Press Release

TowneBank Reports First Quarter 2019 Earnings

Company Release - 4/25/2019 8:30 AM ET

SUFFOLK, Va., April 25, 2019 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (NASDAQ: TOWN) today reported earnings for the quarter ended March 31, 2019, of $31.41 million, or $0.44 per diluted share, compared to $24.71 million or $0.36 per diluted share for the quarter ended March 31, 2018.  Excluding acquisition-related expenses, earnings for the quarter ended March 31, 2019 were $31.77 million (non-GAAP), or $0.44 (non-GAAP) per diluted share, compared to $31.79 million (non-GAAP), or $0.46 (non-GAAP) per diluted share for the quarter ended March 31, 2018.

“As we celebrate our twentieth anniversary since the founding of TowneBank, our consistent financial performance continues to enable us to invest in building a solid pathway to the future through our expansion of our North Carolina and Virginia franchise," said G. Robert Aston, Jr., Executive Chairman.

Highlights for the First Quarter of 2019 Compared to the First Quarter of 2018:

  • Total revenues were $133.85 million, an increase of $7.58 million, or 6.0%.
  • Loans held for investment were $8.11 billion, an increase of $0.64 billion, or 8.50%, from March 31, 2018, and $0.09 billion, or 1.09%, from December 31, 2018, or 4.41% on an annualized basis.
  • Total deposits were $8.73 billion, an increase of $0.91 billion, or 11.58%.
  • Noninterest bearing deposits increased by 12.41%, to $2.81 billion, representing 32.23% of total deposits.
  • Annualized return on common shareholders' equity was 8.30% and annualized return on average tangible common shareholders' equity was 13.39% (non-GAAP).
  • Net interest margin for the quarter was 3.54% and taxable equivalent net interest margin was 3.57% (non-GAAP).
  • Effective tax rate of 20.72% in the quarter compared to 19.74% in the first quarter of 2018.

“Deposit growth was robust in the first quarter.  We continue to add to our production teams in North Carolina.  In addition to 11 member-facing hires in Greensboro and Greenville, North Carolina where we have added over $80 million in new deposits, we have added Jack Clayton in Raleigh as President of Business Strategies for North Carolina.  Jack is a 40-year veteran of Wells Fargo where he led the central and northeastern North Carolina regions.  His proven ability to recruit talent from the national banks and his extensive business contacts will enhance our already strong double-digit growth in North Carolina," said J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to the First Quarter of 2018:

  • Net interest income was $87.47 million compared to $76.34 million at March 31, 2018.
  • Taxable equivalent net interest margin was 3.57%, including accretion of 11 basis points, compared to 3.54%, including accretion of 15 basis points, for 2018.
  • Total cost of deposits increased to 0.93% from 0.53% at March 31, 2018.
  • Average interest-earning assets totaled $10.02 billion at March 31, 2019 compared to $8.81 billion at March 31, 2018, an increase of 13.73%.
  • Average loans held for investment represented 80.16% of average earning assets at March 31, 2019 compared to 78.95% at March 31, 2018.
  • Average interest-bearing liabilities totaled $6.82 billion, an increase of $0.79 billion from prior year.
  • Management periodically reviews the cost of funds charged to TowneBank Mortgage to fund its operations.  Effective January 1, 2019, the line moved a floating-rate structure tied to Federal Home Loan Bank rates.  As a result of the funding change, interest income declined in the Realty Segment.  All intercompany transaction are eliminated in the Banking Segment.

Quarterly Provision for Loan Losses:

  • Recorded a provision for loan losses of $1.44 million compared to $1.95 million one year ago and $2.29 million in the prior quarter.
  • Net charge-offs were $0.23 million compared to $0.35 million one year prior.  The ratio of net charge-offs to average loans on an annualized basis was 0.01% compared to 0.02% in both the prior quarter and the first quarter of 2018.
  • The allowance for loan losses represented 0.66% of total loans compared to 0.65% at December 31, 2018 and 0.63% at March 31, 2018.  Loan loss reserve as a percentage of total loans, excluding purchased loans, decreased to 0.81%, from 0.82% at December 31, 2018 and 0.86% at March 31, 2018.  The allowance for loan losses was 9.36 times nonperforming loans compared to 10.97 times at December 31, 2018 and 10.40 times at March 31, 2018.

Quarterly Noninterest Income Compared to the First Quarter of 2018:

  • Total noninterest income was $46.38 million compared to $49.93 million in 2018.  The increase in insurance commissions and other title fees of $2.21 million was offset by decreases in residential mortgage banking income of $4.10 million and real estate brokerage of $1.16 million.
  • Residential mortgage banking income was $13.51 million compared to $17.60 million in first quarter 2018.  Loan volume in the current quarter was $513.53 million, with purchase loan activity comprising 86.08%, compared to first quarter 2018 loan volume of $662.45 million, and 80.86% purchase loan activity.  Lower volumes and continued pressure on gain on sale margin contributed to the decline in revenue, combined with a reduction in mortgage producers in certain markets as the Company repositions itself to enhance future growth and profitability.
  • Total Insurance segment revenue increased 17.88% to $18.50 million in first quarter due to additional commission income from two insurance agency acquisitions in 2018 and one insurance agency acquisition in January 2019.
  • Property management fee revenue decreased 11.72%, or $1.02 million, due to lower reservation levels in the current year, as compared to first quarter 2018.

Quarterly Noninterest Expense Compared to the First Quarter of 2018:

  • Total noninterest expense was $92.12 million compared to $92.30 million, a decrease of $0.18 million, or 0.20%.  Driving the decrease was a reduction in acquisition-related expenses of $8.32 million, which was partially offset by increases of $2.08 million in salary and benefits expense, $1.05 million in outside processing expenses, $0.78 million in charitable contributions, and $0.71 million in professional fees.
  • Noninterest expense included operational expenses of insurance agencies acquired subsequent to first quarter 2018 of $2.41 million.

Quarterly Income Taxes Compared to the First Quarter of 2018:

  • Income tax expense was $8.21 million compared to $6.08 million, one year prior.  This represents an effective tax rate of 20.72% compared to 19.74% in the first quarter of 2018.

Investment Securities:

  • Total investment securities were $1.20 billion compared to $1.19 billion at December 31, 2018 and $1.34 billion at March 31, 2018.  The weighted average duration of the portfolio at March 31, 2019 was 3.30 years.  The carrying value of the available-for-sale portfolio included $2.22 million of net unrealized losses compared to $11.91 million at December 31, 2018 and $17.95 million in net unrealized losses at March 31, 2018.  The decrease in net unrealized losses was primarily due to interest rate fluctuations.  During the first quarter of 2019, we sold $100.08 million in available-for-sale securities at a loss of $0.78 million, in order to position our portfolio for better yield, going forward.  The carrying value of the held-to-maturity portfolio does not reflect $1.04 million in net unrealized gains compared to $0.67 million in net unrealized gains at December 31, 2018 and $0.88 million in net unrealized gains at March 31, 2018.

Loans and Asset Quality:

  • Total loans held for investment were $8.11 billion at March 31, 2019 compared to $8.02 billion at December 31, 2018 and $7.47 billion at March 31, 2018.
  • Nonperforming assets declined to $24.99 million, or 0.22% of total assets, compared to $28.48 million, or 0.27%, at March 31, 2018.
  • Nonperforming loans were 0.07% of period end loans.
  • Foreclosed property decreased to $17.07 million from $21.73 million at March 31, 2018.

Deposits and Borrowings:

  • Total deposits were $8.73 billion compared to $8.37 billion at December 31, 2018, and $7.83 billion at March 31, 2018.
  • Total loans to total deposits were 92.83% compared to 95.79% at December 31, 2018 and 95.46% at March 31, 2018.
  • Non-interest bearing deposits were 32.23% of total deposits at March 31, 2019 compared to 31.33% at December 31, 2018 and 31.99% at March 31, 2018.
  • Total borrowings were $1.03 billion compared to $1.09 billion and $1.18 billion at December 31, 2018 and March 31, 2018, respectively.

Capital:

  • Common equity tier 1 capital ratio of 11.49%.
  • Tier 1 leverage capital ratio of 9.92%.
  • Tier 1 risk-based capital ratio of 11.52%.
  • Total risk-based capital ratio of 14.79%.
  • Book value was $21.40 compared to $21.05 at December 31, 2018 and $19.90 at March 31, 2018.
  • Tangible book value was $14.46 compared to $14.26 at December 31, 2018 and $13.34 at March 31, 2018.

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 41 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, Greenville, 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 $11.57 billion as of March 31, 2019, 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 its 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: 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 area; 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 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
  March 31, December 31, September 30, June 30, March 31,
 2019 2018 2018 2018 2018
Income and Performance Ratios:         
 Total Revenue$133,854  $131,417  $137,914  $137,058  $126,276 
 Net income32,082  36,440  39,252  36,138  25,943 
 Net income attributable to TowneBank31,409  35,990  38,293  34,804  24,705 
 Net income per common share - diluted0.44  0.50  0.53  0.48  0.36 
 Book value per common share21.40  21.05  20.54  20.22  19.90 
 Tangible book value per share (non-GAAP)14.46  14.26  13.83  13.50  13.34 
 Return on average assets1.14% 1.28% 1.40% 1.32% 1.02%
 Return on average assets - tangible (non-GAAP)1.29% 1.43% 1.56% 1.48% 1.15%
 Return on average equity8.24% 9.44% 10.21% 9.55% 7.39%
 Return on average equity - tangible (non-GAAP)13.24% 14.91% 16.08% 15.19% 11.64%
 Return on average common equity8.30% 9.53% 10.30% 9.62% 7.45%
 Return on average common equity - tangible (non-GAAP)13.39% 15.11% 16.30% 15.36% 11.77%
 Noninterest income as a percentage of total revenue34.65% 32.12% 35.69% 36.65% 39.54%
           
Regulatory Capital Ratios (1):         
 Common equity tier 111.49% 11.51% 11.53% 11.33% 11.65%
 Tier 111.52% 11.54% 11.57% 11.36% 11.68%
 Total14.79% 14.83% 14.90% 14.71% 15.27%
 Tier 1 leverage ratio9.92% 9.87% 9.98% 10.00% 9.97%
           
Asset Quality:         
 Allowance for loan losses to nonperforming loans 9.36x   10.97x   7.25x   12.64x   10.40x 
 Allowance for loan losses to period end loans0.66% 0.65% 0.64% 0.64% 0.63%
 Allowance for loan losses to period end loans excluding purchased loans0.81% 0.82% 0.82% 0.84% 0.86%
 Nonperforming loans to period end loans0.07% 0.06% 0.09% 0.05% 0.06%
 Nonperforming assets to period end assets0.22% 0.22% 0.25% 0.24% 0.27%
 Net charge-offs to average loans (annualized)0.01% 0.02% 0.03% 0.01% 0.02%
           
 Nonperforming loans$5,697  $4,749  $6,926  $3,919  $4,495 
 Former bank premises2,223  2,253  2,253  2,253  2,253 
 Foreclosed property17,070  17,163  18,153  20,133  21,731 
 Total nonperforming assets$24,990  $24,165  $27,332  $26,305  $28,479 
 Loans past due 90 days and still accruing interest$117  $394  $153  $22  $199 
           
 Allowance for loan losses$53,303  $52,094  $50,236  $49,535  $46,735 
           
Mortgage Banking:         
 Loans originated, mortgage$366,643  $407,787  $561,543  $667,189  $477,147 
 Loans originated, joint venture146,884  192,280  249,956  283,933  185,306 
 Total loans originated$513,527  $600,067  $811,499  $951,122  $662,453 
 Number of loans originated1,977  2,304  3,068  3,687  2,601 
 Number of originators240  293  303  324  324 
 Purchase %86.08% 88.64% 89.72% 91.23% 80.86%
 Loans sold$473,068  $694,341  $852,205  $825,313  $677,114 
 Realized gain on sales and fees as a % of loans closed3.58% 3.37% 3.36% 3.30% 3.59%
           
Other Ratios:         
 Net interest margin3.54% 3.53% 3.62% 3.69% 3.51%
 Net interest margin-fully tax equivalent (nonGAAP)3.57% 3.55% 3.64% 3.71% 3.54%
 Average earning assets/total average assets89.50% 89.91% 89.69% 89.61% 89.45%
 Average loans/average deposits95.83% 95.32% 97.55% 97.79% 95.89%
 Average noninterest deposits/total average deposits31.39% 31.90% 32.61% 32.28% 31.75%
 Period end equity/period end total assets13.53% 13.78% 13.49% 13.63% 13.65%
 Efficiency ratio68.43% 62.65% 64.00% 65.10% 73.10%
           
 (1) Current reporting period regulatory capital ratios are preliminary      


TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
          
Investment Securities      % Change
 Q1 Q1 Q4 Q1 19 vs. Q1 19 vs.
Available-for-sale securities, at fair value2019 2018 2018 Q1 18 Q4 18
U.S. agency securities$260,152  $428,952  $358,542  (39.35)% (27.44)%
U.S. Treasury notes2,229  301,442  1,246  (99.26)% 78.89%
Municipal securities107,278  56,655  87,308  89.35% 22.87%
Trust preferred and other corporate securities32,439  24,570  30,992  32.03% 4.67%
Mortgage-backed securities issued by GSE697,679  425,560  617,251  63.94% 13.03%
Total$1,099,777  $1,237,179  $1,095,339  (11.11)% 0.41%
          
Held-to-maturity securities, at amortized cost         
Municipal securities$34,472  $36,056  $34,488  (4.39)% (0.05)%
Trust preferred corporate securities500  500  500  % %
Mortgage-backed securities issued by GSE14,715  18,727  15,610  (21.42)% (5.73)%
Total$49,687  $55,283  $50,598  (10.12)% (1.80)%
          
          
Loans Held For Investment      % Change
 Q1 Q1 Q4 Q1 19 vs. Q1 19 vs.
 2019 2018 2018 Q1 18 Q4 18
Real estate-construction and development$1,111,360  $996,159  $1,067,239  11.56% 4.13%
Commercial real estate - investment related properties1,951,292  1,853,737  1,978,592  5.26% (1.38)%
Commercial real estate - owner occupied1,279,039  1,164,923  1,262,748  9.80% 1.29%
Real estate-multifamily255,649  297,085  260,987  (13.95)% (2.05)%
Real estate-residential 1-4 family1,637,579  1,566,449  1,626,896  4.54% 0.66%
Commercial and industrial business1,547,623  1,328,357  1,510,364  16.51% 2.47%
Consumer and other loans322,828  263,441  311,407  22.54% 3.67%
Total$8,105,370  $7,470,151  $8,018,233  8.50% 1.09%
          
          
Deposits      % Change
 Q1 Q1 Q4 Q1 19 vs. Q1 19 vs.
 2019 2018 2018 Q1 18 Q4 18
Noninterest-bearing demand$2,813,857  $2,503,246  $2,622,761  12.41% 7.29%
Interest-bearing:         
Demand and money market accounts3,290,907  3,001,256  3,223,215  9.65% 2.10%
Savings285,790  309,077  286,684  (7.53)% (0.31)%
Certificates of deposits2,341,134  2,011,843  2,237,762  16.37% 4.62%
Total$8,731,688  $7,825,422  $8,370,422  11.58% 4.32%
          
          
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:
  Discount Accretion (Premium Amortization)  
  For the three months ended  
  June 30, September 30, December 31,  
  2019 2019 2019  
Assets:        
Investment Securities $(75) $(74) $(75)  
Loans 1,837  1,773  1,716   
         
Liabilities:        
Deposits 54  51  47   
         
Total estimated effect on net interest income $1,708  $1,648  $1,594   
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
factors such as changes in estimated prepayment speeds or projected credit loss rates.


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Three Months Ended Three Months Ended Three Months Ended
 March 31, 2019 December 31, 2018 March 31, 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
$8,030,994  $100,146  5.06% $7,923,978  $99,895  5.00% $6,954,777  $81,911  4.78%
Taxable investment securities1,036,645  7,529  2.91% 1,101,892  7,515  2.73% 902,292  5,041  2.23%
Tax-exempt investment securities79,310  765  3.86% 80,656  747  3.70% 73,037  672  3.68%
Total securities1,115,955  8,294  2.97% 1,182,548  8,262  2.73% 975,329  5,713  2.34%
Interest-bearing deposits693,365  3,998  2.34% 652,131  3,559  2.17% 640,349  2,362  1.50%
Loans held for sale178,475  2,003  4.49% 266,058  3,176  4.77% 239,103  2,379  3.98%
Total earning assets10,018,789  114,441  4.63% 10,024,715  114,892  4.55% 8,809,558  92,365  4.25%
Less: allowance for loan losses(52,844)     (50,792)     (46,199)    
                  
Total nonearning assets1,228,808      1,176,037      1,085,005     
                  
Total assets$11,194,753      $11,149,960      $9,848,364     
                  
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$3,174,157  $6,240  0.80% $3,122,973  $5,670  0.72% $2,774,347  $2,969  0.43%
Savings285,499  1,027  1.46% 293,135  1,022  1.38% 308,539  876  1.15%
Certificates of deposit2,290,056  11,907  2.11% 2,245,039  10,803  1.91% 1,866,889  5,641  1.23%
Total interest-bearing deposits5,749,712  19,174  1.35% 5,661,147  17,495  1.23% 4,949,775  9,486  0.78%
Borrowings821,889  4,221  2.05% 920,389  4,643  1.97% 820,967  2,878  1.40%
Subordinated debt, net247,913  2,962  4.78% 247,769  2,961  4.78% 259,205  3,158  4.87%
Total interest-bearing liabilities6,819,514  26,357  1.57% 6,829,305  25,099  1.46% 6,029,947  15,522  1.04%
Demand deposits2,630,813      2,651,495      2,303,125     
Other noninterest-bearing liabilities198,527      157,238      160,308     
Total liabilities9,648,854      9,638,038      8,493,380     
                  
Shareholders’ equity1,545,899      1,511,922      1,354,984     
                  
Total liabilities and equity$11,194,753      $11,149,960      $9,848,364     
                  
Net interest income (tax-equivalent basis)  $88,084      $89,793      $76,843   
Reconcilement of Non-GAAP Financial Measures                
Tax-equivalent basis adjustment  (611)     (585)     (499)  
Net interest income (GAAP)  $87,473      $89,208      $76,344   
                  
Interest rate spread (1)    3.06%     3.09%     3.21%
Interest expense as a percent of average earning assets   1.07%     0.99%     0.71%
Net interest margin (tax equivalent basis) (2)   3.57%     3.55%     3.54%
Total cost of deposits    0.93%     0.83%     0.53%
                  

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


TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
  
   
 March 31, December 31,
 2019 2018
 (unaudited) (audited)
ASSETS   
Cash and due from banks$879,299  $665,029 
Interest-bearing deposits in financial institutions21,001  21,667 
Total Cash and Cash Equivalents900,300  686,696 
Securities available for sale, at fair value1,099,777  1,095,339 
Securities held to maturity, at amortized cost49,687  50,598 
Other securities5,022  4,797 
Federal Home Loan Bank stock, at amortized cost41,464  43,229 
Total Securities1,195,950  1,193,963 
Mortgage loans held for sale247,021  220,986 
Loans, net of unearned income and deferred costs8,105,370  8,018,233 
Less: allowance for loan losses(53,303) (52,094)
Net Loans8,052,067  7,966,139 
Premises and equipment, net227,458  211,796 
Goodwill442,881  433,658 
Other intangible assets, net61,333  58,752 
Bank-owned life insurance policies238,977  237,371 
Other assets202,276  153,669 
TOTAL ASSETS$11,568,263  $11,163,030 
    
LIABILITIES AND EQUITY   
Deposits:   
Noninterest-bearing demand$2,813,857  $2,622,761 
Interest-bearing:   
Demand and money market accounts3,290,907  3,223,215 
Savings285,790  286,684 
Certificates of deposit2,341,134  2,237,762 
Total Deposits8,731,688  8,370,422 
Advances from the Federal Home Loan Bank739,160  799,315 
Subordinated debt, net248,010  247,861 
Repurchase agreements and other borrowings44,775  47,156 
Total Borrowings1,031,945  1,094,332 
Other liabilities238,974  159,856 
TOTAL LIABILITIES10,002,607  9,624,610 
Preferred stock   
Authorized and unissued shares - 2,000,000   
Common stock, $1.667 par: 150,000,000 shares authorized   
72,613,754 and 72,465,923 shares issued at   
March 31, 2019 and December 31, 2018, respectively121,047  120,801 
Capital surplus1,035,563  1,034,676 
Retained earnings399,030  379,239 
Common stock issued to deferred compensation trust, at cost   
768,274 and 769,200 shares at   
March 31, 2019 and December 31, 2018, respectively(14,067) (13,955)
Deferred compensation trust14,067  13,955 
Accumulated other comprehensive loss(1,792) (9,190)
TOTAL SHAREHOLDERS’ EQUITY1,553,848  1,525,526 
Noncontrolling interest11,808  12,894 
TOTAL EQUITY1,565,656  1,538,420 
TOTAL LIABILITIES AND EQUITY$11,568,263  $11,163,030 


TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
    
    
 Three Months Ended
 March 31,
 2019 2018
INTEREST INCOME:   
Loans, including fees$99,695  $81,533 
Investment securities8,134  5,592 
Interest-bearing deposits in financial institutions and federal funds sold3,998  2,362 
Mortgage loans held for sale2,003  2,379 
Total interest income113,830  91,866 
INTEREST EXPENSE:   
Deposits19,174  9,486 
Advances from the Federal Home Loan Bank4,153  2,838 
Subordinated capital debentures2,962  3,158 
Repurchase agreements and other borrowings, net of capitalized interest68  40 
Total interest expense26,357  15,522 
Net interest income87,473  76,344 
    
PROVISION FOR LOAN LOSSES1,438  1,953 
Net interest income after provision for loan losses86,035  74,391 
NONINTEREST INCOME:   
Residential mortgage banking income, net13,508  17,604 
Insurance commissions and other title fees and income, net15,582  13,372 
Real estate brokerage and property management income, net9,268  10,429 
Service charges on deposit accounts2,861  2,883 
Credit card merchant fees, net1,183  1,168 
Bank owned life insurance1,598  1,532 
Other income3,157  2,941 
Gain/(loss) on investment securities(776) 3 
Total noninterest income46,381  49,932 
NONINTEREST EXPENSE:   
Salaries and employee benefits52,860  50,784 
Occupancy8,251  6,477 
Furniture and equipment3,371  3,698 
Other expenses27,641  31,344 
Total noninterest expense92,123  92,303 
Income before income tax expense and noncontrolling interest40,293  32,020 
Provision for income tax expense8,211  6,077 
Net income$32,082  $25,943 
Net income attributable to noncontrolling interest(673) (1,238)
Net income attributable to TowneBank$31,409  $24,705 
Per common share information   
Basic earnings$0.44  $0.36 
Diluted earnings$0.44  $0.36 
Cash dividends declared$0.16  $0.14 


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
          
 March 31, December 31, September 30, June 30, March 31,
 2019 2018 2018 2018 2018
 (unaudited) (audited) (unaudited) (unaudited) (unaudited)
ASSETS         
Cash and due from banks$879,299  $665,029  $688,584  $440,054  $479,453 
Interest-bearing deposits in financial institutions21,001  21,667  20,910  17,749  17,728 
Total Cash and Cash Equivalents900,300  686,696  709,494  457,803  497,181 
Securities available for sale, at fair value1,099,777  1,095,339  1,051,773  1,057,663  1,237,179 
Securities held to maturity, at amortized cost49,687  50,598  52,002  53,954  55,283 
Other securities5,022  4,797  5,519  5,206  5,002 
Federal Home Loan Bank stock, at amortized cost41,464  43,229  46,393  46,393  46,400 
Total Securities1,195,950  1,193,963  1,155,687  1,163,216  1,343,864 
Mortgage loans held for sale247,021  220,986  333,354  396,185  293,731 
Loans, net of unearned income and deferred costs8,105,370  8,018,233  7,881,692  7,774,956  7,470,151 
Less: allowance for loan losses(53,303) (52,094) (50,236) (49,535) (46,735)
Net Loans8,052,067  7,966,139  7,831,456  7,725,421  7,423,416 
Premises and equipment, net227,458  211,796  210,724  207,997  207,126 
Goodwill442,881  433,658  427,117  425,625  416,789 
Other intangible assets, net61,333  58,752  58,165  60,669  57,493 
Bank-owned life insurance policies238,977  237,371  235,348  233,682  232,039 
Other assets202,276  153,669  159,887  161,055  148,776 
TOTAL ASSETS$11,568,263  $11,163,030  $11,121,232  $10,831,653  $10,620,415 
LIABILITIES AND EQUITY         
Deposits:         
Noninterest-bearing demand$2,813,857  $2,622,761  $2,671,558  $2,597,320  $2,503,246 
Interest-bearing:         
Demand and money market accounts3,290,907  3,223,215  3,096,317  3,017,767  3,001,256 
Savings285,790  286,684  298,368  305,334  309,077 
Certificates of deposit2,341,134  2,237,762  2,233,188  2,070,790  2,011,843 
Total Deposits8,731,688  8,370,422  8,299,431  7,991,211  7,825,422 
Advances from the Federal Home Loan Bank739,160  799,315  873,469  873,622  873,773 
Subordinated debt, net248,010  247,861  247,712  247,563  257,723 
Repurchase agreements and other borrowings44,775  47,156  45,591  50,981  52,509 
Total Borrowings1,031,945  1,094,332  1,166,772  1,172,166  1,184,005 
Other liabilities238,974  159,856  155,205  191,490  161,638 
TOTAL LIABILITIES10,002,607  9,624,610  9,621,408  9,354,867  9,171,065 
Preferred stock         
Authorized shares - 2,000,000         
          
Common stock, $1.667 par value121,047  120,801  120,613  120,615  120,472 
Capital surplus1,035,563  1,034,676  1,032,863  1,031,965  1,028,985 
Retained earnings399,030  379,239  354,842  328,125  304,896 
Common stock issued to deferred compensation         
trust, at cost(14,067) (13,955) (13,780) (13,500) (12,612)
Deferred compensation trust14,067  13,955  13,780  13,500  12,612 
Accumulated other comprehensive loss(1,792) (9,190) (22,348) (17,944) (15,873)
TOTAL SHAREHOLDERS’ EQUITY1,553,848  1,525,526  1,485,970  1,462,761  1,438,480 
Noncontrolling interest11,808  12,894  13,854  14,025  10,870 
TOTAL EQUITY1,565,656  1,538,420  1,499,824  1,476,786  1,449,350 
TOTAL LIABILITIES AND EQUITY$11,568,263  $11,163,030  $11,121,232  $10,831,653  $10,620,415 


TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except share data)
  
  
 Three Months Ended
 March 31, December 31, September 30, June 30, March 31,
 2019 2018 2018 2018 2018
INTEREST INCOME:         
Loans, including fees$99,695  $99,446  $97,215  $93,150  $81,533 
Investment securities8,134  8,126  7,019  6,390  5,592 
Interest-bearing deposits in financial institutions and federal funds sold3,998  3,559  2,148  2,159  2,362 
Mortgage loans held for sale2,003  3,176  4,012  3,557  2,379 
Total interest income113,830  114,307  110,394  105,256  91,866 
INTEREST EXPENSE:         
Deposits19,174  17,495  14,540  11,620  9,486 
Advances from the Federal Home Loan Bank4,153  4,585  4,153  3,764  2,838 
Subordinated capital debentures2,962  2,961  2,962  2,986  3,158 
Repurchase agreements and other borrowings68  58  42  63  40 
Total interest expense26,357  25,099  21,697  18,433  15,522 
Net interest income87,473  89,208  88,697  86,823  76,344 
          
PROVISION FOR LOAN LOSSES1,438  2,292  1,241  3,056  1,953 
Net interest income after provision for loan losses86,035  86,916  87,456  83,767  74,391 
NONINTEREST INCOME:         
Residential mortgage banking income, net13,508  12,951  15,804  18,745  17,604 
Insurance commissions and other title fees and income, net15,582  13,212  14,493  15,087  13,372 
Real estate brokerage and property management income, net9,268  5,982  8,542  6,910  10,429 
Service charges on deposit accounts2,861  2,928  3,028  2,969  2,883 
Credit card merchant fees, net1,183  1,298  1,563  1,443  1,168 
Bank owned life insurance1,598  2,014  1,657  1,633  1,532 
Other income3,157  3,824  4,130  3,448  2,941 
Gain/(loss) on investment securities(776)       3 
Total noninterest income46,381  42,209  49,217  50,235  49,932 
NONINTEREST EXPENSE:         
Salaries and employee benefits52,860  50,233  50,497  50,324  50,784 
Occupancy expense8,251  7,352  7,013  6,802  6,477 
Furniture and equipment3,371  3,587  3,646  3,546  3,698 
Other expenses27,641  21,165  27,106  28,549  31,344 
Total noninterest expense92,123  82,337  88,262  89,221  92,303 
Income before income tax expense and noncontrolling interest40,293  46,788  48,411  44,781  32,020 
Provision for income tax expense8,211  10,348  9,159  8,643  6,077 
Net income32,082  36,440  39,252  36,138  25,943 
Net income attributable to noncontrolling interest(673) (450) (959) (1,334) (1,238)
Net income attributable to TowneBank$31,409  $35,990  $38,293  $34,804  $24,705 
Per common share information         
Basic earnings$0.44  $0.50  $0.53  $0.48  $0.36 
Diluted earnings$0.44  $0.50  $0.53  $0.48  $0.36 
Basic weighted average shares outstanding71,992,330  71,905,956  71,875,085  71,787,980  68,983,745 
Diluted weighted average shares outstanding72,099,558  $72,043,369  72,044,355  71,949,590  69,156,809 
Cash dividends declared$0.16  $0.16  $0.16  $0.16  $0.14 
          
          
          


TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)
 
      
 Three Months Ended Increase/(Decrease)
 March 31, December 31, 2019 over 2018
 2019 2018 2018 Amount Percent
Revenue         
Net interest income$86,400  $74,042  $86,433  $12,358  16.69%
Noninterest income         
Service charges on deposit accounts2,861  2,883  2,928  (22) (0.76)%
Credit card merchant fees1,183  1,168  1,298  15  1.28%
Other income3,927  3,956  4,660  (29) (0.73)%
Subtotal7,971  8,007  8,886  (36) (0.45)%
Gain/(loss) on investment securities(776) 3    (779) N/M 
Total noninterest income7,195  8,010  8,886  (815) (10.17)%
Total revenue93,595  82,052  95,319  11,543  14.07%
          
Provision for loan losses1,438  1,953  2,292  (515) (26.37)%
          
Expenses         
Salaries and employee benefits31,087  30,202  28,100  885  2.93%
Occupancy expense5,244  4,016  4,789  1,228  30.58%
Furniture and equipment2,367  2,532  2,426  (165) (6.52)%
Amortization of intangibles1,366  1,221  1,428  145  11.88%
Other expenses16,181  20,748  9,759  (4,567) (22.01)%
Total expenses56,245  58,719  46,502  (2,474) (4.21)%
Income before income tax, corporate allocation and noncontrolling interest35,912  21,380  46,525  14,532  67.97%
Corporate allocation452  456  367  (4) (0.88)%
Income before income tax provision and noncontrolling interest36,364  21,836  46,892  14,528  66.53%
Provision for income tax expense7,192  3,881  10,252  3,311  85.31%
Net income29,172  17,955  36,640  11,217  62.47%
Noncontrolling interest2  (2) 4  4  N/M 
Net income attributable to TowneBank$29,174  $17,953  $36,644  $11,221  62.50%
          
Efficiency ratio59.60% 71.57% 48.79% (11.97)% (16.72)%


TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)
 
   
 Three Months Ended Increase/(Decrease)
 March 31, December 31, 2019 over 2018
 2019 2018 2018 Amount Percent
Revenue         
Residential mortgage brokerage income, net$13,756  $17,661  $13,472  $(3,905) (22.11)%
Real estate brokerage income, net1,561  1,698  2,183  (137) (8.07)%
Title insurance and settlement fees368  315  458  53  16.83%
Property management fees, net7,708  8,731  3,799  (1,023) (11.72)%
Income from unconsolidated subsidiary94  94  54    %
Net interest and other income1,372  2,546  3,210  (1,174) (46.11)%
Total revenue24,859  31,045  23,176  (6,186) (19.93)%
          
Expenses         
Salaries and employee benefits12,895  13,877  14,308  (982) (7.08)%
Occupancy expense2,345  1,894  1,928  451  23.81%
Furniture and equipment768  980  930  (212) (21.63)%
Amortization of intangible assets725  672  767  53  7.89%
Other expenses6,241  6,294  6,419  (53) (0.84)%
Total expenses22,974  23,717  24,352  (743) (3.13)%
          
Income/(loss) before income tax, corporate allocation and noncontrolling interest1,885  7,328  (1,176) (5,443) (74.28)%
Corporate allocation(263) (289) (238) 26  (9.00)%
Income before income tax provision and noncontrolling interest1,622  7,039  (1,414) (5,417) (76.96)%
Provision for income tax expense551  1,559  (86) (1,008) (64.66)%
Net income/(loss)1,071  5,480  (1,328) (4,409) (80.46)%
Noncontrolling interest(252) (622) (130) 370  (59.49)%
Net income/(loss) attributable to TowneBank$819  $4,858  $(1,458) $(4,039) (83.14)%
          
Efficiency ratio92.42% 76.40% 105.07% 16.02% 20.97%
          


TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)
 
      
    
 Three Months Ended Increase/(Decrease)
 March 31, December 31, 2019 over 2018
 2019 2018 2018 Amount Percent
Commission and fee income         
Property and casualty$11,873  $9,356  $9,770  $2,517  26.90%
Employee benefits3,506  3,196  3,625  310  9.70%
Travel insurance1,289  1,768  1,095  (479) (27.09)%
Specialized benefit services170  169  168  1  0.59%
Total commissions and fees16,838  14,489  14,658  2,349  16.21%
          
Contingency and bonus revenue1,585  1,133  1,185  452  39.89%
Other income75  70  79  5  7.14%
Total revenue18,498  15,692  15,922  2,806  17.88%
          
Employee commission expense3,098  2,513  3,000  585  23.28%
Revenue, net of commission expense15,400  13,179  12,922  2,221  16.85%
          
Salaries and employee benefits8,878  6,705  7,825  2,173  32.41%
Occupancy expense662  567  635  95  16.75%
Furniture and equipment236  185  231  51  27.57%
Amortization of intangible assets1,101  702  928  399  56.84%
Other expenses2,027  1,708  1,865  319  18.68%
Total operating expenses12,904  9,867  11,484  3,037  30.78%
Income before income tax, corporate allocation and noncontrolling interest2,496  3,312  1,438  (816) (24.64)%
Corporate allocation(189) (167) (128) (22) 13.17%
Income before income tax provision and noncontrolling interest2,307  3,145  1,310  (838) (26.65)%
Provision for income tax expense468  637  182  (169) (26.53)%
Net income1,839  2,508  1,128  (669) (26.67)%
Noncontrolling interest(423) (614) (324) 191  (31.11)%
Net income attributable to TowneBank$1,416