TowneBank Reports Third Quarter 2023 Earnings

SUFFOLK, Va., Oct. 26, 2023 (GLOBE NEWSWIRE) -- TowneBank (the "Company" or "Towne") (NASDAQ: TOWN) today reported earnings for the quarter ended September 30, 2023 of $44.86 million, or $0.60 per diluted share, compared to $50.17 million, or $0.69 per diluted share, for the quarter ended September 30, 2022.

"We were pleased to deliver a solid performance for the quarter which reflected the strength of our core deposit franchise, diversified revenue model and robust capital levels. TowneBank continues to retain and grow its leading 28% deposit market share position in our home market in the Hampton Roads region, along with maintaining a top tier position in the Richmond, Raleigh, and Charlotte metropolitan markets, which validates our Main Street banking strategy. Average deposits were up $326 million versus the sequential quarter, excluding brokered deposits, which allowed us to reduce higher cost borrowings. Highlighting the value of our diversified revenue model, fee income benefited from stronger insurance revenues as we continue to build the intrinsic value of our insurance agency. While earnings will likely remain under pressure in the short run, we believe our conservative approach to balance sheet management will position our Company to benefit from opportunities despite a challenging operating environment," said G. Robert Aston, Jr., Executive Chairman.

Highlights for Third Quarter 2023:

• Total revenues were $172.86 million, a decrease of $6.37 million, or 3.56%, compared to third quarter 2022. A decline in net interest income of $10.98 million, driven by an increase in interest expense, was partially offset by an increase in noninterest income of $4.61 million.
• Loans held for investment were $11.17 billion, an increase of $0.61 billion, or 5.81%, compared to September 30, 2022, and a decrease of $35.04 million, or 0.31%, compared to June 30, 2023, 1.24% on an annualized basis. The increase from the prior year was primarily due to the January 2023 acquisition of Farmers Bankshares, Inc., ("Farmers"). Excluding loans acquired in the first quarter, total loans would have increased $335.47 million, or 3.18%, compared to September 30, 2022.
• Total deposits were $13.88 billion, an increase of $468.74 million, or 3.49%, compared to third quarter 2022, driven by the Farmers acquisition. In comparison to June 30, 2023, total deposits increased 0.83%, or $114.14 million, 3.29% on an annualized basis.
• Noninterest bearing deposits decreased 20.26%, to $4.44 billion, compared to third quarter 2022 and represented 32.02% of total deposits. Compared to the linked quarter, noninterest bearing deposits decreased 6.91%.
• Annualized return on common shareholders' equity was 9.04% compared to 10.69% in third quarter 2022. Annualized return on average tangible common shareholders' equity (non-GAAP) was 13.11% compared to 15.27% in third quarter 2022.
• Net interest margin was 2.95% for the quarter and taxable equivalent net interest margin (non-GAAP) was 2.98%, compared to the prior year quarter net interest margin of 3.28% and taxable equivalent net interest margin (non-GAAP) of 3.31%.
• The effective tax rate was 17.34% in the quarter compared to 20.08% in third quarter 2022 and 18.41% in the linked quarter.
  

"We continue to prudently manage the Company during the uncertain economic environment. Seasonality in noninterest revenues and member deposit balances may create some volatility in the next few quarters, however, we believe in our conservative approach to growth, liquidity and capital deployment will prove to be the right strategy for our long-term success," stated William I. Foster III, President and Chief Executive Officer.

Quarterly Net Interest Income:

• Net interest income was $113.06 million compared to $124.04 million for the quarter ended September 30, 2022. The decrease was driven by increased deposit costs outpacing higher earning asset yields.
• Tax-equivalent net interest margin (non-GAAP) was 2.98%, including purchase accounting accretion of 5 basis points, compared to 3.31%, including purchase accounting accretion of 2 basis points, for third quarter 2022.
• On an average basis, loans held for investment, with a yield of 5.13%, represented 73.45% of earning assets at September 30, 2023 compared to a yield of 4.25% and 69.83% of earning assets in the third quarter of 2022.
• Total cost of deposits increased to 1.84% from 0.30% for the quarter ended September 30, 2022. Interest expense on deposits increased $53.94 million, or 527.28%, over the prior year quarter driven by the increase in rate.
• Higher mortgage rates and low home sale inventory have adversely impacted our residential mortgage banking business.
• Average interest-earning assets totaled $15.21 billion at September 30, 2023 compared to $14.99 billion at September 30, 2022, an increase of 1.47%.
• Average interest-bearing liabilities totaled $9.75 billion, an increase of $1.40 billion, or 16.83% from prior year. Average short term FHLB borrowings were $248.91 million during the quarter.
  

Quarterly Provision for Credit Losses:

• The quarterly provision for credit losses was an expense of $1.01 million compared to $3.93 million one year ago and $3.56 million in the linked quarter.
• The allowance for credit losses on loans increased $1.65 million in third quarter 2023, compared to the linked quarter. The increase in the allowance was driven by changes in our portfolio composition, combined with changes to the macroeconomic forecast scenarios utilized in our models.
• Net loan recoveries were $1.07 million in the quarter compared to net recoveries of $187 thousand in the prior year quarter and net charge-offs of $9 thousand in the linked quarter. Two notable recoveries in third quarter 2023 were related to charge-offs that occurred in the fourth quarter of 2022 and first quarter of 2023.
• The ratio of net charge-offs (recoveries) to average loans on an annualized basis was (0.04)% in third quarter 2023, (0.01)% in third quarter 2022, and zero percent in the linked quarter.
• The allowance for credit losses on loans represented 1.12% of total loans at September 30, 2023, 1.02% at September 30, 2022, and 1.10% at June 30, 2023. The allowance for credit losses on loans was 17.60 times nonperforming loans compared to 20.48 times at September 30, 2022 and 18.09 times at June 30, 2023.
  

Quarterly Noninterest Income:

• Total noninterest income was $59.81 million compared to $55.20 million in 2022, an increase of $4.61 million, or 8.35%.
• Residential mortgage banking income was $10.65 million compared to $11.97 million in third quarter 2022. Loan volume decreased to $520.41 million in third quarter 2023 from $692.70 million in 2022. Higher mortgage rates coupled with low home sale inventory levels have adversely impacted production.   Residential purchase activity comprised 95.96% of production volume in the third quarter of 2023 compared to 93.20% in the prior year quarter.
• Gross margins on residential mortgage sales increased 15 basis points from 3.02% in third quarter 2022 to 3.17% in the current quarter.
• Total net insurance commissions increased $4.34 million, or 22.34%, to $23.78 million in third quarter 2023 compared to 2022. This resulted from increases in property and casualty commissions, which were driven by organic growth and commissions from a recent acquisition.
• Property management fee revenue increased 29.41%, or $2.91 million, to $12.80 million in third quarter 2023 compared to 2022. Reservation income increased compared to the prior year due to higher rental inventories and income from a recent acquisition.
  

Quarterly Noninterest Expense:

• Total noninterest expense was $117.70 million compared to $112.03 million in 2022, an increase of $5.67 million, or 5.06%. Increases in salaries and employee benefits of $1.80 million, FDIC and other insurance of $1.37 million, software expense of $1.54 million, and amortization expense of $0.97 million were the primary sources of the increase.
• Salaries and benefits expense increases were driven by annual base salary adjustments that went into effect July 2023 and an increase in the year-over-year number of employees, primarily related to the Farmers Bankshares, Inc. acquisition.
• FDIC and other insurance increased due to an increased assessment rate in 2023.
• Software expense increased due to growth related cost increases and a number of ongoing projects throughout the Company.
• Amortization expense increased driven by the recent Farmers Bankshares, Inc. acquisition.
  

Consolidated Balance Sheet Highlights:

• Total assets were $16.68 billion for the quarter ended September 30, 2023, a $544.72 million decrease compared to $17.23 billion at June 30, 2023. Total assets increased $728.56 million, or 4.57%, from $15.95 billion at September 30, 2022.
• Loans held for investment increased $0.61 billion, or 5.81%, compared to prior year but decreased $35.04 million, or 0.31%, compared to the linked quarter, 1.24% on an annualized basis.
• Mortgage loans held for sale increased $23.03 million, or 13.95%, compared to prior year but declined $41.45 million, or 18.06%, compared to the linked quarter.
• Total deposits increased $468.74 million, or 3.49%, compared to prior year, primarily in interest- bearing demand and time deposits. In the linked quarter comparison, total deposits increased $114.14 million, or 3.29% on an annualized basis.
• Total borrowings increased $86.75 million, or 27.09%, over third quarter 2022 but decreased $0.65 billion, or 61.59%, compared to the linked quarter. FHLB advances, which are included in total borrowings, decreased $0.65 billion in third quarter 2023, compared to the linked quarter.
  

Investment Securities:

• Total investment securities were $2.54 billion compared to $2.61 billion at June 30, 2023 and $2.45 billion at September 30, 2022. The weighted average duration of the portfolio at September 30, 2023 was 3.3 years. The carrying value of the available for sale debt securities portfolio included net unrealized losses of $238.52 million at September 30, 2023, compared to $195.98 million at June 30, 2023 and $199.84 million at September 30, 2022, with the increases related to market valuation adjustments due to rising interest rates.
  

Loans and Asset Quality:

• Total loans held for investment were $11.17 billion at September 30, 2023 compared to $11.21 billion at June 30, 2023 and $10.56 billion at September 30, 2022.
• Total loans for commercial real estate non-owner occupied office buildings were $714.20 million at September 30, 2023. The average loan balance was $1.83 million with less than $1.0 million total criticized or classified loans.
• Nonperforming assets were $7.88 million, or 0.05% of total assets, compared to $5.44 million, or 0.03%, at September 30, 2022.
• Nonperforming loans were 0.06% of period end loans compared to 0.05% at September 30, 2022.
• Other real estate owned increased to $766 thousand from $186 thousand at September 30, 2022.
  

Deposits and Borrowings:

• Total deposits were $13.88 billion compared to $13.77 billion at June 30, 2023 and $13.41 billion at September 30, 2022.
• Total loans held for investment to deposits was 80.49% compared to 81.41% at June 30, 2023 and 78.73% at September 30, 2022.
• Noninterest-bearing deposits were 32.02% of total deposits at September 30, 2023 compared to 34.68% at June 30, 2023 and 41.56% at September 30, 2022. Noninterest-bearing deposits declined $1.13 billion, or 20.26%, compared to September 30, 2022, primarily in commercial and escrow accounts.
• Total borrowings were $0.41 billion compared to $1.06 billion at June 30, 2023 and $0.32 billion at September 30, 2022.

Capital:

• Common equity tier 1 capital ratio of 12.19%.
• Tier 1 leverage capital ratio of 10.06%.
• Tier 1 risk-based capital ratio of 12.31%.
• Total risk-based capital ratio of 15.09%.
• Book value per common share was $26.28 compared to $26.36 at June 30, 2023 and $25.08 at September 30, 2022.
• Tangible book value per common share (non-GAAP) was $19.28 compared to $19.31 at June 30, 2023 and $18.17 at September 30, 2022.

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

TowneBank operates over 45 banking offices throughout Hampton Roads and Central Virginia, as well as Northeastern and Central North Carolina – serving as a local leader in promoting the social, cultural, and economic growth in each community. Towne offers a competitive array of business and personal banking solutions, delivered with only the highest ethical standards. Experienced local bankers providing a higher level of expertise and personal attention with local decision-making are key to the TowneBank strategy. TowneBank has grown its capabilities beyond banking to provide expertise through its affiliated companies that include Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices, RW Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations. With total assets of $16.68 billion as of September 30, 2023, TowneBank is one of the largest banks headquartered in Virginia.

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

Forward-Looking Statements:
This press release contains certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only the beliefs, expectations, or opinions of TowneBank and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: "believe," "expect," "anticipate," "intend," "plan,” "estimate," or words of similar meaning, or future or conditional terms, such as "will," "would," "should," "could," "may," "likely," "probably," or "possibly." These statements may address issues that involve significant risks, uncertainties, estimates, and assumptions made by management. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include competitive pressures in the banking industry that may increase significantly; changes in the interest rate environment that may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; an unforeseen outflow of cash or deposits or an inability to access the capital markets, which could jeopardize our overall liquidity or capitalization; changes in the creditworthiness of customers and the possible impairment of the collectability of loans; insufficiency of our allowance for credit losses due to market conditions, inflation, changing interest rates or other factors; adverse developments in the financial industry generally, such as the recent bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer and client behavior; general economic conditions, either nationally or regionally, that may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit or other services; unusual and infrequently occurring events, such as weather-related or natural disasters, acts of war or terrorism, or public health events (such as the COVID-19 pandemic); changes in the legislative or regulatory environment, including changes in accounting standards and tax laws, that may adversely affect our business; costs or difficulties related to the integration of the businesses we have acquired may be greater than expected; expected cost savings associated with pending or recently completed acquisitions may not be fully realized or realized within the expected time frame; cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain reliable electronic systems; our competitors may have greater financial resources and develop products that enable them to compete more successfully; changes in business conditions; changes in the securities market; and changes in our local economy with regard to our market area. Any forward-looking statements made by us or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events, or otherwise. For additional information on factors that could materially influence forward-looking statements included in this report, see the "Risk Factors" in TowneBank’s Annual Report on Form 10-K for the year ended December 31, 2022, our Quarterly Report on Form 10-Q for the period ended June 30, 2023, and related disclosures in other filings that have been, or will be, filed by TowneBank with the Federal Deposit Insurance Corporation.

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

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

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
		Three Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
			2023				2023				2023				2022				2022
Income and Performance Ratios:
	Total revenue	$	172,864			$	181,568			$	184,144			$	175,307			$	179,236
	Net income		44,745				43,368				38,478				46,494				50,671
	Net income available to common shareholders		44,862				41,716				38,333				46,685				50,169
	Net income per common share - diluted		0.60				0.56				0.52				0.64				0.69
	Book value per common share		26.28				26.36				26.40				25.73				25.08
	Book value per common share - tangible(non-GAAP)		19.28				19.31				19.04				18.84				18.17
	Return on average assets		1.06	%			0.99	%			0.95	%			1.16	%			1.22	%
	Return on average assets - tangible(non-GAAP)		1.17	%			1.10	%			1.05	%			1.25	%			1.31	%
	Return on average equity		8.96	%			8.46	%			7.99	%			9.98	%			10.60	%
	Return on average equity - tangible(non-GAAP)		12.97	%			12.35	%			11.71	%			14.26	%			15.08	%
	Return on average common equity		9.04	%			8.52	%			8.05	%			10.07	%			10.69	%
	Return on average common equity - tangible(non-GAAP)		13.11	%			12.48	%			11.83	%			14.44	%			15.27	%
	Noninterest income as a percentage of total revenue		34.60	%			37.43	%			33.00	%			26.54	%			30.80	%
Regulatory Capital Ratios (1):
	Common equity tier 1		12.19	%			11.99	%			11.68	%			11.92	%			11.92	%
	Tier 1		12.31	%			12.11	%			11.80	%			12.04	%			12.05	%
	Total		15.09	%			14.88	%			14.55	%			14.80	%			14.80	%
	Tier 1 leverage ratio		10.06	%			9.85	%			9.86	%			9.87	%			9.52	%
Asset Quality:
	Allowance for credit losses on loans to nonperforming loans	17.60x				18.09x				12.87x				17.67x				20.48x
	Allowance for credit losses on loans to period end loans		1.12	%			1.10	%			1.07	%			1.03	%			1.02	%
	Nonperforming loans to period end loans		0.06	%			0.06	%			0.08	%			0.06	%			0.05	%
	Nonperforming assets to period end assets		0.05	%			0.05	%			0.06	%			0.04	%			0.03	%
	Net charge-offs (recoveries) to average loans (annualized)	(0.04)%					—	%			0.14	%			0.11	%		(0.01)%
	Net charge-offs (recoveries)	$	(1,074	)		$	9			$	3,874			$	2,904			$	(187	)
	Nonperforming loans	$	7,110			$	6,827			$	9,322			$	6,273			$	5,250
	Former bank premises		—				1,782				—				—				—
	Foreclosed property		766				738				564				560				186
	Total nonperforming assets	$	7,876			$	9,347			$	9,886			$	6,833			$	5,436
	Loans past due 90 days and still accruing interest	$	970			$	360			$	206			$	324			$	725
	Allowance for credit losses on loans	$	125,159			$	123,513			$	120,002			$	110,816			$	107,497
Mortgage Banking:
	Loans originated, mortgage	$	348,387			$	409,050			$	280,401			$	299,298			$	458,254
	Loans originated, joint venture		172,021				207,450				135,818				157,511				234,443
	Total loans originated	$	520,408			$	616,500			$	416,219			$	456,809			$	692,697
	Number of loans originated		1,487				1,715				1,249				1,355				1,983
	Number of originators		192				196				194				186				194
	Purchase %		95.96	%			96.32	%			94.99	%			95.08	%			93.20	%
	Loans sold	$	567,291			$	525,078			$	346,288			$	483,254			$	701,908
	Rate lock asset	$	1,348			$	1,551			$	1,435			$	482			$	859
	Gross realized gain on sales and fees as a % of loans originated		3.17	%			2.96	%			3.11	%			2.93	%			3.02	%
Other Ratios:
	Net interest margin		2.95	%			2.98	%			3.36	%			3.51	%			3.28	%
	Net interest margin-fully tax equivalent(non-GAAP)		2.98	%			3.01	%			3.39	%			3.53	%			3.31	%
	Average earning assets/total average assets		90.73	%			90.96	%			90.98	%			91.51	%			91.92	%
	Average loans/average deposits		80.75	%			83.72	%			82.40	%			80.14	%			76.82	%
	Average noninterest deposits/total average deposits		33.50	%			36.07	%			38.35	%			41.07	%			41.77	%
	Period end equity/period end total assets		11.90	%			11.56	%			11.89	%			11.92	%			11.56	%
	Efficiency ratio(non-GAAP)		66.21	%			70.41	%			65.64	%			61.99	%			61.03	%
	(1) Current reporting period regulatory capital ratios are preliminary.

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
Investment Securities													% Change
	Q3				Q3				Q2				Q3 23 vs.			Q3 23 vs.
Available-for-sale securities, at fair value		2023				2022				2023			Q3 22			Q2 23
U.S. agency securities	$	300,161			$	331,297			$	318,354			(9.40)%			(5.71)%
U.S. Treasury notes		26,721				26,399				26,874			1.22	%		(0.57)%
Municipal securities		484,587				426,720				503,792			13.56	%		(3.81)%
Trust preferred and other corporate securities		74,024				79,501				71,116			(6.89)%			4.09	%
Mortgage-backed securities issued by GSE		1,079,303				1,027,331				1,086,947			5.06	%		(0.70)%
Allowance for credit losses		(1,343	)			(1,112	)			(1,232	)		20.77	%		9.01	%
Total	$	1,963,453			$	1,890,136			$	2,005,851			3.88	%		(2.11)%
Gross unrealized gains (losses) reflected in financial statements
Total gross unrealized gains	$	475			$	1,292			$	975			(63.24)%			(51.28)%
Total gross unrealized losses		(238,993	)			(201,127	)			(196,954	)		18.83	%		21.34	%
Net unrealized gains (losses) and other adjustments on AFS securities	$	(238,518	)		$	(199,835	)		$	(195,979	)		19.36	%		21.71	%
Held-to-maturity securities, at amortized cost
U.S. agency securities	$	101,659			$	100,905			$	101,469			0.75	%		0.19	%
U.S. Treasury notes		433,015				434,148				433,298			(0.26)%			(0.07)%
Municipal securities		5,249				5,159				5,226			1.74	%		0.44	%
Trust preferred corporate securities		2,185				2,235				2,198			(2.24)%			(0.59)%
Mortgage-backed securities issued by GSE		5,746				6,298				5,826			(8.76)%			(1.37)%
Allowance for credit losses		(85	)			(83	)			(87	)		2.41	%		(2.30)%
Total	$	547,769			$	548,662			$	547,930			(0.16)%			(0.03)%
Total gross unrealized gains	$	82			$	153			$	272			(46.41)%			(69.85)%
Total gross unrealized losses		(23,505	)			(31,116	)			(25,914	)		(24.46)%			(9.30)%
Net unrealized gains (losses) in HTM securities	$	(23,423	)		$	(30,963	)		$	(25,642	)		(24.35)%			(8.65)%
Total unrealized (losses) gains on AFS and HTM securities	$	(261,941	)		$	(230,798	)		$	(221,621	)		13.49	%		18.19	%
													% Change
Loans Held For Investment	Q3				Q3				Q2				Q3 23 vs.			Q3 23 vs.
		2023				2022				2023			Q3 22			Q2 23
Real estate - construction and development	$	1,325,976			$	1,324,831			$	1,364,575			0.09	%		(2.83)%
Commercial real estate - owner occupied		1,686,888				1,590,371				1,687,261			6.07	%		(0.02)%
Commercial real estate - non owner occupied		3,025,985				2,799,363				3,034,548			8.10	%		(0.28)%
Real estate - multifamily		542,611				458,803				520,464			18.27	%		4.26	%
Residential 1-4 family		1,818,843				1,567,024				1,790,225			16.07	%		1.60	%
HELOC		371,861				388,305				380,501			(4.23)%			(2.27)%
Commercial and industrial business (C&I)		1,237,524				1,251,350				1,259,282			(1.10)%			(1.73)%
Government		523,456				520,198				520,994			0.63	%		0.47	%
Indirect		548,621				572,710				562,161			(4.21)%			(2.41)%
Consumer loans and other		91,206				86,656				88,003			5.25	%		3.64	%
Total	$	11,172,971			$	10,559,611			$	11,208,014			5.81	%		(0.31)%
													% Change
Deposits	Q3				Q3				Q2				Q3 23 vs.			Q3 23 vs.
		2023				2022				2023			Q3 22			Q2 23
Noninterest-bearing demand	$	4,444,861			$	5,574,528			$	4,774,830			(20.26)%			(6.91)%
Interest-bearing:
Demand and money market accounts		6,764,415				6,042,417				6,529,336			11.95	%		3.60	%
Savings		350,031				387,622				361,891			(9.70)%			(3.28)%
Certificates of deposits		2,321,498				1,407,495				2,100,604			64.94	%		10.52	%
Total		13,880,805				13,412,062				13,766,661			3.49	%		0.83	%

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
	Three Months Ended											Three Months Ended											Three Months Ended
	September 30, 2023											June 30, 2023											September 30, 2022
					Interest				Average							Interest				Average							Interest				Average
	Average				Income/				Yield/			Average				Income/				Yield/			Average				Income/				Yield/
	Balance				Expense				Rate (1)			Balance				Expense				Rate (1)			Balance				Expense				Rate (1)
Assets:
Loans (net of unearned income and deferred costs)	$	11,169,924			$	144,457			5.13	%		$	11,209,641			$	139,814			5.00	%		$	10,465,441			$	112,225			4.25	%
Taxable investment securities		2,373,731				18,645			3.14	%			2,450,393				17,195			2.81	%			2,385,218				12,943			2.17	%
Tax-exempt investment securities		206,639				1,993			3.86	%			209,728				2,003			3.82	%			147,184				1,252			3.41	%
Total securities		2,580,370				20,638			3.20	%			2,660,121				19,198			2.89	%			2,532,402				14,195			2.24	%
Interest-bearing deposits		1,230,582				15,031			4.85	%			1,262,692				14,488			4.60	%			1,800,798				9,509			2.09	%
Loans held for sale		227,426				3,928			6.91	%			172,679				2,547			5.90	%			188,737				2,446			5.18	%
Total earning assets		15,208,302				184,054			4.80	%			15,305,133				176,047			4.61	%			14,987,378				138,375			3.66	%
Less: allowance for credit losses		(125,553	)										(121,140	)										(104,178	)
Total nonearning assets		1,680,110											1,642,972											1,421,094
Total assets	$	16,762,859										$	16,826,965										$	16,304,294
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,605,853			$	41,381			2.49	%		$	6,220,394			$	32,058			2.07	%		$	6,084,753			$	6,542			0.43	%
Savings		356,116				938			1.05	%			371,455				895			0.97	%			391,437				628			0.64	%
Certificates of deposit		2,236,102				21,852			3.88	%			1,968,623				15,718			3.20	%			1,456,746				3,060			0.83	%
Total interest-bearing deposits		9,198,071				64,171			2.77	%			8,560,472				48,671			2.28	%			7,932,936				10,230			0.51	%
Borrowings		299,105				3,382			4.42	%			863,255				10,345			4.74	%			94,411				139			0.58	%
Subordinated debt, net		255,446				2,245			3.52	%			255,264				2,236			3.50	%			320,518				3,117			3.89	%
Total interest-bearing liabilities		9,752,622				69,798			2.84	%			9,678,991				61,252			2.54	%			8,347,865				13,486			0.64	%
Demand deposits		4,633,856											4,829,395											5,690,020
Other noninterest-bearing liabilities		389,912											339,966											387,835
Total liabilities		14,776,390											14,848,352											14,425,720
Shareholders’ equity		1,986,469											1,978,613											1,878,574
Total liabilities and equity	$	16,762,859										$	16,826,965										$	16,304,294
Net interest income (tax-equivalent basis) (4)					$	114,256										$	114,795										$	124,889
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment						(1,198	)										(1,184	)										(851	)
Net interest income (GAAP)					$	113,058										$	113,611										$	124,038
Interest rate spread (2)(4)									1.96	%										2.07	%										3.02	%
Interest expense as a percent of average earning assets									1.82	%										1.61	%										0.36	%
Net interest margin (tax equivalent basis) (3)(4)									2.98	%										3.01	%										3.31	%
Total cost of deposits									1.84	%										1.46	%										0.30	%

(1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 21%.
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4) Non-GAAP.

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
	Nine Months Ended											Nine Months Ended
	September 30, 2023											September 30, 2022
					Interest				Average							Interest				Average
	Average				Income/				Yield/			Average				Income/				Yield/
	Balance				Expense				Rate (1)			Balance				Expense				Rate (1)
Assets:
Loans (net of unearned income and deferred costs)	$	11,159,329			$	417,808			5.01	%		$	10,113,980			$	309,283			4.09	%
Taxable investment securities		2,420,634				52,656			2.90	%			2,259,940				33,344			1.97	%
Tax-exempt investment securities		201,535				5,883			3.89	%			130,196				3,090			3.16	%
Total securities		2,622,169				58,539			2.98	%			2,390,136				36,434			2.03	%
Interest-bearing deposits		1,179,952				40,168			4.55	%			2,362,155				15,472			0.88	%
Loans held for sale		168,822				8,079			6.38	%			225,777				7,038			4.16	%
Total earning assets		15,130,272				524,594			4.64	%			15,092,048				368,227			3.26	%
Less: allowance for credit losses		(120,420	)										(104,733	)
Total nonearning assets		1,637,952											1,394,691
Total assets	$	16,647,804										$	16,382,006
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,349,422			$	96,742			2.04	%		$	6,203,889			$	11,898			0.26	%
Savings		376,282				2,676			0.95	%			387,290				1,664			0.57	%
Certificates of deposit		1,964,718				47,358			3.22	%			1,440,661				7,134			0.66	%
Total interest-bearing deposits		8,690,422				146,776			2.26	%			8,031,840				20,696			0.34	%
Borrowings		505,856				17,644			4.60	%			119,336				412			0.46	%
Subordinated debt, net		253,612				6,650			3.50	%			401,195				12,328			4.10	%
Total interest-bearing liabilities		9,449,890				171,070			2.42	%			8,552,371				33,436			0.52	%
Demand deposits		4,873,945											5,569,186
Other noninterest-bearing liabilities		353,459											374,794
Total liabilities		14,677,294											14,496,351
Shareholders’ equity		1,970,510											1,885,655
Total liabilities and equity	$	16,647,804										$	16,382,006
Net interest income (tax-equivalent basis)(4)					$	353,524										$	334,791
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment						(3,477	)										(2,209	)
Net interest income (GAAP)					$	350,047										$	332,582
Interest rate spread (2)(4)									2.22	%										2.74	%
Interest expense as a percent of average earning assets									1.51	%										0.30	%
Net interest margin (tax equivalent basis) (3)(4)									3.12	%										2.97	%
Total cost of deposits									1.45	%										0.20	%
(1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory rate of 21%.
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4) Non-GAAP.

TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
	September 30,				December 31,
		2023				2022
	(unaudited)				(audited)
ASSETS
Cash and due from banks	$	83,949			$	55,381
Interest-bearing deposits at FRB - Richmond		1,029,276				1,000,205
Federal funds sold and interest-bearing deposits in financial institutions		102,527				97,244
Total Cash and Cash Equivalents		1,215,752				1,152,830
Securities available for sale, at fair value (amortized cost of $2,203,314 and $2,033,040, and allowance for credit losses of $1,343 and $1,086 at September 30, 2023 and December 31, 2022, respectively)		1,963,453				1,840,902
Securities held to maturity, at amortized cost (fair value $524,431 and $518,993 at September 30, 2023 and December 31, 2022, respectively)		547,854				548,475
Less: allowance for credit losses		(85	)			(83	)
Securities held to maturity, net of allowance for credit losses		547,769				548,392
Other equity securities		14,062				6,424
FHLB stock		16,634				9,617
Total Securities		2,541,918				2,405,335
Mortgage loans held for sale		188,048				102,339
Loans, net of unearned income and deferred costs		11,172,971				10,794,602
Less: allowance for credit losses		(125,159	)			(110,816	)
Net Loans		11,047,812				10,683,786
Premises and equipment, net		335,522				304,802
Goodwill		456,684				458,482
Other intangible assets, net		67,496				43,163
BOLI		275,240				258,069
Other assets		551,884				436,461
TOTAL ASSETS	$	16,680,356			$	15,845,267
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	4,444,861			$	5,265,186
Interest-bearing:
Demand and money market accounts		6,764,415				6,185,075
Savings		350,031				374,987
Certificates of deposit		2,321,498				1,468,975
Total Deposits		13,880,805				13,294,223
Advances from the FHLB		104,139				29,674
Subordinated debt, net		255,580				247,420
Repurchase agreements and other borrowings		47,315				40,918
Total Borrowings		407,034				318,012
Other liabilities		408,305				344,275
TOTAL LIABILITIES		14,696,144				13,956,510
Preferred stock, authorized and unissued shares - 2,000,000		—				—
Common stock, $1.667 par value: 150,000,000 shares authorized
74,887,083 and 72,841,379 shares issued at
September 30, 2023 and December 31, 2022, respectively		124,837				121,426
Capital surplus		1,111,152				1,052,262
Retained earnings		911,042				840,777
Common stock issued to deferred compensation trust, at cost
1,001,376 and 931,030 shares at September 30, 2023 and December 31, 2022, respectively		(20,740	)			(18,974	)
Deferred compensation trust		20,740				18,974
Accumulated other comprehensive income (loss)		(179,043	)			(140,505	)
TOTAL SHAREHOLDERS’ EQUITY		1,967,988				1,873,960
Noncontrolling interest		16,224				14,797
TOTAL EQUITY		1,984,212				1,888,757
TOTAL LIABILITIES AND EQUITY	$	16,680,356			$	15,845,267

TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2023				2022				2023				2022
INTEREST INCOME:
Loans, including fees	$	143,605			$	111,590			$	415,351			$	307,595
Investment securities		20,292				13,979				57,519				35,913
Interest-bearing deposits in financial institutions and federal funds sold		15,031				9,509				40,168				15,472
Mortgage loans held for sale		3,928				2,446				8,079				7,038
Total interest income		182,856				137,524				521,117				366,018
INTEREST EXPENSE:
Deposits		64,171				10,230				146,776				20,696
Advances from the FHLB		3,438				83				16,838				261
Subordinated debt, net		2,245				3,117				6,650				12,328
Repurchase agreements and other borrowings		(56	)			56				806				151
Total interest expense		69,798				13,486				171,070				33,436
Net interest income		113,058				124,038				350,047				332,582
PROVISION FOR CREDIT LOSSES		1,007				3,925				16,232				2,532
Net interest income after provision for credit losses		112,051				120,113				333,815				330,050
NONINTEREST INCOME:
Residential mortgage banking income, net		10,648				11,968				31,380				39,782
Insurance commissions and other income, net		23,777				19,435				69,098				58,255
Property management income, net		12,800				9,891				40,433				36,489
Real estate brokerage income, net		(63	)			2,932				3,562				8,899
Service charges on deposit accounts		2,802				2,455				8,671				7,474
Credit card merchant fees, net		2,006				1,658				5,232				4,940
BOLI		1,814				1,585				5,196				5,155
Other income		6,022				5,274				24,956				18,052
Total noninterest income		59,806				55,198				188,528				179,046
NONINTEREST EXPENSE:
Salaries and employee benefits		67,258				65,463				204,124				194,318
Occupancy		9,027				8,748				27,579				25,417
Furniture and equipment		4,100				3,764				12,733				11,097
Amortization - intangibles		3,610				2,644				10,744				8,145
Software expense		6,130				4,594				17,922				13,848
Data processing		4,140				3,628				11,504				10,778
Professional fees		2,770				2,627				8,948				6,416
Advertising and marketing		3,653				4,290				12,012				12,508
Other expenses		17,014				16,276				61,762				47,612
Total noninterest expense		117,702				112,034				367,328				330,139
Income before income tax expense and noncontrolling interest		54,155				63,277				155,015				178,957
Provision for income tax expense		9,410				12,606				28,424				34,983
Net income	$	44,745			$	50,671			$	126,591			$	143,974
Net income attributable to noncontrolling interest		117				(502	)			(1,680	)			(1,672	)
Net income attributable to TowneBank	$	44,862			$	50,169			$	124,911			$	142,302
Per common share information
Basic earnings	$	0.60			$	0.69			$	1.67			$	1.96
Diluted earnings	$	0.60			$	0.69			$	1.67			$	1.96
Cash dividends declared	$	0.25			$	0.23			$	0.73			$	0.66

TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
	September 30,				June 30,				March 31,				December 31,				September 30,
		2023				2023				2023				2022				2022
	(unaudited)				(unaudited)				(unaudited)				(audited)				(unaudited)
ASSETS
Cash and due from banks	$	83,949			$	106,994			$	97,502			$	55,381			$	97,290
Interest-bearing deposits at FRB - Richmond		1,029,276				1,427,044				1,040,112				1,000,205				1,245,067
Federal funds sold and interest-bearing deposits in financial institutions		102,527				102,231				104,924				97,244				96,862
Total Cash and Cash Equivalents		1,215,752				1,636,269				1,242,538				1,152,830				1,439,219
Securities available for sale		1,963,453				2,005,851				2,078,483				1,840,902				1,890,136
Securities held to maturity		547,854				548,017				548,226				548,475				548,745
Less: allowance for credit losses		(85	)			(87	)			(88	)			(83	)			(83	)
Securities held to maturity, net of allowance for credit losses		547,769				547,930				548,138				548,392				548,662
Other equity securities		14,062				13,798				13,341				6,424				6,360
FHLB stock		16,634				40,454				29,837				9,617				9,475
Total Securities		2,541,918				2,608,033				2,669,799				2,405,335				2,454,633
Mortgage loans held for sale		188,048				229,502				157,161				102,339				165,023
Loans, net of unearned income and deferred costs		11,172,971				11,208,014				11,173,785				10,794,602				10,559,611
Less: allowance for credit losses		(125,159	)			(123,513	)			(120,002	)			(110,816	)			(107,497	)
Net Loans		11,047,812				11,084,501				11,053,783				10,683,786				10,452,114
Premises and equipment, net		335,522				326,686				321,944				304,802				295,345
Goodwill		456,684				456,695				477,234				458,482				458,482
Other intangible assets, net		67,496				71,106				73,238				43,163				44,854
BOLI		275,240				273,435				271,704				258,069				256,074
Other assets		551,884				538,848				463,076				436,461				386,053
TOTAL ASSETS	$	16,680,356			$	17,225,075			$	16,730,477			$	15,845,267			$	15,951,797
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	4,444,861			$	4,774,830			$	5,069,363			$	5,265,186			$	5,574,528
Interest-bearing:
Demand and money market accounts		6,764,415				6,529,336				6,284,184				6,185,075				6,042,417
Savings		350,031				361,891				389,173				374,987				387,622
Certificates of deposit		2,321,498				2,100,604				1,855,411				1,468,975				1,407,495
Total Deposits		13,880,805				13,766,661				13,598,131				13,294,223				13,412,062
Advances from the FHLB		104,139				754,319				504,497				29,674				29,850
Subordinated debt, net		255,580				255,365				255,151				247,420				247,265
Repurchase agreements and other borrowings		47,315				49,898				46,602				40,918				43,165
Total Borrowings		407,034				1,059,582				806,250				318,012				320,280
Other liabilities		408,305				408,333				336,201				344,275				375,869
TOTAL LIABILITIES		14,696,144				15,234,576				14,740,582				13,956,510				14,108,211
Preferred stock		—				—				—				—				—
Common stock, $1.667 par value		124,837				124,805				124,682				121,426				121,423
Capital surplus		1,111,152				1,109,526				1,109,387				1,052,262				1,052,374
Retained earnings		911,042				884,901				861,905				840,777				810,845
Common stock issued to deferred compensation
trust, at cost		(20,740	)			(20,134	)			(18,839	)			(18,974	)			(18,862	)
Deferred compensation trust		20,740				20,134				18,839				18,974				18,862
Accumulated other comprehensive income (loss)		(179,043	)			(145,392	)			(121,297	)			(140,505	)			(157,980	)
TOTAL SHAREHOLDERS’ EQUITY		1,967,988				1,973,840				1,974,677				1,873,960				1,826,662
Noncontrolling interest		16,224				16,659				15,218				14,797				16,924
TOTAL EQUITY		1,984,212				1,990,499				1,989,895				1,888,757				1,843,586
TOTAL LIABILITIES AND EQUITY	$	16,680,356			$	17,225,075			$	16,730,477			$	15,845,267			$	15,951,797

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,
		2023				2023				2023				2022			2022
INTEREST INCOME:
Loans, including fees	$	143,605			$	138,977			$	132,768			$	123,395		$	111,590
Investment securities		20,292				18,851				18,375				15,294			13,979
Interest-bearing deposits in financial institutions and federal funds sold		15,031				14,488				10,649				11,387			9,509
Mortgage loans held for sale		3,928				2,547				1,604				1,842			2,446
Total interest income		182,856				174,863				163,396				151,918			137,524
INTEREST EXPENSE:
Deposits		64,171				48,671				33,934				20,118			10,230
Advances from the FHLB		3,438				10,407				2,992				665			83
Subordinated debt, net		2,245				2,236				2,169				2,108			3,117
Repurchase agreements and other borrowings		(56	)			(62	)			923				244			56
Total interest expense		69,798				61,252				40,018				23,135			13,486
Net interest income		113,058				113,611				123,378				128,783			124,038
PROVISION FOR CREDIT LOSSES		1,007				3,556				11,670				6,074			3,925
Net interest income after provision for credit losses		112,051				110,055				111,708				122,709			120,113
NONINTEREST INCOME:
Residential mortgage banking income, net		10,648				11,360				9,372				7,368			11,968
Insurance commissions and other income, net		23,777				22,498				22,823				17,324			19,435
Property management income, net		12,800				12,098				15,535				7,756			9,891
Real estate brokerage income, net		(63	)			1,834				1,791				2,355			2,932
Service charges on deposit accounts		2,802				3,018				2,851				2,655			2,455
Credit card merchant fees, net		2,006				1,682				1,545				1,653			1,658
BOLI		1,814				1,710				1,672				1,985			1,585
Other income		6,022				13,757				5,177				5,428			5,274
Total noninterest income		59,806				67,957				60,766				46,524			55,198
NONINTEREST EXPENSE:
Salaries and employee benefits		67,258				67,445				69,420				61,307			65,463
Occupancy		9,027				9,487				9,064				9,252			8,748
Furniture and equipment		4,100				4,389				4,244				3,983			3,764
Amortization - intangibles		3,610				3,610				3,524				2,475			2,644
Software expense		6,130				6,169				5,624				5,111			4,594
Data processing		4,140				4,011				3,353				3,096			3,628
Professional fees		2,770				3,166				3,011				3,605			2,627
Advertising and marketing		3,653				3,959				4,401				3,489			4,290
Other expenses		17,014				22,992				21,756				18,823			16,276
Total noninterest expense		117,702				125,228				124,397				111,141			112,034
Income before income tax expense and noncontrolling interest		54,155				52,784				48,077				58,092			63,277
Provision for income tax expense		9,410				9,416				9,599				11,598			12,606
Net income		44,745				43,368				38,478				46,494			50,671
Net income attributable to noncontrolling interest		117				(1,652	)			(145	)			191			(502	)
Net income attributable to TowneBank	$	44,862			$	41,716			$	38,333			$	46,685		$	50,169
Per common share information
Basic earnings	$	0.60			$	0.56			$	0.52			$	0.64		$	0.69
Diluted earnings	$	0.60			$	0.56			$	0.52			$	0.64		$	0.69
Basic weighted average shares outstanding		74,750,294				74,691,121				74,363,222				72,686,303			72,578,736
Diluted weighted average shares outstanding		74,765,515				74,699,810				74,390,614				72,724,189			72,594,474
Cash dividends declared	$	0.25			$	0.25			$	0.23			$	0.23		$	0.23

TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)
	Three Months Ended												Nine Months Ended								Increase/(Decrease)
	September 30,								June 30,				September 30,								YTD 2023 over 2022
		2023				2022				2023				2023				2022			Amount				Percent
Revenue
Net interest income	$	112,189			$	123,039			$	113,327			$	349,165			$	327,226			$	21,939			6.70	%
Service charges on deposit accounts		2,802				2,455				3,018				8,671				7,474				1,197			16.02	%
Credit card merchant fees		2,006				1,658				1,682				5,232				4,940				292			5.91	%
Other income		6,608				5,332				6,153				18,499				17,083				1,416			8.29	%
Total noninterest income		11,416				9,445				10,853				32,402				29,497				2,905			9.85	%
Total revenue		123,605				132,484				124,180				381,567				356,723				24,844			6.96	%
Provision for credit losses		1,206				4,240				3,482				16,442				2,247				14,195			631.73	%
Expenses
Salaries and employee benefits		42,727				39,349				42,240				128,161				115,082				13,079			11.36	%
Occupancy		6,637				6,109				6,846				19,717				17,401				2,316			13.31	%
Furniture and equipment		3,273				2,803				3,544				10,150				8,259				1,891			22.90	%
Amortization of intangible assets		1,296				726				1,341				3,918				2,330				1,588			68.15	%
Other expenses		22,595				21,075				29,178				80,215				57,158				23,057			40.34	%
Total expenses		76,528				70,062				83,149				242,161				200,230				41,931			20.94	%
Income before income tax, corporate allocation and noncontrolling interest		45,871				58,182				37,549				122,964				154,246				(31,282	)		(20.28)%
Corporate allocation		1,291				902				1,271				3,763				3,520				243			6.90	%
Income before income tax provision and noncontrolling interest		47,162				59,084				38,820				126,727				157,766				(31,039	)		(19.67)%
Provision for income tax expense		7,440				11,507				6,114				21,204				29,782				(8,578	)		(28.80)%
Net income		39,722				47,577				32,706				105,523				127,984				(22,461	)		(17.55)%
Noncontrolling interest		—				—				—				—				—				—			N/M
Net income attributable to TowneBank	$	39,722			$	47,577			$	32,706			$	105,523			$	127,984			$	(22,461	)		(17.55)%
Efficiency ratio(non-GAAP)		60.86	%			52.34	%			65.88	%			62.44	%			55.48	%			6.96	%		12.55	%

TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)
	Three Months Ended												Nine Months Ended								Increase/(Decrease)
	September 30,								June 30,				September 30,								YTD 2023 over 2022
		2023				2022				2023				2023				2022			Amount				Percent
Revenue
Residential mortgage brokerage income, net	$	10,955			$	12,726			$	12,215			$	32,964			$	43,491			$	(10,527	)		(24.21)%
Real estate brokerage income, net		(63	)			2,932				1,834				3,562				8,899				(5,337	)		(59.97)%
Title insurance and settlement fees		—				525				152				443				1,590				(1,147	)		(72.14)%
Property management fees, net		12,800				9,891				12,098				40,433				36,489				3,944			10.81	%
Income from unconsolidated subsidiary		(63	)			77				(886	)			(884	)			359				(1,243	)		(346.24)%
Net interest and other income		1,163				1,508				9,468				10,817				6,851				3,966			57.89	%
Total revenue		24,792				27,659				34,881				87,335				97,679				(10,344	)		(10.59)%
Provision for credit losses		(199	)			(315	)			74				(210	)			285				(495	)		(173.68)%
Expenses
Salaries and employee benefits		12,881				15,854				13,949				41,670				49,646				(7,976	)		(16.07)%
Occupancy		1,669				1,919				1,869				5,559				5,814				(255	)		(4.39)%
Furniture and equipment		600				765				640				1,933				2,232				(299	)		(13.40)%
Amortization of intangible assets		742				817				741				2,166				2,449				(283	)		(11.56)%
Other expenses		9,544				8,687				9,337				27,319				29,472				(2,153	)		(7.31)%
Total expenses		25,436				28,042				26,536				78,647				89,613				(10,966	)		(12.24)%
Income before income tax, corporate allocation and noncontrolling interest		(445	)			(68	)			8,271				8,898				7,781				1,117			14.36	%
Corporate allocation		(600	)			(602	)			(600	)			(1,800	)			(2,602	)			802			(30.82)%
Income before income tax provision and noncontrolling interest		(1,045	)			(670	)			7,671				7,098				5,179				1,919			37.05	%
Provision for income tax expense		(99	)			(120	)			1,686				1,769				1,110				659			59.37	%
Net income		(946	)			(550	)			5,985				5,329				4,069				1,260			30.97	%
Noncontrolling interest		117				(502	)			(1,652	)			(1,680	)			(1,672	)			(8	)		0.48	%
Net income attributable to TowneBank	$	(829	)		$	(1,052	)		$	4,333			$	3,649			$	2,397			$	1,252			52.23	%
Efficiency ratio excluding gain on equity investment(non-GAAP)		99.61	%			98.43	%			99.03	%			97.43	%			89.24	%			8.19	%		9.18	%

TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)
	Three Months Ended												Nine Months Ended								Increase/(Decrease)
	September 30,								June 30,				September 30,								YTD 2023 over 2022
		2023				2022				2023				2023				2022			Amount				Percent
Commission and fee income
Property and casualty	$	22,103			$	17,567			$	20,028			$	60,259			$	49,451			$	10,808			21.86	%
Employee benefits		4,245				4,020				4,561				13,393				12,105				1,288			10.64	%
Specialized benefit services		133				160				153				445				489				(44	)		(9.00)%
Total commissions and fees		26,481				21,747				24,742				74,097				62,045				12,052			19.42	%
Contingency and bonus revenue		2,335				1,654				2,638				9,343				8,052				1,291			16.03	%
Other income		557				23				8				573				72				501			695.83	%
Total revenue		29,373				23,424				27,388				84,013				70,169				13,844			19.73	%
Employee commission expense		4,906				4,331				4,881				14,340				12,943				1,397			10.79	%
Revenue, net of commission expense		24,467				19,093				22,507				69,673				57,226				12,447			21.75	%
Salaries and employee benefits		11,650				10,260				11,256				34,293				29,590				4,703			15.89	%
Occupancy		721				720				772				2,303				2,202				101			4.59	%
Furniture and equipment		227				196				205				650				606				44			7.26	%
Amortization of intangible assets		1,572				1,101				1,528				4,660				3,366				1,294			38.44	%
Other expenses		1,568				1,653				1,782				4,614				4,532				82			1.81	%
Total operating expenses		15,738				13,930				15,543				46,520				40,296				6,224			15.45	%
Income before income tax, corporate allocation and noncontrolling interest		8,729				5,163				6,964				23,153				16,930				6,223			36.76	%
Corporate allocation		(691	)			(300	)			(671	)			(1,963	)			(918	)			(1,045	)		113.83	%
Income before income tax provision and noncontrolling interest		8,038				4,863				6,293				21,190				16,012				5,178			32.34	%
Provision for income tax expense		2,069				1,219				1,616				5,451				4,091				1,360			33.24	%
Net income		5,969				3,644				4,677				15,739				11,921				3,818			32.03	%
Noncontrolling interest		—				—				—				—				—				—			N/M
Net income attributable to TowneBank	$	5,969			$	3,644			$	4,677			$	15,739			$	11,921			$	3,818			32.03	%
Provision for income taxes		2,069				1,219				1,616				5,451				4,091				1,360			33.24	%
Depreciation, amortization and interest expense		1,726				1,228				1,683				5,115				3,767				1,348			35.78	%
EBITDA(non-GAAP)	$	9,764			$	6,091			$	7,976			$	26,305			$	19,779			$	6,526			32.99	%
Efficiency ratio(non-GAAP)		59.21	%			67.19	%			62.27	%			60.55	%			64.53	%		(3.98)        %				(6.17)%

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,
		2023				2022				2023				2023				2022
Return on average assets (GAAP)		1.06	%			1.22	%			0.99	%			1.00	%			1.16	%
Impact of excluding average goodwill and other intangibles and amortization		0.11	%			0.09	%			0.11	%			0.11	%			0.09	%
Return on average tangible assets (non-GAAP)		1.17	%			1.31	%			1.10	%			1.11	%			1.25	%
Return on average equity (GAAP)		8.96	%			10.60	%			8.46	%			8.48	%			10.09	%
Impact of excluding average goodwill and other intangibles and amortization		4.01	%			4.48	%			3.89	%			3.87	%			4.31	%
Return on average tangible equity (non-GAAP)		12.97	%			15.08	%			12.35	%			12.35	%			14.40	%
Return on average common equity (GAAP)		9.04	%			10.69	%			8.52	%			8.54	%			10.18	%
Impact of excluding average goodwill and other intangibles and amortization		4.07	%			4.58	%			3.96	%			3.95	%			4.39	%
Return on average tangible common equity (non-GAAP)		13.11	%			15.27	%			12.48	%			12.49	%			14.57	%
Book value (GAAP)	$	26.28			$	25.08			$	26.36			$	26.28			$	25.08
Impact of excluding average goodwill and other intangibles and amortization		(7.00	)			(6.91	)			(7.05	)			(7.00	)			(6.91	)
Tangible book value (non-GAAP)	$	19.28			$	18.17			$	19.31			$	19.28			$	18.17
Efficiency ratio (GAAP)		68.09	%			62.51	%			68.97	%			68.20	%			64.53	%
Impact of exclusions	(1.88)        %				(1.48)        %					1.44	%		(0.82)        %				(1.59)        %
Efficiency ratio (non-GAAP)		66.21	%			61.03	%			70.41	%			67.38	%			62.94	%
Average assets (GAAP)	$	16,762,859			$	16,304,294			$	16,826,965			$	16,647,804			$	16,382,006
Less: average goodwill and intangible assets		526,445				504,000				530,658				526,375				504,715
Average tangible assets (non-GAAP)	$	16,236,414			$	15,800,294			$	16,296,307			$	16,121,429			$	15,877,291
Average equity (GAAP)	$	1,986,469			$	1,878,574			$	1,978,613			$	1,970,510			$	1,885,655
Less: average goodwill and intangible assets		526,445				504,000				530,658				526,375				504,715
Average tangible equity (non-GAAP)	$	1,460,024			$	1,374,574			$	1,447,955			$	1,444,135			$	1,380,940
Average common equity (GAAP)	$	1,969,898			$	1,861,845			$	1,963,164			$	1,954,850			$	1,869,112
Less: average goodwill and intangible assets		526,445				504,000				530,658				526,375				504,715
Average tangible common equity (non-GAAP)	$	1,443,453			$	1,357,845			$	1,432,506			$	1,428,475			$	1,364,397
Net income (GAAP)	$	44,862			$	50,169			$	41,716			$	124,911			$	142,302
Amortization of intangibles, net of tax		2,852				2,089				2,852				8,488				6,435
Tangible net income (non-GAAP)	$	47,714			$	52,258			$	44,568			$	133,399			$	148,737
Noninterest expense (GAAP)	$	117,702			$	112,034			$	125,228			$	367,328			$	330,139
Less: amortization of intangibles		3,610				2,644				3,610				10,744				8,145
Noninterest expense net of amortization (non-GAAP)	$	114,092			$	109,390			$	121,618			$	356,584			$	321,994

TOWNEBANK
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
Reconciliation of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability		Three Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
			2023				2023				2023				2022				2022
Net income (GAAP)		$	44,862			$	41,716			$	38,333			$	46,685			$	50,169
Adjustments
Plus: Acquisition-related expenses, net of tax			458				2,457				4,803				320				610
Plus: Initial provision for acquired loans, net of tax			—				—				3,166				—				—
Less: Gain on sale of equity investments, net of noncontrolling interest and tax			(438	)			(5,513	)			—				—				—
Core operating earnings, excluding certain items affecting comparability (non-GAAP)		$	44,882			$	38,660			$	46,302			$	47,005			$	50,779
Weighted average diluted shares			74,765,515				74,699,810				74,390,614				72,724,189				72,594,474
Diluted EPS (GAAP)		$	0.60			$	0.56			$	0.52			$	0.64			$	0.69
Diluted EPS, excluding certain items affecting comparability (non-GAAP)		$	0.60			$	0.52			$	0.62			$	0.65			$	0.70
Average assets		$	16,762,859			$	16,826,965			$	16,349,040			$	15,929,756			$	16,304,294
Average tangible equity		$	1,460,024			$	1,447,955				1,424,030			$	1,352,891			$	1,374,574
Average common tangible equity		$	1,443,453			$	1,432,506			$	1,409,091			$	1,336,356			$	1,357,845
Return on average assets, excluding certain items affecting comparability (non-GAAP)			1.06	%			0.92	%			1.15	%			1.17	%			1.24	%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)			12.97	%			11.50	%			13.98	%			14.36	%			15.26	%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)			13.12	%			11.62	%			14.13	%			14.54	%			15.45	%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)			67.76	%			67.32	%			64.32	%			63.20	%			62.16	%

TOWNEBANK
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
Reconciliation of GAAP Earnings to Operating Earnings Excluding Certain Items Affecting Comparability		Nine Months Ended
		September 30,				September 30,
			2023				2022
Net income (GAAP)		$	124,911			$	142,302
Adjustments
Plus: Acquisition-related expenses, net of tax			7,718				705
Plus: Initial provision for acquired loans, net of tax			3,166				—
Less: Gain on sale of equity investments, net of noncontrolling interest and tax			(5,951	)			—
Total charges, net of taxes			4,933				705
Core operating earnings, excluding certain items affecting comparability (non-GAAP)		$	129,844			$	143,007
Weighted average diluted shares			74,618,743				72,567,596
Diluted EPS (GAAP)		$	1.67			$	1.96
Diluted EPS, excluding certain items affecting comparability (non-GAAP)		$	1.74			$	1.96
Average assets		$	16,647,804			$	16,382,006
Average tangible equity		$	1,444,135			$	1,380,940
Average tangible common equity		$	1,428,475			$	1,364,397
Return on average assets, excluding certain items affecting comparability (non-GAAP)			1.04	%			1.17	%
Return on average tangible equity, excluding certain items affecting comparability (non-GAAP)			12.81	%			14.47	%
Return on average common tangible equity, excluding certain items affecting comparability (non-GAAP)			12.95	%			14.64	%
Efficiency ratio, excluding certain items affecting comparability (non-GAAP)			67.61	%			64.39	%