07%
Furniture and equipment258  220  236  494  406  88  21.67%
Amortization of intangible assets1,103  794  1,101  2,204  1,497  707  47.23%
Other expenses1,768  2,032  2,027  3,795  3,739  56  1.50%
Total operating expenses12,357  10,691  12,904  25,261  20,558  4,703  22.88%
Income before income tax, corporate allocation and noncontrolling interest4,446  3,933  2,496  6,942  7,244  (302) (4.17)%
Corporate allocation(218) (183) (189) (407) (350) (57) 16.29%
Income before income tax provision and noncontrolling interest4,228  3,750  2,307  6,535  6,894  (359) (5.21)%
Provision for income tax expense978  868  468  1,446  1,505  (59) (3.92)%
Net income3,250  2,882  1,839  5,089  5,389  (300) (5.57)%
Noncontrolling interest(357) (437) (423) (780) (1,052) 272  (25.86)%
Net income attributable to TowneBank$2,893  $2,445  $1,416  $4,309  $4,337  $(28) (0.65)%
              
Provision for income taxes978  868  468  1,446  1,505  (59) (3.92)%
Depreciation, amortization and interest expense1,309  1,007  1,333  2,642  1,913  729  38.11%
EBITDA (non-GAAP)$5,180  $4,320  $3,217  $8,397  $7,755  $642  8.28%
              
Efficiency ratio73.54% 73.11% 83.79% 78.44% 73.94% 4.50% 6.09%


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


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


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