TowneBank Reports First Quarter 2022 Earnings

SUFFOLK, Va., April 28, 2022 (GLOBE NEWSWIRE) — TowneBank (the “Company” or “Towne”) (NASDAQ: TOWN) today reported earnings for the quarter ended March 31, 2022 of $45.59 million, or $0.63 per diluted share, compared to $69.00 million, or $0.95 per diluted share, for the quarter ended March 31, 2021.

“TowneBank had a strong start to the year despite the expected revenue decline in our real estate segment as well as a reduction in revenue associated with the forgiveness of Paycheck Protection Program (“PPP”) loans. With core annualized loan growth of over 20%, spread across all of our markets, combined with the continued deployment of excess liquidity, we expect the increase in short-term rates will result in improvements in net interest income and margin through the rest of 2022. Credit metrics remained excellent and we strengthened our balance sheet ahead of rising rates by completing a sub debt offering at attractive rates in early February,” said G. Robert Aston, Jr., Executive Chairman.

Highlights for First Quarter 2022 Compared to First Quarter 2021:

  • Total revenues were $165.41 million, a decrease of $17.10 million, or 9.37%, and pre-provision, pre-tax, net revenues (non-GAAP), were $55.37 million, a decrease of $26.21 million, or 32.13%. These declines were primarily driven by residential mortgage banking income, which declined $22.77 million in the quarter and a reduction in income on PPP loans of $9.53 million.
  • Loans held for investment were $9.91 billion, an increase of $0.17 billion, or 1.79%, from March 31, 2021, and $0.40 billion, or 4.24%, from December 31, 2021. Excluding the decline in PPP loans, loans held for investment increased $989.07 million, or 11.19%, compared to March 31, 2021, and $476.79 million, or 20.68% on an annualized basis, from the linked quarter. Total loans at March 31, 2022, March 31, 2021, and December 31, 2021 included $0.08 billion, $0.90 billion, and $0.16 billion, respectively, of PPP loans.
  • Total deposits were $13.77 billion, an increase of $1.63 billion, or 13.44% compared to prior year and $0.20 billion, or 5.92% on an annualized basis, from December 31, 2021.
  • Noninterest bearing deposits increased by 14.29%, to $5.53 billion, representing 40.17% of total deposits. Compared to the linked quarter, noninterest bearing deposits decreased $14.33 million, primarily in escrow deposits.
  • Annualized return on common shareholders’ equity was 9.81% and annualized return on average tangible common shareholders’ equity was 14.08% (non-GAAP).
  • Net interest margin for the quarter was 2.67% and taxable equivalent net interest margin (non-GAAP) was 2.69%.
  • Effective tax rate of 19.77% in the quarter compared to 19.37% in first quarter 2021, and 18.97% in the linked quarter.

“Our results benefited from healthy loan pipelines as we entered 2022. We opened a new full-service banking office in Charlotte, and we continue to invest in growing our fee-based businesses. We also believe our strong commitment to generating high levels of noninterest bearing deposits should provide a competitive advantage in a rising rate environment,” stated J. Morgan Davis, Chief Executive Officer.

Quarterly Net Interest Income Compared to First Quarter 2021:

  • Net interest income was $99.20 million compared to $99.99 million as of March 31, 2021.
  • Tax-equivalent net interest margin (non-GAAP) was 2.69%, including purchase accounting accretion of 6 basis points and PPP interest and fees of 3 basis points, compared to 3.05%, including purchase accounting accretion of 4 basis points and 11 basis points of PPP interest and fees, for first quarter 2021.
  • On an average basis, loans held for investment, with a yield of 4.01%, represented 64.26% of earning assets at March 31, 2022 compared to a yield of 4.28% and 72.33% of earning assets in the first quarter of 2021. Excluding PPP loans, loan yields were 3.97% in first quarter 2022 compared to 4.17% in first quarter 2021.
  • Interest and fee income on PPP loans was $2.10 million in first quarter 2022, compared to $3.85 million in the linked quarter, and $11.63 million in first quarter 2021.
  • Total cost of deposits decreased to 0.15% from 0.30% at March 31, 2021.
  • In February 2022, the Company issued $250.00 million of fixed-to-floating rate subordinated notes. The subordinated notes accrue interest at a fixed rate of 3.13%, resulting in an increase in interest expense of $1.11 million in the quarter.
  • Average interest-earning assets totaled $15.05 billion at March 31, 2022 compared to $13.36 billion at March 31, 2021, an increase of 12.65%.
  • Average interest-bearing liabilities totaled $8.56 billion, an increase of $0.55 billion from prior year, driven primarily by growth in interest bearing deposits.
  • We expect to continue positioning our earning asset portfolio to positively benefit interest margin in a rising rate environment.

Quarterly Provision for Credit Losses:

  • The quarterly provision for credit losses for on-balance-sheet loans was a benefit of $2.10 million compared to benefits of $3.41 million one year ago and $1.18 million in the linked quarter.
  • The first quarter 2022 included a release in the allowance for credit losses of $2.23 million that was driven by improved economic forecasts and the related release of certain reserves associated with industries heavily impacted by COVID-19, partially offset by an increase in reserves driven by core loan growth.
  • Net loan charge-offs were $0.13 million compared to $0.67 million one year prior and net recoveries of $0.06 million in the linked quarter. The ratio of net loan charge-offs to average loans on an annualized basis was 0.01% in first quarter 2022, 0.03% in first quarter 2021, and 0.00% in the linked quarter.
  • The allowance for credit losses on loans represented 1.05% of total loans at March 31, 2022, 1.12% at December 31, 2021, and 1.19% at March 31, 2021. Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses (non-GAAP) was 1.06%, compared to 1.13% at December 31, 2021 and 1.31% at March 31, 2021. The allowance for credit losses on loans was 21.52 times nonperforming loans compared to 17.76 times at December 31, 2021 and 9.09 times at March 31, 2021.

Quarterly Noninterest Income Compared to First Quarter 2021:

  • Total noninterest income was $66.21 million compared to $82.52 million in 2021, a decrease of $16.31 million, or 19.77%. Residential mortgage banking income decreased $22.77 million, while insurance commissions and property management income increased $2.75 million and $1.66 million, respectively.
  • Residential mortgage banking recorded income of $14.64 million compared to $37.41 million in first quarter 2021. Margins declined 100 basis points between quarters and loan volume decreased to $0.82 billion in first quarter 2022 compared to $1.60 billion in 2021. Residential purchase activity comprised 77.93% of production volume in the first quarter of 2022 compared to 53.45% in the prior year quarter as the increase in rates continued to negatively impact refinance activity. Included in first quarter 2022 was a loss on interest rate-locks of $0.45 million, compared to a gain of $0.74 million in first quarter 2021.
  • Margins on residential mortgages decreased 100 basis points from first quarter 2021 to 3.01% in the current quarter.
  • Total Insurance segment revenue was $23.11 million in first quarter 2022, $3.03 million or 15.11%, higher than first quarter 2021. This increase was attributable to organic growth in property and casualty commissions plus bonus and contingency income.
  • Property management fee revenue increased 10.75%, or $1.66 million, to $17.15 million compared to first quarter 2021. Reservation income is up in the quarter over quarter comparison due primarily to the July 2021 acquisition of a vacation rental company in Tennessee, which contributed $4.14 million in property management fees during the quarter. Management anticipates the loosening of COVID-related travel restrictions may result in a decline in reservation activity for the remainder of 2022, from the record levels of the past two years.
  • In April 22, the Company implemented changes for personal accounts to eliminate fees for non-sufficient funds and other overdraft program fees. The change is not expected to have a material effect on future revenue.

Quarterly Noninterest Expense Compared to First Quarter 2021:

  • Total noninterest expense was $109.38 million compared to $97.33 million in 2021, an increase of $12.05 million, or 12.38%. The higher level of expenses was attributable to increases in salaries and benefits of $5.53 million, advertising and marketing expense of $1.16 million, an earnout adjustment of $1.84 million for a prior year property management company acquisition, and $0.53 million in fixed asset disposals associated with the move of our financial services group headquarters.
  • Advertising and marketing expense increases, related primarily to our Realty segment, were driven by production based advertising programs in our property management companies and consumer mortgage advertising in our residential mortgage operations.
  • Increased costs associated with our core banking platform resulted in higher software expenses, and higher credit card fees on vacation property reservation activities drove the increase in data processing expense.

Consolidated Balance Sheet Highlights:

  • Total assets were $16.67 billion for the quarter ended March 31, 2022, an increase of $1.59 billion, or 10.53%, from $15.08 billion at March 31, 2021. Total assets increased $0.31 billion, or 1.87%, from the linked quarter. The year-over-year increase was driven by increases in securities and loans held for investment.
  • Loans held for investment increased $0.17 billion, or 1.79%, compared to prior year and $0.40 billion, or 4.24%, compared the linked quarter. Excluding PPP loans of $0.08 billion in first quarter 2022, $0.90 billion in first quarter 2021, and $0.16 billion in the linked quarter, loans held for investment increased $989.07 million, or 11.19%, compared to prior year, and $476.79 million, or 5.10%, compared to December 31, 2021, or 20.68% on an annualized basis. Loan growth was broad-based across almost all of our loan portfolio classifications and market areas.
  • Average loans held for investment, excluding PPP loans, were $9.55 billion in the first quarter of 2022, an increase of $699.86 million, or 7.91%, compared to prior year. In the linked quarter comparison, average loans held for investment, excluding PPP loans, increased 4.15%, or $380.77 million, 16.84% on an annualized basis.
  • Unamortized fee income related to PPP loans was $2.08 million at March 31, 2022.
  • Mortgage loans held for sale decreased $348.29 million, or 59.75%, compared to the prior year and $123.68 million, or 34.52%, compared to the linked quarter.
  • Total deposits increased $1.63 billion, or 13.44%, compared to the prior year and $0.20 billion, or 1.46%, compared to the linked quarter.
  • Total borrowings decreased $0.13 billion, or 17.02%, from prior year due to the repayment of FHLB borrowings and the FRB PPP Lending Facility. Total borrowings increased $0.15 billion, or 30.33%, compared to the linked quarter due to a new subordinated debt offering in the quarter.

Investment Securities:

  • Total investment securities were $2.30 billion compared to $1.98 billion at December 31, 2021 and $1.46 billion at March 31, 2021. The weighted average duration of the portfolio at March 31, 2022 was 3.9 years. The carrying value of the available for sale debt securities portfolio included $70.32 million in net unrealized losses at March 31, 2022, and $28.12 million and $17.54 million in net unrealized gains at March 31, 2021 and December 31, 2021, respectively. In first quarter 2022, the net change in carrying value for available-for-sale debt securities resulted in a $1.03 decrease in tangible book value.

Loans and Asset Quality:

  • Total loans held for investment were $9.91 billion at March 31, 2022 compared to $9.51 billion at December 31, 2021 and $9.73 billion at March 31, 2021.
  • Nonperforming assets were $5.39 million, or 0.03% of total assets, compared to $17.27 million, or 0.11%, at March 31, 2021.
  • Nonperforming loans were 0.05% of period end loans compared to 0.13% at March 31, 2021.
  • Foreclosed property decreased to $0.56 million from $3.75 million at March 31, 2021.

Deposits and Borrowings:

  • Total deposits were $13.77 billion compared to $13.57 billion at December 31, 2021 and $12.14 billion at March 31, 2021.
  • Total loans held for investment to deposits were 71.95% compared to 70.03% at December 31, 2021 and 80.19% at March 31, 2021.
  • Non-interest bearing deposits were 40.17% of total deposits at March 31, 2022 compared to 40.86% at December 31, 2021 and 39.87% at March 31, 2021.
  • Total borrowings were $0.63 billion compared to $0.48 billion at December 31, 2021 and $0.76 billion at March 31, 2021.

Capital:

  • Common equity tier 1 capital ratio of 12.16%.
  • Tier 1 leverage capital ratio of 9.16%.
  • Tier 1 risk-based capital ratio of 12.31%.
  • Total risk-based capital ratio of 17.34%.
  • Book value per common share was $25.61 compared to $26.13 at December 31, 2021 and $24.78 at March 31, 2021.
  • Tangible book value per common share (non-GAAP) was $18.67 compared to $19.15 at December 31, 2021 and $17.94 at March 31, 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 $16.67 billion as of March 31, 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, 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 the impacts of the ongoing 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 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; 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, 757-673-1673

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
    March 31,   December 31,   September 30,   June 30,   March 31,
    2022       2021       2021       2021       2021  
Income and Performance Ratios:                  
  Total Revenue $ 165,412     $ 160,424     $ 170,076     $ 167,321     $ 182,509  
  Net income   46,250       41,657       52,743       58,002       72,631  
  Net income available to common shareholders   45,586       40,183       50,400       55,803       68,995  
  Pre-provision, pre-tax, net revenues(non-GAAP)   55,369       48,483       63,647       59,728       81,578  
  Net income per common share – diluted   0.63       0.55       0.69       0.77       0.95  
  Book value per common share   25.61       26.13       25.91       25.51       24.78  
  Book value per common share – tangible(non-GAAP)   18.67       19.15       18.92       18.70       17.94  
  Return on average assets   1.13 %     0.99 %     1.27 %     1.48 %     1.92 %
  Return on average assets – tangible(non-GAAP)   1.23 %     1.08 %     1.37 %     1.59 %     2.05 %
  Return on average equity   9.73 %     8.38 %     10.59 %     12.21 %     15.56 %
  Return on average equity – tangible(non-GAAP)   13.91 %     12.08 %     15.09 %     17.38 %     22.19 %
  Return on average common equity   9.81 %     8.45 %     10.68 %     12.31 %     15.70 %
  Return on average common equity – tangible(non-GAAP)   14.08 %     12.22 %     15.27 %     17.57 %     22.45 %
  Noninterest income as a percentage of total revenue   40.03 %     37.17 %     40.94 %     39.55 %     45.21 %
Regulatory Capital Ratios (1):                  
  Common equity tier 1   12.16 %     12.36 %     12.53 %     12.42 %     12.15 %
  Tier 1   12.31 %     12.51 %     12.69 %     12.57 %     12.30 %
  Total   17.34 %     15.56 %     15.85 %     15.76 %     15.59 %
  Tier 1 leverage ratio   9.16 %     9.11 %     9.18 %     9.44 %     9.54 %
Asset Quality:                  
  Allowance for credit losses on loans to nonperforming loans 21.52x   17.76x   12.68x   9.67x   9.09x
  Allowance for credit losses on loans to period end loans   1.05 %     1.12 %     1.15 %     1.15 %     1.19 %
  Allowance for credit losses on loans to period end loans excluding PPP loans(non-GAAP)   1.06 %     1.13 %     1.18 %     1.22 %     1.31 %
  Nonperforming loans to period end loans   0.05 %     0.06 %     0.09 %     0.12 %     0.13 %
  Nonperforming assets to period end assets   0.03 %     0.06 %     0.09 %     0.10 %     0.11 %
  Net charge-offs (recoveries) to average loans (annualized)   0.01 %     %   (0.03)        %   (0.01)        %     0.03 %
  Net charge-offs (recoveries) $ 126     $ (60 )   $ (644 )   $ (137 )   $ 669  
                     
  Nonperforming loans $ 4,825     $ 5,973     $ 8,451     $ 11,178     $ 12,768  
  Former bank premises                           750  
  Foreclosed property   560       4,583       5,409       4,041       3,748  
  Total nonperforming assets $ 5,385     $ 10,556     $ 13,860     $ 15,219     $ 17,266  
  Loans past due 90 days and still accruing interest $ 40     $ 372     $ 143     $ 1,584     $ 108  
  Allowance for credit losses on loans $ 103,833     $ 106,059     $ 107,177     $ 108,130     $ 116,077  
Mortgage Banking:                  
  Loans originated, mortgage $ 583,008     $ 851,021     $ 939,272     $ 1,050,663     $ 1,187,595  
  Loans originated, joint venture   236,980       303,362       370,865       403,864       417,177  
  Total loans originated $ 819,988     $ 1,154,383     $ 1,310,137     $ 1,454,527     $ 1,604,772  
  Number of loans originated   2,237       3,408       3,917       4,514       5,164  
  Number of originators   207       213       219       222       229  
  Purchase %   77.93 %     79.36 %     77.45 %     76.95 %     53.45 %
  Loans sold $ 853,808     $ 1,150,996     $ 1,394,166     $ 1,485,057     $ 1,601,480  
  Rate lock asset $ 3,009     $ 3,455     $ 6,087     $ 7,760     $ 12,522  
  Gross realized gain on sales and fees as a % of loans originated   3.01 %     3.42 %     3.61 %     3.64 %     4.01 %
Other Ratios:                  
  Net interest margin   2.67 %     2.70 %     2.76 %     2.91 %     3.04 %
  Net interest margin-fully tax equivalent(non-GAAP)   2.69 %     2.72 %     2.77 %     2.94 %     3.05 %
  Average earning assets/total average assets   92.24 %     92.13 %     91.95 %     91.97 %     91.52 %
  Average loans/average deposits   71.61 %     70.68 %     71.69 %     78.22 %     82.71 %
  Average noninterest deposits/total average deposits   40.49 %     41.42 %     40.40 %     40.21 %     38.39 %
  Period end equity/period end total assets   11.28 %     11.71 %     12.02 %     11.83 %     12.04 %
  Efficiency ratio(non-GAAP)   64.42 %     67.03 %     59.58 %     61.46 %     52.11 %
  (1) Current reporting period regulatory capital ratios are preliminary            

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
  Time Period   % Change
Investment Securities Q1   Q1   Q4   Q1 22 vs.   Q1 22 vs.
Available-for-sale securities, at fair value   2022       2021       2021     Q1 21   Q4 21
U.S. agency securities $ 338,490     $ 201,787     $ 310,587     67.75 %   8.98 %
U.S. Treasury notes   970       1,019       1,000     (4.81) %   (3.00) %
Municipal securities   400,200       334,751       385,673     19.55 %   3.77 %
Trust preferred and other corporate securities   85,792       31,241       53,950     174.61 %   59.02 %
Mortgage-backed securities issued by GSE and GNMA   1,022,169       849,418       1,055,183     20.34 %   (3.13) %
Allowance for credit losses   (1,081 )     (210 )     (210 )   414.76 %   414.76 %
Total $ 1,846,540     $ 1,418,006     $ 1,806,183     30.22 %   2.23 %
Gross unrealized gains (losses) reflected in financial statements            
Total gross unrealized gains $ 3,443     $ 38,751     $ 32,054     (91.12) %   (89.26) %
Total gross unrealized losses   (73,758 )     (10,632 )     (14,514 )   593.74 %   408.19 %
Net unrealized gains (losses) and other adj. on AFS securities $ (70,315 )   $ 28,119     $ 17,540     (350.06) %   (500.88) %
Held-to-maturity securities, at amortized cost                  
U.S. agency securities   83,004     $     $ 73,360     N/M   13.15 %
U.S. Treasury notes   336,193             66,326     N/M   406.88 %
Municipal securities   5,116       5,032       5,095     1.67 %   0.41 %
Trust preferred corporate securities   2,260       2,309       2,272     (2.12) %   (0.53) %
Mortgage-backed securities issued by GSE and GNMA   6,811       8,639       7,168     (21.16) %   (4.98) %
Allowance for credit losses   (92 )     (97 )     (94 )   (5.15) %   (2.13) %
Total $ 433,292     $ 15,883     $ 154,127     2,628.02 %   181.13 %
Gross unrealized gains (losses) not reflected in financial statements                
Total gross unrealized gains $ 714     $ 1,598     $ 1,561     (55.32) %   (54.26) %
Total gross unrealized losses   (11,915 )           (106 )   %   %
Net unrealized gains (losses) in HTM securities $ (11,201 )   $ 1,598     $ 1,455     (800.94) %   (869.83) %
 
Loans Held For Investment(1) Q1   Q1   Q4   Q1 22 vs.   Q1 22 vs.
    2022       2021       2021     Q1 21   Q4 21
Real estate – construction and development $ 1,236,294     $ 1,031,267     $ 1,125,863     19.88 %   9.81 %
Commercial real estate – owner occupied   1,561,117       1,439,412       1,494,000     8.46 %   4.49 %
Commercial real estate – non owner occupied   2,697,929       2,477,315       2,620,334     8.91 %   2.96 %
Real estate – multifamily   339,220       360,125       332,659     (5.80) %   1.97 %
Residential 1-4 family   1,392,052       1,173,761       1,305,915     18.60 %   6.60 %
HELOC   376,480       400,314       380,834     (5.95) %   (1.14) %
Commercial and industrial business (C&I)   1,212,973       2,005,558       1,206,911     (39.52) %   0.50 %
Government   518,839       398,579       525,358     30.17 %   (1.24) %
Indirect   485,620       278,567       394,802     74.33 %   23.00 %
Consumer loans and other   88,784       169,685       119,576     (47.68) %   (25.75) %
Total $ 9,909,308     $ 9,734,583     $ 9,506,252     1.79 %   4.24 %
(1) Paycheck Protection Program loans totaling $0.08 billion, $0.90 billion, and $0.16 billion, primarily in C&I, are included in Q1 22, Q1 21, and Q4 21, respectively.
 
Deposits Q1   Q1   Q4   Q1 22 vs.   Q1 22 vs.
    2022       2021       2021     Q1 21   Q4 21
Noninterest-bearing demand $ 5,532,337     $ 4,840,678     $ 5,546,665     14.29 %   (0.26) %
Interest-bearing:                  
Demand and money market accounts   6,432,005       5,062,461       6,139,714     27.05 %   4.76 %
Savings   393,119       342,554       371,356     14.76 %   5.86 %
Certificates of deposits   1,414,339       1,893,951       1,515,891     (25.32) %   (6.70) %
Total $ 13,771,800     $ 12,139,644     $ 13,573,626     13.44 %   1.46 %

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
  Three Months Ended   Three Months Ended   Three Months Ended
  March 31, 2022   December 31, 2021   March 31, 2021
      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), (1)(2)
$ 9,668,724     $ 95,596     4.01 %   $ 9,372,187     $ 95,696     4.05 %   $ 9,660,111     $ 101,960     4.28 %
Taxable investment securities   2,059,614       9,013     1.75 %     1,625,683       10,217     2.51 %     1,303,535       6,604     2.03 %
Tax-exempt investment securities   110,698       680     2.46 %     157,855       292     0.74 %     139,859       542     1.55 %
Total securities   2,170,312       9,693     1.79 %     1,783,538       10,509     2.36 %     1,443,394       7,146     1.98 %
Interest-bearing deposits   2,929,929       1,347     0.19 %     3,274,392       1,215     0.15 %     1,715,110       416     0.10 %
Loans held for sale   276,448       2,375     3.44 %     379,808       2,750     2.90 %     536,997       3,361     2.50 %
Total earning assets   15,045,413       109,011     2.94 %     14,809,925       110,170     2.95 %     13,355,612       112,883     3.42 %
Less: allowance for credit losses   (106,172 )             (107,215 )             (120,934 )        
Total nonearning assets   1,372,757               1,372,799               1,357,738          
Total assets $ 16,311,998             $ 16,075,509             $ 14,592,416          
Liabilities and Equity:                                  
Interest-bearing deposits                                  
Demand and money market $ 6,178,217     $ 2,262     0.15 %   $ 5,853,873     $ 2,148     0.15 %   $ 4,904,885     $ 2,075     0.17 %
Savings   382,839       511     0.54 %     371,901       534     0.57 %     332,006       522     0.64 %
Certificates of deposit   1,472,942       2,121     0.58 %     1,541,483       2,707     0.70 %     1,959,225       5,951     1.23 %
Total interest-bearing deposits   8,033,998       4,894     0.25 %     7,767,257       5,389     0.28 %     7,196,116       8,548     0.48 %
Borrowings   135,775       137     0.40 %     245,622       360     0.58 %     562,451       822     0.58 %
Subordinated debt, net   386,934       4,120     4.26 %     249,555       2,962     4.75 %     249,114       2,930     4.70 %
Total interest-bearing liabilities   8,556,707       9,151     0.43 %     8,262,434       8,711     0.42 %     8,007,681       12,300     0.62 %
Demand deposits   5,467,153               5,492,894               4,483,444          
Other noninterest-bearing liabilities   387,871               417,707               303,524          
Total liabilities   14,411,731               14,173,035               12,794,649          
Shareholders’ equity   1,900,267               1,902,474               1,797,767          
Total liabilities and equity $ 16,311,998             $ 16,075,509             $ 14,592,416          
Net interest income (tax-equivalent basis)     $ 99,860             $ 101,459             $ 100,583      
Reconciliation of Non-GAAP Financial Measures                                
Tax-equivalent basis adjustment       (656 )             (667 )             (593 )    
Net interest income (GAAP)     $ 99,204             $ 100,792             $ 99,990      
                                   
Interest rate spread (3)(4)         2.51 %           2.53 %           2.80 %
Interest expense as a percent of average earning assets       0.25 %           0.23 %           0.37 %
Net interest margin (tax equivalent basis) (4)(5)       2.69 %           2.72 %           3.05 %
Total cost of deposits         0.15 %           0.16 %           0.30 %
                                   

(1) Average loans balances for December 31, 2021 and March 31, 2021 and related yields have been restated to include, previously excluded, nonaccrual loans of $7.69 million and $12.98 million, respectively.
(2) March 31, 2022, March 31, 2021, and December 31, 2021 includes average PPP balances of $0.12 billion, $0.81 billion and $0.20 billion, and related interest and fee income of $2.10 million, $11.63 million, and $3.85 million, respectively.
(3) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(4) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(5) Non-GAAP.

TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
   
     
  March 31,   December 31,
    2022       2021  
  (unaudited)   (audited)
ASSETS      
Cash and due from banks $ 74,991     $ 17,373  
Interest-bearing deposits at FRB – Richmond   2,857,327       3,244,484  
Interest-bearing deposits in financial institutions   34,684       34,779  
Total Cash and Cash Equivalents   2,967,002       3,296,636  
Securities available for sale, at fair value (amortized cost of $1,917,936 and $1,788,853, and allowance for credit losses of $1,081 and $210 at March 31, 2022 and December 31, 2021, respectively.)   1,846,540       1,806,183  
Securities held to maturity, at amortized cost (fair value $422,183 and $155,676 at March 31, 2022 and December 31, 2021, respectively.)   433,384       154,221  
Less: allowance for credit losses   (92 )     (94 )
Securities held to maturity, net of allowance for credit losses   433,292       154,127  
Other equity securities   6,789       6,759  
FHLB stock   10,432       13,146  
Total Securities   2,297,053       1,980,215  
Mortgage loans held for sale   234,620       358,303  
Loans, net of unearned income and deferred costs   9,909,308       9,506,252  
Less: allowance for credit losses   (103,833 )     (106,059 )
Net Loans   9,805,475       9,400,193  
Premises and equipment, net   277,764       270,772  
Goodwill   457,162       457,187  
Other intangible assets, net   47,562       50,379  
BOLI   253,112       251,805  
Other assets   326,838       295,897  
TOTAL ASSETS $ 16,666,588     $ 16,361,387  
       
LIABILITIES AND EQUITY      
Deposits:      
Noninterest-bearing demand $ 5,532,337     $ 5,546,665  
Interest-bearing:      
Demand and money market accounts   6,432,005       6,139,714  
Savings   393,119       371,356  
Certificates of deposit   1,414,339       1,515,891  
Total Deposits   13,771,800       13,573,626  
Advances from the FHLB   55,196       155,367  
Subordinated debt, net   496,757       249,652  
FRB PPP lending facility          
Repurchase agreements and other borrowings   75,988       76,797  
Total Borrowings   627,941       481,816  
Other liabilities   387,087       389,771  
TOTAL LIABILITIES   14,786,828       14,445,213  
Preferred stock, authorized and unissued shares – 2,000,000          
Common stock, $1.667 par: 150,000,000 shares authorized      
72,724,275 and 72,683,985 shares issued at      
March 31, 2022 and December 31, 2021, respectively   121,231       121,164  
Capital surplus   1,050,387       1,050,948  
Retained earnings   747,614       716,605  
Common stock issued to deferred compensation trust, at cost      
910,304 and 911,458 shares at March 31, 2022 and December 31, 2021, respectively   (18,323 )     (18,257 )
Deferred compensation trust   18,323       18,257  
Accumulated other comprehensive income (loss)   (56,712 )     10,597  
TOTAL SHAREHOLDERS’ EQUITY   1,862,520       1,899,314  
Noncontrolling interest   17,240       16,860  
TOTAL EQUITY   1,879,760       1,916,174  
               TOTAL LIABILITIES AND EQUITY $ 16,666,588     $ 16,361,387  
 

TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
       
       
  Three Months Ended
  March 31,
    2022       2021  
INTEREST INCOME:      
Loans, including fees $ 94,962     $ 101,396  
Investment securities   9,671       7,117  
Interest-bearing deposits in financial institutions and federal funds sold   1,347       416  
Mortgage loans held for sale   2,375       3,361  
Total interest income   108,355       112,290  
INTEREST EXPENSE:      
Deposits   4,894       8,548  
Advances from the FHLB   92       497  
Subordinated debt, net   4,120       2,930  
Repurchase agreements and other borrowings   45       325  
Total interest expense   9,151       12,300  
Net interest income   99,204       99,990  
PROVISION FOR CREDIT LOSSES   (1,449 )     (4,027 )
Net interest income after provision for credit losses   100,653       104,017  
NONINTEREST INCOME:      
Residential mortgage banking income, net   14,638       37,412  
Insurance commissions and other title fees and income, net   19,074       16,325  
Property management income, net   17,147       15,483  
Real estate commission income, net   2,554       2,451  
Service charges on deposit accounts   2,574       2,190  
Credit card merchant fees, net   1,375       1,302  
BOLI   1,717       1,519  
Other income   7,129       4,837  
Net gain/(loss) on investment securities         1,000  
Total noninterest income   66,208       82,519  
NONINTEREST EXPENSE:      
Salaries and employee benefits   63,963       58,435  
Occupancy expense   8,327       8,072  
Furniture and equipment   3,690       3,512  
Amortization – intangibles   2,817       2,723  
Software expense   4,492       4,194  
Data processing   3,594       3,239  
Professional fees   2,027       2,339  
Advertising and marketing   4,127       2,968  
Other expenses   16,342       11,844  
Total noninterest expense   109,379       97,326  
Income before income tax expense and noncontrolling interest   57,482       89,210  
Provision for income tax expense   11,232       16,579  
Net income $ 46,250     $ 72,631  
Net income attributable to noncontrolling interest   (664 )     (3,636 )
Net income attributable to TowneBank $ 45,586     $ 68,995  
Per common share information      
Basic earnings $ 0.63     $ 0.95  
Diluted earnings $ 0.63     $ 0.95  
Cash dividends declared $ 0.20     $ 0.18  

TOWNEBANK
Consolidated Balance Sheets – Five Quarter Trend
(dollars in thousands, except share data)
 
                   
  March 31,   December 31,   September 30,   June 30,   March 31,
    2022       2021       2021       2021       2021  
  (unaudited)   (unaudited)   (unaudited)   (audited)   (unaudited)
ASSETS                  
Cash and due from banks $ 74,991     $ 17,373     $ 75,370     $ 117,797     $ 141,545  
Interest-bearing deposits at FRB – Richmond   2,857,327       3,244,484       3,155,039       2,970,490       1,936,458  
Interest-bearing deposits in financial institutions   34,684       34,779       33,506       31,971       30,031  
Total Cash and Cash Equivalents   2,967,002       3,296,636       3,263,915       3,120,258       2,108,034  
Securities available for sale   1,846,540       1,806,183       1,560,402       1,454,421       1,418,006  
Securities held to maturity   433,384       154,221       14,898       15,389       15,980  
Less: allowance for credit losses   (92 )     (94 )     (94 )     (97 )     (97 )
Securities held to maturity, net of allowance for credit losses   433,292       154,127       14,804       15,292       15,883  
Other equity securities   6,789       6,759       6,621       6,395       6,355  
FHLB stock   10,432       13,146       13,146       16,909       16,909  
Total Securities   2,297,053       1,980,215       1,594,973       1,493,017       1,457,153  
Mortgage loans held for sale   234,620       358,303       431,846       554,447       582,905  
Loans, net of unearned income and deferred costs   9,909,308       9,506,252       9,297,565       9,423,578       9,734,583  
Less: allowance for credit losses   (103,833 )     (106,059 )     (107,177 )     (108,130 )     (116,077 )
Net Loans   9,805,475       9,400,193       9,190,388       9,315,448       9,618,506  
Premises and equipment, net   277,764       270,772       270,810       265,644       261,831  
Goodwill   457,162       457,187       457,187       452,328       452,328  
Other intangible assets, net   47,562       50,379       50,839       42,271       44,808  
BOLI   253,112       251,805       249,862       249,213       247,655  
Other assets   326,838       295,897       301,552       311,209       306,176  
  TOTAL ASSETS $ 16,666,588     $ 16,361,387     $ 15,811,372     $ 15,803,835     $ 15,079,396  
LIABILITIES AND EQUITY                  
Deposits:                  
Noninterest-bearing demand $ 5,532,337     $ 5,546,665     $ 5,394,952     $ 5,243,074     $ 4,840,678  
Interest-bearing:                  
Demand and money market accounts   6,432,005       6,139,714       5,681,181       5,373,146       5,062,461  
Savings   393,119       371,356       366,165       349,552       342,554  
Certificates of deposit   1,414,339       1,515,891       1,571,752       1,998,828       1,893,951  
Total Deposits   13,771,800       13,573,626       13,014,050       12,964,600       12,139,644  
Advances from the FHLB   55,196       155,367       155,537       255,706       255,872  
Subordinated debt, net   496,757       249,652       249,503       249,353       249,204  
FRB PPP lending facility                           183,164  
Repurchase agreements and other borrowings   75,988       76,797       82,413       85,042       68,509  
Total Borrowings   627,941       481,816       487,453       590,101       756,749  
Other liabilities   387,087       389,771       409,435       379,278       366,697  
        TOTAL LIABILITIES   14,786,828       14,445,213       13,910,938       13,933,979       13,263,090  
Preferred stock                  
Authorized shares – 2,000,000                            
Common stock, $1.667 par value   121,231       121,164       121,163       121,144       121,108  
Capital surplus   1,050,387       1,050,948       1,049,367       1,048,332       1,047,312  
Retained earnings   747,614       716,605       690,960       655,095       613,826  
Common stock issued to deferred compensation                  
trust, at cost   (18,323 )     (18,257 )     (18,076 )     (18,076 )     (17,063 )
Deferred compensation trust   18,323       18,257       18,076       18,076       17,063  
Accumulated other comprehensive income (loss)   (56,712 )     10,597       21,597       29,273       17,969  
TOTAL SHAREHOLDERS’ EQUITY   1,862,520       1,899,314       1,883,087       1,853,844       1,800,215  
Noncontrolling interest   17,240       16,860       17,347       16,012       16,091  
       TOTAL EQUITY   1,879,760       1,916,174       1,900,434       1,869,856       1,816,306  
TOTAL LIABILITIES AND EQUITY $ 16,666,588     $ 16,361,387     $ 15,811,372     $ 15,803,835     $ 15,079,396  

TOWNEBANK  
Consolidated Statements of Income – Five Quarter Trend (unaudited)  
(dollars in thousands, except share data)  
   
   
  Three Months Ended
  March 31,   December 31,   September 30,   June 30,   March 31,  
    2022       2021       2021       2021       2021    
INTEREST INCOME:                    
Loans, including fees $ 94,962     $ 95,054     $ 98,258     $ 100,614     $ 101,396    
Investment securities   9,671       10,484       7,000       6,871       7,117    
Interest-bearing deposits in financial institutions and federal funds sold   1,347       1,215       1,182       619       416    
Mortgage loans held for sale   2,375       2,750       3,405       3,711       3,361    
Total interest income   108,355       109,503       109,845       111,815       112,290    
INTEREST EXPENSE:                    
Deposits   4,894       5,389       6,028       7,144       8,548    
Advances from the FHLB   92       206       247       274       497    
Subordinated debt   4,120       2,962       2,962       2,962       2,930    
Repurchase agreements and other borrowings   45       154       165       291       325    
Total interest expense   9,151       8,711       9,402       10,671       12,300    
Net interest income   99,204       100,792       100,443       101,144       99,990    
PROVISION FOR CREDIT LOSSES   (1,449 )     (1,110 )     (1,582 )     (10,055 )     (4,027 )  
Net interest income after provision for credit losses   100,653       101,902       102,025       111,199       104,017    
NONINTEREST INCOME:                    
Residential mortgage banking income, net   14,638       20,945       25,422       25,524       37,412    
Insurance commissions and other title fees and income, net   19,074       15,486       17,398       18,331       16,325    
Property management income, net   17,147       9,099       10,502       7,091       15,483    
Real estate commission income, net   2,554       3,165       3,781       3,893       2,451    
Service charges on deposit accounts   2,574       2,479       2,524       2,391       2,190    
Credit card merchant fees, net   1,375       1,412       1,660       1,667       1,302    
BOLI   1,717       1,904       2,301       1,541       1,519    
Other income   7,129       5,142       6,045       5,487       4,837    
Net gain/(loss) on investment securities                     252       1,000    
Total noninterest income   66,208       59,632       69,633       66,177       82,519    
NONINTEREST EXPENSE:                    
Salaries and employee benefits   63,963       64,814       61,230       61,365       58,435    
Occupancy expense   8,327       8,371       7,656       7,559       8,072    
Furniture and equipment   3,690       3,528       3,513       3,622       3,512    
Amortization – intangibles   2,817       2,935       2,750       2,719       2,723    
Software expense   4,492       4,014       4,209       4,494       4,194    
Data processing   3,594       3,524       3,603       3,414       3,239    
Professional fees   2,027       2,723       2,227       2,259       2,339    
Advertising and marketing   4,127       3,414       3,865       3,257       2,968    
Other expenses   16,342       17,144       15,033       16,705       11,844    
Total noninterest expense   109,379       110,467       104,086       105,394       97,326    
Income before income tax expense and noncontrolling interest   57,482       51,067       67,572       71,982       89,210    
Provision for income tax expense   11,232       9,410       14,829       13,980       16,579    
Net income   46,250       41,657       52,743       58,002       72,631    
Net income attributable to noncontrolling interest   (664 )     (1,474 )     (2,343 )     (2,199 )     (3,636 )  
Net income attributable to TowneBank $ 45,586     $ 40,183     $ 50,400     $ 55,803     $ 68,995    
Per common share information                    
Basic earnings $ 0.63     $ 0.55     $ 0.70     $ 0.77     $ 0.95    
Diluted earnings $ 0.63     $ 0.55     $ 0.69     $ 0.77     $ 0.95    
Basic weighted average shares outstanding   72,498,075       72,525,504       72,506,877       72,468,094       72,414,953    
Diluted weighted average shares outstanding   72,562,122       72,624,610       72,591,281       72,560,234       72,517,008    
Cash dividends declared $ 0.20     $ 0.20     $ 0.20     $ 0.20     $ 0.18    
                     
                     

TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)
 
           
  Three Months Ended   Increase/(Decrease)
  March 31,   December 31,   2022 over 2021
    2022       2021       2021     Amount   Percent
Revenue                  
Net interest income $ 96,770     $ 97,604     $ 98,345     $ (834 )   (0.85) %
Service charges on deposit                  
accounts   2,574       2,190       2,479       384     17.53 %
Credit card merchant fees   1,375       1,302       1,412       73     5.61 %
Other income   6,710       4,970       4,876       1,740     35.01 %
Subtotal   10,659       8,462       8,767       2,197     25.96 %
Net gain/(loss) on investment securities         1,000             (1,000 )   (100.00) %
Total noninterest income   10,659       9,462       8,767       1,197     12.65 %
Total revenue   107,429       107,066       107,112       363     0.34 %
                   
Provision for credit losses   (1,833 )     (3,401 )     (1,199 )     1,568     (46.10) %
                   
Expenses                  
Salaries and employee benefits   37,059       31,861       37,678       5,198     16.31 %
Occupancy expense   5,659       5,546       5,541       113     2.04 %
Furniture and equipment   2,709       2,668       2,570       41     1.54 %
Amortization of intangibles   827       962       812       (135 )   (14.03) %
Other expenses   18,228       14,050       19,484       4,178     29.74 %
Total expenses   64,482       55,087       66,085       9,395     17.05 %
Income before income tax, corporate allocation and noncontrolling interest   44,780       55,380       42,226       (10,600 )   (19.14) %
Corporate allocation   1,292       1,292       1,260           %
Income before income tax provision and noncontrolling interest   46,072       56,672       43,486       (10,600 )   (18.70) %
Provision for income tax expense   8,519       9,701       7,123       (1,182 )   (12.18) %
Net income   37,553       46,971       36,363       (9,418 )   (20.05) %
Noncontrolling interest         (5 )     (3 )     5     (100.00) %
Net income attributable to TowneBank $ 37,553     $ 46,966     $ 36,360       (9,413 )   (20.04) %
                   
Efficiency ratio(non-GAAP)   59.25 %     51.03 %     60.94 %        

TOWNEBANK  
Realty Segment Financial Information (unaudited)  
(dollars in thousands)  
   
         
  Three Months Ended   Increase/(Decrease)  
  March 31,   December 31,   2022 over 2021  
    2022       2021       2021     Amount   Percent  
Revenue                    
Residential mortgage brokerage
income, net
$ 15,906     $ 37,877     $ 22,257     $ (21,971 )   (58.01) %  
Real estate brokerage income, net   2,554       2,451       3,165       103     4.20 %  
Title insurance and settlement fees   504       525       610       (21 )   (4.00) %    
Property management fees, net   17,147       15,483       9,099       1,664     10.75 %  
Income from unconsolidated
subsidiary
  167       406       113       (239 )   (58.87) %    
Net interest and other income   2,932       2,736       3,010       196     7.16 %  
Total revenue   39,210       59,478       38,254       (20,268 )   (34.08) %  
                     
Provision for credit losses   384       (626 )     89       1,010     (161.34) %  
                     
Expenses                    
Salaries and employee benefits   17,291       16,847       17,682       444     2.64 %  
Occupancy expense   1,898       1,871       1,957       27     1.44 %  
Furniture and equipment   761       649       727       112     17.26 %  
Amortization of intangible assets   816       590       931       226     38.31 %  
Other expenses   10,852       9,229       9,805       1,623     17.59 %  
Total expenses   31,618       29,186       31,102       2,432     8.33 %  
                     
Income before income tax, corporate allocation and noncontrolling interest   7,208       30,918       7,063       (23,710 )   (76.69) %  
Corporate allocation   (1,000 )     (1,000 )     (1,000 )         %  
Income before income tax provision and noncontrolling interest   6,208       29,918       6,063       (23,710 )   (79.25) %  
Provision for income tax expense   1,374       6,216       1,894       (4,842 )   (77.90) %  
Net income   4,834       23,702       4,169       (18,868 )   (79.61) %  
Noncontrolling interest   (664 )     (3,631 )     (1,471 )     2,967     (81.71) %  
Net income attributable to TowneBank $ 4,170     $ 20,071     $ 2,698       (15,901 )   (79.22) %  
                     
Efficiency ratio(non-GAAP)   78.56 %     48.08 %     78.87 %          
                     

TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)
 
           
  Three Months Ended   Increase/(Decrease)
  March 31,   December 31,   2022 over 2021
    2022       2021       2021     Amount   Percent
Commission and fee income                  
Property and casualty $ 15,337     $ 14,188     $ 13,135     $ 1,149     8.10 %
Employee benefits   4,161       3,884       3,682       277     7.13 %
Specialized benefit services   170       167       172       3     1.80 %
Total commissions and fees   19,668       18,239       16,989       1,429     7.83 %
                   
Contingency and bonus revenue   3,404       1,759       2,231       1,645     93.52 %
Other income   33       74       40       (41 )   (55.41) %
Total revenue   23,105       20,072       19,260       3,033     15.11 %
                   
Employee commission expense   4,332       4,107       4,202       225     5.48 %
Revenue, net of commission expense   18,773       15,965       15,058       2,808     17.59 %
                   
Salaries and employee benefits   9,613       9,727       9,454       (114 )   (1.17) %
Occupancy expense   770       655       873       115     17.56 %
Furniture and equipment   220       195       231       25     12.82 %
Amortization of intangible assets   1,174       1,171       1,192       3     0.26 %
Other expenses   1,502       1,305       1,530       197     15.10 %
Total operating expenses   13,279       13,053       13,280       226     1.73 %
Income before income tax, corporate allocation and noncontrolling interest   5,494       2,912       1,778       2,582     88.67 %
Corporate allocation   (292 )     (292 )     (260 )         %
Income before income tax provision and noncontrolling interest   5,202       2,620       1,518       2,582     98.55 %
Provision for income tax expense   1,339       662       393       677     102.27 %
Net income   3,863       1,958       1,125       1,905     97.29 %
Noncontrolling interest                         N/M
Net income attributable to TowneBank $ 3,863     $ 1,958     $ 1,125       1,905     97.29 %
                   
Provision for income taxes   1,339       662       393       677     102.27 %
Depreciation, amortization and interest expense   1,319       1,308       1,342       11     0.84 %
EBITDA(non-GAAP) $ 6,521     $ 3,928     $ 2,860       2,593     66.01 %
                   
Efficiency ratio(non-GAAP)   64.48 %     74.43 %     80.28 %        

TOWNEBANK
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands)
 
  Three Months Ended
  March 31,   March 31,   December 31,
    2022       2021       2021  
           
Return on average assets (GAAP)   1.13 %     1.92 %     0.99 %
Impact of excluding average goodwill and other
intangibles and amortization
  0.10 %     0.13 %     0.09 %
Return on average tangible assets (non-GAAP)   1.23 %     2.05 %     1.08 %
           
Return on average equity (GAAP)   9.73 %     15.56 %     8.38 %
Impact of excluding average goodwill and other
intangibles and amortization
  4.18 %     6.63 %     3.70 %
Return on average tangible equity (non-GAAP)   13.91 %     22.19 %     12.08 %
           
Return on average common equity (GAAP)   9.81 %     15.70 %     8.45 %
Impact of excluding average goodwill and other
intangibles and amortization
  4.27 %     6.75 %     3.77 %
Return on average tangible common equity
(non-GAAP)
  14.08 %     22.45 %     12.22 %
           
Book value (GAAP) $ 25.61     $ 24.78     $ 26.13  
Impact of excluding average goodwill and other
intangibles and amortization
  (6.94 )     (6.84 )     (6.98 )
Tangible book value (non-GAAP) $ 18.67     $ 17.94     $ 19.15  
           
Efficiency ratio (GAAP)   66.13 %     53.33 %     68.86 %
Impact of exclusions (1.71) %   (1.22) %   (1.83) %
Efficiency ratio (non-GAAP)   64.42 %     52.11 %     67.03 %
           
Average assets (GAAP) $ 16,311,998     $ 14,592,416     $ 16,075,509  
Less: average goodwill and intangible assets   506,496       497,446       506,867  
Average tangible assets (non-GAAP) $ 15,805,502     $ 14,094,970     $ 15,568,642  
           
Average equity (GAAP) $ 1,900,267     $ 1,797,767     $ 1,902,474  
Less: average goodwill and intangible assets   506,496       497,446       506,867  
Average tangible equity (non-GAAP) $ 1,393,771     $ 1,300,321     $ 1,395,607  
           
Average common equity (GAAP) $ 1,884,101     $ 1,782,795     $ 1,886,279  
Less: average goodwill and intangible assets   506,496       497,446       506,867  
Average tangible common equity (non-GAAP) $ 1,377,605     $ 1,285,349     $ 1,379,412  
           
Net Income (GAAP) $ 45,586     $ 68,995     $ 40,183  
Amortization of Intangibles, net of tax   2,225       2,151       2,318  
Tangible net income (non-GAAP) $ 47,811     $ 71,146     $ 42,501  
           
Net Income (GAAP) $ 45,586     $ 68,995     $ 40,183  
Provision for credit losses   (1,449 )     (4,027 )     (1,110 )
Provision for income tax   11,232       16,579       9,410  
Pre-provision, pre-tax net revenues (non-GAAP) $ 55,369     $ 81,547     $ 48,483  
           
Total Revenue (GAAP) $ 165,412     $ 182,509     $ 160,424  
Net (gain)/loss on investment securities         (1,000 )      
Other nonrecurring (income) loss         30        
Total Revenue for efficiency calculation (non-GAAP) $ 165,412     $ 181,539     $ 160,424  
           
Noninterest expense (GAAP) $ 109,379     $ 97,326     $ 110,467  
Less: Amortization of intangibles   2,817       2,723       2,935  
Noninterest expense net of amortization (non-GAAP) $ 106,562     $ 94,603     $ 107,532  

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