TowneBank Reports Third Quarter 2021 Earnings

SUFFOLK, Va., Oct. 28, 2021 (GLOBE NEWSWIRE) -- TowneBank (the "Company" or "Towne") (NASDAQ: TOWN) today reported earnings for the quarter ended September 30, 2021 of $50.40 million, or $0.69 per diluted share, compared to $34.46 million, or $0.48 per diluted share, for the quarter ended September 30, 2020.

"TowneBank had another successful quarter highlighted by solid organic loan growth despite headwinds from historically low levels of line utilization. Our credit quality metrics are excellent, and our Company is poised to capitalize on growth opportunities across our markets. The strong momentum in our fee-based businesses continued during the quarter as we explore additional strategies to accelerate noninterest income growth," said G. Robert Aston, Jr., Executive Chairman.

Highlights for Third Quarter 2021 Compared to Third Quarter 2020:

Total revenues were $170.08 million, a decrease of $22.06 million, or 11.48%. This year-over-year decrease was driven by a 2020 gain on the sale of Red Sky Travel Insurance ("Red Sky"), totaling $17.63 million.
Pre-provision, pre-tax, net revenues (non-GAAP), were $63.65 million, an increase of $7.37 million, or 13.09%, excluding the 2020 gain on sale of Red Sky.
Loans held for investment were $9.30 billion, a decrease of $0.47 billion, or 4.84%, from September 30, 2020, and $0.13 billion, or 1.34%, from June 30, 2021. Excluding the decline in loans from the Paycheck Protection Program ("PPP"), loans held for investment increased $378.69 million, or 4.37%, compared to September 30, 2020, and $147.41 million, or 6.57%, on an annualized basis, from the linked quarter. Total loans at September 30, 2021, September 30, 2020, and June 30, 2021 included $0.25 billion, $1.10 billion, and $0.52 billion, respectively, of PPP loans.
Total deposits were $13.01 billion, an increase of $1.31 billion, or 11.18% compared to prior year and $0.05 billion, or 1.51% on an annualized basis, from June 30, 2021.
Noninterest bearing deposits increased by 20.85%, to $5.39 billion, representing 41.45% of total deposits. Compared to the linked quarter, noninterest bearing deposits increased 11.17%, on an annualized basis.
Annualized return on common shareholders' equity was 10.68% and annualized return on average tangible common shareholders' equity was 15.27% (non-GAAP).
Net interest margin for the quarter was 2.76% and taxable equivalent net interest margin (non-GAAP) was 2.78%.
Nonperforming assets were $13.86 million, or 0.09% of total assets, compared to $28.74 million, or 0.19%, at September 30, 2020, primarily due to the sale of several foreclosed properties.
Effective tax rate of 22.73% in the quarter compared to 18.53% in third quarter 2020, and 20.03% in the linked quarter.

"While facing continued pressure from the current rate environment on net interest margins, our Company delivered another strong performance for the quarter. Our diversified revenue model has afforded us the opportunity to patiently deploy excess liquidity and the recent rise in rates should provide more attractive entry points potentially increasing security purchases over the next several quarters," stated J. Morgan Davis, Chief Executive Officer.

Quarterly Net Interest Income Compared to Third Quarter 2020:

Net interest income was $100.44 million compared to $96.76 million as of September 30, 2020.
Tax-equivalent net interest margin (non-GAAP) was 2.78%, including purchase accounting accretion of 4 basis points and PPP interest and fees of 15 basis points, compared to 2.72%, including purchase accounting accretion of 5 basis points and a 17 basis point increase in PPP interest and fees, for third quarter 2020.
On an average basis, loans held for investment, with a yield of 4.24%, represented 64.01% of earning assets at September 30, 2021 compared to a yield of 4.22% and 68.38% of earning assets in the third quarter of 2020. Excluding PPP loans, loan yields were 4.06% in third quarter 2021 compared to 4.30% in third quarter 2020.
Interest and fee income on PPP loans was $7.77 million in third quarter 2021, compared to $10.02 million in the linked quarter, and $9.82 million in third quarter 2020.
Total cost of deposits decreased to 0.19% from 0.46% at September 30, 2020.
Average interest-earning assets totaled $14.43 billion at September 30, 2021 compared to $14.26 billion at September 30, 2020, an increase of 1.20%.
Average interest-bearing liabilities totaled $8.24 billion, a decrease of $0.98 billion from prior year.

Quarterly Provision for Credit Losses:

The quarterly provision for credit losses for on-balance-sheet loans was a benefit of $1.60 million compared to a provision expense of $28.26 million one year ago and a benefit of $8.08 million in the linked quarter.
The third quarter 2021 included a release in the allowance for credit losses of $0.95 million that was driven by a combination of net recoveries and a slight improvement in the quarterly economic forecast, offset by modest core loan growth.
Net loan recoveries were $0.64 million compared to $0.33 million one year prior and $0.14 million in the linked quarter. The ratio of net loan recoveries to average loans on an annualized basis was (0.03)% in third quarter 2021, (0.01)% in third quarter 2020, and (0.01)% in the linked quarter.
The provision expense for credit losses on off-balance-sheet commitments was $0.01 million compared to $3.50 million in the third quarter of 2020, and a benefit of $1.89 million in the linked quarter.
The allowance for credit losses on loans represented 1.15% of total loans at September 30, 2021 and June 30, 2021, compared to 1.22% at September 30, 2020. Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses (non-GAAP) was 1.18%, compared to 1.22% at June 30, 2021 and 1.37% at September 30, 2020. The allowance for credit losses on loans was 12.68 times nonperforming loans compared to 9.67 times at June 30, 2021 and 7.31 times at September 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 Third Quarter 2020:

Total noninterest income was $69.63 million compared to $95.38 million in 2020, a decrease of $25.74 million, or 26.99%. Residential mortgage banking income decreased $12.11 million, while real estate brokerage and property management income increased $2.98 million. In the third quarter of 2020, noninterest income included a gain of $17.63 million on the sale of Red Sky, a travel insurance joint venture.
Residential mortgage banking recorded income of $25.42 million compared to $37.53 million in third quarter 2020. Margins declined 4 basis points between quarters and loan volume decreased to $1.31 billion in third quarter 2021 compared to $1.79 billion in 2020. Residential purchase activity comprised 77.45% of production volume in the third quarter of 2021 compared to 61.21% in the prior year quarter. In addition to the declines related to margin and volume, the income statement impact of derivative instruments in third quarter 2021 was a net loss of $0.77 million compared to a net gain on derivative instruments of $3.33 million in third quarter 2020. Included in the third quarter 2021 derivative instrument loss was a loss on interest rate-locks of $1.67 million, compared to a gain of $3.28 million in third quarter 2020.
Margins on residential mortgages declined 41 basis points from the peak in December 2020. Management expects margin compression to continue through the end of the year to more normalized levels.
Total Insurance segment revenue decreased $17.24 million, or 45.06%, to $21.03 million in third quarter 2021 compared to 2020. This decline is attributable to the sale of Red Sky mid-third quarter 2020 and the gain on sale totaling $17.63 million that was recorded in other income in that quarter. After distributions to noncontrolling interests, Towne retained $6.52 million of the pre-tax gain. Partially offsetting the decline was the acquisition of a property and casualty insurance agency in December 2020, which brought in $0.73 million in additional revenue in third quarter 2021.
Property management fee revenue increased 37.95%, or $2.89 million, to $10.50 million compared to third quarter 2020. Demand for vacation rentals remains strong, keeping levels high. In July 2021, the Company acquired Venture Resorts, the largest cabin rental company in the Smoky Mountains of Tennessee, which brought in an additional $3.0 million in management fee revenue in the quarter.

Quarterly Noninterest Expense Compared to Third Quarter 2020:

Total noninterest expense was $104.09 million compared to $101.98 million in 2020, an increase of $2.11 million, or 2.06%. The higher level of expenses was attributable to increases in advertising and marketing expense of $2.0 million, software expense of $0.64 million, and data processing expense of $0.49 million.
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.
We expect the fourth quarter 2021 noninterest expense run rate to be consistent with the current quarter.

Consolidated Balance Sheet Highlights:

Total assets were $15.81 billion for the quarter ended September 30, 2021, a marginal increase compared to $15.80 billion at June 30, 2021. Total assets increased $1.02 billion, or 6.87%, from $14.80 billion at September 30, 2020. The year-over-year increase was driven by higher liquidity levels due to deposit growth.
Loans held for investment decreased $0.47 billion, or 4.84%, compared to prior year and $0.13 billion, or 1.34%, compared the linked quarter. Excluding PPP loans of $0.25 billion in third quarter 2021, $1.10 billion in third quarter 2020, and $0.52 billion in the linked quarter, loans held for investment increased $378.69 million, or 4.37%, compared to prior year, and $147.41 million, or 1.66%, compared to June 30, 2021, or 6.57% on an annualized basis.
Average loans held for investment, excluding PPP loans, were $8.88 billion in the third quarter of 2021, an increase of $220.80 million, or 2.55%, compared to prior year. In the linked quarter comparison, average loans held for investment, excluding PPP loans, increased 0.47%, or $41.38 million, 1.86% on an annualized basis.
Unamortized fee income related to PPP loans was $7.50 million at September 30, 2021.
Mortgage loans held for sale decreased $237.17 million, or 35.45%, compared to the prior year and $122.60 million, or 22.11%, compared to the linked quarter.
Total deposits increased $1.31 billion, or 11.18%, compared to the prior year and $0.05 billion, or 0.38%, compared to the linked quarter.
Total borrowings decreased $0.55 billion, or 53.05%, from prior year and $0.10 billion, or 17.40%, compared to the linked quarter.

Investment Securities:

Total investment securities were $1.59 billion compared to $1.49 billion at June 30, 2021 and $1.38 billion at September 30, 2020. The weighted average duration of the portfolio at September 30, 2021 was 4.0 years. The carrying value of the available for sale debt securities portfolio included $32.06 million, $61.43 million, and $42.18 million in net unrealized gains at September 30, 2021, September 30, 2020, and June 30, 2021, respectively.

Loans and Asset Quality:

Total loans held for investment were $9.30 billion at September 30, 2021 compared to $9.42 billion at June 30, 2021 and $9.77 billion at September 30, 2020.
Nonperforming assets were $13.86 million, or 0.09% of total assets, compared to $28.74 million, or 0.19%, at September 30, 2020.
Nonperforming loans were 0.09% of period end loans compared to 0.17% at September 30, 2020.
Foreclosed property decreased to $5.41 million from $11.69 million at September 30, 2020.
At September 30, 2021, we had $50.95 million in loan modifications made in accordance with section 4013 of the CARES Act, a decline of $1.82 billion, or 97.27%, from a reported peak of $1.87 billion at April 30, 2020.

Deposits and Borrowings:

Total deposits were $13.01 billion compared to $12.96 billion at June 30, 2021 and $11.70 billion at September 30, 2020.
Total loans held for investment to deposits were 71.44% compared to 72.69% at June 30, 2021 and 83.47% at September 30, 2020.
Non-interest bearing deposits were 41.45% of total deposits at September 30, 2021 compared to 40.44% at June 30, 2021 and 38.14% at September 30, 2020.
Total borrowings were $0.49 billion compared to $0.59 billion at June 30, 2021 and $1.04 billion at September 30, 2020.

Capital:

Common equity tier 1 capital ratio of 12.53%.
Tier 1 leverage capital ratio of 9.18%.
Tier 1 risk-based capital ratio of 12.69%.
Total risk-based capital ratio of 15.85%.
Book value per common share was $25.91 compared to $25.51 at June 30, 2021 and $23.83 at September 30, 2020.
Tangible book value per common share (non-GAAP) was $18.92 compared to $18.70 at June 30, 2021 and $17.06 at September 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 $15.81 billion as of September 30, 2021, 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, 2020 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
		September 30,			June 30,			March 31,			December 31,			September 30,
		2021			2021			2021			2020			2020
Income and Performance Ratios:
	Total Revenue	$	170,076		$	167,321		$	182,509		$	171,848		$	192,135
	Net income	52,743			58,002			72,631			53,891			50,715
	Net income available to common shareholders	50,400			55,803			68,995			50,082			34,464
	Pre-provision, pre-tax, net revenues ^(non-GAAP)	63,647			59,728			81,577			62,107			56,278
	Net income per common share - diluted	0.69			0.77			0.95			0.69			0.48
	Book value per common share	25.91			25.51			24.78			24.31			23.83
	Book value per common share - tangible ^(non-GAAP)	18.92			18.70			17.94			17.46			17.06
	Return on average assets	1.27		%	1.48		%	1.92		%	1.35		%	0.89		%
	Return on average assets - tangible ^(non-GAAP)	1.37		%	1.59		%	2.05		%	1.46		%	0.97		%
	Return on average equity	10.59		%	12.21		%	15.56		%	11.26		%	7.85		%
	Return on average equity - tangible ^(non-GAAP)	15.09		%	17.38		%	22.19		%	16.28		%	11.66		%
	Return on average common equity	10.68		%	12.31		%	15.70		%	11.36		%	7.91		%
	Return on average common equity - tangible ^(non-GAAP)	15.27		%	17.57		%	22.45		%	16.48		%	11.79		%
	Noninterest income as a percentage of total revenue	40.94		%	39.55		%	45.21		%	41.45		%	49.64		%
Regulatory Capital Ratios (1):
	Common equity tier 1	12.53		%	12.42		%	12.15		%	11.87		%	11.75		%
	Tier 1	12.69		%	12.57		%	12.30		%	12.04		%	11.91		%
	Total	15.85		%	15.76		%	15.59		%	15.42		%	15.35		%
	Tier 1 leverage ratio	9.18		%	9.44		%	9.54		%	8.99		%	8.89		%
Asset Quality:
	Allowance for credit losses on loans to nonperforming loans	12.68x			9.67x			9.09x			10.74x			7.31x
	Allowance for credit losses on loans to period end loans	1.15		%	1.15		%	1.19		%	1.25		%	1.22		%
	Allowance for credit losses on loans to period end loans excluding PPP loans ^(non-GAAP)	1.18		%	1.22		%	1.31		%	1.37		%	1.37		%
	Nonperforming loans to period end loans	0.09		%	0.12		%	0.13		%	0.12		%	0.17		%
	Nonperforming assets to period end assets	0.09		%	0.10		%	0.11		%	0.11		%	0.19		%
	Net charge-offs (recoveries) to average loans (annualized)	(0.03		)%	(0.01		)%	0.03		%	—		%	(0.01		)%
	Net charge-offs (recoveries)	$	(644	)	$	(137	)	$	669		$	109		$	(328	)

	Nonperforming loans	$	8,451		$	11,178		$	12,768		$	11,188		$	16,295
	Former bank premises	—			—			750			750			750
	Foreclosed property	5,409			4,041			3,748			4,276			11,695
	Total nonperforming assets	$	13,860		$	15,219		$	17,266		$	16,214		$	28,740
	Loans past due 90 days and still accruing interest	$	143		$	1,584		$	108		$	528		$	19
	Allowance for credit losses on loans	$	107,177		$	108,130		$	116,077		$	120,157		$	119,058
Mortgage Banking:
	Loans originated, mortgage	$	939,272		$	1,050,663		$	1,187,595		$	1,257,963		$	1,292,801
	Loans originated, joint venture	370,865			403,864			417,177			429,848			498,100
	Total loans originated	$	1,310,137		$	1,454,527		$	1,604,772		$	1,687,811		$	1,790,901
	Number of loans originated	3,917			4,514			5,164			5,481			5,817
	Number of originators	219			222			229			228			224
	Purchase %	77.45		%	76.95		%	53.45		%	59.76		%	61.21		%
	Loans sold	$	1,394,166		$	1,485,057		$	1,601,480		$	1,845,926		$	1,833,590
	Rate lock asset	$	6,087		$	7,760		$	12,522		$	11,781		$	10,480
	Gross realized gain on sales and fees as a % of loans originated	3.61		%	3.64		%	4.01		%	4.02		%	3.65		%
Other Ratios:
	Net interest margin	2.76		%	2.92		%	3.04		%	2.97		%	2.70		%
	Net interest margin-fully tax equivalent ^(non-GAAP)	2.78		%	2.94		%	3.06		%	2.98		%	2.72		%
	Average earning assets/total average assets	91.89		%	91.89		%	91.46		%	91.59		%	92.09		%
	Average loans/average deposits	71.69		%	78.22		%	82.71		%	83.42		%	86.29		%
	Average noninterest deposits/total average deposits	40.40		%	40.21		%	38.39		%	39.61		%	37.76		%
	Period end equity/period end total assets	12.02		%	11.83		%	12.04		%	12.20		%	11.82		%
	Efficiency ratio ^(non-GAAP)	59.58		%	61.46		%	52.11		%	60.02		%	57.36		%
	(1) Current reporting period regulatory capital ratios are preliminary

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)

Investment Securities										% Change
	Q3			Q3			Q2			Q3 21 vs.			Q3 21 vs.
*Available-for-sale securities, at fair value*	2021			2020			2021			Q3 20			Q2 21
U.S. agency securities	$	207,949		$	167,275		$	206,151		24.32		%	0.87		%
U.S. Treasury notes	1,007			1,006			1,013			0.10		%	(0.59	)	%
Municipal securities	350,980			292,792			334,633			19.87		%	4.89		%
Trust preferred and other corporate securities	31,591			24,236			31,680			30.35		%	(0.28	)	%
Mortgage-backed securities issued by GSE and GNMA	969,017			825,378			881,078			17.40		%	9.98		%
Allowance for credit losses	(142		)	(4		)	(134		)	3,450.00		%	5.97		%
Total	$	1,560,402		$	1,310,683		$	1,454,421		19.05		%	7.29		%
*Gross unrealized gains (losses) reflected in financial statements*
Total gross unrealized gains	$	40,906		$	62,206		$	65,152		(34.24	)	%	(37.21	)	%
Total gross unrealized losses	(8,845		)	(773		)	(22,968		)	1,044.24		%	(61.49	)	%
Net unrealized gains (losses) and other adjustments on AFS securities	$	32,061		$	61,433		$	42,184		(47.81	)	%	(24.00	)	%
*Held-to-maturity securities, at amortized cost*
Trust preferred corporate securities	$	2,285		$	2,333		$	2,297		(2.06	)	%	(0.52	)	%
Municipal securities	5,074			4,992			5,053			1.64		%	0.42		%
Mortgage-backed securities issued by GSE and GNMA	7,539			9,806			8,039			(23.12	)	%	(6.22	)	%
Allowance for credit losses	(94		)	(90		)	(97		)	4.44		%	(3.09	)	%
Total	$	14,804		$	17,041		$	15,292		(13.13	)	%	(3.19	)	%

*Gross unrealized gains (losses) not reflected in financial statements*
Total gross unrealized gains	$	1,591		$	1,971		$	1,708		(19.28	)	%	(6.85	)	%
Total gross unrealized losses	—			—			—			—		%	—		%
Net unrealized gains (losses) in HTM securities	$	1,591		$	1,971		$	1,708		(19.28	)	%	(6.85	)	%

Loans Held For Investment (1)										% Change
	Q3			Q3			Q2			Q3 21 vs.			Q3 21 vs.
	2021			2020			2021			Q3 20			Q2 21
Real estate - construction and development	$	1,005,592		$	1,143,202		$	1,029,811		(12.04	)	%	(2.35	)	%
Commercial real estate - owner occupied	1,463,000			1,378,443			1,445,328			6.13		%	1.22		%
Commercial real estate - non owner occupied	2,647,625			2,338,532			2,597,405			13.22		%	1.93		%
Real estate - multifamily	363,733			289,270			343,764			25.74		%	5.81		%
Residential 1-4 family	1,233,125			1,229,732			1,166,898			0.28		%	5.68		%
HELOC	389,974			430,803			390,726			(9.48	)	%	(0.19	)	%
Commercial and industrial business (C&I)	1,253,972			2,144,875			1,529,788			(41.54	)	%	(18.03	)	%
Government	471,037			354,926			479,664			32.71		%	(1.80	)	%
Indirect	348,864			270,371			310,492			29.03		%	12.36		%
Consumer loans and other	120,643			190,416			129,702			(36.64	)	%	(6.98	)	%
Total	$	9,297,565		$	9,770,570		$	9,423,578		(4.84	)	%	(1.34	)	%
(1) Paycheck Protection Program loans totaling $0.25 billion, $1.10 billion, and $0.52 billion, primarily in C&I, are included in Q3 21, Q3 20, and Q2 21, respectively.
Deposits										% Change
	Q3			Q3			Q2			Q3 21 vs.			Q3 21 vs.
	2021			2020			2021			Q3 20			Q2 21
Noninterest-bearing demand	$	5,394,952		$	4,464,178		$	5,243,073		20.85		%	2.90		%
Interest-bearing:
Demand and money market accounts	5,681,181			4,642,482			5,373,146			22.37		%	5.73		%
Savings	366,165			312,444			349,552			17.19		%	4.75		%
Certificates of deposits	1,571,752			2,285,859			1,998,828			(31.24	)	%	(21.37	)	%
Total	$	13,014,050		$	11,704,963		$	12,964,599		11.18		%	0.38		%

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)

	Three Months Ended								Three Months Ended								Three Months Ended
	September 30, 2021								June 30, 2021								September 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)	$	9,238,922		$	98,732		4.24	%	$	9,604,805		$	101,490		4.24	%	$	9,752,746		$	103,401		4.22	%
Taxable investment securities	1,421,347			6,560			1.85	%	1,351,922			6,476			1.92	%	1,206,679			6,726			2.23	%
Tax-exempt investment securities	125,523			487			1.55	%	128,094			434			1.36	%	144,999			779			2.15	%
Total securities	1,546,870			7,047			1.82	%	1,480,016			6,910			1.87	%	1,351,678			7,505			2.22	%
Interest-bearing deposits	3,179,010			1,182			0.15	%	2,327,310			619			0.11	%	2,523,644			632			0.10	%
Loans held for sale	468,323			3,406			2.91	%	503,706			3,711			2.95	%	634,309			4,587			2.89	%
Total earning assets	14,433,125			110,367			3.03	%	13,915,837			112,730			3.25	%	14,262,377			116,125			3.24	%
Less: allowance for credit losses	(108,478		)						(116,025		)						(95,594		)
Total nonearning assets	1,382,351								1,344,076								1,320,369
Total assets	$	15,706,998							$	15,143,888							$	15,487,152
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	5,486,788		$	2,095		0.15	%	$	5,179,907		$	2,004		0.16	%	$	4,311,920		$	2,663		0.25	%
Savings	358,739			533			0.59	%	346,177			528			0.61	%	304,753			555			0.72	%
Certificates of deposit	1,842,948			3,400			0.73	%	1,816,283			4,612			1.02	%	2,417,772			9,747			1.60	%
Total interest-bearing deposits	7,688,475			6,028			0.31	%	7,342,367			7,144			0.39	%	7,034,445			12,965			0.73	%
Borrowings	300,505			412			0.54	%	476,122			565			0.47	%	1,931,120			2,841			0.58	%
Subordinated debt, net	249,405			2,962			4.75	%	249,260			2,962			4.75	%	248,807			2,962			4.76	%
Total interest-bearing liabilities	8,238,385			9,402			0.45	%	8,067,749			10,671			0.53	%	9,214,372			18,768			0.81	%
Demand deposits	5,212,271								4,937,754								4,268,443
Other noninterest-bearing liabilities	367,891								304,793								257,304
Total liabilities	13,818,547								13,310,296								13,740,119
Shareholders’ equity	1,888,451								1,833,592								1,747,033
Total liabilities and equity	$	15,706,998							$	15,143,888							$	15,487,152
Net interest income (tax-equivalent basis)				$	100,965							$	102,059							$	97,357
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment				(522		)						(915		)						(598		)
Net interest income (GAAP)				$	100,443							$	101,144							$	96,759

Interest rate spread (2)(3)							2.58	%							2.72	%							2.43	%
Interest expense as a percent of average earning assets							0.26	%							0.31	%							0.52	%
Net interest margin (tax equivalent basis) (3)(4)							2.78	%							2.94	%							2.72	%
Total cost of deposits							0.19	%							0.23	%							0.46	%

(1) September 30, 2021, September 30, 2020, and June 30, 2021 includes average PPP balances of $0.36 billion, $1.10 billion and $0.77 billion, and related interest and fee income of $7.77 million, $9.82 million, and $10.02 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)

	Nine Months Ended								Nine Months Ended								Nine Months Ended September 30,
	September 30, 2021								September 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)	$	9,495,456		$	302,182		4.25	%	$	9,309,256		$	306,622		4.40	%	$	(4,440	)	$	(10,384	)	$	5,944
Taxable investment securities	1,359,366			19,640			1.93	%	1,253,783			23,304			2.48	%	(3,664		)	(5,507		)	1,843
Tax-exempt investment securities	131,106			1,462			1.49	%	140,248			2,476			2.35	%	(1,014		)	(862		)	(152		)
Total securities	1,490,472			21,102			1.89	%	1,394,031			25,780			2.47	%	(4,678		)	(6,369		)	1,691
Interest-bearing deposits	2,426,468			2,218			0.12	%	615,466			2,168			0.47	%	50			(2,552		)	2,602
Loans held for sale	502,758			10,477			2.78	%	477,964			11,386			3.18	%	(909		)	(1,478		)	569
Total earning assets	13,915,154			335,979			3.23	%	11,796,717			345,956			3.92	%	(9,977		)	(20,783		)	10,806
Less: allowance for credit losses	(115,100		)						(73,538		)
Total nonearning assets	1,351,796								2,264,295
Total assets	$	15,151,850							$	13,987,474
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	5,192,658		$	6,175		0.16	%	$	3,898,642		$	10,472		0.36	%	$	(4,297	)	$	(7,044	)	$	2,747
Savings	345,739			1,583			0.61	%	290,684			1,702			0.78	%	(119		)	(408		)	289
Certificates of deposit	1,872,393			13,963			1.00	%	2,451,715			34,925			1.90	%	(20,962		)	(14,008		)	(6,954		)
Total interest-bearing deposits	7,410,790			21,721			0.39	%	6,641,041			47,099			0.95	%	(25,378		)	(21,460		)	(3,918		)
Borrowings	445,399			1,798			0.53	%	1,452,652			8,661			0.78	%	(6,863		)	(2,169		)	(4,694		)
Subordinated debt, net	249,261			8,854			4.74	%	248,660			8,885			4.76	%	(31		)	(52		)	21
Total interest-bearing liabilities	8,105,450			32,373			0.53	%	8,342,353			64,645			1.04	%	(32,272		)	(23,681		)	(8,591		)
Demand deposits	4,880,493								3,687,791
Other noninterest-bearing liabilities	325,639								252,337
Total liabilities	13,311,582								12,282,481
Shareholders’ equity	1,840,268								1,704,993
Total liabilities and equity	$	15,151,850							$	13,987,474
Net interest income (tax-equivalent basis)				$	303,606							$	281,311				$	22,295		$	2,898		$	19,397
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment				(2,029		)						(1,781		)			(248		)
Net interest income (GAAP)				$	301,577							$	279,530				$	22,047

Interest rate spread (2)(4)							2.69	%							2.88	%
Interest expense as a percent of average earning assets							0.31	%							0.73	%
Net interest margin (tax equivalent basis) (3)(4)							2.92	%							3.19	%
Total cost of deposits							0.24	%							0.61	%

(1) September 30, 2021 and September 30, 2020 includes average PPP balances of $0.48 billion and $0.64 billion and related interest income of $29.42 million and $15.65 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)


	September 30,			December 31,
	2021			2020
	(unaudited)			(audited)
ASSETS
Cash and due from banks	$	75,370		$	41,514
Interest-bearing deposits at FRB - Richmond	3,155,039			1,795,241
Interest-bearing deposits in financial institutions	33,506			27,532
Total Cash and Cash Equivalents	3,263,915			1,864,287
Securities available for sale, at fair value (amortized cost of $1,528,483 and $1,310,250, and allowance for credit losses of $142 and $348 at September 30, 2021 and December 31, 2020, respectively.)	1,560,402			1,368,224
Securities held to maturity, at amortized cost (fair value $16,489 and $18,469 at September 30, 2021 and December 31, 2020, respectively.)	14,898			16,512
Less: allowance for credit losses	(94		)	(97		)
Securities held to maturity, net of allowance for credit losses	14,804			16,415
Other equity securities	6,621			6,492
FHLB stock	13,146			30,135
Total Securities	1,594,973			1,421,266
Mortgage loans held for sale	431,846			540,798
Loans, net of unearned income and deferred costs	9,297,565			9,629,068
Less: allowance for credit losses	(107,177		)	(120,157		)
Net Loans	9,190,388			9,508,911
Premises and equipment, net	270,810			260,242
Goodwill	457,187			452,328
Other intangible assets, net	50,839			45,533
BOLI	249,862			246,109
Other assets	301,552			286,970
TOTAL ASSETS	$	15,811,372		$	14,626,444

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	5,394,952		$	4,374,566
Interest-bearing:
Demand and money market accounts	5,681,181			4,819,604
Savings	366,165			330,091
Certificates of deposit	1,571,752			2,048,905
Total Deposits	13,014,050			11,573,166
Advances from the FHLB	155,537			456,038
Subordinated debt, net	249,503			249,055
FRB PPP lending facility	—			182,852
Repurchase agreements and other borrowings	82,413			67,786
Total Borrowings	487,453			955,731
Other liabilities	409,435			313,719
TOTAL LIABILITIES	13,910,938			12,842,616
Preferred stock, authorized and unissued shares - 2,000,000	—			—
Common stock, $1.667 par: 150,000,000 shares authorized
72,683,529 and 72,667,541 shares issued at
September 30, 2021 and December 31, 2020, respectively	121,163			121,132
Capital surplus	1,049,367			1,046,642
Retained earnings	690,960			557,889
Common stock issued to deferred compensation trust, at cost
905,484 and 873,486 shares at September 30, 2021 and December 31, 2020, respectively	(18,076		)	(16,969		)
Deferred compensation trust	18,076			16,969
Accumulated other comprehensive income (loss)	21,597			41,184
TOTAL SHAREHOLDERS’ EQUITY	1,883,087			1,766,847
Noncontrolling interest	17,347			16,981
TOTAL EQUITY	1,900,434			1,783,828
TOTAL LIABILITIES AND EQUITY	$	15,811,372		$	14,626,444

TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
INTEREST INCOME:
Loans, including fees	$	98,258		$	102,869		$	300,268		$	305,070
Investment securities	7,000			7,440			20,987			25,553
Interest-bearing deposits in financial institutions and federal funds sold	1,182			632			2,218			2,168
Mortgage loans held for sale	3,405			4,587			10,477			11,385
Total interest income	109,845			115,528			333,950			344,176
INTEREST EXPENSE:
Deposits	6,028			12,966			21,721			47,099
Advances from the FHLB	247			1,901			1,017			6,990
Subordinated debt, net	2,962			2,962			8,854			8,885
Repurchase agreements and other borrowings	165			940			781			1,672
Total interest expense	9,402			18,769			32,373			64,646
Net interest income	100,443			96,759			301,577			279,530
PROVISION FOR CREDIT LOSSES	(1,582		)	31,598			(15,665		)	65,559
Net interest income after provision for credit losses	102,025			65,161			317,242			213,971
NONINTEREST INCOME:
Residential mortgage banking income, net	25,422			37,531			88,359			74,662
Insurance commissions and other title fees and income, net	17,398			17,468			52,055			51,973
Real estate brokerage and property management income, net	14,283			11,301			43,201			29,020
Service charges on deposit accounts	2,524			1,986			7,104			6,314
Credit card merchant fees, net	1,660			1,506			4,630			3,793
BOLI	2,301			1,605			5,361			6,295
Other income	6,045			22,278			16,367			31,268
Net gain/(loss) on investment securities	—			1,701			1,252			9,632
Total noninterest income	69,633			95,376			218,329			212,957
NONINTEREST EXPENSE:
Salaries and employee benefits	61,230			61,408			181,030			174,201
Occupancy expense	7,656			8,396			23,286			23,124
Furniture and equipment	3,513			3,247			10,647			10,451
Amortization - intangibles	2,750			2,851			8,192			8,702
Software expense	4,209			3,572			12,896			10,556
Data processing	3,603			3,113			10,255			8,622
Professional fees	2,227			2,637			6,826			8,677
Advertising and marketing	3,865			1,870			10,090			7,440
Other expenses	15,033			14,887			43,583			38,121
Total noninterest expense	104,086			101,981			306,805			289,894
Income before income tax expense and noncontrolling interest	67,572			58,556			228,766			137,034
Provision for income tax expense	14,829			7,841			45,388			21,492
Net income	$	52,743		$	50,715		$	183,378		$	115,542
Net income attributable to noncontrolling interest	(2,343		)	(16,251		)	(8,177		)	(20,089		)
Net income attributable to TowneBank	$	50,400		$	34,464		$	175,201		$	95,453
Per common share information
Basic earnings	$	0.70		$	0.48		$	2.42		$	1.32
Diluted earnings	$	0.69		$	0.48		$	2.41		$	1.32
Cash dividends declared	$	0.20		$	0.18		$	0.38		$	0.54

TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)


	September 30,			June 30,			March 31,			December 31,			September 30,
	2021			2021			2021			2020			2020
	(unaudited)			(unaudited)			(unaudited)			(audited)			(unaudited)
ASSETS
Cash and due from banks	$	75,370		$	117,797		$	141,545		$	41,514		$	114,604
Interest-bearing deposits at FRB - Richmond	3,155,039			2,970,490			1,936,458			1,795,241			1,670,186
Interest-bearing deposits in financial institutions	33,506			31,971			30,031			27,532			24,890
Total Cash and Cash Equivalents	3,263,915			3,120,258			2,108,034			1,864,287			1,809,680
Securities available for sale	1,560,402			1,454,421			1,418,006			1,368,224			1,310,683
Securities held to maturity	14,898			15,389			15,980			16,512			17,131
Less: allowance for credit losses	(94		)	(97		)	(97		)	(97		)	(90		)
Securities held to maturity, net of allowance for credit losses	14,804			15,292			15,883			16,415			17,041
Other equity securities	6,621			6,395			6,355			6,492			6,497
FHLB stock	13,146			16,909			16,909			30,135			41,829
Total Securities	1,594,973			1,493,017			1,457,153			1,421,266			1,376,050
Mortgage loans held for sale	431,846			554,447			582,905			540,798			669,020
Loans, net of unearned income and deferred costs	9,297,565			9,423,578			9,734,583			9,629,068			9,770,570
Less: allowance for credit losses	(107,177		)	(108,130		)	(116,077		)	(120,157		)	(119,058		)
Net Loans	9,190,388			9,315,448			9,618,506			9,508,911			9,651,512
Premises and equipment, net	270,810			265,644			261,831			260,242			256,909
Goodwill	457,187			452,328			452,328			452,328			446,725
Other intangible assets, net	50,839			42,271			44,808			45,533			45,781
BOLI	249,862			249,213			247,655			246,109			244,103
Other assets	301,552			311,209			306,176			286,970			295,637
TOTAL ASSETS	$	15,811,372		$	15,803,835		$	15,079,396		$	14,626,444		$	14,795,417
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	5,394,952		$	5,243,074		$	4,840,678		$	4,374,566		$	4,464,178
Interest-bearing:
Demand and money market accounts	5,681,181			5,373,146			5,062,461			4,819,604			4,642,482
Savings	366,165			349,552			342,554			330,091			312,444
Certificates of deposit	1,571,752			1,998,828			1,893,951			2,048,905			2,285,859
Total Deposits	13,014,050			12,964,600			12,139,644			11,573,166			11,704,963
Advances from the FHLB	155,537			255,706			255,872			456,038			731,202
Subordinated debt, net	249,503			249,353			249,204			249,055			248,906
FRB PPP lending facility	—			—			183,164			182,852			—
Repurchase agreements and other borrowings	82,413			85,042			68,509			67,786			58,061
Total Borrowings	487,453			590,101			756,749			955,731			1,038,169
Other liabilities	409,435			379,278			366,697			313,719			303,582
TOTAL LIABILITIES	13,910,938			13,933,979			13,263,090			12,842,616			13,046,714
Preferred stock
Authorized shares - 2,000,000	—			—			—			—			—
Common stock, $1.667 par value	121,163			121,144			121,108			121,132			121,115
Capital surplus	1,049,367			1,048,332			1,047,312			1,046,642			1,045,170
Retained earnings	690,960			655,095			613,826			557,889			520,888
Common stock issued to deferred compensation
trust, at cost	(18,076		)	(18,076		)	(17,063		)	(16,969		)	(16,951		)
Deferred compensation trust	18,076			18,076			17,063			16,969			16,951
Accumulated other comprehensive income (loss)	21,597			29,273			17,969			41,184			44,569
TOTAL SHAREHOLDERS’ EQUITY	1,883,087			1,853,844			1,800,215			1,766,847			1,731,742
Noncontrolling interest	17,347			16,012			16,091			16,981			16,961
TOTAL EQUITY	1,900,434			1,869,856			1,816,306			1,783,828			1,748,703
TOTAL LIABILITIES AND EQUITY	$	15,811,372		$	15,803,835		$	15,079,396		$	14,626,444		$	14,795,417

TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except share data)


	Three Months Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
	2021			2021			2021			2020			2020
INTEREST INCOME:
Loans, including fees	$	98,258		$	100,614		$	101,396		$	104,182		$	102,869
Investment securities	7,000			6,871			7,117			7,499			7,440
Interest-bearing deposits in financial institutions and federal funds sold	1,182			619			416			435			632
Mortgage loans held for sale	3,405			3,711			3,361			3,867			4,587
Total interest income	109,845			111,815			112,290			115,983			115,528
INTEREST EXPENSE:
Deposits	6,028			7,144			8,548			10,762			12,966
Advances from the FHLB	247			274			497			1,404			1,901
Subordinated debt	2,962			2,962			2,930			2,962			2,962
Repurchase agreements and other borrowings	165			291			325			241			940
Total interest expense	9,402			10,671			12,300			15,369			18,769
Net interest income	100,443			101,144			99,990			100,614			96,759
PROVISION FOR CREDIT LOSSES	(1,582		)	(10,055		)	(4,027		)	1,617			31,598
Net interest income after provision for credit losses	102,025			111,199			104,017			98,997			65,161
NONINTEREST INCOME:
Residential mortgage banking income, net	25,422			25,524			37,412			37,504			37,531
Insurance commissions and other title fees and income, net	17,398			18,331			16,325			13,868			17,468
Real estate brokerage and property management income, net	14,283			10,984			17,934			9,229			11,301
Service charges on deposit accounts	2,524			2,391			2,190			1,707			1,986
Credit card merchant fees, net	1,660			1,667			1,302			1,377			1,506
BOLI	2,301			1,541			1,519			1,990			1,605
Other income	6,045			5,487			4,837			5,559			22,278
Net gain/(loss) on investment securities	—			252			1,000			—			1,701
Total noninterest income	69,633			66,177			82,519			71,234			95,376
NONINTEREST EXPENSE:
Salaries and employee benefits	61,230			61,365			58,435			61,475			61,408
Occupancy expense	7,656			7,559			8,072			8,193			8,396
Furniture and equipment	3,513			3,622			3,512			3,462			3,247
Amortization - intangibles	2,750			2,719			2,723			2,797			2,851
Software expense	4,209			4,494			4,194			4,066			3,572
Data processing	3,603			3,414			3,239			2,363			3,113
Professional fees	2,227			2,259			2,339			2,591			2,637
Advertising and marketing	3,865			3,257			2,968			2,204			1,870
Other expenses	15,033			16,705			11,844			18,781			14,887
Total noninterest expense	104,086			105,394			97,326			105,932			101,981
Income before income tax expense and noncontrolling interest	67,572			71,982			89,210			64,299			58,556
Provision for income tax expense	14,829			13,980			16,579			10,408			7,841
Net income	52,743			58,002			72,631			53,891			50,715
Net income attributable to noncontrolling interest	(2,343		)	(2,199		)	(3,636		)	(3,809		)	(16,251		)
Net income attributable to TowneBank	$	50,400		$	55,803		$	68,995		$	50,082		$	34,464
Per common share information
Basic earnings	$	0.70		$	0.77		$	0.95		$	0.69		$	0.48
Diluted earnings	$	0.69		$	0.77		$	0.95		$	0.69		$	0.48
Basic weighted average shares outstanding	72,506,877			72,468,094			72,414,953			72,357,177			72,339,413
Diluted weighted average shares outstanding	72,591,281			72,560,234			72,517,008			72,455,096			72,375,736
Cash dividends declared	$	0.20		$	0.20		$	0.18		$	0.18		$	0.18

TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)


	Three Months Ended												Nine Months Ended							Increase/(Decrease)
	September 30,								June 30,				September 30,							2021 over 2020
	2021				2020				2021				2021				2020			Amount				Percent
Revenue
Net interest income	$	97,668			$	92,869			$	98,134			$	293,407			$	269,941		$	23,466			8.69		%
Service charges on deposit accounts	2,524				1,986				2,391				7,104				6,315			789				12.49		%
Credit card merchant fees	1,660				1,506				1,667				4,630				3,793			837				22.07		%
Other income	6,334				4,876				5,404				16,706				15,826			880				5.56		%
Subtotal	10,518				8,368				9,462				28,440				25,934			2,506				9.66		%
Net gain/(loss) on investment securities	—				1,701				252				1,252				9,632			(8,380		)		(87.00	)	%
Total noninterest income	10,518				10,069				9,714				29,692				35,566			(5,874		)		(16.52	)	%
Total revenue	108,186				102,938				107,848				323,099				305,507			17,592				5.76		%

Provision for credit losses	(1,728		)		31,070				(9,532		)		(14,661		)		64,170			(78,831		)		(122.85	)	%

Expenses
Salaries and employee benefits	34,791				36,535				35,776				102,427				104,970			(2,543		)		(2.42	)	%
Occupancy expense	5,098				5,829				5,012				15,657				15,557			100				0.64		%
Furniture and equipment	2,602				2,424				2,816				8,086				7,800			286				3.67		%
Amortization of intangibles	862				1,063				912				2,737				3,341			(604		)		(18.08	)	%
Other expenses	16,580				15,793				18,392				49,020				45,214			3,806				8.42		%
Total expenses	59,933				61,644				62,908				177,927				176,882			1,045				0.59		%
Income before income tax, corporate allocation and noncontrolling interest	49,981				10,224				54,472				159,833				64,455			95,378				147.98		%
Corporate allocation	1,241				595				1,249				3,782				1,891			1,891				100.00		%
Income before income tax provision and noncontrolling interest	51,222				10,819				55,721				163,615				66,346			97,269				146.61		%
Provision for income tax expense	10,225				474				10,535				30,461				9,304			21,157				227.40		%
Net income	40,997				10,345				45,186				133,154				57,042			76,112				133.43		%
Noncontrolling interest	2				(2		)		1				(1		)		2			(3		)		(150.00	)	%
Net income attributable to TowneBank	$	40,999			$	10,343			$	45,187			$	133,153			$	57,044		$	76,109			133.42		%

Efficiency ratio ^(non-GAAP)	54.60			%	59.84			%	57.62			%	54.43			%	58.65		%	(4.22		)	%	(7.20	)	%

TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)


	Three Months Ended												Nine Months Ended								Increase/(Decrease)
	September 30,								June 30,				September 30,								2021 over 2020
	2021				2020				2021				2021				2020				Amount				Percent
Revenue
Residential mortgage brokerage income, net	$	26,637			$	38,074			$	26,383			$	90,898			$	76,549			$	14,349			18.74		%
Real estate brokerage income, net	3,781				3,688				3,893				10,125				8,212				1,913				23.30		%
Title insurance and settlement fees	706				654				684				1,917				1,728				189				10.94		%
Property management fees, net	10,502				7,613				7,091				33,076				20,808				12,268				58.96		%
Income from unconsolidated subsidiary	269				451				289				964				938				26				2.77		%
Net interest and other income	3,154				4,101				3,336				9,223				10,262				(1,039		)		(10.12	)	%
Total revenue	45,049				54,581				41,676				146,203				118,497				27,706				23.38		%

Provision for credit losses	146				528				(523		)		(1,004		)		1,389				(2,393		)		(172.28	)	%

Expenses
Salaries and employee benefits	17,375				15,744				16,018				50,240				42,095				8,145				19.35		%
Occupancy expense	1,926				1,906				1,935				5,732				5,595				137				2.45		%
Furniture and equipment	693				620				592				1,934				2,007				(73		)		(3.64	)	%
Amortization of intangible assets	702				658				590				1,882				1,973				(91		)		(4.61	)	%
Other expenses	11,103				9,226				10,442				30,774				24,366				6,408				26.30		%
Total expenses	31,799				28,154				29,577				90,562				76,036				14,526				19.10		%

Income before income tax, corporate allocation and noncontrolling interest	13,104				25,899				12,622				56,645				41,072				15,573				37.92		%
Corporate allocation	(1,000		)		(356		)		(1,000		)		(3,000		)		(1,119		)		(1,881		)		168.10		%
Income before income tax provision and noncontrolling interest	12,104				25,543				11,622				53,645				39,953				13,692				34.27		%
Provision for income tax expense	3,546				4,780				2,255				12,017				7,614				4,403				57.83		%
Net income	8,558				20,763				9,367				41,628				32,339				9,289				28.72		%
Noncontrolling interest	(2,345		)		(4,790		)		(2,200		)		(8,176		)		(7,996		)		(180		)		2.25		%
Net income attributable to TowneBank	$	6,213			$	15,973			$	7,167			$	33,452			$	24,343			$	9,109			37.42		%

Efficiency ratio ^(non-GAAP)	69.03			%	50.38			%	69.55			%	60.66			%	62.50			%	(1.84		)	%	(2.94	)	%

TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)


	Three Months Ended												Nine Months Ended								Increase/(Decrease)
	September 30,								June 30,				September 30,								2021 over 2020
	2021				2020				2021				2021				2020				Amount				Percent
Commission and fee income
Property and casualty	$	15,338			$	14,072			$	14,941			$	44,467			$	40,784			$	3,683			9.03		%
Employee benefits	3,820				3,825				3,430				11,135				11,534				(399		)		(3.46	)	%
Travel insurance	—				1,399				—				—				3,526				(3,526		)		(100.00	)	%
Specialized benefit services	164				165				163				494				489				5				1.02		%
Total commissions and fees	19,322				19,461				18,534				56,096				56,333				(237		)		(0.42	)	%

Contingency and bonus revenue	1,664				1,112				3,323				6,746				5,144				1,602				31.14		%
Other income	40				17,697				43				157				17,906				(17,749		)		(99.12	)	%
Total revenue	21,026				38,270				21,900				62,999				79,383				(16,384		)		(20.64	)	%

Employee commission expense	4,185				3,654				4,103				12,395				10,900				1,495				13.72		%
Revenue, net of commission expense	16,841				34,616				17,797				50,604				68,483				(17,879		)		(26.11	)	%

Salaries and employee benefits	9,064				9,129				9,571				28,363				27,136				1,227				4.52		%
Occupancy expense	632				661				612				1,897				1,972				(75		)		(3.80	)	%
Furniture and equipment	218				203				214				626				644				(18		)		(2.80	)	%
Amortization of intangible assets	1,186				1,130				1,217				3,573				3,388				185				5.46		%
Other expenses	1,254				1,060				1,295				3,857				3,836				21				0.55		%
Total operating expenses	12,354				12,183				12,909				38,316				36,976				1,340				3.62		%
Income before income tax, corporate allocation and noncontrolling interest	4,487				22,433				4,888				12,288				31,507				(19,219		)		(61.00	)	%
Corporate allocation	(241		)		(239		)		(249		)		(782		)		(772		)		(10		)		1.30		%
Income before income tax provision and noncontrolling interest	4,246				22,194				4,639				11,506				30,735				(19,229		)		(62.56	)	%
Provision for income tax expense	1,058				2,587				1,190				2,910				4,574				(1,664		)		(36.38	)	%
Net income	3,188				19,607				3,449				8,596				26,161				(17,565		)		(67.14	)	%
Noncontrolling interest	—				(11,459		)		—				—				(12,095		)		12,095				(100.00	)	%
Net income attributable to TowneBank	$	3,188			$	8,148			$	3,449			$	8,596			$	14,066			(5,470		)		(38.89	)	%

Provision for income taxes	1,058				2,587				1,190				2,910				4,574				(1,664		)		(36.38	)	%
Depreciation, amortization and interest expense	1,330				1,285				1,361				3,999				3,875				124				3.20		%
EBITDA ^(non-GAAP)	$	5,576			$	12,020			$	6,000			$	15,505			$	22,515			$	(7,010	)		(31.13	)	%

Efficiency ratio ^(non-GAAP)	66.31			%	31.93			%	65.70			%	68.66			%	49.05			%	19.61			%	39.98		%
*Included in other income is the gross gain on the sale of Red Sky					$	17,626											$	17,626
Efficiency ratio excluding gain					31.95			%									49.06			%

TOWNEBANK
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands)

	Three Months Ended												Nine Months Ended
	September 30,				September 30,				June 30,				September 30,				September 30,
	2021				2020				2021				2021				2020

Return on average assets (GAAP)	1.27			%	0.89			%	1.48			%	1.55			%	0.91			%
Impact of excluding average goodwill and other intangibles and amortization	0.10			%	0.08			%	0.11			%	0.11			%	0.10			%
Return on average tangible assets (non-GAAP)	1.37			%	0.97			%	1.59			%	1.66			%	1.01			%

Return on average equity (GAAP)	10.59			%	7.85			%	12.21			%	12.73			%	7.48			%
Impact of excluding average goodwill and other intangibles and amortization	4.50			%	3.81			%	5.17			%	5.39			%	3.84			%
Return on average tangible equity (non-GAAP)	15.09			%	11.66			%	17.38			%	18.12			%	11.32			%

Return on average common equity (GAAP)	10.68			%	7.91			%	12.31			%	12.84			%	7.53			%
Impact of excluding average goodwill and other intangibles and amortization	4.59			%	3.88			%	5.26			%	5.49			%	3.91			%
Return on average tangible common equity (non-GAAP)	15.27			%	11.79			%	17.57			%	18.33			%	11.44			%

Book value (GAAP)	$	25.91			$	23.83			$	25.51			$	25.91			$	23.83
Impact of excluding average goodwill and other intangibles and amortization	(6.99		)		(6.77		)		(6.81		)		(6.99		)		(6.77		)
Tangible book value (non-GAAP)	$	18.92			$	17.06			$	18.70			$	18.92			$	17.06

Efficiency ratio (GAAP)	61.20			%	53.08			%	62.99			%	59.01			%	58.86			%
Impact of exclusions	(1.62		)	%	4.28			%	(1.53		)	%	(1.44		)	%	1.58			%
Efficiency ratio (non-GAAP)	59.58			%	57.36			%	61.46			%	57.57			%	60.44			%

Average assets (GAAP)	$	15,706,998			$	15,487,152			$	15,143,888			$	15,151,850			$	13,987,474
Less: average goodwill and intangible assets	506,231				494,238				496,059				499,944				497,135
Average tangible assets (non-GAAP)	$	15,200,767			$	14,992,914			$	14,647,829			$	14,651,906			$	13,490,339

Average equity (GAAP)	$	1,888,451			$	1,747,033			$	1,833,592			$	1,840,268			$	1,704,993
Less: average goodwill and intangible assets	506,231				494,238				496,059				499,944				497,135
Average tangible equity (non-GAAP)	$	1,382,220			$	1,252,795			$	1,337,533			$	1,340,324			$	1,207,858

Average common equity (GAAP)	$	1,871,820			$	1,732,881			$	1,818,664			$	1,824,753			$	1,692,202
Less: average goodwill and intangible assets	506,231				494,238				496,059				499,944				497,135
Average tangible common equity (non-GAAP)	$	1,365,589			$	1,238,643			$	1,322,605			$	1,324,809			$	1,195,067

Net Income (GAAP)	$	50,400			$	34,464			$	55,803			$	175,201			$	95,453
Amortization of Intangibles, net of tax	2,172				2,252				2,148				6,472				6,875
Tangible net income (non-GAAP)	$	52,572			$	36,716			$	57,951			$	181,673			$	102,328

Net Income (GAAP)	$	50,400			$	34,464			$	55,803			$	175,201			$	95,453
Provision for credit losses	(1,582		)		31,599				(10,055		)		(15,665		)		65,559
Provision for income tax	14,829				7,841				13,980				45,388				21,492
Other nonrecurring (income) loss	—				(17,626		)		—				30				(17,626		)
Pre-provision, pre-tax net revenues (non-GAAP)	$	63,647			$	56,278			$	59,728			$	204,955			$	164,879

Total Revenue (GAAP)	$	170,076			$	192,136			$	167,321			$	519,906			$	492,487
Net (gain)/loss on investment securities	—				(1,701		)		(252		)		(1,252		)		(9,633		)
Other nonrecurring (income) loss	—				(17,626		)		—				30				(17,626		)
Total Revenue for efficiency calculation (non-GAAP)	$	170,076			$	172,809			$	167,069			$	518,684			$	465,228

Noninterest expense (GAAP)	$	104,086			$	101,981			$	105,394			$	306,805			$	289,894
Less: Amortization of intangibles	2,750				2,851				2,719				8,192				8,702
Noninterest expense net of amortization (non-GAAP)	$	101,336			$	99,130			$	102,675			$	298,613			$	281,192