TowneBank Reports Full Year and Fourth Quarter Financial Results for 2020

21st Consecutive Year of Earnings Improvement

Suffolk, Virginia, UNITED STATES


SUFFOLK, Va., Jan. 28, 2021 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (Nasdaq: TOWN) today reported financial results for the full year and the fourth quarter ended December 31, 2020. For the year ended December 31, 2020, earnings were $145.54 million, or $2.01 per diluted share, compared to $138.78 million, or $1.92 per diluted share for the year ended December 31, 2019. Earnings in the fourth quarter of 2020 were $50.08 million, or $0.69 per diluted share, compared to fourth quarter 2019 earnings of $35.08 million, or $0.49 per diluted share.

“We were pleased to deliver our 21St consecutive year of increased earnings during a year filled with challenges and opportunities. We achieved solid financial results while facing economic headwinds and prudently building substantial reserves to address future economic uncertainty. Our unique business model enabled our HomeTowne bankers to support our members and the communities we serve with more than $1.1 billion in funds through the Paycheck Protection Program. Additionally, our diverse sources of revenue resulted in record levels of total revenues which eclipsed $664 million for the year. TowneMortgage achieved record volumes and delivered a strong performance by closing more than $5.88 billion in mortgages. These accomplishments were the result of hard work and dedication from our more than 2,800 team members who work each day defining our culture of caring,” said G. Robert Aston, Jr., Executive Chairman.

Quarter Highlights:

  • Total revenues were $171.85 million, in fourth quarter 2020, an increase over the prior year quarter of $32.18 million, or 23.04%.
  • Quarterly pre-provision, pre-tax, net revenues (non-GAAP) were $62.11 million, an increase of $15.65 million, or 33.67%.
  • During fourth quarter 2020, we completed a core banking system conversion to allow the Company to provide a greater variety of financial services to our members through new technologies and enhanced digital solutions.
  • Loans held for investment increased $1.21 billion, or 14.37%, from December 31, 2019, and decreased $141.50 million, or 1.45%, from September 30, 2020. The balance at December 31, 2020 and September 30, 2020 included $0.86 billion and $1.10 billion, respectively, of loans originated under the Small Business Administration's Paycheck Protection Program ("PPP"). Excluding PPP, loans held for investment increased $353.89 million, or 4.20%, compared to prior year, and $105.75 million, or 4.85% on an annualized basis, compared to the linked quarter.
  • Total deposits were $11.57 billion, an increase of $2.30 billion, or 24.83%, compared to prior year but a decrease, due to expected runoff and seasonality, of $131.80 million, or 1.13%, from September 30, 2020.
  • Noninterest bearing deposits increased by 48.23%, to $4.37 billion, compared to prior year, representing 37.80% of total deposits. Compared to the linked quarter, noninterest bearing deposits decreased 2.01%.
  • In the quarter ended December 31, 2020, annualized return on average common shareholders' equity was 11.36% and annualized return on average tangible common shareholders' equity was 16.48% (non-GAAP). For the full 12 months, return on average common shareholders' equity was 8.52% and return on average tangible common shareholders' equity was 12.76% (non-GAAP).
  • Net interest margin of 2.97% and taxable equivalent net interest margin of 2.98% (non-GAAP) compared to the prior year quarter of 3.33% and 3.35%, respectively.
  • Effective tax rate of 17.21% compared to 18.17% at December 31, 2019.

“In addition to our financial results, we concluded a multi-year system conversion during the fourth quarter. This system will enable us to improve our digital capabilities and drive revenue growth. We opened the door to over 700 new relationships through our efforts with the Paycheck Protection Program, having onboarded 65% of those new banking relationships throughout 2020. We continue to have strong interest in nonbank acquisitions and completed an insurance agency acquisition in late December,” said J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to the Fourth Quarter of 2019:

  • Net interest income was $100.61 million compared to $89.96 million for the quarter ended December 31, 2019. Included in net interest income was PPP interest and fee income of $11.29 million and $0, respectively.
  • Taxable equivalent net interest margin was 2.98%, including purchase accounting accretion of 5 basis points and PPP accretion of 5 basis points, compared to 3.35%, including purchase accounting accretion of 9 basis points, for 2019.
  • Average loans held for investment, with an average yield of 4.28%, represented 72.32% of average earning assets in the fourth quarter of 2020 compared to an average yield of 4.81%, which represented 77.25% of average earning assets in the fourth quarter of 2019.
  • Total cost of deposits decreased to 0.37% from 0.92% at December 31, 2019.
  • Average interest-earning assets totaled $13.48 billion at December 31, 2020 compared to $10.72 billion at December 31, 2019, an increase of 25.76%.
  • Average interest-bearing liabilities totaled $8.03 billion, an increase of $0.97 billion, or 13.74%, from the prior year.
  • Total interest expense decreased 42.04%, to $15.37 million in fourth quarter 2020 compared to $26.52 million in fourth quarter 2019, and decreased $3.40 million, or 18.11%, compared to the linked quarter.

Quarterly Provision for Loan Losses:

  • Recorded a provision for loan losses of $1.21 million compared to $3.60 million one year ago and $28.26 million in the linked quarter. A combination of modest loan growth, significantly higher provisions in the two previous quarters, and improvements in the economic forecast were the drivers in the lower fourth quarter 2020 provision.
  • Net charge-offs were $0.11 million compared to $0.80 million one year prior. The ratio of net charge-offs (recoveries) to average loans on an annualized basis was 0.00% in fourth quarter 2020, (0.01)% in the linked quarter, and 0.04% in fourth quarter 2019.
  • Recorded a provision for credit losses on off-balance sheet commitments of $0.06 million compared to $3.50 million in the linked quarter.
  • The allowance for loan losses represented 1.25% of total loans compared to 1.22% at September 30, 2020 and 0.69% at December 31, 2019. Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses (non-GAAP) was 1.37%, at December 31, 2020 and September 30, 2020. The allowance for loan losses was 10.74 times nonperforming loans compared to 7.31 times at September 30, 2020 and 3.34 times at December 31, 2019.

Quarterly Noninterest Income Compared to the Fourth Quarter of 2019:

  • Total noninterest income was $71.23 million compared to $49.71 million in 2019, an increase of $21.52 million, or 43.29%. Residential mortgage banking income increased $21.62 million, insurance commissions decreased $1.13 million, and real estate brokerage and property management income increased $2.49 million.
  • Residential mortgage banking income was $37.50 million compared to $15.88 million in fourth quarter 2019. Loan volume in the current quarter was $1.69 billion, with purchase activity comprising 59.76%. Loan volume in fourth quarter 2019 was $860.16 million, with purchase activity of 70.32%. Loan volume in the linked quarter was $1.79 billion with purchase activity of 61.21%.
  • Total insurance segment revenue decreased $2.89 million, or 14.51%, to $17.00 million in the fourth quarter of 2020. This decrease is attributable to several factors. The prior year quarter included proceeds from life insurance policies of $1.64 million. Contingency income and benefits commissions declined, compared to the prior year quarter. Additionally, there were no commissions on travel insurance in the fourth quarter of 2020, compared to $0.79 million in the prior year quarter, due to the sale of Red Sky Insurance in the third quarter of 2020. We also acquired an insurance agency, which is expected to add approximately $2.4 million in gross revenue for 2021, at the end of December 2020.
  • Property management fee revenue increased 35.30%, or $1.48 million, as compared to fourth quarter 2019 due to increases in reservation levels and stronger fourth quarter 2020 advanced reservations.
  • Service charges on deposit accounts declined $0.54 million, or 23.96%, compared to the prior year quarter due to fee waivers for members experiencing financial hardship and the waiving of various member service charges during our core conversion.

Quarterly Noninterest Expense Compared to the Fourth Quarter of 2019:

  • Total noninterest expense was $105.93 million compared to $92.34 million, an increase of $13.60 million, or 14.72%. This reflects increases of $5.46 million in salary and benefits expense, $1.09 million in software expense, and $0.68 million in occupancy expenses.
  • FDIC insurance assessments increased $1.84 million in fourth quarter 2020 compared to 2019 due to the Company's receipt of small bank assessment credits for $1.66 million in the fourth quarter of 2019.
  • Increases in salaries and benefits were driven by incentives related to a strong full-year performance and conversion and production related overtime. Software increases were largely driven by core conversion costs, and the costs associated with software needed to facilitate the adoption of CECL. Occupancy expense increases were driven by a full quarter expense related to the November 2019 expansion into the Greensboro, North Carolina market.
  • Recorded a loss on early extinguishment of debt of $2.63 million in the fourth quarter of 2020, associated with restructuring of certain borrowings to reduce future interest expense and deploy excess liquidity.   The impact of this nonrecurring expense was a reduction to our EPS of $0.03.

Quarterly Income Taxes Compared to the Fourth Quarter of 2019:

  • Income tax expense was $10.41 million compared to $7.79 million one year prior. This represents an effective tax rate of 17.21% compared to 18.17% in the fourth quarter of 2019.

Consolidated Balance Sheet December 31, 2020 Compared to December 31, 2019

  • Total assets were $14.63 billion at December 31, 2020, an increase of 22.42%, compared to $11.95 billion at December 31, 2019. This increase was driven primarily by increased liquidity levels and additional loan balances attributable to PPP loans.
  • Loans held for investment increased $1.21 billion, or 14.37%, compared to year end 2019, but decreased $0.14 billion compared to the linked quarter.  
  • Mortgage loans held for sale increased $121.57 million, or 29.00%, compared to prior year and decreased $128.22 million, or 19.17%, compared to the linked quarter.
  • Total deposits increased $2.30 billion, or 24.83%, over December 31, 2019, and decreased $0.13 billion, or 1.13%, compared to the linked quarter.

Investment Securities:

  • Total investment securities were $1.42 billion compared to $1.38 billion at September 30, 2020 and $1.52 billion at December 31, 2019. The weighted average duration of the portfolio at December 31, 2020 was 4.10 years. The carrying value of the AFS debt securities portfolio included $58.32 million in net unrealized gains compared to $19.73 million in net unrealized gains at December 31, 2019.

Loans and Asset Quality:

  • Total loans held for investment were $9.63 billion at December 31, 2020 compared to $9.77 billion at September 30, 2020 and $8.42 billion at December 31, 2019.
  • Nonperforming assets were $16.21 million, or 0.11% of total assets, compared to $32.80 million, or 0.27% of total assets, at December 31, 2019.
  • Nonperforming loans were 0.12% of period end loans compared to 0.21% at December 31, 2019.
  • Foreclosed property decreased to $4.28 million from $13.84 million at December 31, 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.
  • At December 31, 2020 we had $340.81 million in loan modifications made in accordance with section 4013 of the Cares Act, 64% are currently paying interest.

Deposits and Borrowings:

  • Total deposits were $11.57 billion compared to $11.70 billion at September 30, 2020 and $9.27 billion at December 31, 2019.
  • Total loans to total deposits were 83.20% compared to 83.47% at September 30, 2020 and 90.81% at December 31, 2019.
  • Non-interest bearing deposits were 37.80% of total deposits at December 31, 2020 compared to 38.14% at September 30, 2020 and 31.83% at December 31, 2019. Non-interest bearing deposits experienced typical seasonality during the fourth quarter.
  • Total borrowings were $0.96 billion compared to $1.04 billion and $0.77 billion at September 30, 2020 and December 31, 2019, respectively.

Capital:

  • Common equity tier 1 capital ratio of 11.87%.
  • Tier 1 leverage capital ratio of 8.99%.
  • Tier 1 risk-based capital ratio of 12.04%.
  • Total risk-based capital ratio of 15.42%.
  • Book value was $24.31 compared to $23.83 at September 30, 2020 and $22.58 at December 31, 2019.
  • Tangible book value (non-GAAP) was $17.46 compared to $17.06 at September 30, 2020 and $15.69 at December 31, 2019.

Annual Meeting of Shareholders:
TowneBank intends to hold its 2021 Annual Meeting of Shareholders at 11:30 a.m. on Wednesday, May 26, 2021 at the Virginia Beach Convention Center, 1000 19th Street in Virginia Beach, Virginia.

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 and Nags Head in North Carolina. TowneBank also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations. Local decision-making is a hallmark of its hometown banking strategy that is delivered through the leadership of each group’s President and Board of Directors. With total assets of $14.63 billion as of December 31, 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 their 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 impact of the COVID-19 pandemic and the associated efforts to limit its spread, 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 areas; cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain 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
  December 31, September 30, June 30, March 31, December 31,
 2020 2020 2020 2020 2019
Income and Performance Ratios:         
 Total Revenue$171,848  $192,135  $162,656  $137,696  $139,671 
 Net income53,891  50,715  37,222  27,605  35,948 
 Net income available to common shareholders50,082  34,464  34,605  26,384  35,075 
 Pre-provision, pre-tax, net revenues (non-GAAP)62,107  73,903  69,014  39,587  46,462 
 Net income per common share - diluted0.69  0.48  0.48  0.36  0.49 
 Book value per common share24.31  23.83  23.50  22.77  22.58 
 Book value per share - tangible (non-GAAP)17.46  17.06  16.68  15.91  15.69 
 Return on average assets1.35% 0.89% 0.97% 0.88% 1.16%
 Return on average assets - tangible (non-GAAP)1.46% 0.97% 1.07% 1.00% 1.30%
 Return on average equity11.26% 7.85% 8.18% 6.37% 8.44%
 Return on average equity - tangible (non-GAAP)16.28% 11.66% 12.32% 9.91% 12.97%
 Return on average common equity11.36% 7.91% 8.24% 6.42% 8.51%
 Return on average common equity - tangible (non-GAAP)16.48% 11.79% 12.44% 10.01% 13.12%
 Noninterest income as a percentage of total revenue41.45% 49.64% 42.66% 35.00% 35.59%
Regulatory Capital Ratios (1):         
 Common equity tier 111.87% 11.75% 11.54% 11.23% 11.46%
 Tier 112.04% 11.91% 11.67% 11.35% 11.49%
 Total15.42% 15.35% 14.91% 14.40% 14.58%
 Tier 1 leverage ratio8.99% 8.89% 9.05% 10.11% 9.95%
Asset Quality:         
 Allowance for loan losses to nonperforming loans10.74x 7.31x 5.34x 3.85x 3.34x
 Allowance for loan losses to period end loans1.25% 1.22% 0.92% 0.73% 0.69%
 Allowance for loan losses to period end loans excluding PPP loans (non-GAAP)1.37% 1.37% 1.04% 0.73% 0.69%
 Nonperforming loans to period end loans0.12% 0.17% 0.17% 0.19% 0.21%
 Nonperforming assets to period end assets0.11% 0.19% 0.19% 0.24% 0.27%
 Net charge-offs (recoveries) to average loans (annualized)% (0.01)% % 0.03% 0.04%
           
 Nonperforming loans$11,188  $16,295  $16,935  $16,700  $17,437 
 Former bank premises750  750      1,521 
 Foreclosed property4,276  11,695  12,315  13,053  13,839 
 Total nonperforming assets$16,214  $28,740  $29,250  $29,753  $32,797 
 Loans past due 90 days and still accruing interest$528  $19  $464  $91  $309 
 Allowance for loan losses120,157  119,058  90,467  64,372  58,234 
Mortgage Banking:         
 Loans originated, mortgage$1,257,963  $1,292,801  $1,116,782  $718,681  $628,279 
 Loans originated, joint venture429,848  498,100  357,815  204,522  231,879 
 Total loans originated$1,687,811  $1,790,901  $1,474,597  $923,203  $860,158 
 Number of loans originated5,481  5,817  4,818  3,025  2,984 
 Number of originators228  224  216  223  217 
 Purchase %59.76% 61.21% 51.26% 61.31% 70.32%
 Loans sold$1,845,926  $1,833,590  $1,398,649  $809,834  $879,910 
 Rate lock asset$11,781  $10,480  $7,202  $3,691  $1,525 
 Gross realized gain on sales and fees as a % of loans originated4.02% 3.65% 3.17% 1.80% 3.38%
Other Ratios:         
 Net interest margin2.97% 2.70% 2.85% 3.35% 3.33%
 Net interest margin-fully tax equivalent (non-GAAP)2.98% 2.72% 2.87% 3.37% 3.35%
 Average earning assets/total average assets91.59% 92.09% 91.33% 89.15% 89.57%
 Average loans/average deposits83.42% 86.29% 91.81% 92.99% 88.41%
 Average noninterest deposits/total average deposits39.61% 37.76% 36.52% 32.21% 32.14%
 Period end equity/period end total assets12.20% 11.82% 11.05% 13.19% 13.84%
 Efficiency ratio (non-GAAP)60.02% 57.36% 55.17% 70.79% 63.96%
 (1) Current reporting period regulatory capital ratios are preliminary.      
        


TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
          
Investment Securities      % Change
 Q4 Q4 Q3 Q4 20 vs. Q4 20 vs.
Available-for-sale securities, at fair value2020 2019 2020 Q4 19 Q3 20
U.S. agency securities$184,657  $129,038  $167,275  43.10% 10.39%
U.S. Treasury notes1,000  1,000  1,006  % (0.60)%
Municipal securities353,651  223,106  292,792  58.51% 20.79%
Trust preferred and other corporate securities31,499  53,367  24,236  (40.98)% 29.97%
Mortgage-backed securities issued by GSE and GNMA797,765  1,034,797  825,378  (22.91)% (3.35)%
Allowance for credit losses(348)   (4) n/m n/m
Total$1,368,224  $1,441,308  $1,310,683  (5.07)% 4.39%
          
Gross unrealized gains (losses) reflected in financial statements         
Total gross unrealized gains$60,025  $23,950  $62,206  150.63% (3.51)%
Total gross unrealized losses(1,703) (4,215) (773) (59.60)% 120.31%
Net unrealized gain (loss) on AFS securities$58,322  $19,735  $61,433  195.53% (5.06)%
          
Held-to-maturity securities, at amortized cost         
Municipal securities$5,012  $29,167  $2,333  (82.82)% 114.83%
Trust preferred corporate securities2,321  2,369  4,992  (2.03)% (53.51)%
Mortgage-backed securities issued by GSE and GNMA9,179  12,152  9,806  (24.47)% (6.39)%
Allowance for credit losses(97)   (90) n/a 7.78%
Total$16,415  $43,688  $17,041  (62.43)% (3.67)%
          
Gross unrealized gains (losses) not reflected in financial statements        
Total gross unrealized gains$1,957  $1,520  $1,971  28.75% (0.71)%
Total gross unrealized losses  (37)   (100.00)% n/m
Net unrealized gain (loss) on HTM securities$1,957  $1,483  $1,971  31.96% (0.71)%
          
Loans Held For Investment (1)      % Change
 Q4 Q4 Q3 Q4 20 vs. Q4 20 vs.
 2020 2019 2020 Q4 19 Q3 20
Real estate - construction and development$1,199,772  $1,120,533  $1,143,202  7.07% 4.95%
Commercial real estate - investment related properties2,335,235  2,183,232  2,338,532  6.96% (0.14)%
Commercial real estate - owner occupied1,380,516  1,329,144  1,378,443  3.87% 0.15%
Real estate - multifamily295,488  243,041  289,270  21.58% 2.15%
Real estate - residential 1-4 family1,629,105  1,653,084  1,660,535  (1.45)% (1.89)%
Commercial and industrial business2,370,051  1,574,275  2,499,801  50.55% (5.19)%
Consumer and other loans418,901  315,979  460,787  32.57% (9.09)%
Total$9,629,068  $8,419,288  $9,770,570  14.37% (1.45)%
(1) PPP loans totaling $0.86 billion and $1.10 billion, primarily in C&I, are included in Q4 2020 and Q3 2020, respectively.
          
Deposits      % Change
 Q4 Q4 Q3 Q4 20 vs. Q4 20 vs.
 2020 2019 2020 Q4 19 Q3 20
Noninterest-bearing demand$4,374,566  $2,951,225  $4,464,178  48.23% (2.01)%
Interest-bearing:         
Demand and money market accounts4,819,604  3,586,364  4,642,482  34.39% 3.82%
Savings330,091  276,205  312,444  19.51% 5.65%
Certificates of deposits2,048,905  2,457,123  2,285,859  (16.61)% (10.37)%
Total$11,573,166  $9,270,917  $11,704,963  24.83% (1.13)%
          


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Three Months Ended Three Months Ended Three Months Ended
 December 31, 2020 September 30, 2020 December 31, 2019
   Interest Average   Interest Average   Interest Average
 Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets:                 
Loans (net of unearned income and deferred costs), excluding nonaccrual loans (1)$9,752,150  $104,799  4.28% $9,752,746  $103,401  4.22% $8,283,388  $100,504  4.81%
Taxable investment securities1,250,375  6,878  2.20% 1,206,679  6,726  2.23% 1,331,175  9,179  2.76%
Tax-exempt investment securities139,572  520  1.49% 144,999  779  2.15% 118,298  908  3.07%
Total securities1,389,947  7,398  2.13% 1,351,678  7,505  2.22% 1,449,473  10,087  2.78%
Interest-bearing deposits1,754,365  435  0.10% 2,523,644  632  0.10% 519,737  2,067  1.58%
Loans held for sale587,517  3,867  2.63% 634,309  4,587  2.89% 469,725  4,413  3.76%
Total earning assets13,483,979  116,499  3.44% 14,262,377  116,125  3.24% 10,722,323  117,071  4.33%
Less: allowance for loan losses(121,402)     (95,594)     (56,766)    
Total nonearning assets1,359,808      1,320,369      1,305,036     
Total assets$14,722,385      $15,487,152      $11,970,593     
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$4,582,588  $2,633  0.23% $4,311,920  $2,663  0.25% $3,533,912  $6,421  0.72%
Savings317,561  552  0.69% 304,753  555  0.72% 278,910  638  0.91%
Certificates of deposit2,159,573  7,578  1.40% 2,417,772  9,747  1.60% 2,544,845  14,685  2.29%
Total interest-bearing deposits7,059,722  10,763  0.61% 7,034,445  12,965  0.73% 6,357,667  21,744  1.36%
Borrowings722,291  1,645  0.89% 1,931,120  2,841  0.58% 454,621  1,810  1.56%
Subordinated debt, net248,965  2,962  4.76% 248,807  2,962  4.76% 248,361  2,962  4.77%
Total interest-bearing liabilities8,030,978  15,370  0.76% 9,214,372  18,768  0.81% 7,060,649  26,516  1.49%
Demand deposits4,630,665      4,268,443      3,011,688     
Other noninterest-bearing liabilities291,836      257,304      250,327     
Total liabilities12,953,479      13,740,119      10,322,664     
Shareholders’ equity1,768,906      1,747,033      1,647,929     
Total liabilities and equity$14,722,385      $15,487,152      $11,970,593     
Net interest income (tax-equivalent basis)  $101,129      $97,357      $90,555   
Reconcilement of Non-GAAP Financial Measures                
Tax-equivalent basis adjustment  (515)     (598)     (596)  
Net interest income (GAAP)  $100,614      $96,759      $89,959   
Interest rate spread (2)(3)    2.68%     2.43%     2.84%
Interest expense as a percent of average earning assets   0.45%     0.52%     0.98%
Net interest margin (tax equivalent basis) (3)(4)   2.98%     2.72%     3.35%
Total cost of deposits    0.37%     0.46%     0.92%
                  

(1) December 31, and September 30, 2020 balances include average PPP balances of $1.04 billion and $1.10 billion, and related interest and fee income of $11.29 million and $9.82 million, respectively. There were no PPP balances at December 31, 2019.
(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)
 
 Year Ended December 31,
 2020 2019 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 (1)$9,420,584  $411,421  4.37% $8,122,210  $405,511  4.99% $7,567,570  $373,057  4.93%
Taxable investment securities1,252,926  30,181  2.41% 1,202,107  34,141  2.84% 1,004,080  24,729  2.46%
Tax-exempt investment securities140,078  2,997  2.14% 102,731  3,426  3.34% 79,720  2,920  3.66%
Total securities1,393,004  33,178  2.38% 1,304,838  37,567  2.88% 1,083,800  27,649  2.55%
Interest-bearing deposits689,715  2,603  0.38% 665,903  13,825  2.08% 560,368  10,229  1.83%
Mortgage loans held for sale505,502  15,252  3.02% 335,588  13,379  3.99% 293,017  13,124  4.48%
Total earning assets12,008,805  462,454  3.85% 10,428,539  470,282  4.51% 9,504,755  424,059  4.46%
Less: allowance for loan losses(85,570)     (54,476)     (48,737)    
Total nonearning assets2,248,971      1,264,363      1,143,167     
Total assets$14,172,206      $11,638,426      $10,599,185     
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$4,070,562  $13,105  0.32% $3,351,135  $26,909  0.80% $2,951,038  $16,458  0.56%
Savings297,441  2,254  0.76% 280,894  3,296  1.17% 302,435  3,824  1.26%
Certificates of deposit2,378,281  42,502  1.79% 2,478,663  56,050  2.26% 2,060,587  32,859  1.59%
Total interest-bearing deposits6,746,284  57,861  0.86% 6,110,692  86,255  1.41% 5,314,060  53,141  1.00%
Borrowings1,269,064  10,306  0.80% 609,142  11,368  1.84% 897,574  15,542  1.71%
Subordinated debt, net248,736  11,847  4.76% 248,139  11,847  4.77% 251,097  12,067  4.81%
Total interest-bearing liabilities8,264,084  80,014  0.97% 6,967,973  109,470  1.57% 6,462,731  80,750  1.25%
Demand deposits3,924,797      2,844,178      2,517,173     
Other noninterest-bearing liabilities262,266      228,994      164,486     
Total liabilities12,451,147      10,041,145      9,144,390     
Shareholders' equity1,721,059      1,597,281      1,454,795     
Total liabilities and equity$14,172,206      $11,638,426      $10,599,185     
Net interest income (tax-equivalent basis) $382,440      $360,812      $343,309   
Reconcilement of Non-GAAP Financial Measures                
Tax-equivalent basis adjustment (2,296)     (2,457)     (2,236)  
Net interest income (GAAP) $380,144      $358,355      $341,073   
Interest rate spread (2)(4)   2.88%     2.94%     3.21%
Interest expense as a percent of average earning assets   0.67%     1.05%     0.85%
Net interest margin (tax-equivalent basis) (3)(4)   3.18%     3.46%     3.61%
Total cost of deposits   0.54%     0.96%     0.68%
                  

(1) December 31, 2020 balances include average PPP balances of $0.74 billion and related interest and fee income of $26.94 million. There were no PPP balances at December 31, 2019 or 2018.
(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 per share data)
    
 2020 2019
 (unaudited) (audited)
ASSETS   
Cash and due from banks$41,514  $97,593 
Interest-bearing deposits at FRB - Richmond1,795,241  322,505 
Interest-bearing deposits in financial institutions27,532  22,518 
Total Cash and Cash Equivalents1,864,287  442,616 
Securities available for sale, at fair value (amortized cost $1,310,250, allowance for credit losses of $348)(1)1,368,224  1,441,308 
Securities held to maturity, at amortized cost (fair value $18,469)(1)16,512  43,688 
Less: allowance for credit losses(97)  
Securities held to maturity, net of allowance for credit losses16,415  43,688 
Other equity securities6,492  6,462 
FHLB stock30,135  30,094 
Total Securities1,421,266  1,521,552 
Mortgage loans held for sale540,798  419,233 
Loans, net of unearned income and deferred costs9,629,068  8,419,288 
Less: allowance for credit losses(120,157) (58,234)
Net Loans9,508,911  8,361,054 
Premises and equipment, net260,242  231,806 
Goodwill452,328  446,816 
Other intangible assets, net45,533  54,399 
BOLI246,109  243,062 
Other assets286,970  227,125 
TOTAL ASSETS$14,626,444  $11,947,663 
LIABILITIES AND EQUITY   
Deposits:   
Noninterest-bearing demand$4,374,566  $2,951,225 
Interest-bearing:   
Demand and money market accounts4,819,604  3,586,364 
Savings330,091  276,205 
Certificates of deposit2,048,905  2,457,123 
Total Deposits11,573,166  9,270,917 
Advances from the FHLB456,038  471,687 
Subordinated debt, net249,055  248,458 
FRB PPP Lending Facility182,852   
Repurchase agreements and other borrowings67,786  52,391 
Total Borrowings955,731  772,536 
Other liabilities313,719  250,516 
TOTAL LIABILITIES12,842,616  10,293,969 
Preferred stock   
Authorized and unissued shares - 2,000,000   
Common stock, $1.667 par: Authorized shares - 150,000,000   
Issued and outstanding shares 72,667,541 in 2020 and 72,649,682 in 2019121,132  121,107 
Capital surplus1,046,642  1,041,160 
Retained earnings557,889  467,186 
Common stock issued to deferred compensation trust, at cost   
873,486 shares in 2020 and 818,578 shares in 2019(16,969) (15,555)
Deferred compensation trust16,969  15,555 
Accumulated other comprehensive income (loss)41,184  11,302 
TOTAL SHAREHOLDERS’ EQUITY1,766,847  1,640,755 
Noncontrolling interest16,981  12,939 
TOTAL EQUITY1,783,828  1,653,694 
TOTAL LIABILITIES AND EQUITY$14,626,444  $11,947,663 
        

(1) For 2020, disclosures are presented in compliance with ASC 326.

TOWNEBANK
Consolidated Statements of Income
(dollars in thousands, except per share data)
   
 Three Months Ended Twelve Months Ended
 December 31, December 31,
 2020 2019 2020 2019
 (unaudited) (unaudited) (unaudited) (audited)
INTEREST INCOME:       
Loans, including fees$104,182  $100,059  $409,252  $403,675 
Investment securities7,499  9,936  33,052  36,946 
Interest-bearing deposits in financial institutions and federal funds sold435  2,067  2,603  13,825 
Mortgage loans held for sale3,867  4,413  15,252  13,379 
Total interest income115,983  116,475  460,159  467,825 
INTEREST EXPENSE:       
Deposits10,762  21,744  57,862  86,255 
Advances from the FHLB1,404  1,730  8,393  11,018 
Subordinated debt, net2,962  2,962  11,847  11,847 
Repurchase agreements and other borrowings241  80  1,913  350 
Total interest expense15,369  26,516  80,015  109,470 
Net interest income100,614  89,959  380,144  358,355 
PROVISION FOR CREDIT LOSSES1,617  3,601  67,177  9,371 
Net interest income after provision for credit losses98,997  86,358  312,967  348,984 
NONINTEREST INCOME:       
Residential mortgage banking income, net37,504  15,884  112,166  66,812 
Insurance commissions and other title fees and income, net13,868  15,001  65,840  64,478 
Real estate brokerage and property management income, net9,229  6,737  38,249  34,292 
Service charges on deposit accounts1,707  2,245  8,021  10,544 
Credit card merchant fees, net1,377  1,389  5,170  4,746 
BOLI1,990  3,865  8,285  9,215 
Other income5,559  4,591  36,826  16,346 
Net gain/(loss) on investment securities    9,634  (845)
Total noninterest income71,234  49,712  284,191  205,588 
NONINTEREST EXPENSE:       
Salaries and employee benefits61,475  56,013  235,676  218,920 
Occupancy expense8,193  7,516  31,317  31,381 
Furniture and equipment3,462  3,598  13,914  14,351 
Amortization - intangibles2,797  3,005  11,498  12,370 
Software expense4,066  2,976  14,622  11,717 
Data processing2,363  2,510  10,985  11,825 
Professional fees2,591  2,990  11,268  12,943 
Advertising and marketing2,204  2,839  9,643  12,279 
Other expenses18,781  10,889  56,902  52,516 
Total noninterest expense105,932  92,336  395,825  378,302 
Income before income tax expense and noncontrolling interest64,299  43,734  201,333  176,270 
Provision for income tax expense10,408  7,786  31,900  32,596 
Net income$53,891  $35,948  $169,433  $143,674 
Net income attributable to noncontrolling interest(3,809) (873) (23,898) (4,891)
Net income attributable to TowneBank$50,082  $35,075  $145,535  $138,783 
        
Per common share information       
Basic earnings$0.69  $0.49  $2.01  $1.93 
Diluted earnings$0.69  $0.49  $2.01  $1.92 
Cash dividends declared$0.18  $0.18  $0.72  $0.70 
                


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except per share data)
 
          
 December 31, September 30, June 30, March 31, December 31,
 2020 2020 2020 2020 2019
 (unaudited) (unaudited) (unaudited) (unaudited) (audited)
ASSETS         
Cash and due from banks$41,514  $114,604  $115,724  $108,929  $97,593 
Interest-bearing deposits at FRB - Richmond1,795,241  1,670,186  2,511,152  753,643  322,505 
Interest-bearing deposits in financial institutions27,532  24,890  24,374  23,564  22,518 
Total Cash and Cash Equivalents1,864,287  1,809,680  2,651,250  886,136  442,616 
Securities available for sale, at fair value1,368,224  1,310,683  1,266,624  1,248,420  1,441,308 
Securities held to maturity16,512  17,131  41,595  42,431  43,688 
Less: allowance for credit losses(97) (90) (121) (133)  
Securities held to maturity, net of allowance for credit losses16,415  17,041  41,474  42,298  43,688 
Other equity securities6,492  6,497  6,497  6,462  6,462 
Federal Home Loan Bank stock30,135  41,829  49,277  52,042  30,094 
Total Securities1,421,266  1,376,050  1,363,872  1,349,222  1,521,552 
Mortgage loans held for sale540,798  669,020  610,369  453,143  419,233 
Loans, net of unearned income and deferred costs9,629,068  9,770,570  9,801,889  8,784,195  8,419,288 
Less: allowance for credit losses(120,157) (119,058) (90,467) (64,372) (58,234)
Net Loans9,508,911  9,651,512  9,711,422  8,719,823  8,361,054 
Premises and equipment, net260,242  256,909  257,533  236,735  231,806 
Goodwill452,328  446,725  446,725  446,725  446,816 
Other intangible assets, net45,533  45,781  48,632  51,448  54,399 
BOLI246,109  244,103  242,493  240,924  243,062 
Other assets286,970  295,637  247,962  239,670  227,125 
TOTAL ASSETS$14,626,444  $14,795,417  $15,580,258  $12,623,826  $11,947,663 
LIABILITIES AND EQUITY         
Deposits:         
Noninterest-bearing demand$4,374,566  $4,464,178  $4,226,208  $3,060,515  $2,951,225 
Interest-bearing:         
Demand and money market accounts4,819,604  4,642,482  4,223,391  3,573,926  3,586,364 
Savings330,091  312,444  298,673  280,807  276,205 
Certificates of deposit2,048,905  2,285,859  2,516,666  2,392,744  2,457,123 
Total Deposits11,573,166  11,704,963  11,264,938  9,307,992  9,270,917 
Advances from the FHLB456,038  731,202  906,365  971,527  471,687 
Subordinated debt, net249,055  248,906  248,756  248,607  248,458 
FRB PPP Lending Facility182,852    1,111,429     
Repurchase agreements and other borrowings67,786  58,061  60,913  171,762  52,391 
Total Borrowings955,731  1,038,169  2,327,463  1,391,896  772,536 
Other liabilities313,719  303,582  266,314  258,306  250,516 
TOTAL LIABILITIES12,842,616  13,046,714  13,858,715  10,958,194  10,293,969 
Preferred stock         
Authorized shares - 2,000,000         
Common stock, $1.667 par value121,132  121,115  121,101  121,057  121,107 
Capital surplus1,046,642  1,045,170  1,043,774  1,041,870  1,041,160 
Retained earnings557,889  520,888  499,502  477,972  467,186 
Common stock issued to deferred compensation trust, at cost(16,969) (16,951) (16,776) (15,562) (15,555)
Deferred compensation trust16,969  16,951  16,776  15,562  15,555 
Accumulated other comprehensive income (loss)41,184  44,569  43,218  12,301  11,302 
TOTAL SHAREHOLDERS’ EQUITY1,766,847  1,731,742  1,707,595  1,653,200  1,640,755 
Noncontrolling interest16,981  16,961  13,948  12,432  12,939 
TOTAL EQUITY1,783,828  1,748,703  1,721,543  1,665,632  1,653,694 
TOTAL LIABILITIES AND EQUITY$14,626,444  $14,795,417  $15,580,258  $12,623,826  $11,947,663 
                    


TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)
      
      
 Three Months Ended
 December 31, September 30, June 30, March 31, December 31,
 2020 2020 2020 2020 2019
INTEREST INCOME:         
Loans, including fees$104,182  $102,869  $102,139  $100,062  $100,059 
Investment securities7,499  7,440  8,163  9,949  9,936 
Interest-bearing deposits in financial institutions and federal funds sold435  632  433  1,102  2,067 
Mortgage loans held for sale3,867  4,587  3,811  2,988  4,413 
Total interest income115,983  115,528  114,546  114,101  116,475 
INTEREST EXPENSE:         
Deposits10,762  12,966  15,072  19,062  21,744 
Advances from the FHLB1,404  1,901  2,595  2,492  1,730 
Subordinated debt2,962  2,962  2,962  2,962  2,962 
Repurchase agreements and other borrowings241  940  643  89  80 
Total interest expense15,369  18,769  21,272  24,605  26,516 
Net interest income100,614  96,759  93,274  89,496  89,959 
PROVISION FOR CREDIT LOSSES1,617  31,598  26,945  7,016  3,601 
Net interest income after provision for credit losses98,997  65,161  66,329  82,480  86,358 
NONINTEREST INCOME:         
Residential mortgage banking income, net37,504  37,531  29,715  7,416  15,884 
Insurance commissions and other title fees and income, net13,868  17,468  17,612  16,893  15,001 
Real estate brokerage and property management income, net9,229  11,301  10,781  6,938  6,737 
Service charges on deposit accounts1,707  1,986  1,888  2,440  2,245 
Credit card merchant fees, net1,377  1,506  1,109  1,179  1,389 
BOLI1,990  1,605  1,584  3,105  3,865 
Other income5,559  22,278  3,763  5,227  4,591 
Net gain/(loss) on investment securities  1,701  2,930  5,002   
Total noninterest income71,234  95,376  69,382  48,200  49,712 
NONINTEREST EXPENSE:         
Salaries and employee benefits61,475  61,408  56,926  55,867  56,013 
Occupancy expense8,193  8,396  7,227  7,502  7,516 
Furniture and equipment3,462  3,247  3,564  3,640  3,598 
Amortization - intangibles2,797  2,851  2,901  2,950  3,005 
Software expense4,066  3,572  3,492  3,492  2,976 
Data processing2,363  3,113  2,718  2,791  2,510 
Professional fees2,591  2,637  2,972  3,067  2,990 
Advertising and marketing2,204  1,870  1,986  3,584  2,839 
Other expenses18,781  14,887  9,239  13,995  10,889 
Total noninterest expense105,932  101,981  91,025  96,888  92,336 
Income before income tax expense and noncontrolling interest64,299  58,556  44,686  33,792  43,734 
Provision for income tax expense10,408  7,841  7,464  6,187  7,786 
Net income53,891  50,715  37,222  27,605  35,948 
Net income attributable to noncontrolling interest(3,809) (16,251) (2,617) (1,221) (873)
Net income attributable to TowneBank$50,082  $34,464  $34,605  $26,384  $35,075 
Per common share information         
Basic earnings$0.69  $0.48  $0.48  $0.37  $0.49 
Diluted earnings (1)$0.69  $0.48  $0.48  $0.36  $0.49 
Basic weighted average shares outstanding72,357,177  72,307,961  72,280,555  72,206,228  72,122,476 
Diluted weighted average shares outstanding72,455,096  72,344,284  72,317,988  72,299,721  72,302,414 
Cash dividends declared$0.18  $0.18  $0.18  $0.18  $0.18 
                    

(1) The quarterly diluted EPS do not sum to the total year diluted EPS due to rounding.

TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
                           
                           
 Three Months Ended Year Ended Increase/(Decrease)
 December 31,  September 30,  December 31, 2020 over 2019
  2020   2019    2020   2020   2019   Amount  Percent 
Revenue                          
Net interest income$97,412  $87,637  $92,869  $367,353  $351,969  $15,384  4.37%
Noninterest income             
Service charges on deposit accounts1,707  2,245  1,986  8,021  10,544  (2,523) (23.93)%
Credit card merchant fees1,377  1,389  1,506  5,169  4,746  423  8.91%
Other income5,983  5,271  4,876  21,809  19,620  2,189  11.16%
Subtotal9,067  8,905  8,368  34,999  34,910  89  0.25%
Gain (loss) on investment securities    1,701  9,634  (845) 10,479  n/m
Total noninterest income9,067  8,905  10,069  44,633  34,065  10,568  31.02%
Total revenue106,479  96,542  102,938  411,986  386,034  25,952  6.72%
              
Provision for credit losses1,628  3,601  31,070  65,799  9,371  56,428  602.16%
              
Expenses             
Salaries and employee benefits37,358  34,183  36,535  142,328  131,149  11,179  8.52%
Occupancy expense5,681  4,959  5,829  21,237  20,419  818  4.01%
Furniture and equipment2,625  2,577  2,424  10,425  10,240  185  1.81%
Amortization of intangible assets1,013  1,214  1,063  4,354  5,160  (806) (15.62)%
Other expenses19,892  14,078  15,793  65,107  66,295  (1,188) (1.79)%
Total expenses66,569  57,011  61,644  243,451  233,263  10,188  4.37%
Income before income tax, corporate allocation and noncontrolling interest38,282  35,930  10,224  102,736  143,400  (40,664) (28.36)%
Corporate allocation643  627  595  2,534  2,011  523  26.01%
Income before income tax provision and noncontrolling interest38,925  36,557  10,819  105,270  145,411  (40,141) (27.61)%
Provision for income tax expense5,163  6,368  474  14,467  25,706  (11,239) (43.72)%
Net income33,762  30,189  10,345  90,803  119,705  (28,902) (24.14)%
Noncontrolling interest4  (1) (2) 6  2  4  n/m
Net income attributable to TowneBank$33,766  $30,188  $10,343  $90,809  $119,707  $(28,898) (24.14)%
              
Efficiency ratio (non-GAAP)61.57% 57.80% 59.84% 59.42% 58.96%    
                   


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
 
    
 Three Months Ended Year Ended Increase/(Decrease)
 December 31, September 30,  December 31, 2020 over 2019
 2020 2019 2020 2020 2019 Amount Percent
Revenue             
Residential mortgage brokerage income, net$38,040  $16,617  $38,074  $114,589  $68,443  $46,146  67.42%
Real estate brokerage income, net3,564  2,550  3,688  11,776  9,865  1,911  19.37%
Title insurance and settlement fees669  531  654  2,397  2,111  286  13.55%
Property management fees, net5,665  4,187  7,613  26,473  24,427  2,046  8.38%
Income from unconsolidated subsidiary398  75  451  1,336  516  820  158.91%
Net interest and other income3,627  2,787  4,101  13,889  7,724  6,165  79.82%
Total revenue51,963  26,747  54,581  170,460  113,086  57,374  50.73%
              
Provision for (recovery of) credit losses(11)   528  1,378    $1,378  n/m
              
Expenses             
Salaries and employee benefits$16,168  $12,941  $15,744  $58,263  $52,619  $5,644  10.73%
Occupancy expense1,869  1,857  1,906  7,465  8,285  (820) (9.90)%
Furniture and equipment614  773  620  2,622  3,099  (477) (15.39)%
Amortization of intangible assets658  655  658  2,630  2,741  (111) (4.05)%
Other expenses8,779  7,030  9,226  33,143  27,982  5,161  18.44%
Total expenses28,088  23,256  28,154  104,123  94,726  9,397  9.92%
              
Income (loss) before income tax, corporate allocation, and noncontrolling interest23,886  3,491  25,899  64,959  18,360  46,599  253.81%
Corporate allocation(403) (362) (356) (1,522) (1,163) (359) 30.87%
Income (loss) before income tax provision and noncontrolling interest23,483  3,129  25,543  63,437  17,197  46,240  268.88%
Provision for income tax4,421  416  4,780  12,035  3,707  8,328  224.66%
Net income (loss)19,062  2,713  20,763  51,402  13,490  37,912  281.04%
Noncontrolling interest(3,813) (715) (4,790) (11,809) (3,711) (8,098) 218.22%
Net income (loss) attributable to TowneBank$15,249  $1,998  $15,973  $39,593  $9,779  $29,814  304.88%
              
Efficiency ratio (non-GAAP)52.79% 84.50% 50.38% 59.54% 81.34%    
                   


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
              
 Three Months Ended Year Ended Increase/(Decrease)
 December 31, September 30, December 31, 2020 over 2019
 2020 2019 2020 2020 2019 Amount Percent
Commission and fee income             
Property and casualty$11,942  $11,957  $14,072  $52,726  $50,380  $2,346  4.66%
Employee benefits3,725  3,758  3,825  15,259  14,726  533  3.62%
Travel insurance (1)  794  1,399  3,526  4,085  (559) (13.68)%
Specialized benefit services175  173  165  664  672  (8) (1.19)%
Total commissions and fees15,842  16,682  19,461  72,175  69,863  2,312  3.31%
Contingency and bonus revenue1,087  1,396  1,112  6,230  6,307  (77) (1.22)%
Other income (1)69  1,805  17,697  17,976  2,032  15,944  784.65%
Total revenue16,998  19,883  38,270  96,381  78,202  18,179  23.25%
Employee commission expense3,592  3,501  3,654  14,492  13,379  1,113  8.32%
Revenue, net of commission expense13,406  16,382  34,616  81,889  64,823  17,066  26.33%
              
Expenses             
Salaries and employee benefits$7,949  $8,889  $9,129  $35,085  $35,152  $(67) (0.19)%
Occupancy expense643  700  661  2,615  2,677  (62) (2.32)%
Furniture and equipment223  248  203  867  1,012  (145) (14.33)%
Amortization of intangible assets1,126  1,136  1,130  4,514  4,469  45  1.01%
Other expenses1,334  1,096  1,060  5,170  7,003  (1,833) (26.17)%
Total operating expenses11,275  12,069  12,183  48,251  50,313  (2,062) (4.10)%
Income before income tax and noncontrolling interest2,131  4,313  22,433  33,638  14,510  19,128  131.83%
Corporate allocation(240) (265) (239) (1,012) (848) (164) 19.34%
Income before income tax provision and noncontrolling interest1,891  4,048  22,194  32,626  13,662  18,964  138.81%
Provision for income tax expense824  1,002  2,587  5,398  3,183  2,215  69.59%
Net income1,067  3,046  19,607  27,228  10,479  16,749  159.83%
Noncontrolling interest (1)  (157) (11,459) (12,095) (1,182) (10,913) 923.27%
Net income attributable to TowneBank$1,067  $2,889  $8,148  $15,133  $9,297  $5,836  62.77%
              
Provision for income taxes824  1,002  2,587  5,398  3,183  2,215  69.59%
Depreciation, amortization and interest expense1,274  1,333  1,285  5,151  5,312  (161) (3.03)%
EBITDA (non-GAAP)$3,165  $5,224  $12,020  $25,682  $17,792  $7,890  44.35%
              
Efficiency ratio (non-GAAP)75.70% 66.74% 65.06% 68.06% 70.72%    
(1) In third quarter 2020 we sold Red Sky Insurance, our travel insurance joint venture. We recorded a gross gain on sale in other income of $17,626. Our re-tax net gain, after distributions to noncontrolling interest was $6,521.
 


TOWNEBANK
Reconciliation of Non-GAAP Financial Measures:
       
        
 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31, December 31,
 2020 2020 2019 2020 2019
          
Return on average assets (GAAP)1.35% 0.89% 1.16% 1.03% 1.19%
Impact of excluding average goodwill and other intangibles and amortization0.11% 0.08% 0.14% 0.10% 0.15%
Return on average tangible assets (non-GAAP)1.46% 0.97% 1.30% 1.13% 1.33%
          
Return on average equity (GAAP)11.26% 7.85% 8.44% 8.46% 8.69%
Impact of excluding average goodwill and other intangibles and amortization5.02% 3.81% 4.53% 4.16% 4.89%
Return on average tangible equity (non-GAAP)16.28% 11.66% 12.97% 12.62% 13.58%
          
Return on average common equity (GAAP)11.36% 7.91% 8.51% 8.52% 8.75%
Impact of excluding average goodwill and other intangibles and amortization5.12% 3.88% 4.61% 4.24% 4.98%
Return on average tangible common equity (non-GAAP)16.48% 11.79% 13.12% 12.76% 13.73%
          
Book value (GAAP)$24.31  $23.83  $22.58  $24.31  $22.58 
Impact of excluding average goodwill and other intangibles and amortization(6.85) (6.77) (6.89) (6.85) (6.89)
Tangible book value (non-GAAP)$17.46  $17.06  $15.69  $17.46  15.69 
          
Efficiency ratio (GAAP)61.64% 53.08% 66.11% 59.58% 67.08%
Impact of excluding g/l on investments and amortization expense(1.62)% 4.28% (2.15)% (0.88)% (2.29)%
Efficiency ratio (non-GAAP)60.02% 57.36% 63.96% 58.70% 64.79%
          
Average assets (GAAP)$14,722,385  $15,487,152  $11,970,593  $14,172,206  $11,638,426 
Less: average goodwill and intangible assets491,453  494,238  502,767  495,707  503,108 
Average tangible assets (non-GAAP)$14,230,932  $14,992,914  $11,467,826  $13,676,499  $11,135,318 
          
Average equity (GAAP)$1,768,906  $1,747,033  $1,647,929  $1,721,059  $1,597,281 
Less: average goodwill and intangible assets491,453  494,238  502,767  495,707  503,108 
Average tangible equity (non-GAAP)$1,277,453  $1,252,795  $1,145,162  $1,225,352  $1,094,173 
          
Average common equity (GAAP)$1,753,596  $1,732,881  $1,635,394  $1,707,635  $1,585,238 
Less: average goodwill and intangible assets491,453  494,238  502,767  495,707  503,108 
Average tangible common equity (non-GAAP)$1,262,143  $1,238,643  $1,132,627  $1,211,928  $1,082,130 
          
Net income (GAAP)$50,082  $34,464  $35,075  $145,535  $138,783 
Amortization of intangibles, net of tax2,210  2,252  2,374  9,086  9,772 
Tangible net income (non-GAAP)$52,292  $36,716  $37,449  $154,621  $148,555 
          
Net income (GAAP)$50,082  $34,464  $35,075  $145,535  $138,783 
Provision for credit losses1,617  31,598  3,601  67,177  9,371 
Provision for income taxes10,408  7,841  7,786  31,900  32,596 
Pre-provision, pre-tax net revenues (non-GAAP)$62,107  $73,903  $46,462  $244,612  $180,750 
          
Total revenue (GAAP)$171,848  $192,135  $139,671  $664,335  $563,943 
Net (gain) loss on equity investment  (17,625)      
Net (gain)/loss on investment securities  (1,701)   (9,634) 845 
Total revenue for efficiency calculation (non-GAAP)$171,848  $172,809  $139,671  $654,701  $564,788 
          
Noninterest expense (GAAP)$105,932  $101,981  $92,336  $395,825  $378,302 
Less: Amortization of intangibles2,797  2,851  3,005  11,498  12,370 
Noninterest expense net of amortization (non-GAAP)$103,135  $99,130  $89,331  $384,327  $365,932