SUFFOLK, Va., Jan. 24, 2019 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (Nasdaq: TOWN) today reported financial results for the full year and the fourth quarter ended December 31, 2018.  For the year ended December 31, 2018, earnings were $133.79 million, or $1.88 per diluted share, compared to $87.66 million, or $1.41 per diluted share for the year ended December 31, 2017.  “2018 was a great year for TowneBank, highlighted by a strong operating performance, continued number one deposit market share in Hampton Roads, and a successful merger with Paragon Commercial Corporation.  At $133.79 million, annual net income increased 52.62% over 2017, credit quality remained strong and our annual return on average assets was 1.26%,” said G. Robert Aston, Jr., Executive Chairman.

Earnings in fourth quarter 2017 included an expense of $10.11 million related to the enactment of the Tax Cuts and Jobs Act of 2017 (“Tax Reform”) and fourth quarter 2018 included an expense of $0.70 million due to the finalization of the provisional component of the impact of Tax Reform.  Excluding acquisition-related expenses and adjustments related to tax reform, earnings for the year ended December 31, 2018 were $141.50 million (non-GAAP), or $1.98 (non-GAAP) per diluted share, compared to $97.18 million (non-GAAP), or $1.56 (non-GAAP) per diluted share for the year ended December 31, 2017.

Earnings for the fourth quarter were $35.99 million, or $0.50 per diluted share, versus $12.33 million, or $0.20 per diluted share,  for the quarter ended December 31, 2017.  Excluding acquisition-related expenses and adjustments related to tax reform, earnings for the quarter ended December 31, 2018 were $35.52 million (non-GAAP), or $0.49 (non-GAAP) per diluted share, compared to $22.87 million (non-GAAP), or $0.37 (non-GAAP) per diluted share for the quarter ended December 31, 2017.

Highlights for the Fourth Quarter of 2018 Compared to the Fourth Quarter of 2017:

“Our team worked hard in 2018 as is evident by our stellar performance.  Throughout the year we focused our efforts on cultivating the benefits achieved through our successful Paragon merger and organic growth.  These efforts resulted in annual loan growth of 10.74%, balanced across legacy and new markets, excluding loans acquired in the Paragon merger.  We have also been working diligently to identify market opportunities in North Carolina where we can share our unique brand of Hometown Banking,” said J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to the Fourth Quarter of 2017:

The following table sets forth an estimate of the expected effects of the aggregate acquisition accounting adjustments on pre-tax net interest income for the periods shown (in thousands):

  Discount Accretion (Premium Amortization)
  For the three months ended
  March 31, June 30, September 30, December 31,
  2019 2019 2019 2019
Assets:       
Investment Securities $(72) $(72) $(70) $(70)
Loans 1,730  2,040  1,482  1,469 
         
Liabilities:        
Deposits 60  54  51  47 
         
Total estimated effect on net interest income $1,598  $1,914  $1,361  $1,352 
         
         
Note:  This information is intended for informational purposes only and is not necessarily indicative of future results.
    Actual results may differ due to factors such as changes in estimated prepayment speeds or projected credit loss rates.

Quarterly Provision for Loan Losses:

Quarterly Noninterest Income Compared to the Fourth Quarter of 2017:

Quarterly Noninterest Expense Compared to the Fourth Quarter of 2017:

Quarterly Income Taxes Compared to the Fourth Quarter of 2017:

Investment Securities:

Loans:

       % Change
         Annualized
 Q4 Q4 Q3 Q4 18 vs. Q4 18 vs.
(dollars in thousands)2018 2017 2018 Q4 17 Q3 18
Construction and land development$1,067,239  $930,426  $1,016,120  14.70% 19.96%
Commercial real estate - investment related properties1,978,592  1,344,774  1,957,297  47.13% 4.32%
Commercial real estate - owner occupied1,262,748  938,767  1,259,368  34.51% 1.06%
Multifamily real estate260,987  198,720  284,423  31.33% (32.69)%
1-4 family residential real estate1,626,896  1,217,349  1,608,517  33.64% 4.53%
Commercial and industrial business loans1,510,364  1,087,157  1,447,794  38.93% 17.15%
Consumer loans and other311,407  229,772  308,173  35.53% 4.16%
Total$8,018,233  $5,946,965  $7,881,692  34.83% 6.87%

Asset Quality:

Deposits and Borrowings:

       % Change
         Annualized
 Q4 Q4 Q3 Q4 18 vs. Q4 18 vs.
(dollars in thousands)2018 2017 2018 Q4 17 Q3 18
Noninterest-bearing demand$2,622,761  $2,157,338  $2,671,558  21.57% (7.25)%
Interest-bearing:         
Demand and money market accounts3,223,215  2,225,211  3,096,317  44.85% 16.26%
Savings286,684  315,889  298,368  (9.25)% (15.54)%
Certificates of deposits2,237,762  1,749,782  2,233,188  27.89% 0.81%
Total$8,370,422  $6,448,220  $8,299,431  29.81% 3.39%

Capital:

Annual Meeting of Shareholders:
TowneBank announced that its 2019 Annual Meeting of Shareholders would be held at 11:30 a.m. on Wednesday, May 22, 2019 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 40 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, 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 $11.16 billion as of December 31, 2018, 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 accounting principles generally accepted in the United States of America ("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:
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: 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; implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; changes in accounting principles, policies and guidelines; and other risk factors detailed from time to time in filings made by TowneBank with the FDIC. 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,
 2018 2018 2018 2018 2017
Income and Performance Ratios:         
 Total Revenue$131,417  $137,915  $137,058  $126,276  $109,141 
 Net income36,440  39,252  36,138  25,943  13,287 
 Net income attributable to TowneBank35,990  38,293  34,804  24,705  12,333 
 Net income per common share - diluted0.50  0.53  0.48  0.36  0.20 
 Book value per common share21.05  20.54  20.22  19.90  18.06 
 Tangible book value per share (non-GAAP)14.26  13.83  13.50  13.34  13.13 
 Return on average assets1.28% 1.40% 1.32% 1.02% 0.57%
 Return on average assets - tangible (non-GAAP)1.43% 1.56% 1.48% 1.15% 0.65%
 Return on average equity9.44% 10.21% 9.55% 7.39% 4.26%
 Return on average equity - tangible (non-GAAP)14.91% 16.08% 15.19% 11.64% 6.39%
 Return on average common equity9.53% 10.30% 9.62% 7.45% 4.30%
 Return on average common equity - tangible (non-GAAP)15.11% 16.30% 15.36% 11.77% 6.47%
 Noninterest income as a percentage of total revenue32.12% 35.69% 36.65% 39.54% 39.84%
           
Regulatory Capital Ratios (1):         
 Common equity tier 111.64% 11.53% 11.33% 11.65% 12.19%
 Tier 111.67% 11.57% 11.36% 11.68% 12.23%
 Total15.00% 14.90% 14.71% 15.27% 16.48%
 Tier 1 leverage ratio9.87% 9.98% 10.00% 9.97% 10.17%
           
Asset Quality:         
 Allowance for loan losses to nonperforming loans10.97x 7.25x 12.64x 10.40x 9.39x
 Allowance for loan losses to period end loans0.65% 0.64% 0.64% 0.63% 0.76%
 Allowance for loan losses to period end loans excluding purchased loans0.82% 0.82% 0.84% 0.86% 0.86%
 Nonperforming loans to period end loans0.06% 0.09% 0.05% 0.06% 0.08%
 Nonperforming assets to period end assets0.22% 0.25% 0.24% 0.27% 0.33%
 Net charge-offs to average loans (annualized)0.02% 0.03% 0.01% 0.02% 0.01%
           
 Nonperforming loans$4,749  $6,926  $3,919  $4,495  $4,807 
 Former bank premises2,253  2,253  2,253  2,253  3,469 
 Foreclosed property17,163  18,153  20,133  21,731  19,818 
 Total nonperforming assets$24,165  $27,332  $26,305  $28,479  $28,094 
 Loans past due 90 days and still accruing interest$394  $153  $22  $199  $103 
           
 Allowance for loan losses$52,094  $50,236  $49,535  $46,735  $45,131 
           
Mortgage Banking:         
 Loans originated, mortgage$531,871  $561,543  $667,189  $478,039  $585,567 
 Loans originated, joint venture68,196  249,956  284,337  185,306  212,173 
 Total loans originated$600,067  $811,499  $951,526  $663,345  $797,740 
 Number of loans originated2,472  3,068  3,687  2,603  3,061 
 Average number of originators314  329  336  330  302 
 Purchase %88.89% 90.00% 91.50% 81.80% 83.10%
 Loans sold$695,521  $853,981  $827,575  $679,167  $806,323 
 Realized gain on sales and fees as a % of loans sold3.18% 3.18% 3.11% 3.38% 3.45%
           
Other Ratios:         
 Net interest margin3.53% 3.62% 3.69% 3.51% 3.37%
 Net interest margin-fully tax equivalent (non-GAAP)3.55% 3.64% 3.71% 3.54% 3.41%
 Average earning assets/total average assets89.91% 89.69% 89.61% 89.45% 90.09%
 Average loans/average deposits95.32% 97.55% 97.79% 95.89% 91.10%
 Average noninterest deposits/total average deposits31.90% 32.61% 32.28% 31.75% 33.27%
 Period end equity/period end total assets13.78% 13.49% 13.63% 13.65% 13.41%
 Efficiency ratio62.65% 64.00% 65.10% 73.10% 67.49%
           
 (1) Current reporting period regulatory capital ratios are preliminary.      


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Three Months Ended Three Months Ended Three Months Ended
 December 31, 2018 September 30, 2018 December 31, 2017
   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		$7,923,978  $99,895  5.00% $7,825,065  $97,704  4.95% $5,920,302  $70,019  4.69%
Taxable investment securities1,101,892  7,515  2.73% 1,022,051  6,403  2.51% 644,875  3,237  2.01%
Tax-exempt investment securities80,656  747  3.70% 82,235  766  3.73% 46,825  386  3.30%
Interest-bearing deposits652,131  3,559  2.17% 450,455  2,149  1.89% 825,164  2,661  1.28%
Loans held for sale266,058  3,176  4.77% 346,806  4,012  4.63% 292,697  2,874  3.93%
Total earning assets10,024,715  114,892  4.55% 9,726,612  111,034  4.53% 7,729,863  79,177  4.06%
  Less: allowance for loan losses(50,792)     (50,144)     (44,704)    
                  
Total nonearning assets1,176,037      1,168,102      894,547     
                  
  Total assets$11,149,960      $10,844,570      $8,579,706     
                  
Liabilities and Equity:                 
Interest-bearing deposits                 
  Demand and money market$3,122,973  $5,670  0.72% $2,957,038  $4,217  0.57% $2,247,745  $2,091  0.37%
  Savings293,135  1,022  1.38% 301,311  984  1.30% 320,218  870  1.08%
  Certificates of deposit2,245,039  10,803  1.91% 2,147,337  9,339  1.73% 1,768,212  5,141  1.15%
Total interest-bearing deposits5,661,147  17,495  1.23% 5,405,686  14,540  1.07% 4,336,175  8,102  0.74%
Borrowings920,389  4,643  1.97% 920,380  4,195  1.78% 554,039  1,819  1.28%
Subordinated debentures247,769  2,961  4.78% 247,615  2,962  4.78% 247,152  2,880  4.66%
Total interest-bearing liabilities6,829,305  25,099  1.46% 6,573,681  21,697  1.31% 5,137,366  12,801  0.99%
Noninterest bearing demand deposits2,651,495      2,615,946      2,162,271     
Other noninterest-bearing liabilities157,238      166,575      130,181     
  Total liabilities9,638,038      9,356,202      7,429,818     
                  
Shareholders’ equity1,511,922      1,488,368      1,149,888     
                  
  Total liabilities and equity$11,149,960      $10,844,570      $8,579,706     
                  
Net interest income (tax-equivalent basis)  $89,793      $89,337      $66,376   
Reconcilement of Non-GAAP Financial Measures                
  Tax-equivalent basis adjustment  (585)     (640)     (712)  
Net interest income (GAAP)  $89,208      $88,697      $65,664   
                  
Interest rate spread (1)    3.09%     3.22%     3.07%
Interest expense as a percent of average earning assets   0.99%     0.88%     0.66%
Net interest margin (tax equivalent basis) (2)   3.55%     3.64%     3.41%
Total cost of deposits    0.83%     0.72%     0.49%
                  
(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.


 
TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Year Ended December 31,
 2018  2017  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		$7,567,570  $373,057  4.93% $5,901,797  $276,746  4.69% $5,129,990  $234,318  4.57%
Taxable investment securities1,004,080  24,729  2.46% 600,080  11,597  1.93% 695,082  11,254  1.62%
Tax-exempt investment securities79,720  2,920  3.66% 48,228  1,582  3.28% 52,689  1,601  3.04%
Interest-bearing deposits560,368  10,229  1.83% 696,507  7,480  1.07% 300,130  1,145  0.38%
Mortgage loans held for sale293,017  13,124  4.48% 271,281  10,561  3.89% 264,494  9,152  3.46%
      Total earning assets9,504,755  424,059  4.46% 7,517,893  307,966  4.10% 6,442,385  257,470  4.00%
    Less: allowance for loan losses(48,737)     (43,760)     (39,547)    
     Total nonearning assets1,143,167      860,866      802,398     
  Total assets$10,599,185      $8,334,999      $7,205,236     
                  
Liabilities and Equity:                 
Interest-bearing deposits                 
  Demand and money market$2,951,038  $16,458  0.56% $2,260,378  $8,020  0.35% $2,012,061  $6,043  0.30%
  Savings302,435  3,824  1.26% 319,940  3,305  1.03% 309,049  2,859  0.93%
  Certificates of deposit2,060,587  32,859  1.59% 1,668,252  17,467  1.05% 1,530,990  13,414  0.88%
Total interest-bearing deposits5,314,060  53,141  1.00% 4,248,570  28,792  0.68% 3,852,100  22,316  0.58%
FHLB advances and repurchase
  agreements		897,574  15,542  1.71% 617,720  9,942  1.61% 523,366  13,424  2.56%
Subordinated capital debentures251,097  12,067  4.81% 113,752  5,249  4.61% —  —  —%
Total interest-bearing liabilities6,462,731  80,750  1.25% 4,980,042  43,983  0.88% 4,375,466  35,740  0.82%
Noninterest-bearing liabilities                 
Noninterest bearing demand deposits2,517,173      2,094,753      1,720,093     
Other noninterest-bearing liabilities164,486      136,616      145,902     
      Total liabilities9,144,390      7,211,411      6,241,461     
Shareholders' equity1,454,795      1,123,588      963,775     
  Total liabilities and equity$10,599,185      $8,334,999      $7,205,236     
Net interest income (tax-equivalent basis) $343,309      $263,983      $221,730   
Reconcilement of Non-GAAP Financial Measures                
Tax-equivalent basis adjustment (2,236)     (2,862)     (2,854)  
Net interest income (GAAP) $341,073      $261,121      $218,876   
Interest rate spread  (1)   3.21%     3.22%     3.18%
Interest expense as a percent of average earning assets   0.85%     0.59%     0.55%
Net interest margin (tax-equivalent basis) (2)   3.61%     3.51%     3.44%
Total cost of deposits   0.68%     0.45%     0.40%
                  
(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)
 
  
 2018 2017
 (unaudited) (audited)
ASSETS   
Cash and due from banks$665,029  $504,095 
Interest-bearing deposits in financial institutions21,667  17,094 
       Total Cash and Cash Equivalents686,696  521,189 
Securities available for sale, at fair value1,095,339  866,138 
Securities held to maturity, at amortized cost50,598  61,304 
Other equity securities4,797  1,516 
Federal Home Loan Bank stock, at amortized cost43,229  29,595 
        Total Securities1,193,963  958,553 
Mortgage loans held for sale220,986  313,256 
Loans, net of unearned income and deferred costs:   
Real estate-residential 1-4 family1,626,896  1,217,349 
Real estate-commercial3,241,340  2,283,541 
Real estate-construction and development1,067,239  930,426 
Real estate-multi-family260,987  198,720 
Commercial and industrial business1,510,364  1,087,157 
Consumer and other loans311,407  229,772 
Loans, net of unearned income and deferred costs8,018,233  5,946,965 
  Less: allowance for loan losses(52,094) (45,131)
        Net Loans7,966,139  5,901,834 
Premises and equipment, net211,796  194,900 
Goodwill433,658  270,250 
Other intangible assets, net58,752  38,568 
Bank-owned life insurance policies237,371  195,775 
Other assets153,669  127,851 
TOTAL ASSETS$11,163,030  $8,522,176 
    
LIABILITIES AND EQUITY   
Deposits:   
Noninterest-bearing demand$2,622,761  $2,157,338 
Interest-bearing:   
     Demand and money market accounts3,223,215  2,225,211 
     Savings286,684  315,889 
     Certificates of deposit2,237,762  1,749,782 
        Total Deposits8,370,422  6,448,220 
Advances from the Federal Home Loan Bank799,315  526,923 
Subordinated debt, net247,861  247,196 
Repurchase agreements and other borrowings47,156  24,850 
        Total Borrowings1,094,332  798,969 
Other liabilities159,856  132,482 
TOTAL LIABILITIES9,624,610  7,379,671 
Preferred stock   
Authorized and unissued shares - 2,000,000—  — 
Common stock, $1.667 par: Authorized shares - 120,000,000   
Issued and outstanding shares 72,465,923 in 2018   
  and 62,629,001 in 2017120,801  104,403 
Capital surplus1,034,676  749,800 
Retained earnings379,239  282,729 
Common stock issued to deferred compensation trust, at cost   
769,200 shares in 2018 and 729,919 shares in 2017(13,955) (12,524)
Deferred compensation trust13,955  12,524 
Accumulated other comprehensive loss(9,190) (5,692)
TOTAL SHAREHOLDERS’ EQUITY1,525,526  1,131,240 
Noncontrolling interest12,894  11,265 
TOTAL EQUITY1,538,420  1,142,505 
TOTAL LIABILITIES AND EQUITY$11,163,030  $8,522,176 


TOWNEBANK
Consolidated Statements of Income
(dollars in thousands, except per share data)
   
        
 Three Months Ended Twelve Months Ended
 December 31, December 31,
 2018 2017 2018 2017
 (unaudited) (unaudited) (unaudited) (audited)
INTEREST INCOME:       
Loans, including fees$99,446  $69,332  $371,343  $273,999 
Investment securities8,126  3,598  27,127  13,064 
Interest-bearing deposits in financial institutions and
  federal funds sold		3,559  2,661  10,229  7,480 
Mortgage loans held for sale3,176  2,874  13,124  10,561 
        Total interest income114,307  78,465  421,823  305,104 
INTEREST EXPENSE:       
Deposits17,495  8,102  53,141  28,792 
Advances from the Federal Home Loan Bank4,585  1,791  15,340  9,837 
Subordinated debt, net2,961  2,880  12,067  5,249 
Repurchase agreements and other borrowings58  28  202  105 
        Total interest expense25,099  12,801  80,750  43,983 
Net interest income89,208  65,664  341,073  261,121 
        
PROVISION FOR LOAN LOSSES2,292  869  8,541  5,426 
        Net interest income after provision for loan losses86,916  64,795  332,532  255,695 
NONINTEREST INCOME:       
Residential mortgage banking income, net12,951  17,537  65,104  75,851 
Insurance commissions and other title fees and income, net13,212  12,115  56,164  51,933 
Real estate brokerage and property management income, net5,982  4,823  31,863  27,487 
Service charges on deposit accounts2,928  2,809  11,808  10,594 
Credit card merchant fees, net1,298  1,204  5,472  5,008 
Bank owned life insurance2,014  1,941  6,836  6,262 
Other income3,824  3,048  14,343  10,987 
Gain (loss) on investment securities—  —  3  (1)
        Total noninterest income42,209  43,477  191,593  188,121 
NONINTEREST EXPENSE:       
Salaries and employee benefits50,233  41,965  201,838  169,449 
Occupancy7,352  6,878  27,644  26,855 
Furniture and equipment3,587  3,456  14,477  14,072 
Other expenses21,165  21,361  108,165  85,838 
        Total noninterest expense82,337  73,660  352,124  296,214 
Income before income tax expense & noncontrolling interest46,788  34,612  172,001  147,602 
Provision for income tax expense10,348  21,325  34,227  54,813 
Net income$36,440  $13,287  $137,774  $92,789 
Net income attributable to noncontrolling interest(450) (954) (3,981) (5,126)
Net income attributable to TowneBank$35,990  $12,333  $133,793  $87,663 
        
Per common share information       
Basic earnings$0.50  $0.20  $1.88  $1.41 
Diluted earnings$0.50  $0.20  $1.88  $1.41 
Cash dividends declared$0.16  $0.14  $0.62  $0.55 


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
          
 December 31, September 30, June 30, March 31, December 31,
 2018 2018 2018 2018 2017
 (unaudited) (unaudited) (unaudited) (unaudited) (audited)
ASSETS         
Cash and due from banks$665,029  $688,584  $440,054  $479,453  $504,095 
Interest-bearing deposits in financial institutions21,667  20,910  17,749  17,728  17,094 
       Total Cash and Cash Equivalents686,696  709,494  457,803  497,181  521,189 
Securities available for sale, at fair value1,095,339  1,051,773  1,057,663  1,237,179  866,138 
Securities held to maturity, at amortized cost50,598  52,002  53,954  55,283  61,304 
Other equity securities4,797  5,519  5,206  5,002  1,516 
Federal Home Loan Bank stock, at amortized cost43,229  46,393  46,393  46,400  29,595 
       Total Securities1,193,963  1,155,687  1,163,216  1,343,864  958,553 
Mortgage loans held for sale220,986  333,354  396,185  293,731  313,256 
Loans, net of unearned income and deferred costs8,018,233  7,881,692  7,774,956  7,470,151  5,946,965 
  Less: allowance for loan losses(52,094) (50,236) (49,535) (46,735) (45,131)
        Net Loans7,966,139  7,831,456  7,725,421  7,423,416  5,901,834 
Premises and equipment, net211,796  210,724  207,997  207,126  194,900 
Goodwill433,658  427,117  425,625  416,789  270,250 
Other intangible assets, net58,752  58,165  60,669  57,493  38,568 
Bank-owned life insurance policies237,371  235,348  233,682  232,039  195,775 
Other assets153,669  159,887  161,055  148,776  127,851 
TOTAL ASSETS$11,163,030  $11,121,232  $10,831,653  $10,620,415  $8,522,176 
LIABILITIES AND EQUITY         
Deposits:         
Noninterest-bearing demand$2,622,761  $2,671,558  $2,597,320  $2,503,246  $2,157,338 
Interest-bearing:         
    Demand and money market accounts3,223,215  3,096,317  3,017,767  3,001,256  2,225,211 
    Savings286,684  298,368  305,334  309,077  315,889 
    Certificates of deposit2,237,762  2,233,188  2,070,790  2,011,843  1,749,782 
         Total Deposits8,370,422  8,299,431  7,991,211  7,825,422  6,448,220 
Advances from the Federal Home Loan Bank799,315  873,469  873,622  873,773  526,923 
Subordinated debt, net247,861  247,712  247,563  257,723  247,196 
Repurchase agreements and other borrowings47,156  45,591  50,981  52,509  24,850 
         Total Borrowings1,094,332  1,166,772  1,172,166  1,184,005  798,969 
Other liabilities159,856  155,205  191,490  161,638  132,482 
TOTAL LIABILITIES9,624,610  9,621,408  9,354,867  9,171,065  7,379,671 
Preferred stock         
Authorized shares - 2,000,000—  —  —  —  — 
          
Common stock, $1.667 par value120,801  120,613  120,615  120,472  104,403 
Capital surplus1,034,676  1,032,863  1,031,965  1,028,985  749,800 
Retained earnings379,239  354,842  328,125  304,896  282,729 
Common stock issued to deferred compensation trust, at cost(13,955) (13,780) (13,500) (12,612) (12,524)
Deferred compensation trust13,955  13,780  13,500  12,612  12,524 
Accumulated other comprehensive loss(9,190) (22,348) (17,944) (15,873) (5,692)
TOTAL SHAREHOLDERS’ EQUITY1,525,526  1,485,970  1,462,761  1,438,480  1,131,240 
Noncontrolling interest12,894  13,854  14,025  10,870  11,265 
TOTAL EQUITY1,538,420  1,499,824  1,476,786  1,449,350  1,142,505 
TOTAL LIABILITIES AND EQUITY$11,163,030  $11,121,232  $10,831,653  $10,620,415  $8,522,176 


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,
 2018 2018 2018 2018 2017
INTEREST INCOME:         
Loans, including fees$99,446  $97,215  $93,150  $81,533  $69,332 
Investment securities8,126  7,019  6,390  5,592  3,598 
Interest-bearing deposits in financial institutions and
    federal funds sold		3,559  2,148  2,159  2,362  2,661 
Mortgage loans held for sale3,176  4,012  3,557  2,379  2,874 
            Total interest income114,307  110,394  105,256  91,866  78,465 
INTEREST EXPENSE:         
Deposits17,495  14,540  11,620  9,486  8,102 
Advances from the Federal Home Loan Bank4,585  4,153  3,764  2,838  1,791 
Subordinated debt2,961  2,962  2,986  3,158  2,880 
Repurchase agreements and other borrowings58  42  63  40  28 
            Total interest expense25,099  21,697  18,433  15,522  12,801 
Net interest income89,208  88,697  86,823  76,344  65,664 
          
PROVISION FOR LOAN LOSSES2,292  1,241  3,056  1,953  869 
            Net interest income after provision for loan losses86,916  87,456  83,767  74,391  64,795 
NONINTEREST INCOME:         
Residential mortgage banking income, net12,951  15,804  18,745  17,604  17,537 
Insurance commissions and other title fees and income, net13,212  14,493  15,087  13,372  12,115 
Real estate brokerage and property management income, net5,982  8,542  6,910  10,429  4,823 
Service charges on deposit accounts2,928  3,028  2,969  2,883  2,809 
Credit card merchant fees, net1,298  1,563  1,443  1,168  1,204 
Bank owned life insurance2,014  1,657  1,633  1,532  1,941 
Other income3,824  4,130  3,448  2,941  3,048 
Gain on investment securities—  —  —  3  — 
            Total noninterest income42,209  49,217  50,235  49,932  43,477 
NONINTEREST EXPENSE:         
Salaries and employee benefits50,233  50,497  50,324  50,784  41,965 
Occupancy expense7,352  7,013  6,802  6,477  6,878 
Furniture and equipment3,587  3,646  3,546  3,698  3,456 
Other expenses21,165  27,106  28,549  31,344  21,361 
            Total noninterest expense82,337  88,262  89,221  92,303  73,660 
Income before income tax expense and noncontrolling interest46,788  48,411  44,781  32,020  34,612 
Provision for income tax expense10,348  9,159  8,643  6,077  21,325 
Net income36,440  39,252  36,138  25,943  13,287 
Net income attributable to noncontrolling interest(450) (959) (1,334) (1,238) (954)
Net income attributable to TowneBank$35,990  $38,293  $34,804  $24,705  $12,333 
Per common share information         
Basic earnings$0.50  $0.53  $0.48  $0.36  $0.20 
Diluted earnings$0.50  $0.53  $0.48  $0.36  $0.20 
Basic weighted average shares outstanding71,905,956  71,875,085  71,787,980  68,983,745  62,239,028 
Diluted weighted average shares outstanding72,043,369  72,044,355  71,949,590  69,156,809  62,462,629 
Cash dividends declared$0.16  $0.16  $0.16  $0.14  $0.14 


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
 
    
 Three Months Ended Year Ended Increase/(Decrease)
 December 31, September 30,
2018		 December 31, 2018 over 2017
 2018 2017  2018 2017 Amount Percent
Revenue             
Net interest income$86,433  $63,030  $85,423  $329,584  $251,003  $78,581  31.31%
Noninterest income             
Service charges on deposit accounts2,928  2,809  3,028  11,808  10,594  1,214  11.46%
Credit card merchant fees1,298  1,203  1,563  5,472  5,008  464  9.27%
Other income4,660  4,319  4,300  16,833  14,046  2,787  19.84%
Subtotal8,886  8,331  8,891  34,113  29,648  4,465  15.06%
Gain (loss) on investment securities—  —  —  147  (1) 148  N/M
Total noninterest income8,886  8,331  8,891  34,260  29,647  4,613  15.56%
Total revenue95,319  71,361  94,314  363,844  280,650  83,194  29.64%
              
Provision for loan losses2,292  869  1,241  8,541  5,426  3,115  57.41%
              
Expenses             
Salaries and employee benefits28,100  21,134  28,329  114,472  85,654  28,818  33.64%
Occupancy expense4,789  4,418  4,331  17,410  16,365  1,045  6.39%
Furniture and equipment2,426  2,326  2,463  9,912  9,406  506  5.38%
Amortization of intangible assets1,428  536  1,479  5,658  2,288  3,370  147.29%
Other expenses9,759  11,571  14,829  60,697  45,141  15,556  34.46%
Total expenses46,502  39,985  51,431  208,149  158,854  49,295  31.03%
Income before income tax, corporate allocation and noncontrolling interest46,525  30,507  41,642  147,154  116,370  30,784  26.45%
Corporate allocation367  533  438  1,736  1,828  (92) (5.03)%
                     
Income before income tax provision and noncontrolling interest46,892  31,040  42,080  148,890  118,198  30,692  25.97%
                     
Provision for income tax expense10,252  19,510  7,604  28,880  44,584  (15,704) (35.22)%
Net income36,640  11,530  34,476  120,010  73,614  46,396  63.03%
Noncontrolling interest4  —  (4) (8) 1  (9) N/M
Net income attributable to TowneBank$36,644  $11,530  $34,472  $120,002  $73,615  $46,387  63.01%
              
Efficiency ratio48.79% 56.03% 54.53% 57.21% 56.60%    


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
 
    
 Three Months Ended Year Ended Increase/(Decrease)
 December 31, September 30, December 31, 2018 over 2017
 2018 2017 2018 2018 2017 Amount Percent
Revenue             
  Residential mortgage brokerage
      income, net		$13,472  $17,544  $16,219  $66,696  $76,245  $(9,549) (12.52)%
  Real estate brokerage income, net2,183  2,092  2,758  9,458  7,991  1,467  18.36%
  Title insurance and settlement fees458  431  525  1,877  1,877  —  —%
  Property management fees, net3,799  2,731  5,783  22,405  19,496  2,909  14.92%
  Income from unconsolidated
       subsidiary		54  116  122  370  704  (334) (47.44)%
  Net interest and other income3,210  3,050  4,111  13,210  11,725  1,485  12.67%
Total revenue23,176  25,964  29,518  114,016  118,038  (4,022) (3.41)%
              
Expenses             
  Salaries and employee benefits$14,308  $14,279  $14,862  $58,450  $58,586  $(136) (0.23)%
  Occupancy expense1,928  1,894  2,084  7,871  8,171  (300) (3.67)%
  Furniture and equipment930  960  952  3,697  3,865  (168) (4.35)%
  Amortization of intangible assets767  571  672  2,782  2,566  216  8.42%
  Other expenses6,419  6,259  7,543  28,416  26,742  1,674  6.26%
Total expenses24,352  23,963  26,113  101,216  99,930  1,286  1.29%
              
Income (loss) before income tax, corporate allocation, and noncontrolling interest(1,176) 2,001  3,405  12,800  18,108  (5,308) (29.31)%
Corporate allocation(238) (370) (270) (1,091) (1,210) 119  (9.83)%
Income (loss) before income tax provision and noncontrolling interest(1,414) 1,631  3,135  11,709  16,898  (5,189) (30.71)%
Provision for income tax(86) 1,160  786  2,892  5,791  (2,899) (50.06)%
Net income (loss)(1,328) 471  2,349  8,817  11,107  (2,290) (20.62)%
Noncontrolling interest(130) (695) (756) (2,398) (3,756) 1,358  (36.16)%
Net income (loss) attributable to TowneBank$(1,458) $(224) $1,593  $6,419  $7,351  $(932) (12.68)%
              
Efficiency ratio105.07% 92.29% 88.46% 88.77% 84.66%    


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
              
 Three Months Ended Year Ended Increase/(Decrease)
 December 31, September 30, December 31, 2018 over 2017
 2018 2017 2018 2018 2017 Amount Percent
Commission and fee income             
Property and casualty$9,770  $8,198  $10,762  $40,948  $35,694  $5,254  14.72%
Employee benefits3,625  3,164  3,813  14,088  12,551  1,537  12.25%
Travel insurance1,095  912  871  5,123  4,668  455  9.75%
Specialized benefit services168  170  166  673  657  16  2.44%
Total commissions and fees14,658  12,444  15,612  60,832  53,570  7,262  13.56%
              
Contingency and bonus revenue1,185  1,654  1,137  4,888  6,322  (1,434) (22.68)%
Other income79  80  75  295  308  (13) (4.22)%
Total revenue15,922  14,178  16,824  66,015  60,200  5,815  9.66%
              
Employee commission
  expense		3,000  2,362  2,742  11,209  9,646  1,563  16.20%
Revenue, net of commission
  expense		12,922  11,816  14,082  54,806  50,554  4,252  8.41%
              
Salaries and employee benefits$7,825  $6,552  $7,306  $28,916  $25,209  $3,707  14.71%
Occupancy expense635  566  598  2,363  2,319  44  1.90%
Furniture and equipment231  169  232  868  801  67  8.36%
Amortization of intangible assets928  726  845  3,269  2,803  466  16.63%
Other expenses1,865  1,698  1,737  7,343  6,298  1,045  16.59%
Total operating expenses11,484  9,711  10,718  42,759  37,430  5,329  14.24%
Income before income tax and noncontrolling interest1,438  2,105  3,364  12,047  13,124  (1,077) (8.21)%
Corporate allocation(128) (164) (168) (645) (618) (27) 4.37%
Income before income tax provision and noncontrolling interest1,310  1,941  3,196  11,402  12,506  (1,104) (8.83)%
Provision for income tax expense182  655  769  2,455  4,438  (1,983) (44.68)%
Net income1,128  1,286  2,427  8,947  8,068  879  10.89%
Noncontrolling interest(324) (259) (199) (1,575) (1,371) (204) 14.88%
Net income attributable to TowneBank$804  $1,027  $2,228  $7,372  $6,697  $675  10.08%
              
Provision for income taxes182  655  769  2,455  4,438  (1,983) (44.68)%
Depreciation, amortization and interest expense1,152  934  1,068  4,134  3,593  541  15.06%
EBITDA$2,138  $2,616  $4,065  $13,961  $14,728  $(767) (5.21)%
              
Efficiency ratio88.87% 82.19% 76.11% 78.02% 74.04%    


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures:
       
        
 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31, December 31,
 2018 2018 2017 2018 2017
          
Return on average assets (GAAP)1.28% 1.40% 0.57% 1.26% 1.05%
Impact of excluding average goodwill and other intangibles and amortization0.15% 0.16% 0.08% 0.15% 0.10%
Return on average tangible assets (non-GAAP)1.43% 1.56% 0.65% 1.41% 1.15%
          
Return on average equity (GAAP)9.44% 10.21% 4.26% 9.20% 7.80%
Impact of excluding average goodwill and other intangibles and amortization5.47% 5.87% 2.13% 5.32% 3.55%
Return on average tangible equity (non-GAAP)14.91% 16.08% 6.39% 14.52% 11.35%
          
Return on average common equity (GAAP)9.53% 10.30% 4.30% 9.27% 7.88%
Impact of excluding average goodwill and other intangibles and amortization5.58% 6.00% 2.17% 5.43% 3.63%
Return on average tangible common equity (non-GAAP)15.11% 16.30% 6.47% 14.70% 11.51%
          
Book value (GAAP)$21.05  $20.54  $18.06  $21.05  $18.06 
Impact of excluding average goodwill and other intangibles and amortization(6.79) (6.71) (4.93) (7.71) (4.93)
Tangible book value (non-GAAP)$14.26  $13.83  $13.13  $13.34  $13.13 


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
           
           
Reconcilement of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
  2018 2018 2018 2018 2017
           
Net income (GAAP) $35,990  $38,293  $34,804  $24,705  $12,333 
           
Acquisition-related expenses (1,518) 424  797  8,726  526 
           
Income tax expense - tax reform legislation 696  —  —  —  10,112 
Income tax expense (benefit) - other items 355  (44) (93) (1,639) (98)
Total income tax expense (benefit) 1,051  (44) (93) (1,639) 10,014 
Total charges, net of taxes (467) 380  704  7,087  10,540 
Operating earnings, excluding certain items affecting
    comparability (non-GAAP)		 $35,523  $38,673  $35,508  $31,792  $22,873 
           
Weighted average diluted shares 72,043,369  72,044,355  71,949,590  69,156,809  62,462,629 
           
Diluted EPS (GAAP) $0.50  $0.53  $0.48  $0.36  $0.20 
Diluted EPS, excluding certain items affecting
    comparability (non-GAAP)		 $0.49  $0.54  $0.49  $0.46  $0.37 
           
Average assets $11,149,960  $10,844,570  $10,536,847  $9,848,364  $8,579,705 
Average tangible equity $1,022,982  $1,003,151  $981,607  $932,161  $839,942 
           
Return on average assets, excluding certain items
    affecting comparability (non-GAAP)		 1.26% 1.41% 1.35% 1.31% 1.06%
Return on average tangible equity, excluding certain
    items affecting comparability (non-GAAP)		 14.73% 16.23% 15.48% 14.72% 11.37%
Return on average common tangible equity, excluding
    certain items affecting comparability (non-GAAP)		 14.93% 16.45% 15.66% 14.89% 11.52%
Efficiency ratio, excluding certain items affecting
    comparability (non-GAAP)		 63.81% 63.69% 64.52% 66.19% 67.01%


TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
     
     
Reconcilement of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability Year Ended
  December 31, December 31,
  2018 2017
     
Net income (GAAP) $133,793  $87,663 
     
Purchase accounting adjustments —  (3,889)
     
Acquisition-related expenses 8,428  2,268 
     
Total charges 8,428  (1,621)
     
Income tax expense - tax reform legislation 696  10,112 
Income tax expense (benefit) - other items (1,420) 1,027 
Total income tax expense (benefit) (724) 11,139 
Total charges, net of taxes 7,704  9,518 
Operating earnings, excluding certain items affecting comparability (non-GAAP) $141,497  $97,181 
     
Weighted average diluted shares 71,293,129  62,394,282 
     
Diluted EPS (GAAP) $1.88  $1.41 
Diluted EPS, excluding certain items affecting comparability (non-GAAP) $1.98  $1.56 
     
Average assets $10,599,185  $8,334,999 
Average tangible equity $985,274  $815,969 
     
Return on average assets, excluding certain items affecting comparability (non-GAAP) 1.33% 1.17%
Return on average tangible equity, excluding certain items affecting
    comparability (non-GAAP)		 15.30% 12.52%
Return on average common tangible equity, excluding certain items affecting
    comparability (non-GAAP)		 15.49% 12.69%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP) 64.52% 65.43%