TowneBank Reports Third Quarter 2022 Earnings

Source: Nasdaq GlobeNewswire / 27 Oct 2022 07:30:02 America/Chicago

SUFFOLK, Va., Oct. 27, 2022 (GLOBE NEWSWIRE) -- TowneBank (the "Company" or "Towne") (NASDAQ: TOWN) today reported earnings for the quarter ended September 30, 2022 of $50.17 million, or $0.69 per diluted share, compared to $50.40 million, or $0.69 per diluted share, for the quarter ended September 30, 2021. Excluding acquisition-related expenses, earnings (non-GAAP) for the quarter ended September 30, 2022 were $50.78 million, or $0.70 per diluted share, compared to $51.08 million, or $0.70 per diluted share for the quarter ended September 30, 2021.

"TowneBank's solid third quarter results demonstrate the strength and durability of our business model. Continued loan growth and positive impacts from higher interest rates led to significant margin expansion during the quarter. While credit quality continues to perform well, we remain diligent in maintaining a healthy balance sheet and strong capital levels given the uncertain economic environment. Notwithstanding some of the current headwinds facing our Realty segment, we believe our diverse business mix, disciplined expense management and long-term view of managing our company position TowneBank to enjoy continued success," said G. Robert Aston, Jr., Executive Chairman.

Highlights for Third Quarter 2022 Compared to Third Quarter 2021:

Total revenues were $179.24 million, an increase of $9.16 million, or 5.39%. This year-over-year increase was driven primarily by a $23.60 million increase in net interest income partially offset by a $13.45 million decline in residential mortgage banking income.
Pre-provision, pre-tax, net revenues (non-GAAP), were $66.70 million, an increase of $3.05 million, or 4.80%.
Loans held for investment were $10.56 billion, an increase of $1.26 billion, or 13.57%, compared to September 30, 2021, and $0.13 billion, or 5.09% on an annualized basis, compared to June 30, 2022. Excluding the decline in loans from the Paycheck Protection Program ("PPP"), loans held for investment increased $1.50 billion, or 16.59%, compared to September 30, 2021, and $0.16 billion, or 6.01% on an annualized basis, from the linked quarter. Total loans on September 30, 2022, September 30, 2021, and June 30, 2022 included $12.65 million, $251.45 million, and $36.19 million, respectively, of PPP loans.
Total deposits were $13.41 billion, an increase of $0.40 billion, or 3.06%, compared to prior year but a decrease of $0.58 billion, or 4.17%, from June 30, 2022.
Noninterest bearing deposits increased by 3.33%, to $5.57 billion, representing 41.56% of total deposits. Compared to the linked quarter, noninterest bearing deposits decreased 2.60%.
Annualized return on common shareholders' equity was 10.69% compared to 10.68% in third quarter 2021. Annualized return on average tangible common shareholders' equity (non-GAAP) was 15.27% compared to 15.27% in third quarter 2021.
Net interest margin was 3.28% for the quarter and 2.76% for third quarter 2021 and taxable equivalent net interest margin (non-GAAP) was 3.30% and 2.77%.
Effective tax rate of 20.08% in the quarter compared to 22.73% in third quarter 2021 and 19.32% in the linked quarter.

"We remain excited about our Farmers Bank partnership. Our teams have begun working on the integration planned for early 2023. We believe our complimentary approach to serving the needs of our members and communities will lead to a successful partnership and post integration opportunities for continued growth," stated J. Morgan Davis, Chief Executive Officer.

Quarterly Net Interest Income Compared to Third Quarter 2021:

Net interest income was $124.04 million compared to $100.44 million as of September 30, 2021. The increase was driven by higher interest rates and increased loan and investment securities balances partially offset by increased deposit costs.
Tax-equivalent net interest margin (non-GAAP) was 3.30%, including purchase accounting accretion of 1 basis point and PPP interest and fees of 1 basis point, compared to 2.77%, including purchase accounting accretion of 3 basis points and PPP interest and fees of 15 basis points for third quarter 2021.
On an average basis, loans held for investment, with a yield of 4.25%, represented 69.83% of earning assets at September 30, 2022 compared to a yield of 4.24% and 64.04% of earning assets in the third quarter of 2021. Excluding PPP loans, loan yields were 4.24% in third quarter 2022 compared to 4.06% in third quarter 2021.
Interest and fee income on PPP loans was $0.62 million in third quarter 2022, compared to $7.77 million in third quarter 2021 and $1.52 million in the linked quarter.
Total cost of deposits increased to 0.30% from 0.19% at September 30, 2021. Management expects continued pressure on the cost of deposits.
On August 1, 2022, the Company redeemed its 4.50% fixed to floating rate subordinated notes due 2027 that had a total principal amount of $250 million. The Company recognized interest expense related to the notes of $0.99 million in third quarter 2022 and $2.96 million in third quarter 2021.
Average interest-earning assets totaled $14.99 billion at September 30, 2022 compared to $14.44 billion at September 30, 2021, an increase of 3.77%.
Average interest-bearing liabilities totaled $8.35 billion, an increase of $0.11 billion from prior year.

Quarterly Provision for Credit Losses:

The quarterly provision for credit losses for on-balance-sheet loans was an expense of $3.29 million compared to a provision benefit of $1.60 million one year ago and an expense of $0.11 million in the linked quarter.
In the linked quarter comparison, third quarter 2022 included an increase in the allowance for credit losses on loans of $3.48 million that was driven by loan growth and weakening in the macroeconomic forecast scenarios.
Net loan recoveries were $0.19 million compared to net recoveries of $0.64 million one year prior and $0.08 million in the linked quarter. The ratio of net charge-offs to average loans on an annualized basis was (0.01)% in third quarter 2022, (0.03)% in third quarter 2021, and zero percent in the linked quarter.
The allowance for credit losses on loans represented 1.02% of total loans at September 30, 2022, 1.15% at September 30, 2021, and 1.00% on June 30, 2022. The allowance for credit losses on loans was 20.48 times nonperforming loans compared to 12.68 times at September 30, 2021 and 18.94 times at June 30, 2022.

Quarterly Noninterest Income Compared to Third Quarter 2021:

Total noninterest income was $55.20 million compared to $69.63 million in 2021, a decrease of $14.44 million, or 20.73%. The decrease was driven by declines in residential mortgage banking income of $13.45 million and real estate brokerage income of $0.85 million, partially offset by increased insurance commissions of $2.04 million.
Residential mortgage banking income was $11.97 million compared to $25.42 million in third quarter 2021. Loan volume decreased to $0.69 billion in third quarter 2022 compared to $1.31 billion in 2021. Increases in mortgage rates have resulted in refinance activities dropping below 10% of our total mortgage production volume, the lowest level since second quarter 2018. Residential purchase activity comprised 93.20% of production volume in the third quarter of 2022 compared to 77.45% in the prior year quarter.
Gross margins on residential mortgages declined 59 basis points from 3.61% in third quarter 2021 to 3.02% in the current quarter.
Total net insurance commissions increased $2.04 million, or 11.71%, to $19.44 million in third quarter 2022 compared to 2021. This resulted from increases in property and casualty commissions, which were driven by organic growth and higher rates.
Property management fee revenue decreased 5.82%, or $0.61 million, to $9.89 million compared to third quarter 2021 but increased $0.44 million, or 4.64%, compared to the linked quarter. Reservation income is down compared to the prior year quarter due to decreased bookings at some of our property management locations. Compared to the linked quarter, reservation income increased at one location while others held level with prior quarter.

Quarterly Noninterest Expense Compared to Third Quarter 2021:

Total noninterest expense was $112.03 million compared to $104.09 million in 2021, an increase of $7.95 million, or 7.64%. Growth in salaries and employee benefits of $4.23 million, occupancy expense of $1.09 million, charitable contributions of $1.02 million, and advertising and marketing expense of $0.43 million was the primary sources of the increase.
Salary and benefits expense increases were driven by annual base salary adjustments that went into effect July 2022 and increases in health insurance costs.
The increase in occupancy expense was driven by lower tenant income in 2022.
Advertising and marketing expense increases were primarily related to internet advertising in our realty segment and post-COVID increases in client business development.

Consolidated Balance Sheet Highlights:

Total assets were $15.95 billion for the quarter ended September 30, 2022, a $0.91 billion decrease compared to $16.86 billion at June 30, 2022. Total assets increased $0.14 billion, or 0.89%, from $15.81 billion at September 30, 2021. Our asset mix has changed in the year-over-year comparison, with growth in investment securities and loans offset by declines in mortgage loans held for sale and total cash and cash equivalents.
Loans held for investment increased $1.26 billion, or 13.57%, compared to prior year, and $0.13 billion, or 1.28%, compared to the linked quarter. Excluding PPP loans of $12.65 million in third quarter 2022, $251.45 million in third quarter 2021, and $36.19 million in the linked quarter, loans held for investment increased $1.50 billion, or 16.59%, compared to prior year, and $0.16 billion, or 1.51%, compared to June 30, 2022, or 6.01% on an annualized basis.
Average loans held for investment, excluding PPP loans, were $10.45 billion in the third quarter of 2022, an increase of $1.56 billion, or 17.49%, compared to prior year. In the linked quarter comparison, average loans held for investment, excluding PPP loans, increased 3.04%, or $0.31 billion, and 12.08% on an annualized basis.
Mortgage loans held for sale decreased $266.82 million, or 61.79%, compared to the prior year and $46.69 million, or 22.05%, compared to the linked quarter.
Total deposits increased $0.40 billion, or 3.06%, compared to the prior year and decreased $0.58 billion, or 4.17%, compared to the linked quarter.
Total borrowings decreased $167.17 million, or 34.30%, from prior year and $279.73 million, or 46.62%, compared to the linked quarter.

Investment Securities:

Total investment securities were $2.45 billion compared to $2.48 billion at June 30, 2022 and $1.59 billion at September 30, 2021. The weighted average duration of the portfolio at September 30, 2022 was 3.6 years. The carrying value of the available for sale debt securities portfolio included $199.84 million and $120.41 million in net unrealized losses, related to rising rates, at September 30, 2022 and June 30, 2022, respectively, compared to net unrealized gains of $32.06 million at September 30, 2021.

Loans and Asset Quality:

Total loans held for investment were $10.56 billion at September 30, 2022 compared to $10.43 billion at June 30, 2022 and $9.30 billion at September 30, 2021.
Nonperforming assets were $5.44 million, or 0.03% of total assets, compared to $13.86 million, or 0.09%, at September 30, 2021.
Nonperforming loans were 0.05% of period end loans compared to 0.09% at September 30, 2021.
Foreclosed property decreased to $0.19 million from $5.41 million at September 30, 2021. The Company had no OREO properties at September 30, 2022.

Deposits and Borrowings:

Total deposits were $13.41 billion compared to $14.00 billion at June 30, 2022 and $13.01 billion at September 30, 2021.
Total loans held for investment to deposits were 78.73% compared to 74.49% at June 30, 2022 and 71.44% at September 30, 2021.
Non-interest bearing deposits were 41.56% of total deposits at September 30, 2022 compared to 40.89% at June 30, 2022 and 41.45% at September 30, 2021.
Total borrowings were $0.32 billion compared to $0.60 billion at June 30, 2022 and $0.49 billion at September 30, 2021.

Capital:

Common equity tier 1 capital ratio of 11.92%.
Tier 1 leverage capital ratio of 9.52%.
Tier 1 risk-based capital ratio of 12.05%.
Total risk-based capital ratio of 14.80%.
Book value per common share was $25.08 compared to $25.48 at June 30, 2022 and $25.91 at September 30, 2021.
Tangible book value per common share (non-GAAP) was $18.17 compared to $18.58 at June 30, 2022 and $18.92 at September 30, 2021.

About TowneBank:
Founded in 1999, TowneBank is a company built on relationships, offering a full range of banking and other financial services, with a focus of serving others and enriching lives. Dedicated to a culture of caring, Towne values all employees and members by embracing their diverse talents, perspectives, and experiences.

Today, TowneBank operates over 40 banking offices throughout Hampton Roads and Central Virginia, as well as Northeastern and Central North Carolina – serving as a local leader in promoting the social, cultural, and economic growth in each community. Towne offers a competitive array of business and personal banking solutions, delivered with only the highest ethical standards. Experienced local bankers providing a higher level of expertise and personal attention with local decision-making are key to the TowneBank strategy. TowneBank has grown its capabilities beyond banking to provide expertise through its controlled divisions and subsidiaries that include 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. With total assets of $15.95 billion as of September 30, 2022, TowneBank is one of the largest banks headquartered in Virginia.

Non-GAAP Financial Measures:
This press release contains certain financial measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Such non-GAAP financial measures include the following: fully tax-equivalent net interest margin, core operating earnings, core net income, tangible book value per common share, pre-provision, pre-tax net revenues, total risk-based capital ratio, tier one leverage ratio, tier one capital ratio, and the tangible common equity to tangible assets ratio. Management uses these non-GAAP financial measures to assess the performance of TowneBank’s core business and the strength of its capital position. Management believes that these non-GAAP financial measures provide meaningful additional information about TowneBank to assist investors in evaluating operating results, financial strength, and capitalization. The non-GAAP financial measures should be considered as additional views of the way our financial measures are affected by significant charges for credit costs and other factors. These non-GAAP financial measures should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The computations of the non-GAAP financial measures used in this presentation are referenced in a footnote or in the appendix to this presentation.

Forward-Looking Statements:
This press release contains certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only the beliefs, expectations, or opinions of TowneBank and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: "believe," "expect," "anticipate," "intend," "plan,” "estimate," or words of similar meaning, or future or conditional terms, such as "will," "would," "should," "could," "may," "likely," "probably," or "possibly." These statements may address issues that involve significant risks, uncertainties, estimates, and assumptions made by management. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include competitive pressures in the banking industry that may increase significantly; changes in the interest rate environment that may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; changes in the credit worthiness of customers and the possible impairment of the collectability of loans; general economic conditions, either nationally or regionally, that may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit or other services; unusual and infrequently occurring events, such as weather-related disasters, terrorist acts or public health events (such as the COVID-19 pandemic); changes in the legislative or regulatory environment, including changes in accounting standards and tax laws, that may adversely affect our business; costs or difficulties related to the integration of the businesses we have acquired may be greater than expected; expected cost savings associated with pending or recently completed acquisitions may not be fully realized or realized within the expected time frame; cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain reliable electronic systems; our competitors may have greater financial resources and develop products that enable them to compete more successfully; changes in business conditions; changes in the securities market; and changes in our local economy with regard to our market area. Any forward-looking statements made by us or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events, or otherwise. For additional information on factors that could materially influence forward-looking statements included in this report, see the "Risk Factors" in TowneBank’s Annual Report on Form 10-K for the year ended December 31, 2021 and related disclosures in other filings that have been, or will be, filed by TowneBank with the Federal Deposit Insurance Corporation.

Media contact:
G. Robert Aston, Jr., Executive Chairman, 757-638-6780
J. Morgan Davis, 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
	September 30,			June 30,			March 31,			December 31,			September 30,
		2022			2022			2022			2021			2021
Income and Performance Ratios:
Total revenue	$	179,236		$	166,980		$	165,412		$	160,424		$	170,076
Net income		50,671			47,054			46,250			41,657			52,743
Net income available to common shareholders		50,169			46,547			45,586			40,183			50,400
Pre-provision, pre-tax, net revenues ^(non-GAAP)		66,700			57,748			55,369			48,483			63,647
Net income per common share - diluted		0.69			0.64			0.63			0.55			0.69
Book value per common share		25.08			25.48			25.61			26.13			25.91
Book value per common share - tangible ^(non-GAAP)		18.17			18.58			18.67			19.15			18.92
Return on average assets		1.22	%		1.13	%		1.13	%		0.99	%		1.27	%
Return on average assets - tangible ^(non-GAAP)		1.31	%		1.22	%		1.23	%		1.08	%		1.37	%
Return on average equity		10.60	%		9.94	%		9.73	%		8.38	%		10.59	%
Return on average equity - tangible ^(non-GAAP)		15.08	%		14.20	%		13.91	%		12.08	%		15.09	%
Return on average common equity		10.69	%		10.03	%		9.81	%		8.45	%		10.68	%
Return on average common equity - tangible ^(non-GAAP)		15.27	%		14.37	%		14.08	%		12.22	%		15.27	%
Noninterest income as a percentage of total revenue		30.80	%		34.52	%		40.03	%		37.17	%		40.94	%
Regulatory Capital Ratios (1):
Common equity tier 1		11.92	%		11.83	%		12.16	%		12.36	%		12.53	%
Tier 1		12.05	%		11.97	%		12.31	%		12.51	%		12.69	%
Total		14.80	%		16.76	%		17.34	%		15.56	%		15.85	%
Tier 1 leverage ratio		9.52	%		9.19	%		9.16	%		9.11	%		9.18	%
Asset Quality:
Allowance for credit losses on loans to nonperforming loans		20.48x			18.94x			21.52x			17.75x			12.68x
Allowance for credit losses on loans to period end loans		1.02	%		1.00	%		1.05	%		1.12	%		1.15	%
Allowance for credit losses on loans to period end loans excluding PPP loans ^(non-GAAP)		1.02	%		1.00	%		1.06	%		1.13	%		1.18	%
Nonperforming loans to period end loans		0.05	%		0.05	%		0.05	%		0.06	%		0.09	%
Nonperforming assets to period end assets		0.03	%		0.04	%		0.03	%		0.06	%		0.09	%
Net charge-offs (recoveries) to average loans (annualized)		(0.01)	%		—	%		0.01	%		—	%		(0.03)	%
Net charge-offs (recoveries)	$	(187	)	$	(80	)	$	126		$	(60	)	$	(644	)

Nonperforming loans	$	5,250		$	5,493		$	4,825		$	5,973		$	8,451
Foreclosed property		186			563			560			4,583			5,409
Total nonperforming assets	$	5,436		$	6,056		$	5,385		$	10,556		$	13,860
Loans past due 90 days and still accruing interest	$	725		$	232		$	40		$	372		$	143
Allowance for credit losses on loans	$	107,497		$	104,019		$	103,833		$	106,059		$	107,177
Mortgage Banking:
Loans originated, mortgage	$	458,254		$	588,529		$	583,008		$	851,021		$	939,272
Loans originated, joint venture		234,443			249,279			236,980			303,362			370,865
Total loans originated	$	692,697		$	837,808		$	819,988		$	1,154,383		$	1,310,137
Number of loans originated		1,983			2,282			2,237			3,408			3,917
Number of originators		194			201			207			213			219
Purchase %		93.20	%		92.27	%		77.93	%		79.36	%		77.45	%
Loans sold	$	701,908		$	759,073		$	853,808		$	1,150,996		$	1,394,166
Rate lock asset	$	859		$	1,935		$	3,009		$	3,455		$	6,087
Gross realized gain on sales and fees as a % of loans originated		3.02	%		2.92	%		3.01	%		3.42	%		3.61	%
Other Ratios:
Net interest margin		3.28	%		2.88	%		2.67	%		2.70	%		2.76	%
Net interest margin-fully tax equivalent ^(non-GAAP)		3.30	%		2.89	%		2.69	%		2.72	%		2.77	%
Average earning assets/total average assets		91.92	%		92.22	%		92.24	%		92.13	%		91.95	%
Average loans/average deposits		76.82	%		74.57	%		71.61	%		70.68	%		71.69	%
Average noninterest deposits/total average deposits		41.77	%		40.56	%		40.49	%		41.42	%		40.40	%
Period end equity/period end total assets		11.56	%		11.09	%		11.28	%		11.71	%		12.02	%
Efficiency ratio^(non-GAAP)		61.03	%		63.51	%		64.42	%		67.03	%		59.58	%
^{(1) Current reporting period regulatory capital ratios are preliminary.}

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)

Investment Securities										% Change
	Q3			Q3			Q2			Q3 22 vs.		Q3 22 vs.
*Available-for-sale securities, at fair value*		2022			2021			2022		Q3 21		Q2 22
U.S. agency securities	$	331,297		$	207,949		$	342,702		59.32	%	(3.33)	%
U.S. Treasury notes		26,399			1,007			27,496		2,521.55	%	(3.99)	%
Municipal securities		426,720			350,980			447,927		21.58	%	(4.73)	%
Trust preferred and other corporate securities		79,501			31,591			84,307		151.66	%	(5.70)	%
Mortgage-backed securities issued by GSE and GNMA		1,027,331			969,017			1,012,690		6.02	%	1.45	%
Allowance for credit losses		(1,112	)		(142	)		(1,111	)	683.10	%	0.09	%
Total	$	1,890,136		$	1,560,402		$	1,914,011		21.13	%	(1.25)	%
*Gross unrealized gains (losses) reflected in financial statements*
Total gross unrealized gains	$	1,292		$	40,906		$	1,840		(96.84)	%	(29.78)	%
Total gross unrealized losses		(201,127	)		(8,845	)		(122,253	)	2,173.91	%	64.52	%
Net unrealized gains (losses) and other adjustments on AFS securities	$	(199,835	)	$	32,061		$	(120,413	)	(723.30)	%	65.96	%
*Held-to-maturity securities, at amortized cost*
U.S. agency securities	$	100,905		$	—		$	100,718		N/M		0.19	%
U.S. Treasury notes		434,148			—			434,432		N/M		(0.07)	%
Municipal securities		5,159			5,074			5,138		1.68	%	0.41	%
Trust preferred corporate securities		2,235			2,285			2,248		(2.19)	%	(0.58)	%
Mortgage-backed securities issued by GSE and GNMA		6,298			7,539			6,547		(16.46)	%	(3.80)	%
Allowance for credit losses		(83	)		(94	)		(85	)	(11.70)	%	(2.35)	%
Total	$	548,662		$	14,804		$	548,998		3,606.17	%	(0.06)	%

Total gross unrealized gains	$	153		$	1,591		$	448		(90.38)	%	(65.85)	%
Total gross unrealized losses		(31,116	)		—			(18,615	)	—	%	67.16	%
Net unrealized gains (losses) in HTM securities	$	(30,963	)	$	1,591		$	(18,167	)	(2,046.13)	%	70.44	%
Loans Held For Investment (1)										% Change
	Q3			Q3			Q2			Q3 22 vs.		Q3 22 vs.
		2022			2021			2022		Q3 21		Q2 22
Real estate - construction and development	$	1,324,831		$	1,005,592		$	1,383,791		31.75	%	(4.26)	%
Commercial real estate - owner occupied		1,590,371			1,463,000			1,579,464		8.71	%	0.69	%
Commercial real estate - non owner occupied		2,799,363			2,647,625			2,757,651		5.73	%	1.51	%
Real estate - multifamily		458,803			363,733			371,658		26.14	%	23.45	%
Residential 1-4 family		1,567,024			1,233,125			1,513,662		27.08	%	3.53	%
HELOC		388,305			389,974			386,067		(0.43)	%	0.58	%
Commercial and industrial business (C&I)		1,251,350			1,253,972			1,261,279		(0.21)	%	(0.79)	%
Government		520,198			471,037			527,230		10.44	%	(1.33)	%
Indirect		572,710			348,864			555,638		64.16	%	3.07	%
Consumer loans and other		86,656			120,643			89,320		(28.17)	%	(2.98)	%
Total	$	10,559,611		$	9,297,565		$	10,425,760		13.57	%	1.28	%
(1) Paycheck Protection Program loans totaling $0.01 billion, $0.25 billion, and $0.04 billion, primarily in C&I, are included in Q3 22, Q3 21, and Q2 22, respectively.
Deposits										% Change
	Q3			Q3			Q2			Q3 22 vs.		Q3 22 vs.
		2022			2021			2022		Q3 21		Q2 22
Noninterest-bearing demand	$	5,574,528		$	5,394,952		$	5,723,415		3.33	%	(2.60)	%
Interest-bearing:
Demand and money market accounts		6,042,417			5,681,181			6,384,818		6.36	%	(5.36)	%
Savings		387,622			366,165			388,364		5.86	%	(0.19)	%
Certificates of deposits		1,407,495			1,571,752			1,499,514		(10.45)	%	(6.14)	%
Total	$	13,412,062		$	13,014,050		$	13,996,111		3.06	%	(4.17)	%

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)

	Three Months Ended								Three Months Ended								Three Months Ended
	September 30, 2022								June 30, 2022								September 30, 2021
				Interest			Average					Interest			Average					Interest			Average
	Average			Income/			Yield/		Average			Income/			Yield/		Average			Income/			Yield/
	Balance			Expense			Rate (1)		Balance			Expense			Rate (1)		Balance			Expense			Rate (1)
Assets:
Loans (net of unearned income and deferred costs) (2)(3)	$	10,465,441		$	112,225		4.25	%	$	10,199,019		$	101,463		3.99	%	$	9,248,867		$	98,733		4.24	%
Taxable investment securities		2,385,218			12,943		2.17	%		2,331,410			11,388		1.95	%		1,421,347			6,560		1.85	%
Tax-exempt investment securities		147,184			1,054		2.86	%		132,304			879		2.66	%		125,523			487		1.55	%
Total securities		2,532,402			13,997		2.21	%		2,463,714			12,267		1.99	%		1,546,870			7,047		1.82	%
Interest-bearing deposits		1,800,798			9,509		2.09	%		2,368,147			4,616		0.78	%		3,179,010			1,182		0.15	%
Loans held for sale		188,737			2,446		5.18	%		213,109			2,217		4.16	%		468,323			3,405		2.91	%
Total earning assets		14,987,378			138,177		3.66	%		15,243,989			120,563		3.17	%		14,443,070			110,367		3.03	%
Less: allowance for credit losses		(104,178	)							(103,871	)							(108,478	)
Total nonearning assets		1,421,094								1,389,692								1,372,406
Total assets	$	16,304,294							$	16,529,810							$	15,706,998
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,084,753		$	6,542		0.43	%	$	6,349,725		$	3,094		0.20	%	$	5,486,788		$	2,095		0.15	%
Savings		391,437			628		0.64	%		387,498			526		0.54	%		358,739			533		0.59	%
Certificates of deposit		1,456,746			3,060		0.83	%		1,392,474			1,953		0.56	%		1,842,948			3,400		0.73	%
Total interest-bearing deposits		7,932,936			10,230		0.51	%		8,129,697			5,573		0.27	%		7,688,475			6,028		0.31	%
Borrowings		94,411			139		0.58	%		128,276			135		0.42	%		300,505			412		0.54	%
Subordinated debt, net		320,518			3,117		3.89	%		496,862			5,091		4.10	%		249,405			2,962		4.75	%
Total interest-bearing liabilities		8,347,865			13,486		0.64	%		8,754,835			10,799		0.49	%		8,238,385			9,402		0.45	%
Demand deposits		5,690,020								5,547,936								5,212,271
Other noninterest-bearing liabilities		387,835								348,678								367,891
Total liabilities		14,425,720								14,651,449								13,818,547
Shareholders’ equity		1,878,574								1,878,361								1,888,451
Total liabilities and equity	$	16,304,294							$	16,529,810							$	15,706,998
Net interest income (tax-equivalent basis) (6)				$	124,691							$	109,764							$	100,965
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment					(653	)							(424	)							(522	)
Net interest income (GAAP)				$	124,038							$	109,340							$	100,443

Interest rate spread (4)(6)							3.02	%							2.68	%							2.58	%
Interest expense as a percent of average earning assets							0.36	%							0.28	%							0.26	%
Net interest margin (tax equivalent basis) (5)(6)							3.30	%							2.89	%							2.77	%
Total cost of deposits							0.30	%							0.16	%							0.19	%

^{(1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 21%.}
^{(2) Average loan balances for September 30, 2021 and related yields have been restated to include, previously excluded, nonaccrual loans of $9.95 million.}
^{(3) September 30, 2022, September 30, 2021, and June 30, 2022 includes average PPP balances of $18.68 million, $357.17 million and $60.89 million, respectively, and related interest and fee income of $0.62 million, $7.77 million, and $1.52 million, respectively.}
^{(4) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.}
^{(5) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.}
^{(6) Non-GAAP.}

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)

	Nine Months Ended								Nine Months Ended								Nine Months Ended September 30,
	September 30, 2022								September 30, 2021								2022 Compared with 2021
				Interest			Average					Interest			Average
	Average			Income/			Yield/		Average			Income/			Yield/		Increase			Change Due to
	Balance			Expense			Rate (1)		Balance			Expense			Rate (1)		(Decrease)			Rate			Volume
Assets:
Loans (net of unearned income and deferred costs) (2)(3)	$	10,113,980		$	309,283		4.09	%	$	9,507,082		$	302,182		4.25	%	$	7,101		$	(11,730	)	$	18,831
Taxable investment securities		2,259,940			33,344		1.97	%		1,359,366			19,640		1.93	%		13,704			425			13,279
Tax-exempt investment securities		130,196			2,613		2.68	%		131,106			1,462		1.49	%		1,151			1,161			(10	)
Total securities		2,390,136			35,957		2.01	%		1,490,472			21,102		1.89	%		14,855			1,586			13,269
Interest-bearing deposits		2,362,155			15,472		0.88	%		2,426,468			2,218		0.12	%		13,254			13,314			(60	)
Loans held for sale		225,777			7,038		4.16	%		502,758			10,477		2.78	%		(3,439	)		3,839			(7,278	)
Total earning assets		15,092,048			367,750		3.26	%		13,926,780			335,979		3.23	%		31,771			7,009			24,762
Less: allowance for credit losses		(104,733	)							(115,100	)
Total nonearning assets		1,394,691								1,340,170
Total assets	$	16,382,006							$	15,151,850
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,203,889		$	11,898		0.26	%	$	5,192,658		$	6,175		0.16	%	$	5,723		$	4,343		$	1,380
Savings		387,290			1,664		0.57	%		345,739			1,583		0.61	%		81			(101	)		182
Certificates of deposit		1,440,661			7,134		0.66	%		1,872,393			13,963		1.00	%		(6,829	)		(4,050	)		(2,779	)
Total interest-bearing deposits		8,031,840			20,696		0.34	%		7,410,790			21,721		0.39	%		(1,025	)		192			(1,217	)
Borrowings		119,336			412		0.46	%		445,399			1,798		0.53	%		(1,386	)		(229	)		(1,157	)
Subordinated debt, net		401,195			12,328		4.10	%		249,261			8,854		4.74	%		3,474			(1,327	)		4,801
Total interest-bearing liabilities		8,552,371			33,436		0.52	%		8,105,450			32,373		0.53	%		1,063			(1,364	)		2,427
Demand deposits		5,569,186								4,880,493
Other noninterest-bearing liabilities		374,794								325,639
Total liabilities		14,496,351								13,311,582
Shareholders’ equity		1,885,655								1,840,268
Total liabilities and equity	$	16,382,006							$	15,151,850
Net interest income (tax-equivalent basis)(6)				$	334,314							$	303,606				$	30,708		$	8,373		$	22,335
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment					(1,732	)							(2,029	)				297
Net interest income (GAAP)				$	332,582							$	301,577				$	31,005

Interest rate spread (4)(6)							2.74	%							2.70	%
Interest expense as a percent of average earning assets							0.30	%							0.31	%
Net interest margin (tax equivalent basis) (5)(6)							2.96	%							2.91	%
Total cost of deposits							0.20	%							0.24	%

^{(1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory rate of 21%.}
^{(2) Average loan balances for September 30, 2021 and related yields have been restated to include, previously excluded, nonaccrual loans of $11.63}
^million.
^{(3) Average loan balances for September 30, 2022 and September 30, 2021 includes average PPP balances of $64.67 million and $641.82 million,}
^{respectively, and related interest income of $4.24 million and $29.42 million, respectively.}
^{(4) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.}
^{(5) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.}
^{(6) Non-GAAP.}

TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)


	September 30,			December 31,
		2022			2021
	(unaudited)			(audited)
ASSETS
Cash and due from banks	$	97,290		$	17,373
Interest-bearing deposits at FRB - Richmond		1,245,067			3,244,484
Interest-bearing deposits in financial institutions		96,862			34,779
Total Cash and Cash Equivalents		1,439,219			3,296,636
Securities available for sale, at fair value (amortized cost of $2,091,083 and $1,788,853, and allowance for credit losses of $1,112 and $210 at September 30, 2022 and December 31, 2021, respectively.)		1,890,136			1,806,183
Securities held to maturity, at amortized cost (fair value $517,782 and $155,676 at September 30, 2022 and December 31, 2021, respectively.)		548,745			154,221
Less: allowance for credit losses		(83	)		(94	)
Securities held to maturity, net of allowance for credit losses		548,662			154,127
Other equity securities		6,360			6,759
FHLB stock		9,475			13,146
Total Securities		2,454,633			1,980,215
Mortgage loans held for sale		165,023			358,303
Loans, net of unearned income and deferred costs		10,559,611			9,506,252
Less: allowance for credit losses		(107,497	)		(106,059	)
Net Loans		10,452,114			9,400,193
Premises and equipment, net		295,345			270,772
Goodwill		458,482			457,187
Other intangible assets, net		44,854			50,379
BOLI		256,074			251,805
Other assets		386,053			295,897
TOTAL ASSETS	$	15,951,797		$	16,361,387

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	5,574,528		$	5,546,665
Interest-bearing:
Demand and money market accounts		6,042,417			6,139,714
Savings		387,622			371,356
Certificates of deposit		1,407,495			1,515,891
Total Deposits		13,412,062			13,573,626
Advances from the FHLB		29,850			155,367
Subordinated debt, net		247,265			249,652
Repurchase agreements and other borrowings		43,165			76,797
Total Borrowings		320,280			481,816
Other liabilities		375,869			389,771
TOTAL LIABILITIES		14,108,211			14,445,213
Preferred stock, authorized and unissued shares - 2,000,000		—			—
Common stock, $1.667 par: 150,000,000 shares authorized
72,839,291 and 72,683,985 shares issued at
September 30, 2022 and December 31, 2021, respectively		121,423			121,164
Capital surplus		1,052,374			1,050,948
Retained earnings		810,845			716,605
Common stock issued to deferred compensation trust, at cost
927,176 and 911,458 shares at September 30, 2022 and December 31, 2021, respectively		(18,862	)		(18,257	)
Deferred compensation trust		18,862			18,257
Accumulated other comprehensive income (loss)		(157,980	)		10,597
TOTAL SHAREHOLDERS’ EQUITY		1,826,662			1,899,314
Noncontrolling interest		16,924			16,860
TOTAL EQUITY		1,843,586			1,916,174
TOTAL LIABILITIES AND EQUITY	$	15,951,797		$	16,361,387

TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2022			2021			2022			2021
INTEREST INCOME:
Loans, including fees	$	111,590		$	98,258		$	307,595		$	300,268
Investment securities		13,979			7,000			35,913			20,987
Interest-bearing deposits in financial institutions and federal funds sold		9,509			1,182			15,472			2,218
Mortgage loans held for sale		2,446			3,405			7,038			10,477
Total interest income		137,524			109,845			366,018			333,950
INTEREST EXPENSE:
Deposits		10,230			6,028			20,696			21,721
Advances from the FHLB		83			247			261			1,017
Subordinated debt, net		3,117			2,962			12,328			8,854
Repurchase agreements and other borrowings		56			165			151			781
Total interest expense		13,486			9,402			33,436			32,373
Net interest income		124,038			100,443			332,582			301,577
PROVISION FOR CREDIT LOSSES		3,925			(1,582	)		2,532			(15,665	)
Net interest income after provision for credit losses		120,113			102,025			330,050			317,242
NONINTEREST INCOME:
Residential mortgage banking income, net		11,968			25,422			39,782			88,359
Insurance commissions and other title fees and income, net		19,435			17,398			58,255			52,055
Property management income, net		9,891			10,502			36,489			33,076
Real estate commission income, net		2,932			3,781			8,899			10,125
Service charges on deposit accounts		2,455			2,524			7,474			7,104
Credit card merchant fees, net		1,658			1,660			4,940			4,630
BOLI		1,585			2,301			5,155			5,361
Other income		5,274			6,045			18,052			16,367
Net gain/(loss) on investment securities		—			—			—			1,252
Total noninterest income		55,198			69,633			179,046			218,329
NONINTEREST EXPENSE:
Salaries and employee benefits		65,463			61,230			194,318			181,030
Occupancy expense		8,748			7,656			25,417			23,286
Furniture and equipment		3,764			3,513			11,097			10,647
Amortization - intangibles		2,644			2,750			8,145			8,192
Software expense		4,594			4,209			13,848			12,896
Data processing		3,628			3,603			10,778			10,255
Professional fees		2,627			2,227			6,416			6,826
Advertising and marketing		4,290			3,865			12,508			10,090
Other expenses		16,276			15,033			47,612			43,583
Total noninterest expense		112,034			104,086			330,139			306,805
Income before income tax expense and noncontrolling interest		63,277			67,572			178,957			228,766
Provision for income tax expense		12,606			14,829			34,983			45,388
Net income	$	50,671		$	52,743		$	143,974		$	183,378
Net income attributable to noncontrolling interest		(502	)		(2,343	)		(1,672	)		(8,177	)
Net income attributable to TowneBank	$	50,169		$	50,400		$	142,302		$	175,201
Per common share information
Basic earnings	$	0.69		$	0.70		$	1.96		$	2.42
Diluted earnings	$	0.69		$	0.69		$	1.97		$	2.41
Cash dividends declared	$	0.23		$	0.20		$	0.66		$	0.58

TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)


	September 30,			June 30,			March 31,			December 31,			September 30,
		2022			2022			2022			2021			2021
	(unaudited)			(unaudited)			(unaudited)			(audited)			(unaudited)
ASSETS
Cash and due from banks	$	97,290		$	72,592		$	74,991		$	17,373		$	75,370
Interest-bearing deposits at FRB - Richmond		1,245,067			2,341,942			2,857,327			3,244,484			3,155,039
Interest-bearing deposits in financial institutions		96,862			35,087			34,684			34,779			33,506
Total Cash and Cash Equivalents		1,439,219			2,449,621			2,967,002			3,296,636			3,263,915
Securities available for sale		1,890,136			1,914,011			1,846,540			1,806,183			1,560,402
Securities held to maturity		548,745			549,083			433,384			154,221			14,898
Less: allowance for credit losses		(83	)		(85	)		(92	)		(94	)		(94	)
Securities held to maturity, net of allowance for credit losses		548,662			548,998			433,292			154,127			14,804
Other equity securities		6,360			6,679			6,789			6,759			6,621
FHLB stock		9,475			10,432			10,432			13,146			13,146
Total Securities		2,454,633			2,480,120			2,297,053			1,980,215			1,594,973
Mortgage loans held for sale		165,023			211,716			234,620			358,303			431,846
Loans, net of unearned income and deferred costs		10,559,611			10,425,760			9,909,308			9,506,252			9,297,565
Less: allowance for credit losses		(107,497	)		(104,019	)		(103,833	)		(106,059	)		(107,177	)
Net Loans		10,452,114			10,321,741			9,805,475			9,400,193			9,190,388
Premises and equipment, net		295,345			289,753			277,764			270,772			270,810
Goodwill		458,482			457,162			457,162			457,187			457,187
Other intangible assets, net		44,854			44,878			47,562			50,379			50,839
BOLI		256,074			254,478			253,112			251,805			249,862
Other assets		386,053			354,570			326,838			295,897			301,552
TOTAL ASSETS	$	15,951,797		$	16,864,039		$	16,666,588		$	16,361,387		$	15,811,372
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	5,574,528		$	5,723,415		$	5,532,337		$	5,546,665		$	5,394,952
Interest-bearing:
Demand and money market accounts		6,042,417			6,384,818			6,432,005			6,139,714			5,681,181
Savings		387,622			388,364			393,119			371,356			366,165
Certificates of deposit		1,407,495			1,499,514			1,414,339			1,515,891			1,571,752
Total Deposits		13,412,062			13,996,111			13,771,800			13,573,626			13,014,050
Advances from the FHLB		29,850			55,024			55,196			155,367			155,537
Subordinated debt, net		247,265			497,061			496,757			249,652			249,503
Repurchase agreements and other borrowings		43,165			47,922			75,988			76,797			82,413
Total Borrowings		320,280			600,007			627,941			481,816			487,453
Other liabilities		375,869			397,388			387,087			389,771			409,435
TOTAL LIABILITIES		14,108,211			14,993,506			14,786,828			14,445,213			13,910,938
Preferred stock
Authorized shares - 2,000,000		—			—			—			—			—
Common stock, $1.667 par value		121,423			121,265			121,231			121,164			121,163
Capital surplus		1,052,374			1,051,384			1,050,387			1,050,948			1,049,367
Retained earnings		810,845			777,430			747,614			716,605			690,960
Common stock issued to deferred compensation
trust, at cost		(18,862	)		(19,349	)		(18,323	)		(18,257	)		(18,076	)
Deferred compensation trust		18,862			19,349			18,323			18,257			18,076
Accumulated other comprehensive income (loss)		(157,980	)		(96,358	)		(56,712	)		10,597			21,597
TOTAL SHAREHOLDERS’ EQUITY		1,826,662			1,853,721			1,862,520			1,899,314			1,883,087
Noncontrolling interest		16,924			16,812			17,240			16,860			17,347
TOTAL EQUITY		1,843,586			1,870,533			1,879,760			1,916,174			1,900,434
TOTAL LIABILITIES AND EQUITY	$	15,951,797		$	16,864,039		$	16,666,588		$	16,361,387		$	15,811,372

TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except share data)


	Three Months Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
		2022			2022			2022			2021			2021
INTEREST INCOME:
Loans, including fees	$	111,590		$	101,043		$	94,962		$	95,054		$	98,258
Investment securities		13,979			12,263			9,671			10,484			7,000
Interest-bearing deposits in financial institutions and federal funds sold		9,509			4,616			1,347			1,215			1,182
Mortgage loans held for sale		2,446			2,217			2,375			2,750			3,405
Total interest income		137,524			120,139			108,355			109,503			109,845
INTEREST EXPENSE:
Deposits		10,230			5,573			4,894			5,389			6,028
Advances from the FHLB		83			86			92			206			247
Subordinated debt, net		3,117			5,091			4,120			2,962			2,962
Repurchase agreements and other borrowings		56			49			45			154			165
Total interest expense		13,486			10,799			9,151			8,711			9,402
Net interest income		124,038			109,340			99,204			100,792			100,443
PROVISION FOR CREDIT LOSSES		3,925			56			(1,449	)		(1,110	)		(1,582	)
Net interest income after provision for credit losses		120,113			109,284			100,653			101,902			102,025
NONINTEREST INCOME:
Residential mortgage banking income, net		11,968			13,176			14,638			20,945			25,422
Insurance commissions and other title fees and income, net		19,435			19,746			19,074			15,486			17,398
Property management income, net		9,891			9,452			17,147			9,099			10,502
Real estate commission income, net		2,932			3,412			2,554			3,165			3,781
Service charges on deposit accounts		2,455			2,446			2,574			2,479			2,524
Credit card merchant fees, net		1,658			1,906			1,375			1,412			1,660
BOLI		1,585			1,853			1,717			1,904			2,301
Other income		5,274			5,649			7,129			5,142			6,045
Total noninterest income		55,198			57,640			66,208			59,632			69,633
NONINTEREST EXPENSE:
Salaries and employee benefits		65,463			64,892			63,963			64,814			61,230
Occupancy expense		8,748			8,342			8,327			8,371			7,656
Furniture and equipment		3,764			3,643			3,690			3,528			3,513
Amortization - intangibles		2,644			2,684			2,817			2,935			2,750
Software expense		4,594			4,762			4,492			4,014			4,209
Data processing		3,628			3,556			3,594			3,524			3,603
Professional fees		2,627			1,761			2,027			2,723			2,227
Advertising and marketing		4,290			4,091			4,127			3,414			3,865
Other expenses		16,276			14,994			16,342			17,144			15,033
Total noninterest expense		112,034			108,725			109,379			110,467			104,086
Income before income tax expense and noncontrolling interest		63,277			58,199			57,482			51,067			67,572
Provision for income tax expense		12,606			11,145			11,232			9,410			14,829
Net income		50,671			47,054			46,250			41,657			52,743
Net income attributable to noncontrolling interest		(502	)		(507	)		(664	)		(1,474	)		(2,343	)
Net income attributable to TowneBank	$	50,169		$	46,547		$	45,586		$	40,183		$	50,400
Per common share information
Basic earnings	$	0.69		$	0.64		$	0.63		$	0.55		$	0.70
Diluted earnings	$	0.69		$	0.64		$	0.63		$	0.55		$	0.69
Basic weighted average shares outstanding		72,578,736			72,559,537			72,498,075			72,525,504			72,506,877
Diluted weighted average shares outstanding		72,594,474			72,568,886			72,562,122			72,624,610			72,591,281
Cash dividends declared	$	0.23		$	0.23		$	0.20		$	0.20		$	0.20

TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)


	Three Months Ended									Nine Months Ended						Increase/(Decrease)
	September 30,						June 30,			September 30,						2022 over 2021
		2022			2021			2022			2022			2021		Amount			Percent
Revenue
Net interest income	$	123,039		$	97,668		$	107,417		$	327,226		$	293,407		$	33,819		11.53	%
Service charges on deposit
accounts		2,455			2,524			2,446			7,474			7,104			370		5.21	%
Credit card merchant fees		1,658			1,660			1,906			4,940			4,630			310		6.70	%
Other income		5,332			6,334			5,042			17,083			16,706			377		2.26	%
Subtotal		9,445			10,518			9,394			29,497			28,440			1,057		3.72	%
Net gain/(loss) on investment securities		—			—			—			—			1,252			(1,252	)	(100.00)	%
Total noninterest income		9,445			10,518			9,394			29,497			29,692			(195	)	(0.66)	%
Total revenue		132,484			108,186			116,811			356,723			323,099			33,624		10.41	%

Provision for credit losses		4,240			(1,728	)		(160	)		2,247			(14,661	)		16,908		(115.33)	%

Expenses
Salaries and employee benefits		39,349			34,791			38,673			115,082			102,427			12,655		12.36	%
Occupancy expense		6,109			5,098			5,633			17,401			15,657			1,744		11.14	%
Furniture and equipment		2,803			2,602			2,747			8,259			8,086			173		2.14	%
Amortization of intangibles		726			862			777			2,330			2,737			(407	)	(14.87)	%
Other expenses		21,075			16,580			17,856			57,158			49,020			8,138		16.60	%
Total expenses		70,062			59,933			65,686			200,230			177,927			22,303		12.53	%
Income before income tax, corporate allocation and noncontrolling interest		58,182			49,981			51,285			154,246			159,833			(5,587	)	(3.50)	%
Corporate allocation		902			1,241			1,325			3,520			3,782			(262	)	(6.93)	%
Income before income tax provision and noncontrolling interest		59,084			51,222			52,610			157,766			163,615			(5,849	)	(3.57)	%
Provision for income tax expense		11,507			10,225			9,756			29,782			30,461			(679	)	(2.23)	%
Net income		47,577			40,997			42,854			127,984			133,154			(5,170	)	(3.88)	%
Noncontrolling interest		—			2			—			—			(1	)		1		(100.00)	%
Net income attributable to TowneBank	$	47,577		$	40,999		$	42,854		$	127,984		$	133,153		$	(5,169	)	(3.88)	%
Efficiency ratio^(non-GAAP)		52.34	%		54.60	%		55.57	%		55.48	%		54.43	%		1.05	%	1.93	%

TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)


	Three Months Ended									Nine Months Ended						Increase/(Decrease)
	September 30,						June 30,			September 30,						2022 over 2021
		2022			2021			2022			2022			2021		Amount			Percent
Revenue
Residential mortgage brokerage income, net	$	12,726		$	26,637		$	14,858		$	43,491		$	90,898		$	(47,407	)	(52.15)	%
Real estate brokerage income, net		2,932			3,781			3,412			8,899			10,125			(1,226	)	(12.11)	%
Title insurance and settlement fees		525			706			561			1,590			1,917			(327	)	(17.06)	%
Property management fees, net		9,891			10,502			9,452			36,489			33,076			3,413		10.32	%
Income from unconsolidated subsidiary		77			269			115			359			964			(605	)	(62.76)	%
Net interest and other income		1,508			3,154			2,411			6,851			9,223			(2,372	)	(25.72)	%
Total revenue		27,659			45,049			30,809			97,679			146,203			(48,524	)	(33.19)	%

Provision for credit losses		(315	)		146			216			285			(1,004	)		1,289		(128.39)	%

Expenses
Salaries and employee benefits		15,854			17,375			16,501			49,646			50,240			(594	)	(1.18)	%
Occupancy expense		1,919			1,926			1,997			5,814			5,732			82		1.43	%
Furniture and equipment		765			693			707			2,232			1,934			298		15.41	%
Amortization of intangible assets		817			702			816			2,449			1,882			567		30.13	%
Other expenses		8,687			11,103			9,932			29,472			30,774			(1,302	)	(4.23)	%
Total expenses		28,042			31,799			29,953			89,613			90,562			(949	)	(1.05)	%

Income before income tax, corporate allocation and noncontrolling interest		(68	)		13,104			640			7,781			56,645			(48,864	)	(86.26)	%
Corporate allocation		(602	)		(1,000	)		(1,000	)		(2,602	)		(3,000	)		398		(13.27)	%
Income before income tax provision and noncontrolling interest		(670	)		12,104			(360	)		5,179			53,645			(48,466	)	(90.35)	%
Provision for income tax expense		(120	)		3,546			(144	)		1,110			12,017			(10,907	)	(90.76)	%
Net income		(550	)		8,558			(216	)		4,069			41,628			(37,559	)	(90.23)	%
Noncontrolling interest		(502	)		(2,345	)		(507	)		(1,672	)		(8,176	)		6,504		(79.55)	%
Net income attributable to TowneBank	$	(1,052	)	$	6,213		$	(723	)	$	2,397		$	33,452		$	(31,055	)	(92.83)	%

Efficiency ratio ^(non-GAAP)		98.43	%		69.03	%		94.57	%		89.24	%		60.66	%		28.58	%	47.12	%

TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)


	Three Months Ended									Nine Months Ended						Increase/(Decrease)
	September 30,						June 30,			September 30,						2022 over 2021
		2022			2021			2022			2022			2021		Amount			Percent
Commission and fee income
Property and casualty	$	17,567		$	15,338		$	16,546		$	49,451		$	44,467		$	4,984		11.21	%
Employee benefits		4,020			3,820			3,924			12,105			11,135			970		8.71	%
Specialized benefit services		160			164			160			489			494			(5	)	(1.01)	%
Total commissions and fees		21,747			19,322			20,630			62,045			56,096			5,949		10.61	%

Contingency and bonus revenue		1,654			1,664			2,994			8,052			6,746			1,306		19.36	%
Other income		23			40			15			72			157			(85	)	(54.14)	%
Total revenue		23,424			21,026			23,639			70,169			62,999			7,170		11.38	%

Employee commission expense		4,331			4,185			4,279			12,943			12,395			548		4.42	%
Revenue, net of commission expense		19,093			16,841			19,360			57,226			50,604			6,622		13.09	%

Salaries and employee benefits		10,260			9,064			9,718			29,590			28,363			1,227		4.33	%
Occupancy expense		720			632			712			2,202			1,897			305		16.08	%
Furniture and equipment		196			218			189			606			626			(20	)	(3.19)	%
Amortization of intangible assets		1,101			1,186			1,091			3,366			3,573			(207	)	(5.79)	%
Other expenses		1,653			1,254			1,376			4,532			3,857			675		17.50	%
Total operating expenses		13,930			12,354			13,086			40,296			38,316			1,980		5.17	%
Income before income tax, corporate allocation and noncontrolling interest		5,163			4,487			6,274			16,930			12,288			4,642		37.78	%
Corporate allocation		(300	)		(241	)		(325	)		(918	)		(782	)		(136	)	17.39	%
Income before income tax provision and noncontrolling interest		4,863			4,246			5,949			16,012			11,506			4,506		39.16	%
Provision for income tax expense		1,219			1,058			1,533			4,091			2,910			1,181		40.58	%
Net income		3,644			3,188			4,416			11,921			8,596			3,325		38.68	%
Noncontrolling interest		—			—			—			—			—			—		N/M
Net income attributable to TowneBank	$	3,644		$	3,188		$	4,416		$	11,921		$	8,596			3,325		38.68	%

Provision for income taxes		1,219			1,058			1,533			4,091			2,910			1,181		40.58	%
Depreciation, amortization and interest expense		1,228			1,330			1,220			3,767			3,999			(232	)	(5.80)	%
EBITDA^(non-GAAP)	$	6,091		$	5,576		$	7,169		$	19,779		$	15,505		$	4,274		27.57	%

Efficiency ratio^(non-GAAP)		67.19	%		66.31	%		61.96	%		64.53	%		68.66	%		(4.13)	%	(6.02)	%

TOWNEBANK
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands)

	Three Months Ended									Nine Months Ended
	September 30,			September 30,			June 30,			September 30,			September 30,
		2022			2021			2022			2022			2021

Return on average assets (GAAP)		1.22	%		1.27	%		1.13	%		1.16	%		1.55	%
Impact of excluding average goodwill and other intangibles and amortization		0.09	%		0.10	%		0.09	%		0.09	%		0.11	%
Return on average tangible assets (non-GAAP)		1.31	%		1.37	%		1.22	%		1.25	%		1.66	%

Return on average equity (GAAP)		10.60	%		10.59	%		9.94	%		10.09	%		12.73	%
Impact of excluding average goodwill and other intangibles and amortization		4.48	%		4.50	%		4.26	%		4.31	%		5.39	%
Return on average tangible equity (non-GAAP)		15.08	%		15.09	%		14.20	%		14.40	%		18.12	%

Return on average common equity (GAAP)		10.69	%		10.68	%		10.03	%		10.18	%		12.84	%
Impact of excluding average goodwill and other intangibles and amortization		4.58	%		4.59	%		4.34	%		4.39	%		5.49	%
Return on average tangible common equity (non-GAAP)		15.27	%		15.27	%		14.37	%		14.57	%		18.33	%

Book value (GAAP)	$	25.08		$	25.91		$	25.48		$	25.08		$	25.91
Impact of excluding average goodwill and other intangibles and amortization		(6.91	)		(6.99	)		(6.90	)		(6.91	)		(6.99	)
Tangible book value (non-GAAP)	$	18.17		$	18.92		$	18.58		$	18.17		$	18.92

Efficiency ratio (GAAP)		62.51	%		61.20	%		65.11	%		64.53	%		59.01	%
Impact of exclusions		(1.48)	%		(1.62)	%		(1.60)	%		(1.59)	%		(1.44)	%
Efficiency ratio (non-GAAP)		61.03	%		59.58	%		63.51	%		62.94	%		57.57	%

Average assets (GAAP)	$	16,304,294		$	15,706,998		$	16,529,810		$	16,382,006		$	15,151,850
Less: average goodwill and intangible assets		504,000			506,231			503,678			504,715			499,944
Average tangible assets (non-GAAP)	$	15,800,294		$	15,200,767		$	16,026,132		$	15,877,291		$	14,651,906

Average equity (GAAP)	$	1,878,574		$	1,888,451		$	1,878,361		$	1,885,655		$	1,840,268
Less: average goodwill and intangible assets		504,000			506,231			503,678			504,715			499,944
Average tangible equity (non-GAAP)	$	1,374,574		$	1,382,220		$	1,374,683		$	1,380,940		$	1,340,324

Average common equity (GAAP)	$	1,861,845		$	1,871,820		$	1,861,635		$	1,869,112		$	1,824,753
Less: average goodwill and intangible assets		504,000			506,231			503,678			504,715			499,944
Average tangible common equity (non-GAAP)	$	1,357,845		$	1,365,589		$	1,357,957		$	1,364,397		$	1,324,809

Net income (GAAP)	$	50,169		$	50,400		$	46,547		$	142,302		$	175,201
Amortization of intangibles, net of tax		2,089			2,172			2,120			6,435			6,472
Tangible net income (non-GAAP)	$	52,258		$	52,572		$	48,667		$	148,737		$	181,673

Net income (GAAP)	$	50,169		$	50,400		$	46,547		$	142,302		$	175,201
Provision for credit losses		3,925			(1,582	)		56			2,532			(15,665	)
Provision for income tax		12,606			14,829			11,145			34,983			45,388
Other nonrecurring (income) loss		—			—			—			—			30
Pre-provision, pre-tax net revenues (non-GAAP)	$	66,700		$	63,647		$	57,748		$	179,817		$	204,954

Total revenue (GAAP)	$	179,236		$	170,076		$	166,980		$	511,628		$	519,906
Net (gain)/loss on investment securities		—			—			—			—			(1,252	)
Other nonrecurring (income) loss		—			—			—			—			30
Total Revenue for efficiency calculation (non-GAAP)	$	179,236		$	170,076		$	166,980		$	511,628		$	518,684

Noninterest expense (GAAP)	$	112,034		$	104,086		$	108,725		$	330,139		$	306,805
Less: amortization of intangibles		2,644			2,750			2,684			8,145			8,192
Noninterest expense net of amortization (non-GAAP)	$	109,390		$	101,336		$	106,041		$	321,994		$	298,613

TOWNEBANK
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands, except per share data)


Reconciliation of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability	Three Months Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
		2022			2022			2022			2021			2021
Net income (GAAP)	$	50,169		$	46,547		$	45,586		$	40,183		$	50,400

Acquisition-related expenses		616			51			59			50			719
Income tax expense (benefit)		(6	)		(1	)		(12	)		(7	)		(41	)
Total charges, net of taxes		610			50			47			43			678
Operating earnings, excluding certain items affecting comparability (non-GAAP)	$	50,779		$	46,597		$	45,633		$	40,226		$	51,078
Weighted average diluted shares		72,594,474			72,568,886			72,562,122			72,624,610			72,591,281
Diluted EPS (GAAP)	$	0.69		$	0.64		$	0.63		$	0.55		$	0.69
Diluted EPS, excluding certain items affecting comparability (non-GAAP)	$	0.70		$	0.64		$	0.63		$	0.55		$	0.70
Average assets	$	16,304,294		$	16,529,810		$	16,311,998		$	16,075,509		$	15,706,998
Average tangible equity	$	1,374,574		$	1,374,683			1,393,771		$	1,395,607		$	1,382,220
Average common tangible equity	$	1,357,845		$	1,357,957		$	1,377,605		$	1,379,412		$	1,365,589
Return on average assets, excluding certain items affecting comparability (non-GAAP)		1.24	%		1.13	%		1.13	%		0.99	%		1.29	%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)		15.26	%		14.21	%		13.93	%		12.09	%		15.28	%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)		15.45	%		14.39	%		14.09	%		12.24	%		15.47	%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)		62.16	%		65.08	%		66.09	%		68.83	%		60.78	%

TOWNEBANK
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands, except per share data)


Reconciliation of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability	Nine Months Ended
	September 30,			September 30,
		2022			2021
Net income (GAAP)	$	142,302		$	175,201

Acquisition-related expenses		726			972
Income tax expense (benefit)		(21	)		(50	)
Total charges, net of taxes		705			922
Operating earnings, excluding certain items affecting comparability (non-GAAP)	$	143,007		$	176,123
Weighted average diluted shares		72,567,596			72,547,478
Diluted EPS (GAAP)	$	1.97		$	2.41
Diluted EPS, excluding certain items affecting comparability (non-GAAP)	$	1.97		$	2.43
Average assets	$	16,382,006		$	15,151,850
Average tangible equity	$	1,380,940		$	1,340,324
Average tangible common equity	$	1,364,397		$	1,324,809
Return on average assets, excluding certain items affecting comparability (non-GAAP)		1.17	%		1.55	%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)		14.47	%		18.21	%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)		14.64	%		18.43	%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)		64.39	%		58.96	%

TowneBank Reports Third Quarter 2022 Earnings

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