TowneBank Reports Second Quarter 2023 Earnings

SUFFOLK, Va., July 27, 2023 (GLOBE NEWSWIRE) -- TowneBank ("Towne") (NASDAQ: TOWN) today reported earnings for the quarter ended June 30, 2023 of $41.72 million, or $0.56 per diluted share, compared to $46.55 million, or $0.64 per diluted share, for the quarter ended June 30, 2022. Excluding acquisition-related items and the gain on sale of Berkshire Hathaway HomeServices ("BHHS") Towne Realty, core earnings (non-GAAP) for the quarter ended June 30, 2023 were $38.66 million, or $0.52 per diluted share, compared to $46.60 million, or $0.64 per diluted share, for the quarter ended June 30, 2022.

"We continue to emphasize strong levels of on balance sheet liquidity, deposit growth, and prudent loan growth in the current environment. Our performance during the quarter delivered success on each of these important initiatives. Our HomeTowne Bankers generated nearly $170 million in deposit growth, or 5% on an annualized basis, which demonstrates the strength of our main street banking model. In addition, we increased reserve levels and grew tangible book value during the quarter. While earnings will likely remain under pressure in the short run, we believe our conservative approach to balance sheet management will position our Company to benefit from opportunities despite a challenging operating environment," said G. Robert Aston, Jr., Executive Chairman.

Highlights for Second Quarter 2023:

• Total revenues were $181.57 million, an increase of $14.59 million, or 8.74%, compared to second quarter 2022. In addition to a $4.27 million increase in net interest income, noninterest income increased $10.32 million, driven by the $8.83 million gross gain on the sale of BHHS Towne Realty.
• Loans held for investment were $11.21 billion, increases of $0.78 billion, or 7.50%, compared to June 30, 2022, and $34.23 million, or 0.31%, compared to March 31, 2023, 1.23% on an annualized basis. Towne completed the acquisition of Farmers Bankshares, Inc. and its wholly owned subsidiary, Farmers Bank, in January 2023. Excluding loans acquired in the first quarter, total loans would have increased $0.50 billion, or 4.84%, compared to June 30, 2022.
• Total deposits were $13.77 billion, a decline of $229.45 million, or 1.64%, compared to second quarter 2022. Excluding $514.57 million in acquired deposits, total deposits would have decreased $744.02 million, or 5.32%, in the yearly comparison. In comparison to March 31, 2023, total deposits increased 1.24%, or $168.53 million, 4.97% on an annualized basis.
• Noninterest bearing deposits decreased 16.57%, to $4.77 billion, compared to second quarter 2022 and represented 34.68% of total deposits. Compared to the linked quarter, noninterest bearing deposits decreased 5.81%.
• Annualized return on common shareholders' equity was 8.52% compared to 10.03% in second quarter 2022. Annualized return on average tangible common shareholders' equity (non-GAAP) was 12.48% compared to 14.37% in second quarter 2022.
• Net interest margin was 2.98% for the quarter and taxable equivalent net interest margin (non-GAAP) was 3.01% compared to the prior year quarter net interest margin of 2.88% and taxable equivalent net interest margin (non-GAAP) of 2.89%.
• The effective tax rate of 18.41% in the quarter compared to 19.32% in second quarter 2022 and 20.03% in the linked quarter.

"We were pleased to announce the formation of BHHS RW Towne Realty, Inc during the quarter. Beyond the financial merits of the transaction, this combination brings two market-leading real estate brokerage operations together, each having distinct core competencies which will deliver unparalleled capabilities in Hampton Roads. The transaction also highlights TowneBank’s proven approach to growing scale in our fee-based businesses whether organic, via acquisitions or by creating strategic partnerships," stated William I. Foster III, President and Chief Executive Officer.

Quarterly Net Interest Income:

• Net interest income was $113.61 million compared to $109.34 million for the quarter ended June 30, 2022. The increase was driven by higher earning asset yields that were mostly offset by increased deposit costs.
• Tax-equivalent net interest margin (non-GAAP) was 3.01%, including purchase accounting accretion of 4 basis points, compared to 2.89%, including purchase accounting accretion of 3 basis points, for second quarter 2022.
• On an average basis, loans held for investment, with a yield of 5.00%, represented 73.24% of earning assets at June 30, 2023 compared to a yield of 3.99% and 66.91% of earning assets in the second quarter of 2022.
• Total cost of deposits increased to 1.46% from 0.16% for the quarter ended June 30, 2022. Interest expense on deposits increased $43.10 million, or 773.34%, over the prior year quarter driven, primarily, by the increase in rate.
• Higher mortgage rates, increased funding costs, and low home sale inventory, have adversely impacted our residential mortgage banking business.
• Average interest-earning assets totaled $15.31 billion at June 30, 2023 compared to $15.24 billion at June 30, 2022, an increase of 0.40%.
• Average interest-bearing liabilities totaled $9.68 billion, an increase of $0.92 billion, or 10.56% from prior year. Average short term FHLB borrowings were $802.75 million during the quarter.

Quarterly Provision for Credit Losses:

• The quarterly provision for credit losses was an expense of $3.56 million compared to $0.06 million one year ago and $11.67 million in the linked quarter.
• The allowance for credit losses on loans in second quarter 2023, compared to the linked quarter, increased $3.51 million. The increase in the allowance was driven by loan growth and changes in our portfolio composition, combined with changes to the macroeconomic forecast scenarios utilized in our models.
• Net loan charge-offs were $9 thousand in the quarter compared to net recoveries of $80 thousand in the prior year quarter and $3.87 million in the linked quarter. The ratio of net charge-offs to average loans on an annualized basis was zero percent in second quarter 2023 and 2022, and 0.14% in the linked quarter.
• The allowance for credit losses on loans represented 1.10% of total loans at June 30, 2023, 1.00% at June 30, 2022, and 1.07% at March 31, 2023. The allowance for credit losses on loans was 18.09 times nonperforming loans compared to 18.94 times at June 30, 2022 and 12.87 times at March 31, 2023.

Quarterly Noninterest Income:

• Total noninterest income was $67.96 million compared to $57.64 million in 2022, an increase of $10.32 million, or 17.90%, $8.83 million of which was attributable to the gross gain on the sale of BHHS Towne Realty.
• Residential mortgage banking income was $11.36 million compared to $13.18 million in second quarter 2022. Loan volume decreased to $616.50 million in second quarter 2023 from $837.81 million in 2022. The prolonged increase in mortgage rates has resulted in refinance activities dropping to 3.68% of total mortgage production volume, a historic low.  Residential purchase activity comprised 96.32% of production volume in the second quarter of 2023 compared to 92.27% in the prior year quarter.
• Gross margins on residential mortgage sales increased 4 basis points from 2.92% in second quarter 2022 to 2.96% in the current quarter.
• Total net insurance commissions increased $2.75 million, or 13.94%, to $22.50 million in second quarter 2023 compared to 2022. This resulted from increases in property and casualty commissions, which were driven by organic growth and commissions from a recent acquisition.
• Property management fee revenue increased 27.99%, or $2.65 million, to $12.10 million in second quarter 2023 compared to 2022. Reservation income increased compared to the prior year due to higher rental inventories and income from a recent acquisition.

Quarterly Noninterest Expense:

• Total noninterest expense was $125.23 million compared to $108.73 million in 2022, an increase of $16.50 million, or 15.18%. Increases in salaries and employee benefits of $2.55 million, acquisition-related expenses of $2.95 million, FDIC and other insurance of $2.53 million, software expense of $1.41 million, and professional fees of $1.41 million were the primary sources of the increase.
• Salaries and benefits expense increases were driven by annual base salary adjustments that went into effect July 2022 and an increase in the year-over-year number of employees, primarily related to the Farmers Bankshares, Inc. acquisition.
• FDIC and other insurance increased due to a combination of timing and increased assessments in 2023.
• Software and professional fee expenses increased due to a number of ongoing projects related to recent acquisitions and our loan portfolio.

Consolidated Balance Sheet Highlights:

• Total assets were $17.23 billion for the quarter ended June 30, 2023, a $494.60 million increase compared to $16.73 billion at March 31, 2023. Total assets increased $361.04 million, or 2.14%, from $16.86 billion at June 30, 2022.
• Loans held for investment increased $0.78 billion, or 7.50%, compared to prior year and $34.23 million, or 0.31%, compared to the linked quarter, 1.23% on an annualized basis. Excluding loans acquired in the prior quarter, total loans would have increased $0.50 billion, or 4.84%, compared to prior year.
• Mortgage loans held for sale increased $17.79 million, or 8.40%, compared to prior year and $72.34 million, or 46.03%, compared to the linked quarter.
• Excluding $514.57 million in acquired deposits, total deposits would have decreased $744.02 million, or 5.32%, compared to second quarter 2022. In the linked quarter comparison, total deposits increased $168.53 million, or 4.97%, on an annualized basis.
• Total borrowings increased $459.58 million, or 76.59%, over second quarter 2022 and $253.33 million, or 31.42%, compared to the linked quarter. FHLB advances, which are included in total borrowings, increased $249.82 million in the quarter.

Investment Securities:

• Total investment securities were $2.61 billion compared to $2.67 billion at March 31, 2023 and $2.48 billion at June 30, 2022. The weighted average duration of the portfolio at June 30, 2023 was 3.4 years. The carrying value of the available for sale debt securities portfolio included net unrealized losses of $195.98 million at June 30, 2023, compared to $165.71 million at March 31, 2023 and $120.41 million at June 30, 2022, related to market valuation adjustments due to rising interest rates.

Loans and Asset Quality:

• Total loans held for investment were $11.21 billion at June 30, 2023 compared to $11.17 billion at March 31, 2023 and $10.43 billion at June 30, 2022.
• Nonperforming assets were $9.35 million, or 0.05% of total assets, compared to $6.06 million, or 0.04%, at June 30, 2022.
• Nonperforming loans were 0.06% of period end loans compared to 0.05% at June 30, 2022.
• Other real estate owned increased to $2.52 million from $0.56 million at June 30, 2022, $1.78 million of which is former bank premises acquired in the Farmers transaction.

Deposits and Borrowings:

• Total deposits were $13.77 billion compared to $13.60 billion at March 31, 2023 and $14.00 billion at June 30, 2022.
• Total loans held for investment to deposits was 81.41% compared to 82.17% at March 31, 2023 and 74.49% at June 30, 2022.
• Noninterest-bearing deposits were 34.68% of total deposits at June 30, 2023 compared to 37.28% at March 31, 2023 and 40.89% at June 30, 2022.
• Total borrowings were $1.06 billion compared to $0.81 billion at March 31, 2023 and $0.60 billion at June 30, 2022.

Capital:

• Common equity tier 1 capital ratio of 11.99%.
• Tier 1 leverage capital ratio of 9.85%.
• Tier 1 risk-based capital ratio of 12.11%.
• Total risk-based capital ratio of 14.88%.
• Book value per common share was $26.36 compared to $26.40 at March 31, 2023 and $25.48 at June 30, 2022.
• Tangible book value per common share (non-GAAP) was $19.31 compared to $19.04 at March 31, 2023 and $18.58 at June 30, 2022.

BHHS Towne Realty
Effective April 27, 2023, the Company transferred its ownership interest in BHHS Towne Realty, which was formerly a subsidiary of TowneBank to BHHS RW Towne Realty, LLC, in exchange for a minority interest in that company.

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

TowneBank operates over 45 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 affiliated companies that include Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices RW Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations. With total assets of $17.23 billion as of June 30, 2023, TowneBank is one of the largest banks headquartered in Virginia.

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

Forward-Looking Statements:
This press release contains certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only the beliefs, expectations, or opinions of TowneBank and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: "believe," "expect," "anticipate," "intend," "plan,” "estimate," or words of similar meaning, or future or conditional terms, such as "will," "would," "should," "could," "may," "likely," "probably," or "possibly." These statements may address issues that involve significant risks, uncertainties, estimates, and assumptions made by management. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include competitive pressures in the banking industry that may increase significantly; changes in the interest rate environment that may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; changes in the 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; unusual and infrequently occurring events, such as weather-related or natural disasters, acts of war or terrorism, or public health events (such as the COVID-19 pandemic); changes in the legislative or regulatory environment, including changes in accounting standards and tax laws, that may adversely affect our business; costs or difficulties related to the integration of the businesses we have acquired may be greater than expected; expected cost savings associated with pending or recently completed acquisitions may not be fully realized or realized within the expected time frame; cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain reliable electronic systems; our competitors may have greater financial resources and develop products that enable them to compete more successfully; changes in business conditions; changes in the securities market; and changes in our local economy with regard to our market area. Any forward-looking statements made by us or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events, or otherwise. For additional information on factors that could materially influence forward-looking statements included in this report, see the "Risk Factors" in TowneBank’s Annual Report on Form 10-K for the year ended December 31, 2022 and related disclosures in other filings that have been, or will be, filed by TowneBank with the Federal Deposit Insurance Corporation.

Media contact:
G. Robert Aston, Jr., Executive Chairman, 757-638-6780
William I. Foster III, Chief Executive Officer, 757-417-6482

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,
	2023				2023				2022				2022				2022
Income and Performance Ratios:
Total revenue	$	181,568			$	184,144			$	175,307			$	179,236			$	166,980
Net income		43,368				38,478				46,494				50,671				47,054
Net income available to common shareholders		41,716				38,333				46,685				50,169				46,547
Pre-provision, pre-tax, net revenues(non-GAAP)(1)		45,855				59,602				64,357				66,700				57,748
Net income per common share - diluted		0.56				0.52				0.64				0.69				0.64
Book value per common share		26.36				26.40				25.73				25.08				25.48
Book value per common share - tangible(non-GAAP)		19.31				19.04				18.84				18.17				18.58
Return on average assets		0.99	%			0.95	%			1.16	%			1.22	%			1.13	%
Return on average assets - tangible(non-GAAP)		1.10	%			1.05	%			1.25	%			1.31	%			1.22	%
Return on average equity		8.46	%			7.99	%			9.98	%			10.60	%			9.94	%
Return on average equity - tangible(non-GAAP)		12.35	%			11.71	%			14.26	%			15.08	%			14.20	%
Return on average common equity		8.52	%			8.05	%			10.07	%			10.69	%			10.03	%
Return on average common equity - tangible(non-GAAP)		12.48	%			11.83	%			14.44	%			15.27	%			14.37	%
Noninterest income as a percentage of total revenue		37.43	%			33.00	%			26.54	%			30.80	%			34.52	%
Regulatory Capital Ratios (1):
Common equity tier 1		11.99	%			11.68	%			11.92	%			11.92	%			11.83	%
Tier 1		12.11	%			11.80	%			12.04	%			12.05	%			11.97	%
Total		14.88	%			14.55	%			14.80	%			14.80	%			16.76	%
Tier 1 leverage ratio		9.85	%			9.86	%			9.87	%			9.52	%			9.19	%
Asset Quality:
Allowance for credit losses on loans to nonperforming loans	18.09x				12.87x				17.67x				20.48x				18.94x
Allowance for credit losses on loans to period end loans		1.10	%			1.07	%			1.03	%			1.02	%			1.00	%
Nonperforming loans to period end loans		0.06	%			0.08	%			0.06	%			0.05	%			0.05	%
Nonperforming assets to period end assets		0.05	%			0.06	%			0.04	%			0.03	%			0.04	%
Net charge-offs (recoveries) to average loans (annualized)		—	%			0.14	%			0.11	%		(0.01		)%			—	%
Net charge-offs (recoveries)	$	9			$	3,874			$	2,904			$	(187	)		$	(80	)
Nonperforming loans	$	6,827			$	9,322			$	6,273			$	5,250			$	5,493
Former bank premises		1,782				—				—				—				—
Foreclosed property		738				564				560				186				563
Total nonperforming assets	$	9,347			$	9,886			$	6,833			$	5,436			$	6,056
Loans past due 90 days and still accruing interest	$	360			$	206			$	324			$	725			$	232
Allowance for credit losses on loans	$	123,513			$	120,002			$	110,816			$	107,497			$	104,019
Mortgage Banking:
Loans originated, mortgage	$	409,050			$	280,401			$	299,298			$	458,254			$	588,529
Loans originated, joint venture		207,450				135,818				157,511				234,443				249,279
Total loans originated	$	616,500			$	416,219			$	456,809			$	692,697			$	837,808
Number of loans originated		1,715				1,249				1,355				1,983				2,282
Number of originators		196				194				186				194				201
Purchase %		96.32	%			94.99	%			95.08	%			93.20	%			92.27	%
Loans sold	$	525,078			$	346,288			$	483,254			$	701,908			$	759,073
Rate lock asset	$	1,551			$	1,435			$	482			$	859			$	1,935
Gross realized gain on sales and fees as a % of loans originated		2.96	%			3.11	%			2.93	%			3.02	%			2.92	%
Other Ratios:
Net interest margin		2.98	%			3.36	%			3.51	%			3.28	%			2.88	%
Net interest margin-fully tax equivalent(non-GAAP)		3.01	%			3.39	%			3.53	%			3.31	%			2.89	%
Average earning assets/total average assets		90.96	%			90.98	%			91.51	%			91.92	%			92.22	%
Average loans/average deposits		83.72	%			82.40	%			80.14	%			76.82	%			74.57	%
Average noninterest deposits/total average deposits		36.07	%			38.35	%			41.07	%			41.77	%			40.56	%
Period end equity/period end total assets		11.56	%			11.89	%			11.92	%			11.56	%			11.09	%
Efficiency ratio(non-GAAP)		70.41	%			65.64	%			61.99	%			61.03	%			63.51	%
(1) Current reporting period regulatory capital ratios are preliminary.

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
Investment Securities													% Change
	Q2				Q2				Q1				Q2 23 vs.			Q2 23 vs.
Available-for-sale securities, at fair value	2023				2022				2023				Q2 22			Q1 23
U.S. agency securities	$	318,354			$	342,702			$	334,211			(7.10	)%		(4.74	)%
U.S. Treasury notes		26,874				27,496				27,272			(2.26	)%		(1.46	)%
Municipal securities		503,792				447,927				508,439			12.47	%		(0.91	)%
Trust preferred and other corporate securities		71,116				84,307				76,965			(15.65	)%		(7.60	)%
Mortgage-backed securities issued by GSE		1,086,947				1,012,690				1,132,746			7.33	%		(4.04	)%
Allowance for credit losses		(1,232	)			(1,111	)			(1,150	)		10.89	%		7.13	%
Total	$	2,005,851			$	1,914,011			$	2,078,483			4.80	%		(3.49	)%
Gross unrealized gains (losses) reflected in financial statements
Total gross unrealized gains	$	975			$	1,840			$	2,218			(47.01	)%		(56.04	)%
Total gross unrealized losses		(196,954	)			(122,253	)			(167,929	)		61.10	%		17.28	%
Net unrealized gains (losses) and other adjustments on AFS securities	$	(195,979	)		$	(120,413	)		$	(165,711	)		62.76	%		18.27	%
Held-to-maturity securities, at amortized cost
U.S. agency securities	$	101,469			$	100,718			$	101,281			0.75	%		0.19	%
U.S. Treasury notes		433,298				434,432				433,584			(0.26	)%		(0.07	)%
Municipal securities		5,226				5,138				5,203			1.71	%		0.44	%
Trust preferred corporate securities		2,198				2,248				2,210			(2.22	)%		(0.54	)%
Mortgage-backed securities issued by GSE		5,826				6,547				5,948			(11.01	)%		(2.05	)%
Allowance for credit losses		(87	)			(85	)			(88	)		2.35	%		(1.14	)%
Total	$	547,930			$	548,998			$	548,138			(0.19	)%		(0.04	)%
Total gross unrealized gains	$	272			$	448			$	392			(39.29	)%		(30.61	)%
Total gross unrealized losses		(25,914	)			(18,615	)			(24,018	)		39.21	%		7.89	%
Net unrealized gains (losses) in HTM securities	$	(25,642	)		$	(18,167	)		$	(23,626	)		41.15	%		8.53	%
Total unrealized (losses) gains on AFS and HTM securities	$	(221,621	)		$	(138,580	)		$	(189,337	)		59.92	%		17.05	%
													% Change
Loans Held For Investment	Q2				Q2				Q1				Q2 23 vs.			Q2 23 vs.
	2023				2022				2023				Q2 22			Q1 23
Real estate - construction and development	$	1,364,575			$	1,383,791			$	1,473,034			(1.39	)%		(7.36	)%
Commercial real estate - owner occupied		1,687,261				1,579,464				1,675,119			6.82	%		0.72	%
Commercial real estate - non owner occupied		3,034,548				2,757,651				2,908,791			10.04	%		4.32	%
Real estate - multifamily		520,464				371,658				505,237			40.04	%		3.01	%
Residential 1-4 family		1,790,225				1,513,662				1,734,698			18.27	%		3.20	%
HELOC		380,501				386,067				387,967			(1.44	)%		(1.92	)%
Commercial and industrial business (C&I)		1,259,282				1,261,279				1,297,707			(0.16	)%		(2.96	)%
Government		520,994				527,230				510,494			(1.18	)%		2.06	%
Indirect		562,161				555,638				582,306			1.17	%		(3.46	)%
Consumer loans and other		88,003				89,320				98,432			(1.47	)%		(10.60	)%
Total	$	11,208,014			$	10,425,760			$	11,173,785			7.50	%		0.31	%
													% Change
Deposits	Q2				Q2				Q1				Q2 23 vs.			Q2 23 vs.
	2023				2022				2023				Q2 22			Q1 23
Noninterest-bearing demand	$	4,774,830			$	5,723,415			$	5,069,363			(16.57	)%		(5.81	)%
Interest-bearing:
Demand and money market accounts		6,529,336				6,384,818				6,284,184			2.26	%		3.90	%
Savings		361,891				388,364				389,173			(6.82	)%		(7.01	)%
Certificates of deposits		2,100,604				1,499,514				1,855,411			40.09	%		13.22	%
Total		13,766,661				13,996,111				13,598,131			(1.64	)%		1.24	%

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
	Three Months Ended											Three Months Ended											Three Months Ended
	June 30, 2023											March 31, 2023											June 30, 2022
					Interest				Average							Interest				Average							Interest				Average
	Average				Income/				Yield/			Average				Income/				Yield/			Average				Income/				Yield/
	Balance				Expense				Rate (1)			Balance				Expense				Rate (1)			Balance				Expense				Rate (1)
Assets:
Loans (net of unearned income and deferred costs)	$	11,209,641			$	139,814			5.00	%		$	11,097,626			$	133,536			4.88	%		$	10,199,019			$	101,463			3.99	%
Taxable investment securities		2,450,393				17,195			2.81	%			2,438,489				16,816			2.76	%			2,331,410				11,388			1.95	%
Tax-exempt investment securities		209,728				2,003			3.82	%			188,033				1,887			4.01	%			132,304				1,059			3.20	%
Total securities		2,660,121				19,198			2.89	%			2,626,522				18,703			2.85	%			2,463,714				12,447			2.02	%
Interest-bearing deposits		1,262,692				14,488			4.60	%			1,044,538				10,649			4.13	%			2,368,147				4,616			0.78	%
Loans held for sale		172,679				2,547			5.90	%			105,018				1,604			6.11	%			213,109				2,217			4.16	%
Total earning assets		15,305,133				176,047			4.61	%			14,873,704				164,492			4.49	%			15,243,989				120,743			3.18	%
Less: allowance for credit losses		(121,140	)										(114,447	)										(103,871	)
Total nonearning assets		1,642,972											1,589,783											1,389,692
Total assets	$	16,826,965										$	16,349,040										$	16,529,810
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,220,394			$	32,058			2.07	%		$	6,217,754			$	23,302			1.52	%		$	6,349,725			$	3,094			0.20	%
Savings		371,455				895			0.97	%			401,776				844			0.85	%			387,498				526			0.54	%
Certificates of deposit		1,968,623				15,718			3.20	%			1,683,354				9,788			2.36	%			1,392,474				1,953			0.56	%
Total interest-bearing deposits		8,560,472				48,671			2.28	%			8,302,884				33,934			1.66	%			8,129,697				5,573			0.27	%
Borrowings		863,255				10,345			4.74	%			355,833				3,915			4.40	%			128,276				135			0.42	%
Subordinated debt, net		255,264				2,236			3.50	%			250,066				2,169			3.47	%			496,862				5,091			4.10	%
Total interest-bearing liabilities		9,678,991				61,252			2.54	%			8,908,783				40,018			1.82	%			8,754,835				10,799			0.49	%
Demand deposits		4,829,395											5,164,415											5,547,936
Other noninterest-bearing liabilities		339,966											329,840											348,678
Total liabilities		14,848,352											14,403,038											14,651,449
Shareholders’ equity		1,978,613											1,946,002											1,878,361
Total liabilities and equity	$	16,826,965										$	16,349,040										$	16,529,810
Net interest income (tax-equivalent basis) (4)					$	114,795										$	124,474										$	109,944
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment						(1,184	)										(1,096	)										(604	)
Net interest income (GAAP)					$	113,611										$	123,378										$	109,340
Interest rate spread (2)(4)									2.07	%										2.67	%										2.69	%
Interest expense as a percent of average earning assets									1.61	%										1.09	%										0.28	%
Net interest margin (tax equivalent basis) (3)(4)									3.01	%										3.39	%										2.89	%
Total cost of deposits									1.46	%										1.02	%										0.16	%

(1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 21%.
(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
	June 30, 2023											June 30, 2022
					Interest				Average							Interest				Average
	Average				Income/				Yield/			Average				Income/				Yield/
	Balance				Expense				Rate (1)			Balance				Expense				Rate (1)
Assets:
Loans (net of unearned income and deferred costs)	$	11,153,944			$	273,349			4.94	%		$	9,935,337			$	197,059			4.00	%
Taxable investment securities		2,444,474				34,011			2.78	%			2,196,263				20,401			1.86	%
Tax-exempt investment securities		198,940				3,891			3.91	%			121,561				1,836			3.02	%
Total securities		2,643,414				37,902			2.87	%			2,317,824				22,237			1.92	%
Interest-bearing deposits		1,154,218				25,137			4.39	%			2,647,485				5,963			0.45	%
Loans held for sale		139,035				4,151			5.97	%			244,604				4,592			3.75	%
Total earning assets		15,090,611				340,539			4.55	%			15,145,250				229,851			3.06	%
Less: allowance for credit losses		(117,812	)										(105,015	)
Total nonearning assets		1,616,524											1,381,271
Total assets	$	16,589,323										$	16,421,506
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,219,081			$	55,360			1.80	%		$	6,264,444			$	5,355			0.17	%
Savings		386,532				1,739			0.91	%			385,182				1,037			0.54	%
Certificates of deposit		1,826,777				25,506			2.82	%			1,432,486				4,074			0.57	%
Total interest-bearing deposits		8,432,390				82,605			1.98	%			8,082,112				10,466			0.26	%
Borrowings		610,946				14,261			4.64	%			132,004				272			0.41	%
Subordinated debt, net		252,679				4,405			3.49	%			442,202				9,212			4.17	%
Total interest-bearing liabilities		9,296,015				101,271			2.20	%			8,656,318				19,950			0.46	%
Demand deposits		4,995,980											5,507,768
Other noninterest-bearing liabilities		334,930											368,166
Total liabilities		14,626,925											14,532,252
Shareholders’ equity		1,962,398											1,889,254
Total liabilities and equity	$	16,589,323										$	16,421,506
Net interest income (tax-equivalent basis)(4)					$	239,268										$	209,901
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment						(2,280	)										(1,357	)
Net interest income (GAAP)					$	236,988										$	208,544
Interest rate spread (2)(4)									2.35	%										2.60	%
Interest expense as a percent of average earning assets									1.35	%										0.28	%
Net interest margin (tax equivalent basis) (3)(4)									3.20	%										2.79	%
Total cost of deposits									1.24	%										0.16	%

(1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory rate of 21%.
(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,
	2023				2022
	(unaudited)				(audited)
ASSETS
Cash and due from banks	$	106,994			$	55,381
Interest-bearing deposits at FRB - Richmond		1,427,044				1,000,205
Federal funds sold and interest-bearing deposits in financial institutions		102,231				97,244
Total Cash and Cash Equivalents		1,636,269				1,152,830
Securities available for sale, at fair value (amortized cost of $2,203,062 and $2,033,040, and allowance for credit losses of $1,232 and $1,086 at June 30, 2023 and December 31, 2022, respectively)		2,005,851				1,840,902
Securities held to maturity, at amortized cost (fair value $522,375 and $518,993 at June 30, 2023 and December 31, 2022, respectively)		548,017				548,475
Less: allowance for credit losses		(87	)			(83	)
Securities held to maturity, net of allowance for credit losses		547,930				548,392
Other equity securities		13,798				6,424
FHLB stock		40,454				9,617
Total Securities		2,608,033				2,405,335
Mortgage loans held for sale		229,502				102,339
Loans, net of unearned income and deferred costs		11,208,014				10,794,602
Less: allowance for credit losses		(123,513	)			(110,816	)
Net Loans		11,084,501				10,683,786
Premises and equipment, net		326,686				304,802
Goodwill		456,695				458,482
Other intangible assets, net		71,106				43,163
BOLI		273,435				258,069
Other assets		538,848				436,461
TOTAL ASSETS	$	17,225,075			$	15,845,267
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	4,774,830			$	5,265,186
Interest-bearing:
Demand and money market accounts		6,529,336				6,185,075
Savings		361,891				374,987
Certificates of deposit		2,100,604				1,468,975
Total Deposits		13,766,661				13,294,223
Advances from the FHLB		754,319				29,674
Subordinated debt, net		255,365				247,420
Repurchase agreements and other borrowings		49,898				40,918
Total Borrowings		1,059,582				318,012
Other liabilities		408,333				344,275
TOTAL LIABILITIES		15,234,576				13,956,510
Preferred stock, authorized and unissued shares - 2,000,000		—				—
Common stock, $1.667 par value: 150,000,000 shares authorized
74,878,243 and 72,841,379 shares issued at
June 30, 2023 and December 31, 2022, respectively		124,805				121,426
Capital surplus		1,109,526				1,052,262
Retained earnings		884,901				840,777
Common stock issued to deferred compensation trust, at cost
977,334 and 931,030 shares at June 30, 2023 and December 31, 2022, respectively		(20,134	)			(18,974	)
Deferred compensation trust		20,134				18,974
Accumulated other comprehensive income (loss)		(145,392	)			(140,505	)
TOTAL SHAREHOLDERS’ EQUITY		1,973,840				1,873,960
Noncontrolling interest		16,659				14,797
TOTAL EQUITY		1,990,499				1,888,757
TOTAL LIABILITIES AND EQUITY	$	17,225,075			$	15,845,267

TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2023				2022				2023				2022
INTEREST INCOME:
Loans, including fees	$	138,977			$	101,043			$	271,745			$	196,005
Investment securities		18,851				12,263				37,226				21,934
Interest-bearing deposits in financial institutions and federal funds sold		14,488				4,616				25,137				5,963
Mortgage loans held for sale		2,547				2,217				4,151				4,592
Total interest income		174,863				120,139				338,259				228,494
INTEREST EXPENSE:
Deposits		48,671				5,573				82,605				10,467
Advances from the FHLB		10,407				86				13,399				178
Subordinated debt, net		2,236				5,091				4,405				9,211
Repurchase agreements and other borrowings		(62	)			49				862				94
Total interest expense		61,252				10,799				101,271				19,950
Net interest income		113,611				109,340				236,988				208,544
PROVISION FOR CREDIT LOSSES		3,556				56				15,225				(1,393	)
Net interest income after provision for credit losses		110,055				109,284				221,763				209,937
NONINTEREST INCOME:
Residential mortgage banking income, net		11,360				13,176				20,732				27,814
Insurance commissions and other title fees and income, net		22,498				19,746				45,321				38,820
Property management income, net		12,098				9,452				27,633				26,599
Real estate brokerage income, net		1,834				3,412				3,625				5,966
Service charges on deposit accounts		3,018				2,446				5,870				5,020
Credit card merchant fees, net		1,682				1,906				3,226				3,281
BOLI		1,710				1,853				3,383				3,570
Other income		13,757				5,649				18,933				12,778
Total noninterest income		67,957				57,640				128,723				123,848
NONINTEREST EXPENSE:
Salaries and employee benefits		67,445				64,892				136,866				128,855
Occupancy		9,487				8,342				18,552				16,669
Furniture and equipment		4,389				3,643				8,633				7,333
Amortization - intangibles		3,610				2,684				7,134				5,501
Software expense		6,169				4,762				11,792				9,254
Data processing		4,011				3,556				7,364				7,150
Professional fees		3,166				1,761				6,178				3,788
Advertising and marketing		3,959				4,091				8,360				8,218
Other expenses		22,992				14,994				44,747				31,336
Total noninterest expense		125,228				108,725				249,626				218,104
Income before income tax expense and noncontrolling interest		52,784				58,199				100,860				115,681
Provision for income tax expense		9,416				11,145				19,014				22,377
Net income	$	43,368			$	47,054			$	81,846			$	93,304
Net income attributable to noncontrolling interest		(1,652	)			(507	)			(1,797	)			(1,171	)
Net income attributable to TowneBank	$	41,716			$	46,547			$	80,049			$	92,133
Per common share information
Basic earnings	$	0.56			$	0.64			$	1.07			$	1.27
Diluted earnings	$	0.56			$	0.64			$	1.07			$	1.27
Cash dividends declared	$	0.25			$	0.23			$	0.48			$	0.43

TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
	June 30,				March 31,				December 31,				September 30,				June 30,
	2023				2023				2022				2022				2022
	(unaudited)				(unaudited)				(audited)				(unaudited)				(unaudited)
ASSETS
Cash and due from banks	$	106,994			$	97,502			$	55,381			$	97,290			$	72,592
Interest-bearing deposits at FRB - Richmond		1,427,044				1,040,112				1,000,205				1,245,067				2,341,942
Federal funds sold and interest-bearing deposits in financial institutions		102,231				104,924				97,244				96,862				35,087
Total Cash and Cash Equivalents		1,636,269				1,242,538				1,152,830				1,439,219				2,449,621
Securities available for sale		2,005,851				2,078,483				1,840,902				1,890,136				1,914,011
Securities held to maturity		548,017				548,226				548,475				548,745				549,083
Less: allowance for credit losses		(87	)			(88	)			(83	)			(83	)			(85	)
Securities held to maturity, net of allowance for credit losses		547,930				548,138				548,392				548,662				548,998
Other equity securities		13,798				13,341				6,424				6,360				6,679
FHLB stock		40,454				29,837				9,617				9,475				10,432
Total Securities		2,608,033				2,669,799				2,405,335				2,454,633				2,480,120
Mortgage loans held for sale		229,502				157,161				102,339				165,023				211,716
Loans, net of unearned income and deferred costs		11,208,014				11,173,785				10,794,602				10,559,611				10,425,760
Less: allowance for credit losses		(123,513	)			(120,002	)			(110,816	)			(107,497	)			(104,019	)
Net Loans		11,084,501				11,053,783				10,683,786				10,452,114				10,321,741
Premises and equipment, net		326,686				321,944				304,802				295,345				289,753
Goodwill		456,695				477,234				458,482				458,482				457,162
Other intangible assets, net		71,106				73,238				43,163				44,854				44,878
BOLI		273,435				271,704				258,069				256,074				254,478
Other assets		538,848				463,076				436,461				386,053				354,570
TOTAL ASSETS	$	17,225,075			$	16,730,477			$	15,845,267			$	15,951,797			$	16,864,039
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	4,774,830			$	5,069,363			$	5,265,186			$	5,574,528			$	5,723,415
Interest-bearing:
Demand and money market accounts		6,529,336				6,284,184				6,185,075				6,042,417				6,384,818
Savings		361,891				389,173				374,987				387,622				388,364
Certificates of deposit		2,100,604				1,855,411				1,468,975				1,407,495				1,499,514
Total Deposits		13,766,661				13,598,131				13,294,223				13,412,062				13,996,111
Advances from the FHLB		754,319				504,497				29,674				29,850				55,024
Subordinated debt, net		255,365				255,151				247,420				247,265				497,061
Repurchase agreements and other borrowings		49,898				46,602				40,918				43,165				47,922
Total Borrowings		1,059,582				806,250				318,012				320,280				600,007
Other liabilities		408,333				336,201				344,275				375,869				397,388
TOTAL LIABILITIES		15,234,576				14,740,582				13,956,510				14,108,211				14,993,506
Preferred stock		—				—				—				—				—
Common stock, $1.667 par value		124,805				124,682				121,426				121,423				121,265
Capital surplus		1,109,526				1,109,387				1,052,262				1,052,374				1,051,384
Retained earnings		884,901				861,905				840,777				810,845				777,430
Common stock issued to deferred compensation
trust, at cost		(20,134	)			(18,839	)			(18,974	)			(18,862	)			(19,349	)
Deferred compensation trust		20,134				18,839				18,974				18,862				19,349
Accumulated other comprehensive income (loss)		(145,392	)			(121,297	)			(140,505	)			(157,980	)			(96,358	)
TOTAL SHAREHOLDERS’ EQUITY		1,973,840				1,974,677				1,873,960				1,826,662				1,853,721
Noncontrolling interest		16,659				15,218				14,797				16,924				16,812
TOTAL EQUITY		1,990,499				1,989,895				1,888,757				1,843,586				1,870,533
TOTAL LIABILITIES AND EQUITY	$	17,225,075			$	16,730,477			$	15,845,267			$	15,951,797			$	16,864,039

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,
	2023				2023				2022			2022				2022
INTEREST INCOME:
Loans, including fees	$	138,977			$	132,768			$	123,395		$	111,590			$	101,043
Investment securities		18,851				18,375				15,294			13,979				12,263
Interest-bearing deposits in financial institutions and federal funds sold		14,488				10,649				11,387			9,509				4,616
Mortgage loans held for sale		2,547				1,604				1,842			2,446				2,217
Total interest income		174,863				163,396				151,918			137,524				120,139
INTEREST EXPENSE:
Deposits		48,671				33,934				20,118			10,230				5,573
Advances from the FHLB		10,407				2,992				665			83				86
Subordinated debt, net		2,236				2,169				2,108			3,117				5,091
Repurchase agreements and other borrowings		(62	)			923				244			56				49
Total interest expense		61,252				40,018				23,135			13,486				10,799
Net interest income		113,611				123,378				128,783			124,038				109,340
PROVISION FOR CREDIT LOSSES		3,556				11,670				6,074			3,925				56
Net interest income after provision for credit losses		110,055				111,708				122,709			120,113				109,284
NONINTEREST INCOME:
Residential mortgage banking income, net		11,360				9,372				7,368			11,968				13,176
Insurance commissions and other title fees and income, net		22,498				22,823				17,324			19,435				19,746
Property management income, net		12,098				15,535				7,756			9,891				9,452
Real estate brokerage income, net		1,834				1,791				2,355			2,932				3,412
Service charges on deposit accounts		3,018				2,851				2,655			2,455				2,446
Credit card merchant fees, net		1,682				1,545				1,653			1,658				1,906
BOLI		1,710				1,672				1,985			1,585				1,853
Other income		13,757				5,177				5,428			5,274				5,649
Total noninterest income		67,957				60,766				46,524			55,198				57,640
NONINTEREST EXPENSE:
Salaries and employee benefits		67,445				69,420				61,307			65,463				64,892
Occupancy		9,487				9,064				9,252			8,748				8,342
Furniture and equipment		4,389				4,244				3,983			3,764				3,643
Amortization - intangibles		3,610				3,524				2,475			2,644				2,684
Software expense		6,169				5,624				5,111			4,594				4,762
Data processing		4,011				3,353				3,096			3,628				3,556
Professional fees		3,166				3,011				3,605			2,627				1,761
Advertising and marketing		3,959				4,401				3,489			4,290				4,091
Other expenses		22,992				21,756				18,823			16,276				14,994
Total noninterest expense		125,228				124,397				111,141			112,034				108,725
Income before income tax expense and noncontrolling interest		52,784				48,077				58,092			63,277				58,199
Provision for income tax expense		9,416				9,599				11,598			12,606				11,145
Net income		43,368				38,478				46,494			50,671				47,054
Net income attributable to noncontrolling interest		(1,652	)			(145	)			191			(502	)			(507	)
Net income attributable to TowneBank	$	41,716			$	38,333			$	46,685		$	50,169			$	46,547
Per common share information
Basic earnings	$	0.56			$	0.52			$	0.64		$	0.69			$	0.64
Diluted earnings	$	0.56			$	0.52			$	0.64		$	0.69			$	0.64
Basic weighted average shares outstanding		74,691,121				74,363,222				72,686,303			72,578,736				72,559,537
Diluted weighted average shares outstanding		74,699,810				74,390,614				72,724,189			72,594,474				72,568,886
Cash dividends declared	$	0.25			$	0.23			$	0.23		$	0.23			$	0.23

TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)
	Three Months Ended												Six Months Ended								Increase/(Decrease)
	June 30,								March 31,				June 30,								YTD 2023 over 2022
	2023				2022				2023				2023				2022				Amount				Percent
Revenue
Net interest income	$	113,327			$	107,417			$	123,650			$	236,976			$	204,187			$	32,789			16.06	%
Service charges on deposit accounts		3,018				2,446				2,851				5,870				5,020				850			16.93	%
Credit card merchant fees		1,682				1,906				1,545				3,226				3,281				(55	)		(1.68	)%
Other income		6,153				5,042				5,740				11,892				11,751				141			1.20	%
Total noninterest income		10,853				9,394				10,136				20,988				20,052				936			4.67	%
Total revenue		124,180				116,811				133,786				257,964				224,239				33,725			15.04	%
Provision for credit losses		3,482				(160	)			11,754				15,235				(1,993	)			17,228			(864.43	)%
Expenses
Salaries and employee benefits		42,240				38,673				43,193				85,433				75,733				9,700			12.81	%
Occupancy		6,846				5,633				6,233				13,080				11,292				1,788			15.83	%
Furniture and equipment		3,544				2,747				3,333				6,877				5,456				1,421			26.04	%
Amortization of intangible assets		1,341				777				1,281				2,622				1,603				1,019			63.57	%
Other expenses		29,178				17,856				28,444				57,621				36,083				21,538			59.69	%
Total expenses		83,149				65,686				82,484				165,633				130,167				35,466			27.25	%
Income before income tax, corporate allocation and noncontrolling interest		37,549				51,285				39,548				77,096				96,065				(18,969	)		(19.75	)%
Corporate allocation		1,271				1,325				1,200				2,472				2,617				(145	)		(5.54	)%
Income before income tax provision and noncontrolling interest		38,820				52,610				40,748				79,568				98,682				(19,114	)		(19.37	)%
Provision for income tax expense		6,114				9,756				7,651				13,765				18,275				(4,510	)		(24.68	)%
Net income		32,706				42,854				33,097				65,803				80,407				(14,604	)		(18.16	)%
Noncontrolling interest		—				—				—				—				—				—			N/M
Net income attributable to TowneBank	$	32,706			$	42,854			$	33,097			$	65,803			$	80,407			$	(14,604	)		(18.16	)%
Efficiency ratio(non-GAAP)		65.88	%			55.57	%			60.70	%			63.19	%			57.33	%			5.86	%		10.22	%

TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)
	Three Months Ended												Six Months Ended								Increase/(Decrease)
	June 30,								March 31,				June 30,								YTD 2023 over 2022
	2023				2022				2023				2023				2022				Amount				Percent
Revenue
Residential mortgage brokerage income, net	$	12,215			$	14,858			$	9,794			$	22,009			$	30,765			$	(8,756	)		(28.46	)%
Real estate brokerage income, net		1,834				3,412				1,791				3,625				5,966				(2,341	)		(39.24	)%
Title insurance and settlement fees		152				561				291				443				1,065				(622	)		(58.40	)%
Property management fees, net		12,098				9,452				15,535				27,633				26,599				1,034			3.89	%
Income from unconsolidated subsidiary		(886	)			115				66				(821	)			282				(1,103	)		(391.13	)%
Net interest and other income		9,468				2,411				184				9,653				5,343				4,310			80.67	%
Total revenue		34,881				30,809				27,661				62,542				70,020				(7,478	)		(10.68	)%
Provision for credit losses		74				216				(84	)			(10	)			600				(610	)		(101.67	)%
Expenses
Salaries and employee benefits		13,949				16,501				14,839				28,789				33,791				(5,002	)		(14.80	)%
Occupancy		1,869				1,997				2,021				3,890				3,895				(5	)		(0.13	)%
Furniture and equipment		640				707				693				1,333				1,467				(134	)		(9.13	)%
Amortization of intangible assets		741				816				683				1,424				1,633				(209	)		(12.80	)%
Other expenses		9,337				9,932				8,437				17,775				20,785				(3,010	)		(14.48	)%
Total expenses		26,536				29,953				26,673				53,211				61,571				(8,360	)		(13.58	)%
Income before income tax, corporate allocation and noncontrolling interest		8,271				640				1,072				9,341				7,849				1,492			19.01	%
Corporate allocation		(600	)			(1,000	)			(600	)			(1,200	)			(2,000	)			800			(40.00	)%
Income before income tax provision and noncontrolling interest		7,671				(360	)			472				8,141				5,849				2,292			39.19	%
Provision for income tax expense		1,686				(144	)			182				1,867				1,230				637			51.79	%
Net income		5,985				(216	)			290				6,274				4,619				1,655			35.83	%
Noncontrolling interest		(1,652	)			(507	)			(145	)			(1,797	)			(1,171	)			(626	)		53.46	%
Net income attributable to TowneBank	$	4,333			$	(723	)		$	145			$	4,477			$	3,448			$	1,029			29.84	%
Efficiency ratio excluding gain on BHHS Towne Realty(non-GAAP)		99.03	%			94.57	%			93.96	%			96.42	%			85.60	%			10.82	%		12.64	%

TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)
	Three Months Ended												Six Months Ended								Increase/(Decrease)
	June 30,								March 31,				June 30,								YTD 2023 over 2022
	2023				2022				2023				2023				2022				Amount				Percent
Commission and fee income
Property and casualty	$	20,028			$	16,546			$	18,129			$	38,156			$	31,884			$	6,272			19.67	%
Employee benefits		4,561				3,924				4,587				9,148				8,085				1,063			13.15	%
Specialized benefit services		153				160				159				312				330				(18	)		(5.45	)%
Total commissions and fees		24,742				20,630				22,875				47,616				40,299				7,317			18.16	%
Contingency and bonus revenue		2,638				2,994				4,369				7,008				6,398				610			9.53	%
Other income		8				15				6				15				48				(33	)		(68.75	)%
Total revenue		27,388				23,639				27,250				54,639				46,745				7,894			16.89	%
Employee commission expense		4,881				4,279				4,553				9,434				8,612				822			9.54	%
Revenue, net of commission expense		22,507				19,360				22,697				45,205				38,133				7,072			18.55	%
Salaries and employee benefits		11,256				9,718				11,388				22,644				19,331				3,313			17.14	%
Occupancy		772				712				810				1,582				1,482				100			6.75	%
Furniture and equipment		205				189				218				423				410				13			3.17	%
Amortization of intangible assets		1,528				1,091				1,560				3,088				2,265				823			36.34	%
Other expenses		1,782				1,376				1,264				3,045				2,878				167			5.80	%
Total operating expenses		15,543				13,086				15,240				30,782				26,366				4,416			16.75	%
Income before income tax, corporate allocation and noncontrolling interest		6,964				6,274				7,457				14,423				11,767				2,656			22.57	%
Corporate allocation		(671	)			(325	)			(600	)			(1,272	)			(617	)			(655	)		106.16	%
Income before income tax provision and noncontrolling interest		6,293				5,949				6,857				13,151				11,150				2,001			17.95	%
Provision for income tax expense		1,616				1,533				1,766				3,382				2,872				510			17.76	%
Net income		4,677				4,416				5,091				9,769				8,278				1,491			18.01	%
Noncontrolling interest		—				—				—				—				—				—			N/M
Net income attributable to TowneBank	$	4,677			$	4,416			$	5,091			$	9,769			$	8,278			$	1,491			18.01	%
Provision for income taxes		1,616				1,533				1,766				3,382				2,872				510			17.76	%
Depreciation, amortization and interest expense		1,683				1,220				1,706				3,389				2,539				850			33.48	%
EBITDA(non-GAAP)	$	7,976			$	7,169			$	8,563			$	16,540			$	13,689			$	2,851			20.83	%
Efficiency ratio(non-GAAP)		62.27	%			61.96	%			60.27	%			61.26	%			63.20	%		(1.94		)%		(3.07	)%

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,
	2023				2022				2023				2023				2022
Return on average assets (GAAP)		0.99	%			1.13	%			0.95	%			0.97	%			1.13	%
Impact of excluding average goodwill and other intangibles and amortization		0.11	%			0.09	%			0.10	%			0.11	%			0.09	%
Return on average tangible assets (non-GAAP)		1.10	%			1.22	%			1.05	%			1.08	%			1.22	%
Return on average equity (GAAP)		8.46	%			9.94	%			7.99	%			8.23	%			9.83	%
Impact of excluding average goodwill and other intangibles and amortization		3.89	%			4.26	%			3.72	%			3.80	%			4.23	%
Return on average tangible equity (non-GAAP)		12.35	%			14.20	%			11.71	%			12.03	%			14.06	%
Return on average common equity (GAAP)		8.52	%			10.03	%			8.05	%			8.29	%			9.92	%
Impact of excluding average goodwill and other intangibles and amortization		3.96	%			4.34	%			3.78	%			3.87	%			4.30	%
Return on average tangible common equity (non-GAAP)		12.48	%			14.37	%			11.83	%			12.16	%			14.22	%
Book value (GAAP)	$	26.36			$	25.48			$	26.40			$	26.36			$	25.48
Impact of excluding average goodwill and other intangibles and amortization		(7.05	)			(6.90	)			(7.36	)			(7.05	)			(6.90	)
Tangible book value (non-GAAP)	$	19.31			$	18.58			$	19.04			$	19.31			$	18.58
Efficiency ratio (GAAP)		68.97	%			65.11	%			67.55	%			68.26	%			65.62	%
Impact of exclusions		1.44	%		(1.60		)%		(1.91		)%		(0.31		)%		(1.66		)%
Efficiency ratio (non-GAAP)		70.41	%			63.51	%			65.64	%			67.95	%			63.96	%
Average assets (GAAP)	$	16,826,965			$	16,529,810			$	16,349,040			$	16,589,323			$	16,421,506
Less: average goodwill and intangible assets		530,658				503,678				521,972				526,339				505,079
Average tangible assets (non-GAAP)	$	16,296,307			$	16,026,132			$	15,827,068			$	16,062,984			$	15,916,427
Average equity (GAAP)	$	1,978,613			$	1,878,361			$	1,946,002			$	1,962,398			$	1,889,254
Less: average goodwill and intangible assets		530,658				503,678				521,972				526,339				505,079
Average tangible equity (non-GAAP)	$	1,447,955			$	1,374,683			$	1,424,030			$	1,436,059			$	1,384,175
Average common equity (GAAP)	$	1,963,164			$	1,861,635			$	1,931,063			$	1,947,202			$	1,872,806
Less: average goodwill and intangible assets		530,658				503,678				521,972				526,339				505,079
Average tangible common equity (non-GAAP)	$	1,432,506			$	1,357,957			$	1,409,091			$	1,420,863			$	1,367,727
Net income (GAAP)	$	41,716			$	46,547			$	38,333			$	80,049			$	92,133
Amortization of intangibles, net of tax		2,852				2,120				2,784				5,636				4,346
Tangible net income (non-GAAP)	$	44,568			$	48,667			$	41,117			$	85,685			$	96,479
Noninterest expense (GAAP)	$	125,228			$	108,725			$	124,397			$	249,626			$	218,104
Less: amortization of intangibles		3,610				2,684				3,524				7,134				5,501
Noninterest expense net of amortization (non-GAAP)	$	121,618			$	106,041			$	120,873			$	242,492			$	212,603

TOWNEBANK
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
Reconciliation of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability	Three Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,
	2023				2023				2022				2022				2022
Net income (GAAP)	$	41,716			$	38,333			$	46,685			$	50,169			$	46,547
Adjustments
Plus: Acquisition-related expenses, net of tax		2,457				4,803				320				610				50
Plus: Initial provision for acquired loans, net of tax		—				3,166				—				—				—
Less: Gain on sale of BHHS Towne Realty, net of noncontrolling interest and tax		(5,513	)			—				—				—				—
Core operating earnings, excluding certain items affecting comparability (non-GAAP)	$	38,660			$	46,302			$	47,005			$	50,779			$	46,597
Weighted average diluted shares		74,699,810				74,390,614				72,724,189				72,594,474				72,568,886
Diluted EPS (GAAP)	$	0.56			$	0.52			$	0.64			$	0.69			$	0.64
Diluted EPS, excluding certain items affecting comparability (non-GAAP)	$	0.52			$	0.62			$	0.65			$	0.70			$	0.64
Average assets	$	16,826,965			$	16,349,040			$	15,929,756			$	16,304,294			$	16,529,810
Average tangible equity	$	1,447,955			$	1,424,030				1,352,891			$	1,374,574			$	1,374,683
Average common tangible equity	$	1,432,506			$	1,409,091			$	1,336,356			$	1,357,845			$	1,357,957
Return on average assets, excluding certain items affecting comparability (non-GAAP)		0.92	%			1.15	%			1.17	%			1.24	%			1.13	%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)		11.50	%			13.98	%			14.36	%			15.26	%			14.21	%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)		11.62	%			14.13	%			14.54	%			15.45	%			14.39	%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)		67.32	%			64.32	%			63.20	%			62.16	%			65.08	%

TOWNEBANK
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
Reconciliation of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability	Six Months Ended
	June 30,				June 30,
	2023				2022
Net income (GAAP)	$	80,049			$	92,133
Adjustments
Plus: Acquisition-related expenses, net of tax		7,260				97
Plus: Initial provision for acquired loans, net of tax		3,166				—
Less: Gain on sale of BHHS Towne Realty, net of noncontrolling interest and tax		(5,513	)			—
Core operating earnings, excluding certain items affecting comparability (non-GAAP)	$	84,962			$	92,230
Weighted average diluted shares		74,545,389				72,560,468
Diluted EPS (GAAP)	$	1.07			$	1.27
Diluted EPS, excluding certain items affecting comparability (non-GAAP)	$	1.14			$	1.27
Average assets	$	16,589,323			$	16,421,506
Average tangible equity	$	1,436,059			$	1,384,175
Average tangible common equity	$	1,420,863			$	1,367,727
Return on average assets, excluding certain items affecting comparability (non-GAAP)		1.03	%			1.13	%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)		12.72	%			14.07	%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)		12.86	%			14.24	%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)		67.44	%			65.58	%