TowneBank Reports Second Quarter 2021 Earnings

Source: Nasdaq GlobeNewswire / 29 Jul 2021 08:30:02 America/New_York

SUFFOLK, Va., July 29, 2021 (GLOBE NEWSWIRE) -- TowneBank (the "Company") (NASDAQ: TOWN) today reported earnings for the quarter ended June 30, 2021 of $55.80 million, or $0.77 per diluted share, compared to $34.61 million, or $0.48 per diluted share, for the quarter ended June 30, 2020.

"Towne delivered another strong financial performance for the quarter with solid contributions across each of our business segments. Continued improvements in economic conditions led to an increase of nearly $50 million, or 16%, in total revenues. In fact, CNBC recently recognized Virginia and North Carolina as the #1 and #2 top states, respectively, in our country for doing business. As our economy continues to normalize, our Company is well-positioned to capitalize on the opportunities to drive future growth," said G. Robert Aston, Jr., Executive Chairman.

Highlights for Second Quarter 2021 Compared to Second Quarter 2020:

Total revenues were $167.32 million, an increase of $4.67 million, or 2.87%.
Pre-provision, pre-tax, net revenues (non-GAAP) were $59.73 million, a decrease of $9.29 million, or 13.46%.
Loans held for investment were $9.42 billion, a decrease of $0.38 billion, or 3.86%, from June 30, 2020, and $0.31 billion, or 3.19%, from March 31, 2021. Excluding the decline in loans from the Paycheck Protection Program ("PPP"), loans held for investment increased $186.81 million, or 2.14%, compared to June 30, 2020, and $62.46 million, or 2.84%, on an annualized basis from the linked quarter. Total loans at June 30, 2021, June 30, 2020, and March 31, 2021 included $0.52 billion, $1.09 billion, and $0.90 billion, respectively, of PPP loans.
Total deposits were $12.96 billion, an increase of $1.70 billion, or 15.09%, compared to prior year and $0.82 billion, or 27.26% on an annualized basis, from March 31, 2021.
Noninterest bearing deposits increased by 24.06%, to $5.24 billion, representing 40.44% of total deposits. Compared to the linked quarter, noninterest bearing deposits increased 8.31%, or 33.34%, on an annualized basis.
Annualized return on common shareholders' equity was 12.31% and annualized return on average tangible common shareholders' equity was 17.57% (non-GAAP).
Net interest margin for the quarter was 2.92% and taxable equivalent net interest margin (non-GAAP) was 2.94%.
Nonperforming assets were $15.22 million, or 0.10% of total assets, compared to $29.25 million, or 0.19%, at June 30, 2020, primarily due to the sale of several OREO properties.
Effective tax rate of 20.03% in the quarter compared to 17.74% in second quarter 2020.

"We were pleased to deliver more than $62 million in core loan growth, excluding PPP, during the quarter. Strong credit performance and continued reductions in loan deferrals coupled with an improving economic forecast led to a modest release in loan loss reserves. Looking ahead, as liquidity continues to build we would expect continued pressure on our net interest margins, highlighting the importance of our fee-based business lines and diversified business model," stated J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to Second Quarter 2020:

Net interest income was $101.14 million compared to $93.27 million at June 30, 2020.
Tax-equivalent net interest margin (non-GAAP) was 2.94%, including purchase accounting accretion of 5 basis points and PPP interest and fees of 10 basis points, compared to 2.87%, including purchase accounting accretion of 8 basis points and a 16 basis point decline in interest and fees related to PPP, for second quarter 2020.
On an average basis, loans held for investment, with a yield of 4.24%, represented 69.02% of earning assets at June 30, 2021 compared to a yield of 4.29% and 73.10% of earning assets in the second quarter of 2020. Excluding PPP loans, loan yields were 4.15% in second quarter 2021 compared to 4.42% in second quarter 2020.
Interest and fee income on PPP loans was $10.02 million in second quarter 2021, compared to $11.63 million in the linked quarter, and $5.81 million in second quarter 2020.
Total cost of deposits decreased to 0.23% from 0.58% at June 30, 2020.
Average interest-earning assets totaled $13.92 billion at June 30, 2021 compared to $13.16 billion at June 30, 2020, an increase of 5.74%.
Average interest-bearing liabilities totaled $8.07 billion, a decrease of $0.57 billion from prior year.
Interest expense on the Federal Reserve Bank ("FRB") PPP lending facility was $0.12 million in second quarter 2021, compared to $0.16 million in the linked quarter, and $0.54 million in second quarter 2020. The Company repaid the entire balance of the facility during second quarter 2021.

Quarterly Provision for Credit Losses:

The quarterly provision for credit losses for on-balance-sheet loans was a benefit of $8.09 million compared to a provision expense of $25.99 million one year ago and a benefit of $3.41 million in the linked quarter. The second quarter 2021 included a release in the allowance for credit losses of $7.95 million that was driven by a combination of net recoveries, reduction in loans deferred under the CARES Act, and improvements in the economic forecast, offset by modest core loan growth.
Net loan recoveries were $0.14 million compared to net recoveries of $0.10 million one year prior and net charge-offs of $0.67 million in the linked quarter. The ratio of net loan charge-offs to average loans on an annualized basis was (0.01)% in second quarter 2021, 0.00% in 2020, and 0.03% in the linked quarter.
The provision for credit losses on off-balance-sheet commitments was a benefit of $1.89 million compared to a provision expense of $1.08 million in the second quarter of 2020, and a benefit of $0.48 million in the linked quarter.
The allowance for credit losses on loans represented 1.15% of total loans compared to 1.19% at March 31, 2021 and 0.92% at June 30, 2020. Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses (non-GAAP) was 1.22%, compared to 1.31% at March 31, 2021 and 1.04% at June 30, 2020. The allowance for credit losses on loans was 9.67 times nonperforming loans compared to 9.09 times at March 31, 2021 and 5.34 times at June 30, 2020.
Expected loss estimates are subject to change based on continuing review of models and assumptions, portfolio performance, changes in forecasted macroeconomic conditions and loan mix, which could result in material changes to the reserve in future periods.

Quarterly Noninterest Income Compared to Second Quarter 2020:

Total noninterest income was $66.18 million compared to $69.38 million in 2020, a decrease of $3.21 million, or 4.62%. Residential mortgage banking income decreased $4.19 million, investment income increased $0.88 million, insurance commissions and other title fees increased $0.72 million, and real estate brokerage and property management income increased $0.20 million. Also included in noninterest income are net gains on investment securities of $0.25 million as compared to net gains of $2.93 million in the prior year.
Residential mortgage banking recorded income of $25.52 million compared to $29.72 million in second quarter 2020. Loan volume in the current quarter was $1.45 billion, with purchase activity comprising 76.95% of that volume, compared to volume in second quarter 2020 of $1.47 billion, with purchase activity comprising 51.26%. Offsetting this 1.36% decline in volume between quarters, margins improved 47 basis points. The primary driver of the decline in income between quarters was the income statement impact of a net loss on derivative instruments of $7.88 million, including a loss on interest rate-locks of $4.76 million, compared to a net gain on derivative instruments of $6.43 million, including a gain on interest rate-locks of $3.51 million in second quarter 2020.
In the quarterly comparison, margins on residential mortgages declined 37 basis points from the linked quarter after peaking in December 2020. Management expects margin compression to continue through the end of the year.
Total Insurance segment revenue increased $1.03 million, or 4.93% to $21.90 million in second quarter 2021 compared to 2020. The Company acquired a property and casualty insurance agency in December 2020, which brought in $0.53 million in additional revenue in second quarter 2021. The new agency revenues, combined with organic growth, outpaced the impact of the reduction in revenues due to the sale of its travel insurance joint venture in third quarter 2020, which contributed revenue of $0.86 million in second quarter 2020.
Property management fee revenue decreased 12.69%, or $1.03 million, to $7.09 million compared to second quarter 2020. The earnings streams between years has been impacted by the emergence of the COVID-19 pandemic, which put travel at a standstill in first quarter 2020 and resulted in heavier reservation activities in second quarter 2020. Due to record first quarter 2021 reservations, occupancy levels are currently at near-maximum and year-to-date reservation income is $9.38 million, or 71.08% ahead of 2020.
The Company acquired Venture Resorts, the largest cabin rental company in the Smoky Mountains of Tennessee, in July 2021. Based on the timing of this acquisition, management does not expect the impact to earnings for the remainder of 2021 to be material.

Quarterly Noninterest Expense Compared to Second Quarter 2020:

Total noninterest expense was $105.39 million compared to $91.03 million in 2020, an increase of $14.37 million, or 15.79%. The higher level of expenses were attributable to increases in salary and benefits expense of $4.44 million, and production or performance related items such as advertising and marketing expense of $1.27 million, software expense of $1.0 million, charitable contributions of $3.43 million, and data processing expense of $0.70 million.
The quarterly increase in salaries and benefits was primarily driven by across-the-board cost of living increases in the second quarter of 2021.
Noninterest expenses across most major categories have increased compared to 2020, due to the pandemic impact in the prior year, and have begun to normalize in 2021.
Higher credit card fees on vacation property reservation activities drove the increase in data processing expense, while increased costs associated with our core banking platform resulted in higher software expenses.

Consolidated Balance Sheet Highlights:

Total assets were $15.80 billion for the quarter ended June 30, 2021, an increase of $0.72 billion, or 4.80%, compared to $15.08 billion at March 31, 2021. Total assets increased $0.22 billion, or 1.44%, from $15.58 billion at June 30, 2020. The year-over-year increase was driven primarily by higher liquidity levels and loans held for investment tied to PPP lending activities.
Loans held for investment decreased $0.38 billion, or 3.86%, compared to prior year and $0.31 billion, or 3.19%, compared the linked quarter. Excluding PPP loans of $0.52 billion in second quarter 2021, $1.09 billion in second quarter 2020, and $0.90 billion in the linked quarter, loans held for investment increased $186.81 million, or 2.14%, compared to prior year, and $62.46 million, or 0.71%, compared to March 31, 2021, or 2.84% on an annualized basis.
Average loans held for investment, excluding PPP loans, were $8.85 billion in the second quarter of 2021, an increase of $19.19 million, or 0.22% compared to prior year. In the linked quarter comparison, average loans held for investment, excluding PPP loans, increased 0.79%, or $68.96 million, 3.15% on an annualized basis.
Unamortized fee income related to PPP loans was $14.33 million at June 30, 2021.
Mortgage loans held for sale decreased $55.92 million, or 9.16%, compared to the prior year and $28.46 million, or 4.88%, compared to the linked quarter.
Total deposits increased $1.70 billion, or 15.09%, compared to the prior year and $0.82 billion, or 6.80%, compared to the linked quarter.
Total borrowings decreased $1.74 billion, or 74.65%, from prior year and $0.17 billion, or 22.02%, compared to the linked quarter.

Investment Securities:

Total investment securities were $1.49 billion compared to $1.46 billion at March 31, 2021 and $1.36 billion at June 30, 2020. The weighted average duration of the portfolio at June 30, 2021 was 4.3 years. The carrying value of the AFS debt securities portfolio included $42.18 million, $59.89 million, and $28.12 million in net unrealized gains at June 30, 2021, June 30, 2020, and March 31, 2021, respectively.

Loans and Asset Quality:

Total loans held for investment were $9.42 billion at June 30, 2021 compared to $9.73 billion at March 31, 2021 and $9.80 billion at June 30, 2020.
Nonperforming assets were $15.22 million, or 0.10% of total assets, compared to $29.25 million, or 0.19%, at June 30, 2020.
Nonperforming loans were 0.12% of period end loans compared to 0.17% at June 30, 2020.
Foreclosed property decreased to $4.04 million from $12.32 million at June 30, 2020.
At June 30, 2021, we had $61.02 million in loan modifications made in accordance with section 4013 of the CARES Act, a decline of $1.92 billion, or 96.92%, from a reported peak of $1.98 billion at April 30, 2020.

Deposits and Borrowings:

Total deposits were $12.96 billion compared to $12.14 billion at March 31, 2021 and $11.26 billion at June 30, 2020.
Total loans to deposits were 72.69% compared to 80.19% at March 31, 2021 and 87.01% at June 30, 2020.
Non-interest bearing deposits were 40.44% of total deposits at June 30, 2021 compared to 39.87% at March 31, 2021 and 37.52% at June 30, 2020.
Total borrowings were $0.59 billion compared to $0.76 billion at March 31, 2021 and $2.33 billion at June 30, 2020.

Capital:

Common equity tier 1 capital ratio of 12.42%.
Tier 1 leverage capital ratio of 9.44%.
Tier 1 risk-based capital ratio of 12.57%.
Total risk-based capital ratio of 15.76%.
Book value per common share was $25.51 compared to $24.78 at March 31, 2021 and $23.50 at June 30, 2020.
Tangible book value per common share (non-GAAP) was $18.70 compared to $17.94 at March 31, 2021 and $16.68 at June 30, 2020.

About TowneBank:
Founded in 1999, TowneBank is a company built on relationships, offering a full range of banking and other financial services, with a mission 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 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. With total assets of $15.80 billion as of June 30, 2021, 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 that may cause actual results to differ materially from those contemplated by such forward-looking statements include the impact of the COVID-19 pandemic and the associated efforts to limit its spread; 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 creditworthiness 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; changes in the legislative or regulatory environment, including changes in accounting standards and tax laws, that may adversely affect TowneBank’s business; costs or difficulties related to the integration of the businesses TowneBank has acquired may be greater than expected; expected revenue growth or 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; TowneBank’s 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; changes in the local economy with regard to TowneBank’s market areas; 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
	June 30,			March 31,			December 31,			September 30,			June 30,
	2021			2021			2020			2020			2020
Income and Performance Ratios:
Total Revenue	$	167,321		$	182,509		$	171,848		$	192,135		$	162,656
Net income	58,002			72,631			53,891			50,715			37,222
Net income available to common shareholders	55,803			68,995			50,082			34,464			34,605
Pre-provision, pre-tax, net revenues ^(non-GAAP)	59,728			81,547			62,107			73,903			69,014
Net income per common share - diluted	0.77			0.95			0.69			0.48			0.48
Book value per common share	25.51			24.78			24.31			23.83			23.50
Book value per common share - tangible ^(non-GAAP)	18.70			17.94			17.46			17.06			16.68
Return on average assets	1.48		%	1.92		%	1.35		%	0.89		%	0.97		%
Return on average assets - tangible ^(non-GAAP)	1.59		%	2.05		%	1.46		%	0.97		%	1.07		%
Return on average equity	12.21		%	15.56		%	11.26		%	7.85		%	8.18		%
Return on average equity - tangible ^(non-GAAP)	17.38		%	22.19		%	16.28		%	11.66		%	12.32		%
Return on average common equity	12.31		%	15.70		%	11.36		%	7.91		%	8.24		%
Return on average common equity - tangible ^(non-GAAP)	17.57		%	22.45		%	16.48		%	11.79		%	12.44		%
Noninterest income as a percentage of total revenue	39.55		%	45.21		%	41.45		%	49.64		%	42.66		%
Regulatory Capital Ratios (1):
Common equity tier 1	12.42		%	12.15		%	11.87		%	11.75		%	11.54		%
Tier 1	12.57		%	12.30		%	12.04		%	11.91		%	11.67		%
Total	15.76		%	15.59		%	15.42		%	15.35		%	14.91		%
Tier 1 leverage ratio	9.44		%	9.54		%	8.99		%	8.89		%	9.05		%
Asset Quality:
Allowance for credit losses on loans to nonperforming loans	9.67x			9.09x			10.74x			7.31x			5.34x
Allowance for credit losses on loans to period end loans	1.15		%	1.19		%	1.25		%	1.22		%	0.92		%
Allowance for credit losses on loans to period end loans excluding PPP loans ^(non-GAAP)	1.22		%	1.31		%	1.37		%	1.37		%	1.04		%
Nonperforming loans to period end loans	0.12		%	0.13		%	0.12		%	0.17		%	0.17		%
Nonperforming assets to period end assets	0.10		%	0.11		%	0.11		%	0.19		%	0.19		%
Net charge-offs (recoveries) to average loans (annualized)	(0.01		)%	0.03		%	—		%	(0.01		)%	—		%
Net charge-offs (recoveries)	$	(137	)	$	669		$	109		$	(328	)	$	(102	)

Nonperforming loans	$	11,178		$	12,768		$	11,188		$	16,295		$	16,935
Former bank premises	—			750			750			750			—
Foreclosed property	4,041			3,748			4,276			11,695			12,315
Total nonperforming assets	$	15,219		$	17,266		$	16,214		$	28,740		$	29,250
Loans past due 90 days and still accruing interest	$	1,584		$	108		$	528		$	19		$	464
Allowance for credit losses on loans	$	108,130		$	116,077		$	120,157		$	119,058		$	90,467
Mortgage Banking:
Loans originated, mortgage	$	1,050,663		$	1,187,595		$	1,257,963		$	1,292,801		$	1,116,782
Loans originated, joint venture	403,864			417,177			429,848			498,100			357,815
Total loans originated	$	1,454,527		$	1,604,772		$	1,687,811		$	1,790,901		$	1,474,597
Number of loans originated	4,514			5,164			5,481			5,817			4,818
Number of originators	222			229			228			224			216
Purchase %	76.95		%	53.45		%	59.76		%	61.21		%	51.26		%
Loans sold	$	1,485,057		$	1,601,480		$	1,845,926		$	1,833,590		$	1,398,649
Rate lock asset	$	7,760		$	12,522		$	11,781		$	10,480		$	7,202
Gross realized gain on sales and fees as a % of loans originated	3.64		%	4.01		%	4.02		%	3.65		%	3.17		%
Other Ratios:
Net interest margin	2.92		%	3.04		%	2.97		%	2.70		%	2.85		%
Net interest margin-fully tax equivalent ^(non-GAAP)	2.94		%	3.06		%	2.98		%	2.72		%	2.87		%
Average earning assets/total average assets	91.89		%	91.47		%	91.59		%	92.09		%	91.33		%
Average loans/average deposits	78.22		%	82.71		%	83.42		%	86.29		%	91.81		%
Average noninterest deposits/total average deposits	40.21		%	38.39		%	39.61		%	37.76		%	36.52		%
Period end equity/period end total assets	11.83		%	12.04		%	12.20		%	11.82		%	11.05		%
Efficiency ratio^(non-GAAP)	61.46		%	52.11		%	60.02		%	57.36		%	55.17		%
(1) Current reporting period regulatory capital ratios are preliminary

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)

Investment Securities										% Change
	Q2			Q2			Q1			Q2 21 vs.		Q2 21 vs.
*Available-for-sale securities, at fair value*	2021			2020			2021			Q2 20		Q1 21
U.S. agency securities	$	206,151		$	118,176		$	201,787		74.44	%	2.16	%
U.S. Treasury notes	1,013			1,010			1,019			0.30	%	(0.59	)%
Municipal securities	334,633			313,322			334,751			6.80	%	(0.04	)%
Trust preferred and other corporate securities	31,680			59,598			31,241			(46.84	)%	1.41	%
Mortgage-backed securities issued by GSE and GNMA	881,078			774,658			849,418			13.74	%	3.73	%
Allowance for credit losses	(134		)	(140		)	(210		)	(4.29	)%	(36.19	)%
Total	$	1,454,421		$	1,266,624		$	1,418,006		14.83	%	2.57	%
*Gross unrealized gains (losses) reflected in financial statements*
Total gross unrealized gains	$	65,152		$	61,559		$	38,751		5.84	%	68.13	%
Total gross unrealized losses	(22,968		)	(1,674		)	(10,632		)	1,272.04	%	116.03	%
Net unrealized gains (losses) and other adjustments on AFS securities	$	42,184		$	59,885		$	28,119		(29.56	)%	50.02	%
*Held-to-maturity securities, at amortized cost*
Trust preferred corporate securities	$	2,297		$	2,345		$	2,309		(2.05	)%	(0.52	)%
Municipal securities	5,053			28,854			5,032			(82.49	)%	0.42	%
Mortgage-backed securities issued by GSE and GNMA	8,039			10,395			8,639			(22.66	)%	(6.95	)%
Allowance for credit losses	(97		)	(121		)	(97		)	(19.83	)%	—
Total	$	15,292		$	41,473		$	15,883		(63.13	)%	(3.72	)%

*Gross unrealized gains (losses) not reflected in financial statements*
Total gross unrealized gains	$	1,708		$	1,980		$	1,598		(13.74	)%	6.88	%
Total gross unrealized losses	—			—			—			—		—
Net unrealized gains (losses) in HTM securities	$	1,708		$	1,980		$	1,598		(13.74	)%	6.88	%

Loans Held For Investment (1)										% Change
	Q2			Q2			Q1			Q2 21 vs.		Q2 21 vs.
	2021			2020			2021			Q2 20		Q1 21
Real estate - construction and development	$	1,029,811		$	1,178,832		$	1,031,267		(12.64	)%	(0.14	)%
Commercial real estate - owner occupied	1,445,328			1,383,294			1,439,412			4.48	%	0.41	%
Commercial real estate - non owner occupied	2,597,405			2,332,447			2,477,315			11.36	%	4.85	%
Real estate - multifamily	343,764			277,947			360,125			23.68	%	(4.54	)%
Residential 1-4 family	1,166,898			1,227,961			1,173,761			(4.97	)%	(0.58	)%
HELOC	390,726			442,569			400,314			(11.71	)%	(2.40	)%
Commercial and industrial business (C&I)	1,529,788			2,156,428			2,005,558			(29.06	)%	(23.72	)%
Government	479,664			346,734			398,579			38.34	%	20.34	%
Indirect	310,492			270,321			278,567			14.86	%	11.46	%
Consumer loans and other	129,702			185,356			169,685			(30.03	)%	(23.56	)%
Total	$	9,423,578		$	9,801,889		$	9,734,583		(3.86	)%	(3.19	)%

(1) Paycheck Protection Program loans totaling $0.52 billion, $1.09 billion, and $0.90 billion, primarily in C&I, are included in Q2 2021, Q2 2020, and Q1 2021, respectively.
Deposits										% Change
	Q2			Q2			Q1			Q2 21 vs.		Q2 21 vs.
	2021			2020			2021			Q2 20		Q1 21
Noninterest-bearing demand	$	5,243,074		$	4,226,208		$	4,840,678		24.06	%	8.31	%
Interest-bearing:
Demand and money market accounts	5,373,146			4,223,391			5,062,461			27.22	%	6.14	%
Savings	349,552			298,673			342,554			17.04	%	2.04	%
Certificates of deposits	1,998,828			2,516,666			1,893,951			(20.58	)%	5.54	%
Total	$	12,964,600		$	11,264,938		$	12,139,644		15.09	%	6.80	%

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

	Three Months Ended								Three Months Ended								Three Months Ended
	June 30, 2021								March 31, 2021								June 30, 2020
				Interest			Average					Interest			Average					Interest			Average
	Average			Income/			Yield/		Average			Income/			Yield/		Average			Income/			Yield/
	Balance			Expense			Rate		Balance			Expense			Rate		Balance			Expense			Rate
Assets:
Loans (net of unearned income and deferred costs), excluding nonaccrual loans (1)	$	9,604,805		$	101,490		4.24	%	$	9,647,129		$	101,960		4.29	%	$	9,619,931		$	102,656		4.29	%
Taxable investment securities	1,351,922			6,476			1.92	%	1,303,535			6,604			2.03	%	1,198,776			7,367			2.46	%
Tax-exempt investment securities	128,094			434			1.36	%	139,859			542			1.55	%	147,489			836			2.27	%
Total securities	1,480,016			6,910			1.87	%	1,443,394			7,146			1.98	%	1,346,265			8,203			2.44	%
Interest-bearing deposits	2,327,310			619			0.11	%	1,715,110			416			0.10	%	1,729,140			433			0.10	%
Loans held for sale	503,706			3,711			2.95	%	536,997			3,361			2.50	%	464,796			3,811			3.28	%
Total earning assets	13,915,837			112,730			3.25	%	13,342,630			112,883			3.44	%	13,160,132			115,103			3.52	%
Less: allowance for credit losses	(116,025		)						(120,934		)						(69,451		)
Total nonearning assets	1,344,076								1,370,720								1,318,787
Total assets	$	15,143,888							$	14,592,416							$	14,409,468
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	5,179,907		$	2,004		0.16	%	$	4,904,885		$	2,075		0.17	%	$	3,857,757		$	2,491		0.26	%
Savings	346,177			528			0.61	%	332,006			522			0.64	%	290,201			554			0.77	%
Certificates of deposit	1,816,283			4,612			1.02	%	1,959,225			5,951			1.23	%	2,503,648			12,027			1.93	%
Total interest-bearing deposits	7,342,367			7,144			0.39	%	7,196,116			8,548			0.48	%	6,651,606			15,072			0.91	%
Borrowings	476,122			565			0.47	%	562,451			822			0.58	%	1,741,832			3,238			0.74	%
Subordinated debt, net	249,260			2,962			4.75	%	249,114			2,930			4.70	%	248,660			2,962			4.76	%
Total interest-bearing liabilities	8,067,749			10,671			0.53	%	8,007,681			12,300			0.62	%	8,642,098			21,272			0.99	%
Demand deposits	4,937,754								4,483,444								3,826,439
Other noninterest-bearing liabilities	304,793								303,524								239,154
Total liabilities	13,310,296								12,794,649								12,707,691
Shareholders’ equity	1,833,592								1,797,767								1,701,777
Total liabilities and equity	$	15,143,888							$	14,592,416							$	14,409,468
Net interest income (tax-equivalent basis)				$	102,059							$	100,583							$	93,831
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment				(915		)						(593		)						(557		)
Net interest income (GAAP)				$	101,144							$	99,990							$	93,274

Interest rate spread (2)(3)							2.72	%							2.81	%							2.53	%
Interest expense as a percent of average earning assets							0.31	%							0.37	%							0.65	%
Net interest margin (tax equivalent basis) (3)(4)							2.94	%							3.06	%							2.87	%
Total cost of deposits							0.23	%							0.30	%							0.58	%

(1)	June 30, 2021, June 30, 2020, and March 31, 2021 includes average PPP balances of $0.77 billion, $0.81 billion and $0.88 billion, and related interest and fee income of $10.02 million, $5.81 million, and $11.29 million, respectively.
(2)	Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3)	Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4)	Non-GAAP.

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

	Six Months Ended								Six Months Ended								Six Months Ended June 30,
	June 30, 2021								June 30, 2020								2021 Compared with 2020
				Interest			Average					Interest			Average
	Average			Income/			Yield/		Average			Income/			Yield/		Increase			Change Due to
	Balance			Expense			Rate		Balance			Expense			Rate		(Decrease)			Rate			Volume
Assets:
Loans (net of unearned income and deferred costs), excluding nonaccrual loans (1)	$	9,625,850		$	203,451		4.26	%	$	9,085,074		$	203,221		4.50	%	$	230		$	(11,198	)	$	11,427
Taxable investment securities	1,327,862			13,080			1.97	%	1,277,593			16,578			2.60	%	(3,498		)	(4,128		)	630
Tax-exempt investment securities	133,944			976			1.46	%	137,846			1,698			2.46	%	(722		)	(675		)	(47		)
Total securities	1,461,806			14,056			1.92	%	1,415,439			18,276			2.58	%	(4,220		)	(4,803		)	583
Interest-bearing deposits	2,022,901			1,035			0.10	%	472,589			1,535			0.65	%	(500		)	(2,153		)	1,653
Loans held for sale	520,260			7,072			2.72	%	398,933			6,799			3.41	%	273			(1,543		)	1,816
Total earning assets	13,630,817			225,614			3.34	%	11,372,035			229,831			4.06	%	(4,217		)	(19,697		)	15,479
Less: allowance for credit losses	(118,466		)						(62,390		)
Total nonearning assets	1,357,324								1,919,751
Total assets	$	14,869,675							$	13,229,396
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	5,043,155		$	4,080		0.16	%	$	3,689,732		$	7,809		0.43	%	$	(3,729	)	$	(5,920	)	$	2,191
Savings	339,131			1,050			0.62	%	283,574			1,147			0.81	%	(97		)	(296		)	199
Certificates of deposit	1,887,359			10,563			1.13	%	2,468,873			25,177			2.05	%	(14,614		)	(9,590		)	(5,024		)
Total interest-bearing deposits	7,269,645			15,693			0.44	%	6,442,179			34,133			1.07	%	(18,440		)	(15,806		)	(2,634		)
Borrowings	519,048			1,387			0.53	%	1,210,789			5,820			0.95	%	(4,433		)	(1,931		)	(2,502		)
Subordinated debt, net	249,188			5,892			4.73	%	248,585			5,923			4.77	%	(31		)	(45		)	14
Total interest-bearing liabilities	8,037,881			22,972			0.58	%	7,901,553			45,876			1.17	%	(22,904		)	(17,782		)	(5,122		)
Demand deposits	4,711,854								3,394,275
Other noninterest-bearing liabilities	304,162								249,827
Total liabilities	13,053,897								11,545,655
Shareholders’ equity	1,815,778								1,683,741
Total liabilities and equity	$	14,869,675							$	13,229,396
Net interest income (tax-equivalent basis)				$	202,642							$	183,955				$	18,687		$	(1,915	)	$	20,601
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment				(1,508		)						(1,185		)			(323		)
Net interest income (GAAP)				$	201,134							$	182,770				$	18,364

Interest rate spread (2)(4)							2.76	%							2.90	%
Interest expense as a percent of average earning assets							0.34	%							0.81	%
Net interest margin (tax equivalent basis) (3)(4)							3.00	%							3.25	%
Total cost of deposits							0.26	%							0.70	%

(1) June 30, 2021 and June 30, 2020 includes average PPP balances of $0.79 billion and $0.40 billion and related interest income of $17.44 million and $5.81 million.
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4) Non-GAAP.

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


	June 30,			December 31,
	2021			2020
	(unaudited)			(audited)
ASSETS
Cash and due from banks	$	117,797		$	41,514
Interest-bearing deposits at FRB - Richmond	2,970,490			1,795,241
Interest-bearing deposits in financial institutions	31,971			27,532
Total Cash and Cash Equivalents	3,120,258			1,864,287
Securities available for sale, at fair value (amortized cost of $1,412,371 and $1,310,250, and allowance for credit losses of $134 and $348 at June 30, 2021 and December 31, 2020, respectively.)	1,454,421			1,368,224
Securities held to maturity, at amortized cost (fair value $17,097 and $18,469 at June 30, 2021 and December 31, 2020, respectively.)	15,389			16,512
Less: allowance for credit losses	(97		)	(97		)
Securities held to maturity, net of allowance for credit losses	15,292			16,415
Other equity securities	6,395			6,492
FHLB stock	16,909			30,135
Total Securities	1,493,017			1,421,266
Mortgage loans held for sale	554,447			540,798
Loans, net of unearned income and deferred costs	9,423,578			9,629,068
Less: allowance for credit losses	(108,130		)	(120,157		)
Net Loans	9,315,448			9,508,911
Premises and equipment, net	265,644			260,242
Goodwill	452,328			452,328
Other intangible assets, net	42,271			45,533
BOLI	249,213			246,109
Other assets	311,209			286,970
TOTAL ASSETS	$	15,803,835		$	14,626,444

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	5,243,074		$	4,374,566
Interest-bearing:
Demand and money market accounts	5,373,146			4,819,604
Savings	349,552			330,091
Certificates of deposit	1,998,828			2,048,905
Total Deposits	12,964,600			11,573,166
Advances from the FHLB	255,706			456,038
Subordinated debt, net	249,353			249,055
FRB PPP lending facility	—			182,852
Repurchase agreements and other borrowings	85,042			67,786
Total Borrowings	590,101			955,731
Other liabilities	379,278			313,719
TOTAL LIABILITIES	13,933,979			12,842,616
Preferred stock, authorized and unissued shares - 2,000,000	—			—
Common stock, $1.667 par: 150,000,000 shares authorized
72,671,891 and 72,667,541 shares issued at
June 30, 2021 and December 31, 2020, respectively	121,144			121,132
Capital surplus	1,048,332			1,046,642
Retained earnings	655,095			557,889
Common stock issued to deferred compensation trust, at cost
905,484 and 873,486 shares at June 30, 2021 and December 31, 2020, respectively	(18,076		)	(16,969		)
Deferred compensation trust	18,076			16,969
Accumulated other comprehensive income (loss)	29,273			41,184
TOTAL SHAREHOLDERS’ EQUITY	1,853,844			1,766,847
Noncontrolling interest	16,012			16,981
TOTAL EQUITY	1,869,856			1,783,828
TOTAL LIABILITIES AND EQUITY	$	15,803,835		$	14,626,444

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
INTEREST INCOME:
Loans, including fees	$	100,614		$	102,139		$	202,011		$	202,201
Investment securities	6,871			8,163			13,988			18,112
Interest-bearing deposits in financial institutions and federal funds sold	619			433			1,035			1,535
Mortgage loans held for sale	3,711			3,811			7,072			6,799
Total interest income	111,815			114,546			224,106			228,647
INTEREST EXPENSE:
Deposits	7,144			15,072			15,693			34,134
Advances from the FHLB	274			2,595			771			5,088
Subordinated debt, net	2,962			2,962			5,892			5,923
Repurchase agreements and other borrowings	291			643			616			732
Total interest expense	10,671			21,272			22,972			45,877
Net interest income	101,144			93,274			201,134			182,770
PROVISION FOR CREDIT LOSSES	(10,055		)	26,945			(14,082		)	33,961
Net interest income after provision for credit losses	111,199			66,329			215,216			148,809
NONINTEREST INCOME:
Residential mortgage banking income, net	25,524			29,715			62,937			37,131
Insurance commissions and other title fees and income, net	18,331			17,612			34,656			34,505
Real estate brokerage and property management income, net	10,984			10,781			28,918			17,719
Service charges on deposit accounts	2,391			1,888			4,580			4,328
Credit card merchant fees, net	1,667			1,109			2,969			2,287
BOLI	1,541			1,584			3,060			4,690
Other income	5,487			3,763			10,324			8,990
Net gain/(loss) on investment securities	252			2,930			1,252			7,932
Total noninterest income	66,177			69,382			148,696			117,582
NONINTEREST EXPENSE:
Salaries and employee benefits	61,365			56,926			119,801			112,793
Occupancy expense	7,559			7,227			15,630			14,728
Furniture and equipment	3,622			3,564			7,134			7,205
Amortization - intangibles	2,719			2,901			5,442			5,851
Software expense	4,494			3,492			8,688			6,984
Data processing	3,414			2,718			6,652			5,509
Professional fees	2,259			2,972			4,598			6,040
Advertising and marketing	3,257			1,986			6,225			5,570
Other expenses	16,705			9,239			28,549			23,233
Total noninterest expense	105,394			91,025			202,719			187,913
Income before income tax expense and noncontrolling interest	71,982			44,686			161,193			78,478
Provision for income tax expense	13,980			7,464			30,559			13,651
Net income	$	58,002		$	37,222		$	130,634		$	64,827
Net income attributable to noncontrolling interest	(2,199		)	(2,617		)	(5,835		)	(3,838		)
Net income attributable to TowneBank	$	55,803		$	34,605		$	124,799		$	60,989
Per common share information
Basic earnings	$	0.77		$	0.48		$	1.72		$	0.84
Diluted earnings	$	0.77		$	0.48		$	1.72		$	0.84
Cash dividends declared	$	0.20		$	0.18		$	0.38		$	0.36

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


	June 30,			March 31,			December 31,			September 30,			June 30,
	2021			2021			2020			2020			2020
	(unaudited)			(unaudited)			(audited)			(unaudited)			(unaudited)
ASSETS
Cash and due from banks	$	117,797		$	141,545		$	41,514		$	114,604		$	115,724
Interest-bearing deposits at FRB - Richmond	2,970,490			1,936,458			1,795,241			1,670,186			2,511,152
Interest-bearing deposits in financial institutions	31,971			30,031			27,532			24,890			24,374
Total Cash and Cash Equivalents	3,120,258			2,108,034			1,864,287			1,809,680			2,651,250
Securities available for sale	1,454,421			1,418,006			1,368,224			1,310,683			1,266,624
Securities held to maturity	15,389			15,980			16,512			17,131			41,595
Less: allowance for credit losses	(97		)	(97		)	(97		)	(90		)	(121		)
Securities held to maturity, net of allowance for credit losses	15,292			15,883			16,415			17,041			41,474
Other equity securities	6,395			6,355			6,492			6,497			6,497
FHLB stock	16,909			16,909			30,135			41,829			49,277
Total Securities	1,493,017			1,457,153			1,421,266			1,376,050			1,363,872
Mortgage loans held for sale	554,447			582,905			540,798			669,020			610,369
Loans, net of unearned income and deferred costs	9,423,578			9,734,583			9,629,068			9,770,570			9,801,889
Less: allowance for credit losses	(108,130		)	(116,077		)	(120,157		)	(119,058		)	(90,467		)
Net Loans	9,315,448			9,618,506			9,508,911			9,651,512			9,711,422
Premises and equipment, net	265,644			261,831			260,242			256,909			257,533
Goodwill	452,328			452,328			452,328			446,725			446,725
Other intangible assets, net	42,271			44,808			45,533			45,781			48,632
BOLI	249,213			247,655			246,109			244,103			242,493
Other assets	311,209			306,176			286,970			295,637			247,962
TOTAL ASSETS	$	15,803,835		$	15,079,396		$	14,626,444		$	14,795,417		$	15,580,258
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	5,243,074		$	4,840,678		$	4,374,566		$	4,464,178		$	4,226,208
Interest-bearing:
Demand and money market accounts	5,373,146			5,062,461			4,819,604			4,642,482			4,223,391
Savings	349,552			342,554			330,091			312,444			298,673
Certificates of deposit	1,998,828			1,893,951			2,048,905			2,285,859			2,516,666
Total Deposits	12,964,600			12,139,644			11,573,166			11,704,963			11,264,938
Advances from the FHLB	255,706			255,872			456,038			731,202			906,365
Subordinated debt, net	249,353			249,204			249,055			248,906			248,756
FRB PPP lending facility	—			183,164			182,852			—			1,111,429
Repurchase agreements and other borrowings	85,042			68,509			67,786			58,061			60,913
Total Borrowings	590,101			756,749			955,731			1,038,169			2,327,463
Other liabilities	379,278			366,697			313,719			303,582			266,314
TOTAL LIABILITIES	13,933,979			13,263,090			12,842,616			13,046,714			13,858,715
Preferred stock
Authorized shares - 2,000,000	—			—			—			—			—
Common stock, $1.667 par value	121,144			121,108			121,132			121,115			121,101
Capital surplus	1,048,332			1,047,312			1,046,642			1,045,170			1,043,774
Retained earnings	655,095			613,826			557,889			520,888			499,502
Common stock issued to deferred compensation
trust, at cost	(18,076		)	(17,063		)	(16,969		)	(16,951		)	(16,776		)
Deferred compensation trust	18,076			17,063			16,969			16,951			16,776
Accumulated other comprehensive income (loss)	29,273			17,969			41,184			44,569			43,218
TOTAL SHAREHOLDERS’ EQUITY	1,853,844			1,800,215			1,766,847			1,731,742			1,707,595
Noncontrolling interest	16,012			16,091			16,981			16,961			13,948
TOTAL EQUITY	1,869,856			1,816,306			1,783,828			1,748,703			1,721,543
TOTAL LIABILITIES AND EQUITY	$	15,803,835		$	15,079,396		$	14,626,444		$	14,795,417		$	15,580,258

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


	Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2021			2021			2020			2020			2020
INTEREST INCOME:
Loans, including fees	$	100,614		$	101,396		$	104,182		$	102,869		$	102,139
Investment securities	6,871			7,117			7,499			7,440			8,163
Interest-bearing deposits in financial institutions and federal funds sold	619			416			435			632			433
Mortgage loans held for sale	3,711			3,361			3,867			4,587			3,811
Total interest income	111,815			112,290			115,983			115,528			114,546
INTEREST EXPENSE:
Deposits	7,144			8,548			10,762			12,966			15,072
Advances from the FHLB	274			497			1,404			1,901			2,595
Subordinated debt	2,962			2,930			2,962			2,962			2,962
Repurchase agreements and other borrowings	291			325			241			940			643
Total interest expense	10,671			12,300			15,369			18,769			21,272
Net interest income	101,144			99,990			100,614			96,759			93,274
PROVISION FOR CREDIT LOSSES	(10,055		)	(4,027		)	1,617			31,598			26,945
Net interest income after provision for credit losses	111,199			104,017			98,997			65,161			66,329
NONINTEREST INCOME:
Residential mortgage banking income, net	25,524			37,412			37,504			37,531			29,715
Insurance commissions and other title fees and income, net	18,331			16,325			13,868			17,468			17,612
Real estate brokerage and property management income, net	10,984			17,934			9,229			11,301			10,781
Service charges on deposit accounts	2,391			2,190			1,707			1,986			1,888
Credit card merchant fees, net	1,667			1,302			1,377			1,506			1,109
BOLI	1,541			1,519			1,990			1,605			1,584
Other income	5,487			4,837			5,559			22,278			3,763
Net gain/(loss) on investment securities	252			1,000			—			1,701			2,930
Total noninterest income	66,177			82,519			71,234			95,376			69,382
NONINTEREST EXPENSE:
Salaries and employee benefits	61,365			58,435			61,475			61,408			56,926
Occupancy expense	7,559			8,072			8,193			8,396			7,227
Furniture and equipment	3,622			3,512			3,462			3,247			3,564
Amortization - intangibles	2,719			2,723			2,797			2,851			2,901
Software expense	4,494			4,194			4,066			3,572			3,492
Data processing	3,414			3,239			2,363			3,113			2,718
Professional fees	2,259			2,339			2,591			2,637			2,972
Advertising and marketing	3,257			2,968			2,204			1,870			1,986
Other expenses	16,705			11,844			18,781			14,887			9,239
Total noninterest expense	105,394			97,326			105,932			101,981			91,025
Income before income tax expense and noncontrolling interest	71,982			89,210			64,299			58,556			44,686
Provision for income tax expense	13,980			16,579			10,408			7,841			7,464
Net income	58,002			72,631			53,891			50,715			37,222
Net income attributable to noncontrolling interest	(2,199		)	(3,636		)	(3,809		)	(16,251		)	(2,617		)
Net income attributable to TowneBank	$	55,803		$	68,995		$	50,082		$	34,464		$	34,605
Per common share information
Basic earnings	$	0.77		$	0.95		$	0.69		$	0.48		$	0.48
Diluted earnings	$	0.77		$	0.95		$	0.69		$	0.48		$	0.48
Basic weighted average shares outstanding	72,468,094			72,414,953			72,357,177			72,339,413			72,280,555
Diluted weighted average shares outstanding	72,560,234			72,517,008			72,455,096			72,375,736			72,317,988
Cash dividends declared	$	0.20		$	0.18		$	0.18		$	0.18		$	0.18

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


	Three Months Ended									Six Months Ended						Increase/(Decrease)
	June 30,						March 31,			June 30,						2021 over 2020
	2021			2020			2021			2021			2020			Amount			Percent
Revenue
Net interest income	$	98,134		$	89,665		$	97,604		$	195,739		$	177,071		$	18,668		10.54	%
Service charges on deposit
accounts	2,391			1,888			2,190			4,580			4,328			252			5.82	%
Credit card merchant fees	1,667			1,109			1,302			2,969			2,287			682			29.82	%
Other income	5,404			3,888			4,970			10,375			10,950			(575		)	(5.25	)%
Subtotal	9,462			6,885			8,462			17,924			17,565			359			2.04	%
Net gain/(loss) on investment securities	252			2,930			1,000			1,252			7,932			(6,680		)	(84.22	)%
Total noninterest income	9,714			9,815			9,462			19,176			25,497			(6,321		)	(24.79	)%
Total revenue	107,848			99,480			107,066			214,915			202,568			12,347			6.10	%

Provision for credit losses	(9,532		)	26,059			(3,401		)	(12,932		)	33,100			(46,032		)	(139.07	)%

Expenses
Salaries and employee benefits	35,776			35,209			31,861			67,637			68,434			(797		)	(1.16	)%
Occupancy expense	5,012			4,812			5,546			10,558			9,728			830			8.53	%
Furniture and equipment	2,816			2,715			2,668			5,484			5,375			109			2.03	%
Amortization of intangibles	912			1,114			962			1,875			2,278			(403		)	(17.69	)%
Other expenses	18,392			10,718			14,050			32,441			29,423			3,018			10.26	%
Total expenses	62,908			54,568			55,087			117,995			115,238			2,757			2.39	%
Income before income tax, corporate allocation and noncontrolling interest	54,472			18,853			55,380			109,852			54,230			55,622			102.57	%
Corporate allocation	1,249			627			1,292			2,540			1,297			1,243			95.84	%
Income before income tax provision and noncontrolling interest	55,721			19,480			56,672			112,392			55,527			56,865			102.41	%
Provision for income tax expense	10,535			2,167			9,701			20,236			8,830			11,406			129.17	%
Net income	45,186			17,313			46,971			92,156			46,697			45,459			97.35	%
Noncontrolling interest	1			5			(5		)	(3		)	4			(7		)	(175.00	)%
Net income attributable to TowneBank	$	45,187		$	17,318		$	46,966		$	92,153		$	46,701		$	45,452		97.33	%

Efficiency ratio^(non-GAAP)	57.62		%	55.36		%	51.03		%	54.35		%	58.04		%	(3.69		)%	(6.36	)%

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


	Three Months Ended									Six Months Ended						Increase/(Decrease)
	June 30,						March 31,			June 30,						2021 over 2020
	2021			2020			2021			2021			2020			Amount			Percent
Revenue
Residential mortgage brokerage income, net	$	26,383		$	30,468		$	37,877		$	64,260		$	38,475		$	25,785		67.02	%
Real estate brokerage income, net	3,893			2,659			2,451			6,344			4,524			1,820			40.23	%
Title insurance and settlement fees	684			639			525			1,211			1,075			136			12.65	%
Property management fees, net	7,091			8,122			15,483			22,574			13,195			9,379			71.08	%
Income from unconsolidated subsidiary	289			301			406			695			487			208			42.71	%
Net interest and other income	3,336			3,765			2,736			6,069			6,161			(92		)	(1.49	)%
Total revenue	41,676			45,954			59,478			101,153			63,917			37,236			58.26	%

Provision for credit losses	(523		)	886			(626		)	(1,150		)	861			(2,011		)	(233.57	)%

Expenses
Salaries and employee benefits	16,018			13,059			16,847			32,865			26,352			6,513			24.72	%
Occupancy expense	1,935			1,763			1,871			3,806			3,690			116			3.14	%
Furniture and equipment	592			626			649			1,242			1,388			(146		)	(10.52	)%
Amortization of intangible assets	590			658			590			1,180			1,315			(135		)	(10.27	)%
Other expenses	10,442			8,270			9,229			19,669			15,137			4,532			29.94	%
Total expenses	29,577			24,376			29,186			58,762			47,882			10,880			22.72	%

Income before income tax, corporate allocation and noncontrolling interest	12,622			20,692			30,918			43,541			15,174			28,367			186.94	%
Corporate allocation	(1,000		)	(370		)	(1,000		)	(2,000		)	(763		)	(1,237		)	162.12	%
Income before income tax provision and noncontrolling interest	11,622			20,322			29,918			41,541			14,411			27,130			188.26	%
Provision for income tax expense	2,255			4,127			6,216			8,471			2,835			5,636			198.80	%
Net income	9,367			16,195			23,702			33,070			11,576			21,494			185.68	%
Noncontrolling interest	(2,200		)	(2,415		)	(3,631		)	(5,832		)	(3,206		)	(2,626		)	81.91	%
Net income attributable to TowneBank	$	7,167		$	13,780		$	20,071		$	27,238		$	8,370		$	18,868		225.42	%

Efficiency ratio ^(non-GAAP)	69.55		%	51.61		%	48.08		%	56.93		%	72.86		%	(15.93		)%	(21.86	)%

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


	Three Months Ended									Six Months Ended						Increase/(Decrease)
	June 30,						March 31,			June 30,						2021 over 2020
	2021			2020			2021			2021			2020			Amount			Percent
Commission and fee income
Property and casualty	$	14,941		$	13,926		$	14,189		$	29,129		$	26,712		$	2,417		9.05	%
Employee benefits	3,430			3,791			3,884			7,315			7,709			(394		)	(5.11	)%
Travel insurance	—			861			—			—			2,127			(2,127		)	(100.00	)%
Specialized benefit services	163			157			167			329			325			4			1.23	%
Total commissions and fees	18,534			18,735			18,240			36,773			36,873			(100		)	(0.27	)%

Contingency and bonus revenue	3,323			2,009			1,759			5,082			4,031			1,051			26.07	%
Other income	43			127			73			117			208			(91		)	(43.75	)%
Total revenue	21,900			20,871			20,072			41,972			41,112			860			2.09	%

Employee commission expense	4,103			3,649			4,107			8,210			7,245			965			13.32	%
Revenue, net of commission expense	17,797			17,222			15,965			33,762			33,867			(105		)	(0.31	)%

Salaries and employee benefits	9,571			8,658			9,727			19,299			18,007			1,292			7.17	%
Occupancy expense	612			652			655			1,266			1,311			(45		)	(3.43	)%
Furniture and equipment	214			223			195			408			441			(33		)	(7.48	)%
Amortization of intangible assets	1,217			1,129			1,171			2,387			2,258			129			5.71	%
Other expenses	1,295			1,419			1,305			2,602			2,776			(174		)	(6.27	)%
Total operating expenses	12,909			12,081			13,053			25,962			24,793			1,169			4.72	%
Income before income tax, corporate allocation and noncontrolling interest	4,888			5,141			2,912			7,800			9,074			(1,274		)	(14.04	)%
Corporate allocation	(249		)	(257		)	(292		)	(540		)	(534		)	(6		)	1.12	%
Income before income tax provision and noncontrolling interest	4,639			4,884			2,620			7,260			8,540			(1,280		)	(14.99	)%
Provision for income tax expense	1,190			1,170			662			1,852			1,986			(134		)	(6.75	)%
Net income	3,449			3,714			1,958			5,408			6,554			(1,146		)	(17.49	)%
Noncontrolling interest	—			(207		)	—			—			(636		)	636			(100.00	)%
Net income attributable to TowneBank	$	3,449		$	3,507		$	1,958		$	5,408		$	5,918		(510		)	(8.62	)%

Provision for income taxes	1,190			1,170			662			1,852			1,986			(134		)	(6.75	)%
Depreciation, amortization and interest expense	1,361			1,291			1,308			2,669			2,591			78			3.01	%
EBITDA^(non-GAAP)	$	6,000		$	5,968		$	3,928		$	9,929		$	10,495		$	(566	)	(5.39	)%

Efficiency ratio^(non-GAAP)	65.70		%	63.59		%	74.43		%	69.83		%	66.54		%	3.29		%	4.94	%

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

	Three Months Ended									Six Months Ended
	June 30,			June 30,			March 31,			June 30,			June 30,
	2021			2020			2021			2021			2020

Return on average assets (GAAP)	1.48		%	0.97		%	1.92		%	1.69		%	0.93		%
Impact of excluding average goodwill and other intangibles and amortization	0.11		%	0.10		%	0.13		%	0.12		%	0.11		%
Return on average tangible assets (non-GAAP)	1.59		%	1.07		%	2.05		%	1.81		%	1.04		%

Return on average equity (GAAP)	12.21		%	8.18		%	15.56		%	13.86		%	7.28		%
Impact of excluding average goodwill and other intangibles and amortization	5.17		%	4.14		%	6.63		%	5.88		%	3.85		%
Return on average tangible equity (non-GAAP)	17.38		%	12.32		%	22.19		%	19.74		%	11.13		%

Return on average common equity (GAAP)	12.31		%	8.24		%	15.70		%	13.98		%	7.34		%
Impact of excluding average goodwill and other intangibles and amortization	5.26		%	4.20		%	6.75		%	5.98		%	3.91		%
Return on average tangible common equity (non-GAAP)	17.57		%	12.44		%	22.45		%	19.96		%	11.25		%

Book value (GAAP)	$	25.51		$	23.50		$	24.78		$	25.51		$	23.50
Impact of excluding average goodwill and other intangibles and amortization	(6.81		)	(6.82		)	(6.84		)	(6.81		)	(6.82		)
Tangible book value (non-GAAP)	$	18.70		$	16.68		$	17.94		$	18.70		$	16.68

Efficiency ratio (GAAP)	62.99		%	55.96		%	53.33		%	57.95		%	62.56		%
Impact of exclusions	(1.53		)%	(0.79		)%	(1.22		)%	(1.36		)%	(0.30		)%
Efficiency ratio (non-GAAP)	61.46		%	55.17		%	52.11		%	56.59		%	62.26		%

Average assets (GAAP)	$	15,143,888		$	14,409,468		$	14,592,416		$	14,869,675		$	13,229,396
Less: average goodwill and intangible assets	496,059			497,077			497,446			496,748			498,600
Average tangible assets (non-GAAP)	$	14,647,829		$	13,912,391		$	14,094,970		$	14,372,927		$	12,730,796

Average equity (GAAP)	$	1,833,592		$	1,701,777		$	1,797,767		$	1,815,778		$	1,683,742
Less: average goodwill and intangible assets	496,059			497,077			497,446			496,748			498,600
Average tangible equity (non-GAAP)	$	1,337,533		$	1,204,700		$	1,300,321		$	1,319,030		$	1,185,142

Average common equity (GAAP)	$	1,818,664		$	1,689,603		$	1,782,795		$	1,800,829		$	1,671,640
Less: average goodwill and intangible assets	496,059			497,077			497,446			496,748			498,600
Average tangible common equity (non-GAAP)	$	1,322,605		$	1,192,526		$	1,285,349		$	1,304,081		$	1,173,040

Net Income (GAAP)	$	55,803		$	34,605		68,995			124,799			60,989
Amortization of Intangibles, net of tax	2,148			2,292			2,151			4,299			4,622
Tangible net income (non-GAAP)	$	57,951		$	36,897		$	71,146		$	129,098		$	65,611

Net Income (GAAP)	$	55,803		$	34,605		$	68,995		$	124,799		$	60,989
Provision for credit losses	(10,055		)	26,945			(4,027		)	(14,082		)	33,961
Provision for income tax	13,980			7,464			16,579			30,559			13,651
Pre-provision, pre-tax net revenues (non-GAAP)	$	59,728		$	69,014		$	81,547		$	141,276		$	108,601

Total Revenue (GAAP)	$	167,321		$	162,656		$	182,509		$	349,830		$	300,352
Net (gain)/loss on investment securities	(252		)	(2,930		)	(1,000		)	(1,252		)	(7,932		)
Other nonrecurring (income) loss	—			—			30			30			—
Total Revenue for efficiency calculation (non-GAAP)	$	167,069		$	159,726		$	181,539		$	348,608		$	292,420

Noninterest expense (GAAP)	$	105,394		$	91,025		$	97,326		$	202,719		$	187,913
Less: Amortization of intangibles	2,719			2,901			2,723			5,442			5,851
Noninterest expense net of amortization (non-GAAP)	$	102,675		$	88,124		$	94,603		$	197,277		$	182,062

TowneBank Reports Second Quarter 2021 Earnings

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