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Towne Bank
TowneBank Reports Second Quarter 2021 Earnings
Jul 29 2021
3 min read

TowneBank Reports Second Quarter 2021 Earnings

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

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

Highlights for Second Quarter 2021 Compared to Second Quarter 2020:

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

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

Quarterly Net Interest Income Compared to Second Quarter 2020:

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

Quarterly Provision for Credit Losses:

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

Quarterly Noninterest Income Compared to Second Quarter 2020:

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

Quarterly Noninterest Expense Compared to Second Quarter 2020:

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

Consolidated Balance Sheet Highlights:

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

Investment Securities:

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

Loans and Asset Quality:

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

Deposits and Borrowings:

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

Capital:

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

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

Today, TowneBank operates over 40 banking offices throughout Hampton Roads and Central Virginia, as well as Northeastern and Central North Carolina – serving as a local leader in promoting the social, cultural, and economic growth in each community.  Towne offers a competitive array of business and personal banking solutions, delivered with only the highest ethical standards.  Experienced local bankers providing a higher level of expertise and personal attention with local decision-making are key to the TowneBank strategy.  TowneBank has grown its capabilities beyond banking to provide expertise through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations.  With total assets of $15.80 billion as of June 30, 2021, TowneBank is one of the largest banks headquartered in Virginia.

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

Forward-Looking Statements:Certain statements contained in this release constitute forward-looking statements within the meaning of U.S. federal securities laws.  These forward-looking statements speak only as of the date of this release, are based on current expectations, and involve a number of assumptions.  These include statements regarding TowneBank’s future economic performance, financial condition, prospects, growth, strategies and expectations, and objectives of management, and are generally identified by the use of words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” or “project” or similar expressions.  TowneBank intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions.  You should not place undue reliance on forward-looking statements, which are subject to assumptions that are subject to change.  TowneBank’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain.  These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ from those indicated or implied in the forward-looking statements and such differences may be material.  Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include the impact of the COVID-19 pandemic and the associated efforts to limit its spread; competitive pressures in the banking industry that may increase significantly; changes in the interest rate environment that may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; changes in the creditworthiness of customers and the possible impairment of the collectability of loans; general economic conditions, either nationally or regionally, that may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit or other services; changes in the legislative or regulatory environment, including changes in accounting standards and tax laws, that may adversely affect TowneBank’s business; costs or difficulties related to the integration of the businesses TowneBank has acquired may be greater than expected; expected revenue growth or cost savings associated with pending or recently completed acquisitions may not be fully realized or realized within the expected time frame; cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain reliable electronic systems; TowneBank’s competitors may have greater financial resources and develop products that enable them to compete more successfully; changes in business conditions; changes in the securities market; changes in the local economy with regard to TowneBank’s market areas; and other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation.  TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

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

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

               
TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
               
 Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
 2021 2021 2020 2020 2020
Income and Performance Ratios:              
Total Revenue$167,321  $182,509  $171,848  $192,135  $162,656 
Net income58,002  72,631  53,891  50,715  37,222 
Net income available to common shareholders55,803  68,995  50,082  34,464  34,605 
Pre-provision, pre-tax, net revenues (non-GAAP)59,728  81,547  62,107  73,903  69,014 
Net income per common share - diluted0.77  0.95  0.69  0.48  0.48 
Book value per common share25.51  24.78  24.31  23.83  23.50 
Book value per common share - tangible (non-GAAP)18.70  17.94  17.46  17.06  16.68 
Return on average assets1.48% 1.92% 1.35% 0.89% 0.97%
Return on average assets - tangible (non-GAAP)1.59% 2.05% 1.46% 0.97% 1.07%
Return on average equity12.21% 15.56% 11.26% 7.85% 8.18%
Return on average equity - tangible (non-GAAP)17.38% 22.19% 16.28% 11.66% 12.32%
Return on average common equity12.31% 15.70% 11.36% 7.91% 8.24%
Return on average common equity - tangible (non-GAAP)17.57% 22.45% 16.48% 11.79% 12.44%
Noninterest income as a percentage of total revenue39.55% 45.21% 41.45% 49.64% 42.66%
Regulatory Capital Ratios (1):              
Common equity tier 112.42% 12.15% 11.87% 11.75% 11.54%
Tier 112.57% 12.30% 12.04% 11.91% 11.67%
Total15.76% 15.59% 15.42% 15.35% 14.91%
Tier 1 leverage ratio9.44% 9.54% 8.99% 8.89% 9.05%
Asset Quality:              
Allowance for credit losses on loans to nonperforming loans9.67x  9.09x  10.74x  7.31x  5.34x 
Allowance for credit losses on loans to period end loans1.15% 1.19% 1.25% 1.22% 0.92%
Allowance for credit losses on loans to period end loans excluding PPP loans (non-GAAP)1.22% 1.31% 1.37% 1.37% 1.04%
Nonperforming loans to period end loans0.12% 0.13% 0.12% 0.17% 0.17%
Nonperforming assets to period end assets0.10% 0.11% 0.11% 0.19% 0.19%
Net charge-offs (recoveries) to average loans (annualized)(0.01)% 0.03% —% (0.01)% —%
Net charge-offs (recoveries)$(137) $669  $109  $(328) $(102)
               
Nonperforming loans$11,178  $12,768  $11,188  $16,295  $16,935 
Former bank premises—  750  750  750  — 
Foreclosed property4,041  3,748  4,276  11,695  12,315 
Total nonperforming assets$15,219  $17,266  $16,214  $28,740  $29,250 
Loans past due 90 days and still accruing interest$1,584  $108  $528  $19  $464 
Allowance for credit losses on loans$108,130  $116,077  $120,157  $119,058  $90,467 
Mortgage Banking:              
Loans originated, mortgage$1,050,663  $1,187,595  $1,257,963  $1,292,801  $1,116,782 
Loans originated, joint venture403,864  417,177  429,848  498,100  357,815 
Total loans originated$1,454,527  $1,604,772  $1,687,811  $1,790,901  $1,474,597 
Number of loans originated4,514  5,164  5,481  5,817  4,818 
Number of originators222  229  228  224  216 
Purchase %76.95% 53.45% 59.76% 61.21% 51.26%
Loans sold$1,485,057  $1,601,480  $1,845,926  $1,833,590  $1,398,649 
Rate lock asset$7,760  $12,522  $11,781  $10,480  $7,202 
Gross realized gain on sales and fees as a % of loans originated3.64% 4.01% 4.02% 3.65% 3.17%
Other Ratios:              
Net interest margin2.92% 3.04% 2.97% 2.70% 2.85%
Net interest margin-fully tax equivalent (non-GAAP)2.94% 3.06% 2.98% 2.72% 2.87%
Average earning assets/total average assets91.89% 91.47% 91.59% 92.09% 91.33%
Average loans/average deposits78.22% 82.71% 83.42% 86.29% 91.81%
Average noninterest deposits/total average deposits40.21% 38.39% 39.61% 37.76% 36.52%
Period end equity/period end total assets11.83% 12.04% 12.20% 11.82% 11.05%
Efficiency ratio (non-GAAP)61.46% 52.11% 60.02% 57.36% 55.17%
(1) Current reporting period regulatory capital ratios are preliminary              

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
               
Investment Securities         % Change
 Q2 Q2 Q1 Q2 21 vs. Q2 21 vs.
Available-for-sale securities, at fair value2021 2020 2021 Q2 20 Q1 21
U.S. agency securities$206,151  $118,176  $201,787  74.44% 2.16%
U.S. Treasury notes1,013  1,010  1,019  0.30% (0.59)%
Municipal securities334,633  313,322  334,751  6.80% (0.04)%
Trust preferred and other corporate securities31,680  59,598  31,241  (46.84)% 1.41%
Mortgage-backed securities issued by GSE and GNMA881,078  774,658  849,418  13.74% 3.73%
Allowance for credit losses(134) (140) (210) (4.29)% (36.19)%
Total$1,454,421  $1,266,624  $1,418,006  14.83% 2.57%
Gross unrealized gains (losses) reflected in financial statements              
Total gross unrealized gains$65,152  $61,559  $38,751  5.84% 68.13%
Total gross unrealized losses(22,968) (1,674) (10,632) 1,272.04% 116.03%
Net unrealized gains (losses) and other adjustments on AFS securities$42,184  $59,885  $28,119  (29.56)% 50.02%
Held-to-maturity securities, at amortized cost              
Trust preferred corporate securities$2,297  $2,345  $2,309  (2.05)% (0.52)%
Municipal securities5,053  28,854  5,032  (82.49)% 0.42%
Mortgage-backed securities issued by GSE and GNMA8,039  10,395  8,639  (22.66)% (6.95)%
Allowance for credit losses(97) (121) (97) (19.83)% — 
Total$15,292  $41,473  $15,883  (63.13)% (3.72)%
               
Gross unrealized gains (losses) not reflected in financial statements              
Total gross unrealized gains$1,708  $1,980  $1,598  (13.74)% 6.88%
Total gross unrealized losses—  —  —  —  — 
Net unrealized gains (losses) in HTM securities$1,708  $1,980  $1,598  (13.74)% 6.88%
               
Loans Held For Investment (1)         % Change
 Q2 Q2 Q1 Q2 21 vs. Q2 21 vs.
 2021 2020 2021 Q2 20 Q1 21
Real estate - construction and development$1,029,811  $1,178,832  $1,031,267  (12.64)% (0.14)%
Commercial real estate - owner occupied1,445,328  1,383,294  1,439,412  4.48% 0.41%
Commercial real estate - non owner occupied2,597,405  2,332,447  2,477,315  11.36% 4.85%
Real estate - multifamily343,764  277,947  360,125  23.68% (4.54)%
Residential 1-4 family1,166,898  1,227,961  1,173,761  (4.97)% (0.58)%
HELOC390,726  442,569  400,314  (11.71)% (2.40)%
Commercial and industrial business (C&I)1,529,788  2,156,428  2,005,558  (29.06)% (23.72)%
Government479,664  346,734  398,579  38.34% 20.34%
Indirect310,492  270,321  278,567  14.86% 11.46%
Consumer loans and other129,702  185,356  169,685  (30.03)% (23.56)%
Total$9,423,578  $9,801,889  $9,734,583  (3.86)% (3.19)%
 
(1) Paycheck Protection Program loans totaling $0.52 billion, $1.09 billion, and $0.90 billion, primarily in C&I, are included in Q2 2021, Q2 2020, and Q1 2021, respectively.
Deposits         % Change
 Q2 Q2 Q1 Q2 21 vs. Q2 21 vs.
 2021 2020 2021 Q2 20 Q1 21
Noninterest-bearing demand$5,243,074  $4,226,208  $4,840,678  24.06% 8.31%
Interest-bearing:              
Demand and money market accounts5,373,146  4,223,391  5,062,461  27.22% 6.14%
Savings349,552  298,673  342,554  17.04% 2.04%
Certificates of deposits1,998,828  2,516,666  1,893,951  (20.58)% 5.54%
Total$12,964,600  $11,264,938  $12,139,644  15.09% 6.80%
               

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
                           
 Three Months Ended Three Months Ended Three Months Ended
 June 30, 2021 March 31, 2021 June 30, 2020
    Interest Average    Interest Average    Interest Average
 Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets:                          
Loans (net of unearned income and deferred costs), excluding nonaccrual loans (1)$9,604,805  $101,490  4.24% $9,647,129  $101,960  4.29% $9,619,931  $102,656  4.29%
Taxable investment securities1,351,922  6,476  1.92%  1,303,535  6,604  2.03%  1,198,776  7,367  2.46%
Tax-exempt investment securities128,094  434  1.36%  139,859  542  1.55%  147,489  836  2.27%
Total securities1,480,016  6,910  1.87%  1,443,394  7,146  1.98%  1,346,265  8,203  2.44%
Interest-bearing deposits2,327,310  619  0.11%  1,715,110  416  0.10%  1,729,140  433  0.10%
Loans held for sale503,706  3,711  2.95%  536,997  3,361  2.50%  464,796  3,811  3.28%
Total earning assets13,915,837  112,730  3.25%  13,342,630  112,883  3.44%  13,160,132  115,103  3.52%
Less: allowance for credit losses(116,025)       (120,934)       (69,451)      
Total nonearning assets1,344,076        1,370,720        1,318,787       
Total assets$15,143,888        $14,592,416        $14,409,468       
Liabilities and Equity:                          
Interest-bearing deposits                          
Demand and money market$5,179,907  $2,004  0.16%  $4,904,885  $2,075  0.17%  $3,857,757  $2,491  0.26%
Savings346,177  528  0.61%  332,006  522  0.64%  290,201  554  0.77%
Certificates of deposit1,816,283  4,612  1.02%  1,959,225  5,951  1.23%  2,503,648  12,027  1.93%
Total interest-bearing deposits7,342,367  7,144  0.39%  7,196,116  8,548  0.48%  6,651,606  15,072  0.91%
Borrowings476,122  565  0.47%  562,451  822  0.58%  1,741,832  3,238  0.74%
Subordinated debt, net249,260  2,962  4.75%  249,114  2,930  4.70%  248,660  2,962  4.76%
Total interest-bearing liabilities8,067,749  10,671  0.53%  8,007,681  12,300  0.62%  8,642,098  21,272  0.99%
Demand deposits4,937,754        4,483,444        3,826,439       
Other noninterest-bearing liabilities304,793        303,524        239,154       
Total liabilities13,310,296        12,794,649        12,707,691       
Shareholders’ equity1,833,592        1,797,767        1,701,777       
Total liabilities and equity$15,143,888        $14,592,416        $14,409,468       
Net interest income (tax-equivalent basis)   $102,059        $100,583        $93,831    
Reconciliation of Non-GAAP Financial Measures                          
Tax-equivalent basis adjustment   (915)       (593)       (557)   
Net interest income (GAAP)   $101,144        $99,990        $93,274    
                           
Interest rate spread (2)(3)      2.72%        2.81%        2.53%
Interest expense as a percent of average earning assets      0.31%        0.37%        0.65%
Net interest margin (tax equivalent basis) (3)(4)      2.94%        3.06%        2.87%
Total cost of deposits      0.23%        0.30%        0.58%
                           

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

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
                           
 Six Months Ended Six Months Ended Six Months Ended June 30,
 June 30, 2021 June 30, 2020 2021 Compared with 2020
   Interest Average   Interest Average      
 Average  Income/ Yield/ Average  Income/ Yield/ Increase Change Due to
 Balance Expense Rate Balance Expense Rate (Decrease) Rate Volume
Assets:                          
Loans (net of unearned income and deferred costs), excluding nonaccrual loans (1)$9,625,850  $203,451  4.26% $9,085,074  $203,221  4.50% $230  $(11,198) $11,427 
Taxable investment securities1,327,862  13,080  1.97% 1,277,593  16,578  2.60% (3,498) (4,128) 630 
Tax-exempt investment securities133,944  976  1.46% 137,846  1,698  2.46% (722) (675) (47)
Total securities1,461,806  14,056  1.92% 1,415,439  18,276  2.58% (4,220) (4,803) 583 
Interest-bearing deposits2,022,901  1,035  0.10% 472,589  1,535  0.65% (500) (2,153) 1,653 
Loans held for sale520,260  7,072  2.72% 398,933  6,799  3.41% 273  (1,543) 1,816 
Total earning assets13,630,817  225,614  3.34% 11,372,035  229,831  4.06% (4,217) (19,697) 15,479 
Less: allowance for credit losses(118,466)       (62,390)               
Total nonearning assets1,357,324        1,919,751                
Total assets$14,869,675        $13,229,396                
Liabilities and Equity:                          
Interest-bearing deposits                          
Demand and money market$5,043,155  $4,080  0.16% $3,689,732  $7,809  0.43% $(3,729) $(5,920) $2,191 
Savings339,131  1,050  0.62% 283,574  1,147  0.81% (97) (296) 199 
Certificates of deposit1,887,359  10,563  1.13% 2,468,873  25,177  2.05% (14,614) (9,590) (5,024)
Total interest-bearing deposits7,269,645  15,693  0.44% 6,442,179  34,133  1.07% (18,440) (15,806) (2,634)
Borrowings519,048  1,387  0.53% 1,210,789  5,820  0.95% (4,433) (1,931) (2,502)
Subordinated debt, net249,188  5,892  4.73% 248,585  5,923  4.77% (31) (45) 14 
Total interest-bearing liabilities8,037,881  22,972  0.58% 7,901,553  45,876  1.17% (22,904) (17,782) (5,122)
Demand deposits4,711,854        3,394,275                
Other noninterest-bearing    liabilities304,162        249,827                
Total liabilities13,053,897        11,545,655                
Shareholders’ equity1,815,778        1,683,741                
Total liabilities and equity$14,869,675        $13,229,396                
Net interest income (tax-equivalent basis)   $202,642        $183,955     $18,687  $(1,915) $20,601 
Reconciliation of Non-GAAP Financial Measures                          
Tax-equivalent basis adjustment   (1,508)       (1,185)    (323)      
Net interest income (GAAP)   $201,134        $182,770     $18,364       
                           
Interest rate spread (2)(4)      2.76%       2.90%         
Interest expense as a percent of average earning assets      0.34%       0.81%         
Net interest margin (tax equivalent basis) (3)(4)      3.00%       3.25%         
Total cost of deposits      0.26%       0.70%         
                           
(1)  June 30, 2021 and June 30, 2020 includes average PPP balances of  $0.79 billion and $0.40 billion and related interest income of $17.44 million  and $5.81 million.
(2)  Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(3)  Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.
(4) Non-GAAP.
 

TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
  
   
 June 30, December 31,
 2021 2020
 (unaudited) (audited)
ASSETS   
Cash and due from banks$117,797  $41,514 
Interest-bearing deposits at FRB - Richmond2,970,490  1,795,241 
Interest-bearing deposits in financial institutions31,971  27,532 
Total Cash and Cash Equivalents3,120,258  1,864,287 
Securities available for sale, at fair value (amortized cost of $1,412,371 and $1,310,250, and allowance for credit losses of $134 and $348 at June 30, 2021 and December 31, 2020, respectively.)1,454,421  1,368,224 
Securities held to maturity, at amortized cost (fair value $17,097 and $18,469 at June 30, 2021 and December 31, 2020, respectively.)15,389  16,512 
Less:  allowance for credit losses(97) (97)
Securities held to maturity, net of allowance for credit losses15,292  16,415 
Other equity securities6,395  6,492 
FHLB stock16,909  30,135 
Total Securities1,493,017  1,421,266 
Mortgage loans held for sale554,447  540,798 
Loans, net of unearned income and deferred costs9,423,578  9,629,068 
Less: allowance for credit losses(108,130) (120,157)
Net Loans9,315,448  9,508,911 
Premises and equipment, net265,644  260,242 
Goodwill452,328  452,328 
Other intangible assets, net42,271  45,533 
BOLI249,213  246,109 
Other assets311,209  286,970 
TOTAL ASSETS$15,803,835  $14,626,444 
    
LIABILITIES AND EQUITY   
Deposits:   
Noninterest-bearing demand$5,243,074  $4,374,566 
Interest-bearing:   
Demand and money market accounts5,373,146  4,819,604 
Savings349,552  330,091 
Certificates of deposit1,998,828  2,048,905 
Total Deposits12,964,600  11,573,166 
Advances from the FHLB255,706  456,038 
Subordinated debt, net249,353  249,055 
FRB PPP lending facility—  182,852 
Repurchase agreements and other borrowings85,042  67,786 
Total Borrowings590,101  955,731 
Other liabilities379,278  313,719 
TOTAL LIABILITIES13,933,979  12,842,616 
Preferred stock, authorized and unissued shares - 2,000,000—  — 
Common stock, $1.667 par: 150,000,000 shares authorized   
72,671,891 and 72,667,541 shares issued at   
June 30, 2021 and December 31, 2020, respectively121,144  121,132 
Capital surplus1,048,332  1,046,642 
Retained earnings655,095  557,889 
Common stock issued to deferred compensation trust, at cost   
905,484 and 873,486 shares at June 30, 2021 and December 31, 2020, respectively(18,076) (16,969)
Deferred compensation trust18,076  16,969 
Accumulated other comprehensive income (loss)29,273  41,184 
TOTAL SHAREHOLDERS’ EQUITY1,853,844  1,766,847 
Noncontrolling interest16,012  16,981 
TOTAL EQUITY1,869,856  1,783,828 
TOTAL LIABILITIES AND EQUITY$15,803,835  $14,626,444 
        

TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
        
        
 Three Months Ended Six Months Ended
 June 30, June 30,
 2021 2020 2021 2020
INTEREST INCOME:       
Loans, including fees$100,614  $102,139  $202,011  $202,201 
Investment securities6,871  8,163  13,988  18,112 
Interest-bearing deposits in financial institutions and federal funds sold619  433  1,035  1,535 
Mortgage loans held for sale3,711  3,811  7,072  6,799 
Total interest income111,815  114,546  224,106  228,647 
INTEREST EXPENSE:       
Deposits7,144  15,072  15,693  34,134 
Advances from the FHLB274  2,595  771  5,088 
Subordinated debt, net2,962  2,962  5,892  5,923 
Repurchase agreements and other borrowings291  643  616  732 
Total interest expense10,671  21,272  22,972  45,877 
Net interest income101,144  93,274  201,134  182,770 
PROVISION FOR CREDIT LOSSES(10,055) 26,945  (14,082) 33,961 
Net interest income after provision for credit losses111,199  66,329  215,216  148,809 
NONINTEREST INCOME:       
Residential mortgage banking income, net25,524  29,715  62,937  37,131 
Insurance commissions and other title fees and income, net18,331  17,612  34,656  34,505 
Real estate brokerage and property management income, net10,984  10,781  28,918  17,719 
Service charges on deposit accounts2,391  1,888  4,580  4,328 
Credit card merchant fees, net1,667  1,109  2,969  2,287 
BOLI1,541  1,584  3,060  4,690 
Other income5,487  3,763  10,324  8,990 
Net gain/(loss) on investment securities252  2,930  1,252  7,932 
Total noninterest income66,177  69,382  148,696  117,582 
NONINTEREST EXPENSE:       
Salaries and employee benefits61,365  56,926  119,801  112,793 
Occupancy expense7,559  7,227  15,630  14,728 
Furniture and equipment3,622  3,564  7,134  7,205 
Amortization - intangibles2,719  2,901  5,442  5,851 
Software expense4,494  3,492  8,688  6,984 
Data processing3,414  2,718  6,652  5,509 
Professional fees2,259  2,972  4,598  6,040 
Advertising and marketing3,257  1,986  6,225  5,570 
Other expenses16,705  9,239  28,549  23,233 
Total noninterest expense105,394  91,025  202,719  187,913 
Income before income tax expense and noncontrolling interest71,982  44,686  161,193  78,478 
Provision for income tax expense13,980  7,464  30,559  13,651 
Net income$58,002  $37,222  $130,634  $64,827 
Net income attributable to noncontrolling interest(2,199) (2,617) (5,835) (3,838)
Net income attributable to TowneBank$55,803  $34,605  $124,799  $60,989 
Per common share information       
Basic earnings$0.77  $0.48  $1.72  $0.84 
Diluted earnings$0.77  $0.48  $1.72  $0.84 
Cash dividends declared$0.20  $0.18  $0.38  $0.36 
                

TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
                    
          
 June 30, March 31, December 31, September 30, June 30,
 2021 2021 2020 2020 2020
 (unaudited) (unaudited) (audited) (unaudited) (unaudited)
ASSETS         
Cash and due from banks$117,797  $141,545  $41,514  $114,604  $115,724 
Interest-bearing deposits at FRB - Richmond2,970,490  1,936,458  1,795,241  1,670,186  2,511,152 
Interest-bearing deposits in financial institutions31,971  30,031  27,532  24,890  24,374 
Total Cash and Cash Equivalents3,120,258  2,108,034  1,864,287  1,809,680  2,651,250 
Securities available for sale1,454,421  1,418,006  1,368,224  1,310,683  1,266,624 
Securities held to maturity15,389  15,980  16,512  17,131  41,595 
Less:  allowance for credit losses(97) (97) (97) (90) (121)
Securities held to maturity, net of allowance for credit losses15,292  15,883  16,415  17,041  41,474 
Other equity securities6,395  6,355  6,492  6,497  6,497 
FHLB stock16,909  16,909  30,135  41,829  49,277 
Total Securities1,493,017  1,457,153  1,421,266  1,376,050  1,363,872 
Mortgage loans held for sale554,447  582,905  540,798  669,020  610,369 
Loans, net of unearned income and deferred costs9,423,578  9,734,583  9,629,068  9,770,570  9,801,889 
Less: allowance for credit losses(108,130) (116,077) (120,157) (119,058) (90,467)
Net Loans9,315,448  9,618,506  9,508,911  9,651,512  9,711,422 
Premises and equipment, net265,644  261,831  260,242  256,909  257,533 
Goodwill452,328  452,328  452,328  446,725  446,725 
Other intangible assets, net42,271  44,808  45,533  45,781  48,632 
BOLI249,213  247,655  246,109  244,103  242,493 
Other assets311,209  306,176  286,970  295,637  247,962 
TOTAL ASSETS$15,803,835  $15,079,396  $14,626,444  $14,795,417  $15,580,258 
LIABILITIES AND EQUITY         
Deposits:         
Noninterest-bearing demand$5,243,074  $4,840,678  $4,374,566  $4,464,178  $4,226,208 
Interest-bearing:         
Demand and money market accounts5,373,146  5,062,461  4,819,604  4,642,482  4,223,391 
Savings349,552  342,554  330,091  312,444  298,673 
Certificates of deposit1,998,828  1,893,951  2,048,905  2,285,859  2,516,666 
Total Deposits12,964,600  12,139,644  11,573,166  11,704,963  11,264,938 
Advances from the FHLB255,706  255,872  456,038  731,202  906,365 
Subordinated debt, net249,353  249,204  249,055  248,906  248,756 
FRB PPP lending facility—  183,164  182,852  —  1,111,429 
Repurchase agreements and other borrowings85,042  68,509  67,786  58,061  60,913 
Total Borrowings590,101  756,749  955,731  1,038,169  2,327,463 
Other liabilities379,278  366,697  313,719  303,582  266,314 
TOTAL LIABILITIES13,933,979  13,263,090  12,842,616  13,046,714  13,858,715 
Preferred stock         
Authorized shares - 2,000,000—  —  —  —  — 
Common stock, $1.667 par value121,144  121,108  121,132  121,115  121,101 
Capital surplus1,048,332  1,047,312  1,046,642  1,045,170  1,043,774 
Retained earnings655,095  613,826  557,889  520,888  499,502 
Common stock issued to deferred compensation         
trust, at cost(18,076) (17,063) (16,969) (16,951) (16,776)
Deferred compensation trust18,076  17,063  16,969  16,951  16,776 
Accumulated other comprehensive income (loss)29,273  17,969  41,184  44,569  43,218 
TOTAL SHAREHOLDERS’ EQUITY1,853,844  1,800,215  1,766,847  1,731,742  1,707,595 
Noncontrolling interest16,012  16,091  16,981  16,961  13,948 
TOTAL EQUITY1,869,856  1,816,306  1,783,828  1,748,703  1,721,543 
TOTAL LIABILITIES AND EQUITY$15,803,835  $15,079,396  $14,626,444  $14,795,417  $15,580,258 
                    

TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except share data)
  
  
 Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
 2021 2021 2020 2020 2020
INTEREST INCOME:         
Loans, including fees$100,614  $101,396  $104,182  $102,869  $102,139 
Investment securities6,871  7,117  7,499  7,440  8,163 
Interest-bearing deposits in financial institutions and federal funds sold619  416  435  632  433 
Mortgage loans held for sale3,711  3,361  3,867  4,587  3,811 
Total interest income111,815  112,290  115,983  115,528  114,546 
INTEREST EXPENSE:         
Deposits7,144  8,548  10,762  12,966  15,072 
Advances from the FHLB274  497  1,404  1,901  2,595 
Subordinated debt2,962  2,930  2,962  2,962  2,962 
Repurchase agreements and other borrowings291  325  241  940  643 
Total interest expense10,671  12,300  15,369  18,769  21,272 
Net interest income101,144  99,990  100,614  96,759  93,274 
PROVISION FOR CREDIT LOSSES(10,055) (4,027) 1,617  31,598  26,945 
Net interest income after provision for credit losses111,199  104,017  98,997  65,161  66,329 
NONINTEREST INCOME:         
Residential mortgage banking income, net25,524  37,412  37,504  37,531  29,715 
Insurance commissions and other title fees and income, net18,331  16,325  13,868  17,468  17,612 
Real estate brokerage and property management income, net10,984  17,934  9,229  11,301  10,781 
Service charges on deposit accounts2,391  2,190  1,707  1,986  1,888 
Credit card merchant fees, net1,667  1,302  1,377  1,506  1,109 
BOLI1,541  1,519  1,990  1,605  1,584 
Other income5,487  4,837  5,559  22,278  3,763 
Net gain/(loss) on investment securities252  1,000  —  1,701  2,930 
Total noninterest income66,177  82,519  71,234  95,376  69,382 
NONINTEREST EXPENSE:         
Salaries and employee benefits61,365  58,435  61,475  61,408  56,926 
Occupancy expense7,559  8,072  8,193  8,396  7,227 
Furniture and equipment3,622  3,512  3,462  3,247  3,564 
Amortization - intangibles2,719  2,723  2,797  2,851  2,901 
Software expense4,494  4,194  4,066  3,572  3,492 
Data processing3,414  3,239  2,363  3,113  2,718 
Professional fees2,259  2,339  2,591  2,637  2,972 
Advertising and marketing3,257  2,968  2,204  1,870  1,986 
Other expenses16,705  11,844  18,781  14,887  9,239 
Total noninterest expense105,394  97,326  105,932  101,981  91,025 
Income before income tax expense and noncontrolling interest71,982  89,210  64,299  58,556  44,686 
Provision for income tax expense13,980  16,579  10,408  7,841  7,464 
Net income58,002  72,631  53,891  50,715  37,222 
Net income attributable to noncontrolling interest(2,199) (3,636) (3,809) (16,251) (2,617)
Net income attributable to TowneBank$55,803  $68,995  $50,082  $34,464  $34,605 
Per common share information         
Basic earnings$0.77  $0.95  $0.69  $0.48  $0.48 
Diluted earnings$0.77  $0.95  $0.69  $0.48  $0.48 
Basic weighted average shares outstanding72,468,094  72,414,953  72,357,177  72,339,413  72,280,555 
Diluted weighted average shares outstanding72,560,234  72,517,008  72,455,096  72,375,736  72,317,988 
Cash dividends declared$0.20  $0.18  $0.18  $0.18  $0.18 
          

TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)
                     
                     
 Three Months Ended Six Months Ended Increase/(Decrease)
 June 30, March 31, June 30, 2021 over 2020
 2021 2020 2021 2021 2020 Amount Percent
Revenue                    
Net interest income$98,134  $89,665  $97,604  $195,739  $177,071  $18,668  10.54%
Service charges on deposit                    
accounts2,391  1,888  2,190  4,580  4,328  252  5.82%
Credit card merchant fees1,667  1,109  1,302  2,969  2,287  682  29.82%
Other income5,404  3,888  4,970  10,375  10,950  (575) (5.25)%
Subtotal9,462  6,885  8,462  17,924  17,565  359  2.04%
Net gain/(loss) on investment securities252  2,930  1,000  1,252  7,932  (6,680) (84.22)%
Total noninterest income9,714  9,815  9,462  19,176  25,497  (6,321) (24.79)%
Total revenue107,848  99,480  107,066  214,915  202,568  12,347  6.10%
                     
Provision for credit losses(9,532) 26,059  (3,401) (12,932) 33,100  (46,032) (139.07)%
                     
Expenses                    
Salaries and employee benefits35,776  35,209  31,861  67,637  68,434  (797) (1.16)%
Occupancy expense5,012  4,812  5,546  10,558  9,728  830  8.53%
Furniture and equipment2,816  2,715  2,668  5,484  5,375  109  2.03%
Amortization of intangibles912  1,114  962  1,875  2,278  (403) (17.69)%
Other expenses18,392  10,718  14,050  32,441  29,423  3,018  10.26%
Total expenses62,908  54,568  55,087  117,995  115,238  2,757  2.39%
Income before income tax, corporate allocation and noncontrolling interest54,472  18,853  55,380  109,852  54,230  55,622  102.57%
Corporate allocation1,249  627  1,292  2,540  1,297  1,243  95.84%
Income before income tax provision and noncontrolling interest55,721  19,480  56,672  112,392  55,527  56,865  102.41%
Provision for income tax expense10,535  2,167  9,701  20,236  8,830  11,406  129.17%
Net income45,186  17,313  46,971  92,156  46,697  45,459  97.35%
Noncontrolling interest1  5  (5) (3) 4  (7) (175.00)%
Net income attributable to TowneBank$45,187  $17,318  $46,966  $92,153  $46,701  $45,452  97.33%
                     
Efficiency ratio (non-GAAP)57.62% 55.36% 51.03% 54.35% 58.04% (3.69)% (6.36)%
                     

TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)
                     
                     
 Three Months Ended Six Months Ended Increase/(Decrease)
 June 30, March 31, June 30, 2021 over 2020
 2021 2020 2021 2021 2020 Amount Percent
Revenue                    
Residential mortgage brokerageincome, net$26,383  $30,468  $37,877  $64,260  $38,475  $25,785  67.02%
Real estate brokerage income, net3,893  2,659  2,451  6,344  4,524  1,820  40.23%
Title insurance and settlement fees684  639  525  1,211  1,075  136  12.65%
Property management fees, net7,091  8,122  15,483  22,574  13,195  9,379  71.08%
Income from unconsolidatedsubsidiary289  301  406  695  487  208  42.71%
Net interest and other income3,336  3,765  2,736  6,069  6,161  (92) (1.49)%
Total revenue41,676  45,954  59,478  101,153  63,917  37,236  58.26%
                     
Provision for credit losses(523) 886  (626) (1,150) 861  (2,011) (233.57)%
                     
Expenses                    
Salaries and employee benefits16,018  13,059  16,847  32,865  26,352  6,513  24.72%
Occupancy expense1,935  1,763  1,871  3,806  3,690  116  3.14%
Furniture and equipment592  626  649  1,242  1,388  (146) (10.52)%
Amortization of intangible assets590  658  590  1,180  1,315  (135) (10.27)%
Other expenses10,442  8,270  9,229  19,669  15,137  4,532  29.94%
Total expenses29,577  24,376  29,186  58,762  47,882  10,880  22.72%
                     
Income before income tax, corporate allocation and noncontrolling interest12,622  20,692  30,918  43,541  15,174  28,367  186.94%
Corporate allocation(1,000) (370) (1,000) (2,000) (763) (1,237) 162.12%
Income before income tax provision and noncontrolling interest11,622  20,322  29,918  41,541  14,411  27,130  188.26%
Provision for income tax expense2,255  4,127  6,216  8,471  2,835  5,636  198.80%
Net  income9,367  16,195  23,702  33,070  11,576  21,494  185.68%
Noncontrolling interest(2,200) (2,415) (3,631) (5,832) (3,206) (2,626) 81.91%
Net income attributable to TowneBank$7,167  $13,780  $20,071  $27,238  $8,370  $18,868  225.42%
                     
Efficiency ratio (non-GAAP)69.55 % 51.61 % 48.08 % 56.93 % 72.86 % (15.93)% (21.86)%
                     

TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)
                     
                     
 Three Months Ended Six Months Ended Increase/(Decrease)
 June 30, March 31, June 30, 2021 over 2020
 2021 2020 2021 2021 2020 Amount Percent
Commission and fee income                    
Property and casualty$14,941  $13,926  $14,189  $29,129  $26,712  $2,417  9.05%
Employee benefits3,430  3,791  3,884  7,315  7,709  (394) (5.11)%
Travel insurance—  861  —  —  2,127  (2,127) (100.00)%
Specialized benefit services163  157  167  329  325  4  1.23%
Total commissions and fees18,534  18,735  18,240  36,773  36,873  (100) (0.27)%
                     
Contingency and bonus revenue3,323  2,009  1,759  5,082  4,031  1,051  26.07%
Other income43  127  73  117  208  (91) (43.75)%
Total revenue21,900  20,871  20,072  41,972  41,112  860  2.09%
                     
Employee commission expense4,103  3,649  4,107  8,210  7,245  965  13.32%
Revenue, net of commission expense17,797  17,222  15,965  33,762  33,867  (105) (0.31)%
                     
Salaries and employee benefits9,571  8,658  9,727  19,299  18,007  1,292  7.17%
Occupancy expense612  652  655  1,266  1,311  (45) (3.43)%
Furniture and equipment214  223  195  408  441  (33) (7.48)%
Amortization of intangible assets1,217  1,129  1,171  2,387  2,258  129  5.71%
Other expenses1,295  1,419  1,305  2,602  2,776  (174) (6.27)%
Total operating expenses12,909  12,081  13,053  25,962  24,793  1,169  4.72%
Income before income tax, corporate allocation and noncontrolling interest4,888  5,141  2,912  7,800  9,074  (1,274) (14.04)%
Corporate allocation(249) (257) (292) (540) (534) (6) 1.12%
Income before income tax provision and noncontrolling interest4,639  4,884  2,620  7,260  8,540  (1,280) (14.99)%
Provision for income tax expense1,190  1,170  662  1,852  1,986  (134) (6.75)%
Net income3,449  3,714  1,958  5,408  6,554  (1,146) (17.49)%
Noncontrolling interest—  (207) —  —  (636) 636  (100.00)%
Net income attributable to TowneBank$3,449  $3,507  $1,958  $5,408  $5,918  (510) (8.62)%
                     
Provision for income taxes1,190  1,170  662  1,852  1,986  (134) (6.75)%
Depreciation, amortization and interest expense1,361  1,291  1,308  2,669  2,591  78  3.01%
EBITDA (non-GAAP)$6,000  $5,968  $3,928  $9,929  $10,495  $(566) (5.39)%
                     
Efficiency ratio (non-GAAP)65.70% 63.59% 74.43% 69.83% 66.54% 3.29% 4.94%

TOWNEBANK
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands)
               
 Three Months Ended Six Months Ended
 June 30, June 30, March 31, June 30, June 30,
 2021 2020 2021 2021 2020
               
Return on average assets (GAAP)1.48% 0.97% 1.92% 1.69% 0.93%
Impact of excluding average goodwill and otherintangibles and amortization0.11%  0.10%  0.13%  0.12%  0.11%
Return on average tangible assets (non-GAAP)1.59%  1.07%  2.05%  1.81%  1.04%
               
Return on average equity (GAAP)12.21%  8.18%  15.56%  13.86%  7.28%
Impact of excluding average goodwill and otherintangibles and amortization5.17%  4.14%  6.63%  5.88%  3.85%
Return on average tangible equity (non-GAAP)17.38%  12.32%  22.19%  19.74%  11.13%
               
Return on average common equity (GAAP)12.31%  8.24%  15.70%  13.98%  7.34%
Impact of excluding average goodwill and otherintangibles and amortization5.26%  4.20%  6.75%  5.98%  3.91%
Return on average tangible common equity(non-GAAP)17.57%  12.44%  22.45%  19.96%  11.25%
               
Book value (GAAP)$25.51  $23.50  $24.78  $25.51  $23.50 
Impact of excluding average goodwill and otherintangibles and amortization(6.81)  (6.82)  (6.84)  (6.81)  (6.82)
Tangible book value (non-GAAP)$18.70  $16.68  $17.94  $18.70  $16.68 
               
Efficiency ratio (GAAP)62.99%  55.96%  53.33%  57.95%  62.56%
Impact of exclusions(1.53)%  (0.79)%  (1.22)%  (1.36)%  (0.30)%
Efficiency ratio (non-GAAP)61.46%  55.17%  52.11%  56.59%  62.26%
               
Average assets (GAAP)$15,143,888  $14,409,468  $14,592,416  $14,869,675  $13,229,396 
Less: average goodwill and intangible assets496,059  497,077  497,446  496,748  498,600 
Average tangible assets (non-GAAP)$14,647,829  $13,912,391  $14,094,970  $14,372,927  $12,730,796 
               
Average equity (GAAP)$1,833,592  $1,701,777  $1,797,767  $1,815,778  $1,683,742 
Less: average goodwill and intangible assets496,059  497,077  497,446  496,748  498,600 
Average tangible equity (non-GAAP)$1,337,533  $1,204,700  $1,300,321  $1,319,030  $1,185,142 
               
Average common equity (GAAP)$1,818,664  $1,689,603  $1,782,795  $1,800,829  $1,671,640 
Less: average goodwill and intangible assets496,059  497,077  497,446  496,748  498,600 
Average tangible common equity (non-GAAP)$1,322,605  $1,192,526  $1,285,349  $1,304,081  $1,173,040 
               
Net Income (GAAP)$55,803  $34,605  68,995  124,799  60,989 
Amortization of Intangibles, net of tax2,148  2,292  2,151  4,299  4,622 
Tangible net income (non-GAAP)$57,951  $36,897  $71,146  $129,098  $65,611 
               
Net Income (GAAP)$55,803  $34,605  $68,995  $124,799  $60,989 
Provision for credit losses(10,055)  26,945  (4,027)  (14,082)  33,961 
Provision for income tax13,980  7,464  16,579  30,559  13,651 
Pre-provision, pre-tax net revenues (non-GAAP)$59,728  $69,014  $81,547  $141,276  $108,601 
               
Total Revenue (GAAP)$167,321  $162,656  $182,509  $349,830  $300,352 
Net (gain)/loss on investment securities(252)  (2,930)  (1,000)  (1,252)  (7,932)
Other nonrecurring (income) loss—  —  30  30  — 
Total Revenue for efficiency calculation (non-GAAP)$167,069  $159,726  $181,539  $348,608  $292,420 
               
Noninterest expense (GAAP)$105,394  $91,025  $97,326  $202,719  $187,913 
Less:  Amortization of intangibles2,719  2,901  2,723  5,442  5,851 
Noninterest expense net of amortization (non-GAAP)$102,675  $88,124  $94,603  $197,277  $182,062 

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Source: TowneBank