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TowneBank Reports Third Quarter 2022 Earnings
ソース: Nasdaq GlobeNewswire / 27 10 2022 08:30:02 America/New_York
SUFFOLK, Va., Oct. 27, 2022 (GLOBE NEWSWIRE) -- TowneBank (the "Company" or "Towne") (NASDAQ: TOWN) today reported earnings for the quarter ended September 30, 2022 of $50.17 million, or $0.69 per diluted share, compared to $50.40 million, or $0.69 per diluted share, for the quarter ended September 30, 2021. Excluding acquisition-related expenses, earnings (non-GAAP) for the quarter ended September 30, 2022 were $50.78 million, or $0.70 per diluted share, compared to $51.08 million, or $0.70 per diluted share for the quarter ended September 30, 2021.
"TowneBank's solid third quarter results demonstrate the strength and durability of our business model. Continued loan growth and positive impacts from higher interest rates led to significant margin expansion during the quarter. While credit quality continues to perform well, we remain diligent in maintaining a healthy balance sheet and strong capital levels given the uncertain economic environment. Notwithstanding some of the current headwinds facing our Realty segment, we believe our diverse business mix, disciplined expense management and long-term view of managing our company position TowneBank to enjoy continued success," said G. Robert Aston, Jr., Executive Chairman.
Highlights for Third Quarter 2022 Compared to Third Quarter 2021:
- Total revenues were $179.24 million, an increase of $9.16 million, or 5.39%. This year-over-year increase was driven primarily by a $23.60 million increase in net interest income partially offset by a $13.45 million decline in residential mortgage banking income.
- Pre-provision, pre-tax, net revenues (non-GAAP), were $66.70 million, an increase of $3.05 million, or 4.80%.
- Loans held for investment were $10.56 billion, an increase of $1.26 billion, or 13.57%, compared to September 30, 2021, and $0.13 billion, or 5.09% on an annualized basis, compared to June 30, 2022. Excluding the decline in loans from the Paycheck Protection Program ("PPP"), loans held for investment increased $1.50 billion, or 16.59%, compared to September 30, 2021, and $0.16 billion, or 6.01% on an annualized basis, from the linked quarter. Total loans on September 30, 2022, September 30, 2021, and June 30, 2022 included $12.65 million, $251.45 million, and $36.19 million, respectively, of PPP loans.
- Total deposits were $13.41 billion, an increase of $0.40 billion, or 3.06%, compared to prior year but a decrease of $0.58 billion, or 4.17%, from June 30, 2022.
- Noninterest bearing deposits increased by 3.33%, to $5.57 billion, representing 41.56% of total deposits. Compared to the linked quarter, noninterest bearing deposits decreased 2.60%.
- Annualized return on common shareholders' equity was 10.69% compared to 10.68% in third quarter 2021. Annualized return on average tangible common shareholders' equity (non-GAAP) was 15.27% compared to 15.27% in third quarter 2021.
- Net interest margin was 3.28% for the quarter and 2.76% for third quarter 2021 and taxable equivalent net interest margin (non-GAAP) was 3.30% and 2.77%.
- Effective tax rate of 20.08% in the quarter compared to 22.73% in third quarter 2021 and 19.32% in the linked quarter.
"We remain excited about our Farmers Bank partnership. Our teams have begun working on the integration planned for early 2023. We believe our complimentary approach to serving the needs of our members and communities will lead to a successful partnership and post integration opportunities for continued growth," stated J. Morgan Davis, Chief Executive Officer.
Quarterly Net Interest Income Compared to Third Quarter 2021:
- Net interest income was $124.04 million compared to $100.44 million as of September 30, 2021. The increase was driven by higher interest rates and increased loan and investment securities balances partially offset by increased deposit costs.
- Tax-equivalent net interest margin (non-GAAP) was 3.30%, including purchase accounting accretion of 1 basis point and PPP interest and fees of 1 basis point, compared to 2.77%, including purchase accounting accretion of 3 basis points and PPP interest and fees of 15 basis points for third quarter 2021.
- On an average basis, loans held for investment, with a yield of 4.25%, represented 69.83% of earning assets at September 30, 2022 compared to a yield of 4.24% and 64.04% of earning assets in the third quarter of 2021. Excluding PPP loans, loan yields were 4.24% in third quarter 2022 compared to 4.06% in third quarter 2021.
- Interest and fee income on PPP loans was $0.62 million in third quarter 2022, compared to $7.77 million in third quarter 2021 and $1.52 million in the linked quarter.
- Total cost of deposits increased to 0.30% from 0.19% at September 30, 2021. Management expects continued pressure on the cost of deposits.
- On August 1, 2022, the Company redeemed its 4.50% fixed to floating rate subordinated notes due 2027 that had a total principal amount of $250 million. The Company recognized interest expense related to the notes of $0.99 million in third quarter 2022 and $2.96 million in third quarter 2021.
- Average interest-earning assets totaled $14.99 billion at September 30, 2022 compared to $14.44 billion at September 30, 2021, an increase of 3.77%.
- Average interest-bearing liabilities totaled $8.35 billion, an increase of $0.11 billion from prior year.
Quarterly Provision for Credit Losses:
- The quarterly provision for credit losses for on-balance-sheet loans was an expense of $3.29 million compared to a provision benefit of $1.60 million one year ago and an expense of $0.11 million in the linked quarter.
- In the linked quarter comparison, third quarter 2022 included an increase in the allowance for credit losses on loans of $3.48 million that was driven by loan growth and weakening in the macroeconomic forecast scenarios.
- Net loan recoveries were $0.19 million compared to net recoveries of $0.64 million one year prior and $0.08 million in the linked quarter. The ratio of net charge-offs to average loans on an annualized basis was (0.01)% in third quarter 2022, (0.03)% in third quarter 2021, and zero percent in the linked quarter.
- The allowance for credit losses on loans represented 1.02% of total loans at September 30, 2022, 1.15% at September 30, 2021, and 1.00% on June 30, 2022. The allowance for credit losses on loans was 20.48 times nonperforming loans compared to 12.68 times at September 30, 2021 and 18.94 times at June 30, 2022.
Quarterly Noninterest Income Compared to Third Quarter 2021:
- Total noninterest income was $55.20 million compared to $69.63 million in 2021, a decrease of $14.44 million, or 20.73%. The decrease was driven by declines in residential mortgage banking income of $13.45 million and real estate brokerage income of $0.85 million, partially offset by increased insurance commissions of $2.04 million.
- Residential mortgage banking income was $11.97 million compared to $25.42 million in third quarter 2021. Loan volume decreased to $0.69 billion in third quarter 2022 compared to $1.31 billion in 2021. Increases in mortgage rates have resulted in refinance activities dropping below 10% of our total mortgage production volume, the lowest level since second quarter 2018. Residential purchase activity comprised 93.20% of production volume in the third quarter of 2022 compared to 77.45% in the prior year quarter.
- Gross margins on residential mortgages declined 59 basis points from 3.61% in third quarter 2021 to 3.02% in the current quarter.
- Total net insurance commissions increased $2.04 million, or 11.71%, to $19.44 million in third quarter 2022 compared to 2021. This resulted from increases in property and casualty commissions, which were driven by organic growth and higher rates.
- Property management fee revenue decreased 5.82%, or $0.61 million, to $9.89 million compared to third quarter 2021 but increased $0.44 million, or 4.64%, compared to the linked quarter. Reservation income is down compared to the prior year quarter due to decreased bookings at some of our property management locations. Compared to the linked quarter, reservation income increased at one location while others held level with prior quarter.
Quarterly Noninterest Expense Compared to Third Quarter 2021:
- Total noninterest expense was $112.03 million compared to $104.09 million in 2021, an increase of $7.95 million, or 7.64%. Growth in salaries and employee benefits of $4.23 million, occupancy expense of $1.09 million, charitable contributions of $1.02 million, and advertising and marketing expense of $0.43 million was the primary sources of the increase.
- Salary and benefits expense increases were driven by annual base salary adjustments that went into effect July 2022 and increases in health insurance costs.
- The increase in occupancy expense was driven by lower tenant income in 2022.
- Advertising and marketing expense increases were primarily related to internet advertising in our realty segment and post-COVID increases in client business development.
Consolidated Balance Sheet Highlights:
- Total assets were $15.95 billion for the quarter ended September 30, 2022, a $0.91 billion decrease compared to $16.86 billion at June 30, 2022. Total assets increased $0.14 billion, or 0.89%, from $15.81 billion at September 30, 2021. Our asset mix has changed in the year-over-year comparison, with growth in investment securities and loans offset by declines in mortgage loans held for sale and total cash and cash equivalents.
- Loans held for investment increased $1.26 billion, or 13.57%, compared to prior year, and $0.13 billion, or 1.28%, compared to the linked quarter. Excluding PPP loans of $12.65 million in third quarter 2022, $251.45 million in third quarter 2021, and $36.19 million in the linked quarter, loans held for investment increased $1.50 billion, or 16.59%, compared to prior year, and $0.16 billion, or 1.51%, compared to June 30, 2022, or 6.01% on an annualized basis.
- Average loans held for investment, excluding PPP loans, were $10.45 billion in the third quarter of 2022, an increase of $1.56 billion, or 17.49%, compared to prior year. In the linked quarter comparison, average loans held for investment, excluding PPP loans, increased 3.04%, or $0.31 billion, and 12.08% on an annualized basis.
- Mortgage loans held for sale decreased $266.82 million, or 61.79%, compared to the prior year and $46.69 million, or 22.05%, compared to the linked quarter.
- Total deposits increased $0.40 billion, or 3.06%, compared to the prior year and decreased $0.58 billion, or 4.17%, compared to the linked quarter.
- Total borrowings decreased $167.17 million, or 34.30%, from prior year and $279.73 million, or 46.62%, compared to the linked quarter.
Investment Securities:
- Total investment securities were $2.45 billion compared to $2.48 billion at June 30, 2022 and $1.59 billion at September 30, 2021. The weighted average duration of the portfolio at September 30, 2022 was 3.6 years. The carrying value of the available for sale debt securities portfolio included $199.84 million and $120.41 million in net unrealized losses, related to rising rates, at September 30, 2022 and June 30, 2022, respectively, compared to net unrealized gains of $32.06 million at September 30, 2021.
Loans and Asset Quality:
- Total loans held for investment were $10.56 billion at September 30, 2022 compared to $10.43 billion at June 30, 2022 and $9.30 billion at September 30, 2021.
- Nonperforming assets were $5.44 million, or 0.03% of total assets, compared to $13.86 million, or 0.09%, at September 30, 2021.
- Nonperforming loans were 0.05% of period end loans compared to 0.09% at September 30, 2021.
- Foreclosed property decreased to $0.19 million from $5.41 million at September 30, 2021. The Company had no OREO properties at September 30, 2022.
Deposits and Borrowings:
- Total deposits were $13.41 billion compared to $14.00 billion at June 30, 2022 and $13.01 billion at September 30, 2021.
- Total loans held for investment to deposits were 78.73% compared to 74.49% at June 30, 2022 and 71.44% at September 30, 2021.
- Non-interest bearing deposits were 41.56% of total deposits at September 30, 2022 compared to 40.89% at June 30, 2022 and 41.45% at September 30, 2021.
- Total borrowings were $0.32 billion compared to $0.60 billion at June 30, 2022 and $0.49 billion at September 30, 2021.
Capital:
- Common equity tier 1 capital ratio of 11.92%.
- Tier 1 leverage capital ratio of 9.52%.
- Tier 1 risk-based capital ratio of 12.05%.
- Total risk-based capital ratio of 14.80%.
- Book value per common share was $25.08 compared to $25.48 at June 30, 2022 and $25.91 at September 30, 2021.
- Tangible book value per common share (non-GAAP) was $18.17 compared to $18.58 at June 30, 2022 and $18.92 at September 30, 2021.
About TowneBank:
Founded in 1999, TowneBank is a company built on relationships, offering a full range of banking and other financial services, with a focus of serving others and enriching lives. Dedicated to a culture of caring, Towne values all employees and members by embracing their diverse talents, perspectives, and experiences.Today, TowneBank operates over 40 banking offices throughout Hampton Roads and Central Virginia, as well as Northeastern and Central North Carolina – serving as a local leader in promoting the social, cultural, and economic growth in each community. Towne offers a competitive array of business and personal banking solutions, delivered with only the highest ethical standards. Experienced local bankers providing a higher level of expertise and personal attention with local decision-making are key to the TowneBank strategy. TowneBank has grown its capabilities beyond banking to provide expertise through its controlled divisions and subsidiaries that include Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations. With total assets of $15.95 billion as of September 30, 2022, TowneBank is one of the largest banks headquartered in Virginia.
Non-GAAP Financial Measures:
This press release contains certain financial measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Such non-GAAP financial measures include the following: fully tax-equivalent net interest margin, core operating earnings, core net income, tangible book value per common share, pre-provision, pre-tax net revenues, total risk-based capital ratio, tier one leverage ratio, tier one capital ratio, and the tangible common equity to tangible assets ratio. Management uses these non-GAAP financial measures to assess the performance of TowneBank’s core business and the strength of its capital position. Management believes that these non-GAAP financial measures provide meaningful additional information about TowneBank to assist investors in evaluating operating results, financial strength, and capitalization. The non-GAAP financial measures should be considered as additional views of the way our financial measures are affected by significant charges for credit costs and other factors. These non-GAAP financial measures should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The computations of the non-GAAP financial measures used in this presentation are referenced in a footnote or in the appendix to this presentation.Forward-Looking Statements:
This press release contains certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only the beliefs, expectations, or opinions of TowneBank and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: "believe," "expect," "anticipate," "intend," "plan,” "estimate," or words of similar meaning, or future or conditional terms, such as "will," "would," "should," "could," "may," "likely," "probably," or "possibly." These statements may address issues that involve significant risks, uncertainties, estimates, and assumptions made by management. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include competitive pressures in the banking industry that may increase significantly; changes in the interest rate environment that may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; changes in the credit worthiness of customers and the possible impairment of the collectability of loans; general economic conditions, either nationally or regionally, that may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit or other services; unusual and infrequently occurring events, such as weather-related disasters, terrorist acts or public health events (such as the COVID-19 pandemic); changes in the legislative or regulatory environment, including changes in accounting standards and tax laws, that may adversely affect our business; costs or difficulties related to the integration of the businesses we have acquired may be greater than expected; expected cost savings associated with pending or recently completed acquisitions may not be fully realized or realized within the expected time frame; cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain reliable electronic systems; our competitors may have greater financial resources and develop products that enable them to compete more successfully; changes in business conditions; changes in the securities market; and changes in our local economy with regard to our market area. Any forward-looking statements made by us or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events, or otherwise. For additional information on factors that could materially influence forward-looking statements included in this report, see the "Risk Factors" in TowneBank’s Annual Report on Form 10-K for the year ended December 31, 2021 and related disclosures in other filings that have been, or will be, filed by TowneBank with the Federal Deposit Insurance Corporation.Media contact:
G. Robert Aston, Jr., Executive Chairman, 757-638-6780
J. Morgan Davis, Chief Executive Officer, 757-673-1673Investor contact:
William B. Littreal, Chief Financial Officer, 757-638-6813TOWNEBANK Selected Financial Highlights (unaudited) (dollars in thousands, except per share data) Three Months Ended September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Income and Performance Ratios: Total revenue $ 179,236 $ 166,980 $ 165,412 $ 160,424 $ 170,076 Net income 50,671 47,054 46,250 41,657 52,743 Net income available to common shareholders 50,169 46,547 45,586 40,183 50,400 Pre-provision, pre-tax, net revenues (non-GAAP) 66,700 57,748 55,369 48,483 63,647 Net income per common share - diluted 0.69 0.64 0.63 0.55 0.69 Book value per common share 25.08 25.48 25.61 26.13 25.91 Book value per common share - tangible (non-GAAP) 18.17 18.58 18.67 19.15 18.92 Return on average assets 1.22 % 1.13 % 1.13 % 0.99 % 1.27 % Return on average assets - tangible (non-GAAP) 1.31 % 1.22 % 1.23 % 1.08 % 1.37 % Return on average equity 10.60 % 9.94 % 9.73 % 8.38 % 10.59 % Return on average equity - tangible (non-GAAP) 15.08 % 14.20 % 13.91 % 12.08 % 15.09 % Return on average common equity 10.69 % 10.03 % 9.81 % 8.45 % 10.68 % Return on average common equity - tangible (non-GAAP) 15.27 % 14.37 % 14.08 % 12.22 % 15.27 % Noninterest income as a percentage of total revenue 30.80 % 34.52 % 40.03 % 37.17 % 40.94 % Regulatory Capital Ratios (1): Common equity tier 1 11.92 % 11.83 % 12.16 % 12.36 % 12.53 % Tier 1 12.05 % 11.97 % 12.31 % 12.51 % 12.69 % Total 14.80 % 16.76 % 17.34 % 15.56 % 15.85 % Tier 1 leverage ratio 9.52 % 9.19 % 9.16 % 9.11 % 9.18 % Asset Quality: Allowance for credit losses on loans to nonperforming loans 20.48x 18.94x 21.52x 17.75x 12.68x Allowance for credit losses on loans to period end loans 1.02 % 1.00 % 1.05 % 1.12 % 1.15 % Allowance for credit losses on loans to period end loans excluding PPP loans (non-GAAP) 1.02 % 1.00 % 1.06 % 1.13 % 1.18 % Nonperforming loans to period end loans 0.05 % 0.05 % 0.05 % 0.06 % 0.09 % Nonperforming assets to period end assets 0.03 % 0.04 % 0.03 % 0.06 % 0.09 % Net charge-offs (recoveries) to average loans (annualized) (0.01) % — % 0.01 % — % (0.03) % Net charge-offs (recoveries) $ (187 ) $ (80 ) $ 126 $ (60 ) $ (644 ) Nonperforming loans $ 5,250 $ 5,493 $ 4,825 $ 5,973 $ 8,451 Foreclosed property 186 563 560 4,583 5,409 Total nonperforming assets $ 5,436 $ 6,056 $ 5,385 $ 10,556 $ 13,860 Loans past due 90 days and still accruing interest $ 725 $ 232 $ 40 $ 372 $ 143 Allowance for credit losses on loans $ 107,497 $ 104,019 $ 103,833 $ 106,059 $ 107,177 Mortgage Banking: Loans originated, mortgage $ 458,254 $ 588,529 $ 583,008 $ 851,021 $ 939,272 Loans originated, joint venture 234,443 249,279 236,980 303,362 370,865 Total loans originated $ 692,697 $ 837,808 $ 819,988 $ 1,154,383 $ 1,310,137 Number of loans originated 1,983 2,282 2,237 3,408 3,917 Number of originators 194 201 207 213 219 Purchase % 93.20 % 92.27 % 77.93 % 79.36 % 77.45 % Loans sold $ 701,908 $ 759,073 $ 853,808 $ 1,150,996 $ 1,394,166 Rate lock asset $ 859 $ 1,935 $ 3,009 $ 3,455 $ 6,087 Gross realized gain on sales and fees as a % of loans originated 3.02 % 2.92 % 3.01 % 3.42 % 3.61 % Other Ratios: Net interest margin 3.28 % 2.88 % 2.67 % 2.70 % 2.76 % Net interest margin-fully tax equivalent (non-GAAP) 3.30 % 2.89 % 2.69 % 2.72 % 2.77 % Average earning assets/total average assets 91.92 % 92.22 % 92.24 % 92.13 % 91.95 % Average loans/average deposits 76.82 % 74.57 % 71.61 % 70.68 % 71.69 % Average noninterest deposits/total average deposits 41.77 % 40.56 % 40.49 % 41.42 % 40.40 % Period end equity/period end total assets 11.56 % 11.09 % 11.28 % 11.71 % 12.02 % Efficiency ratio (non-GAAP) 61.03 % 63.51 % 64.42 % 67.03 % 59.58 % (1) Current reporting period regulatory capital ratios are preliminary. TOWNEBANK Selected Data (unaudited) (dollars in thousands) Investment Securities % Change Q3 Q3 Q2 Q3 22 vs. Q3 22 vs. Available-for-sale securities, at fair value 2022 2021 2022 Q3 21 Q2 22 U.S. agency securities $ 331,297 $ 207,949 $ 342,702 59.32 % (3.33) % U.S. Treasury notes 26,399 1,007 27,496 2,521.55 % (3.99) % Municipal securities 426,720 350,980 447,927 21.58 % (4.73) % Trust preferred and other corporate securities 79,501 31,591 84,307 151.66 % (5.70) % Mortgage-backed securities issued by GSE and GNMA 1,027,331 969,017 1,012,690 6.02 % 1.45 % Allowance for credit losses (1,112 ) (142 ) (1,111 ) 683.10 % 0.09 % Total $ 1,890,136 $ 1,560,402 $ 1,914,011 21.13 % (1.25) % Gross unrealized gains (losses) reflected in financial statements Total gross unrealized gains $ 1,292 $ 40,906 $ 1,840 (96.84) % (29.78) % Total gross unrealized losses (201,127 ) (8,845 ) (122,253 ) 2,173.91 % 64.52 % Net unrealized gains (losses) and other adjustments on AFS securities $ (199,835 ) $ 32,061 $ (120,413 ) (723.30) % 65.96 % Held-to-maturity securities, at amortized cost U.S. agency securities $ 100,905 $ — $ 100,718 N/M 0.19 % U.S. Treasury notes 434,148 — 434,432 N/M (0.07) % Municipal securities 5,159 5,074 5,138 1.68 % 0.41 % Trust preferred corporate securities 2,235 2,285 2,248 (2.19) % (0.58) % Mortgage-backed securities issued by GSE and GNMA 6,298 7,539 6,547 (16.46) % (3.80) % Allowance for credit losses (83 ) (94 ) (85 ) (11.70) % (2.35) % Total $ 548,662 $ 14,804 $ 548,998 3,606.17 % (0.06) % Total gross unrealized gains $ 153 $ 1,591 $ 448 (90.38) % (65.85) % Total gross unrealized losses (31,116 ) — (18,615 ) — % 67.16 % Net unrealized gains (losses) in HTM securities $ (30,963 ) $ 1,591 $ (18,167 ) (2,046.13) % 70.44 % Loans Held For Investment (1) % Change Q3 Q3 Q2 Q3 22 vs. Q3 22 vs. 2022 2021 2022 Q3 21 Q2 22 Real estate - construction and development $ 1,324,831 $ 1,005,592 $ 1,383,791 31.75 % (4.26) % Commercial real estate - owner occupied 1,590,371 1,463,000 1,579,464 8.71 % 0.69 % Commercial real estate - non owner occupied 2,799,363 2,647,625 2,757,651 5.73 % 1.51 % Real estate - multifamily 458,803 363,733 371,658 26.14 % 23.45 % Residential 1-4 family 1,567,024 1,233,125 1,513,662 27.08 % 3.53 % HELOC 388,305 389,974 386,067 (0.43) % 0.58 % Commercial and industrial business (C&I) 1,251,350 1,253,972 1,261,279 (0.21) % (0.79) % Government 520,198 471,037 527,230 10.44 % (1.33) % Indirect 572,710 348,864 555,638 64.16 % 3.07 % Consumer loans and other 86,656 120,643 89,320 (28.17) % (2.98) % Total $ 10,559,611 $ 9,297,565 $ 10,425,760 13.57 % 1.28 % (1) Paycheck Protection Program loans totaling $0.01 billion, $0.25 billion, and $0.04 billion, primarily in C&I, are included in Q3 22, Q3 21, and Q2 22, respectively. Deposits % Change Q3 Q3 Q2 Q3 22 vs. Q3 22 vs. 2022 2021 2022 Q3 21 Q2 22 Noninterest-bearing demand $ 5,574,528 $ 5,394,952 $ 5,723,415 3.33 % (2.60) % Interest-bearing: Demand and money market accounts 6,042,417 5,681,181 6,384,818 6.36 % (5.36) % Savings 387,622 366,165 388,364 5.86 % (0.19) % Certificates of deposits 1,407,495 1,571,752 1,499,514 (10.45) % (6.14) % Total $ 13,412,062 $ 13,014,050 $ 13,996,111 3.06 % (4.17) % TOWNEBANK Average Balances, Yields and Rate Paid (unaudited) (dollars in thousands) Three Months Ended Three Months Ended Three Months Ended September 30, 2022 June 30, 2022 September 30, 2021 Interest Average Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate (1) Balance Expense Rate (1) Balance Expense Rate (1) Assets: Loans (net of unearned income
and deferred costs) (2)(3)$ 10,465,441 $ 112,225 4.25 % $ 10,199,019 $ 101,463 3.99 % $ 9,248,867 $ 98,733 4.24 % Taxable investment securities 2,385,218 12,943 2.17 % 2,331,410 11,388 1.95 % 1,421,347 6,560 1.85 % Tax-exempt investment securities 147,184 1,054 2.86 % 132,304 879 2.66 % 125,523 487 1.55 % Total securities 2,532,402 13,997 2.21 % 2,463,714 12,267 1.99 % 1,546,870 7,047 1.82 % Interest-bearing deposits 1,800,798 9,509 2.09 % 2,368,147 4,616 0.78 % 3,179,010 1,182 0.15 % Loans held for sale 188,737 2,446 5.18 % 213,109 2,217 4.16 % 468,323 3,405 2.91 % Total earning assets 14,987,378 138,177 3.66 % 15,243,989 120,563 3.17 % 14,443,070 110,367 3.03 % Less: allowance for credit losses (104,178 ) (103,871 ) (108,478 ) Total nonearning assets 1,421,094 1,389,692 1,372,406 Total assets $ 16,304,294 $ 16,529,810 $ 15,706,998 Liabilities and Equity: Interest-bearing deposits Demand and money market $ 6,084,753 $ 6,542 0.43 % $ 6,349,725 $ 3,094 0.20 % $ 5,486,788 $ 2,095 0.15 % Savings 391,437 628 0.64 % 387,498 526 0.54 % 358,739 533 0.59 % Certificates of deposit 1,456,746 3,060 0.83 % 1,392,474 1,953 0.56 % 1,842,948 3,400 0.73 % Total interest-bearing deposits 7,932,936 10,230 0.51 % 8,129,697 5,573 0.27 % 7,688,475 6,028 0.31 % Borrowings 94,411 139 0.58 % 128,276 135 0.42 % 300,505 412 0.54 % Subordinated debt, net 320,518 3,117 3.89 % 496,862 5,091 4.10 % 249,405 2,962 4.75 % Total interest-bearing liabilities 8,347,865 13,486 0.64 % 8,754,835 10,799 0.49 % 8,238,385 9,402 0.45 % Demand deposits 5,690,020 5,547,936 5,212,271 Other noninterest-bearing liabilities 387,835 348,678 367,891 Total liabilities 14,425,720 14,651,449 13,818,547 Shareholders’ equity 1,878,574 1,878,361 1,888,451 Total liabilities and equity $ 16,304,294 $ 16,529,810 $ 15,706,998 Net interest income (tax-equivalent basis) (6) $ 124,691 $ 109,764 $ 100,965 Reconciliation of Non-GAAP Financial Measures Tax-equivalent basis adjustment (653 ) (424 ) (522 ) Net interest income (GAAP) $ 124,038 $ 109,340 $ 100,443 Interest rate spread (4)(6) 3.02 % 2.68 % 2.58 % Interest expense as a percent of average earning assets 0.36 % 0.28 % 0.26 % Net interest margin (tax equivalent basis) (5)(6) 3.30 % 2.89 % 2.77 % Total cost of deposits 0.30 % 0.16 % 0.19 % (1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 21%.
(2) Average loan balances for September 30, 2021 and related yields have been restated to include, previously excluded, nonaccrual loans of $9.95 million.
(3) September 30, 2022, September 30, 2021, and June 30, 2022 includes average PPP balances of $18.68 million, $357.17 million and $60.89 million, respectively, and related interest and fee income of $0.62 million, $7.77 million, and $1.52 million, respectively.
(4) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(5) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(6) Non-GAAP.TOWNEBANK Average Balances, Yields and Rate Paid (unaudited) (dollars in thousands) Nine Months Ended Nine Months Ended Nine Months Ended September 30, September 30, 2022 September 30, 2021 2022 Compared with 2021 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Increase Change Due to Balance Expense Rate (1) Balance Expense Rate (1) (Decrease) Rate Volume Assets: Loans (net of unearned income
and deferred costs) (2)(3)$ 10,113,980 $ 309,283 4.09 % $ 9,507,082 $ 302,182 4.25 % $ 7,101 $ (11,730 ) $ 18,831 Taxable investment securities 2,259,940 33,344 1.97 % 1,359,366 19,640 1.93 % 13,704 425 13,279 Tax-exempt investment securities 130,196 2,613 2.68 % 131,106 1,462 1.49 % 1,151 1,161 (10 ) Total securities 2,390,136 35,957 2.01 % 1,490,472 21,102 1.89 % 14,855 1,586 13,269 Interest-bearing deposits 2,362,155 15,472 0.88 % 2,426,468 2,218 0.12 % 13,254 13,314 (60 ) Loans held for sale 225,777 7,038 4.16 % 502,758 10,477 2.78 % (3,439 ) 3,839 (7,278 ) Total earning assets 15,092,048 367,750 3.26 % 13,926,780 335,979 3.23 % 31,771 7,009 24,762 Less: allowance for credit losses (104,733 ) (115,100 ) Total nonearning assets 1,394,691 1,340,170 Total assets $ 16,382,006 $ 15,151,850 Liabilities and Equity: Interest-bearing deposits Demand and money market $ 6,203,889 $ 11,898 0.26 % $ 5,192,658 $ 6,175 0.16 % $ 5,723 $ 4,343 $ 1,380 Savings 387,290 1,664 0.57 % 345,739 1,583 0.61 % 81 (101 ) 182 Certificates of deposit 1,440,661 7,134 0.66 % 1,872,393 13,963 1.00 % (6,829 ) (4,050 ) (2,779 ) Total interest-bearing deposits 8,031,840 20,696 0.34 % 7,410,790 21,721 0.39 % (1,025 ) 192 (1,217 ) Borrowings 119,336 412 0.46 % 445,399 1,798 0.53 % (1,386 ) (229 ) (1,157 ) Subordinated debt, net 401,195 12,328 4.10 % 249,261 8,854 4.74 % 3,474 (1,327 ) 4,801 Total interest-bearing liabilities 8,552,371 33,436 0.52 % 8,105,450 32,373 0.53 % 1,063 (1,364 ) 2,427 Demand deposits 5,569,186 4,880,493 Other noninterest-bearing
liabilities374,794 325,639 Total liabilities 14,496,351 13,311,582 Shareholders’ equity 1,885,655 1,840,268 Total liabilities and equity $ 16,382,006 $ 15,151,850 Net interest income (tax-equivalent basis)(6) $ 334,314 $ 303,606 $ 30,708 $ 8,373 $ 22,335 Reconciliation of Non-GAAP Financial Measures Tax-equivalent basis adjustment (1,732 ) (2,029 ) 297 Net interest income (GAAP) $ 332,582 $ 301,577 $ 31,005 Interest rate spread (4)(6) 2.74 % 2.70 % Interest expense as a percent of average earning assets 0.30 % 0.31 % Net interest margin (tax equivalent basis) (5)(6) 2.96 % 2.91 % Total cost of deposits 0.20 % 0.24 % (1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory rate of 21%. (2) Average loan balances for September 30, 2021 and related yields have been restated to include, previously excluded, nonaccrual loans of $11.63 million. (3) Average loan balances for September 30, 2022 and September 30, 2021 includes average PPP balances of $64.67 million and $641.82 million, respectively, and related interest income of $4.24 million and $29.42 million, respectively. (4) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent. (5) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent. (6) Non-GAAP. TOWNEBANK Consolidated Balance Sheets (dollars in thousands, except share data) September 30, December 31, 2022 2021 (unaudited) (audited) ASSETS Cash and due from banks $ 97,290 $ 17,373 Interest-bearing deposits at FRB - Richmond 1,245,067 3,244,484 Interest-bearing deposits in financial institutions 96,862 34,779 Total Cash and Cash Equivalents 1,439,219 3,296,636 Securities available for sale, at fair value (amortized cost of $2,091,083 and $1,788,853, and allowance for credit losses of $1,112 and $210 at September 30, 2022 and December 31, 2021, respectively.) 1,890,136 1,806,183 Securities held to maturity, at amortized cost (fair value $517,782 and $155,676 at September 30, 2022 and December 31, 2021, respectively.) 548,745 154,221 Less: allowance for credit losses (83 ) (94 ) Securities held to maturity, net of allowance for credit losses 548,662 154,127 Other equity securities 6,360 6,759 FHLB stock 9,475 13,146 Total Securities 2,454,633 1,980,215 Mortgage loans held for sale 165,023 358,303 Loans, net of unearned income and deferred costs 10,559,611 9,506,252 Less: allowance for credit losses (107,497 ) (106,059 ) Net Loans 10,452,114 9,400,193 Premises and equipment, net 295,345 270,772 Goodwill 458,482 457,187 Other intangible assets, net 44,854 50,379 BOLI 256,074 251,805 Other assets 386,053 295,897 TOTAL ASSETS $ 15,951,797 $ 16,361,387 LIABILITIES AND EQUITY Deposits: Noninterest-bearing demand $ 5,574,528 $ 5,546,665 Interest-bearing: Demand and money market accounts 6,042,417 6,139,714 Savings 387,622 371,356 Certificates of deposit 1,407,495 1,515,891 Total Deposits 13,412,062 13,573,626 Advances from the FHLB 29,850 155,367 Subordinated debt, net 247,265 249,652 Repurchase agreements and other borrowings 43,165 76,797 Total Borrowings 320,280 481,816 Other liabilities 375,869 389,771 TOTAL LIABILITIES 14,108,211 14,445,213 Preferred stock, authorized and unissued shares - 2,000,000 — — Common stock, $1.667 par: 150,000,000 shares authorized 72,839,291 and 72,683,985 shares issued at September 30, 2022 and December 31, 2021, respectively 121,423 121,164 Capital surplus 1,052,374 1,050,948 Retained earnings 810,845 716,605 Common stock issued to deferred compensation trust, at cost 927,176 and 911,458 shares at September 30, 2022 and December 31, 2021, respectively (18,862 ) (18,257 ) Deferred compensation trust 18,862 18,257 Accumulated other comprehensive income (loss) (157,980 ) 10,597 TOTAL SHAREHOLDERS’ EQUITY 1,826,662 1,899,314 Noncontrolling interest 16,924 16,860 TOTAL EQUITY 1,843,586 1,916,174 TOTAL LIABILITIES AND EQUITY $ 15,951,797 $ 16,361,387 TOWNEBANK Consolidated Statements of Income (unaudited) (dollars in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 INTEREST INCOME: Loans, including fees $ 111,590 $ 98,258 $ 307,595 $ 300,268 Investment securities 13,979 7,000 35,913 20,987 Interest-bearing deposits in financial institutions and federal funds sold 9,509 1,182 15,472 2,218 Mortgage loans held for sale 2,446 3,405 7,038 10,477 Total interest income 137,524 109,845 366,018 333,950 INTEREST EXPENSE: Deposits 10,230 6,028 20,696 21,721 Advances from the FHLB 83 247 261 1,017 Subordinated debt, net 3,117 2,962 12,328 8,854 Repurchase agreements and other borrowings 56 165 151 781 Total interest expense 13,486 9,402 33,436 32,373 Net interest income 124,038 100,443 332,582 301,577 PROVISION FOR CREDIT LOSSES 3,925 (1,582 ) 2,532 (15,665 ) Net interest income after provision for credit losses 120,113 102,025 330,050 317,242 NONINTEREST INCOME: Residential mortgage banking income, net 11,968 25,422 39,782 88,359 Insurance commissions and other title fees and income, net 19,435 17,398 58,255 52,055 Property management income, net 9,891 10,502 36,489 33,076 Real estate commission income, net 2,932 3,781 8,899 10,125 Service charges on deposit accounts 2,455 2,524 7,474 7,104 Credit card merchant fees, net 1,658 1,660 4,940 4,630 BOLI 1,585 2,301 5,155 5,361 Other income 5,274 6,045 18,052 16,367 Net gain/(loss) on investment securities — — — 1,252 Total noninterest income 55,198 69,633 179,046 218,329 NONINTEREST EXPENSE: Salaries and employee benefits 65,463 61,230 194,318 181,030 Occupancy expense 8,748 7,656 25,417 23,286 Furniture and equipment 3,764 3,513 11,097 10,647 Amortization - intangibles 2,644 2,750 8,145 8,192 Software expense 4,594 4,209 13,848 12,896 Data processing 3,628 3,603 10,778 10,255 Professional fees 2,627 2,227 6,416 6,826 Advertising and marketing 4,290 3,865 12,508 10,090 Other expenses 16,276 15,033 47,612 43,583 Total noninterest expense 112,034 104,086 330,139 306,805 Income before income tax expense and noncontrolling interest 63,277 67,572 178,957 228,766 Provision for income tax expense 12,606 14,829 34,983 45,388 Net income $ 50,671 $ 52,743 $ 143,974 $ 183,378 Net income attributable to noncontrolling interest (502 ) (2,343 ) (1,672 ) (8,177 ) Net income attributable to TowneBank $ 50,169 $ 50,400 $ 142,302 $ 175,201 Per common share information Basic earnings $ 0.69 $ 0.70 $ 1.96 $ 2.42 Diluted earnings $ 0.69 $ 0.69 $ 1.97 $ 2.41 Cash dividends declared $ 0.23 $ 0.20 $ 0.66 $ 0.58 TOWNEBANK Consolidated Balance Sheets - Five Quarter Trend (dollars in thousands, except share data) September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 (unaudited) (unaudited) (unaudited) (audited) (unaudited) ASSETS Cash and due from banks $ 97,290 $ 72,592 $ 74,991 $ 17,373 $ 75,370 Interest-bearing deposits at FRB - Richmond 1,245,067 2,341,942 2,857,327 3,244,484 3,155,039 Interest-bearing deposits in financial institutions 96,862 35,087 34,684 34,779 33,506 Total Cash and Cash Equivalents 1,439,219 2,449,621 2,967,002 3,296,636 3,263,915 Securities available for sale 1,890,136 1,914,011 1,846,540 1,806,183 1,560,402 Securities held to maturity 548,745 549,083 433,384 154,221 14,898 Less: allowance for credit losses (83 ) (85 ) (92 ) (94 ) (94 ) Securities held to maturity, net of allowance for credit losses 548,662 548,998 433,292 154,127 14,804 Other equity securities 6,360 6,679 6,789 6,759 6,621 FHLB stock 9,475 10,432 10,432 13,146 13,146 Total Securities 2,454,633 2,480,120 2,297,053 1,980,215 1,594,973 Mortgage loans held for sale 165,023 211,716 234,620 358,303 431,846 Loans, net of unearned income and deferred costs 10,559,611 10,425,760 9,909,308 9,506,252 9,297,565 Less: allowance for credit losses (107,497 ) (104,019 ) (103,833 ) (106,059 ) (107,177 ) Net Loans 10,452,114 10,321,741 9,805,475 9,400,193 9,190,388 Premises and equipment, net 295,345 289,753 277,764 270,772 270,810 Goodwill 458,482 457,162 457,162 457,187 457,187 Other intangible assets, net 44,854 44,878 47,562 50,379 50,839 BOLI 256,074 254,478 253,112 251,805 249,862 Other assets 386,053 354,570 326,838 295,897 301,552 TOTAL ASSETS $ 15,951,797 $ 16,864,039 $ 16,666,588 $ 16,361,387 $ 15,811,372 LIABILITIES AND EQUITY Deposits: Noninterest-bearing demand $ 5,574,528 $ 5,723,415 $ 5,532,337 $ 5,546,665 $ 5,394,952 Interest-bearing: Demand and money market accounts 6,042,417 6,384,818 6,432,005 6,139,714 5,681,181 Savings 387,622 388,364 393,119 371,356 366,165 Certificates of deposit 1,407,495 1,499,514 1,414,339 1,515,891 1,571,752 Total Deposits 13,412,062 13,996,111 13,771,800 13,573,626 13,014,050 Advances from the FHLB 29,850 55,024 55,196 155,367 155,537 Subordinated debt, net 247,265 497,061 496,757 249,652 249,503 Repurchase agreements and other borrowings 43,165 47,922 75,988 76,797 82,413 Total Borrowings 320,280 600,007 627,941 481,816 487,453 Other liabilities 375,869 397,388 387,087 389,771 409,435 TOTAL LIABILITIES 14,108,211 14,993,506 14,786,828 14,445,213 13,910,938 Preferred stock Authorized shares - 2,000,000 — — — — — Common stock, $1.667 par value 121,423 121,265 121,231 121,164 121,163 Capital surplus 1,052,374 1,051,384 1,050,387 1,050,948 1,049,367 Retained earnings 810,845 777,430 747,614 716,605 690,960 Common stock issued to deferred compensation trust, at cost (18,862 ) (19,349 ) (18,323 ) (18,257 ) (18,076 ) Deferred compensation trust 18,862 19,349 18,323 18,257 18,076 Accumulated other comprehensive income (loss) (157,980 ) (96,358 ) (56,712 ) 10,597 21,597 TOTAL SHAREHOLDERS’ EQUITY 1,826,662 1,853,721 1,862,520 1,899,314 1,883,087 Noncontrolling interest 16,924 16,812 17,240 16,860 17,347 TOTAL EQUITY 1,843,586 1,870,533 1,879,760 1,916,174 1,900,434 TOTAL LIABILITIES AND EQUITY $ 15,951,797 $ 16,864,039 $ 16,666,588 $ 16,361,387 $ 15,811,372 TOWNEBANK Consolidated Statements of Income - Five Quarter Trend (unaudited) (dollars in thousands, except share data) Three Months Ended September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 INTEREST INCOME: Loans, including fees $ 111,590 $ 101,043 $ 94,962 $ 95,054 $ 98,258 Investment securities 13,979 12,263 9,671 10,484 7,000 Interest-bearing deposits in financial institutions and federal funds sold 9,509 4,616 1,347 1,215 1,182 Mortgage loans held for sale 2,446 2,217 2,375 2,750 3,405 Total interest income 137,524 120,139 108,355 109,503 109,845 INTEREST EXPENSE: Deposits 10,230 5,573 4,894 5,389 6,028 Advances from the FHLB 83 86 92 206 247 Subordinated debt, net 3,117 5,091 4,120 2,962 2,962 Repurchase agreements and other borrowings 56 49 45 154 165 Total interest expense 13,486 10,799 9,151 8,711 9,402 Net interest income 124,038 109,340 99,204 100,792 100,443 PROVISION FOR CREDIT LOSSES 3,925 56 (1,449 ) (1,110 ) (1,582 ) Net interest income after provision for credit losses 120,113 109,284 100,653 101,902 102,025 NONINTEREST INCOME: Residential mortgage banking income, net 11,968 13,176 14,638 20,945 25,422 Insurance commissions and other title fees and income, net 19,435 19,746 19,074 15,486 17,398 Property management income, net 9,891 9,452 17,147 9,099 10,502 Real estate commission income, net 2,932 3,412 2,554 3,165 3,781 Service charges on deposit accounts 2,455 2,446 2,574 2,479 2,524 Credit card merchant fees, net 1,658 1,906 1,375 1,412 1,660 BOLI 1,585 1,853 1,717 1,904 2,301 Other income 5,274 5,649 7,129 5,142 6,045 Total noninterest income 55,198 57,640 66,208 59,632 69,633 NONINTEREST EXPENSE: Salaries and employee benefits 65,463 64,892 63,963 64,814 61,230 Occupancy expense 8,748 8,342 8,327 8,371 7,656 Furniture and equipment 3,764 3,643 3,690 3,528 3,513 Amortization - intangibles 2,644 2,684 2,817 2,935 2,750 Software expense 4,594 4,762 4,492 4,014 4,209 Data processing 3,628 3,556 3,594 3,524 3,603 Professional fees 2,627 1,761 2,027 2,723 2,227 Advertising and marketing 4,290 4,091 4,127 3,414 3,865 Other expenses 16,276 14,994 16,342 17,144 15,033 Total noninterest expense 112,034 108,725 109,379 110,467 104,086 Income before income tax expense and noncontrolling interest 63,277 58,199 57,482 51,067 67,572 Provision for income tax expense 12,606 11,145 11,232 9,410 14,829 Net income 50,671 47,054 46,250 41,657 52,743 Net income attributable to noncontrolling interest (502 ) (507 ) (664 ) (1,474 ) (2,343 ) Net income attributable to TowneBank $ 50,169 $ 46,547 $ 45,586 $ 40,183 $ 50,400 Per common share information Basic earnings $ 0.69 $ 0.64 $ 0.63 $ 0.55 $ 0.70 Diluted earnings $ 0.69 $ 0.64 $ 0.63 $ 0.55 $ 0.69 Basic weighted average shares outstanding 72,578,736 72,559,537 72,498,075 72,525,504 72,506,877 Diluted weighted average shares outstanding 72,594,474 72,568,886 72,562,122 72,624,610 72,591,281 Cash dividends declared $ 0.23 $ 0.23 $ 0.20 $ 0.20 $ 0.20 TOWNEBANK Banking Segment Financial Information (unaudited) (dollars in thousands) Three Months Ended Nine Months Ended Increase/(Decrease) September 30, June 30, September 30, 2022 over 2021 2022 2021 2022 2022 2021 Amount Percent Revenue Net interest income $ 123,039 $ 97,668 $ 107,417 $ 327,226 $ 293,407 $ 33,819 11.53 % Service charges on deposit accounts 2,455 2,524 2,446 7,474 7,104 370 5.21 % Credit card merchant fees 1,658 1,660 1,906 4,940 4,630 310 6.70 % Other income 5,332 6,334 5,042 17,083 16,706 377 2.26 % Subtotal 9,445 10,518 9,394 29,497 28,440 1,057 3.72 % Net gain/(loss) on investment securities — — — — 1,252 (1,252 ) (100.00) % Total noninterest income 9,445 10,518 9,394 29,497 29,692 (195 ) (0.66) % Total revenue 132,484 108,186 116,811 356,723 323,099 33,624 10.41 % Provision for credit losses 4,240 (1,728 ) (160 ) 2,247 (14,661 ) 16,908 (115.33) % Expenses Salaries and employee benefits 39,349 34,791 38,673 115,082 102,427 12,655 12.36 % Occupancy expense 6,109 5,098 5,633 17,401 15,657 1,744 11.14 % Furniture and equipment 2,803 2,602 2,747 8,259 8,086 173 2.14 % Amortization of intangibles 726 862 777 2,330 2,737 (407 ) (14.87) % Other expenses 21,075 16,580 17,856 57,158 49,020 8,138 16.60 % Total expenses 70,062 59,933 65,686 200,230 177,927 22,303 12.53 % Income before income tax, corporate allocation and noncontrolling interest 58,182 49,981 51,285 154,246 159,833 (5,587 ) (3.50) % Corporate allocation 902 1,241 1,325 3,520 3,782 (262 ) (6.93) % Income before income tax provision and noncontrolling interest 59,084 51,222 52,610 157,766 163,615 (5,849 ) (3.57) % Provision for income tax expense 11,507 10,225 9,756 29,782 30,461 (679 ) (2.23) % Net income 47,577 40,997 42,854 127,984 133,154 (5,170 ) (3.88) % Noncontrolling interest — 2 — — (1 ) 1 (100.00) % Net income attributable to TowneBank $ 47,577 $ 40,999 $ 42,854 $ 127,984 $ 133,153 $ (5,169 ) (3.88) % Efficiency ratio (non-GAAP) 52.34 % 54.60 % 55.57 % 55.48 % 54.43 % 1.05 % 1.93 % TOWNEBANK Realty Segment Financial Information (unaudited) (dollars in thousands) Three Months Ended Nine Months Ended Increase/(Decrease) September 30, June 30, September 30, 2022 over 2021 2022 2021 2022 2022 2021 Amount Percent Revenue Residential mortgage brokerage
income, net$ 12,726 $ 26,637 $ 14,858 $ 43,491 $ 90,898 $ (47,407 ) (52.15) % Real estate brokerage income, net 2,932 3,781 3,412 8,899 10,125 (1,226 ) (12.11) % Title insurance and settlement fees 525 706 561 1,590 1,917 (327 ) (17.06) % Property management fees, net 9,891 10,502 9,452 36,489 33,076 3,413 10.32 % Income from unconsolidated
subsidiary77 269 115 359 964 (605 ) (62.76) % Net interest and other income 1,508 3,154 2,411 6,851 9,223 (2,372 ) (25.72) % Total revenue 27,659 45,049 30,809 97,679 146,203 (48,524 ) (33.19) % Provision for credit losses (315 ) 146 216 285 (1,004 ) 1,289 (128.39) % Expenses Salaries and employee benefits 15,854 17,375 16,501 49,646 50,240 (594 ) (1.18) % Occupancy expense 1,919 1,926 1,997 5,814 5,732 82 1.43 % Furniture and equipment 765 693 707 2,232 1,934 298 15.41 % Amortization of intangible assets 817 702 816 2,449 1,882 567 30.13 % Other expenses 8,687 11,103 9,932 29,472 30,774 (1,302 ) (4.23) % Total expenses 28,042 31,799 29,953 89,613 90,562 (949 ) (1.05) % Income before income tax, corporate allocation and noncontrolling interest (68 ) 13,104 640 7,781 56,645 (48,864 ) (86.26) % Corporate allocation (602 ) (1,000 ) (1,000 ) (2,602 ) (3,000 ) 398 (13.27) % Income before income tax provision and noncontrolling interest (670 ) 12,104 (360 ) 5,179 53,645 (48,466 ) (90.35) % Provision for income tax expense (120 ) 3,546 (144 ) 1,110 12,017 (10,907 ) (90.76) % Net income (550 ) 8,558 (216 ) 4,069 41,628 (37,559 ) (90.23) % Noncontrolling interest (502 ) (2,345 ) (507 ) (1,672 ) (8,176 ) 6,504 (79.55) % Net income attributable to TowneBank $ (1,052 ) $ 6,213 $ (723 ) $ 2,397 $ 33,452 $ (31,055 ) (92.83) % Efficiency ratio (non-GAAP) 98.43 % 69.03 % 94.57 % 89.24 % 60.66 % 28.58 % 47.12 % TOWNEBANK Insurance Segment Financial Information (unaudited) (dollars in thousands) Three Months Ended Nine Months Ended Increase/(Decrease) September 30, June 30, September 30, 2022 over 2021 2022 2021 2022 2022 2021 Amount Percent Commission and fee income Property and casualty $ 17,567 $ 15,338 $ 16,546 $ 49,451 $ 44,467 $ 4,984 11.21 % Employee benefits 4,020 3,820 3,924 12,105 11,135 970 8.71 % Specialized benefit services 160 164 160 489 494 (5 ) (1.01) % Total commissions and fees 21,747 19,322 20,630 62,045 56,096 5,949 10.61 % Contingency and bonus revenue 1,654 1,664 2,994 8,052 6,746 1,306 19.36 % Other income 23 40 15 72 157 (85 ) (54.14) % Total revenue 23,424 21,026 23,639 70,169 62,999 7,170 11.38 % Employee commission expense 4,331 4,185 4,279 12,943 12,395 548 4.42 % Revenue, net of commission expense 19,093 16,841 19,360 57,226 50,604 6,622 13.09 % Salaries and employee benefits 10,260 9,064 9,718 29,590 28,363 1,227 4.33 % Occupancy expense 720 632 712 2,202 1,897 305 16.08 % Furniture and equipment 196 218 189 606 626 (20 ) (3.19) % Amortization of intangible assets 1,101 1,186 1,091 3,366 3,573 (207 ) (5.79) % Other expenses 1,653 1,254 1,376 4,532 3,857 675 17.50 % Total operating expenses 13,930 12,354 13,086 40,296 38,316 1,980 5.17 % Income before income tax, corporate allocation and noncontrolling interest 5,163 4,487 6,274 16,930 12,288 4,642 37.78 % Corporate allocation (300 ) (241 ) (325 ) (918 ) (782 ) (136 ) 17.39 % Income before income tax provision and noncontrolling interest 4,863 4,246 5,949 16,012 11,506 4,506 39.16 % Provision for income tax expense 1,219 1,058 1,533 4,091 2,910 1,181 40.58 % Net income 3,644 3,188 4,416 11,921 8,596 3,325 38.68 % Noncontrolling interest — — — — — — N/M Net income attributable to TowneBank $ 3,644 $ 3,188 $ 4,416 $ 11,921 $ 8,596 3,325 38.68 % Provision for income taxes 1,219 1,058 1,533 4,091 2,910 1,181 40.58 % Depreciation, amortization and interest expense 1,228 1,330 1,220 3,767 3,999 (232 ) (5.80) % EBITDA (non-GAAP) $ 6,091 $ 5,576 $ 7,169 $ 19,779 $ 15,505 $ 4,274 27.57 % Efficiency ratio (non-GAAP) 67.19 % 66.31 % 61.96 % 64.53 % 68.66 % (4.13) % (6.02) % TOWNEBANK Reconciliation of Non-GAAP Financial Measures (dollars in thousands) Three Months Ended Nine Months Ended September 30, September 30, June 30, September 30, September 30, 2022 2021 2022 2022 2021 Return on average assets (GAAP) 1.22 % 1.27 % 1.13 % 1.16 % 1.55 % Impact of excluding average goodwill and other
intangibles and amortization0.09 % 0.10 % 0.09 % 0.09 % 0.11 % Return on average tangible assets (non-GAAP) 1.31 % 1.37 % 1.22 % 1.25 % 1.66 % Return on average equity (GAAP) 10.60 % 10.59 % 9.94 % 10.09 % 12.73 % Impact of excluding average goodwill and other
intangibles and amortization4.48 % 4.50 % 4.26 % 4.31 % 5.39 % Return on average tangible equity (non-GAAP) 15.08 % 15.09 % 14.20 % 14.40 % 18.12 % Return on average common equity (GAAP) 10.69 % 10.68 % 10.03 % 10.18 % 12.84 % Impact of excluding average goodwill and other
intangibles and amortization4.58 % 4.59 % 4.34 % 4.39 % 5.49 % Return on average tangible common equity
(non-GAAP)15.27 % 15.27 % 14.37 % 14.57 % 18.33 % Book value (GAAP) $ 25.08 $ 25.91 $ 25.48 $ 25.08 $ 25.91 Impact of excluding average goodwill and other
intangibles and amortization(6.91 ) (6.99 ) (6.90 ) (6.91 ) (6.99 ) Tangible book value (non-GAAP) $ 18.17 $ 18.92 $ 18.58 $ 18.17 $ 18.92 Efficiency ratio (GAAP) 62.51 % 61.20 % 65.11 % 64.53 % 59.01 % Impact of exclusions (1.48) % (1.62) % (1.60) % (1.59) % (1.44) % Efficiency ratio (non-GAAP) 61.03 % 59.58 % 63.51 % 62.94 % 57.57 % Average assets (GAAP) $ 16,304,294 $ 15,706,998 $ 16,529,810 $ 16,382,006 $ 15,151,850 Less: average goodwill and intangible assets 504,000 506,231 503,678 504,715 499,944 Average tangible assets (non-GAAP) $ 15,800,294 $ 15,200,767 $ 16,026,132 $ 15,877,291 $ 14,651,906 Average equity (GAAP) $ 1,878,574 $ 1,888,451 $ 1,878,361 $ 1,885,655 $ 1,840,268 Less: average goodwill and intangible assets 504,000 506,231 503,678 504,715 499,944 Average tangible equity (non-GAAP) $ 1,374,574 $ 1,382,220 $ 1,374,683 $ 1,380,940 $ 1,340,324 Average common equity (GAAP) $ 1,861,845 $ 1,871,820 $ 1,861,635 $ 1,869,112 $ 1,824,753 Less: average goodwill and intangible assets 504,000 506,231 503,678 504,715 499,944 Average tangible common equity (non-GAAP) $ 1,357,845 $ 1,365,589 $ 1,357,957 $ 1,364,397 $ 1,324,809 Net income (GAAP) $ 50,169 $ 50,400 $ 46,547 $ 142,302 $ 175,201 Amortization of intangibles, net of tax 2,089 2,172 2,120 6,435 6,472 Tangible net income (non-GAAP) $ 52,258 $ 52,572 $ 48,667 $ 148,737 $ 181,673 Net income (GAAP) $ 50,169 $ 50,400 $ 46,547 $ 142,302 $ 175,201 Provision for credit losses 3,925 (1,582 ) 56 2,532 (15,665 ) Provision for income tax 12,606 14,829 11,145 34,983 45,388 Other nonrecurring (income) loss — — — — 30 Pre-provision, pre-tax net revenues (non-GAAP) $ 66,700 $ 63,647 $ 57,748 $ 179,817 $ 204,954 Total revenue (GAAP) $ 179,236 $ 170,076 $ 166,980 $ 511,628 $ 519,906 Net (gain)/loss on investment securities — — — — (1,252 ) Other nonrecurring (income) loss — — — — 30 Total Revenue for efficiency calculation (non-GAAP) $ 179,236 $ 170,076 $ 166,980 $ 511,628 $ 518,684 Noninterest expense (GAAP) $ 112,034 $ 104,086 $ 108,725 $ 330,139 $ 306,805 Less: amortization of intangibles 2,644 2,750 2,684 8,145 8,192 Noninterest expense net of amortization (non-GAAP) $ 109,390 $ 101,336 $ 106,041 $ 321,994 $ 298,613 TOWNEBANK Reconciliation of Non-GAAP Financial Measures (dollars in thousands, except per share data) Reconciliation of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability Three Months Ended September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Net income (GAAP) $ 50,169 $ 46,547 $ 45,586 $ 40,183 $ 50,400 Acquisition-related expenses 616 51 59 50 719 Income tax expense (benefit) (6 ) (1 ) (12 ) (7 ) (41 ) Total charges, net of taxes 610 50 47 43 678 Operating earnings, excluding certain items affecting comparability (non-GAAP) $ 50,779 $ 46,597 $ 45,633 $ 40,226 $ 51,078 Weighted average diluted shares 72,594,474 72,568,886 72,562,122 72,624,610 72,591,281 Diluted EPS (GAAP) $ 0.69 $ 0.64 $ 0.63 $ 0.55 $ 0.69 Diluted EPS, excluding certain items affecting
comparability (non-GAAP)$ 0.70 $ 0.64 $ 0.63 $ 0.55 $ 0.70 Average assets $ 16,304,294 $ 16,529,810 $ 16,311,998 $ 16,075,509 $ 15,706,998 Average tangible equity $ 1,374,574 $ 1,374,683 1,393,771 $ 1,395,607 $ 1,382,220 Average common tangible equity $ 1,357,845 $ 1,357,957 $ 1,377,605 $ 1,379,412 $ 1,365,589 Return on average assets, excluding certain items
affecting comparability (non-GAAP)1.24 % 1.13 % 1.13 % 0.99 % 1.29 % Return on average tangible equity, excluding certain items affecting comparability (non-GAAP) 15.26 % 14.21 % 13.93 % 12.09 % 15.28 % Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP) 15.45 % 14.39 % 14.09 % 12.24 % 15.47 % Efficiency ratio, excluding certain items affecting
comparability (non-GAAP)62.16 % 65.08 % 66.09 % 68.83 % 60.78 % TOWNEBANK Reconciliation of Non-GAAP Financial Measures (dollars in thousands, except per share data) Reconciliation of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability Nine Months Ended September 30, September 30, 2022 2021 Net income (GAAP) $ 142,302 $ 175,201 Acquisition-related expenses 726 972 Income tax expense (benefit) (21 ) (50 ) Total charges, net of taxes 705 922 Operating earnings, excluding certain items affecting
comparability (non-GAAP)$ 143,007 $ 176,123 Weighted average diluted shares 72,567,596 72,547,478 Diluted EPS (GAAP) $ 1.97 $ 2.41 Diluted EPS, excluding certain items affecting
comparability (non-GAAP)$ 1.97 $ 2.43 Average assets $ 16,382,006 $ 15,151,850 Average tangible equity $ 1,380,940 $ 1,340,324 Average tangible common equity $ 1,364,397 $ 1,324,809 Return on average assets, excluding certain items
affecting comparability (non-GAAP)1.17 % 1.55 % Return on average tangible equity, excluding certain items affecting comparability (non-GAAP) 14.47 % 18.21 % Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP) 14.64 % 18.43 % Efficiency ratio, excluding certain items affecting
comparability (non-GAAP)64.39 % 58.96 %