TowneBank Reports Full Year and Fourth Quarter Financial Results for 2020

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

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

Quarter Highlights:

  • Total revenues were $171.85 million, in fourth quarter 2020, an increase over the prior year quarter of $32.18 million, or 23.04%.

  • Quarterly pre-provision, pre-tax, net revenues (non-GAAP) were $62.11 million, an increase of $15.65 million, or 33.67%.

  • During fourth quarter 2020, we completed a core banking system conversion to allow the Company to provide a greater variety of financial services to our members through new technologies and enhanced digital solutions.

  • Loans held for investment increased $1.21 billion, or 14.37%, from December 31, 2019, and decreased $141.50 million, or 1.45%, from September 30, 2020. The balance at December 31, 2020 and September 30, 2020 included $0.86 billion and $1.10 billion, respectively, of loans originated under the Small Business Administration’s Paycheck Protection Program (“PPP”). Excluding PPP, loans held for investment increased $353.89 million, or 4.20%, compared to prior year, and $105.75 million, or 4.85% on an annualized basis, compared to the linked quarter.

  • Total deposits were $11.57 billion, an increase of $2.30 billion, or 24.83%, compared to prior year but a decrease, due to expected runoff and seasonality, of $131.80 million, or 1.13%, from September 30, 2020.

  • Noninterest bearing deposits increased by 48.23%, to $4.37 billion, compared to prior year, representing 37.80% of total deposits. Compared to the linked quarter, noninterest bearing deposits decreased 2.01%.

  • In the quarter ended December 31, 2020, annualized return on average common shareholders’ equity was 11.36% and annualized return on average tangible common shareholders’ equity was 16.48% (non-GAAP). For the full 12 months, return on average common shareholders’ equity was 8.52% and return on average tangible common shareholders’ equity was 12.76% (non-GAAP).

  • Net interest margin of 2.97% and taxable equivalent net interest margin of 2.98% (non-GAAP) compared to the prior year quarter of 3.33% and 3.35%, respectively.

  • Effective tax rate of 17.21% compared to 18.17% at December 31, 2019.

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

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

  • Net interest income was $100.61 million compared to $89.96 million for the quarter ended December 31, 2019. Included in net interest income was PPP interest and fee income of $11.29 million and $0, respectively.

  • Taxable equivalent net interest margin was 2.98%, including purchase accounting accretion of 5 basis points and PPP accretion of 5 basis points, compared to 3.35%, including purchase accounting accretion of 9 basis points, for 2019.

  • Average loans held for investment, with an average yield of 4.28%, represented 72.32% of average earning assets in the fourth quarter of 2020 compared to an average yield of 4.81%, which represented 77.25% of average earning assets in the fourth quarter of 2019.

  • Total cost of deposits decreased to 0.37% from 0.92% at December 31, 2019.

  • Average interest-earning assets totaled $13.48 billion at December 31, 2020 compared to $10.72 billion at December 31, 2019, an increase of 25.76%.

  • Average interest-bearing liabilities totaled $8.03 billion, an increase of $0.97 billion, or 13.74%, from the prior year.

  • Total interest expense decreased 42.04%, to $15.37 million in fourth quarter 2020 compared to $26.52 million in fourth quarter 2019, and decreased $3.40 million, or 18.11%, compared to the linked quarter.

Quarterly Provision for Loan Losses:

  • Recorded a provision for loan losses of $1.21 million compared to $3.60 million one year ago and $28.26 million in the linked quarter. A combination of modest loan growth, significantly higher provisions in the two previous quarters, and improvements in the economic forecast were the drivers in the lower fourth quarter 2020 provision.

  • Net charge-offs were $0.11 million compared to $0.80 million one year prior. The ratio of net charge-offs (recoveries) to average loans on an annualized basis was 0.00% in fourth quarter 2020, (0.01)% in the linked quarter, and 0.04% in fourth quarter 2019.

  • Recorded a provision for credit losses on off-balance sheet commitments of $0.06 million compared to $3.50 million in the linked quarter.

  • The allowance for loan losses represented 1.25% of total loans compared to 1.22% at September 30, 2020 and 0.69% at December 31, 2019. Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses (non-GAAP) was 1.37%, at December 31, 2020 and September 30, 2020. The allowance for loan losses was 10.74 times nonperforming loans compared to 7.31 times at September 30, 2020 and 3.34 times at December 31, 2019.

Quarterly Noninterest Income Compared to the Fourth Quarter of 2019:

  • Total noninterest income was $71.23 million compared to $49.71 million in 2019, an increase of $21.52 million, or 43.29%. Residential mortgage banking income increased $21.62 million, insurance commissions decreased $1.13 million, and real estate brokerage and property management income increased $2.49 million.

  • Residential mortgage banking income was $37.50 million compared to $15.88 million in fourth quarter 2019. Loan volume in the current quarter was $1.69 billion, with purchase activity comprising 59.76%. Loan volume in fourth quarter 2019 was $860.16 million, with purchase activity of 70.32%. Loan volume in the linked quarter was $1.79 billion with purchase activity of 61.21%.

  • Total insurance segment revenue decreased $2.89 million, or 14.51%, to $17.00 million in the fourth quarter of 2020. This decrease is attributable to several factors. The prior year quarter included proceeds from life insurance policies of $1.64 million. Contingency income and benefits commissions declined, compared to the prior year quarter. Additionally, there were no commissions on travel insurance in the fourth quarter of 2020, compared to $0.79 million in the prior year quarter, due to the sale of Red Sky Insurance in the third quarter of 2020. We also acquired an insurance agency, which is expected to add approximately $2.4 million in gross revenue for 2021, at the end of December 2020.

  • Property management fee revenue increased 35.30%, or $1.48 million, as compared to fourth quarter 2019 due to increases in reservation levels and stronger fourth quarter 2020 advanced reservations.

  • Service charges on deposit accounts declined $0.54 million, or 23.96%, compared to the prior year quarter due to fee waivers for members experiencing financial hardship and the waiving of various member service charges during our core conversion.

Quarterly Noninterest Expense Compared to the Fourth Quarter of 2019:

  • Total noninterest expense was $105.93 million compared to $92.34 million, an increase of $13.60 million, or 14.72%. This reflects increases of $5.46 million in salary and benefits expense, $1.09 million in software expense, and $0.68 million in occupancy expenses.

  • FDIC insurance assessments increased $1.84 million in fourth quarter 2020 compared to 2019 due to the Company’s receipt of small bank assessment credits for $1.66 million in the fourth quarter of 2019.

  • Increases in salaries and benefits were driven by incentives related to a strong full-year performance and conversion and production related overtime. Software increases were largely driven by core conversion costs, and the costs associated with software needed to facilitate the adoption of CECL. Occupancy expense increases were driven by a full quarter expense related to the November 2019 expansion into the Greensboro, North Carolina market.

  • Recorded a loss on early extinguishment of debt of $2.63 million in the fourth quarter of 2020, associated with restructuring of certain borrowings to reduce future interest expense and deploy excess liquidity. The impact of this nonrecurring expense was a reduction to our EPS of $0.03.

Quarterly Income Taxes Compared to the Fourth Quarter of 2019:

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

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

  • Total assets were $14.63 billion at December 31, 2020, an increase of 22.42%, compared to $11.95 billion at December 31, 2019. This increase was driven primarily by increased liquidity levels and additional loan balances attributable to PPP loans.

  • Loans held for investment increased $1.21 billion, or 14.37%, compared to year end 2019, but decreased $0.14 billion compared to the linked quarter.

  • Mortgage loans held for sale increased $121.57 million, or 29.00%, compared to prior year and decreased $128.22 million, or 19.17%, compared to the linked quarter.

  • Total deposits increased $2.30 billion, or 24.83%, over December 31, 2019, and decreased $0.13 billion, or 1.13%, compared to the linked quarter.

Investment Securities:

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

Loans and Asset Quality:

  • Total loans held for investment were $9.63 billion at December 31, 2020 compared to $9.77 billion at September 30, 2020 and $8.42 billion at December 31, 2019.

  • Nonperforming assets were $16.21 million, or 0.11% of total assets, compared to $32.80 million, or 0.27% of total assets, at December 31, 2019.

  • Nonperforming loans were 0.12% of period end loans compared to 0.21% at December 31, 2019.

  • Foreclosed property decreased to $4.28 million from $13.84 million at December 31, 2019.

  • Expected loss estimates are subject to change based on continuing review of models and assumptions, portfolio performance, changes in forecasted macroeconomic conditions and loan mix which could result in material changes to the reserve in future periods.

  • At December 31, 2020 we had $340.81 million in loan modifications made in accordance with section 4013 of the Cares Act, 64% are currently paying interest.

Deposits and Borrowings:

  • Total deposits were $11.57 billion compared to $11.70 billion at September 30, 2020 and $9.27 billion at December 31, 2019.

  • Total loans to total deposits were 83.20% compared to 83.47% at September 30, 2020 and 90.81% at December 31, 2019.

  • Non-interest bearing deposits were 37.80% of total deposits at December 31, 2020 compared to 38.14% at September 30, 2020 and 31.83% at December 31, 2019. Non-interest bearing deposits experienced typical seasonality during the fourth quarter.

  • Total borrowings were $0.96 billion compared to $1.04 billion and $0.77 billion at September 30, 2020 and December 31, 2019, respectively.

Capital:

  • Common equity tier 1 capital ratio of 11.87%.

  • Tier 1 leverage capital ratio of 8.99%.

  • Tier 1 risk-based capital ratio of 12.04%.

  • Total risk-based capital ratio of 15.42%.

  • Book value was $24.31 compared to $23.83 at September 30, 2020 and $22.58 at December 31, 2019.

  • Tangible book value (non-GAAP) was $17.46 compared to $17.06 at September 30, 2020 and $15.69 at December 31, 2019.

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

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 42 banking offices serving Chesapeake, Chesterfield County, Glen Allen, Hampton, James City County, Mechanicsville, Newport News, Norfolk, Portsmouth, Richmond, Suffolk, Virginia Beach, Williamsburg, and York County in Virginia, along with Raleigh, Cary, Charlotte, Greensboro, Greenville, Moyock, Grandy, Camden County, Southern Shores, Corolla and Nags Head in North Carolina. TowneBank also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations. Local decision-making is a hallmark of its hometown banking strategy that is delivered through the leadership of each group’s President and Board of Directors. With total assets of $14.63 billion as of December 31, 2020, TowneBank is one of the largest banks headquartered in Virginia.

Non-GAAP Financial Measures:

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

Forward-Looking Statements:

Certain statements contained in this release constitute forward-looking statements within the meaning of U.S. federal securities laws. These forward-looking statements speak only as of the date of this release, are based on current expectations, and involve a number of assumptions. These include statements regarding TowneBank’s future economic performance, financial condition, prospects, growth, strategies and expectations, and objectives of management, and are generally identified by the use of words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” or “project” or similar expressions. TowneBank intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. You should not place undue reliance on forward-looking statements, which are subject to assumptions that are subject to change. TowneBank’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ from those indicated or implied in the forward-looking statements and such differences may be material. Factors which could have a material effect on the operations and future prospects of TowneBank include but are not limited to: the impact of the COVID-19 pandemic and the associated efforts to limit its spread, changes in interest rates, general economic and business conditions; legislative/regulatory changes; the monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; the quality and composition of TowneBank’s loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBank’s market areas; cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain reliable electronic systems; changes in the securities markets; changes in accounting principles, policies and guidelines; and other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation. TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

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

Investor contact:
William B. Littreal, Chief Financial Officer, 757-638-6813

TOWNEBANK

Selected Financial Highlights (unaudited)

(dollars in thousands, except per share data)

Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

2020

2020

2020

2020

2019

Income and Performance Ratios:

Total Revenue

$

171,848

$

192,135

$

162,656

$

137,696

$

139,671

Net income

53,891

50,715

37,222

27,605

35,948

Net income available to common shareholders

50,082

34,464

34,605

26,384

35,075

Pre-provision, pre-tax, net revenues (non-GAAP) 62,107

73,903

69,014

39,587

46,462

Net income per common share – diluted

0.69

0.48

0.48

0.36

0.49

Book value per common share

24.31

23.83

23.50

22.77

22.58

Book value per share – tangible (non-GAAP) 17.46

17.06

16.68

15.91

15.69

Return on average assets

1.35

%

0.89

%

0.97

%

0.88

%

1.16

%

Return on average assets – tangible (non-GAAP) 1.46

%

0.97

%

1.07

%

1.00

%

1.30

%

Return on average equity

11.26

%

7.85

%

8.18

%

6.37

%

8.44

%

Return on average equity – tangible (non-GAAP) 16.28

%

11.66

%

12.32

%

9.91

%

12.97

%

Return on average common equity

11.36

%

7.91

%

8.24

%

6.42

%

8.51

%

Return on average common equity – tangible (non-GAAP) 16.48

%

11.79

%

12.44

%

10.01

%

13.12

%

Noninterest income as a percentage of total revenue

41.45

%

49.64

%

42.66

%

35.00

%

35.59

%

Regulatory Capital Ratios (1):

Common equity tier 1

11.87

%

11.75

%

11.54

%

11.23

%

11.46

%

Tier 1

12.04

%

11.91

%

11.67

%

11.35

%

11.49

%

Total

15.42

%

15.35

%

14.91

%

14.40

%

14.58

%

Tier 1 leverage ratio

8.99

%

8.89

%

9.05

%

10.11

%

9.95

%

Asset Quality:

Allowance for loan losses to nonperforming loans

10.74x

7.31x

5.34x

3.85x

3.34x

Allowance for loan losses to period end loans

1.25

%

1.22

%

0.92

%

0.73

%

0.69

%

Allowance for loan losses to period end loans excluding PPP loans (non-GAAP) 1.37

%

1.37

%

1.04

%

0.73

%

0.69

%

Nonperforming loans to period end loans

0.12

%

0.17

%

0.17

%

0.19

%

0.21

%

Nonperforming assets to period end assets

0.11

%

0.19

%

0.19

%

0.24

%

0.27

%

Net charge-offs (recoveries) to average loans (annualized)

%

(0.01

)%

%

0.03

%

0.04

%

Nonperforming loans

$

11,188

$

16,295

$

16,935

$

16,700

$

17,437

Former bank premises

750

750

1,521

Foreclosed property

4,276

11,695

12,315

13,053

13,839

Total nonperforming assets

$

16,214

$

28,740

$

29,250

$

29,753

$

32,797

Loans past due 90 days and still accruing interest

$

528

$

19

$

464

$

91

$

309

Allowance for loan losses

120,157

119,058

90,467

64,372

58,234

Mortgage Banking:

Loans originated, mortgage

$

1,257,963

$

1,292,801

$

1,116,782

$

718,681

$

628,279

Loans originated, joint venture

429,848

498,100

357,815

204,522

231,879

Total loans originated

$

1,687,811

$

1,790,901

$

1,474,597

$

923,203

$

860,158

Number of loans originated

5,481

5,817

4,818

3,025

2,984

Number of originators

228

224

216

223

217

Purchase %

59.76

%

61.21

%

51.26

%

61.31

%

70.32

%

Loans sold

$

1,845,926

$

1,833,590

$

1,398,649

$

809,834

$

879,910

Rate lock asset

$

11,781

$

10,480

$

7,202

$

3,691

$

1,525

Gross realized gain on sales and fees as a % of loans originated

4.02

%

3.65

%

3.17

%

1.80

%

3.38

%

Other Ratios:

Net interest margin

2.97

%

2.70

%

2.85

%

3.35

%

3.33

%

Net interest margin-fully tax equivalent (non-GAAP) 2.98

%

2.72

%

2.87

%

3.37

%

3.35

%

Average earning assets/total average assets

91.59

%

92.09

%

91.33

%

89.15

%

89.57

%

Average loans/average deposits

83.42

%

86.29

%

91.81

%

92.99

%

88.41

%

Average noninterest deposits/total average deposits

39.61

%

37.76

%

36.52

%

32.21

%

32.14

%

Period end equity/period end total assets

12.20

%

11.82

%

11.05

%

13.19

%

13.84

%

Efficiency ratio (non-GAAP) 60.02

%

57.36

%

55.17

%

70.79

%

63.96

%

(1) Current reporting period regulatory capital ratios are preliminary.

TOWNEBANK

Selected Data (unaudited)

(dollars in thousands)

Investment Securities

% Change

Q4

Q4

Q3

Q4 20 vs.

Q4 20 vs.

Available-for-sale securities, at fair value

2020

2019

2020

Q4 19

Q3 20

U.S. agency securities

$

184,657

$

129,038

$

167,275

43.10

%

10.39

%

U.S. Treasury notes

1,000

1,000

1,006

%

(0.60

)%

Municipal securities

353,651

223,106

292,792

58.51

%

20.79

%

Trust preferred and other corporate securities

31,499

53,367

24,236

(40.98

)%

29.97

%

Mortgage-backed securities issued by GSE and GNMA

797,765

1,034,797

825,378

(22.91

)%

(3.35

)%

Allowance for credit losses

(348

)

(4

)

n/m

n/m

Total

$

1,368,224

$

1,441,308

$

1,310,683

(5.07

)%

4.39

%

Gross unrealized gains (losses) reflected in financial statements

Total gross unrealized gains

$

60,025

$

23,950

$

62,206

150.63

%

(3.51

)%

Total gross unrealized losses

(1,703

)

(4,215

)

(773

)

(59.60

)%

120.31

%

Net unrealized gain (loss) on AFS securities

$

58,322

$

19,735

$

61,433

195.53

%

(5.06

)%

Held-to-maturity securities, at amortized cost

Municipal securities

$

5,012

$

29,167

$

2,333

(82.82

)%

114.83

%

Trust preferred corporate securities

2,321

2,369

4,992

(2.03

)%

(53.51

)%

Mortgage-backed securities issued by GSE and GNMA

9,179

12,152

9,806

(24.47

)%

(6.39

)%

Allowance for credit losses

(97

)

(90

)

n/a

7.78

%

Total

$

16,415

$

43,688

$

17,041

(62.43

)%

(3.67

)%

Gross unrealized gains (losses) not reflected in financial statements

Total gross unrealized gains

$

1,957

$

1,520

$

1,971

28.75

%

(0.71

)%

Total gross unrealized losses

(37

)

(100.00

)%

n/m

Net unrealized gain (loss) on HTM securities

$

1,957

$

1,483

$

1,971

31.96

%

(0.71

)%

Loans Held For Investment (1)

% Change

Q4

Q4

Q3

Q4 20 vs.

Q4 20 vs.

2020

2019

2020

Q4 19

Q3 20

Real estate – construction and development

$

1,199,772

$

1,120,533

$

1,143,202

7.07

%

4.95

%

Commercial real estate – investment related properties

2,335,235

2,183,232

2,338,532

6.96

%

(0.14

)%

Commercial real estate – owner occupied

1,380,516

1,329,144

1,378,443

3.87

%

0.15

%

Real estate – multifamily

295,488

243,041

289,270

21.58

%

2.15

%

Real estate – residential 1-4 family

1,629,105

1,653,084

1,660,535

(1.45

)%

(1.89

)%

Commercial and industrial business

2,370,051

1,574,275

2,499,801

50.55

%

(5.19

)%

Consumer and other loans

418,901

315,979

460,787

32.57

%

(9.09

)%

Total

$

9,629,068

$

8,419,288

$

9,770,570

14.37

%

(1.45

)%

(1) PPP loans totaling $0.86 billion and $1.10 billion, primarily in C&I, are included in Q4 2020 and Q3 2020, respectively.

Deposits

% Change

Q4

Q4

Q3

Q4 20 vs.

Q4 20 vs.

2020

2019

2020

Q4 19

Q3 20

Noninterest-bearing demand

$

4,374,566

$

2,951,225

$

4,464,178

48.23

%

(2.01

)%

Interest-bearing:

Demand and money market accounts

4,819,604

3,586,364

4,642,482

34.39

%

3.82

%

Savings

330,091

276,205

312,444

19.51

%

5.65

%

Certificates of deposits

2,048,905

2,457,123

2,285,859

(16.61

)%

(10.37

)%

Total

$

11,573,166

$

9,270,917

$

11,704,963

24.83

%

(1.13

)%

TOWNEBANK

Average Balances, Yields and Rate Paid (unaudited)

(dollars in thousands)

Three Months Ended

Three Months Ended

Three Months Ended

December 31, 2020

September 30, 2020

December 31, 2019

Interest

Average

Interest

Average

Interest

Average

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets:

Loans (net of unearned income and deferred costs), excluding nonaccrual loans (1)

$

9,752,150

$

104,799

4.28

%

$

9,752,746

$

103,401

4.22

%

$

8,283,388

$

100,504

4.81

%

Taxable investment securities

1,250,375

6,878

2.20

%

1,206,679

6,726

2.23

%

1,331,175

9,179

2.76

%

Tax-exempt investment securities

139,572

520

1.49

%

144,999

779

2.15

%

118,298

908

3.07

%

Total securities

1,389,947

7,398

2.13

%

1,351,678

7,505

2.22

%

1,449,473

10,087

2.78

%

Interest-bearing deposits

1,754,365

435

0.10

%

2,523,644

632

0.10

%

519,737

2,067

1.58

%

Loans held for sale

587,517

3,867

2.63

%

634,309

4,587

2.89

%

469,725

4,413

3.76

%

Total earning assets

13,483,979

116,499

3.44

%

14,262,377

116,125

3.24

%

10,722,323

117,071

4.33

%

Less: allowance for loan losses

(121,402

)

(95,594

)

(56,766

)

Total nonearning assets

1,359,808

1,320,369

1,305,036

Total assets

$

14,722,385

$

15,487,152

$

11,970,593

Liabilities and Equity:

Interest-bearing deposits

Demand and money market

$

4,582,588

$

2,633

0.23

%

$

4,311,920

$

2,663

0.25

%

$

3,533,912

$

6,421

0.72

%

Savings

317,561

552

0.69

%

304,753

555

0.72

%

278,910

638

0.91

%

Certificates of deposit

2,159,573

7,578

1.40

%

2,417,772

9,747

1.60

%

2,544,845

14,685

2.29

%

Total interest-bearing deposits

7,059,722

10,763

0.61

%

7,034,445

12,965

0.73

%

6,357,667

21,744

1.36

%

Borrowings

722,291

1,645

0.89

%

1,931,120

2,841

0.58

%

454,621

1,810

1.56

%

Subordinated debt, net

248,965

2,962

4.76

%

248,807

2,962

4.76

%

248,361

2,962

4.77

%

Total interest-bearing liabilities

8,030,978

15,370

0.76

%

9,214,372

18,768

0.81

%

7,060,649

26,516

1.49

%

Demand deposits

4,630,665

4,268,443

3,011,688

Other noninterest-bearing liabilities

291,836

257,304

250,327

Total liabilities

12,953,479

13,740,119

10,322,664

Shareholders’ equity

1,768,906

1,747,033

1,647,929

Total liabilities and equity

$

14,722,385

$

15,487,152

$

11,970,593

Net interest income (tax-equivalent basis)

$

101,129

$

97,357

$

90,555

Reconcilement of Non-GAAP Financial Measures

Tax-equivalent basis adjustment

(515

)

(598

)

(596

)

Net interest income (GAAP)

$

100,614

$

96,759

$

89,959

Interest rate spread (2)(3)

2.68

%

2.43

%

2.84

%

Interest expense as a percent of average earning assets

0.45

%

0.52

%

0.98

%

Net interest margin (tax equivalent basis) (3)(4)

2.98

%

2.72

%

3.35

%

Total cost of deposits

0.37

%

0.46

%

0.92

%

(1) December 31, and September 30, 2020 balances include average PPP balances of $1.04 billion and $1.10 billion, and related interest and fee income of $11.29 million and $9.82 million, respectively. There were no PPP balances at December 31, 2019.
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4) Non-GAAP.

TOWNEBANK

Average Balances, Yields and Rate Paid (unaudited)

(dollars in thousands)

Year Ended December 31,

2020

2019

2018

Interest

Average

Interest

Average

Interest

Average

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets:

Loans (net of unearned income and deferred costs), excluding nonaccrual loans (1)

$

9,420,584

$

411,421

4.37

%

$

8,122,210

$

405,511

4.99

%

$

7,567,570

$

373,057

4.93

%

Taxable investment securities

1,252,926

30,181

2.41

%

1,202,107

34,141

2.84

%

1,004,080

24,729

2.46

%

Tax-exempt investment securities

140,078

2,997

2.14

%

102,731

3,426

3.34

%

79,720

2,920

3.66

%

Total securities

1,393,004

33,178

2.38

%

1,304,838

37,567

2.88

%

1,083,800

27,649

2.55

%

Interest-bearing deposits

689,715

2,603

0.38

%

665,903

13,825

2.08

%

560,368

10,229

1.83

%

Mortgage loans held for sale

505,502

15,252

3.02

%

335,588

13,379

3.99

%

293,017

13,124

4.48

%

Total earning assets

12,008,805

462,454

3.85

%

10,428,539

470,282

4.51

%

9,504,755

424,059

4.46

%

Less: allowance for loan losses

(85,570

)

(54,476

)

(48,737

)

Total nonearning assets

2,248,971

1,264,363

1,143,167

Total assets

$

14,172,206

$

11,638,426

$

10,599,185

Liabilities and Equity:

Interest-bearing deposits

Demand and money market

$

4,070,562

$

13,105

0.32

%

$

3,351,135

$

26,909

0.80

%

$

2,951,038

$

16,458

0.56

%

Savings

297,441

2,254

0.76

%

280,894

3,296

1.17

%

302,435

3,824

1.26

%

Certificates of deposit

2,378,281

42,502

1.79

%

2,478,663

56,050

2.26

%

2,060,587

32,859

1.59

%

Total interest-bearing deposits

6,746,284

57,861

0.86

%

6,110,692

86,255

1.41

%

5,314,060

53,141

1.00

%

Borrowings

1,269,064

10,306

0.80

%

609,142

11,368

1.84

%

897,574

15,542

1.71

%

Subordinated debt, net

248,736

11,847

4.76

%

248,139

11,847

4.77

%

251,097

12,067

4.81

%

Total interest-bearing liabilities

8,264,084

80,014

0.97

%

6,967,973

109,470

1.57

%

6,462,731

80,750

1.25

%

Demand deposits

3,924,797

2,844,178

2,517,173

Other noninterest-bearing liabilities

262,266

228,994

164,486

Total liabilities

12,451,147

10,041,145

9,144,390

Shareholders’ equity

1,721,059

1,597,281

1,454,795

Total liabilities and equity

$

14,172,206

$

11,638,426

$

10,599,185

Net interest income (tax-equivalent basis)

$

382,440

$

360,812

$

343,309

Reconcilement of Non-GAAP Financial Measures

Tax-equivalent basis adjustment

(2,296

)

(2,457

)

(2,236

)

Net interest income (GAAP)

$

380,144

$

358,355

$

341,073

Interest rate spread (2)(4)

2.88

%

2.94

%

3.21

%

Interest expense as a percent of average earning assets

0.67

%

1.05

%

0.85

%

Net interest margin (tax-equivalent basis) (3)(4)

3.18

%

3.46

%

3.61

%

Total cost of deposits

0.54

%

0.96

%

0.68

%

(1) December 31, 2020 balances include average PPP balances of $0.74 billion and related interest and fee income of $26.94 million. There were no PPP balances at December 31, 2019 or 2018.
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4) Non-GAAP.

TOWNEBANK

Consolidated Balance Sheets

(dollars in thousands, except per share data)

2020

2019

(unaudited)

(audited)

ASSETS

Cash and due from banks

$

41,514

$

97,593

Interest-bearing deposits at FRB – Richmond

1,795,241

322,505

Interest-bearing deposits in financial institutions

27,532

22,518

Total Cash and Cash Equivalents

1,864,287

442,616

Securities available for sale, at fair value (amortized cost $1,310,250, allowance for credit losses of $348)(1)

1,368,224

1,441,308

Securities held to maturity, at amortized cost (fair value $18,469)(1)

16,512

43,688

Less: allowance for credit losses

(97

)

Securities held to maturity, net of allowance for credit losses

16,415

43,688

Other equity securities

6,492

6,462

FHLB stock

30,135

30,094

Total Securities

1,421,266

1,521,552

Mortgage loans held for sale

540,798

419,233

Loans, net of unearned income and deferred costs

9,629,068

8,419,288

Less: allowance for credit losses

(120,157

)

(58,234

)

Net Loans

9,508,911

8,361,054

Premises and equipment, net

260,242

231,806

Goodwill

452,328

446,816

Other intangible assets, net

45,533

54,399

BOLI

246,109

243,062

Other assets

286,970

227,125

TOTAL ASSETS

$

14,626,444

$

11,947,663

LIABILITIES AND EQUITY

Deposits:

Noninterest-bearing demand

$

4,374,566

$

2,951,225

Interest-bearing:

Demand and money market accounts

4,819,604

3,586,364

Savings

330,091

276,205

Certificates of deposit

2,048,905

2,457,123

Total Deposits

11,573,166

9,270,917

Advances from the FHLB

456,038

471,687

Subordinated debt, net

249,055

248,458

FRB PPP Lending Facility

182,852

Repurchase agreements and other borrowings

67,786

52,391

Total Borrowings

955,731

772,536

Other liabilities

313,719

250,516

TOTAL LIABILITIES

12,842,616

10,293,969

Preferred stock

Authorized and unissued shares – 2,000,000

Common stock, $1.667 par: Authorized shares – 150,000,000

Issued and outstanding shares 72,667,541 in 2020 and 72,649,682 in 2019

121,132

121,107

Capital surplus

1,046,642

1,041,160

Retained earnings

557,889

467,186

Common stock issued to deferred compensation trust, at cost

873,486 shares in 2020 and 818,578 shares in 2019

(16,969

)

(15,555

)

Deferred compensation trust

16,969

15,555

Accumulated other comprehensive income (loss)

41,184

11,302

TOTAL SHAREHOLDERS’ EQUITY

1,766,847

1,640,755

Noncontrolling interest

16,981

12,939

TOTAL EQUITY

1,783,828

1,653,694

TOTAL LIABILITIES AND EQUITY

$

14,626,444

$

11,947,663

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

TOWNEBANK

Consolidated Statements of Income

(dollars in thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2020

2019

2020

2019

(unaudited)

(unaudited)

(unaudited)

(audited)

INTEREST INCOME:

Loans, including fees

$

104,182

$

100,059

$

409,252

$

403,675

Investment securities

7,499

9,936

33,052

36,946

Interest-bearing deposits in financial institutions and federal funds sold

435

2,067

2,603

13,825

Mortgage loans held for sale

3,867

4,413

15,252

13,379

Total interest income

115,983

116,475

460,159

467,825

INTEREST EXPENSE:

Deposits

10,762

21,744

57,862

86,255

Advances from the FHLB

1,404

1,730

8,393

11,018

Subordinated debt, net

2,962

2,962

11,847

11,847

Repurchase agreements and other borrowings

241

80

1,913

350

Total interest expense

15,369

26,516

80,015

109,470

Net interest income

100,614

89,959

380,144

358,355

PROVISION FOR CREDIT LOSSES

1,617

3,601

67,177

9,371

Net interest income after provision for credit losses

98,997

86,358

312,967

348,984

NONINTEREST INCOME:

Residential mortgage banking income, net

37,504

15,884

112,166

66,812

Insurance commissions and other title fees and income, net

13,868

15,001

65,840

64,478

Real estate brokerage and property management income, net

9,229

6,737

38,249

34,292

Service charges on deposit accounts

1,707

2,245

8,021

10,544

Credit card merchant fees, net

1,377

1,389

5,170

4,746

BOLI

1,990

3,865

8,285

9,215

Other income

5,559

4,591

36,826

16,346

Net gain/(loss) on investment securities

9,634

(845

)

Total noninterest income

71,234

49,712

284,191

205,588

NONINTEREST EXPENSE:

Salaries and employee benefits

61,475

56,013

235,676

218,920

Occupancy expense

8,193

7,516

31,317

31,381

Furniture and equipment

3,462

3,598

13,914

14,351

Amortization – intangibles

2,797

3,005

11,498

12,370

Software expense

4,066

2,976

14,622

11,717

Data processing

2,363

2,510

10,985

11,825

Professional fees

2,591

2,990

11,268

12,943

Advertising and marketing

2,204

2,839

9,643

12,279

Other expenses

18,781

10,889

56,902

52,516

Total noninterest expense

105,932

92,336

395,825

378,302

Income before income tax expense and noncontrolling interest

64,299

43,734

201,333

176,270

Provision for income tax expense

10,408

7,786

31,900

32,596

Net income

$

53,891

$

35,948

$

169,433

$

143,674

Net income attributable to noncontrolling interest

(3,809

)

(873

)

(23,898

)

(4,891

)

Net income attributable to TowneBank

$

50,082

$

35,075

$

145,535

$

138,783

Per common share information

Basic earnings

$

0.69

$

0.49

$

2.01

$

1.93

Diluted earnings

$

0.69

$

0.49

$

2.01

$

1.92

Cash dividends declared

$

0.18

$

0.18

$

0.72

$

0.70

TOWNEBANK

Consolidated Balance Sheets – Five Quarter Trend

(dollars in thousands, except per share data)

December 31,

September 30,

June 30,

March 31,

December 31,

2020

2020

2020

2020

2019

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(audited)

ASSETS

Cash and due from banks

$

41,514

$

114,604

$

115,724

$

108,929

$

97,593

Interest-bearing deposits at FRB – Richmond

1,795,241

1,670,186

2,511,152

753,643

322,505

Interest-bearing deposits in financial institutions

27,532

24,890

24,374

23,564

22,518

Total Cash and Cash Equivalents

1,864,287

1,809,680

2,651,250

886,136

442,616

Securities available for sale, at fair value

1,368,224

1,310,683

1,266,624

1,248,420

1,441,308

Securities held to maturity

16,512

17,131

41,595

42,431

43,688

Less: allowance for credit losses

(97

)

(90

)

(121

)

(133

)

Securities held to maturity, net of allowance for credit losses

16,415

17,041

41,474

42,298

43,688

Other equity securities

6,492

6,497

6,497

6,462

6,462

Federal Home Loan Bank stock

30,135

41,829

49,277

52,042

30,094

Total Securities

1,421,266

1,376,050

1,363,872

1,349,222

1,521,552

Mortgage loans held for sale

540,798

669,020

610,369

453,143

419,233

Loans, net of unearned income and deferred costs

9,629,068

9,770,570

9,801,889

8,784,195

8,419,288

Less: allowance for credit losses

(120,157

)

(119,058

)

(90,467

)

(64,372

)

(58,234

)

Net Loans

9,508,911

9,651,512

9,711,422

8,719,823

8,361,054

Premises and equipment, net

260,242

256,909

257,533

236,735

231,806

Goodwill

452,328

446,725

446,725

446,725

446,816

Other intangible assets, net

45,533

45,781

48,632

51,448

54,399

BOLI

246,109

244,103

242,493

240,924

243,062

Other assets

286,970

295,637

247,962

239,670

227,125

TOTAL ASSETS

$

14,626,444

$

14,795,417

$

15,580,258

$

12,623,826

$

11,947,663

LIABILITIES AND EQUITY

Deposits:

Noninterest-bearing demand

$

4,374,566

$

4,464,178

$

4,226,208

$

3,060,515

$

2,951,225

Interest-bearing:

Demand and money market accounts

4,819,604

4,642,482

4,223,391

3,573,926

3,586,364

Savings

330,091

312,444

298,673

280,807

276,205

Certificates of deposit

2,048,905

2,285,859

2,516,666

2,392,744

2,457,123

Total Deposits

11,573,166

11,704,963

11,264,938

9,307,992

9,270,917

Advances from the FHLB

456,038

731,202

906,365

971,527

471,687

Subordinated debt, net

249,055

248,906

248,756

248,607

248,458

FRB PPP Lending Facility

182,852

1,111,429

Repurchase agreements and other borrowings

67,786

58,061

60,913

171,762

52,391

Total Borrowings

955,731

1,038,169

2,327,463

1,391,896

772,536

Other liabilities

313,719

303,582

266,314

258,306

250,516

TOTAL LIABILITIES

12,842,616

13,046,714

13,858,715

10,958,194

10,293,969

Preferred stock

Authorized shares – 2,000,000

Common stock, $1.667 par value

121,132

121,115

121,101

121,057

121,107

Capital surplus

1,046,642

1,045,170

1,043,774

1,041,870

1,041,160

Retained earnings

557,889

520,888

499,502

477,972

467,186

Common stock issued to deferred compensation trust, at cost

(16,969

)

(16,951

)

(16,776

)

(15,562

)

(15,555

)

Deferred compensation trust

16,969

16,951

16,776

15,562

15,555

Accumulated other comprehensive income (loss)

41,184

44,569

43,218

12,301

11,302

TOTAL SHAREHOLDERS’ EQUITY

1,766,847

1,731,742

1,707,595

1,653,200

1,640,755

Noncontrolling interest

16,981

16,961

13,948

12,432

12,939

TOTAL EQUITY

1,783,828

1,748,703

1,721,543

1,665,632

1,653,694

TOTAL LIABILITIES AND EQUITY

$

14,626,444

$

14,795,417

$

15,580,258

$

12,623,826

$

11,947,663

TOWNEBANK

Consolidated Statements of Income – Five Quarter Trend (unaudited)

(dollars in thousands, except per share data)

Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

2020

2020

2020

2020

2019

INTEREST INCOME:

Loans, including fees

$

104,182

$

102,869

$

102,139

$

100,062

$

100,059

Investment securities

7,499

7,440

8,163

9,949

9,936

Interest-bearing deposits in financial institutions and federal funds sold

435

632

433

1,102

2,067

Mortgage loans held for sale

3,867

4,587

3,811

2,988

4,413

Total interest income

115,983

115,528

114,546

114,101

116,475

INTEREST EXPENSE:

Deposits

10,762

12,966

15,072

19,062

21,744

Advances from the FHLB

1,404

1,901

2,595

2,492

1,730

Subordinated debt

2,962

2,962

2,962

2,962

2,962

Repurchase agreements and other borrowings

241

940

643

89

80

Total interest expense

15,369

18,769

21,272

24,605

26,516

Net interest income

100,614

96,759

93,274

89,496

89,959

PROVISION FOR CREDIT LOSSES

1,617

31,598

26,945

7,016

3,601

Net interest income after provision for credit losses

98,997

65,161

66,329

82,480

86,358

NONINTEREST INCOME:

Residential mortgage banking income, net

37,504

37,531

29,715

7,416

15,884

Insurance commissions and other title fees and income, net

13,868

17,468

17,612

16,893

15,001

Real estate brokerage and property management income, net

9,229

11,301

10,781

6,938

6,737

Service charges on deposit accounts

1,707

1,986

1,888

2,440

2,245

Credit card merchant fees, net

1,377

1,506

1,109

1,179

1,389

BOLI

1,990

1,605

1,584

3,105

3,865

Other income

5,559

22,278

3,763

5,227

4,591

Net gain/(loss) on investment securities

1,701

2,930

5,002

Total noninterest income

71,234

95,376

69,382

48,200

49,712

NONINTEREST EXPENSE:

Salaries and employee benefits

61,475

61,408

56,926

55,867

56,013

Occupancy expense

8,193

8,396

7,227

7,502

7,516

Furniture and equipment

3,462

3,247

3,564

3,640

3,598

Amortization – intangibles

2,797

2,851

2,901

2,950

3,005

Software expense

4,066

3,572

3,492

3,492

2,976

Data processing

2,363

3,113

2,718

2,791

2,510

Professional fees

2,591

2,637

2,972

3,067

2,990

Advertising and marketing

2,204

1,870

1,986

3,584

2,839

Other expenses

18,781

14,887

9,239

13,995

10,889

Total noninterest expense

105,932

101,981

91,025

96,888

92,336

Income before income tax expense and noncontrolling interest

64,299

58,556

44,686

33,792

43,734

Provision for income tax expense

10,408

7,841

7,464

6,187

7,786

Net income

53,891

50,715

37,222

27,605

35,948

Net income attributable to noncontrolling interest

(3,809

)

(16,251

)

(2,617

)

(1,221

)

(873

)

Net income attributable to TowneBank

$

50,082

$

34,464

$

34,605

$

26,384

$

35,075

Per common share information

Basic earnings

$

0.69

$

0.48

$

0.48

$

0.37

$

0.49

Diluted earnings (1)

$

0.69

$

0.48

$

0.48

$

0.36

$

0.49

Basic weighted average shares outstanding

72,357,177

72,307,961

72,280,555

72,206,228

72,122,476

Diluted weighted average shares outstanding

72,455,096

72,344,284

72,317,988

72,299,721

72,302,414

Cash dividends declared

$

0.18

$

0.18

$

0.18

$

0.18

$

0.18

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

TOWNEBANK Banking Segment Financial Information (dollars in thousands)

Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30,

December 31,

2020 over 2019

2020

2019

2020

2020

2019

Amount

Percent

Revenue

Net interest income

$

97,412

$

87,637

$

92,869

$

367,353

$

351,969

$

15,384

4.37

%

Noninterest income

Service charges on deposit accounts

1,707

2,245

1,986

8,021

10,544

(2,523

)

(23.93

)%

Credit card merchant fees

1,377

1,389

1,506

5,169

4,746

423

8.91

%

Other income

5,983

5,271

4,876

21,809

19,620

2,189

11.16

%

Subtotal

9,067

8,905

8,368

34,999

34,910

89

0.25

%

Gain (loss) on investment securities

1,701

9,634

(845

)

10,479

n/m

Total noninterest income

9,067

8,905

10,069

44,633

34,065

10,568

31.02

%

Total revenue

106,479

96,542

102,938

411,986

386,034

25,952

6.72

%

Provision for credit losses

1,628

3,601

31,070

65,799

9,371

56,428

602.16

%

Expenses

Salaries and employee benefits

37,358

34,183

36,535

142,328

131,149

11,179

8.52

%

Occupancy expense

5,681

4,959

5,829

21,237

20,419

818

4.01

%

Furniture and equipment

2,625

2,577

2,424

10,425

10,240

185

1.81

%

Amortization of intangible assets

1,013

1,214

1,063

4,354

5,160

(806

)

(15.62

)%

Other expenses

19,892

14,078

15,793

65,107

66,295

(1,188

)

(1.79

)%

Total expenses

66,569

57,011

61,644

243,451

233,263

10,188

4.37

%

Income before income tax, corporate allocation and noncontrolling interest

38,282

35,930

10,224

102,736

143,400

(40,664

)

(28.36

)%

Corporate allocation

643

627

595

2,534

2,011

523

26.01

%

Income before income tax provision and noncontrolling interest

38,925

36,557

10,819

105,270

145,411

(40,141

)

(27.61

)%

Provision for income tax expense

5,163

6,368

474

14,467

25,706

(11,239

)

(43.72

)%

Net income

33,762

30,189

10,345

90,803

119,705

(28,902

)

(24.14

)%

Noncontrolling interest

4

(1

)

(2

)

6

2

4

n/m

Net income attributable to TowneBank

$

33,766

$

30,188

$

10,343

$

90,809

$

119,707

$

(28,898

)

(24.14

)%

Efficiency ratio (non-GAAP) 61.57

%

57.80

%

59.84

%

59.42

%

58.96

%

TOWNEBANK

Realty Segment Financial Information

(dollars in thousands)

Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30,

December 31,

2020 over 2019

2020

2019

2020

2020

2019

Amount

Percent

Revenue

Residential mortgage brokerage income, net

$

38,040

$

16,617

$

38,074

$

114,589

$

68,443

$

46,146

67.42

%

Real estate brokerage income, net

3,564

2,550

3,688

11,776

9,865

1,911

19.37

%

Title insurance and settlement fees

669

531

654

2,397

2,111

286

13.55

%

Property management fees, net

5,665

4,187

7,613

26,473

24,427

2,046

8.38

%

Income from unconsolidated subsidiary

398

75

451

1,336

516

820

158.91

%

Net interest and other income

3,627

2,787

4,101

13,889

7,724

6,165

79.82

%

Total revenue

51,963

26,747

54,581

170,460

113,086

57,374

50.73

%

Provision for (recovery of) credit losses

(11

)

528

1,378

$

1,378

n/m

Expenses

Salaries and employee benefits

$

16,168

$

12,941

$

15,744

$

58,263

$

52,619

$

5,644

10.73

%

Occupancy expense

1,869

1,857

1,906

7,465

8,285

(820

)

(9.90

)%

Furniture and equipment

614

773

620

2,622

3,099

(477

)

(15.39

)%

Amortization of intangible assets

658

655

658

2,630

2,741

(111

)

(4.05

)%

Other expenses

8,779

7,030

9,226

33,143

27,982

5,161

18.44

%

Total expenses

28,088

23,256

28,154

104,123

94,726

9,397

9.92

%

Income (loss) before income tax, corporate allocation, and noncontrolling interest

23,886

3,491

25,899

64,959

18,360

46,599

253.81

%

Corporate allocation

(403

)

(362

)

(356

)

(1,522

)

(1,163

)

(359

)

30.87

%

Income (loss) before income tax provision and noncontrolling interest

23,483

3,129

25,543

63,437

17,197

46,240

268.88

%

Provision for income tax

4,421

416

4,780

12,035

3,707

8,328

224.66

%

Net income (loss)

19,062

2,713

20,763

51,402

13,490

37,912

281.04

%

Noncontrolling interest

(3,813

)

(715

)

(4,790

)

(11,809

)

(3,711

)

(8,098

)

218.22

%

Net income (loss) attributable to TowneBank

$

15,249

$

1,998

$

15,973

$

39,593

$

9,779

$

29,814

304.88

%

Efficiency ratio (non-GAAP) 52.79

%

84.50

%

50.38

%

59.54

%

81.34

%

TOWNEBANK

Insurance Segment Financial Information

(dollars in thousands)

Three Months Ended

Year Ended

Increase/(Decrease)

December 31,

September 30,

December 31,

2020 over 2019

2020

2019

2020

2020

2019

Amount

Percent

Commission and fee income

Property and casualty

$

11,942

$

11,957

$

14,072

$

52,726

$

50,380

$

2,346

4.66

%

Employee benefits

3,725

3,758

3,825

15,259

14,726

533

3.62

%

Travel insurance (1)

794

1,399

3,526

4,085

(559

)

(13.68

)%

Specialized benefit services

175

173

165

664

672

(8

)

(1.19

)%

Total commissions and fees

15,842

16,682

19,461

72,175

69,863

2,312

3.31

%

Contingency and bonus revenue

1,087

1,396

1,112

6,230

6,307

(77

)

(1.22

)%

Other income (1)

69

1,805

17,697

17,976

2,032

15,944

784.65

%

Total revenue

16,998

19,883

38,270

96,381

78,202

18,179

23.25

%

Employee commission expense

3,592

3,501

3,654

14,492

13,379

1,113

8.32

%

Revenue, net of commission expense

13,406

16,382

34,616

81,889

64,823

17,066

26.33

%

Expenses

Salaries and employee benefits

$

7,949

$

8,889

$

9,129

$

35,085

$

35,152

$

(67

)

(0.19

)%

Occupancy expense

643

700

661

2,615

2,677

(62

)

(2.32

)%

Furniture and equipment

223

248

203

867

1,012

(145

)

(14.33

)%

Amortization of intangible assets

1,126

1,136

1,130

4,514

4,469

45

1.01

%

Other expenses

1,334

1,096

1,060

5,170

7,003

(1,833

)

(26.17

)%

Total operating expenses

11,275

12,069

12,183

48,251

50,313

(2,062

)

(4.10

)%

Income before income tax and noncontrolling interest

2,131

4,313

22,433

33,638

14,510

19,128

131.83

%

Corporate allocation

(240

)

(265

)

(239

)

(1,012

)

(848

)

(164

)

19.34

%

Income before income tax provision and noncontrolling interest

1,891

4,048

22,194

32,626

13,662

18,964

138.81

%

Provision for income tax expense

824

1,002

2,587

5,398

3,183

2,215

69.59

%

Net income

1,067

3,046

19,607

27,228

10,479

16,749

159.83

%

Noncontrolling interest (1)

(157

)

(11,459

)

(12,095

)

(1,182

)

(10,913

)

923.27

%

Net income attributable to TowneBank

$

1,067

$

2,889

$

8,148

$

15,133

$

9,297

$

5,836

62.77

%

Provision for income taxes

824

1,002

2,587

5,398

3,183

2,215

69.59

%

Depreciation, amortization and interest expense

1,274

1,333

1,285

5,151

5,312

(161

)

(3.03

)%

EBITDA (non-GAAP) $

3,165

$

5,224

$

12,020

$

25,682

$

17,792

$

7,890

44.35

%

Efficiency ratio (non-GAAP) 75.70

%

66.74

%

65.06

%

68.06

%

70.72

%

(1) In third quarter 2020 we sold Red Sky Insurance, our travel insurance joint venture. We recorded a gross gain on sale in other income of $17,626. Our re-tax net gain, after distributions to noncontrolling interest was $6,521.

TOWNEBANK

Reconciliation of Non-GAAP Financial Measures:

Three Months Ended

Twelve Months Ended

December 31,

September 30,

December 31,

December 31,

2020

2020

2019

2020

2019

Return on average assets (GAAP)

1.35

%

0.89

%

1.16

%

1.03

%

1.19

%

Impact of excluding average goodwill and other intangibles and amortization

0.11

%

0.08

%

0.14

%

0.10

%

0.15

%

Return on average tangible assets (non-GAAP)

1.46

%

0.97

%

1.30

%

1.13

%

1.33

%

Return on average equity (GAAP)

11.26

%

7.85

%

8.44

%

8.46

%

8.69

%

Impact of excluding average goodwill and other intangibles and amortization

5.02

%

3.81

%

4.53

%

4.16

%

4.89

%

Return on average tangible equity (non-GAAP)

16.28

%

11.66

%

12.97

%

12.62

%

13.58

%

Return on average common equity (GAAP)

11.36

%

7.91

%

8.51

%

8.52

%

8.75

%

Impact of excluding average goodwill and other intangibles and amortization

5.12

%

3.88

%

4.61

%

4.24

%

4.98

%

Return on average tangible common equity (non-GAAP)

16.48

%

11.79

%

13.12

%

12.76

%

13.73

%

Book value (GAAP)

$

24.31

$

23.83

$

22.58

$

24.31

$

22.58

Impact of excluding average goodwill and other intangibles and amortization

(6.85

)

(6.77

)

(6.89

)

(6.85

)

(6.89

)

Tangible book value (non-GAAP)

$

17.46

$

17.06

$

15.69

$

17.46

15.69

Efficiency ratio (GAAP)

61.64

%

53.08

%

66.11

%

59.58

%

67.08

%

Impact of excluding g/l on investments and amortization expense

(1.62

)%

4.28

%

(2.15

)%

(0.88

)%

(2.29

)%

Efficiency ratio (non-GAAP)

60.02

%

57.36

%

63.96

%

58.70

%

64.79

%

Average assets (GAAP)

$

14,722,385

$

15,487,152

$

11,970,593

$

14,172,206

$

11,638,426

Less: average goodwill and intangible assets

491,453

494,238

502,767

495,707

503,108

Average tangible assets (non-GAAP)

$

14,230,932

$

14,992,914

$

11,467,826

$

13,676,499

$

11,135,318

Average equity (GAAP)

$

1,768,906

$

1,747,033

$

1,647,929

$

1,721,059

$

1,597,281

Less: average goodwill and intangible assets

491,453

494,238

502,767

495,707

503,108

Average tangible equity (non-GAAP)

$

1,277,453

$

1,252,795

$

1,145,162

$

1,225,352

$

1,094,173

Average common equity (GAAP)

$

1,753,596

$

1,732,881

$

1,635,394

$

1,707,635

$

1,585,238

Less: average goodwill and intangible assets

491,453

494,238

502,767

495,707

503,108

Average tangible common equity (non-GAAP)

$

1,262,143

$

1,238,643

$

1,132,627

$

1,211,928

$

1,082,130

Net income (GAAP)

$

50,082

$

34,464

$

35,075

$

145,535

$

138,783

Amortization of intangibles, net of tax

2,210

2,252

2,374

9,086

9,772

Tangible net income (non-GAAP)

$

52,292

$

36,716

$

37,449

$

154,621

$

148,555

Net income (GAAP)

$

50,082

$

34,464

$

35,075

$

145,535

$

138,783

Provision for credit losses

1,617

31,598

3,601

67,177

9,371

Provision for income taxes

10,408

7,841

7,786

31,900

32,596

Pre-provision, pre-tax net revenues (non-GAAP)

$

62,107

$

73,903

$

46,462

$

244,612

$

180,750

Total revenue (GAAP)

$

171,848

$

192,135

$

139,671

$

664,335

$

563,943

Net (gain) loss on equity investment

(17,625

)

Net (gain)/loss on investment securities

(1,701

)

(9,634

)

845

Total revenue for efficiency calculation (non-GAAP)

$

171,848

$

172,809

$

139,671

$

654,701

$

564,788

Noninterest expense (GAAP)

$

105,932

$

101,981

$

92,336

$

395,825

$

378,302

Less: Amortization of intangibles

2,797

2,851

3,005

11,498

12,370

Noninterest expense net of amortization (non-GAAP)

$

103,135

$

99,130

$

89,331

$

384,327

$

365,932

COMTEX_379739304/2471/2021-01-28T08:30:31

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