TowneBank Reports Full Year and Fourth Quarter financial Results for 2019

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GlobeNewswire, Inc.GlobeNewswire, Inc.
Retrieved on: 
Thursday, January 23, 2020
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Geotags: 
Suffolk, VA, Us
Organisation: 
TOWNEBANK
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SUFFOLK, Va., Jan. 23, 2020 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (Nasdaq: TOWN) today reported financial results for the full year and the fourth quarter ended December 31, 2019.  For the year ended December 31, 2019, earnings were $138.78 million, or $1.92 per diluted share, compared to $133.79 million, or $1.88 per diluted share for the year ended December 31, 2018.  Earnings in the fourth quarter of 2019 were $35.08 million, or $0.49 per diluted share, compared to fourth quarter 2018 earnings of $35.99 million, or $0.50 per diluted share.

“In spite of downward pressure on interest rates our Company grew total revenues by 6% climbing to a record $564 million.  Our continued focus on attracting noninterest bearing deposits produced an increase of 13% or $328 million during the year and represents approximately 32% of our total deposits.  We are excited about the momentum we are building in North Carolina with our newest office in Greensboro recently opened and several new sites planned for the Charlotte market in 2020,” said G. Robert Aston, Jr., Executive Chairman.

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

  • Total revenues were $139.67 million, an increase of $8.25 million, or 6.28%.
  • Loans held for investment increased $401.06 million, or 5.00%, from December 31, 2018, and $236.46 million, or 2.89%, from September 30, 2019, or 11.46% on an annualized basis.
  • Total deposits were $9.27 billion, an increase of $0.90 billion, or 10.76%, compared to prior year but a decrease, due to expected runoff and seasonality, of $0.17 billion, or 1.77%, from September 30, 2019, or a decline of 7.02% on an annualized basis.
  • Noninterest bearing deposits increased by 12.52%, to $2.95 billion, representing 31.83% of total deposits.  Compared to the linked quarter, noninterest bearing deposits decreased 2.62%, or 10.38% on an annualized basis.
  • In the quarter comparison, annualized return on average common shareholders' equity was 8.51% and annualized return on average tangible common shareholders' equity was 13.12% (non-GAAP).  For the full 12 months, return on average common shareholders' equity was 8.75% and return on average tangible common shareholders' equity was 13.73% (non-GAAP).
  • Net interest margin of 3.33% and taxable equivalent net interest margin of 3.35% (non-GAAP).
  • Effective tax rate of 18.17% compared to 22.33% at December 31, 2018.

“We ended 2019 on a positive note with a strong loan growth across our footprint.  We are excited about the planned expansion in North Carolina and opportunities to add Banking, Wealth Management, Mortgage and Insurance talent in each of the markets we serve.  2020 will be an exciting year as we implement a state of the art banking platform to better serve the needs of our members,” said J. Morgan Davis, President and Chief Executive Officer.

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

  • Net interest income was $89.96 million compared to $89.21 million for the quarter ended December 31, 2018.
  • Taxable equivalent net interest margin was 3.35%, including accretion of 9 basis points, compared to 3.55%, including accretion of 12 basis points, for 2018.
  • Average loans held for investment, with an average yield of 4.81%, represented 77.25% of average earning assets in the fourth quarter of 2019 compared to an average yield of 5.00% and 79.04% of average earning assets in the fourth quarter of 2018.
  • Total cost of deposits increased to 0.92% from 0.83% at December 31, 2018.
  • Average interest-earning assets totaled $10.72 billion at December 31, 2019 compared to $10.02 billion at December 31, 2018, an increase of 6.96%.
  • Average interest-bearing liabilities totaled $7.06 billion, an increase of $0.23 billion from the prior year.
  • Total interest expense increased 5.65%, to $26.52 million in fourth quarter 2019 compared to $25.10 million in fourth quarter 2018, but decreased $2.02 million, or 7.07%, compared to the linked quarter.  The average cost of deposits declined in fourth quarter 2019 after peaking in the third quarter.

Quarterly Provision for Loan Losses:

  • Recorded a provision for loan losses of $3.60 million compared to $2.29 million one year ago and $1.51 million in the linked quarter, driven by strong fourth quarter 2019 growth.
  • Net charge-offs were $0.80 million compared to $0.43 million one year prior.  The ratio of net charge-offs to average loans on an annualized basis was 0.04% compared to 0.03% in the prior quarter and 0.02% for the fourth quarter of 2018.
  • The allowance for loan losses represented 0.69% of total loans compared to 0.68% at September 30, 2019 and 0.65% at December 31, 2018.  Loan loss reserve as a percentage of total loans, excluding purchased loans, remained unchanged at 0.81%, from September 30, 2019, and decreased from 0.82% at December 31, 2018.  The allowance for loan losses was 3.34 times nonperforming loans compared to 3.95 times at September 30, 2019 and 10.97 times at December 31, 2018.

Quarterly Noninterest Income Compared to the Fourth Quarter of 2018:

  • Total noninterest income was $49.71 million compared to $42.21 million in 2018, an increase of $7.50 million, or 17.78%.  Residential mortgage brokerage income increased $2.93 million, insurance commissions increased $1.79 million, and real estate brokerage and property management income increased $0.76 million.
  • Residential mortgage banking income was $15.88 million compared to $12.95 million in fourth quarter 2018.  Loan volume in the current quarter was $860.16 million, with purchase activity comprising 70.32%.  Loan volume in fourth quarter 2018 was $600.07 million, with purchase activity of 88.64%.  Loan volume in the linked quarter was $963.66 million with purchase activity of 68.83%.
  • Total Insurance segment revenue increased $3.96 million, or 24.88%, to $19.88 million in the fourth quarter of 2019.  Revenue generated by insurance agencies acquired in January 2019 and September 2019 totaled $1.40 million in the fourth quarter of 2019.
  • Property management fee revenue increased 10.21%, or $0.39 million, as compared to fourth quarter 2018 due to increases in reservation levels.
  • Bank owned life insurance and other noninterest income increased $2.62 million, or 44.84%, as compared to fourth quarter 2018 due to proceeds from life insurance policies and investment commission income.

Quarterly Noninterest Expense Compared to the Fourth Quarter of 2018:

  • Total noninterest expense was $92.34 million compared to $82.34 million, an increase of $10.00 million, or 12.14%.  This reflects increases of $5.78 million in salary and benefits expense, $0.96 million in professional fees expense, and $0.29 million in advertising and marketing expenses.
  • The Bank recorded small bank assessment credits from the FDIC of $1.66 million in the fourth quarter of 2019.
  • In addition to growth in production related expenses, changing industry standards and increased regulatory expectations related to exceeding $10 billion in assets, have resulted in enhancements to Company infrastructure, resulting in increased salary and benefits expense and professional fees. Areas of enhancement include: information technology, risk and compliance, accounting, and internal audit.

Quarterly Income Taxes Compared to the Fourth Quarter of 2018:

  • Income tax expense was $7.79 million compared to $10.35 million, one year prior.  This represents an effective tax rate of 18.17% compared to 22.33% in the fourth quarter of 2018.

Consolidated Balance Sheet December 31, 2019 Compared to December 31, 2018

  • Total assets were $11.95 billion for the quarter ended December 31, 2019, an increase of 7.03%, compared to $11.16 billion at December 31, 2018.  This increase was driven primarily by growth in available for sale securities, mortgage loans held for sale, and loans held for investment.  Year-over-year, other assets increased $47.52 million due to the adoption of the leasing standard.
  • Loans held for investment increased $0.40 billion, or 5.00% compared to year end 2018.
  • Total deposits increased $0.90 billion, or 10.76%, over December 31, 2018.
  • Total borrowings declined $0.32 billion, or 29.41%, from December 31, 2018.

Investment Securities:

  • Total investment securities were $1.52 billion compared to $1.41 billion at September 30, 2019 and $1.19 billion at December 31, 2018.  The weighted average duration of the portfolio at December 31, 2019 was 3.90 years.

Loans and Asset Quality:

  • Total loans held for investment were $8.42 billion at December 31, 2019 compared to $8.18 billion at September 30, 2019 and $8.02 billion at December 31, 2018.
  • Nonperforming assets were $32.80 million, or 0.27% of total assets, compared to $24.17 million, or 0.22% of total assets, at December 31, 2018.
  • Nonperforming loans were 0.21% of period end loans.
  • Foreclosed property decreased to $13.84 million from $17.16 million at December 31, 2018.

Deposits and Borrowings:

  • Total deposits were $9.27 billion compared to $9.44 billion at September 30, 2019 and $8.37 billion at December 31, 2018.
  • Total loans to total deposits were 90.81% compared to 86.70% at September 30, 2019 and 95.79% at December 31, 2018.
  • Non-interest bearing deposits were 31.83% of total deposits at December 31, 2019 compared to 32.11% at September 30, 2019 and 31.33% at December 31, 2018.  Non-interest bearing deposits experienced typical seasonality during the fourth quarter.
  • Total borrowings were $0.77 billion compared to $0.67 billion and $1.09 billion at September 30, 2019 and December 31, 2018, respectively.

Capital:

  • Common equity tier 1 capital ratio of 11.45%.
  • Tier 1 leverage capital ratio of 9.95%.
  • Tier 1 risk-based capital ratio of 11.49%.
  • Total risk-based capital ratio of 14.58%.
  • Book value was $22.58 compared to $22.38 at September 30, 2019 and $21.05 at December 31, 2018.
  • Tangible book value was $15.69 compared to $15.44 at September 30, 2019 and $14.26 at December 31, 2018.

Current Expected Credit Losses ("CECL"):
Effective January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.  We currently estimate our loss reserves may increase up to 10% upon the finalization of our adoption of the new ASU.

This increase is driven by:

  • The change in the timing of potential loss recognition from an incurred loss methodology to an expected loss methodology on loans and off-balance sheet commitments,
  • the establishment of life-of-asset loss reserves,
  • the change in accounting for purchased assets,
  • utilization of reasonable and supportable forecasts.

Outlook:
Management reforecasts on a quarterly basis and anticipates:

  • Annual loan growth to be in the mid-single digits in 2020.
  • Our quarterly noninterest expense run rate will range between $94 - $97 million for 2020.

Annual Meeting of Shareholders:
TowneBank will hold its 2020 Annual Meeting of Shareholders at 11:30 a.m. on Wednesday, May 20, 2020 at the Virginia Beach Convention Center, 1000 19th Street in Virginia Beach, Virginia.

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 42 banking offices serving Chesapeake, Chesterfield County, Glen Allen, Hampton, James City County, Mechanicsville, Newport News, Norfolk, Portsmouth, Richmond, Suffolk, Virginia Beach, Williamsburg, and York County in Virginia, along with Raleigh, Cary, Charlotte, Greensboro, Greenville, Moyock, Grandy, Camden County, Southern Shores, Corolla and Nags Head in North Carolina.  TowneBank also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations. Local decision-making is a hallmark of its hometown banking strategy that is delivered through the leadership of each group’s President and Board of Directors.  With total assets of $11.95 billion as of December 31, 2019, TowneBank is one of the largest banks headquartered in Virginia.

Non-GAAP Financial Measures:

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

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

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

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


 
TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
     
    Three Months Ended
    December 31,   September 30,   June 30,   March 31,   December 31,
  2019   2019   2019   2019   2018
Income and Performance Ratios:                  
  Total Revenue $ 139,671     $ 145,879     $ 144,537     $ 133,854     $ 131,417  
  Net income 35,948     39,400     36,242     32,082     36,440  
  Net income attributable to TowneBank 35,075     37,659     34,638     31,409     35,990  
  Net income per common share - diluted 0.49     0.52     0.48     0.44     0.50  
  Book value per common share 22.58     22.38     21.95     21.40     21.05  
  Book value per share - tangible (non-GAAP) 15.69     15.44     15.05     14.46     14.26  
  Return on average assets 1.16 %   1.26 %   1.20 %   1.14 %   1.28 %
  Return on average assets - tangible (non-GAAP) 1.30 %   1.40 %   1.35 %   1.29 %   1.43 %
  Return on average equity 8.44 %   9.22 %   8.83 %   8.24 %   9.44 %
  Return on average equity - tangible (non-GAAP) 12.97 %   14.20 %   13.90 %   13.24 %   14.91 %
  Return on average common equity 8.51 %   9.29 %   8.89 %   8.30 %   9.53 %
  Return on average common equity - tangible (non-GAAP) 13.12 %   14.36 %   14.05 %   13.39 %   15.11 %
  Noninterest income as a percentage of total revenue 35.59 %   37.55 %   37.86 %   34.65 %   32.12 %
                     
Regulatory Capital Ratios (1):                  
  Common equity tier 1 11.45 %   11.52 %   11.58 %   11.49 %   11.51 %
  Tier 1 11.49 %   11.55 %   11.62 %   11.52 %   11.54 %
  Total 14.58 %   14.70 %   14.85 %   14.79 %   14.83 %
  Tier 1 leverage ratio 9.95 %   9.84 %   9.86 %   9.92 %   9.87 %
                     
Asset Quality:                  
  Allowance for loan losses to nonperforming loans   3.34 x     3.95 x     3.00 x     9.36 x     10.97 x
  Allowance for loan losses to period end loans 0.69 %   0.68 %   0.67 %   0.66 %   0.65 %
  Allowance for loan losses to period end loans excluding purchased loans 0.81 %   0.81 %   0.81 %   0.81 %   0.82 %
  Nonperforming loans to period end loans 0.21 %   0.17 %   0.22 %   0.07 %   0.06 %
  Nonperforming assets to period end assets 0.27 %   0.26 %   0.29 %   0.22 %   0.22 %
  Net charge-offs to average loans (annualized) 0.04 %   0.03 %   0.08 %   0.01 %   0.02 %
                     
  Nonperforming loans $ 17,437     $ 14,016     $ 18,202     $ 5,696     $ 4,749  
  Former bank premises 1,521     1,510     1,510     2,223     2,253  
  Foreclosed property 13,839     15,517     14,517     17,071     17,163  
  Total nonperforming assets $ 32,797     $ 31,043     $ 34,229     $ 24,990     $ 24,165  
  Loans past due 90 days and still accruing interest $ 309     $ 636     $ 415     $ 117     $ 394  
                     
  Allowance for loan losses $ 58,234     $ 55,428     $ 54,527     $ 53,303     $ 52,094  
                     
Mortgage Banking:                  
  Loans originated, mortgage $ 628,279     $ 703,922     $ 574,638     $ 366,643     $ 407,787  
  Loans originated, joint venture 231,879     259,742     246,491     146,884     192,280  
  Total loans originated $ 860,158     $ 963,664     $ 821,129     $ 513,527     $ 600,067  
  Number of loans originated 2,984     3,360     3,121     1,977     2,304  
  Number of originators 228     225     229     240     293  
  Purchase % 70.32 %   68.83 %   84.97 %   86.08 %   88.64 %
  Loans sold $ 879,910     $ 925,058     $ 694,832     $ 473,068     $ 694,341  
  Gross realized gain on sales and fees as a % of loans originated 3.38 %   3.45 %   3.43 %   3.58 %   3.37 %
                     
Other Ratios:                  
  Net interest margin 3.33 %   3.41 %   3.49 %   3.54 %   3.53 %
  Net interest margin-fully tax equivalent (non-GAAP) 3.35 %   3.43 %   3.52 %   3.57 %   3.55 %
  Average earning assets/total average assets 89.57 %   89.53 %   89.46 %   89.50 %   89.91 %
  Average loans/average deposits 88.41 %   87.63 %   91.60 %   95.83 %   95.32 %
  Average noninterest deposits/total average deposits 32.14 %   31.82 %   31.63 %   31.39 %   31.90 %
  Period end equity/period end total assets 13.84 %   13.63 %   13.45 %   13.53 %   13.78 %
  Efficiency ratio 66.11 %   66.66 %   66.80 %   68.43 %   62.65 %
                     
  (1) Current reporting period regulatory capital ratios are preliminary.            
               


 
TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
                   
Investment Securities             % Change
  Q4   Q4   Q3   Q4 19 vs.   Q4 19 vs.
Available-for-sale securities, at fair value 2019   2018   2019   Q4 18   Q3 19
U.S. agency securities $ 129,038     $ 358,542     $ 152,581     (64.01 )%   (15.43 )%
U.S. Treasury notes 1,000     1,246     999     (19.74 )%   0.10 %
Municipal securities 223,106     87,308     173,519     155.54 %   28.58 %
Trust preferred and other corporate securities 53,367     30,992     52,006     72.20 %   2.62 %
Mortgage-backed securities issued by GSE and GNMA 1,034,797     617,251     958,290     67.65 %   7.98 %
Total $ 1,441,308     $ 1,095,339     $ 1,337,395     31.59 %   7.77 %
                   
Gross unrealized gains (losses) reflected in financial statements                  
Total gross unrealized gains $ 23,950     $ 3,423     $ 28,114     599.68 %   (14.81 )%
Total gross unrealized losses (4,215 )   (15,333 )   (2,046 )   (72.51 )%   106.01 %
Net unrealized gain (loss) on AFS securities $ 19,735     $ (11,910 )   $ 26,068     (265.70 )%   (24.29 )%
                   
Held-to-maturity securities, at amortized cost                  
Municipal securities $ 29,167     $ 34,488     $ 29,166     (15.43 )%   — %
Trust preferred corporate securities 2,369     500     2,381     373.80 %   (0.50 )%
Mortgage-backed securities issued by GSE and GNMA 12,152     15,610     12,947     (22.15 )%   (6.14 )%
Total $ 43,688     $ 50,598     $ 44,494     (13.66 )%   (1.81 )%
                   
Gross unrealized gains (losses) not reflected in financial statements                  
Total gross unrealized gains $ 1,520     $ 1,271     $ 1,688     19.59 %   (9.95 )%
Total gross unrealized losses (37 )   (601 )   (5 )   (93.84 )%   640.00 %
Net unrealized gain (loss) on HTM securities $ 1,483     $ 670     $ 1,683     121.34 %   (11.88 )%
                   
Loans Held For Investment             % Change
  Q4   Q4   Q3   Q4 19 vs.   Q4 19 vs.
  2019   2018   2019   Q4 18   Q3 19
Real estate - construction and development $ 1,120,533     $ 1,067,239     $ 1,142,225     4.99 %   (1.90 )%
Commercial real estate - investment related properties 2,183,232     1,978,592     2,070,317     10.34 %   5.45 %
Commercial real estate - owner occupied 1,329,144     1,262,748     1,286,137     5.26 %   3.34 %
Real estate - multifamily 243,041     260,987     219,901     (6.88 )%   10.52 %
Real estate - residential 1-4 family 1,653,084     1,626,896     1,621,175     1.61 %   1.97 %
Commercial and industrial business 1,574,275     1,510,364     1,527,515     4.23 %   3.06 %
Consumer and other loans 315,979     311,407     315,559     1.47 %   0.13 %
Total $ 8,419,288     $ 8,018,233     $ 8,182,829     5.00 %   2.89 %
                   
Deposits             % Change
  Q4   Q4   Q3   Q4 19 vs.   Q4 19 vs.
  2019   2018   2019   Q4 18   Q3 19
Noninterest-bearing demand $ 2,951,225     $ 2,622,761     $ 3,030,505     12.52 %   (2.62 )%
Interest-bearing:                  
Demand and money market accounts 3,586,364     3,223,215     3,534,252     11.27 %   1.47 %
Savings 276,205     286,684     280,552     (3.66 )%   (1.55 )%
Certificates of deposits 2,457,123     2,237,762     2,592,705     9.80 %   (5.23 )%
Total $ 9,270,917     $ 8,370,422     $ 9,438,014     10.76 %   (1.77 )%
                   


 
TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
  Three Months Ended   Three Months Ended   Three Months Ended
  December 31, 2019   September 30, 2019   December 31, 2018
      Interest   Average       Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate   Balance   Expense   Rate
Assets:                                  
Loans (net of unearned income and deferred costs), excluding nonaccrual loans $ 8,283,388     $ 100,504     4.81 %   $ 8,096,908     $ 102,495     5.02 %   $ 7,923,978     $ 99,895     5.00 %
Taxable investment securities 1,331,175     9,179     2.76 %   1,266,447     9,087     2.87 %   1,101,892     7,515     2.73 %
Tax-exempt investment securities 118,298     908     3.07 %   121,738     997     3.28 %   80,656     747     3.70 %
Total securities 1,449,473     10,087     2.78 %   1,388,185     10,084     2.91 %   1,182,548     8,262     2.79 %
Interest-bearing deposits 519,737     2,067     1.58 %   711,030     3,745     2.09 %   652,131     3,559     2.17 %
Loans held for sale 469,725     4,413     3.76 %   408,377     3,956     3.87 %   266,058     3,176     4.77 %
Total earning assets 10,722,323     117,071     4.33 %   10,604,500     120,280     4.50 %   10,024,715     114,892     4.55 %
Less: allowance for loan losses (56,766 )           (54,858 )           (50,792 )        
Total nonearning assets 1,305,036             1,295,640             1,176,037          
Total assets $ 11,970,593             $ 11,845,282             $ 11,149,960          
Liabilities and Equity:                                  
Interest-bearing deposits                                  
Demand and money market $ 3,533,912     $ 6,421     0.72 %   $ 3,379,888     $ 7,223     0.85 %   $ 3,122,973     $ 5,670     0.72 %
Savings 278,910     638     0.91 %   278,048     702     1.00 %   293,135     1,022     1.38 %
Certificates of deposit 2,544,845     14,685     2.29 %   2,641,681     15,627     2.35 %   2,245,039     10,803     1.91 %
Total interest-bearing deposits 6,357,667     21,744     1.36 %   6,299,617     23,552     1.48 %   5,661,147     17,495     1.23 %
Borrowings 454,621     1,810     1.56 %   486,644     2,020     1.62 %   920,389     4,643     1.97 %
Subordinated debt, net 248,361     2,962     4.77 %   248,210     2,962     4.77 %   247,769     2,961     4.78 %
Total interest-bearing liabilities 7,060,649     26,516     1.49 %   7,034,471     28,534     1.61 %   6,829,305     25,099     1.46 %
Demand deposits 3,011,688             2,940,370             2,651,495          
Other noninterest-bearing liabilities 250,327             250,371             157,238          
Total liabilities 10,322,664             10,225,212             9,638,038          
Shareholders’ equity 1,647,929             1,620,070             1,511,922          
Total liabilities and equity $ 11,970,593             $ 11,845,282             $ 11,149,960          
Net interest income (tax-equivalent basis)     $ 90,555             $ 91,746             $ 89,793      
Reconcilement of Non-GAAP Financial Measures                                      
Tax-equivalent basis adjustment     (596 )           (643 )           (585 )    
Net interest income (GAAP)     $ 89,959             $ 91,103             $ 89,208      
Interest rate spread (1)(3)         2.84 %           2.89 %           3.09 %
Interest expense as a percent of average earning assets             0.98 %           1.07 %           0.99 %
Net interest margin (tax equivalent basis) (2)(3)             3.35 %           3.43 %           3.55 %
Total cost of deposits         0.92 %           1.01 %           0.83 %
                                   
(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.
(3) Non-GAAP.
 


 
TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
  Year Ended December 31,
  2019   2018   2017
      Interest   Average       Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate   Balance   Expense   Rate
Assets:                                  
Loans (net of unearned income and deferred costs), excluding nonaccrual loans $ 8,122,210     $ 405,511     4.99 %   $ 7,567,570     $ 373,057     4.93 %   $ 5,901,797     $ 276,747     4.69 %
Taxable investment securities 1,202,107     34,141     2.84 %   1,004,080     24,729     2.46 %   600,080     11,597     1.93 %
Tax-exempt investment securities 102,731     3,426     3.34 %   79,720     2,920     3.66 %   48,228     1,590     3.28 %
Total securities 1,304,838     37,567     2.88 %   1,083,800     27,649     2.55 %   648,308     13,187     2.03 %
Interest-bearing deposits 665,903     13,825     2.08 %   560,368     10,229     1.83 %   696,507     7,480     1.07 %
Mortgage loans held for sale 335,588     13,379     3.99 %   293,017     13,124     4.48 %   271,281     10,561     3.89 %
Total earning assets 10,428,539     470,282     4.51 %   9,504,755     424,059     4.46 %   7,517,893     307,975     4.10 %
Less: allowance for loan losses (54,476 )           (48,737 )           (43,760 )        
Total nonearning assets 1,264,363             1,143,167             860,866          
Total assets $ 11,638,426             $ 10,599,185             $ 8,334,999          
Liabilities and Equity:                                  
Interest-bearing deposits                                  
Demand and money market $ 3,351,135     $ 26,909     0.80 %   $ 2,951,038     $ 16,458     0.56 %   $ 2,260,378     $ 8,020     0.35 %
Savings 280,894     3,296     1.17 %   302,435     3,824     1.26 %   319,940     3,305     1.03 %
Certificates of deposit 2,478,663     56,050     2.26 %   2,060,587     32,859     1.59 %   1,668,252     17,467     1.05 %
Total interest-bearing deposits 6,110,692     86,255     1.41 %   5,314,060     53,141     1.00 %   4,248,570     28,792     0.68 %
Borrowings 609,142     11,368     1.84 %   897,574     15,542     1.71 %   617,720     9,942     1.61 %
Subordinated debt, net 248,139     11,847     4.77 %   251,097     12,067     4.81 %   113,752     5,249     4.61 %
Total interest-bearing liabilities 6,967,973     109,470     1.57 %   6,462,731     80,750     1.25 %   4,980,042     43,983     0.88 %
Demand deposits 2,844,178             2,517,173             2,094,753          
Other noninterest-bearing liabilities 228,994             164,486             136,616          
Total liabilities 10,041,145             9,144,390             7,211,411          
Shareholders' equity 1,597,281             1,454,795             1,123,588          
Total liabilities and equity $ 11,638,426             $ 10,599,185             $ 8,334,999          
Net interest income (tax-equivalent basis)         $ 360,812             $ 343,309             $ 263,992      
Reconcilement of Non-GAAP Financial Measures                                      
Tax-equivalent basis adjustment         (2,457 )           (2,236 )           (2,871 )    
Net interest income (GAAP)         $ 358,355             $ 341,073             $ 261,121      
Interest rate spread  (1)(3)             2.94 %           3.21 %           3.22 %
Interest expense as a percent of average earning assets             1.05 %           0.85 %           0.59 %
Net interest margin (tax-equivalent basis) (2)(3)             3.46 %           3.61 %           3.51 %
Total cost of deposits             0.96 %           0.68 %           0.45 %
                                   
(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.
(3) Non-GAAP.
 


 
TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except per share data)
       
  2019   2018
  (unaudited)   (audited)
ASSETS      
Cash and due from banks $ 97,593     $ 94,604  
Interest-bearing deposits at Federal Reserve Bank 322,505     570,425  
Interest-bearing deposits in financial institutions 22,518     21,667  
Total Cash and Cash Equivalents 442,616     686,696  
Securities available for sale, at fair value 1,441,308     1,095,339  
Securities held to maturity, at amortized cost 43,688     50,598  
Other equity securities 6,462     4,797  
Federal Home Loan Bank stock 30,094     43,229  
Total Securities 1,521,552     1,193,963  
Mortgage loans held for sale 419,233     220,986  
Loans, net of unearned income and deferred costs 8,419,288     8,018,233  
Less: allowance for loan losses (58,234 )   (52,094 )
Net Loans 8,361,054     7,966,139  
Premises and equipment, net 231,806     211,796  
Goodwill 446,816     433,658  
Other intangible assets, net 54,399     58,752  
Bank-owned life insurance policies 243,062     237,371  
Other assets 227,125     153,669  
    TOTAL ASSETS $ 11,947,663     $ 11,163,030  
LIABILITIES AND EQUITY      
Deposits:      
Noninterest-bearing demand $ 2,951,225     $ 2,622,761  
Interest-bearing:      
Demand and money market accounts 3,586,364     3,223,215  
Savings 276,205     286,684  
Certificates of deposit 2,457,123     2,237,762  
Total Deposits 9,270,917     8,370,422  
Advances from the Federal Home Loan Bank 471,687     799,315  
Subordinated debt, net 248,458     247,861  
Repurchase agreements and other borrowings 52,391     47,156  
Total Borrowings 772,536     1,094,332  
Other liabilities 250,516     159,856  
    TOTAL LIABILITIES 10,293,969     9,624,610  
Preferred stock      
Authorized and unissued shares - 2,000,000 —     —  
Common stock, $1.667 par: Authorized shares - 150,000,000      
Issued and outstanding shares 72,649,682 in 2019 and 72,465,923 in 2018 121,107     120,801  
Capital surplus 1,041,160     1,034,676  
Retained earnings 467,186     379,239  
Common stock issued to deferred compensation trust, at cost      
818,578 shares in 2019 and 769,200 shares in 2018 (15,555 )   (13,955 )
Deferred compensation trust 15,555     13,955  
Accumulated other comprehensive income (loss) 11,302     (9,190 )
    TOTAL SHAREHOLDERS’ EQUITY 1,640,755     1,525,526  
Noncontrolling interest 12,939     12,894  
    TOTAL EQUITY 1,653,694     1,538,420  
    TOTAL LIABILITIES AND EQUITY $ 11,947,663     $ 11,163,030  
               


 
TOWNEBANK
Consolidated Statements of Income
(dollars in thousands, except per share data)
     
  Three Months Ended   Twelve Months Ended
  December 31,   December 31,
  2019   2018   2019   2018
  (unaudited)   (unaudited)   (unaudited)   (audited)
INTEREST INCOME:              
Loans, including fees $ 100,059     $ 99,446     $ 403,675     $ 371,343  
Investment securities 9,936     8,126     36,946     27,127  
Interest-bearing deposits in financial institutions and federal funds sold 2,067     3,559     13,825     10,229  
Mortgage loans held for sale 4,413     3,176     13,379     13,124  
Total interest income 116,475     114,307     467,825     421,823  
INTEREST EXPENSE:              
Deposits 21,744     17,495     86,255     53,141  
Advances from the Federal Home Loan Bank 1,730     4,585     11,018     15,340  
Subordinated debt, net 2,962     2,961     11,847     12,067  
Repurchase agreements and other borrowings 80     58     350     202  
Total interest expense 26,516     25,099     109,470     80,750  
Net interest income 89,959     89,208     358,355     341,073  
PROVISION FOR LOAN LOSSES 3,601     2,292     9,371     8,541  
    Net interest income after provision for loan losses 86,358     86,916     348,984     332,532  
NONINTEREST INCOME:              
Residential mortgage banking income, net 15,884     12,951     66,812     65,104  
Insurance commissions and other title fees and income, net 15,001     13,212     64,478     56,164  
Real estate brokerage and property management income, net 6,737     5,982     34,292     31,863  
Service charges on deposit accounts 2,245     2,928     10,544     11,808  
Credit card merchant fees, net 1,389     1,298     4,746     5,472  
Bank owned life insurance 3,865     2,014     9,215     6,836  
Other income 4,591     3,824     16,346     14,343  
Gain (loss) on investment securities —     —     (845 )   3  
    Total noninterest income 49,712     42,209     205,588     191,593  
NONINTEREST EXPENSE:              
Salaries and employee benefits 56,013     50,233     218,920     201,838  
Occupancy 7,516     7,352     31,381     27,644  
Furniture and equipment 3,598     3,587     14,351     14,477  
Amortization - intangibles 3,005     3,123     12,370     11,710  
Software expense 2,976     2,694     11,717     10,621  
Data processing 2,510     2,466     11,825     10,364  
Professional fees 2,990     2,028     12,943     8,323  
Advertising and marketing 2,839     2,546     12,279     11,194  
Other expenses 10,889     8,308     52,516     55,953  
    Total noninterest expense 92,336     82,337     378,302     352,124  
Income before income tax expense & noncontrolling interest 43,734     46,788     176,270     172,001  
Provision for income tax expense 7,786     10,348     32,596     34,227  
Net income $ 35,948     $ 36,440     $ 143,674     $ 137,774  
Net income attributable to noncontrolling interest (873 )   (450 )   (4,891 )   (3,981 )
Net income attributable to TowneBank $ 35,075     $ 35,990     $ 138,783     $ 133,793  
               
Per common share information              
Basic earnings $ 0.49     $ 0.50     $ 1.93     $ 1.88  
Diluted earnings $ 0.49     $ 0.50     $ 1.92     $ 1.88  
Cash dividends declared $ 0.18     $ 0.16     $ 0.70     $ 0.62  
                               


 
TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except per share data)
 
                   
  December 31,   September 30,   June 30,   March 31,   December 31,
  2019   2019   2019   2019   2018
  (unaudited)   (unaudited)   (unaudited)   (unaudited)   (audited)
ASSETS                  
Cash and due from banks $ 97,593     $ 124,439     $ 110,580     $ 104,091     $ 94,604  
Interest-bearing deposits at Federal Reserve Bank 322,505     675,288     834,505     775,208     570,425  
Interest-bearing deposits in financial institutions 22,518     21,663     21,527     21,001     21,667  
Total Cash and Cash Equivalents 442,616     821,390     966,612     900,300     686,696  
Securities available for sale, at fair value 1,441,308     1,337,395     1,260,821     1,099,777     1,095,339  
Securities held to maturity, at amortized cost 43,688     44,494     50,574     49,687     50,598  
Other equity securities 6,462     5,697     5,396     5,022     4,797  
Federal Home Loan Bank stock 30,094     26,282     32,657     41,464     43,229  
Total Securities 1,521,552     1,413,868     1,349,448     1,195,950     1,193,963  
Mortgage loans held for sale 419,233     456,719     362,773     247,021     220,986  
Loans, net of unearned income and deferred costs 8,419,288     8,182,829     8,126,729     8,105,370     8,018,233  
Less: allowance for loan losses (58,234 )   (55,428 )   (54,527 )   (53,303 )   (52,094 )
Net Loans 8,361,054     8,127,401     8,072,202     8,052,067     7,966,139  
Premises and equipment, net 231,806     231,060     230,177     227,458     211,796  
Goodwill 446,816     446,423     442,881     442,881     433,658  
Other intangible assets, net 54,399     57,404     58,391     61,333     58,752  
Bank-owned life insurance policies 243,062     241,652     240,621     238,977     237,371  
Other assets 227,125     225,374     219,375     202,276     153,669  
TOTAL ASSETS $ 11,947,663     $ 12,021,291     $ 11,942,480     $ 11,568,263     $ 11,163,030  
LIABILITIES AND EQUITY                  
Deposits:                  
Noninterest-bearing demand $ 2,951,225     $ 3,030,505     $ 2,950,615     $ 2,813,857     $ 2,622,761  
Interest-bearing:                  
Demand and money market accounts 3,586,364     3,534,252     3,409,322     3,290,907     3,223,215  
Savings 276,205     280,552     277,495     285,790     286,684  
Certificates of deposit 2,457,123     2,592,705     2,631,386     2,341,134     2,237,762  
Total Deposits 9,270,917     9,438,014     9,268,818     8,731,688     8,370,422  
Advances from the Federal Home Loan Bank 471,687     381,846     532,004     739,160     799,315  
Subordinated debt, net 248,458     248,309     248,160     248,010     247,861  
Repurchase agreements and other borrowings 52,391     42,971     56,355     44,775     47,156  
Total Borrowings 772,536     673,126     836,519     1,031,945     1,094,332  
Other liabilities 250,516     271,617     230,691     238,974     159,856  
TOTAL LIABILITIES 10,293,969     10,382,757     10,336,028     10,002,607     9,624,610  
Preferred stock                  
Authorized shares - 2,000,000 —     —     —     —     —  
Common stock, $1.667 par value 121,107     121,080     121,038     121,047     120,801  
Capital surplus 1,041,160     1,039,156     1,036,982     1,035,563     1,034,676  
Retained earnings 467,186     445,186     420,600     399,030     379,239  
Common stock issued to deferred compensation trust, at cost (15,555 )   (15,317 )   (15,160 )   (14,067 )   (13,955 )
Deferred compensation trust 15,555     15,317     15,160     14,067     13,955  
Accumulated other comprehensive income (loss) 11,302     19,958     15,143     (1,792 )   (9,190 )
TOTAL SHAREHOLDERS’ EQUITY 1,640,755     1,625,380     1,593,763     1,553,848     1,525,526  
Noncontrolling interest 12,939     13,154     12,689     11,808     12,894  
TOTAL EQUITY 1,653,694     1,638,534     1,606,452     1,565,656     1,538,420  
TOTAL LIABILITIES AND EQUITY $ 11,947,663     $ 12,021,291     $ 11,942,480     $ 11,568,263     $ 11,163,030  
                                       


 
TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)
           
           
  Three Months Ended
  December 31,   September 30,   June 30,   March 31,   December 31,
  2019   2019   2019   2019   2018
INTEREST INCOME:                  
Loans, including fees $ 100,059     $ 102,047     $ 101,874     $ 99,695     $ 99,446  
Investment securities 9,936     9,889     8,987     8,134     8,126  
Interest-bearing deposits in financial institutions and federal funds sold 2,067     3,745     4,015     3,998     3,559  
Mortgage loans held for sale 4,413     3,956     3,007     2,003     3,176  
    Total interest income 116,475     119,637     117,883     113,830     114,307  
INTEREST EXPENSE:                  
Deposits 21,744     23,552     21,784     19,174     17,495  
Advances from the Federal Home Loan Bank 1,730     1,935     3,201     4,153     4,585  
Subordinated debt 2,962     2,962     2,962     2,962     2,961  
Repurchase agreements and other borrowings 80     85     117     68     58  
    Total interest expense 26,516     28,534     28,064     26,357     25,099  
Net interest income 89,959     91,103     89,819     87,473     89,208  
PROVISION FOR LOAN LOSSES 3,601     1,508     2,824     1,438     2,292  
Net interest income after provision for loan losses 86,358     89,595     86,995     86,035     86,916  
NONINTEREST INCOME:                  
Residential mortgage banking income, net 15,884     18,855     18,565     13,508     12,951  
Insurance commissions and other title fees and income, net 15,001     16,681     17,213     15,582     13,212  
Real estate brokerage and property management income, net 6,737     9,444     8,843     9,268     5,982  
Service charges on deposit accounts 2,245     2,253     3,185     2,861     2,928  
Credit card merchant fees, net 1,389     1,514     660     1,183     1,298  
Bank owned life insurance 3,865     2,117     1,635     1,598     2,014  
Other income 4,591     3,981     4,617     3,157     3,824  
Loss on investment securities —     (69 )   —     (776 )   —  
    Total noninterest income 49,712     54,776     54,718     46,381     42,209  
NONINTEREST EXPENSE:                  
Salaries and employee benefits 56,013     55,784     54,263     52,860     50,233  
Occupancy expense 7,516     7,953     7,662     8,251     7,352  
Furniture and equipment 3,598     3,805     3,578     3,371     3,587  
Amortization - intangibles 3,005     3,059     3,113     3,192     3,123  
Software expense 2,976     3,208     2,788     2,745     2,694  
Data processing 2,510     2,533     3,616     3,166     2,466  
Professional fees 2,990     3,566     3,707     2,679     2,028  
Advertising and marketing 2,839     3,429     3,182     2,829     2,546  
Other expenses 10,889     13,950     14,647     13,030     8,308  
    Total noninterest expense 92,336     97,287     96,556     92,123     82,337  
Income before income tax expense and noncontrolling interest 43,734     47,084     45,157     40,293     46,788  
Provision for income tax expense 7,786     7,684     8,915     8,211     10,348  
Net income 35,948     39,400     36,242     32,082     36,440  
Net income attributable to noncontrolling interest (873 )   (1,741 )   (1,604 )   (673 )   (450 )
Net income attributable to TowneBank $ 35,075     $ 37,659     $ 34,638     $ 31,409     $ 35,990  
Per common share information                  
Basic earnings $ 0.49     $ 0.52     $ 0.48     $ 0.44     $ 0.50  
Diluted earnings (1) $ 0.49     $ 0.52     $ 0.48     $ 0.44     $ 0.50  
Basic weighted average shares outstanding 72,132,041     72,091,221     72,044,817     71,992,330     71,905,956  
Diluted weighted average shares outstanding 72,311,979     72,222,934     72,145,600     72,099,558     72,043,369  
Cash dividends declared $ 0.18     $ 0.18     $ 0.18     $ 0.16     $ 0.16  
(1) The quarterly diluted EPS do not sum to the total year diluted EPS due to rounding.
                                       


 
TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
 
       
  Three Months Ended   Year Ended   Increase/(Decrease)
  December 31,   September 30, 
   December 31,   2019 over 2018
  2019   2018   2019   2019   2018   Amount   Percent
Revenue                          
Net interest income $ 87,637     $ 86,433     $ 89,490     $ 351,969     $ 329,584     $ 22,385     6.79 %
Noninterest income                          
Service charges on deposit accounts 2,245     2,928     2,253     10,544     11,808     (1,264 )   (10.70 )%
Credit card merchant fees 1,389     1,298     1,514     4,746     5,472     (726 )   (13.27 )%
Other income 5,271     4,660     5,152     19,620     16,977     2,643     15.57 %
Subtotal 8,905     8,886     8,919     34,910     34,257     653     1.91 %
Gain (loss) on investment securities —     —     (69 )   (845 )   3     (848 )   N/M  
Total noninterest income 8,905     8,886     8,850     34,065     34,260     (195 )   (0.57 )%
Total revenue 96,542     95,319     98,340     386,034     363,844     22,190     6.10 %
                           
Provision for loan losses 3,601     2,292     1,508     9,371     8,541     830     9.72 %
                           
Expenses                          
Salaries and employee benefits 34,183     28,100     33,526     131,149     114,472     16,677     14.57 %
Occupancy expense 4,959     4,789     5,209     20,419     17,410     3,009     17.28 %
Furniture and equipment 2,577     2,426     2,779     10,240     9,912     328     3.31 %
Amortization of intangible assets 1,214     1,428     1,265     5,160     5,658     (498 )   (8.80 )%
Other expenses 14,078     9,759     17,098     66,295     60,697     5,598     9.22 %
Total expenses 57,011     46,502     59,877     233,263     208,149     25,114     12.07 %
Income before income tax, corporate allocation and noncontrolling interest 35,930     46,525     36,955     143,400     147,154     (3,754 )   (2.55 )%
Corporate allocation 627     367     384     2,011     1,736     275     15.84 %
Income before income tax provision and noncontrolling interest 36,557     46,892     37,339     145,411     148,890     (3,479 )   (2.34 )%
Provision for income tax expense 6,368     10,252     5,495     25,706     28,880     (3,174 )   (10.99 )%
Net income 30,189     36,640     31,844     119,705     120,010     (305 )   (0.25 )%
Noncontrolling interest (1 )   4     —     2     (8 )   10     N/M  
Net income attributable to TowneBank $ 30,188     $ 36,644     $ 31,844     $ 119,707     $ 120,002     $ (295 )   (0.25 )%
                           
Efficiency ratio 59.05 %   48.79 %   60.85 %   60.43 %   57.21 %        
                                     


 
TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
 
       
  Three Months Ended   Year Ended   Increase/(Decrease)
  December 31,   September 30,   December 31,   2019 over 2018
  2019   2018   2019   2019   2018   Amount   Percent
Revenue                          
Residential mortgage brokerage income, net $ 16,617     $ 13,472     $ 19,171     $ 68,443     $ 66,696     $ 1,747     2.62 %
Real estate brokerage income, net 2,550     2,183     2,882     9,865     9,458     407     4.30 %
Title insurance and settlement fees 531     458     617     2,111     1,877     234     12.47 %
Property management fees, net 4,187     3,799     6,562     24,427     22,405     2,022     9.02 %
Income from unconsolidated subsidiary 75     54     185     516     370     146     39.46 %
Net interest and other income 2,787     3,210     1,885     7,724     13,210     (5,486 )   (41.53 )%
Total revenue 26,747     23,176     31,302     113,086     114,016     (930 )   (0.82 )%
                           
Expenses                          
Salaries and employee benefits $ 12,941     $ 14,308     $ 13,474     $ 52,619     $ 58,450     $ (5,831 )   (9.98 )%
Occupancy expense 1,857     1,928     2,055     8,285     7,871     414     5.26 %
Furniture and equipment 773     930     754     3,099     3,697     (598 )   (16.18 )%
Amortization of intangible assets 655     767     666     2,741     2,782     (41 )   (1.47 )%
Other expenses 7,030     6,419     7,478     27,982     28,416     (434 )   (1.53 )%
Total expenses 23,256     24,352     24,427     94,726     101,216     (6,490 )   (6.41 )%
                           
Income (loss) before income tax, corporate allocation, and noncontrolling interest 3,491     (1,176 )   6,875     18,360     12,800     5,560     43.44 %
Corporate allocation (362 )   (238 )   (208 )   (1,163 )   (1,091 )   (72 )   6.60 %
Income (loss) before income tax provision and noncontrolling interest 3,129     (1,414 )   6,667     17,197     11,709     5,488     46.87 %
Provision for income tax 416     (86 )   1,454     3,707     2,892     815     28.18 %
Net income (loss) 2,713     (1,328 )   5,213     13,490     8,817     4,673     53.00 %
Noncontrolling interest (715 )   (130 )   (1,496 )   (3,711 )   (2,398 )   (1,313 )   54.75 %
Net income (loss) attributable to TowneBank $ 1,998     $ (1,458 )   $ 3,717     $ 9,779     $ 6,419     $ 3,360     52.34 %
                           
Efficiency ratio 86.95 %   105.07 %   78.04 %   83.76 %   88.77 %        
                                     


 
TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
                           
  Three Months Ended   Year Ended   Increase/(Decrease)
  December 31,   September 30,   December 31,   2019 over 2018
  2019   2018   2019   2019   2018   Amount   Percent
Commission and fee income                          
Property and casualty $ 11,957     $ 9,770     $ 13,481     $ 50,380     $ 40,948     $ 9,432     23.03 %
Employee benefits 3,758     3,625     3,629     14,726     14,088     638     4.53 %
Travel insurance 794     1,095     834     4,085     5,123     (1,038 )   (20.26 )%
Specialized benefit services 173     168     166     672     673     (1 )   (0.15 )%
Total commissions and fees 16,682     14,658     18,110     69,863     60,832     9,031     14.85 %
Contingency and bonus revenue 1,396     1,185     1,431     6,307     4,888     1,419     29.03 %
Other income 1,805     79     74     2,032     295     1,737     588.81 %
Total revenue 19,883     15,922     19,615     78,202     66,015     12,187     18.46 %
Employee commission expense 3,501     3,000     3,378     13,379     11,209     2,170     19.36 %
Revenue, net of commission expense 16,382     12,922     16,237     64,823     54,806     10,017     18.28 %
                           
Expenses                          
Salaries and employee benefits $ 8,889     $ 7,825     $ 8,784     $ 35,152     $ 28,916     $ 6,236     21.57 %
Occupancy expense 700     635     689     2,677     2,363     314     13.29 %
Furniture and equipment 248     231     272     1,012     868     144     16.59 %
Amortization of intangible assets 1,136     928     1,128     4,469     3,269     1,200     36.71 %
Other expenses 1,096     1,865     2,110     7,003     7,343     (340 )   (4.63 )%
Total operating expenses 12,069     11,484     12,983     50,313     42,759     7,554     17.67 %
Income before income tax and noncontrolling interest 4,313     1,438     3,254     14,510     12,047     2,463     20.44 %
Corporate allocation (265 )   (128 )   (176 )   (848 )   (645 )   (203 )   31.47 %
Income before income tax provision and noncontrolling interest 4,048     1,310     3,078     13,662     11,402     2,260     19.82 %
Provision for income tax expense 1,002     182     735     3,183     2,455     728     29.65 %
Net income 3,046     1,128     2,343     10,479     8,947     1,532     17.12 %
Noncontrolling interest (157 )   (324 )   (245 )   (1,182 )   (1,575 )   393     (24.95 )%
Net income attributable to TowneBank $ 2,889     $ 804     $ 2,098     $ 9,297     $ 7,372     $ 1,925     26.11 %
                           
Provision for income taxes 1,002     182     735     3,183     2,455     728     29.65 %
Depreciation, amortization and interest expense 1,333     1,152     1,325     5,312     4,134     1,178     28.50 %
EBITDA (non-GAAP) $ 5,224     $ 2,138     $ 4,158     $ 17,792     $ 13,961     $ 3,831     27.44 %
                           
Efficiency ratio 73.67 %   88.87 %   79.96 %   77.62 %   78.02 %        
                                     


 
TOWNEBANK
Reconcilement of Non-GAAP Financial Measures:
             
               
  Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,   December 31,
  2019   2019   2018   2019   2018
                   
Return on average assets (GAAP) 1.16 %   1.26 %   1.28 %   1.19 %   1.26 %
Impact of excluding average goodwill and other intangibles and amortization 0.14 %   0.14 %   0.15 %   0.14 %   0.15 %
Return on average tangible assets (non-GAAP) 1.30 %   1.40 %   1.43 %   1.33 %   1.41 %
                   
Return on average equity (GAAP) 8.44 %   9.22 %   9.44 %   8.69 %   9.20 %
Impact of excluding average goodwill and other intangibles and amortization 4.53 %   4.98 %   5.47 %   4.89 %   5.32 %
Return on average tangible equity (non-GAAP) 12.97 %   14.20 %   14.91 %   13.58 %   14.52 %
                   
Return on average common equity (GAAP) 8.51 %   9.29 %   9.53 %   8.75 %   9.27 %
Impact of excluding average goodwill and other intangibles and amortization 4.61 %   5.07 %   5.58 %   4.98 %   5.43 %
Return on average tangible common equity (non-GAAP) 13.12 %   14.36 %   15.11 %   13.73 %   14.70 %
                   
Book value (GAAP) $ 22.58     $ 22.38     $ 21.05     $ 22.58     $ 21.05  
Impact of excluding average goodwill and other intangibles and amortization (6.89 )   (6.94 )   (6.79 )   (6.89 )   (7.71 )
Tangible book value (non-GAAP) $ 15.69     $ 15.44     $ 14.26     $ 15.69     13.34  
                   
Average assets (GAAP) $ 11,970,593     $ 11,845,282     $ 11,149,960     $ 11,638,426     $ 10,599,185  
Less: average goodwill 446,428     442,919     429,931     443,781     411,827  
Less: average intangible assets 56,339     57,327     59,009     59,327     57,694  
Average tangible assets (non-GAAP) $ 11,467,826     $ 11,345,036     $ 10,661,020     $ 11,135,318     $ 10,129,664  
                   
Average equity (GAAP) $ 1,647,929     $ 1,620,070     $ 1,511,922     $ 1,597,281     $ 1,454,795  
Less: average goodwill 446,428     442,919     429,931     443,781     411,827  
Less: average intangible assets 56,339     57,327     59,009     59,327     57,694  
Average tangible equity (non-GAAP) $ 1,145,162     $ 1,119,824     $ 1,022,982     $ 1,094,173     $ 985,274  
                   
Average common equity (GAAP) $ 1,635,394     $ 1,607,853     $ 1,498,594     $ 1,585,238     $ 1,442,642  
Less: average goodwill 446,428     442,919     429,931     443,781     411,827  
Less: average intangible assets 56,339     57,327     59,009     59,327     57,694  
Average tangible common equity (non-GAAP) $ 1,132,627     $ 1,107,607     $ 1,009,654     $ 1,082,130     $ 973,121  
                   


 
TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
                     
                     
Reconcilement of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability   Three Months Ended
    December 31,   September 30,   June 30,   March 31,   December 31,
    2019   2019   2019   2019   2018
Net income (GAAP)   $ 35,075     $ 37,659     $ 34,638     $ 31,409     $ 35,990  
Acquisition-related expenses   19     207     20     411     (1,518 )
Income tax expense - tax reform legislation   —     —     —     —     696  
Income tax expense (benefit) - other items   (3 )   (20 )   (3 )   (52 )   355  
Total income tax expense (benefit)   (3 )   (20 )   (3 )   (52 )   1,051  
Total charges, net of taxes   16     187     17     359     (467 )
Operating earnings, excluding certain items affecting comparability (non-GAAP)   $ 35,091     $ 37,846     $ 34,655     $ 31,768     $ 35,523  
                               
Weighted average diluted shares   72,311,979     72,222,934     72,145,600     72,099,558     72,043,369  
                               
Diluted EPS (GAAP)   $ 0.49     $ 0.52     $ 0.48     $ 0.44     $ 0.50  
Diluted EPS, excluding certain items affecting comparability (non-GAAP)   $ 0.49     $ 0.52     $ 0.48     $ 0.44     $ 0.49  
                                         
Average assets   $ 11,970,593     $ 11,845,282     $ 11,532,278     $ 11,194,753     $ 11,149,960  
Average tangible equity   $ 1,145,162     $ 1,119,824     $ 1,070,635     $ 1,039,630     $ 1,022,982  
Return on average assets, excluding certain items affecting comparability (non-GAAP)   1.16 %   1.27 %   1.21 %   1.15 %   1.26 %
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)   12.98 %   14.26 %   13.90 %   13.38 %   14.73 %
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)   13.12 %   14.42 %   14.06 %   13.53 %   14.93 %
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)   66.10 %   66.52 %   66.79 %   68.12 %   63.81 %
                               


 
TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
         
         
Reconcilement of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability   Year Ended
    December 31,   December 31,
    2019   2018
Net income (GAAP)   $ 138,783     $ 133,793  
Acquisition-related expenses   657     8,428  
Income tax expense - tax reform legislation   —     696  
Income tax expense (benefit) - other items   (78 )   (1,420 )
Total income tax expense (benefit)   (78 )   (724 )
Total charges, net of taxes   579     7,704  
Operating earnings, excluding certain items affecting comparability (non-GAAP)   $ 139,362     $ 141,497  
             
Weighted average diluted shares   72,172,635     71,293,129  
             
Diluted EPS (GAAP)   $ 1.92     $ 1.88  
Diluted EPS, excluding certain items affecting comparability (non-GAAP)   $ 1.93     $ 1.98  
                 
Average assets   $ 11,638,426     $ 10,599,185  
Average tangible equity   $ 1,094,173     $ 985,274  
Return on average assets, excluding certain items affecting comparability (non-GAAP)   1.20 %   1.33 %
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)   13.63 %   15.30 %
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)   13.78 %   15.49 %
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)   66.86 %   64.52 %

 

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