TowneBank Reports Third Quarter Earnings

SUFFOLK, Va., Oct. 22, 2015 (GLOBE NEWSWIRE) — Hampton Roads based TowneBank (the “Bank”) (NASDAQ:TOWN) reported earnings of $17.57 million for the quarter ended September 30, 2015, a 44.86% increase, or $5.44 million, over the $12.13 million reported for the comparative period in 2014.  Fully diluted earnings per share were $0.34 per share unchanged from $0.34 per share for the comparative period of 2014. 

Earnings for the year-to-date period increased 42.89% to $49.92 million as compared to the $34.93 million earned in the same period of 2014, while fully diluted earnings per share were $0.98 per share unchanged from comparative 2014.  Earnings per share were affected in 2015 by the issuance of 15.55 million new common shares in conjunction with the acquisition of Franklin Financial Corporation (“Franklin”) on January 2, 2015.

The Bank’s common dividend was $0.12 per share for the quarter with the common dividend totaling $6.19 million.  The current dividend represents an increase of 9.1% over the dividend paid during the same quarter of 2014.

“We are pleased to report another quarter of strong earnings, as we continue to see benefits and positive momentum from our entry into the Richmond, Virginia market, coupled with good growth in the Hampton Roads market,” said G. Robert Aston, Jr., Chairman and Chief Executive Officer.  “Our revenue increased $12.79 million, or 20.25%, from the third quarter of 2014 while producing a return on average assets of 1.14% and a return on average tangible equity of 11.25%.

Third Quarter 2015 Performance Highlights

  • Total revenues were $75.97 million, an increase of $12.79 million, or 20.25%, compared to the third quarter of 2014
    • Taxable equivalent net interest margin was 3.40%, including accretion of 0.06%, compared to 3.32% for third quarter 2014
    • Residential mortgage banking income increased 5.14% from third quarter 2014 to $8.26 million on production volume of $434.82 million
    • Insurance commissions increased 9.58% to $9.71 million
    • Noninterest income was 39.89% of total revenue in third quarter 2015
       
  • Loans held for investment increased $845.96 million, or 24.03%, from September 30, 2014 with organic growth of $395.34 million, an increase of 11.23%, including $118.67 million of new loan originations in Richmond
     
  • Total deposits were $4.79 billion, an increase of $937.95 million, or 24.36%, from the third quarter of 2014
    • Noninterest bearing deposits increased by 16.06%, to $1.45 billion
    • Average interest-bearing deposit costs were 0.58%, up 6 basis points from the prior year
    • Noninterest bearing deposits were 30.20% of total deposits compared to 32.36% at September 30, 2014
    • Total cost of deposits increased to 0.41% from 0.35% at September 30, 2014 reflective of a greater mix of savings deposits acquired in the Franklin merger
       
  • Asset quality showed continued strength
    • Nonperforming assets were $47.99 million, or 0.78% of total assets compared to 0.88% at September 30, 2014
    • Nonperforming loans of $8.48 million were 0.19% of period end loans
    • Foreclosed property of $39.51 million, including $6.21 million acquired in the Franklin merger
    • Performing troubled debt restructurings decreased $9.86 million
       
  • The Bank remained well-capitalized
    • Common equity tier 1 capital ratio of 12.52%
    • Tier 1 leverage capital ratio of 10.93%
    • Tier 1 risk-based capital ratio of 12.62%
    • Total risk-based capital ratio of 13.35%
    • Tangible book value increased to $12.25

Net Interest Income

Third Quarter 2015 compared to Third Quarter 2014

Net interest income increased to $45.67 million, an $8.80 million, or 23.88%, increase from the third quarter of 2014.  The primary driver of the increase was the significant increase in earning assets from the Franklin merger along with the restructuring of the Franklin balance sheet.  Average earning assets increased $1.05 billion, or 22.94%, from the third quarter of 2014.  Contributing to the increase was an 8 basis point widening of the tax-equivalent net interest margin to 3.40% in the current quarter from 3.32% in the third quarter of 2014.  Accretion income added $0.68 million, or 6 basis points, to margin in the current quarter.

Third Quarter 2015 compared to Second Quarter 2015

On a linked quarter basis, net interest income increased slightly by $0.79 million, or 1.75%, in third quarter 2015 versus second quarter 2015, while tax-equivalent net interest margin was 3.40% down 12 basis points from the second quarter of 2015.

Noninterest Income

              % Change
  Q3   Q3   Q2   Q3 15 vs.   Q3 15 vs.
(in millions) 2015   2014   2015   Q3 14   Q2 15
Residential mortgage banking income, net $ 8,262     $ 7,858     $ 10,251     5.14 %   (19.40 )%
Real estate brokerage and property management, net 5,349     3,645     4,584     46.75 %   16.69 %
Insurance commissions and other title fees and  income, net 9,710     8,861     9,885     9.58 %   (1.77 )%
Service charges on deposit accounts 2,388     2,406     2,326     (0.75 )%   2.67 %
Credit card merchant fees, net 823     927     566     (11.22 )%   45.41 %
Other income 3,036     2,572     5,354     18.04 %   (43.29 )%
Subtotal before gain on investment securities 29,568     26,269     32,966     12.56 %   (10.31 )%
Net gain on investment securities 736     44     119     N/M     518.49 %
Total noninterest income $ 30,304     $ 26,313     $ 33,085     15.17 %   (8.41 )%


Third Quarter 2015 compared to Third Quarter 2014

Noninterest income, excluding gains or losses on investment securities, was $29.57 million for the third quarter of 2015, an increase of $3.30 million, or 12.56%, from the third quarter of 2014.  The majority of the increase from the comparative period in 2014 is attributable to real estate brokerage and property management income, which increased $1.70 million, or 46.75%, from the third quarter of 2014 primarily due to the acquisition of a resort property management company in Hilton Head, South Carolina in fourth quarter 2014 and was partially offset by the sale of our North Carolina-based property management business on April 1, 2015, which generated management fee revenue of $1.36 million in third quarter 2014.  Residential mortgage banking income increased $0.40 million, or 5.14%, from third quarter 2014 due to slightly improved production volumes and pricing.  Mortgage production was $434.82 million in the third quarter of 2015, which was $72.28 million greater than third quarter 2014.  Also contributing to the increase were insurance commissions, which increased $0.85 million, or 9.58%, primarily due to the acquisition of two insurance agencies in February 2015 and one agency in September 2015.

Third Quarter 2015 compared to Second Quarter 2015

In comparison to the second quarter of 2015, noninterest income, excluding gains or losses on investment securities, decreased $3.40 million, or 10.31%.  Residential mortgage banking income decreased by $1.99 million, or 19.40%, from the second quarter of 2015 as mortgage production saw a seasonally driven decrease of $31.41 million and a drop in the value of rate lock commitments of $0.46 million recorded as of September 30, 2015 led to a decrease in mortgage banking income, as compared to an increase due to the value of rate lock commitments of $0.22 million recognized for the quarter ended June 30, 2015.  Also contributing to the decrease from the linked quarter were nonrecurring gains recorded in other noninterest income in second quarter of $1.36 million on the sale of our North Carolina-based property management business and $0.57 million on the sale of land in Virginia Beach.  Insurance commissions decreased slightly due to seasonal decreases in policy renewals.  Partially offsetting the decrease from the linked quarter was an increase in real estate brokerage and property management income, which was positively affected by a seasonal increase related to our resort property management business.

Noninterest Expense

              % Change
  Q3   Q3   Q2   Q3 15 vs.   Q3 15 vs.
(in millions) 2015   2014   2015   Q3 14   Q2 15
Salaries and benefits $ 28,910     $ 25,080     $ 26,544     15.27 %   8.91 %
Occupancy expense 4,703     4,618     4,856     1.84 %   (3.15 )%
Furniture and equipment 2,211     2,040     2,369     8.38 %   (6.67 )%
Acquisition-related expenses 243     1,090     370     (77.71 )%   (34.32 )%
Other 13,839     11,326     14,928     22.19 %   (7.30 )%
Total noninterest expense $ 49,906     $ 44,154     $ 49,067     13.03 %   1.71 %


Third Quarter 2015 compared to Third Quarter 2014

Noninterest expense increased by $5.75 million, or 13.03%, from the comparative quarter of 2014.  Driving the increase were operating expenses of $2.75 million related to the Franklin merger.  Additionally, operating expenses increased $1.67 million due to our insurance acquisitions in 2015 and resort property management acquisition in fourth quarter 2014.  Excluding operating expenses associated with acquired companies and acquisition related expenses our expenses increased $1.13 million, or 2.57%, reflecting our continued focus on operational efficiencies.

Third Quarter 2015 compared to Second Quarter 2015

Noninterest expense increased by $0.84 million, or 1.71%, from the second quarter of 2015.  Driving the increase were salary and benefits expenses, which increased by $2.37 million due to higher employee incentive compensation and annual salary adjustments effective July, 1, 2015.  These expenses were partially offset by broad decreases in other expenses.

Segment Results

                $ Change
(in millions)   Q3   Q3   Q2   Q3 15 vs.   Q3 15 vs.
Segment Net Income   2015   2014   2015   Q3 14   Q2 15
Banking   $ 14,148     $ 9,569     $ 13,067     $ 4,579     $ 1,081  
Realty   2,345     1,532     3,727     813     (1,382 )
Insurance   1,073     1,025     1,018     48     55  
Total net income   $ 17,566     $ 12,126     $ 17,812     $ 5,440     $ (246 )


Banking

Third Quarter 2015 compared to Third Quarter 2014

Net income for the three months ended September 30, 2015 for the Banking segment was $14.15 million, increasing $4.58 million, or 47.85%, from the comparative 2014 quarter.  The increase in earnings was driven by an increase in net interest income of $8.40 million, primarily due to the increase in earning assets acquired in the Franklin merger and 2015 growth in Hampton Roads.  Also contributing to the increase was a decrease in the loan loss provision driven by a reduction in historical loss ratios and an increase in gains from the sales of investment securities.  The increases in income were partially offset by higher noninterest expenses related to the Franklin merger, increases in personnel costs, and the opening of a new banking office in May 2015.

Third Quarter 2015 compared to Second Quarter 2015

The increase in earnings of $1.08 million, or 8.27% from the second quarter of 2015 was driven by an increase in revenue due to a combination of higher net interest income of $0.67 million, which was primarily due to loan growth, and an increase in gains on the sale of investment securities of $0.62 million, partially offset by a second quarter gain of $0.57 million on the sale of land owned by the Bank.  Also contributing was a decrease in the loan loss provision primarily due to a reduction in historical loss ratios.  The increases were partially offset by an increase in noninterest expenses of $1.07 million as higher personnel costs more than offset decreases in occupancy expenses, charitable contributions, and advertising and marketing expenses.

Realty

Third Quarter 2015 compared to Third Quarter 2014

For the three months ended September 30, 2015, the Realty segment had net income of $2.35 million, an increase of $0.81 million compared to the third quarter of 2014.  The improvement was driven by an increase in residential mortgage banking income of $0.61 million, or 7.70%, and an increase in property management fees of $1.66 million, or 97.18%.  The increase in property management fees was primarily due to our purchase of Beach Properties on October 1, 2014, which generated management fee revenue of $2.95 million in third quarter 2015 and was partially offset by a decrease in fee revenue of $1.36 million, which was generated in third quarter 2014 by our previously-held North Carolina-based property management business, which was sold on April 1, 2015.

Third Quarter 2015 compared to Second Quarter 2015

Net income in the Realty segment decreased by $1.38 million from the linked quarter ended June 30, 2015.  The decrease resulted from a combination of a seasonal reduction in residential mortgage banking income of $1.92 million and the inclusion in second quarter of the nonrecurring gain of $1.36 million on the sale of our North Carolina-based property management business, partially offset by related expenses of $0.24 million.  The reduction in earnings was partially offset by an increase in property management fees of $0.74 million.

Insurance

Third Quarter 2015 compared to Third Quarter 2014

The Insurance segment had net income of $1.07 million for the three months ended September 30, 2015, an increase of $0.05 million as compared to the third quarter of 2014.  Increases in property and casualty commissions and contingency and bonus revenues outpaced increases in personnel costs and other noninterest expenses.  Increases to corporate allocation expenses and noninterest expenses, such as 401(k) expense, acquisition-related expense, amortization expense, and other loss expenses, were responsible for an increase in expenses of $0.34 million and $1.17 million for the three and nine months ended September 30, 2015, respectively.  The insurance agency acquisitions in the first and third quarters of 2015 resulted in additional commissions and fee revenue of $0.40 million and additional $0.40 million of noninterest expenses, including acquisition-related expenses.

Third Quarter 2015 compared to Second Quarter 2015

Net income increased $0.06 million from the second quarter of 2015.  The increase from the linked quarter was driven by an increase in employee benefits commission income of $0.11 million and an increase in specialized benefit services commission revenue of $0.01 million, which was partially offset by a seasonal decrease in property and casualty commissions of $0.15 million.

As previously announced, the Bank acquired two insurance agencies on October 1, 2015, which in combination with the agency acquired on September 1, 2015, serve to further our expansion in Richmond and the communities of central Virginia.

Balance Sheet

At September 30, 2015, total Bank assets reached $6.17 billion, an increase of $1.20 billion, or 24.16%, over September 30, 2014.

Loans

              % Change
  Q3   Q3   Q2   Q3 15 vs.   Q3 15 vs.
(in thousands) 2015   2014   2015   Q3 14   Q2 15
Construction and land development $ 554,753     $ 476,379     $ 554,053     16.45 %   0.13 %
Commercial real estate – investment related properties 1,020,860     701,286     987,945     45.57 %   3.33 %
Commercial real estate – owner occupied 775,290     749,985     760,622     3.37 %   1.93 %
Multifamily real estate 138,954     53,368     137,378     160.37 %   1.15 %
1-4 family residential real estate 965,559     833,208     948,138     15.88 %   1.84 %
Commercial and industrial business loans 790,614     644,528     732,936     22.67 %   7.87 %
Consumer loans and other 121,009     62,321     107,055     94.17 %   13.03 %
Total $ 4,367,039     $ 3,521,075     $ 4,228,127     24.03 %   3.29 %

The Bank’s loan portfolio ended the period at $4.37 billion representing an increase of 24.03%, or $845.96 million, from the prior year and an increase of 3.29%, or $138.91 million, from June 30, 2015.  Organic growth in 2015, including the effect of loan transfers to OREO, was $349.15 million, or 12.91% on an annualized basis.  Included in this growth were new originations of $118.67 million in our Richmond market.

Deposits

              % Change
  Q3   Q3   Q2   Q3 15 vs.   Q3 15 vs.
(in thousands) 2015   2014   2015   Q3 14   Q2 15
Noninterest-bearing demand $ 1,445,978     $ 1,245,925     $ 1,363,551     16.06 %   6.05 %
Interest-bearing:                  
Demand and money market accounts 1,676,623     1,309,085     1,680,038     28.08 %   (0.20 )%
Savings 295,952     306,811     300,203     (3.54 )%   (1.42 )%
Certificates of deposits 1,369,325     988,111     1,342,860     38.58 %   1.97 %
Total $ 4,787,878     $ 3,849,932     $ 4,686,652     24.36 %   2.16 %

 

The Bank continued to experience solid deposit growth with total deposits increasing to $4.79 billion, up $937.95 million, or 24.36%, from September 30, 2014.  The increase was mostly due to the deposits acquired in the Franklin merger and Hampton Roads market growth.  The Bank saw continued growth in noninterest bearing demand deposits, which ended the quarter at $1.45 billion, a 16.06% increase from September 30, 2014.  Noninterest deposits represented 30.20% of total deposits at September 30, 2015.  The slight percentage decline from September 30, 2014 was a result of the funding mix in the acquired Franklin deposits.

Capital Ratios

    Q3   Q3   Q2
    2015   2014   2015
Common Equity Tier 1 (a)   12.52 %   N/A     12.96 %
Tier 1 (a)   12.62 %   12.88 %   13.07 %
Total (a)   13.35 %   13.84 %   13.84 %
Tier 1 leverage ratio (a)   10.93 %   10.04 %   11.12 %
                   

(a) Basel III rules became effective January 1, 2015, with transitional provisions.  All prior year data is based on Basel I rules

The Bank’s total equity at September 30, 2015 rose to $816.07 million, an increase of $202.66 million, or 33.04%, from September 30, 2014.  Common equity increased 52.95%, or $279.43 million, as the Bank issued common stock in the amount of $238.66 million in the Franklin merger and redeemed in full its $76.46 million of outstanding Non-Cumulative Convertible Preferred Stock, Series C issued to the U.S. Treasury under the Small Business Lending Fund during first quarter 2015.  Total risk-based capital remained strong as total risk-based capital, Tier 1 capital, Tier 1 leverage ratios, and common equity Tier 1 capital ratios were 13.35%, 12.62%, 10.93%, 12.52%, respectively.  All ratios exceed the current regulatory standards for well capitalized status.

Asset Quality

                   
(in thousands) 9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
                   
Nonperforming loans $ 8,477     $ 7,455     $ 7,045     $ 6,741     $ 5,853  
                   
Foreclosed property 39,509     46,154     51,698     35,116     37,951  
                   
Total nonperforming assets $ 47,986     $ 53,609     $ 58,743     $ 41,857     $ 43,804  
                   
Quarterly net loans charged off $ 69     $ 339     $ 333     $ 262     $ 602  
                   
Year-to-date net loans charged off $ 741     $ 672     $ 333     $ 2,955     $ 2,694  

 

Continued improvements in credit quality contributed to the Bank’s financial results as net charge-offs decreased to $0.07 million in the third quarter of 2015 compared to $0.60 million in the third quarter of 2014 and $0.34 million in the linked quarter.  Total nonperforming assets were $47.99 million, or 0.78%, of Bank assets, including foreclosed property of $6.21 million originally acquired in the Franklin merger, at September 30, 2015, as compared to $43.80 million, or 0.88%, at September 30, 2014, and $53.61 million, or 0.89%, at June 30, 2015.  The allowance for loan losses was $37.35 million, increased from $36.18 million at September 30, 2014 and $37.29 million at June 30, 2015.

 

                Change
    Q3   Q3   Q2   Q3 15 vs.   Q3 15 vs.
(dollars in thousands)   2015   2014   2015   Q3 14   Q2 15
Total loans 90 days past due and still accruing   $ 31     $     $ 277     $ 31     $ (246 )
Total loans 30-89 days past due   $ 5,864     $ 7,918     $ 5,283     $ (2,054 )   $ 581  
Allowance for loan losses   $ 37,351     $ 36,180     $ 37,290     $ 1,171     $ 61  
Total performing TDRs   $ 29,920     $ 39,776     $ 31,714     $ (9,856 )   $ (1,794 )
                     
Nonperforming loans to period end loans   0.19 %   0.17 %   0.18 %   0.02 %   0.01 %
Nonperforming assets to period end assets   0.78 %   0.88 %   0.89 %   (0.10 )%   (0.11 )%
Allowance for loan losses to period end loans   0.86 %   1.03 %   0.88 %   (0.17 )%   (0.02 )%
Allowance for loan losses (originated) to originated period end loans   0.96 %   1.04 %   1.00 %   (0.08 )%   (0.04 )%
Net charge-offs to average loans (annualized)   0.01 %   0.07 %   0.03 %   (0.06 )%   (0.02 )%
Ratio of allowance for loan losses to nonperforming loans     4.41x       6.18x       5.00x       -1.77x       (0.59)x  


About TowneBank:

As one of the top community banks in Virginia and North Carolina, TowneBank operates 37 banking offices serving Chesapeake, Chesterfield County, Glen Allen, Hampton, James City County, Mechanicsville, Newport News, Norfolk, Portsmouth, Richmond, Suffolk, Virginia Beach, Williamsburg, and York County in Virginia, along with Moyock, Grandy, Camden County, Southern Shores, Corolla and Nags Head in North Carolina. Towne also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Insurance Agency, TFA Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Beach Properties of Hilton Head. 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 $6.17 billion as of September 30, 2015, 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.  Since the presentation of these GAAP performance measures and their impact differ between companies, management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses.  These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP disclosures are included as tables at the end of this release.

Forward-Looking Statements:
Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions. 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. The Company’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors which could have a material effect on the operations and future prospects of TowneBank include but are not limited to changes in interest rates, general economic and business conditions; legislative/regulatory changes; the monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve; the quality and composition of the loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in the companies’ respective market areas; implementation of new technologies; ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; changes in accounting principles, policies and guidelines; mergers and acquisitions; and other risk factors detailed from time to time in filings made by TowneBank with the FDIC. TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

 

 
Selected Financial Highlights (unaudited)
TOWNEBANK
September 30, 2015
(dollars in thousands, except per share data)
 
              Increase/    % Increase/
Three months ended September 30, 2015   2014    (Decrease)    (Decrease)
                 
Results of Operations:              
  Net interest income $ 45,670     $ 36,867     $ 8,803     23.88 %
  Noninterest income (1) 29,568     26,269     3,299     12.56 %
  Gain (loss) on investment securities 736     44     692     N/M  
  Total Revenue 75,974     63,180     12,794     20.25 %
  Noninterest expenses 49,906     44,154     5,752     13.03 %
  Provision for loan losses 130     996     (866 )   (86.95 )%
  Income before income tax and noncontrolling interest 25,938     18,030     7,908     43.86 %
  Provision for income tax expense 7,444     5,044     2,400     47.58 %
  Net income 18,494     12,986     5,508     42.41 %
  Net income attributable to noncontrolling interest (928 )   (860 )   (68 )   7.91 %
  Net income attributable to TowneBank 17,566     12,126     5,440     44.86 %
  Preferred stock dividends and accretion     191     (191 )   (100.00 )%
  Net income available to common shareholders 17,566     11,935     5,631     47.18 %
  Net income per common share – basic 0.34     0.34         %
  Net income per common share – diluted 0.34     0.34         %
Period End Data:              
  Total assets $ 6,173,891     $ 4,972,448     $ 1,201,443     24.16 %
  Total assets – tangible 5,998,373     4,842,966     1,155,407     23.86 %
  Earning assets (2) 5,508,341     4,606,030     902,311     19.59 %
  Loans (net of unearned income) 4,367,039     3,521,075     845,964     24.03 %
  Allowance for loan losses 37,351     36,180     1,171     3.24 %
  Goodwill and other intangibles 175,518     129,482     46,036     35.55 %
  Nonperforming assets 47,986     43,804     4,182     9.55 %
  Noninterest bearing deposits 1,445,978     1,245,925     200,053     16.06 %
  Interest bearing deposits 3,341,900     2,604,007     737,893     28.34 %
    Total deposits 4,787,878     3,849,932     937,946     24.36 %
  Total equity 816,069     613,408     202,661     33.04 %
  Total equity – tangible 640,551     483,926     156,625     32.37 %
  Common equity 807,152     527,727     279,425     52.95 %
  Common equity – tangible 631,634     398,245     233,389     58.60 %
  Book value per common share 15.65     14.85     0.80     5.39 %
  Book value per common share – tangible 12.25     11.21     1.04     9.28 %
Daily Average Balances:              
  Total assets $ 6,115,681     $ 4,961,204     $ 1,154,477     23.27 %
  Total assets – tangible 5,940,258     4,831,294     1,108,964     22.95 %
  Earning assets (2) 5,604,472     4,558,857     1,045,615     22.94 %
  Loans (net of unearned income), excluding nonaccrual loans 4,300,751     3,471,206     829,545     23.90 %
  Allowance for loan losses 37,926     36,355     1,571     4.32 %
  Goodwill and other intangibles 175,423     129,910     45,513     35.03 %
  Noninterest bearing deposits 1,388,002     1,228,807     159,195     12.96 %
  Interest bearing deposits 3,346,874     2,610,027     736,847     28.23 %
    Total deposits 4,734,876     3,838,834     896,042     23.34 %
  Total equity 812,602     612,250     200,352     32.72 %
  Total equity – tangible 637,179     482,341     154,838     32.10 %
  Common equity 804,090     526,994     277,096     52.58 %
  Common equity – tangible 628,667     397,084     231,583     58.32 %
Key Ratios:              
  Return on average assets 1.14 %   0.97 %   0.17 %   17.53 %
  Return on average assets – tangible 1.21 %   1.03 %   0.18 %   17.48 %
  Return on average equity 8.58 %   7.86 %   0.72 %   9.16 %
  Return on average equity – tangible 11.25 %   10.32 %   0.93 %   9.01 %
  Return on average common equity 8.67 %   8.98 %   (0.31 )%   (3.45 )%
  Return on average common equity – tangible 11.41 %   12.34 %   (0.93 )%   (7.54 )%
  Net interest margin-fully tax equivalent (2)(3) 3.40 %   3.32 %   0.08 %   2.41 %
  Net interest margin (2) 3.32 %   3.25 %   0.07 %   2.15 %
  Average earning assets/total average assets 91.64 %   91.89 %   (0.25 )%   (0.27 )%
  Average loans/average deposits 90.83 %   90.42 %   0.41 %   0.45 %
  Average noninterest deposits/total average deposits 29.31 %   32.01 %   (2.70 )%   (8.43 )%
  Allowance for loan losses/period end loans 0.86 %   1.03 %   (0.17 )%   (16.50 )%
  Nonperforming assets to period end assets 0.78 %   0.88 %   (0.10 )%   (11.36 )%
  Period end equity/period end total assets 13.22 %   12.34 %   0.88 %   7.13 %
  Efficiency ratio (1) 66.33 %   69.94 %   (3.61 )%   (5.16 )%
                 
(1) Excludes gain (loss) on investment securities              
(2) Includes bank-owned life insurance              
(3) Presented on a tax-equivalent basis              

 

 
Selected Financial Highlights (unaudited)
TOWNEBANK
September 30, 2015
(dollars in thousands)
                 
             Increase/   % Increase/
Nine Months Ended September 30, 2015 2015   2014   (Decrease)   (Decrease)
                 
Results of Operations:              
  Net interest income $ 134,111     $ 108,598     $ 25,513     23.49 %
  Noninterest income (1) 91,301     74,342     16,959     22.81 %
  Gain (loss) on investment securities 904     (15 )   919     N/M  
  Total Revenue 226,316     182,925     43,391     23.72 %
  Noninterest expenses 149,414     129,905     19,509     15.02 %
  Provision for loan losses 2,176     493     1,683     341.38 %
  Income before income tax and noncontrolling interest 74,726     52,527     22,199     42.26 %
  Provision for income tax expense 22,030     15,381     6,649     43.23 %
  Net income 52,696     37,146     15,550     41.86 %
  Net income attributable to noncontrolling interest (2,780 )   (2,212 )   (568 )   25.68 %
  Net income attributable to TowneBank 49,916     34,934     14,982     42.89 %
  Preferred stock dividends 13     573     (560 )   (97.73 )%
  Net income available to common shareholders 49,903     34,361     15,542     45.23 %
  Net income per common share – basic 0.98     0.98         %
  Net income per common share – diluted 0.98     0.98         %
Period End Data:              
  Total assets $ 6,173,891     $ 4,972,448     $ 1,201,443     24.16 %
  Total assets – tangible 5,998,373     4,842,966     1,155,407     23.86 %
  Earning assets (2) 5,508,341     4,606,030     902,311     19.59 %
  Loans (net of unearned income) 4,367,039     3,521,075     845,964     24.03 %
  Allowance for loan losses 37,351     36,180     1,171     3.24 %
  Goodwill and other intangibles 175,518     129,482     46,036     35.55 %
  Nonperforming assets 47,986     43,804     4,182     9.55 %
  Noninterest bearing deposits 1,445,978     1,245,925     200,053     16.06 %
  Interest bearing deposits 3,341,900     2,604,007     737,893     28.34 %
    Total deposits 4,787,878     3,849,932     937,946     24.36 %
  Total equity 816,069     613,408     202,661     33.04 %
  Total equity – tangible 640,551     483,926     156,625     32.37 %
  Common equity 807,152     527,727     279,425     52.95 %
  Common equity – tangible 631,634     398,245     233,389     58.60 %
  Book value per common share 15.65     14.85     0.80     5.39 %
  Book value per common share – tangible 12.25     11.21     1.04     9.28 %
Daily Average Balances:              
  Total assets $ 5,949,725     $ 4,819,901     $ 1,129,824     23.44 %
  Total assets – tangible 5,770,456     4,694,307     1,076,149     22.92 %
  Earning assets (2) 5,435,333     4,425,547     1,009,786     22.82 %
  Loans (net of unearned income), excluding nonaccrual loans 4,177,038     3,425,074     751,964     21.95 %
  Allowance for loan losses 36,950     37,461     (511 )   (1.36 )%
  Goodwill and other intangibles 179,269     125,594     53,675     42.74 %
  Noninterest bearing deposits 1,317,517     1,128,954     188,563     16.70 %
  Interest bearing deposits 3,279,354     2,581,126     698,228     27.05 %
    Total deposits 4,596,871     3,710,081     886,790     23.90 %
  Total equity 798,381     601,789     196,592     32.67 %
  Total equity – tangible 619,111     476,195     142,916     30.01 %
  Common equity 788,128     516,586     271,542     52.56 %
  Common equity – tangible 608,858     390,992     217,866     55.72 %
Key Ratios:              
  Return on average assets 1.12 %   0.97 %   0.15 %   15.46 %
  Return on average assets – tangible 1.19 %   1.03 %   0.16 %   15.53 %
  Return on average equity 8.36 %   7.76 %   0.60 %   7.73 %
  Return on average equity – tangible 11.12 %   10.13 %   0.99 %   9.77 %
  Return on average common equity 8.47 %   8.89 %   (0.42 )%   (4.72 )%
  Return on average common equity – tangible 11.30 %   12.14 %   (0.84 )%   (6.92 )%
  Net interest margin-fully tax equivalent (2)(3) 3.48 %   3.39 %   0.09 %   2.65 %
  Net interest margin (2) 3.39 %   3.32 %   0.07 %   2.11 %
  Average earning assets/total average assets 91.35 %   91.82 %   (0.47 )%   (0.51 )%
  Average loans/average deposits 90.87 %   92.32 %   (1.45 )%   (1.57 )%
  Average noninterest deposits/total average deposits 28.66 %   30.43 %   (1.77 )%   (5.82 )%
  Allowance for loan losses/period end loans 0.86 %   1.03 %   (0.17 )%   (16.50 )%
  Nonperforming assets to period end assets 0.78 %   0.88 %   (0.10 )%   (11.36 )%
  Period end equity/period end total assets 13.22 %   12.34 %   0.88 %   7.13 %
  Efficiency ratio (1) 66.28 %   71.01 %   (4.73 )%   (6.66 )%
                 
(1) Excludes gain on investment securities              
(2) Includes bank-owned life insurance              
(3) Presented on a tax-equivalent basis              

  

 
Selected Financial Highlights (unaudited)
TOWNEBANK
September 30, 2015
(dollars in thousands, except per share data)
 
    September 30,   June 30,     Increase/    % Increase/
Three Months Ended 2015   2015    (Decrease)    (Decrease)
                 
Results of Operations:              
  Net interest income $ 45,670     $ 44,884     $ 786     1.75 %
  Noninterest income (1) 29,568     32,966     (3,398 )   (10.31 )%
  Gain (loss) on investment securities 736     119     617     518.49 %
  Total Revenue 75,974     77,969     (1,995 )   (2.56 )%
  Noninterest expenses 49,906     49,067     839     1.71 %
  Provision for loan losses 130     1,723     (1,593 )   (92.46 )%
  Income before income tax and noncontrolling interest 25,938     27,179     (1,241 )   (4.57 )%
  Provision for income tax expense 7,444     8,201     (757 )   (9.23 )%
  Net income 18,494     18,978     (484 )   (2.55 )%
  Net income attributable to noncontrolling interest (928 )   (1,166 )   238     (20.41 )%
  Net income attributable to TowneBank 17,566     17,812     (246 )   (1.38 )%
  Preferred stock dividends and accretion             %
  Net income available to common shareholders 17,566     17,812     (246 )   (1.38 )%
  Net income per common share – basic 0.34     0.35     (0.01 )   (2.86 )%
  Net income per common share – diluted 0.34     0.35     (0.01 )   (2.86 )%
Period End Data:              
  Total assets $ 6,173,891     $ 6,055,181     $ 118,710     1.96 %
  Total assets – tangible 5,998,373     5,879,975     118,398     2.01 %
  Earning assets (2) 5,508,341     5,576,243     (67,902 )   (1.22 )%
  Loans (net of unearned income) 4,367,039     4,228,127     138,912     3.29 %
  Allowance for loan losses 37,351     37,290     61     0.16 %
  Goodwill and other intangibles 175,518     175,207     311     0.18 %
  Nonperforming assets 47,986     53,609     (5,623 )   (10.49 )%
  Noninterest bearing deposits 1,445,978     1,363,551     82,427     6.05 %
  Interest bearing deposits 3,341,900     3,323,101     18,799     0.57 %
  Total deposits 4,787,878     4,686,652     101,226     2.16 %
  Total equity 816,069     802,891     13,178     1.64 %
  Total equity – tangible 640,551     627,685     12,866     2.05 %
  Common equity 807,152     794,018     13,134     1.65 %
  Common equity – tangible 631,634     618,812     12,822     2.07 %
  Book value per common share 15.65     15.40     0.25     1.62 %
  Book value per common share – tangible 12.25     12.00     0.25     2.08 %
Daily Average Balances:              
  Total assets $ 6,115,681     $ 5,900,816     $ 214,865     3.64 %
  Total assets – tangible 5,940,258     5,724,957     215,301     3.76 %
  Earning assets (2) 5,604,472     5,407,516     196,956     3.64 %
  Loans (net of unearned income), excluding nonaccrual loans 4,300,751     4,161,304     139,447     3.35 %
  Allowance for loan losses 37,926     36,854     1,072     2.91 %
  Goodwill and other intangibles 175,423     175,858     (435 )   (0.25 )%
  Noninterest bearing deposits 1,388,002     1,307,075     80,927     6.19 %
  Interest bearing deposits 3,346,874     3,241,276     105,598     3.26 %
  Total deposits 4,734,876     4,548,351     186,525     4.10 %
  Total equity 812,602     800,369     12,233     1.53 %
  Total equity – tangible 637,179     624,511     12,668     2.03 %
  Common equity 804,090     791,915     12,175     1.54 %
  Common equity – tangible 628,667     616,057     12,610     2.05 %
Key Ratios:              
  Return on average assets 1.14 %   1.21 %   (0.07 )%   (5.79 )%
  Return on average assets – tangible 1.21 %   1.28 %   (0.07 )%   (5.47 )%
  Return on average equity 8.58 %   8.93 %   (0.35 )%   (3.92 )%
  Return on average equity – tangible 11.25 %   11.77 %   (0.52 )%   (4.42 )%
  Return on average common equity 8.67 %   9.02 %   (0.35 )%   (3.88 )%
  Return on average common equity – tangible 11.41 %   11.93 %   (0.52 )%   (4.36 )%
  Net interest margin-fully tax equivalent (2)(3) 3.40 %   3.52 %   (0.12 )%   (3.41 )%
  Net interest margin (2) 3.32 %   3.43 %   (0.11 )%   (3.21 )%
  Average earning assets/total average assets 91.64 %   91.64 %   %   %
  Average loans/average deposits 90.83 %   91.49 %   (0.66 )%   (0.72 )%
  Average noninterest deposits/total average deposits 29.31 %   28.74 %   0.57 %   1.98 %
  Allowance for loan losses/period end loans 0.86 %   0.88 %   (0.02 )%   (2.27 )%
  Nonperforming assets to period end assets 0.78 %   0.89 %   (0.11 )%   (12.36 )%
  Period end equity/period end total assets 13.22 %   13.26 %   (0.04 )%   (0.30 )%
  Efficiency ratio (1) 66.33 %   63.03 %   3.30 %   5.24 %
                 
(1) Excludes gain (loss) on investment securities              
(2) Includes bank-owned life insurance              
(3) Presented on a tax-equivalent basis              

  

 
TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
  Three Months Ended   Three Months Ended   Three Months Ended
  September 30, 2015   June 30, 2015   September 30, 2014
    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 $ 4,300,751   $ 49,398   4.56 %   $ 4,161,304   $ 48,729   4.70 %   $ 3,471,206   $ 40,961   4.68 %
Taxable investment securities 796,062   3,235   1.63 %   818,000   2,825   1.38 %   604,908   1,734   1.15 %
Tax-exempt investment securities 61,048   493   3.23 %   63,255   496   3.14 %   70,854   568   3.21 %
Interest-bearing deposits 167,247   107   0.25 %   87,709   56   0.25 %   275,634   174   0.25 %
Loans held for sale 132,214   1,246   3.77 %   131,305   1,161   3.54 %   78,325   787   4.02 %
Bank-owned life insurance 147,150   1,877   5.06 %   145,943   2,044   5.62 %   57,930   674   4.62 %
Total earning assets 5,604,472   56,356   3.99 %   5,407,516   55,311   4.10 %   4,558,857   44,898   3.91 %
Less: allowance for loan losses (37,926 )       (36,854 )       (36,355 )    
                       
Total nonearning assets 549,135         530,154         438,702      
                       
Total assets $ 6,115,681         $ 5,900,816         $ 4,961,204      
                       
Liabilities and Equity:                      
Interest-bearing deposits                      
Demand and money market $ 1,693,424   $ 1,201   0.28 %   $ 1,646,075   $ 1,144   0.28 %   $ 1,317,611   $ 717   0.22 %
Savings 297,041   695   0.93 %   301,020   692   0.92 %   308,466   707   0.91 %
Certificates of deposit 1,356,409   2,985   0.87 %   1,294,181   2,606   0.81 %   983,950   1,981   0.80 %
Total interest-bearing deposits 3,346,874   4,881   0.58 %   3,241,276   4,442   0.55 %   2,610,027   3,405   0.52 %
Borrowings 472,120   3,435   2.85 %   460,993   3,381   2.90 %   424,746   3,396   3.13 %
Total interest-bearing liabilities 3,818,994   8,316   0.86 %   3,702,269   7,823   0.85 %   3,034,773   6,801   0.89 %
Demand deposits 1,388,002         1,307,075         1,228,807      
Other noninterest-bearing liabilities 96,083         91,103         85,374      
Total liabilities 5,303,079         5,100,447         4,348,954      
                       
Shareholders’ equity 812,602         800,369         612,250      
                       
Total liabilities and equity $ 6,115,681         $ 5,900,816         $ 4,961,204      
                       
Net interest income (tax-equivalent basis)   $ 48,040         $ 47,488         $ 38,097    
Reconcilement of Non-GAAP Financial Measures                          
Bank-owned life insurance   (1,877 )       (2,044 )       (674 )  
Tax-equivalent basis adjustment   (493 )       (560 )       (556 )  
Net interest income (GAAP)   $ 45,670         $ 44,884         $ 36,867    
                       
Interest rate spread (1)     3.13 %       3.26 %       3.02 %
Interest expense as a percent of average earning assets         0.59 %       0.58 %       0.59 %
Net interest margin (tax equivalent basis) (2)         3.40 %       3.52 %       3.32 %
Total cost of deposits     0.41 %       0.39 %       0.35 %
                       

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

 

 
TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
  Nine Months Ended   Nine Months Ended   Nine Months Ended September 30, 2015
  September 30, 2015   September 30, 2014   Compared with September 30, 2014
    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 $ 4,177,038   $ 146,020   4.67 %   $ 3,425,074   $ 121,129   4.73 %   $ 24,891   $ (1,411 ) $ 26,302  
Taxable investment securities 787,996   8,862   1.50 %   545,226   5,067   1.24 %   3,795   1,216   2,578  
Tax-exempt investment securities 63,684   1,524   3.19 %   71,035   1,621   3.04 %   (97 ) 77   (173 )
Interest-bearing deposits 152,472   287   0.25 %   262,057   493   0.25 %   (206 )   (206 )
Loans held for sale 109,592   2,971   3.62 %   64,483   1,934   4.00 %   1,037   (201 ) 1,239  
Bank-owned life insurance 144,551   5,674   5.25 %   57,672   2,090   4.85 %   3,584   187   3,396  
Total earning assets 5,435,333   165,338   4.07 %   4,425,547   132,334   4.00 %   33,004   (132 ) 33,136  
Less: allowance for loan losses (36,950 )       (37,461 )            
                       
Total nonearning assets $ 551,342         $ 431,815              
                       
Total assets $ 5,949,725         $ 4,819,901              
                       
Liabilities and Equity:                      
Interest-bearing deposits                      
Demand and money market $ 1,658,531   $ 3,456   0.28 %   $ 1,294,093   $ 2,264   0.23 %   $ 1,192   $ 482   $ 710  
Savings 300,996   2,071   0.92 %   313,114   2,155   0.92 %   (84 ) (1 ) (83 )
Certificates of deposit 1,319,827   8,220   0.83 %   973,919   5,624   0.77 %   2,596   471   2,126  
Total interest-bearing deposits 3,279,354   13,747   0.56 %   2,581,126   10,043   0.52 %   3,704   952   2,753  
Borrowings 460,195   10,205   2.92 %   428,870   10,028   3.12 %   177   (600 ) 776  
Total interest-bearing liabilities 3,739,549   23,952   0.86 %   3,009,996   20,071   0.89 %   3,881   352   3,529  
Demand deposits 1,317,517         1,128,954              
Other noninterest-bearing liabilities 94,278         79,161              
Total liabilities 5,151,344         4,218,111              
                       
Shareholders’ equity 798,381         601,790              
                       
Total liabilities and equity $ 5,949,725         $ 4,819,901              
                       
Net interest income (tax-equivalent basis)       $ 141,386         $ 112,263       $ 29,123   $ (484 ) $ 29,607  
Reconcilement of Non-GAAP Financial Measures                              
Bank-owned life insurance   (5,674 )       (2,090 )     (3,583 )    
Tax-equivalent basis adjustment   (1,601 )       (1,575 )     $ (26 )    
Net interest income (GAAP)   $ 134,111         $ 108,598       $ 25,514      
                       
Interest rate spread (1)         3.21 %       3.11 %        
Interest expense as a percent of average earning assets         0.59 %       0.61 %        
Net interest margin (tax equivalent basis) (2)         3.48 %       3.39 %        
Total cost of deposits     0.40 %       0.36 %        
                           

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

  

 
TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands)
 
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2015   2014   2015   2014
INTEREST INCOME:              
Loans, including fees $ 48,906     $ 40,404     $ 144,418     $ 119,554  
Investment securities 3,728     2,303     10,386     6,688  
Interest-bearing deposits in financial institutions and federal funds sold 107     174     287     493  
Mortgage loans held for sale 1,246     787     2,971     1,934  
Total Interest Income 53,987     43,668     158,062     128,669  
               
INTEREST EXPENSE:              
Deposits 4,881     3,405     13,747     10,043  
Advances from the Federal Home Loan Bank 3,422     3,385     10,160     9,990  
Repurchase agreements and other borrowings 14     11     44     38  
Total Interest Expense 8,317     6,801     23,951     20,071  
               
Net Interest Income 45,670     36,867     134,111     108,598  
               
PROVISION FOR LOAN LOSSES 130     996     2,176     493  
               
Net Interest Income after Provision for Loan Losses 45,540     35,871     131,935     108,105  
               
NONINTEREST INCOME:              
Residential mortgage banking income, net 8,262     7,858     26,956     20,655  
Real estate brokerage and property management income, net 5,349     3,645     13,888     10,184  
Insurance commissions and other title fees and income, net 9,710     8,861     30,644     26,815  
Service charges on deposit accounts 2,388     2,406     6,911     6,904  
Credit card merchant fees, net 823     927     1,821     2,665  
Other income 3,036     2,572     11,081     7,119  
Net gain (loss) on investment securities 736     44     904     (15 )
Total Noninterest Income 30,304     26,313     92,205     74,327  
               
NONINTEREST EXPENSE:              
Salaries and employee benefits 28,910     25,080     83,133     73,801  
Occupancy expense 4,703     4,618     14,489     13,188  
Furniture and equipment 2,211     2,040     6,949     6,080  
Other expenses 14,082     12,416     44,843     36,836  
Total Noninterest Expense 49,906     44,154     149,414     129,905  
               
Income before income tax expense and noncontrolling interest 25,938     18,030     74,726     52,527  
               
Provision for income tax expense 7,444     5,044     22,030     15,381  
               
Net income 18,494     12,986     52,696     37,146  
               
Net income attributable to noncontrolling interest (928 )   (860 )   (2,780 )   (2,212 )
               
Net income attributable to TowneBank $ 17,566     $ 12,126     $ 49,916     $ 34,934  
               
Preferred stock dividends     191     13     573  
               
Net income available to common shareholders $ 17,566     $ 11,935     $ 49,903     $ 34,361  
               
Per common share information              
Basic earnings $ 0.34     $ 0.34     $ 0.98     $ 0.98  
Diluted earnings $ 0.34     $ 0.34     $ 0.98     $ 0.98  
Cash dividends declared $ 0.12     $ 0.11     $ 0.35     $ 0.32  

 

 
TOWNEBANK
Consolidated Statements of Comprehensive Income (unaudited)
(dollars in thousands)
 
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2015   2014   2015   2014
Net income $ 18,494     $ 12,986     $ 52,696     $ 37,146  
               
Other comprehensive income (loss)              
               
Unrealized gains (losses) on securities              
Unrealized holding gains (losses) arising during the period 1,822     (229 )   1,536     1,575  
Deferred tax (expense) benefit (638 )   80     (538 )   (552 )
Realized (gains) losses reclassified into earnings (736 )   (44 )   (785 )   15  
Deferred tax benefit 258     15     275     (6 )
Net unrealized gains (losses) 706     (178 )   488     1,032  
               
Defined benefit retirement plan              
Amortization 60     15     138     15  
Deferred tax expense (21 )   (5 )   (48 )   (5 )
Change in defined benefit retirement plan, net of tax 39     10     90     10  
               
Other comprehensive income (loss), net of tax 745     (168 )   578     1,042  
               
Comprehensive income $ 19,239     $ 12,818     $ 53,274     $ 38,188  

  

 
TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands)
 
  September 30,   December 31,
  2015   2014    2014 
  (unaudited)      (1 )
ASSETS          
Cash and due from banks $ 284,625     $ 230,889     $ 212,994  
Interest-bearing deposits in financial institutions 1,000     1,000     1,011  
Total Cash and Cash Equivalents 285,625     231,889     214,005  
Securities available for sale, at fair value 542,634     607,931     603,908  
Securities held to maturity, at amortized cost 75,154     86,794     85,247  
Federal Home Loan Bank stock, at amortized cost 24,058     22,150     22,157  
Total Securities 641,846     716,875     711,312  
Mortgage loans held for sale 99,330     86,034     71,390  
Loans, net of unearned income and deferred costs:          
Real estate – residential 1-4 family 965,559     833,208     837,370  
Real estate – commercial 1,796,150     1,451,271     1,447,078  
Real estate – construction and land development 554,753     476,379     452,481  
Real estate – multifamily 138,954     53,368     51,472  
Commercial and industrial business 790,614     644,528     700,623  
Consumer and other loans 121,009     62,321     75,365  
Loans, net of unearned income and deferred costs 4,367,039     3,521,075     3,564,389  
Less:  Allowance for loan losses (37,351 )   (36,180 )   (35,917 )
Net Loans 4,329,688     3,484,895     3,528,472  
Premises and equipment, net 172,940     154,343     155,774  
Goodwill 152,438     111,761     113,159  
Other intangible assets, net 23,080     17,721     22,509  
Bank-owned life insurance policies 147,949     58,217     58,716  
Other assets 320,995     110,713     107,148  
TOTAL ASSETS $ 6,173,891     $ 4,972,448     $ 4,982,485  
           
LIABILITIES AND EQUITY          
Liabilities          
Deposits:          
Noninterest-bearing demand $ 1,445,978     $ 1,245,925     $ 1,224,466  
Interest-bearing:          
Demand and money market accounts 1,676,623     1,309,085     1,365,183  
Savings 295,952     306,811     301,033  
Certificates of deposit 1,369,325     988,111     955,920  
Total Deposits 4,787,878     3,849,932     3,846,602  
Advances from the Federal Home Loan Bank 437,282     398,477     398,181  
Repurchase agreements and other borrowings 33,784     24,594     31,893  
Total Borrowings 471,066     423,071     430,074  
Other liabilities 98,878     86,037     87,533  
TOTAL LIABILITIES 5,357,822     4,359,040     4,364,209  
Shareholders’ Equity          
Preferred stock: 2,000,000 shares authorized 0 shares issued at September 30, 2015 and 76,458 shares issued at September 30, 2014 and December 31, 2014     76,458     76,458  
Common stock, $1.667 par: 90,000,000 shares authorized 51,580,762; 35,538,144; and 35,785,679 shares issued at September 30, 2015 and 2014 and December 31, 2014, respectively 85,985     59,242     59,655  
Capital surplus 533,609     316,240     317,718  
Retained earnings 186,522     151,547     154,655  
Common stock issued to deferred compensation trust, at cost 651,362; 617,886; and 627,730 shares at September 30, 2015 and 2014 and December 31, 2014, respectively (10,151 )   (9,508 )   (9,674 )
Deferred compensation trust 10,151     9,508     9,674  
Accumulated other comprehensive income 1,036     698     458  
TOTAL SHAREHOLDERS’ EQUITY 807,152     604,185     608,944  
Noncontrolling interests 8,917     9,223     9,332  
TOTAL EQUITY 816,069     613,408     618,276  
TOTAL LIABILITIES AND EQUITY $ 6,173,891     $ 4,972,448     $ 4,982,485  

                                                                       
(1) As derived from the audited consolidated financial statements for December 31, 2014.

 

 
TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
                   
      Increase/(Decrease)
  Three Months Ended   September 30, 2015   September 30, 2015
  September 30,   June 30,   September 30, 2014   June 30, 2015
  2015   2014   2015   Amount   Percent   Amount   Percent
Commission and fee income                          
Property and casualty $ 8,156     $ 7,335     $ 8,012     $ 821     11.19 %   $ 144     1.80 %
Employee benefits 2,578     2,723     2,443     (145 )   (5.33 )%   135     5.53 %
Travel insurance 626     468     910     158     33.76 %   (284 )   (31.21 )%
Specialized benefit services 145     138     135     7     5.07 %   10     7.41 %
Total commissions and fees 11,505     10,664     11,500     841     7.89 %   5     0.04 %
                           
Contingency and bonus revenue 260     56     387     204     364.29 %   (127 )   (32.82 )%
Other income 53     52     47     1     1.92 %   6     12.77 %
Total revenue $ 11,818     $ 10,772     $ 11,934     $ 1,046     9.71 %   $ (116 )   (0.97 )%
                           
Employee commission expense 2,361     2,165     2,326     196     9.05 %   35     1.50 %
Revenue, net of commission expense $ 9,457     $ 8,607     $ 9,608     $ 850     9.88 %   $ (151 )   (1.57 )%
                           
Salaries and employee benefits 4,583     4,274     4,734     309     7.23 %   (151 )   (3.19 )%
Occupancy expense 480     454     480     26     5.73 %       %
Furniture and equipment 202     200     225     2     1.00 %   (23 )   (10.22 )%
Amortization of intangible assets 543     510     540     33     6.47 %   3     0.56 %
Other expenses 1,491     1,236     1,424     255     20.63 %   67     4.71 %
Total operating expenses 7,299     6,674     7,403     625     9.36 %   (104 )   (1.40 )%
Income before income tax provision and noncontrolling interest $ 2,158     $ 1,933     $ 2,205     $ 225     11.64 %   $ (47 )   (2.13 )%
Plus: Acquisition related expenses 164     128     176     36     28.13 %   (12 )   (6.82 )%
Plus: Amortization of intangible assets 543     510     540     33     6.47 %   3     0.56 %
Operating earnings before income taxes (non-GAAP) $ 2,865     $ 2,571     $ 2,921     $ 294     11.44 %   $ (56 )   (1.92 )%
                           

 

TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
               
  Nine Months Ended   Increase/(Decrease)
  September 30,   2015 over 2014
  2015   2014   Amount   Percent
Commission and fee income              
Property and casualty $ 22,627     $ 18,805     $ 3,822     20.32 %
Employee benefits 7,690     8,027     (337 )   (4.20 )%
Travel insurance 2,668     1,893     775     40.94 %
Specialized benefit services 414     407     7     1.72 %
Total commissions and fees 33,399     29,132     4,267     14.65 %
               
Contingency and bonus revenue 3,171     3,165     6     0.19 %
Other income 148     287     (139 )   (48.43 )%
Total revenue $ 36,718     $ 32,584     $ 4,134     12.69 %
               
Employee commission expense 6,723     6,278     445     7.09 %
Revenue, net of commission expense $ 29,995     $ 26,306     $ 3,689     14.02 %
               
Salaries and employee benefits $ 14,111     $ 11,640     2,471     21.23 %
Occupancy expense 1,417     1,232     185     15.02 %
Furniture and equipment 669     562     107     19.04 %
Amortization of intangible assets 1,609     1,368     241     17.62 %
Other expenses 4,157     3,417     740     21.66 %
Total operating expenses 21,963     18,219     3,744     20.55 %
Income before income tax, corporate allocation and noncontrolling interest $ 8,032     $ 8,087     $ (55 )   (0.68 )%
Plus: Acquisition related expenses 520     214     306     142.99 %
Plus: Amortization of intangible assets 1,609     1,368     241     17.62 %
Operating earnings before income taxes (non-GAAP) $ 10,161     $ 9,669     $ 492     5.09 %
               

  

TOWNEBANK
September 30, 2015
Reconcilement of Non-GAAP Financial Measures:
(dollars in thousands)
             
             
    Three Months Ended
    September 30,   September 30,   December 31,
    2015   2014   2014
             
Return on average assets (GAAP basis)   1.14 %   0.97 %   0.57 %
Impact of excluding average goodwill and other intangibles and amortization   0.07 %   0.06 %   0.06 %
Return on average tangible assets (Non-GAAP)   1.21 %   1.03 %   0.63 %
             
Return on average equity (GAAP basis)   8.58 %   7.86 %   4.62 %
Impact of excluding average goodwill and other intangibles and amortization   2.67 %   2.46 %   1.73 %
Return on average tangible equity (Non-GAAP)   11.25 %   10.32 %   6.35 %
             
Return on average common equity (GAAP basis)   8.67 %   8.98 %   5.21 %
Impact of excluding average goodwill and other intangibles and amortization   2.74 %   3.36 %   2.31 %
Return on average tangible common equity (Non-GAAP)   11.41 %   12.34 %   7.52 %
             
Book value (GAAP basis)   $ 15.65     14.85     $ 14.88  
Impact of excluding average goodwill and other intangibles and amortization   3.40     3.64     (3.79 )
Tangible book value   $ 12.25     $ 11.21     $ 11.09  
             
CONTACT: For more information contact:
G. Robert Aston, Jr., Chairman and CEO, 757-638-6780
Clyde E. McFarland, Jr., Senior Executive Vice President and CFO, 757-638-6801
William B. Littreal, Chief Investment Relations Officer and COO, 757-638-6813