TowneBank Reports Second Quarter 2020 Earnings

Suffolk, Virginia, UNITED STATES


SUFFOLK, Va., July 23, 2020 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (NASDAQ: TOWN) today reported earnings for the quarter ended June 30, 2020 of $34.61 million, or $0.48 per diluted share, compared to $34.64 million, or $0.48 per diluted share, for the quarter ended June 30, 2019.

“Our second quarter performance demonstrated the benefits of our diverse revenue model.  Despite the headwinds from economic uncertainty and increased credit provisions, we delivered a solid quarter highlighted by rebounds in noninterest income from our Realty segment.  Our deposits climbed to record levels enhancing liquidity and strong capital ratios position us well to navigate the challenging environment.  We will also continue to be diligent in our focus on credit risk management,” said G. Robert Aston, Jr., Executive Chairman.

Highlights for Second Quarter 2020 Compared to Second Quarter 2019:

  • Total revenues were a record $162.66 million, an increase of $18.12 million, or 12.54%.
  • Loans held for investment were $9.80 billion, an increase of $1.68 billion, or 20.61%, from June 30, 2019, and $1.02 billion, or 11.59%, from March 31, 2020.  The balance at June 30, 2020 included $1.09 billion of loans originated under the Small Business Administration’s Paycheck Protection Program (“PPP”).
  • Total deposits were $11.26 billion, an increase of $2.00 billion, or 21.54%, compared to prior year and $1.96 billion, or 21.02%, from March 31, 2020.
  • Noninterest bearing deposits increased by 43.23%, to $4.23 billion, representing 37.52% of total deposits.  Compared to the linked quarter, noninterest bearing deposits increased 38.09%.
  • Annualized return on common shareholders' equity was 8.24% and annualized return on average tangible common shareholders' equity was 12.44% (non-GAAP).
  • Net interest margin for the quarter was 2.85% and taxable equivalent net interest margin (non-GAAP) was 2.87%.
  • Effective tax rate of 17.74% in the quarter compared to 20.47% in the second quarter of 2019.

“I am especially proud of the outstanding service our teammates delivered to our members and the communities we serve.  At Towne, we delivered over $1 billion in PPP funding to support businesses in our communities helping to save nearly 130,000 jobs for local families.  In addition, we created more than 650 new relationships out of the PPP process,” stated J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to Second Quarter 2019:

  • Net interest income was $93.27 million compared to $89.82 million at June 30, 2019.
  • Taxable equivalent net interest margin (non-GAAP) was 2.87%, including accretion of 8 basis points, compared to 3.52%, including accretion of 11 basis points, for second quarter 2019.
  • Average loans held for investment, with an average yield of 4.29%, represented 73.10% of average earning assets at June 30, 2020 compared to an average yield of 5.08% and 78.27% of average earning assets in the second quarter of 2019.  Excluding PPP, loan yields were 4.42% in second quarter 2020.
  • Total cost of deposits decreased to 0.58% from 0.99% at June 30, 2019.
  • Average interest-earning assets totaled $13.16 billion at June 30, 2020 compared to $10.32 billion at June 30, 2019, an increase of 27.56%.
  • Average interest-bearing liabilities totaled $8.64 billion, an increase of $1.69 billion from prior year.

Quarterly Provision for Credit Losses:

  • Recorded a quarterly provision for credit losses for on-balance-sheet loans of $25.99 million compared to $2.82 million one year ago and $5.76 million in the linked quarter.  This increase is primarily attributable to management's expectation of continued economic weakness driven by the impact of the COVID-19 pandemic.  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 $0.10 million compared to charge-offs of $1.60 million one year prior.  The ratio of net loan charge-offs to average loans on an annualized basis was 0.03% in the linked quarter and 0.08% in the second quarter of 2019.
  • Recorded a provision for credit losses on off-balance-sheet commitments of $1.08 million compared to $1.10 million in the linked quarter.
  • Recorded a recovery of credit losses on debt securities of $0.13 million compared to a credit loss of $0.16 million in the linked quarter.
  • The allowance for credit losses on loans represented 0.92% of total loans compared to 0.73% at March 31, 2020 and 0.67% at June 30, 2019.  Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses was 1.04%.  The allowance for credit losses on loans was 5.34 times nonperforming loans compared to 3.85 times at March 31, 2020 and 3.00 times at June 30, 2019.

Quarterly Noninterest Income Compared to Second Quarter 2019:

  • Total noninterest income was $69.38 million compared to $54.72 million in 2019, an increase of $14.66 million, or 26.80%.  Residential mortgage banking income increased $11.15 million and real estate brokerage and property management income increased $1.94 million, while service charges on deposit accounts decreased $1.30 million.  Also included in noninterest income are net gains on investment securities of $2.93 million as compared to no gains or losses in the prior year.
  • Residential mortgage banking recorded income of $29.72 million compared to $18.57 million in second quarter 2019.  Loan volume in the current quarter was $1.47 billion, with purchase activity comprising 51.26% of that volume.  Loan volume in second quarter 2019 was $821.13 million, with purchase activity comprising 84.97%.  Increased refinancing activity due to the mortgage rate environment in second quarter 2020, coupled with improved margins were the primary drivers of improvement compared to the prior year quarter.
  • Total Insurance segment revenue increased 3.30% to $20.87 million in the second quarter due to organic growth and additional income from a third quarter 2019 agency acquisition.
  • Property management fee revenue increased 36.05%, or $2.15 million, compared to second quarter 2019.  Reservations were down significantly in first quarter 2020 due to travel restrictions driven by COVID-19 and the uncertainty surrounding summer travel.  The lifting of local travel restrictions, in the areas of our vacation rental companies, drove increased reservation activity during the quarter.
  • Service charges are down $1.30 million, or 40.72%, compared to second quarter 2019 primarily due to a decrease in interchange fees related to Durbin Amendment compliance, combined with a lower transaction volumes and fees waived for members experiencing financial hardships.

Quarterly Noninterest Expense Compared to Second Quarter 2019:

  • Total noninterest expense was $91.03 million compared to $96.56 million in 2019, a decrease of $5.53 million, or 5.73%.  Declines across most expense categories were partially offset by increases in salary and benefits expense of $2.66 million and software expense of $0.70 million.
  • Market expansion and infrastructure enhancements, 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.

Quarterly Income Taxes Compared to Second Quarter 2019:

  • Income tax expense was $7.46 million compared to $8.92 million one year prior.  This represents an effective tax rate of 17.74% compared to 20.47% in the second quarter of 2019.

Consolidated Balance Sheet Highlights:

  • Total assets were $15.58 billion for the quarter ended June 30, 2020, an increase of $3.63 billion, or 30.40%, compared to $12.62 billion at March 31, 2020.  Total assets increased $3.64 billion, or 30.46%, from $11.94 billion at June 30, 2019.  The year-to-date 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 $1.68 billion, or 20.61%, compared to prior year and $1.02 billion compared the linked quarter.  Excluding PPP loans of $1.09 billion, loans held for investment increased $0.59 billion, or 7.20%, compared to prior year, but declined $72.31 million, or 0.82%, compared to the linked quarter.
  • Mortgage loans held for sale increased  $247.60 million, or 68.25%, compared to the prior year and $157.23 million, or 34.70%, compared to the linked quarter.
  • Total deposits increased $2.0 billion, or 21.54%, compared to the prior year and $1.96 billion, or 21.02%, compared to the linked quarter.
  • Total borrowings increased $1.49 billion, or 178.23%, from prior year and $0.94 billion, or 67.22%, compared to the linked quarter.  These increases were driven by $1.11 billion in borrowings under the FRB PPP lending facility, which we used to facilitate funding of the PPP loans.

Investment Securities:

  • Total investment securities were $1.36 billion compared to $1.35 billion at March 31, 2020 and $1.35 billion at June 30, 2019.  The weighted average duration of the portfolio at June 30, 2020 was 4.1 years.  The carrying value of the AFS debt securities portfolio included $59.89 million in net unrealized gains compared to $19.73 million in net unrealized gains at December 31, 2019.  During the second quarter of 2020, we sold $40.0 million in AFS debt securities at a gain of $2.93 million to reposition the portfolio.

Loans and Asset Quality:

  • Total loans held for investment were $9.80 billion at June 30, 2020 compared to $8.78 billion at March 31, 2020 and $8.13 billion at June 30, 2019.
  • Nonperforming assets were $29.25 million, or 0.19% of total assets, compared to $34.23 million, or 0.29%, at June 30, 2019.
  • Nonperforming loans were 0.17% of period end loans compared to 0.22% at June 30, 2019.
  • Foreclosed property decreased to $12.32 million from $14.52 million at June 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 $11.26 billion compared to $9.31 billion at March 31, 2020 and $9.27 billion at June 30, 2019.
  • Total loans to deposits were 87.01% compared to 94.37% at March 31, 2020 and 87.68% at June 30, 2019.
  • Non-interest bearing deposits were 37.52% of total deposits at June 30, 2020 compared to 32.88% at March 31, 2020 and 31.83% at June 30, 2019.
  • Total borrowings were $2.33 billion compared to $1.39 billion at March 31, 2020 and $0.84 billion at  June 30, 2019.

Capital:

  • Common equity tier 1 capital ratio of 11.54%.
  • Tier 1 leverage capital ratio of 9.05%.
  • Tier 1 risk-based capital ratio of 11.67%.
  • Total risk-based capital ratio of 14.91%.
  • Book value was $23.50 compared to $22.77 at March 31, 2020 and $21.95 at June 30, 2019.
  • Tangible book value (non-GAAP) was $16.68 compared to $15.91 at March 31, 2020 and $15.05 at June 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 $15.58 billion as of June 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
  June 30, March 31, December 31, September 30, June 30,
 2020 2020 2019 2019 2019
Income and Performance Ratios:         
 Total Revenue$162,656  $137,696  $139,671  $145,879  $144,537 
 Net income37,222  27,605  35,948  39,400  36,242 
 Net income attributable to TowneBank34,605  26,384  35,075  37,659  34,638 
 Net income per common share - diluted0.48  0.36  0.49  0.52  0.48 
 Book value per common share23.50  22.77  22.58  22.38  21.95 
 Book value per common share - tangible (non-GAAP)16.68  15.91  15.69  15.44  15.05 
 Return on average assets0.97% 0.88% 1.16% 1.26% 1.20%
 Return on average assets - tangible (non-GAAP)1.07% 1.00% 1.30% 1.40% 1.35%
 Return on average equity8.18% 6.37% 8.44% 9.22% 8.83%
 Return on average equity - tangible (non-GAAP)12.32% 9.91% 12.97% 14.20% 13.90%
 Return on average common equity8.24% 6.42% 8.51% 9.29% 8.89%
 Return on average common equity - tangible (non-GAAP)12.44% 10.01% 13.12% 14.36% 14.05%
 Noninterest income as a percentage of total revenue42.66% 35.00% 35.59% 37.55% 37.86%
           
Regulatory Capital Ratios (1):         
 Common equity tier 111.54% 11.23% 11.46% 11.52% 11.58%
 Tier 111.67% 11.35% 11.49% 11.55% 11.62%
 Total14.91% 14.40% 14.58% 14.70% 14.85%
 Tier 1 leverage ratio9.05% 10.11% 9.95% 9.84% 9.86%
           
Asset Quality:         
 Allowance for credit losses on loans to nonperforming loans5.34x
  3.85x
  3.34x
  3.95x
  3.00x
 
 Allowance for credit losses on loans to period end loans0.92% 0.73% 0.69% 0.68% 0.67%
 Allowance for credit losses on loans to period end loans excluding PPP loans (non-GAAP)1.04% 0.73% 0.69% 0.68% 0.67%
 Nonperforming loans to period end loans0.17% 0.19% 0.21% 0.17% 0.22%
 Nonperforming assets to period end assets0.19% 0.24% 0.27% 0.26% 0.29%
 Net charge-offs to average loans (annualized)% 0.03% 0.04% 0.03% 0.08%
           
 Nonperforming loans$16,935  $16,700  $17,437  $14,016  $18,202 
 Former bank premises    1,521  1,510  1,510 
 Foreclosed property12,315  13,053  13,839  15,517  14,517 
 Total nonperforming assets$29,250  $29,753  $32,797  $31,043  $34,229 
 Loans past due 90 days and still accruing interest$464  $91  $309  $636  $415 
           
 Allowance for credit losses on loans$90,467  $64,372  $58,234  $55,428  $54,527 
           
Mortgage Banking:         
 Loans originated, mortgage$1,116,782  $718,681  $628,279  $703,922  $574,638 
 Loans originated, joint venture357,815  204,522  231,879  259,742  246,491 
 Total loans originated$1,474,597  $923,203  $860,158  $963,664  $821,129 
 Number of loans originated4,818  3,025  2,984  3,360  3,121 
 Number of originators216  223  217  225  229 
 Purchase %51.26% 61.31% 70.32% 68.83% 84.97%
 Loans sold$1,398,649  $809,834  $879,910  $925,058  $694,832 
 Gross realized gain on sales and fees as a % of loans originated3.17% 1.80% 3.38% 3.45% 3.43%
           
Other Ratios:         
 Net interest margin2.85% 3.35% 3.33% 3.41% 3.49%
 Net interest margin-fully tax equivalent (non-GAAP)2.87% 3.37% 3.35% 3.43% 3.52%
 Average earning assets/total average assets91.33% 89.15% 89.57% 89.53% 89.46%
 Average loans/average deposits91.81% 92.99% 88.41% 87.63% 91.60%
 Average noninterest deposits/total average deposits36.52% 32.21% 32.14% 31.82% 31.63%
 Period end equity/period end total assets11.05% 13.19% 13.84% 13.63% 13.45%
 Efficiency ratio56.99% 73.02% 66.11% 66.66% 66.80%
           
 (1) Current reporting period regulatory capital ratios are preliminary      
        


TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
Investment Securities      % Change
 Q2 Q2 Q1 Q2 20 vs. Q2 20 vs.
Available-for-sale securities, at fair value2020 2019 2020 Q2 19 Q1 20
U.S. agency securities$118,176  $261,960  $121,857  (54.89)% (3.02)%
U.S. Treasury notes1,010  2,241  1,014  (54.93)% (0.39)%
Municipal securities313,322  167,466  266,489  87.10% 17.57%
Trust preferred and other corporate securities59,598  43,799  59,606  36.07% (0.01)%
Mortgage-backed securities issued by GSE and GNMA774,658  785,355  799,713  (1.36)% (3.13)%
Allowance for credit losses(140) n/a (259) n/a (45.95)%
Total$1,266,624  $1,260,821  $1,248,420  0.46% 1.46%
          
Gross unrealized gains (losses) reflected in financial statements      
Total gross unrealized gains$61,559  $22,119  $30,545  178.31% 101.54%
Total gross unrealized losses(1,674) (2,456) (9,848) (31.84)% (83.00)%
Net unrealized gains (losses) and other adjustments on AFS securities$59,885  $19,663  $20,697     
          
Held-to-maturity securities, at amortized cost         
Municipal securities$28,855  $34,458  $28,852  (16.26)% 0.01%
Trust preferred corporate securities2,345  2,393  2,357  (2.01)% (0.51)%
Mortgage-backed securities issued by GSE and GNMA10,395  13,723  11,222  (24.25)% (7.37)%
Less: Allowance for credit losses(121) n/a (133) n/a (9.02)%
Total$41,474  $50,574  $42,298  (17.99)% (1.95)%
          
Gross unrealized gains (losses) not reflected in financial statements        
Total gross unrealized gains$1,980  $1,636  $964  21.03% 105.39%
Total gross unrealized losses  (57)   (100.00)% %
Net unrealized gains (losses) in HTM securities$1,980  $1,579  $964     
          
Loans Held For Investment (1)      % Change
 Q2 Q2 Q1 Q2 20 vs. Q2 20 vs.
 2020 2019 2020 Q2 19 Q1 20
Real estate - construction and development$1,178,832  $1,107,762  $1,060,834  6.42% 11.12%
Commercial real estate - non owner occupied2,332,447  1,985,990  2,305,971  17.45% 1.15%
Commercial real estate - owner occupied1,383,294  1,288,478  1,398,216  7.36% (1.07)%
Real estate - multifamily277,947  267,528  283,514  3.89% (1.96)%
Real estate - residential 1-4 family and HELOC1,670,530  1,639,547  1,693,562  1.89% (1.36)%
Commercial and industrial business2,503,161  1,523,607  1,636,244  64.29% 52.98%
Consumer and other loans455,678  313,817  405,854  45.21% 12.28%
Total$9,801,889  $8,126,729  $8,784,195  20.61% 11.59%
(1) Paycheck Protection Program loans totaling $1.09 billion, primarily in C&I, are included in Q2 2020.
          
Deposits      % Change
 Q2 Q2 Q1 Q2 20 vs. Q2 20 vs.
 2020 2019 2020 Q2 19 Q1 20
Noninterest-bearing demand$4,226,208  $2,950,615  $3,060,515  43.23% 38.09%
Interest-bearing:         
Demand and money market accounts4,223,391  3,409,322  3,573,926  23.88% 18.17%
Savings298,673  277,495  280,807  7.63% 6.36%
Certificates of deposits2,516,666  2,631,386  2,392,744  (4.36)% 5.18%
Total$11,264,938  $9,268,818  $9,307,992  21.54% 21.02%
                  


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Three Months Ended Three Months Ended Three Months Ended
 June 30, 2020 March 31, 2020 June 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)$9,619,931  $102,656  4.29% $8,550,216  $100,566  4.73% $8,075,054  $102,366  5.08%
Taxable investment securities1,198,776  7,367  2.46% 1,356,411  9,211  2.72% 1,170,215  8,346  2.85%
Tax-exempt investment securities147,489  836  2.27% 128,204  861  2.69% 90,942  756  3.33%
Total securities1,346,265  8,203  2.44% 1,484,615  10,072  2.71% 1,261,157  9,102  2.89%
Interest-bearing deposits1,729,140  433  0.10% 373,984  1,102  1.19% 698,649  4,016  2.31%
Loans held for sale464,796  3,811  3.28% 333,070  2,988  3.59% 281,775  3,007  4.27%
Total earning assets13,160,132  115,103  3.52% 10,741,885  114,728  4.30% 10,316,635  118,491  4.61%
Less: allowance for credit losses(69,451)     (55,331)     (53,386)    
Total nonearning assets1,318,787      1,362,769      1,269,029     
Total assets$14,409,468      $12,049,323      $11,532,278     
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$3,857,757  $2,491  0.26% $3,521,707  $5,319  0.61% $3,312,313  $7,025  0.85%
Savings290,201  554  0.77% 276,947  593  0.86% 281,221  929  1.33%
Certificates of deposit2,503,648  12,027  1.93% 2,434,098  13,150  2.17% 2,433,479  13,830  2.28%
Total interest-bearing deposits6,651,606  15,072  0.91% 6,232,752  19,062  1.23% 6,027,013  21,784  1.45%
Borrowings1,741,832  3,238  0.74% 679,745  2,581  1.50% 678,799  3,318  1.93%
Subordinated debt, net248,660  2,962  4.76% 248,510  2,962  4.77% 248,064  2,962  4.78%
Total interest-bearing liabilities8,642,098  21,272  0.99% 7,161,007  24,605  1.38% 6,953,876  28,064  1.62%
Demand deposits3,826,439      2,962,110      2,788,596     
Other noninterest-bearing liabilities239,154      260,500      215,951     
Total liabilities12,707,691      10,383,617      9,958,423     
Shareholders’ equity1,701,777      1,665,706      1,573,855     
Total liabilities and equity$14,409,468      $12,049,323      $11,532,278     
Net interest income (tax-equivalent basis)  $93,831      $90,123      $90,427   
Reconcilement of Non-GAAP Financial Measures                
Tax-equivalent basis adjustment  (557)     (627)     (608)  
Net interest income (GAAP)  $93,274      $89,496      $89,819   
                  
Interest rate spread (2)(4)    2.53%     2.92%     2.99%
Interest expense as a percent of average earning assets   0.65%     0.92%     1.09%
Net interest margin (tax equivalent basis) (3)(4)   2.87%     3.37%     3.52%
Total cost of deposits    0.58%     0.83%     0.99%
                  
                  

(1) Includes average PPP balances of $0.81 billion and related interest and fee income of $5.8 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)
 
 Six Months Ended Six Months Ended Six Months Ended June 30,
 June 30, 2020 June 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)$9,085,074  $203,221  4.50% $8,053,146  $202,512  5.07% $709  $(24,050) $24,759 
Taxable investment securities1,277,593  16,578  2.60% 1,103,799  15,875  2.88% 703  (1,646) 2,349 
Tax-exempt investment securities137,846  1,698  2.46% 85,158  1,522  3.57% 176  (571) 747 
Total securities1,415,439  18,276  2.58% 1,188,957  17,397  2.93% 879  (2,217) 3,096 
Interest-bearing deposits472,589  1,535  0.65% 695,999  8,013  2.32% (6,478) (4,478) (2,000)
Loans held for sale398,933  6,799  3.41% 230,411  5,010  4.35% 1,789  (1,264) 3,053 
Total earning assets11,372,035  229,831  4.06% 10,168,513  232,932  4.62% (3,101) (32,009) 28,908 
Less: allowance for loan losses(62,390)     (53,117)          
Total nonearning assets1,919,751      1,249,052           
Total assets$13,229,396      $11,364,448           
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$3,689,732  $7,809  0.43% $3,243,616  $13,264  0.82% $(5,455) $(7,097) $1,642 
Savings283,574  1,147  0.81% 283,348  1,956  1.39% (809) (811) 2 
Certificates of deposit2,468,873  25,177  2.05% 2,362,165  25,738  2.20% (561) (1,724) 1,163 
Total interest-bearing deposits6,442,179  34,133  1.07% 5,889,129  40,958  1.40% (6,825) (9,632) 2,807 
Borrowings1,210,789  5,820  0.95% 749,948  7,540  2.00% (1,720) (5,083) 3,363 
Subordinated debt, net248,585  5,923  4.77% 247,989  5,923  4.78%   (14) 14 
Total interest-bearing liabilities7,901,553  45,876  1.17% 6,887,066  54,421  1.59% (8,545) (14,729) 6,184 
Demand deposits3,394,275      2,710,141           
Other noninterest-bearing liabilities249,827      207,287           
Total liabilities11,545,655      9,804,494           
Shareholders’ equity1,683,741      1,559,954           
Total liabilities and equity$13,229,396      $11,364,448           
Net interest income (tax-equivalent basis)  $183,955      $178,511    $5,444  $(17,280) $22,724 
Reconcilement of Non-GAAP Financial Measures                
Tax-equivalent basis adjustment  (1,185)     (1,219)   34     
Net interest income (GAAP)  $182,770      $177,292    $5,478     
                  
Interest rate spread (2)(4)    2.90%     3.03%      
Interest expense as a percent of average earning assets   0.81%     1.08%      
Net interest margin (tax equivalent basis) (3)(4)   3.25%     3.54%      
Total cost of deposits    0.70%     0.96%      
                  
(1) Includes average PPP balances of  $0.40 billion and related interest income of $5.8 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)
  
   
 June 30, December 31,
 2020 2019
 (unaudited) (audited)
ASSETS   
Cash and due from banks$115,724  $97,593 
Interest-bearing deposits at FRB - Richmond2,511,152  322,505 
Interest-bearing deposits in financial institutions24,374  22,518 
Total Cash and Cash Equivalents2,651,250  442,616 
Securities available for sale, at fair value (amortized cost $1,206,878, allowance for credit losses of $140) (1)1,266,624  1,441,308 
Securities held to maturity, at amortized cost (fair value $43,575 )(1)41,595  43,688 
Less:  allowance for credit losses(121)  
Securities held to maturity, net of allowance for credit losses41,474  43,688 
Other equity securities6,497  6,462 
FHLB stock49,277  30,094 
Total Securities1,363,872  1,521,552 
Mortgage loans held for sale610,369  419,233 
Loans, net of unearned income and deferred costs9,801,889  8,419,288 
Less: allowance for credit losses(90,467) (58,234)
Net Loans9,711,422  8,361,054 
Premises and equipment, net257,533  231,806 
Goodwill446,725  446,816 
Other intangible assets, net48,632  54,399 
BOLI242,493  243,062 
Other assets247,962  227,125 
TOTAL ASSETS$15,580,258  $11,947,663 
    
LIABILITIES AND EQUITY   
Deposits:   
Noninterest-bearing demand$4,226,208  $2,951,225 
Interest-bearing:   
Demand and money market accounts4,223,391  3,586,364 
Savings298,673  276,205 
Certificates of deposit2,516,666  2,457,123 
Total Deposits11,264,938  9,270,917 
Advances from the FHLB906,365  471,687 
Subordinated debt, net248,756  248,458 
FRB PPP lending facility1,111,429   
Repurchase agreements and other borrowings60,913  52,391 
Total Borrowings2,327,463  772,536 
Other liabilities266,314  250,516 
TOTAL LIABILITIES13,858,715  10,293,969 
Preferred stock   
Authorized and unissued shares - 2,000,000   
Common stock, $1.667 par: 150,000,000 shares authorized   
72,645,987 and 72,649,682 shares issued at June 30, 2020 and December 31, 2019, respectively121,101  121,107 
Capital surplus1,043,774  1,041,160 
Retained earnings499,502  467,186 
Common stock issued to deferred compensation trust, at cost   
871,634 and 818,578 shares at June 30, 2020 and December 31, 2019, respectively(16,776) (15,555)
Deferred compensation trust16,776  15,555 
Accumulated other comprehensive income (loss)43,218  11,302 
TOTAL SHAREHOLDERS’ EQUITY1,707,595  1,640,755 
Noncontrolling interest13,948  12,939 
TOTAL EQUITY1,721,543  1,653,694 
TOTAL LIABILITIES AND EQUITY$15,580,258  $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 Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
INTEREST INCOME:       
Loans, including fees$102,139  $101,874  $202,201  $201,569 
Investment securities8,163  8,987  18,112  17,121 
Interest-bearing deposits in financial institutions and federal funds sold433  4,015  1,535  8,013 
Mortgage loans held for sale3,811  3,007  6,799  5,010 
Total interest income114,546  117,883  228,647  231,713 
INTEREST EXPENSE:       
Deposits15,072  21,784  34,134  40,958 
Advances from the FHLB2,595  3,201  5,088  7,354 
Subordinated debt, net2,962  2,962  5,923  5,924 
Repurchase agreements and other borrowings643  117  732  185 
Total interest expense21,272  28,064  45,877  54,421 
Net interest income93,274  89,819  182,770  177,292 
        
PROVISION FOR CREDIT LOSSES26,945  2,824  33,961  4,262 
Net interest income after provision for credit losses66,329  86,995  148,809  173,030 
NONINTEREST INCOME:       
Residential mortgage banking income, net29,715  18,565  37,131  32,073 
Insurance commissions and other title fees and income, net17,612  17,213  34,505  32,795 
Real estate brokerage and property management income, net10,781  8,843  17,719  18,111 
Service charges on deposit accounts1,888  3,185  4,328  6,046 
Credit card merchant fees, net1,109  660  2,287  1,843 
BOLI1,584  1,635  4,690  3,233 
Other income3,763  4,617  8,990  7,774 
Net gain/(loss) on investment securities2,930    7,932  (776)
Total noninterest income69,382  54,718  117,582  101,099 
NONINTEREST EXPENSE:       
Salaries and employee benefits56,926  54,263  112,793  107,123 
Occupancy expense7,227  7,662  14,728  15,913 
Furniture and equipment3,564  3,578  7,205  6,949 
Amortization - intangibles2,901  3,113  5,851  6,305 
Software expense3,492  2,788  6,984  5,533 
Data processing2,718  3,616  5,509  6,782 
Professional fees2,972  3,707  6,040  6,386 
Advertising and marketing1,986  3,182  5,570  6,011 
Other expenses9,239  14,647  23,233  27,677 
Total noninterest expense91,025  96,556  187,913  188,679 
Income before income tax expense and noncontrolling interest44,686  45,157  78,478  85,450 
Provision for income tax expense7,464  8,915  13,651  17,126 
Net income$37,222  $36,242  $64,827  $68,324 
Net income attributable to noncontrolling interest(2,617) (1,604) (3,838) (2,277)
Net income attributable to TowneBank$34,605  $34,638  $60,989  $66,047 
Per common share information       
Basic earnings$0.48  $0.48  $0.84  $0.92 
Diluted earnings$0.48  $0.48  $0.84  $0.92 
Cash dividends declared$0.18  $0.18  $0.36  $0.34 


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
          
 June 30, March 31, December 31, September 30, June 30,
 2020 2020 2019 2019 2019
 (unaudited) (unaudited) (audited) (unaudited) (unaudited)
ASSETS         
Cash and due from banks$115,724  $108,929  $97,593  $124,439  $110,580 
Interest-bearing deposits at FRB - Richmond2,511,152  753,643  322,505  675,288  834,505 
Interest-bearing deposits in financial institutions24,374  23,564  22,518  21,663  21,527 
Total Cash and Cash Equivalents2,651,250  886,136  442,616  821,390  966,612 
Securities available for sale1,266,624  1,248,420  1,441,308  1,337,395  1,260,821 
Securities held to maturity41,595  42,431  43,688  44,494  50,574 
Less:  allowance for credit losses(121) (133)      
Securities held to maturity, net of allowance for credit losses41,474  42,298  43,688  44,494  50,574 
Other equity securities6,497  6,462  6,462  5,697  5,396 
FHLB stock49,277  52,042  30,094  26,282  32,657 
Total Securities1,363,872  1,349,222  1,521,552  1,413,868  1,349,448 
Mortgage loans held for sale610,369  453,143  419,233  456,719  362,773 
Loans, net of unearned income and deferred costs9,801,889  8,784,195  8,419,288  8,182,829  8,126,729 
Less: allowance for credit losses(90,467) (64,372) (58,234) (55,428) (54,527)
Net Loans9,711,422  8,719,823  8,361,054  8,127,401  8,072,202 
Premises and equipment, net257,533  236,735  231,806  231,060  230,177 
Goodwill446,725  446,725  446,816  446,423  442,881 
Other intangible assets, net48,632  51,448  54,399  57,404  58,391 
BOLI242,493  240,924  243,062  241,652  240,621 
Other assets247,962  239,670  227,125  225,374  219,375 
TOTAL ASSETS$15,580,258  $12,623,826  $11,947,663  $12,021,291  $11,942,480 
LIABILITIES AND EQUITY         
Deposits:         
Noninterest-bearing demand$4,226,208  $3,060,515  $2,951,225  $3,030,505  $2,950,615 
Interest-bearing:         
Demand and money market accounts4,223,391  3,573,926  3,586,364  3,534,252  3,409,322 
Savings298,673  280,807  276,205  280,552  277,495 
Certificates of deposit2,516,666  2,392,744  2,457,123  2,592,705  2,631,386 
Total Deposits11,264,938  9,307,992  9,270,917  9,438,014  9,268,818 
Advances from the FHLB906,365  971,527  471,687  381,846  532,004 
Subordinated debt, net248,756  248,607  248,458  248,309  248,160 
FRB PPP lending facility1,111,429         
Repurchase agreements and other borrowings60,913  171,762  52,391  42,971  56,355 
Total Borrowings2,327,463  1,391,896  772,536  673,126  836,519 
Other liabilities266,314  258,306  250,516  271,617  230,691 
TOTAL LIABILITIES13,858,715  10,958,194  10,293,969  10,382,757  10,336,028 
Preferred stock         
Authorized shares - 2,000,000         
Common stock, $1.667 par value121,101  121,057  121,107  121,080  121,038 
Capital surplus1,043,774  1,041,870  1,041,160  1,039,156  1,036,982 
Retained earnings499,502  477,972  467,186  445,186  420,600 
Common stock issued to deferred compensation trust, at cost(16,776) (15,562) (15,555) (15,317) (15,160)
Deferred compensation trust16,776  15,562  15,555  15,317  15,160 
Accumulated other comprehensive income (loss)43,218  12,301  11,302  19,958  15,143 
TOTAL SHAREHOLDERS’ EQUITY1,707,595  1,653,200  1,640,755  1,625,380  1,593,763 
Noncontrolling interest13,948  12,432  12,939  13,154  12,689 
TOTAL EQUITY1,721,543  1,665,632  1,653,694  1,638,534  1,606,452 
TOTAL LIABILITIES AND EQUITY$15,580,258  $12,623,826  $11,947,663  $12,021,291  $11,942,480 
                    


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,
 2020 2020 2019 2019 2019
INTEREST INCOME:         
Loans, including fees$102,139  $100,062  $100,059  $102,047  $101,874 
Investment securities8,163  9,949  9,936  9,889  8,987 
Interest-bearing deposits in financial institutions and federal funds sold433  1,102  2,067  3,745  4,015 
Mortgage loans held for sale3,811  2,988  4,413  3,956  3,007 
Total interest income114,546  114,101  116,475  119,637  117,883 
INTEREST EXPENSE:         
Deposits15,072  19,062  21,744  23,552  21,784 
Advances from the FHLB2,595  2,492  1,730  1,935  3,201 
Subordinated debt2,962  2,962  2,962  2,962  2,962 
Repurchase agreements and other borrowings643  89  80  85  117 
Total interest expense21,272  24,605  26,516  28,534  28,064 
Net interest income93,274  89,496  89,959  91,103  89,819 
          
PROVISION FOR CREDIT LOSSES26,945  7,016  3,601  1,508  2,824 
Net interest income after provision for credit losses66,329  82,480  86,358  89,595  86,995 
NONINTEREST INCOME:         
Residential mortgage banking income, net29,715  7,416  15,884  18,855  18,565 
Insurance commissions and other title fees and income, net17,612  16,893  15,001  16,681  17,213 
Real estate brokerage and property management income, net10,781  6,938  6,737  9,444  8,843 
Service charges on deposit accounts1,888  2,440  2,245  2,253  3,185 
Credit card merchant fees, net1,109  1,179  1,389  1,514  660 
BOLI1,584  3,105  3,865  2,117  1,635 
Other income3,763  5,227  4,591  3,981  4,617 
Net gain/(loss) on investment securities2,930  5,002    (69)  
Total noninterest income69,382  48,200  49,712  54,776  54,718 
NONINTEREST EXPENSE:         
Salaries and employee benefits56,926  55,867  56,013  55,784  54,263 
Occupancy expense7,227  7,502  7,516  7,953  7,662 
Furniture and equipment3,564  3,640  3,598  3,805  3,578 
Amortization - intangibles2,901  2,950  3,005  3,059  3,113 
Software expense3,492  3,492  2,976  3,208  2,788 
Data processing2,718  2,791  2,510  2,533  3,616 
Professional fees2,972  3,067  2,990  3,566  3,707 
Advertising and marketing1,986  3,584  2,839  3,429  3,182 
Other expenses9,239  13,995  10,889  13,950  14,647 
Total noninterest expense91,025  96,888  92,336  97,287  96,556 
Income before income tax expense and noncontrolling interest44,686  33,792  43,734  47,084  45,157 
Provision for income tax expense7,464  6,187  7,786  7,684  8,915 
Net income37,222  27,605  35,948  39,400  36,242 
Net income attributable to noncontrolling interest(2,617) (1,221) (873) (1,741) (1,604)
Net income attributable to TowneBank$34,605  $26,384  $35,075  $37,659  $34,638 
Per common share information         
Basic earnings$0.48  $0.37  $0.49  $0.52  $0.48 
Diluted earnings$0.48  $0.36  $0.49  $0.52  $0.48 
Basic weighted average shares outstanding72,280,555  72,206,228  72,122,476  72,091,221  72,044,817 
Diluted weighted average shares outstanding72,317,988  $72,299,721  72,302,414  72,222,934  72,145,600 
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 Six Months Ended Increase/(Decrease)
 June 30, March 31, June 30, 2020 over 2019
 2020 2019 2020 2020 2019 Amount Percent
Revenue             
Net interest income$89,665  $88,442  $87,406  $177,071  $174,842  $2,229  1.27%
Service charges on deposit accounts1,888  3,185  2,440  4,328  6,046  (1,718) (28.42)%
Credit card merchant fees1,109  660  1,179  2,287  1,843  444  24.09%
Other income3,888  5,273  7,061  10,950  9,200  1,750  19.02%
Subtotal6,885  9,118  10,680  17,565  17,089  476  2.79%
Net gain/(loss) on investment securities2,930    5,002  7,932  (776) 8,708  1,122.16%
Total noninterest income9,815  9,118  15,682  25,497  16,313  9,184  56.30%
Total revenue99,480  97,560  103,088  202,568  191,155  11,413  5.97%
              
Provision for credit losses26,059  2,824  7,041  33,100  4,262  28,838  676.63%
              
Expenses             
Salaries and employee benefits35,209  32,353  33,225  68,434  63,440  4,994  7.87%
Occupancy expense4,812  5,007  4,916  9,728  10,251  (523) (5.10)%
Furniture and equipment2,715  2,517  2,660  5,375  4,884  491  10.05%
Amortization of intangibles1,114  1,315  1,164  2,278  2,681  (403) (15.03)%
Other expenses10,718  18,938  18,705  29,423  35,119  (5,696) (16.22)%
Total expenses54,568  60,130  60,670  115,238  116,375  (1,137) (0.98)%
Income before income tax, corporate allocation and noncontrolling interest18,853  34,606  35,377  54,230  70,518  (16,288) (23.10)%
Corporate allocation627  546  670  1,297  998  299  29.96%
Income before income tax provision and noncontrolling interest19,480  35,152  36,047  55,527  71,516  (15,989) (22.36)%
Provision for income tax expense2,167  6,650  6,663  8,830  13,842  (5,012) (36.21)%
Net income17,313  28,502  29,384  46,697  57,674  (10,977) (19.03)%
Noncontrolling interest5  1  (1) 4  3  1  33.33%
Net income attributable to TowneBank$17,318  $28,503  $29,383  $46,701  $57,677  (10,976) (19.03)%
              
Efficiency ratio56.52% 61.63% 61.85% 59.21% 60.63% (1.42)% (2.34)%
                     


TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)
 
    
 Three Months Ended Six Months Ended Increase/(Decrease)
 June 30, March 31, June 30, 2020 over 2019
 2020 2019 2020 2020 2019 Amount Percent
Revenue             
Residential mortgage brokerage income, net$30,468  $18,898  $8,007  $38,475  $32,654  $5,821  17.83%
Real estate brokerage income, net2,659  2,873  1,865  4,524  4,434  90  2.03%
Title insurance and settlement fees639  594  436  1,075  962  113  11.75%
Property management fees, net8,122  5,970  5,073  13,195  13,678  (483) (3.53)%
Income from unconsolidated subsidiary301  162  186  487  256  231  90.23%
Net interest and other income3,765  1,677  2,396  6,161  3,049  3,112  102.07%
Total revenue45,954  30,174  17,963  63,917  55,033  8,884  16.14%
              
Provision for credit losses886    (25) 861    861  n/m 
              
Expenses             
Salaries and employee benefits13,059  13,309  13,293  26,352  26,204  148  0.56%
Occupancy expense1,763  2,028  1,927  3,690  4,373  (683) (15.62)%
Furniture and equipment626  803  762  1,388  1,571  (183) (11.65)%
Amortization of intangible assets658  695  657  1,315  1,420  (105) (7.39)%
Other expenses8,270  7,234  6,867  15,137  13,475  1,662  12.33%
Total expenses24,376  24,069  23,506  47,882  47,043  839  1.78%
              
Income (loss) before income tax, corporate allocation and noncontrolling interest20,692  6,105  (5,518) 15,174  7,990  7,184  89.91%
Corporate allocation(370) (328) (393) (763) (591) (172) 29.10%
(Loss) income before income tax provision and noncontrolling interest20,322  5,777  (5,911) 14,411  7,399  7,012  94.77%
Provision for income tax (benefit) expense4,127  1,287  (1,292) 2,835  1,838  997  54.24%
Net (loss) income16,195  4,490  (4,619) 11,576  5,561  6,015  108.16%
Noncontrolling interest(2,415) (1,248) (791) (3,206) (1,500) (1,706) 113.73%
Net (loss) income attributable to TowneBank$13,780  $3,242  $(5,410) $8,370  $4,061  4,309  106.11%
              
Efficiency ratio53.04% 79.77% 130.86% 74.91% 85.48% (10.57)% (12.37)%
              


TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)
 
          
 Three Months Ended Six Months Ended Increase/(Decrease)
 June 30, March 31, June 30, 2020 over 2019
 2020 2019 2020 2020 2019 Amount Percent
Commission and fee income             
Property and casualty$13,926  $13,067  $12,786  $26,712  $24,940  $1,772  7.11%
Employee benefits3,791  3,833  3,918  7,709  7,339  370  5.04%
Travel insurance861  1,169  1,266  2,127  2,458  (331) (13.47)%
Specialized benefit services157  163  168  325  333  (8) (2.40)%
Total commissions and fees18,735  18,232  18,138  36,873  35,070  1,803  5.14%
              
Contingency and bonus revenue2,009  1,893  2,022  4,031  3,479  552  15.87%
Other income127  79  81  208  154  54  35.06%
Total revenue20,871  20,204  20,241  41,112  38,703  2,409  6.22%
              
Employee commission expense3,649  3,401  3,596  7,245  6,500  745  11.46%
Revenue, net of commission expense17,222  16,803  16,645  33,867  32,203  1,664  5.17%
              
Salaries and employee benefits8,658  8,601  9,349  18,007  17,479  528  3.02%
Occupancy expense652  627  659  1,311  1,289  22  1.71%
Furniture and equipment223  258  218  441  494  (53) (10.73)%
Amortization of intangible assets1,129  1,103  1,129  2,258  2,204  54  2.45%
Other expenses1,419  1,768  1,357  2,776  3,795  (1,019) (26.85)%
Total operating expenses12,081  12,357  12,712  24,793  25,261  (468) (1.85)%
Income before income tax, corporate allocation and noncontrolling interest5,141  4,446  3,933  9,074  6,942  2,132  30.71%
Corporate allocation(257) (218) (277) (533) (407) (126) 30.96%
Income before income tax provision and noncontrolling interest4,884  4,228  3,656  8,541  6,535  2,006  30.70%
Provision for income tax expense1,170  978  816  1,987  1,446  541  37.41%
Net income3,714  3,250  2,840  6,554  5,089  1,465  28.79%
Noncontrolling interest(207) (357) (429) (636) (780) 144  (18.46)%
Net income attributable to TowneBank$3,507  $2,893  $2,411  $5,918  $4,309  $1,609  37.34%
              
Provision for income taxes1,170  978  816  1,987  1,446  541  37.41%
Depreciation, amortization and interest expense1,291  1,309  1,300  2,591  2,982  (391) (13.11)%
EBITDA (non-GAAP)$5,968  $5,180  $4,527  $10,496  $8,737  $1,759  20.13%
              
Efficiency ratio70.15% 73.54% 76.37% 73.21% 78.44% (5.23)% (6.67)%
                     


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands)
     
          
 Three Months Ended Six Months Ended
 June 30, June 30, March 31, June 30, June 30,
 2020 2019 2020 2020 2019
          
Return on average assets (GAAP)0.97% 1.20% 0.88% 0.93% 1.17%
Impact of excluding average goodwill and other intangibles and amortization0.10% 0.15% 0.12% 0.11% 0.15%
Return on average tangible assets (non-GAAP)1.07% 1.35% 1.00% 1.04% 1.32%
          
Return on average equity (GAAP)8.18% 8.83% 6.37% 7.28% 8.54%
Impact of excluding average goodwill and other intangibles and amortization4.14% 5.07% 3.54% 3.85% 5.03%
Return on average tangible equity (non-GAAP)12.32% 13.90% 9.91% 11.13% 13.57%
          
Return on average common equity (GAAP)8.24% 8.89% 6.42% 7.34% 8.60%
Impact of excluding average goodwill and other intangibles and amortization4.20% 5.16% 3.59% 3.91% 5.13%
Return on average tangible common equity (non-GAAP)12.44% 14.05% 10.01% 11.25% 13.73%
          
Book value (GAAP)$23.50  $21.95  $22.77  $23.50  $21.95 
Impact of excluding average goodwill and other intangibles and amortization(6.82) (6.90) (6.86) (6.82) (6.90)
Tangible book value (non-GAAP)$16.68  $15.05  $15.91  $16.68  $15.05 
          
Average assets (GAAP)$14,409,468  $11,532,278  $12,049,323  $13,229,396  $11,364,448 
Less: average goodwill446,725  442,881  446,838  446,781  442,875 
Less: average intangible assets50,352  60,339  53,285  51,819  61,861 
Average tangible assets (non-GAAP)$13,912,391  $11,029,058  $11,549,200  $12,730,796  $10,859,712 
          
Average equity (GAAP)$1,701,777  $1,573,855  $1,665,706  $1,683,742  $1,559,954 
Less: average goodwill446,725  442,881  446,838  446,781  442,875 
Less: average intangible assets50,352  60,339  53,285  51,819  61,861 
Average tangible equity (non-GAAP)$1,204,700  $1,070,635  $1,165,583  $1,185,142  $1,055,218 
          
Average common equity (GAAP)$1,689,603  $1,562,214  $1,653,676  $1,671,640  1,548,250 
Less: average goodwill446,725  442,881  446,838  446,781  442,875 
Less: average intangible assets50,352  60,339  53,285  51,819  61,861 
Average tangible common equity (non-GAAP)$1,192,526  $1,058,994  $1,153,553  $1,173,040  $1,043,514 
          
Net Income (GAAP)$34,605  $34,638  26,384  60,989  66,047 
Amortization of Intangibles, net of tax2,292  2,460  2,331  4,622  4,981 
Tangible Net Income (non-GAAP)$36,897  $37,098  $28,715  $65,611  $71,028