Townebank Reports First Quarter Earnings

by | Apr 27, 2017 | Globe Newswire

SUFFOLK, Va., April 27, 2017 (GLOBE NEWSWIRE) — Hampton Roads based TowneBank (the “Bank” or “Company”) (NASDAQ:TOWN) today reported earnings of $21.97 million for the quarter ended March 31, 2017, as compared to the $17.82 million reported for the comparative period in 2016, representing a 23.28% increase.  Fully diluted earnings per share were $0.35 per share, unchanged from the comparative period of 2016.

The Bank’s quarterly dividend was $0.13 per share resulting in total common dividends of $8.13 million.  The current dividend represents an increase of 8.3% over the dividend paid during the same quarter of 2016.

“We are pleased to announce another quarter of strong earnings with solid loan and deposit growth,” said G. Robert Aston, Jr., Chairman and Chief Executive Officer.  “We saw continued growth in our noninterest income streams and a reduction in noninterest expenses from fourth quarter 2016, while producing a return on average assets of 1.11% and a return on average tangible equity of 11.88%.”

First Quarter 2017 Performance Highlights

• Total revenues were $105.17 million, an increase of $26.42 million, or 33.54% from first quarter 2016 

  • Taxable equivalent net interest margin was 3.45%, including accretion of 9 basis points, compared to 3.33%, including accretion of 6 basis points, for 2016
  • Insurance segment total revenue increased 4.78% to $16.85 million

• Loans held for investment increased $1.36 billion, or 29.89%, from March 31, 2016 with organic growth of $552.68 million, or 12.14%, excluding $808.14 million of loans acquired in the Monarch Financial Holdings, Inc. (“Monarch”) merger on June 24, 2016

• Total deposits were $6.19 billion, an increase of $1.24 billion, or 24.94%, from 2016.  The increase included $1.06 billion deposits acquired in the Monarch merger

  • Noninterest bearing deposits increased by 41.59%, to $2.05 billion, representing 33.16% of total deposits
  • Total cost of deposits decreased to 0.40% from 0.43% at March 31, 2016

• Asset quality showed continued strength

  • Nonperforming assets declined to $35.81 million, or 0.44% of total assets compared to $37.68 million, or 0.59%, at March 31, 2016
  • Nonperforming loans were 0.20% of period end loans
  • Foreclosed property decreased to $21.47 million

• The Bank remained well-capitalized

  • Common equity tier 1 capital ratio of 11.94%
  • Tier 1 leverage capital ratio of 10.49%
  • Tier 1 risk-based capital ratio of 11.98%
  • Total risk-based capital ratio of 12.62%
  • Tangible book value increased to $12.59

First Quarter 2017 Earnings Compared to First Quarter 2016

Net income for the first quarter was $21.97 million, or $0.35 per diluted share, versus $17.82 million, or $0.35 per diluted share, in 2016, reflecting strong growth in net interest income as compared to the prior year period.

Net Interest Income
Net interest income increased to $60.28 million, a $13.95 million, or 30.10%, increase from first quarter 2016.  The primary driver was the growth in average earning assets, which increased $1.51 billion, or 26.71%, while tax-equivalent net interest margin increased to 3.45% in the current quarter from 3.33% in first quarter 2016.  Accretion income added $1.13 million, or 9 basis points, to margin in the current quarter as compared to $0.65 million, or 6 basis points, in the first quarter of 2016.

Noninterest Income
Noninterest income was $44.89 million for the first quarter of 2017, an increase of $12.47 million, or 38.47%, from the first quarter of 2016.  Residential mortgage banking income increased $10.51 million, or 147.71%, from the first quarter of 2016 primarily due to higher production volumes resulting from the Monarch merger.  Mortgage production was $706.06 million in first quarter 2017, which was $392.92 million higher than first quarter 2016 production of $313.14 million.  Insurance commissions and other title fees increased $0.77 million, or 5.47%, primarily due to organic growth across the lines of business.

Noninterest Expense
Noninterest expense increased by $18.09 million, or 34.68%, from the comparative quarter of 2016.  The primary driver was an increase of $10.02 million in salaries and benefits expense due to the addition of staff related to the Monarch acquisition and organic growth.  Also contributing were increases in occupancy expenses of $1.67 million and furniture and equipment expenses of $0.99 million primarily related to mortgage facilities acquired in the Monarch acquisition.

First Quarter 2017 Earnings Compared to Fourth Quarter 2016
Net income for the first quarter was $21.97 million, or $0.35 per diluted share, versus $19.0 million, or $0.31 per diluted share, in fourth quarter 2016, reflecting the seasonality in our Insurance and Realty segments.

Performance Highlights

• Total revenues were $105.17 million compared to $101.67 million in the fourth quarter of 2016

  • Taxable equivalent net interest margin was 3.45%, including accretion of 9 basis points, compared to 3.52%, including accretion of 15 basis points, in the fourth quarter of 2016
  • Noninterest income, excluding gains on investment securities, increased $5.37 million due to seasonality in our Insurance and Realty segments      

• Total loans held for investment increased $105.86 million, or 7.29% on an annualized basis, from December 31, 2016

Net Interest Income
On a linked quarter basis, net interest income decreased by $1.87 million or 3.01%, in first quarter 2017 versus fourth quarter 2016, while tax-equivalent net interest margin was 3.45% versus 3.52% for the fourth quarter of 2016.  The decrease in net interest income was primarily due to seasonally lower loans held for sale average balances combined with a decrease in accretion income.  Accretion income added $1.13 million, or 9 basis points, to margin in the current quarter, as compared to $2.34 million, or 15 basis points, in the linked quarter.

Noninterest Income
In comparison to the fourth quarter of 2016, noninterest income increased $5.37 million, or 13.58%.  The increase was driven by insurance commission income, which grew by $4.98 million, or 50.67%, due to organic growth and with higher contingent commission revenue, which is mostly received during the first quarter of each year.  Additionally, real estate brokerage and property management income was higher due to a seasonal increase related to our resort property management business.  Residential mortgage banking income decreased by $0.46 million, or 2.56%, from the fourth quarter of 2016 primarily due to a seasonal decrease in mortgage production of $299.93 million, from $1.01 billion in fourth quarter 2016 to $706.06 million in first quarter 2017.

Noninterest Expense
Noninterest expense decreased by $2.59 million, or 3.55%, from the fourth quarter of 2016.  The primary driver was a decrease in salaries and benefits expenses of $2.86 million related to decreases in employee profit-sharing and incentive plan expenses.

Noninterest Income

              % Change
  Q1   Q1   Q4   Q1 17 vs.   Q1 17 vs.
(dollars in thousands) 2017   2016   2016   Q1 16   Q4 16
Residential mortgage banking income, net $ 17,632     $ 7,118     $ 18,096     147.71 %   (2.56 )%
Insurance commissions and other title fees and  income, net 14,800     14,033     9,823     5.47 %   50.67 %
Real estate brokerage and property management, net 4,993     4,827     2,925     3.44 %   70.70 %
Service charges on deposit accounts 2,472     2,176     2,535     13.60 %   (2.49 )%
Credit card merchant fees, net 1,118     895     1,135     24.92 %   (1.50 )%
Other income 3,871     3,366     4,998     15.00 %   (22.55 )%
Subtotal before gain on investment securities 44,886     32,415     39,512     38.47 %   13.60 %
Net gain on investment securities —     —     6     —     (100.00 )%
Total noninterest income $ 44,886     $ 32,415     $ 39,518     38.47 %   13.58 %

Noninterest Expense

              % Change
  Q1   Q1   Q4   Q1 17 vs.    Q1 17 vs.
(dollars in thousands) 2017   2016   2016   Q1 16   Q4 16
Salaries and benefits $ 40,208     $ 30,187     $ 43,071     33.20 %   (6.65 )%
Occupancy expense 6,684     5,017     6,885     33.23 %   (2.92 )%
Furniture and equipment 3,343     2,357     3,378     41.83 %   (1.04 )%
Acquisition-related expenses (5 )   414     (707 )   (101.21 )%   (99.29 )%
Other expenses 20,018     14,186     20,207     41.11 %   (0.94 )%
Total noninterest expense $ 70,248     $ 52,161     $ 72,834     34.68 %   (3.55 )%

Segment Results

                $ Change
(in thousands)   Q1   Q1   Q4   Q1 17 vs.    Q1 17 vs.
Segment Net Income (Loss)   2017   2016   2016   Q1 16   Q4 16
Banking   $ 17,967     $ 14,133     $ 17,931     $ 3,834     $ 36  
Realty   926     1,033     673     (107 )   253  
Insurance   3,075     2,653     392     422     2,683  
Total net income   $ 21,968     $ 17,819     $ 18,996     $ 4,149     $ 2,972  

First Quarter 2017 Compared to First Quarter 2016

Banking
Net income for the three months ended March 31, 2017 for the Banking segment was $17.97 million, increasing $3.83 million, or 27.13% from comparative 2016, as net interest income climbed by $12.62 million primarily due to the increase in earning assets from the Monarch merger.  Also contributing to the variance was an increase in noninterest income of $1.10 million, which included increases in service charges and credit card merchant fees.  These factors were partially offset by increases in the provision for loan losses of $2.80 million and noninterest expenses of $6.17 million.

Realty
For the three months ended March 31, 2017, the Realty segment net income decreased to $0.93 million from $1.03 million from comparative quarter 2016.  The decrease was driven by additional noninterest expenses of $11.89 million primarily due to an increase in mortgage operational expenses related to the merger with Monarch, including an increase in personnel costs of $7.00 million.  The decrease was mostly offset by an increase in residential mortgage banking income of $10.47 million, or 143.16%, due to higher production volumes resulting from the Monarch merger.  Additionally, net interest and other income increased by $1.44 million as higher production volume led to higher average mortgage loans held for sale.

Insurance
The Insurance segment had net income of $3.08 million for the three months ended March 31, 2017, an increase of $0.42 million compared to first quarter 2016.  The increase in net income was driven by organic growth in property and casualty insurance, employee benefit insurance, and travel insurance commission income.

First Quarter 2017 Compared to Fourth Quarter 2016

Banking
Earnings increased slightly by $0.04 million, or 0.20% from the fourth quarter of 2016 as decreases in personnel costs of $3.43 million were partially offset by decreases in net interest income and bank-owned life insurance income.  Additionally, loan growth in the quarter led to an increase of $0.74 million in the provision for loan losses.

Realty
Net income in the Realty segment increased by $0.25 million from the linked quarter ended December 31, 2016.  The increase was primarily a result of a seasonal increase in resort property management fees of $2.37 million, partially offset by seasonal decreases in the Bank’s mortgage and real estate brokerage businesses.

Insurance
Net income increased $2.68 million from the fourth quarter of 2016 driven by an increase in contingency and bonus revenue of $3.47 million.  Contingent commissions are seasonal in nature and are mostly received during the first half of each year.  Additionally, commissions from travel insurance increased by $0.80 million and property and casualty commissions increased by $0.84 million due to organic growth and seasonal increases.

Balance Sheet

At March 31, 2017, total Bank assets reached $8.17 billion, an increase of $1.81 billion, or 28.43%, over March 31, 2016.

Loans

              % Change
  Q1   Q1   Q4   Q1 17 vs.   Q1 17 vs.
(dollars in thousands) 2017   2016   2016   Q1 16   Q4 16
Construction and land development $ 898,540     $ 635,992     $ 826,027     41.28 %   8.78 %
Commercial real estate – investment related properties 1,362,184     998,082     1,322,466     36.48 %   3.00 %
Commercial real estate – owner occupied 907,049     764,230     928,846     18.69 %   (2.35 )%
Multifamily real estate 236,782     160,246     222,791     47.76 %   6.28 %
1-4 family residential real estate 1,215,278     988,432     1,215,823     22.95 %   (0.04 )%
Commercial and industrial business loans 1,086,273     852,005     1,089,539     27.50 %   (0.30 )%
Consumer loans and other 206,974     153,273     201,729     35.04 %   2.60 %
Total $ 5,913,080     $ 4,552,260     $ 5,807,221     29.89 %   1.82 %

The Bank’s loan portfolio ended the period at $5.91 billion representing an increase of 29.89%, or $1.36 billion, from the prior year, and an increase of $105.86 million, or 1.82%, from December 31, 2016.  In addition to organic growth, the increase from the prior year is related to loans acquired in the Monarch merger on June 24, 2016.

Deposits

              % Change
  Q1   Q1   Q4   Q1 17 vs.   Q1 17 vs.
(dollars in thousands) 2017   2016   2016   Q1 16   Q4 16
Noninterest-bearing demand $ 2,052,598     $ 1,449,660     $ 1,947,312     41.59 %   5.41 %
Interest-bearing:                  
Demand and money market accounts 2,270,025     1,769,414     2,263,894     28.29 %   0.27 %
Savings 320,104     302,373     319,611     5.86 %   0.15 %
Certificates of deposits 1,548,045     1,433,679     1,504,380     7.98 %   2.90 %
Total $ 6,190,772     $ 4,955,126     $ 6,035,197     24.94 %   2.58 %

The Bank continued to experience solid deposit growth with total deposits increasing to $6.19 billion, up $1.24 billion, or 24.94%, from March 31, 2016.  The increase was primarily due to the deposits acquired in the Monarch merger.  The Bank saw continued growth in noninterest-bearing demand deposits, which ended the quarter at $2.05 billion, a 41.59% increase from the prior year.  Noninterest-bearing deposits represented 33.16% of total deposits at March 31, 2017.

Capital Ratios

    Q1   Q1   Q4
    2017   2016   2016
Common Equity Tier 1   11.94 %   12.66 %   11.75 %
Tier 1   11.98 %   12.73 %   11.82 %
Total   12.62 %   13.46 %   12.44 %
Tier 1 Leverage Ratio   10.49 %   10.70 %   10.44 %

The Bank’s total equity at March 31, 2017 rose to $1.10 billion, an increase of $265.24 million, or 31.73%, from March 31, 2016.  Total risk-based capital remained strong as  common equity Tier 1, Tier 1 capital, total risk-based capital, and Tier 1 leverage capital ratios were 11.94%, 11.98%, 12.62%, 10.49%, respectively.  All ratios exceed the current regulatory standards for well capitalized status.

Asset Quality

                   
(in thousands) 3/31/2017   12/31/2016   9/30/2016   6/30/2016   3/31/2016
Nonperforming loans $ 11,538     $ 13,099     $ 11,337     $ 10,580     $ 7,944  
Former bank premises 2,798     3,494     —     —     —  
Foreclosed property 21,473     21,011     22,884     25,707     29,740  
Total nonperforming assets $ 35,809     $ 37,604     $ 34,221     $ 36,287     $ 37,684  
Quarterly net loans charged off $ 1,347     $ 485     $ 649     $ 241     $ 340  
Year-to-date net loans charged off $ 1,347     $ 1,715     $ 1,230     $ 581     $ 340  

                Change
    Q1   Q1   Q4   Q1 17 vs.   Q1 17 vs.
(dollars in thousands)   2017   2016   2016   Q1 16   Q4 16
Total loans 90 days past due and still accruing   $ 35     $ —     $ 76     $ 35     $ (41 )
Total loans 30-89 days past due   $ 11,424     $ 12,055     $ 10,459     $ (631 )   $ 965  
Allowance for loan losses   $ 43,195     $ 37,760     $ 42,001     $ 5,435     $ 1,194  
Total performing TDRs   $ 26,659     $ 24,955     $ 31,351     $ 1,704     $ (4,692 )
                     
                     
Nonperforming loans to period end loans   0.20 %   0.17 %   0.23 %   0.03     (0.03 )
Nonperforming assets to period end assets   0.44 %   0.59 %   0.47 %   (0.15 )   (0.03 )
Allowance for loan losses to period end loans   0.73 %   0.83 %   0.72 %   (0.10 )   0.01  
Allowance for loan losses (originated) to originated period end loans   0.86 %   0.92 %   0.87 %   (0.06 )   (0.01 )
Net charge-offs to average loans (annualized)   0.09 %   0.03 %   0.03 %   0.06     0.06  
Ratio of allowance for loan losses to nonperforming loans     3.74 x     4.75 x     3.21 x   (1.01 )x   .53 x

Continued strength in credit quality contributed to the Bank’s financial results as net charge-offs totaled $1.35 million in the first quarter of 2017 compared to $0.34 million in the first quarter of 2016 and $0.49 million in the linked quarter.  Total nonperforming assets were $35.81 million, or 0.44%, of Bank assets at March 31, 2017, as compared to $37.68 million, or 0.59%, at March 31, 2016, and $37.60 million, or 0.47%, at December 31, 2016.  The allowance for loan losses was $43.20 million, increased from $37.76 million at March 31, 2016 and $42.00 million at December 31, 2016.

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, Towne 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 $8.17 billion as of March 31, 2017, 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.  TowneBank’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 TowneBank’s market areas; TowneBank’s implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; and 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.

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
              Increase/    % Increase/
Three Months Ended March 31, 2017   2016    (Decrease)    (Decrease)
                 
Results of Operations:              
  Net interest income $ 60,281     $ 46,336     $ 13,945     30.10 %
  Noninterest income 44,886     32,415     12,471     38.47 %
  Total Revenue 105,167     78,751     26,416     33.54 %
  Acquisition-related expenses (5 )   414     (419 )   (101.21 )%
  Noninterest expenses, excluding acquisition-related expenses 70,253     51,747     18,506     35.76 %
  Provision for loan losses 2,541     (259 )   2,800     N/M  
  Income before income tax and noncontrolling interest 32,378     26,849     5,529     20.59 %
  Provision for income tax expense 9,386     8,188     1,198     14.63 %
  Net income 22,992     18,661     4,331     23.21 %
  Net income attributable to noncontrolling interest (1,024 )   (842 )   (182 )   21.62 %
  Net income attributable to TowneBank 21,968     17,819     4,149     23.28 %
  Net income available to common shareholders 21,968     17,819     4,149     23.28 %
  Net income per common share – basic 0.35     0.35     —     — %
  Net income per common share – diluted 0.35     0.35     —     — %
Period End Data:              
  Total assets $ 8,174,786     $ 6,365,169     $ 1,809,617     28.43 %
  Total assets – tangible 7,872,823     6,178,224     1,694,599     27.43 %
  Earning assets 7,362,550     5,745,710     1,616,840     28.14 %
  Loans (net of unearned income) 5,913,080     4,552,260     1,360,820     29.89 %
  Allowance for loan losses 43,195     37,760     5,435     14.39 %
  Goodwill and other intangibles 301,962     186,945     115,017     61.52 %
  Nonperforming assets 35,809     37,684     (1,875 )   (4.98 )%
  Noninterest bearing deposits 2,052,598     1,449,660     602,938     41.59 %
  Interest bearing deposits 4,138,174     3,505,466     632,708     18.05 %
    Total deposits 6,190,772     4,955,126     1,235,646     24.94 %
  Total equity 1,101,245     836,003     265,242     31.73 %
  Total equity – tangible 799,283     649,058     150,225     23.15 %
  Common equity 1,089,760     826,875     262,885     31.79 %
  Common equity – tangible 787,798     639,930     147,868     23.11 %
  Book value per common share 17.42     16.00     1.42     8.88 %
  Book value per common share – tangible 12.59     12.38     0.21     1.70 %
Daily Average Balances:              
  Total assets $ 8,000,366     $ 6,313,238     $ 1,687,128     26.72 %
  Total assets – tangible 7,698,310     6,126,524     1,571,786     25.66 %
  Earning assets 7,177,697     5,664,461     1,513,236     26.71 %
  Loans (net of unearned income), excluding nonaccrual loans 5,862,799     4,516,277     1,346,522     29.81 %
  Allowance for loan losses 42,610     38,555     4,055     10.52 %
  Goodwill and other intangibles 302,056     186,714     115,342     61.77 %
  Noninterest bearing deposits 1,957,887     1,415,793     542,094     38.29 %
  Interest bearing deposits 4,102,109     3,499,607     602,502     17.22 %
    Total deposits 6,059,996     4,915,400     1,144,596     23.29 %
  Total equity 1,093,490     830,178     263,312     31.72 %
  Total equity – tangible 791,433     643,464     147,969     23.00 %
  Common equity 1,082,324     821,268     261,056     31.79 %
  Common equity – tangible 780,268     634,554     145,714     22.96 %
Key Ratios:              
  Return on average assets 1.11 %   1.14 %   (0.03 )%   (2.63 )%
  Return on average assets – tangible 1.22 %   1.21 %   0.01 %   0.83 %
  Return on average equity 8.15 %   8.63 %   (0.48 )%   (5.56 )%
  Return on average equity – tangible 11.88 %   11.56 %   0.32 %   2.77 %
  Return on average common equity 8.23 %   8.73 %   (0.50 )%   (5.73 )%
  Return on average common equity – tangible 12.05 %   11.72 %   0.33 %   2.82 %
  Net interest margin-fully tax equivalent (1) 3.45 %   3.33 %   0.12 %   3.60 %
  Net interest margin 3.41 %   3.29 %   0.12 %   3.65 %
  Average earning assets/total average assets 89.72 %   89.72 %   — %   — %
  Average loans/average deposits 96.75 %   91.88 %   4.87 %   5.30 %
  Average noninterest deposits/total average deposits 32.31 %   28.80 %   3.51 %   12.19 %
  Allowance for loan losses/period end loans 0.73 %   0.83 %   (0.10 )%   (12.05 )%
  Nonperforming assets to period end assets 0.44 %   0.59 %   (0.15 )%   (25.42 )%
  Period end equity/period end total assets 13.47 %   13.13 %   0.34 %   2.59 %
  Efficiency ratio 66.80 %   66.24 %   0.56 %   0.85 %
(1) Presented on a tax-equivalent basis              

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
 
    March 31,   December 31,   Increase/    % Increase/
Three Months Ended 2017   2016   (Decrease)    (Decrease)
                 
Results of Operations:              
  Net interest income $ 60,281     $ 62,151     $ (1,870 )   (3.01 )%
  Noninterest income 44,886     39,518     5,368     13.58 %
  Total Revenue 105,167     101,669     3,498     3.44 %
  Acquisition-related expenses (5 )   (707 )   702     (99.29 )%
  Noninterest expenses, excluding acquisition-related expenses 70,253     73,541     (3,288 )   (4.47 )%
  Provision for loan losses 2,541     1,831     710     38.78 %
  Income before income tax and noncontrolling interest 32,378     27,004     5,374     19.90 %
  Provision for income tax expense 9,386     7,160     2,226     31.09 %
  Net income 22,992     19,844     3,148     15.86 %
  Net income attributable to noncontrolling interest (1,024 )   (848 )   (176 )   20.75 %
  Net income attributable to TowneBank 21,968     18,996     2,972     15.65 %
  Net income available to common shareholders 21,968     18,996     2,972     15.65 %
  Net income per common share – basic 0.35     0.31     0.04     12.90 %
  Net income per common share – diluted 0.35     0.31     0.04     12.90 %
Period End Data:              
  Total assets $ 8,174,786     $ 7,973,915     $ 200,871     2.52 %
  Total assets – tangible 7,872,823     7,671,149     201,674     2.63 %
  Earning assets 7,362,550     7,157,391     205,159     2.87 %
  Loans (net of unearned income) 5,913,080     5,807,221     105,859     1.82 %
  Allowance for loan losses 43,195     42,001     1,194     2.84 %
  Goodwill and other intangibles 301,962     302,766     (804 )   (0.27 )%
  Nonperforming assets 35,809     37,605     (1,796 )   (4.78 )%
  Noninterest bearing deposits 2,052,598     1,947,312     105,286     5.41 %
  Interest bearing deposits 4,138,174     4,087,885     50,289     1.23 %
    Total deposits 6,190,772     6,035,197     155,575     2.58 %
  Total equity 1,101,245     1,086,558     14,687     1.35 %
  Total equity – tangible 799,283     783,792     15,491     1.98 %
  Common equity 1,089,760     1,075,102     14,658     1.36 %
  Common equity – tangible 787,798     772,337     15,461     2.00 %
  Book value per common share 17.42     17.20     0.22     1.28 %
  Book value per common share – tangible 12.59     12.36     0.23     1.86 %
Daily Average Balances:              
  Total assets $ 8,000,366     $ 7,965,438     $ 34,928     0.44 %
  Total assets – tangible 7,698,310     7,661,845     36,465     0.48 %
  Earning assets 7,177,697     7,125,742     51,955     0.73 %
  Loans (net of unearned income), excluding nonaccrual loans 5,862,799     5,705,832     156,967     2.75 %
  Allowance for loan losses 42,610     41,188     1,422     3.45 %
  Goodwill and other intangibles 302,056     303,593     (1,537 )   (0.51 )%
  Noninterest bearing deposits 1,957,887     1,961,902     (4,015 )   (0.20 )%
  Interest bearing deposits 4,102,109     4,137,806     (35,697 )   (0.86 )%
    Total deposits 6,059,996     6,099,708     (39,712 )   (0.65 )%
  Total equity 1,093,490     1,087,382     6,108     0.56 %
  Total equity – tangible 791,433     783,789     7,644     0.98 %
  Common equity 1,082,324     1,076,277     6,047     0.56 %
  Common equity – tangible 780,268     772,683     7,585     0.98 %
Key Ratios:              
  Return on average assets 1.11 %   0.95 %   0.16 %   16.84 %
  Return on average assets – tangible 1.22 %   1.05 %   0.17 %   16.19 %
  Return on average equity 8.15 %   6.95 %   1.20 %   17.27 %
  Return on average equity – tangible 11.88 %   10.27 %   1.61 %   15.68 %
  Return on average common equity 8.23 %   7.02 %   1.21 %   17.24 %
  Return on average common equity – tangible 12.05 %   10.42 %   1.63 %   15.64 %
  Net interest margin-fully tax equivalent (1) 3.45 %   3.52 %   (0.07 )%   (1.99 )%
  Net interest margin 3.41 %   3.47 %   (0.06 )%   (1.73 )%
  Average earning assets/total average assets 89.72 %   89.46 %   0.26 %   0.29 %
  Average loans/average deposits 96.75 %   93.54 %   3.21 %   3.43 %
  Average noninterest deposits/total average deposits 32.31 %   32.16 %   0.15 %   0.47 %
  Allowance for loan losses/period end loans 0.73 %   0.72 %   0.01 %   1.39 %
  Nonperforming assets to period end assets 0.44 %   0.47 %   (0.03 )%   (6.38 )%
  Period end equity/period end total assets 13.47 %   13.63 %   (0.16 )%   (1.17 )%
  Efficiency ratio 66.80 %   71.64 %   (4.84 )%   (6.76 )%
(1) 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
  March 31, 2017   December 31, 2016   March 31, 2016
    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		 $ 5,862,799   $ 64,979   4.49 %   $ 5,705,832   $ 66,061   4.61 %   $ 4,516,277   $ 50,781   4.52 %
Taxable investment securities 627,338   2,843   1.81 %   666,936   2,762   1.66 %   754,514   3,055   1.62 %
Tax-exempt investment securities 50,485   375   2.97 %   52,199   390   2.99 %   52,979   410   3.09 %
Interest-bearing deposits 450,076   887   0.80 %   352,418   487   0.55 %   265,256   330   0.50 %
Loans held for sale 186,999   1,727   3.69 %   348,357   3,028   3.48 %   75,435   693   3.67 %
Total earning assets 7,177,697   70,811   4.00 %   7,125,742   72,728   4.06 %   5,664,461   55,269   3.92 %
  Less: allowance for loan losses (42,610 )       (41,188 )       (38,555 )    
                       
Total nonearning assets 865,279         880,884         687,332      
                       
  Total assets $ 8,000,366         $ 7,965,438         $ 6,313,238      
                       
Liabilities and Equity:                      
Interest-bearing deposits                      
  Demand and money market $ 2,272,911   $ 1,865   0.33 %   $ 2,230,198   $ 1,742   0.31 %   $ 1,782,908   $ 1,328   0.30 %
  Savings 320,319   757   0.96 %   316,211   728   0.92 %   300,070   700   0.94 %
  Certificates of deposit 1,508,879   3,381   0.91 %   1,591,397   3,458   0.86 %   1,416,629   3,185   0.90 %
Total interest-bearing deposits 4,102,109   6,003   0.59 %   4,137,806   5,928   0.57 %   3,499,607   5,213   0.60 %
Borrowings 723,506   3,803   2.10 %   628,272   3,739   2.33 %   468,798   3,185   2.69 %
Total interest-bearing liabilities 4,825,615   9,806   0.82 %   4,766,078   9,667   0.81 %   3,968,405   8,398   0.85 %
Demand deposits 1,957,887         1,961,902         1,415,793      
                             
Other noninterest-bearing liabilities 123,374         150,076         98,862      
  Total liabilities 6,906,876         6,878,056         5,483,060      
                       
Shareholders’ equity 1,093,490         1,087,382         830,178      
                       
  Total liabilities and equity $ 8,000,366         $ 7,965,438         $ 6,313,238      
                       
Net interest income (tax-equivalent basis)   $ 61,005         $ 63,061         $ 46,870    
                                   
Reconcilement of Non-GAAP Financial Measures                    
  Tax-equivalent basis adjustment   (724 )       (910 )       (535 )  
Net interest income (GAAP)   $ 60,281         $ 62,151         $ 46,335    
                       
Interest rate spread (1)     3.18 %       3.25 %       3.07 %
Interest expense as a percent of average earning assets   0.55 %       0.54 %       0.60 %
Net interest margin (tax equivalent basis) (2)   3.45 %       3.52 %       3.33 %
Total cost of deposits     0.40 %       0.39 %       0.43 %

(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 Balance Sheets
(dollars in thousands, except share data)
  March 31,   December 31,
  2017   2016   2016
  (unaudited)   (unaudited)   (audited)
ASSETS          
Cash and due from banks $ 420,192     $ 195,161     $ 130,967  
Interest-bearing deposits in financial institutions 5,335     1,006     5,581  
Total Cash and Cash Equivalents 425,527     196,167     136,548  
Securities available for sale, at fair value 720,667     821,551     812,974  
Securities held to maturity, at amortized cost 65,117     66,921     66,490  
Federal Home Loan Bank stock, at amortized cost 36,402     23,903     35,937  
Total Securities 822,186     912,375     915,401  
Mortgage loans held for sale 214,047     97,491     314,117  
Loans, net of unearned income and deferred costs:          
Real estate-residential 1-4 family 1,215,278     988,432     1,215,823  
Real estate-commercial 2,269,233     1,762,312     2,251,312  
Real estate-construction and development 898,540     635,992     826,027  
Real estate-multi-family 236,782     160,246     222,791  
Commercial 1,086,273     852,005     1,089,539  
Consumer and other loans 206,974     153,273     201,729  
Loans, net of unearned income and deferred costs 5,913,080     4,552,260     5,807,221  
  Less: allowance for loan losses (43,195 )   (37,760 )   (42,001 )
Net Loans 5,869,885     4,514,500     5,765,220  
Premises and equipment, net 198,664     178,154     198,568  
Goodwill 264,910     157,659     264,910  
Other intangible assets, net 37,052     29,286     37,856  
Bank-owned life insurance policies 190,917     150,623     189,499  
Other assets 151,598     128,914     151,796  
TOTAL ASSETS $ 8,174,786     $ 6,365,169     $ 7,973,915  
LIABILITIES AND EQUITY          
Deposits:          
Noninterest-bearing demand $ 2,052,598     $ 1,449,660     $ 1,947,312  
Interest-bearing:          
Demand and money market accounts 2,270,025     1,769,414     2,263,894  
Savings 320,104     302,373     319,611  
Certificates of deposit 1,548,045     1,433,679     1,504,380  
Total Deposits 6,190,772     4,955,126     6,035,197  
Advances from the Federal Home Loan Bank 687,366     428,940     687,511  
Repurchase agreements and other borrowings 35,318     40,235     32,540  
Total Borrowings 722,684     469,175     720,051  
Other liabilities 160,085     104,865     132,109  
TOTAL LIABILITIES 7,073,541     5,529,166     6,887,357  
Preferred stock          
Authorized and unissued shares – 2,000,000 —     —     —  
Common stock, $1.667 par value          
Authorized shares – 90,000,000          
  62,571,739; 51,680,059; and 62,492,168 shares issued at          
  March 31, 2017 and 2016 and December 31, 2016, respectively 104,307     86,151     104,174  
Capital surplus 746,289     536,294     745,411  
Retained earnings 243,337     204,413     229,503  
Common stock issued to deferred compensation trust, at cost          
  693,654; 651,379; and 692,431 shares at          
  March 31, 2017 and 2016 and December 31, 2016, respectively (11,294 )   (10,288 )   (11,168 )
Deferred compensation trust 11,294     10,288     11,168  
Accumulated other comprehensive income (loss) (4,173 )   17     (3,986 )
TOTAL SHAREHOLDERS’ EQUITY 1,089,760     826,875     1,075,102  
Noncontrolling interest 11,485     9,128     11,456  
TOTAL EQUITY 1,101,245     836,003     1,086,558  
TOTAL LIABILITIES AND EQUITY $ 8,174,786     $ 6,365,169     $ 7,973,915  

TOWNEBANK
Consolidated Statements of Income
(dollars in thousands, except per share data)
       
  Three Months Ended
  March 31,
  2017   2016
  (unaudited)   (unaudited)
INTEREST INCOME:      
Loans, including fees $ 64,255     $ 50,247  
Investment securities 3,218     3,464  
Interest-bearing deposits in financial institutions and
  federal funds sold		 887     330  
Mortgage loans held for sale 1,727     693  
Total interest income 70,087     54,734  
INTEREST EXPENSE:      
Deposits 6,003     5,213  
Advances from the Federal Home Loan Bank 3,772     3,163  
Repurchase agreements and other borrowings, net of capitalized interest 31     22  
Total interest expense 9,806     8,398  
Net interest income 60,281     46,336  
       
PROVISION FOR LOAN LOSSES 2,541     (259 )
Net interest income after provision for loan losses 57,740     46,595  
NONINTEREST INCOME:      
Residential mortgage banking income, net 17,632     7,118  
Insurance commissions and other title fees and income, net 14,800     14,033  
Real estate brokerage and property management income, net 4,993     4,827  
Service charges on deposit accounts 2,472     2,176  
Credit card merchant fees, net 1,118     895  
Other income 3,871     3,366  
Total noninterest income 44,886     32,415  
NONINTEREST EXPENSE:      
Salaries and employee benefits 40,208     30,187  
Occupancy 6,684     5,017  
Furniture and equipment 3,343     2,357  
Other expenses 20,013     14,600  
Total noninterest expense 70,248     52,161  
Income before income tax expense & noncontrolling interest 32,378     26,849  
Provision for income tax expense 9,386     8,188  
Net income $ 22,992     $ 18,661  
Net income attributable to noncontrolling interest (1,024 )   (842 )
Net income attributable to TowneBank $ 21,968     $ 17,819  
Net income available to common shareholders $ 21,968     $ 17,819  
Per common share information      
Basic earnings $ 0.35     $ 0.35  
Diluted earnings $ 0.35     $ 0.35  
Cash dividends declared $ 0.13     $ 0.12  

TOWNEBANK
Consolidated Statements of Comprehensive Income
(dollars in thousands)
       
  Three Months Ended
  March 31,
  2017   2016
  (unaudited)   (unaudited)
       
Net income $ 22,992     $ 18,661  
       
Other comprehensive income (loss)      
       
Unrealized gains on securities      
Unrealized holding gains arising during the period 162     4,480  
Deferred tax expense (57 )   (1,568 )
Net unrealized gains 105     2,912  
       
Pension and postretirement benefit plans      
Actuarial gain (loss) (538 )   109  
Deferred tax benefit (expense) 188     (38 )
Amortization of prior service costs 51     38  
Deferred tax expense (18 )   (13 )
Amortization of actuarial loss 39     4  
Deferred tax expense (14 )   (1 )
Change in retirement plans, net of tax (292 )   99  
       
Other comprehensive income (loss), net of tax (187 )   3,011  
       
Comprehensive income $ 22,805     $ 21,672  

TOWNEBANK
Consolidated Balance Sheets – Five Quarter Trend
(dollars in thousands, except share data)
                   
  March 31,   December 31,   September 30,   June 30,   March 31,
  2017   2016   2016   2016   2016
  (unaudited)   (audited)   (unaudited)   (unaudited)   (unaudited)
ASSETS                  
Cash and due from banks $ 420,192     $ 130,967     $ 147,887     $ 188,183     $ 195,161  
Interest-bearing deposits in financial institutions 5,335     5,581     6,891     33,777     1,006  
Federal funds sold —     —     —     14     —  
Total Cash and Cash Equivalents 425,527     136,548     154,778     221,974     196,167  
Securities available for sale, at fair value 720,667     812,974     704,418     812,375     821,551  
Securities held to maturity, at amortized cost 65,117     66,490     70,304     65,728     66,921  
Federal Home Loan Bank stock, at amortized cost 36,402     35,937     24,888     28,008     23,903  
Total Securities 822,186     915,401     799,610     906,111     912,375  
Mortgage loans held for sale 214,047     314,117     439,608     474,978     97,491  
Loans, net of unearned income and deferred costs: 5,913,080     5,807,221     5,651,642     5,559,949     4,552,260  
  Less: allowance for loan losses (43,195 )   (42,001 )   (40,655 )   (39,618 )   (37,760 )
Net Loans 5,869,885     5,765,220     5,610,987     5,520,331     4,514,500  
Premises and equipment, net 198,664     198,568     202,955     202,333     178,154  
Goodwill 264,910     264,910     264,578     257,485     157,659  
Other intangible assets, net 37,052     37,856     39,747     41,515     29,286  
Bank-owned life insurance policies 190,917     189,499     163,385     164,933     150,623  
Other assets 151,598     151,796     154,494     151,081     128,914  
TOTAL ASSETS $ 8,174,786     $ 7,973,915     $ 7,830,142     $ 7,940,741     $ 6,365,169  
LIABILITIES AND EQUITY                  
Deposits:                  
Noninterest-bearing demand $ 2,052,598     $ 1,947,312     $ 1,974,395     $ 1,950,816     $ 1,449,660  
Interest-bearing:                  
Demand and money market accounts 2,270,025     2,263,894     2,207,962     2,174,154     1,769,414  
Savings 320,104     319,611     315,477     317,071     302,373  
Certificates of deposit 1,548,045     1,504,380     1,649,113     1,744,238     1,433,679  
Total Deposits 6,190,772     6,035,197     6,146,947     6,186,279     4,955,126  
Advances from the Federal Home Loan Bank 687,366     687,511     427,655     500,798     428,940  
Repurchase agreements and other borrowings 35,318     32,540     31,927     44,008     40,235  
Total Borrowings 722,684     720,051     459,582     544,806     469,175  
Other liabilities 160,085     132,109     144,735     148,108     104,865  
TOTAL LIABILITIES 7,073,541     6,887,357     6,751,264     6,879,193     5,529,166  
Preferred stock                  
Authorized shares – 2,000,000 —     —     —     —     —  
                   
Common stock, $1.667 par value 104,307     104,174     104,000     103,963     86,151  
Capital surplus 746,289     745,411     743,223     742,228     536,294  
Retained earnings 243,337     229,503     218,631     202,565     204,413  
Common stock issued to deferred compensation trust, at cost (11,294 )   (11,168 )   (10,969 )   (10,785 )   (10,288 )
Deferred compensation trust 11,294     11,168     10,969     10,785     10,288  
Accumulated other comprehensive income (loss) (4,173 )   (3,986 )   1,339     1,604     17  
TOTAL SHAREHOLDERS’ EQUITY 1,089,760     1,075,102     1,067,193     1,050,360     826,875  
Noncontrolling interest 11,485     11,456     11,685     11,188     9,128  
TOTAL EQUITY 1,101,245     1,086,558     1,078,878     1,061,548     836,003  
TOTAL LIABILITIES AND EQUITY $ 8,174,786     $ 7,973,915     $ 7,830,142     $ 7,940,741     $ 6,365,169  

TOWNEBANK
Consolidated Statements of Income – Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)
           
  Three Months Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
  2017   2016   2016   2016   2016
INTEREST INCOME:                  
Loans, including fees $ 64,255     $ 65,151     $ 64,623     $ 51,444     $ 50,247  
Investment securities 3,218     3,152     3,099     3,139     3,464  
Interest-bearing deposits in financial institutions and
federal funds sold		 887     487     (36 )   364     330  
Mortgage loans held for sale 1,727     3,028     4,137     1,294     693  
Total Interest Income 70,087     71,818     71,823     56,241     54,734  
INTEREST EXPENSE:                  
Deposits 6,003     5,928     5,909     5,267     5,213  
Advances from the Federal Home Loan Bank 3,772     3,546     3,276     3,158     3,163  
Repurchase agreements and other borrowings 31     193     33     32     22  
Total Interest Expense 9,806     9,667     9,218     8,457     8,398  
Net Interest Income 60,281     62,151     62,605     47,784     46,336  
                   
PROVISION FOR LOAN LOSSES 2,541     1,831     1,686     2,099     (259 )
Net Interest Income after Provision for Loan Losses 57,740     60,320     60,919     45,685     46,595  
NONINTEREST INCOME:                  
Residential mortgage banking income, net 17,632     18,096     21,430     12,148     7,118  
Insurance commissions and other title fees and income, net 14,800     9,823     11,258     11,627     14,033  
Real estate brokerage and property management income, net 4,993     2,925     6,647     6,116     4,827  
Service charges on deposit accounts 2,472     2,535     2,552     2,284     2,176  
Credit card merchant fees, net 1,118     1,135     1,365     1,113     895  
Other income 3,871     4,998     3,569     3,180     3,366  
Net gain on investment securities —     6     —     —     —  
Total Noninterest Income 44,886     39,518     46,821     36,468     32,415  
NONINTEREST EXPENSE:                  
Salaries and employee benefits 40,208     43,071     40,497     30,093     30,187  
Occupancy expense 6,684     6,885     6,656     5,157     5,017  
Furniture and equipment 3,343     3,378     3,199     2,381     2,357  
Other expenses 20,013     19,500     20,581     34,268     14,600  
Total Noninterest Expense 70,248     72,834     70,933     71,899     52,161  
Income before income tax expense and noncontrolling interest 32,378     27,004     36,807     10,254     26,849  
Provision for income tax expense 9,386     7,160     10,974     2,375     8,188  
Net income 22,992     19,844     25,833     7,879     18,661  
Net income attributable to noncontrolling interest (1,024 )   (848 )   (1,657 )   (1,620 )   (842 )
Net income attributable to TowneBank $ 21,968     $ 18,996     $ 24,176     $ 6,259     $ 17,819  
Net income available to common shareholders $ 21,968     $ 18,996     $ 24,176     $ 6,259     $ 17,819  
Per common share information                  
Basic earnings $ 0.35     $ 0.31     $ 0.39     $ 0.12     $ 0.35  
Diluted earnings $ 0.35     $ 0.31     $ 0.39     $ 0.12     $ 0.35  
Basic weighted average shares outstanding 62,075,983     61,963,948     61,908,316     51,994,473     51,290,010  
Diluted weighted average shares outstanding 62,262,789     62,175,705     62,067,832     52,116,772     51,392,857  
Cash dividends declared $ 0.13     $ 0.13     $ 0.13     $ 0.13     $ 0.12  

TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
       
      Increase/(Decrease)
  Three Months Ended   March 31, 2017   March 31, 2017
  March 31,   December 31,   March 31, 2016   December 31, 2016
  2017   2016   2016   Amount   Percent   Amount   Percent
Revenue                          
Net interest income $ 58,444     $ 45,823     $ 59,482     $ 12,621     27.54 %   $ (1,038 )   (1.75 )%
Service charges on deposit accounts 2,472     2,176     2,535     296     13.60 %   (63 )   (2.49 )%
Credit card merchant fees 1,118     895     1,135     223     24.92 %   (17 )   (1.50 )%
Other income 3,106     2,530     4,125     576     22.77 %   (1,019 )   (24.70 )%
Net gain on investment securities —     —     6     —     —     (6 )   (100.00 )%
Total noninterest income 6,696     5,601     7,801     1,095     19.55 %   (1,105 )   (14.16 )%
Total revenue 65,140     51,424     67,283     13,716     26.67 %   (2,143 )   (3.19 )%
                           
Provision for loan losses 2,541     (259 )   1,801     2,800     N/M     740     41.09 %
                           
Expenses                          
Salaries and employee benefits 20,341     17,513     23,770     2,828     16.15 %   (3,429 )   (14.43 )%
Occupancy expense 4,128     3,475     4,349     653     18.79 %   (221 )   (5.08 )%
Furniture and equipment 2,274     1,865     2,374     409     21.93 %   (100 )   (4.21 )%
Advertising and marketing 1,041     874     749     167     19.11 %   292     38.99 %
Charitable contributions 1,313     967     1,011     346     35.78 %   302     29.87 %
Outside processing 1,154     930     1,387     224     24.09 %   (233 )   (16.80 )%
Foreclosed property expenses 118     112     607     6     5.36 %   (489 )   (80.56 )%
FDIC and other insurance 987     1,050     848     (63 )   (6.00 )%   139     16.39 %
Professional fees 1,280     1,049     1,181     231     22.02 %   99     8.38 %
Telephone and postage 904     744     997     160     21.51 %   (93 )   (9.33 )%
Other expenses 4,809     3,602     4,242     1,207     33.51 %   567     13.37 %
Total expenses 38,349     32,181     41,515     6,168     19.17 %   (3,166 )   (7.63 )%
Income before income tax, corporate allocation and noncontrolling interest 24,250     19,502     23,967     4,748     24.35 %   283     1.18 %
Corporate allocation 484     360     519     $ 124     34.44 %   (35 )   (6.74 )%
Income before income tax provision and noncontrolling interest 24,734     19,862     24,486     4,872     24.53 %   248     1.01 %
Provision for income tax expense 6,765     5,729     6,546     1,036     18.08 %   219     3.35 %
Net income 17,969     14,133     17,940     3,836     27.14 %   29     0.16 %
Noncontrolling interest (2 )   —     (9 )   (2 )   N/M     7     (77.78 )%
Net income attributable to TowneBank $ 17,967     $ 14,133     $ 17,931     $ 3,834     27.13 %   $ 36     0.20 %
Efficiency ratio 58.87 %   62.58 %   61.71 %   (3.71 )%   (5.93 )%   (2.84 )%   (4.60 )%

TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
       
      Increase/(Decrease)
  Three Months Ended   March 31, 2017   March 31, 2017
  March 31,   December 31,   March 31, 2016   December 31, 2016
  2017   2016   2016   Amount   Percent   Amount   Percent
Revenue                          
Residential mortgage brokerage income, net $ 17,775     $ 7,310     $ 18,378     $ 10,465     143.16 %   $ (603 )   (3.28 )%
Real estate brokerage income, net 1,460     1,412     1,761     48     3.40 %   (301 )   (17.09 )%
Title insurance and settlement fees 355     350     422     5     1.43 %   (67 )   (15.88 )%
Property management fees, net 3,533     3,415     1,163     118     3.46 %   2,370     203.78 %
Income from unconsolidated subsidiary 124     165     218     (41 )   (24.85 )%   (94 )   (43.12 )%
Net interest and other income 2,203     762     2,959     1,441     189.11 %   (756 )   (25.55 )%
Total revenue 25,450     13,414     24,901     12,036     89.73 %   549     2.20 %
                           
Expenses                          
Salaries and employee benefits 13,708     6,706     13,551     7,002     104.41 %   157     1.16 %
Occupancy expense 1,964     1,013     2,002     951     93.88 %   (38 )   (1.90 )%
Furniture and equipment 869     268     807     601     224.25 %   62     7.68 %
Amortization of intangible assets 559     353     565     206     58.36 %   (6 )   (1.06 )%
Other expenses 5,978     2,844     5,909     3,134     110.20 %   69     1.17 %
Total expenses 23,078     11,184     22,834     11,894     106.35 %   244     1.07 %
                           
Income before income tax, corporate allocation and noncontrolling interest 2,372     2,230     2,067     142     6.37 %   305     14.76 %
Corporate allocation (307 )   (170 )   (364 )   (137 )   80.59 %   57     (15.66 )%
Income before income tax provision and noncontrolling interest 2,065     2,060     1,703     5     0.24 %   362     21.26 %
Provision for income tax expense 627     659     355     (32 )   (4.86 )%   272     76.62 %
Net income 1,438     1,401     1,348     37     2.64 %   90     6.68 %
Noncontrolling interest (512 )   (368 )   (675 )   (144 )   39.13 %   163     (24.15 )%
Net income attributable to TowneBank $ 926     $ 1,033     $ 673     $ (107 )   (10.36 )%   $ 253     37.59 %
Efficiency ratio 90.68 %   83.38 %   91.70 %   7.30 %   8.76 %   (1.02 )%   (1.11 )%

TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
                   
      Increase/(Decrease)
  Three Months Ended   March 31, 2017   March 31, 2017
  March 31,   December 31,   March 31, 2016   December 31, 2016
  2017   2016   2016   Amount   Percent   Amount   Percent
Commission and fee income                          
Property and casualty $ 8,457     $ 8,086     $ 7,614     $ 371     4.59 %   $ 843     11.07 %
Employee benefits 2,974     2,898     2,930     76     2.62 %   44     1.50 %
Travel insurance 1,627     1,456     828     171     11.74 %   799     96.50 %
Specialized benefit services 165     153     164     12     7.84 %   1     0.61 %
Total commissions and fees 13,223     12,593     11,536     630     5.00 %   1,687     14.62 %
                           
Contingency and bonus revenue 3,539     3,411     67     128     3.75 %   3,472     N/M  
Other income 88     77     71     11     14.29 %   17     23.94 %
Total revenue 16,850     16,081     11,674     769     4.78 %   5,176     44.34 %
                           
Employee commission expense 2,273     2,168     2,221     105     4.84 %   52     2.34 %
Revenue, net of commission expense 14,577     13,913     9,453     664     4.77 %   5,124     54.21 %
                           
Salaries and employee benefits 6,159     5,968     5,749     191     3.20 %   410     7.13 %
Occupancy expense 592     529     535     63     11.91 %   57     10.65 %
Furniture and equipment 200     224     196     (24 )   (10.71 )%   4     2.04 %
Amortization of intangible assets 697     685     701     12     1.75 %   (4 )   (0.57 )%
Other expenses 1,173     1,390     1,304     (217 )   (15.61 )%   (131 )   (10.05 )%
Total operating expenses 8,821     8,796     8,485     25     0.28 %   336     3.96 %
Income before income tax, corporate allocation and noncontrolling interest 5,756     5,117     968     639     12.49 %   4,788     494.63 %
Corporate allocation (177 )   (190 )   (155 )   13     (6.84 )%   (22 )   14.19 %
Income before income tax provision and noncontrolling interest 5,579     4,927     813     652     13.23 %   4,766     586.22 %
Provision for income tax expense 1,994     1,800     259     194     10.78 %   1,735     669.88 %
Net income 3,585     3,127     554     458     14.65 %   3,031     547.11 %
Noncontrolling interest (510 )   (474 )   (162 )   (36 )   7.59 %   (348 )   214.81 %
Net income attributable to TowneBank $ 3,075     $ 2,653     $ 392     $ 422     15.91 %   $ 2,683     684.44 %
Efficiency ratio 60.51 %   63.22 %   89.76 %   (2.71 )%   (4.29 )%   (29.25 )%   (32.59 )%

TOWNEBANK
Reconcilement of Non-GAAP Financial Measures:
           
  Three Months Ended
  March 31,   March 31,   December 31,
  2017   2016   2016
           
Return on average assets (GAAP basis) 1.11 %   1.14 %   0.95 %
Impact of excluding average goodwill and other intangibles and amortization 0.11 %   0.07 %   0.10 %
Return on average tangible assets (Non-GAAP) 1.22 %   1.21 %   1.05 %
           
Return on average equity (GAAP basis) 8.15 %   8.63 %   6.95 %
Impact of excluding average goodwill and other intangibles and amortization 3.73 %   2.93 %   3.32 %
Return on average tangible equity (Non-GAAP) 11.88 %   11.56 %   10.27 %
           
Return on average common equity (GAAP basis) 8.23 %   8.73 %   7.02 %
Impact of excluding average goodwill and other intangibles and amortization 3.82 %   2.99 %   3.40 %
Return on average tangible common equity (Non-GAAP) 12.05 %   11.72 %   10.42 %
           
Book value (GAAP basis) $ 17.42     $ 16.00     $ 17.20  
Impact of excluding average goodwill and other intangibles and amortization (4.83 )   (3.62 )   (4.84 )
Tangible book value $ 12.59     $ 12.38     $ 12.36  
            

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 Investor Relations Officer and CSO, 757-638-6813