SUFFOLK, Va., Jan. 24, 2024 (GLOBE NEWSWIRE) -- TowneBank (the "Company" or "Towne") (NASDAQ:TOWN) today reported financial results for the full year and fourth quarter ended December 31, 2023. For the year ended December 31, 2023, earnings were $153.72 million, or $2.06 per diluted share, compared to $188.99 million, or $2.60 per diluted share, for the year ended December 31, 2022. Excluding acquisition-related items, an FDIC special assessment, and certain notable items, adjusted earnings (non-GAAP) for 2023 were $160.94 million, or $2.16 per diluted share, compared to $190.01 million, or $2.62 per diluted share, for 2022. Earnings in the fourth quarter of 2023 were $28.80 million, or $0.39 per diluted share, compared to fourth quarter 2022 earnings of $46.69 million, or $0.64 per diluted share. Excluding acquisition-related items, the FDIC special assessment, and other notable items, adjusted earnings (non-GAAP) for fourth quarter 2023 were $31.10 million, or $0.42 per diluted share, compared to $47.01 million, or $0.65 per diluted share, for fourth quarter 2022.

"The banking industry operated in a challenging environment in 2023 driven by rising interest rates, inflationary impact on expenses and the failure of three somewhat unusual banks in California and New York whose business models carried significantly more risk than most Main Street banks like Towne. Our conservative approach on maintaining strong liquidity, prudent growth rates and robust capital served us well during this period of economic uncertainty. Standing by our members during difficult periods while protecting the interests of our shareholders, employees, and our communities continues to be the hallmark of our success," said G. Robert Aston, Jr., Executive Chairman.

Annual Highlights for 2023 Compared to 2022:

Total revenues increased $7.19 million, or 1.05%, to $694.12 million, compared to prior year. Noninterest income increased $10.77 million, driven by an $8.83 million gross gain on the sale of Berkshire Hathaway HomeSale ("BHHS") Towne Realty. The increase in noninterest income was partially offset by a decline in net interest income of $3.59 million, driven by increases in interest costs.
On an annual basis the insurance segment's gross revenue exceeded its targeted $100 million in 2023 with gross revenues of $109.46 million.
Towne successfully completed the acquisition of Farmers Bankshares, Inc. and its wholly owned subsidiary Farmers Bank ("Farmers") in January 2023. Included in the acquisition were $277.89 million in loans, $244.89 million in securities, and $514.57 million in deposits.
Loans held for investment increased $534.42 million, or 4.95%, from December 31, 2022.
Including acquired deposits from the Farmers Bank acquisition, total deposits were $13.89 billion, an increase of $598.98 million, or 4.51%, compared to prior year.
Noninterest-bearing deposits declined 17.52% to $4.34 billion driven significantly by movement into interest-bearing accounts coupled with lower balances in real estate escrow accounts. Noninterest-bearing deposits represented 31.26% of total deposits at December 31, 2023.
Return on average common shareholders' equity was 7.85%, and return on average tangible common shareholders' equity (non-GAAP) was 11.50%.
Net interest margin was 3.03% and taxable equivalent net interest margin (non-GAAP) was 3.06% compared to a prior year net interest margin of 3.08% and taxable equivalent net interest margin (non-GAAP) of 3.10%.
Effective tax rate of 16.82% compared to 19.77% in 2022. The decline in effective tax rate was related to changes in state taxes between years, increases in tax-advantaged income investments, and deferred taxes related to the sale of BHHS, Towne Realty.

Highlights for Fourth Quarter 2023:

Total revenues were $155.55 million in fourth quarter 2023, a decrease of $19.76 million, or 11.27% from the prior year quarter. This decrease was attributable to the decline in net interest income of $21.05 million, or 16.35%, due to margin compression. Noninterest income increased $1.29 million, or 2.77%, in the quarterly comparison.
Loans held for investment increased $156.05 million, or 5.54% on an annualized basis, from September 30, 2023.
Total deposits were relatively flat compared to September 30, 2023, increasing $12.40 million, or 0.35% on an annualized basis.
Noninterest-bearing deposits decreased $102.16 million, or 9.12%, on an annualized basis compared to the linked quarter.
In the quarter ended December 31, 2023, annualized return on average common shareholders' equity was 5.79% and annualized return on average tangible common shareholders' equity (non-GAAP) was 8.62%.
Net interest margin was 2.83% and taxable equivalent net interest margin (non-GAAP) was 2.86% compared to the prior year quarter net interest margin of 3.51% and taxable equivalent net interest margin (non-GAAP) of 3.53%.
Effective tax rate of 8.46% compared to 19.90% in fourth quarter 2022 and 17.34% in the linked quarter. A decrease in state tax expense in fourth quarter 2023 and an adjustment to deferred taxes related to the sale of BHHS were the primary drivers of the decline in effective tax rates.

"2023 was a watershed year for our Towne Insurance team as revenue crossed over the $100 million mark to end the year at $109 million, while continuing to create significant intrinsic value for our shareholders," said William I. Foster III, President and Chief Executive Officer. "Looking ahead, we will continue to seek new investment opportunities to provide new and exciting products for our members."

Quarterly Net Interest Income:

Net interest income was $107.73 million compared to $128.78 million for the quarter ended December 31, 2022. This decrease was driven by higher costs on deposits outpacing increases in loan and investment securities interest income.
Taxable equivalent net interest margin (non-GAAP) was 2.86%, including purchase accounting accretion of 4 basis points, compared to 3.53%, including purchase accounting accretion of 1 basis point, for fourth quarter 2022.
On an average basis, loans held for investment had a yield of 5.22%, which represented 74.39% of earning assets in the fourth quarter of 2023, compared to a yield of 4.60%, which represented 73.41% of earning assets in the fourth quarter of 2022.
Total cost of deposits increased to 2.09% from 1.84% in the linked quarter and 0.60% in the quarter ended December 31, 2022.
Average interest-earning assets totaled $15.10 billion at December 31, 2023 compared to $14.58 billion at December 31, 2022, an increase of 3.55%.
Average interest-bearing liabilities totaled $9.87 billion, an increase of $1.62 billion, or 19.58%, compared to the prior year.

Quarterly Provision for Credit Losses:

The provision for credit losses was an expense of $2.45 million in the current quarter and $1.01 million in the linked quarter, compared to $6.07 million one year ago.
The allowance for credit losses on loans increased $1.30 million, compared to the linked quarter. The increase in the allowance was driven by a combination of modest loan growth and changes in our portfolio composition, partially offset by improvements to the macroeconomic forecast scenarios utilized in our models.
Net charge-offs (recoveries) were $68 thousand compared to $2.90 million one year prior and $(1.07) million in the linked quarter. The ratio of net charge-offs (recoveries) to average loans on an annualized basis was 0.00% in fourth quarter 2023, 0.11% in fourth quarter 2022, and (0.04)% in the linked quarter.
The allowance for credit losses on loans represented 1.12% of total loans at both December 31, 2023 and September 30, 2023, compared to 1.03% at December 31, 2022. The allowance for credit losses on loans was 18.48 times nonperforming loans compared to 17.60 times at September 30, 2023 and 17.67 times at December 31, 2022.

Quarterly Noninterest Income:

Total noninterest income was $47.81 million compared to $46.52 million in 2022, an increase of $1.29 million, or 2.77%.
Residential mortgage banking income was $8.04 million compared to $7.37 million in fourth quarter 2022. Loan volume in the current quarter was $428.95 million, with purchase activity comprising 95.06%. Loan volume in fourth quarter 2022 was $456.81 million, with purchase activity of 95.08%. Sustained levels of increased mortgage rates and limited housing inventory have contributed to a decline in production.
Gross margins on residential mortgages increased 13 basis points from 2.93% in fourth quarter 2022 to 3.06% in the current quarter. Compared to the linked quarter, gross margins declined 11 basis points from 3.17%.
Property management fee revenue decreased 5.13%, or $398 thousand, in comparison to fourth quarter 2022 driven by lower reservation levels.
Total insurance commissions and other income increased $3.88 million, or 22.41%, to $21.21 million in the fourth quarter of 2023 due to organic growth and additional commissions from two acquisitions.

Quarterly Noninterest Expense:

Total noninterest expense was $121.90 million compared to $111.14 million, an increase of $10.75 million, or 9.68%. This reflects increases in FDIC and other insurance of $6.24 million, salary and benefits expense of $4.73 million, software expenses of $1.63 million, and amortization of intangibles of $0.94 million.
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 acquisition.
FDIC and other insurance increased primarily due to an accrued expense of $5.17 million before taxes, pursuant to the FDIC special assessment on certain banks to recover losses to the Deposit Insurance Funds associated with the protection of uninsured depositors in several bank failures that occurred in early 2023.
Software expense increased due to growth related cost increases and a number of ongoing projects throughout the Company.
The increase in amortization expense relates to core deposit intangible assets recognized from the recent Farmers acquisition.

Consolidated Balance Sheet Highlights:

Total assets were $16.84 billion at December 31, 2023, an increase of 6.25%, compared to $15.85 billion at December 31, 2022. The increase was driven by modest growth in loans and investment securities in addition to assets acquired with the purchase of Farmers.
Loans held for investment increased $534.42 million, or 4.95%, compared to year end 2022 and $156.05 million compared to the linked quarter. Management has focused on controlling loan growth in 2023 through pricing.
Mortgage loans held for sale increased $47.65 million, or 46.56%, compared to prior year but declined $38.06 million, or 20.24%, compared to the linked quarter.
Total deposits increased $598.98 million, or 4.51%, compared to December 31, 2022 and $12.40 million, or 0.09%, compared to the linked quarter.
Noninterest-bearing deposits decreased $922.49 million, or 17.52%, compared to prior year, and $102.16 million, or 2.30%, compared to the linked quarter.
Total loans held for investment to total deposits were 81.54% compared to 80.49% at September 30, 2023 and 81.20% at December 31, 2022.
Total borrowings increased $174.57 million, or 54.89%, from prior year.

Investment Securities:

Total investment securities were $2.64 billion compared to $2.54 billion at September 30, 2023 and $2.41 billion at December 31, 2022. The weighted average duration of the portfolio at December 31, 2023 was 3.2 years. The carrying value of the AFS debt securities portfolio included $162.12 million in net unrealized losses, related to rising rates, at December 31, 2023 compared to $191.05 million in net unrealized losses at December 31, 2022.

Loans and Asset Quality:

Total loans held for investment were $11.33 billion at December 31, 2023 compared to $11.17 billion at September 30, 2023 and $10.79 billion at December 31, 2022.
Nonperforming assets were $7.75 million, or 0.05% of total assets, compared to $6.83 million, or 0.04% of total assets, at December 31, 2022.
Nonperforming loans were 0.06% of period end loans at both December 31, 2023 and 2022.
Foreclosed property increased marginally, to $0.91 million from $0.56 million at December 31, 2022.

Deposits and Borrowings:

Total deposits were $13.89 billion compared to $13.88 billion at September 30, 2023 and $13.29 billion at December 31, 2022.
Noninterest-bearing deposits were 31.26% of total deposits at December 31, 2023 compared to 32.02% at September 30, 2023 and 39.61% at December 31, 2022. Noninterest-bearing deposits have been declining in 2023 driven by declines in noninterest-bearing commercial and escrow balances, a portion of which have moved to interest-bearing deposits.
Total borrowings were $492.58 million compared to $407.03 million at September 30, 2023 and $318.01 million at December 31, 2022.

Capital:

Common equity tier 1 capital ratio of 12.18% ⁽¹⁾.
Tier 1 leverage capital ratio of 10.17% ⁽¹⁾.
Tier 1 risk-based capital ratio of 12.29% ⁽¹⁾.
Total risk-based capital ratio of 15.06% ⁽¹⁾.
Book value per share was $27.24 compared to $26.28 at September 30, 2023 and $25.73 at December 31, 2022.
Tangible book value per share (non-GAAP) was $20.28 compared to $19.28 at September 30, 2023 and $18.84 at December 31, 2022.

⁽¹⁾ Preliminary.

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.

Now celebrating 25 years, TowneBank operates 50 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 $16.84 billion as of December 31, 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: core operating earnings, fully tax-equivalent net interest margin, 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 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
		December 31,			September 30,			June 30,			March 31,			December 31,
			2023			2023			2023			2023			2022
Income and Performance Ratios:
	Total revenue	$	155,546		$	172,864		$	181,568		$	184,144		$	175,307
	Net income		28,545			44,745			43,368			38,478			46,494
	Net income available to common shareholders		28,804			44,862			41,716			38,333			46,685
	Net income per common share - diluted		0.39			0.60			0.56			0.52			0.64
	Book value per common share		27.24			26.28			26.36			26.40			25.73
	Book value per share - tangible^(non-GAAP)		20.28			19.28			19.31			19.04			18.84
	Return on average assets		0.68	%		1.06	%		0.99	%		0.95	%		1.16	%
	Return on average assets - tangible^(non-GAAP)		0.77	%		1.17	%		1.10	%		1.05	%		1.25	%
	Return on average equity		5.75	%		8.96	%		8.46	%		7.99	%		9.98	%
	Return on average equity - tangible^(non-GAAP)		8.53	%		12.97	%		12.35	%		11.71	%		14.26	%
	Return on average common equity		5.79	%		9.04	%		8.52	%		8.05	%		10.07	%
	Return on average common equity - tangible^(non-GAAP)		8.62	%		13.11	%		12.48	%		11.83	%		14.44	%
	Noninterest income as a percentage of total revenue		30.74	%		34.60	%		37.43	%		33.00	%		26.54	%
Regulatory Capital Ratios (1)
	Common equity tier 1		12.18	%		12.19	%		11.99	%		11.68	%		11.92	%
	Tier 1		12.29	%		12.31	%		12.11	%		11.80	%		12.04	%
	Total		15.06	%		15.09	%		14.88	%		14.55	%		14.80	%
	Tier 1 leverage ratio		10.17	%		10.06	%		9.85	%		9.86	%		9.87	%
Asset Quality:
	Allowance for credit losses on loans to nonperforming loans	18.48x			17.60x			18.09x			12.87x			17.67x
	Allowance for credit losses on loans to period end loans		1.12	%		1.12	%		1.10	%		1.07	%		1.03	%
	Nonperforming loans to period end loans		0.06	%		0.06	%		0.06	%		0.08	%		0.06	%
	Nonperforming assets to period end assets		0.05	%		0.05	%		0.05	%		0.06	%		0.04	%
	Net charge-offs (recoveries) to average loans (annualized)		—	%	(0.04)%				—	%		0.14	%		0.11	%
	Net charge-offs (recoveries)	$	68		$	(1,074	)	$	9		$	3,874		$	2,904

	Nonperforming loans	$	6,843		$	7,110		$	6,827		$	9,322		$	6,273
	Former bank premises		—			—			1,782			—			—
	Foreclosed property		908			766			738			564			560
	Total nonperforming assets	$	7,751		$	7,876		$	9,347		$	9,886		$	6,833
	Loans past due 90 days and still accruing interest	$	735		$	970		$	360		$	206		$	324
	Allowance for credit losses on loans	$	126,461		$	125,159		$	123,513		$	120,002		$	110,816
Mortgage Banking:
	Loans originated, mortgage	$	302,616		$	348,387		$	409,050		$	280,401		$	299,298
	Loans originated, joint venture		126,332			172,021			207,450			135,818			157,511
	Total loans originated	$	428,948		$	520,408		$	616,500		$	416,219		$	456,809
	Number of loans originated		1,237			1,487			1,715			1,249			1,355
	Number of originators		181			192			196			194			186
	Purchase %		95.06	%		95.96	%		96.32	%		94.99	%		95.08	%
	Loans sold	$	468,014		$	567,291		$	525,078		$	346,288		$	483,254
	Rate lock asset	$	895		$	1,348		$	1,551		$	1,435		$	482
	Gross realized gain on sales and fees as a % of loans originated		3.06	%		3.17	%		2.96	%		3.11	%		2.93	%
Other Ratios:
	Net interest margin		2.83	%		2.95	%		2.98	%		3.36	%		3.51	%
	Net interest margin-fully tax equivalent^(non-GAAP)		2.86	%		2.98	%		3.01	%		3.39	%		3.53	%
	Average earning assets/total average assets		90.48	%		90.73	%		90.96	%		90.98	%		91.51	%
	Average loans/average deposits		80.72	%		80.75	%		83.72	%		82.40	%		80.14	%
	Average noninterest deposits/total average deposits		31.69	%		33.50	%		36.07	%		38.35	%		41.07	%
	Period end equity/period end total assets		12.21	%		11.90	%		11.56	%		11.89	%		11.92	%
	Efficiency ratio^(non-GAAP)		76.17	%		66.21	%		70.41	%		65.64	%		61.99	%
	(1) Current reporting period regulatory capital ratios are preliminary.

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)


Investment Securities										% Change
	Q4			Q4			Q3			Q4 23 vs.		Q4 23 vs.
*Available-for-sale securities, at fair value*		2023			2022			2023		Q4 22		Q3 23
U.S. agency securities	$	306,386		$	293,894		$	300,161		4.25	%	2.07	%
U.S. Treasury notes		27,684			26,693			26,721		3.71	%	3.60	%
Municipal securities		510,134			431,299			484,587		18.28	%	5.27	%
Trust preferred and other corporate securities		86,011			78,436			74,024		9.66	%	16.19	%
Mortgage-backed securities issued by GSE		1,200,625			1,011,666			1,079,303		18.68	%	11.24	%
Allowance for credit losses		(1,498	)		(1,086	)		(1,343	)	37.94	%	11.54	%
Total	$	2,129,342		$	1,840,902		$	1,963,453		15.67	%	8.45	%
*Gross unrealized gains (losses) reflected in financial statements*
Total gross unrealized gains	$	3,740		$	1,111		$	475		236.63	%	687.37	%
Total gross unrealized losses		(165,863	)		(192,163	)		(238,993	)	(13.69)%		(30.60)%
Net unrealized gains (losses) and other adjustments on AFS securities	$	(162,123	)	$	(191,052	)	$	(238,518	)	(15.14)%		(32.03)%

*Held-to-maturity securities, at amortized cost*
U.S. agency securities	$	101,850		$	101,092		$	101,659		0.75	%	0.19	%
U.S. Treasury notes		362,593			433,866			433,015		(16.43)%		(16.26)%
Municipal securities		5,272			5,181			5,249		1.76	%	0.44	%
Trust preferred corporate securities		2,172			2,223			2,185		(2.29)%		(0.59)%
Mortgage-backed securities issued by GSE		5,705			6,113			5,746		(6.67)%		(0.71)%
Allowance for credit losses		(84	)		(83	)		(85	)	1.20	%	(1.18)%
Total	$	477,508		$	548,392		$	547,769		(12.93)%		(12.83)%
Total gross unrealized gains	$	380		$	320		$	82		18.75	%	363.41	%
Total gross unrealized losses		(15,316	)		(29,802	)		(23,505	)	N/M		(34.84)%
Net unrealized gains (losses) on HTM securities	$	(14,936	)	$	(29,482	)	$	(23,423	)	(49.34)%		(36.23)%
Total unrealized (losses) gains on AFS and HTM securities	$	(177,059	)	$	(220,534	)	$	(261,941	)	(19.71)%		(32.41)%

										% Change
Loans Held For Investment	Q4			Q4			Q3			Q4 23 vs.		Q4 23 vs.
		2023			2022			2023		Q4 22		Q3 23
Real estate - construction and development	$	1,249,735		$	1,428,376		$	1,325,976		(12.51)%		(5.75)%
Commercial real estate - owner occupied		1,699,386			1,580,099			1,686,888		7.55	%	0.74	%
Commercial real estate - non owner occupied		3,117,071			2,830,620			3,025,985		10.12	%	3.01	%
Real estate - multifamily		583,209			496,190			542,611		17.54	%	7.48	%
Residential 1-4 family		1,852,891			1,634,062			1,818,843		13.39	%	1.87	%
HELOC		382,979			395,526			371,861		(3.17)%		2.99	%
Commercial and industrial business (C&I)		1,265,169			1,256,697			1,237,524		0.67	%	2.23	%
Government		525,261			512,265			523,456		2.54	%	0.34	%
Indirect		558,789			568,190			548,621		(1.65)%		1.85	%
Consumer loans and other		94,531			92,577			91,206		2.11	%	3.65	%
Total	$	11,329,021		$	10,794,602		$	11,172,971		4.95	%	1.40	%

										% Change
Deposits	Q4			Q4			Q3			Q4 23 vs.		Q4 23 vs.
		2023			2022			2023		Q4 22		Q3 23
Noninterest-bearing demand	$	4,342,701		$	5,265,186		$	4,444,861		(17.52)%		(2.30)%
Interest-bearing:
Demand and money market accounts		6,757,619			6,185,075			6,764,415		9.26	%	(0.10)%
Savings		336,492			374,987			350,031		(10.27)%		(3.87)%
Certificates of deposits		2,456,394			1,468,975			2,321,498		67.22	%	5.81	%
Total	$	13,893,206		$	13,294,223		$	13,880,805		4.51	%	0.09	%

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

	Three Months Ended								Three Months Ended								Three Months Ended
	December 31, 2023								September 30, 2023								December 31, 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)	$	11,229,965		$	147,647		5.22	%	$	11,169,924		$	144,457		5.13	%	$	10,701,612		$	124,064		4.60	%
Taxable investment securities		2,365,928			18,820		3.18	%		2,373,731			18,645		3.14	%		2,288,344			14,251		2.49	%
Tax-exempt investment securities		195,603			1,989		4.07	%		206,639			1,993		3.86	%		140,108			1,262		3.60	%
Total securities		2,561,531			20,809		3.25	%		2,580,370			20,638		3.20	%		2,428,452			15,513		2.56	%
Interest-bearing deposits		1,141,086			13,967		4.86	%		1,230,582			15,031		4.85	%		1,321,964			11,387		3.42	%
Loans held for sale		162,543			2,886		7.10	%		227,426			3,928		6.91	%		124,949			1,842		5.90	%
Total earning assets		15,095,125			185,309		4.87	%		15,208,302			184,054		4.80	%		14,576,977			152,806		4.16	%
Less: allowance for credit losses		(126,205	)							(125,553	)							(108,288	)
Total nonearning assets		1,714,122								1,680,110								1,461,067
Total assets	$	16,683,042							$	16,762,859							$	15,929,756
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,786,850		$	46,833		2.74	%	$	6,605,853		$	41,381		2.49	%	$	6,022,582		$	13,903		0.92	%
Savings		345,172			962		1.11	%		356,116			938		1.05	%		378,816			763		0.80	%
Certificates of deposit		2,370,723			25,405		4.25	%		2,236,102			21,852		3.88	%		1,468,589			5,452		1.47	%
Total interest-bearing deposits		9,502,745			73,200		3.06	%		9,198,071			64,171		2.77	%		7,869,987			20,118		1.01	%
Borrowings		114,151			958		3.28	%		299,105			3,382		4.42	%		138,510			909		2.57	%
Subordinated debt, net		255,663			2,236		3.50	%		255,446			2,245		3.52	%		247,319			2,108		3.41	%
Total interest-bearing liabilities		9,872,559			76,394		3.07	%		9,752,622			69,798		2.84	%		8,255,816			23,135		1.11	%
Demand deposits		4,408,712								4,633,856								5,484,477
Other noninterest-bearing liabilities		413,469								389,912								334,033
Total liabilities		14,694,740								14,776,390								14,074,326
Shareholders' equity		1,988,302								1,986,469								1,855,430
Total liabilities and equity	$	16,683,042							$	16,762,859							$	15,929,756
Net interest income (tax-equivalent basis) (4)				$	108,915							$	114,256							$	129,671
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment					(1,182	)							(1,198	)							(888	)
Net interest income (GAAP)				$	107,733							$	113,058							$	128,783
Interest rate spread (2)(4)							1.80	%							1.96	%							3.05	%
Interest expense as a percent of average earning assets							2.01	%							1.82	%							0.63	%
Net interest margin (tax equivalent basis) (3)(4)							2.86	%							2.98	%							3.53	%
Total cost of deposits							2.09	%							1.84	%							0.60	%

_{⁽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)

	Year Ended December 31,
		2023								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)	$	11,177,132		$	565,453		5.06	%	$	10,262,095		$	433,350		4.22	%
Taxable investment securities		2,406,845			71,476		2.97	%		2,267,099			47,594		2.10	%
Tax-exempt investment securities		200,040			7,872		3.94	%		132,694			4,351		3.28	%
Total securities		2,606,885			79,348		3.04	%		2,399,793			51,945		2.16	%
Interest-bearing deposits		1,170,156			54,135		4.63	%		2,099,970			26,859		1.28	%
Loans held for sale		167,240			10,965		6.56	%		200,363			8,880		4.43	%
Total earning assets		15,121,413			709,901		4.69	%		14,962,221			521,034		3.48	%
Less: allowance for credit losses		(121,878	)							(105,629	)
Total nonearning assets		1,657,151								1,411,422
Total assets	$	16,656,686							$	16,268,014
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,459,679		$	143,574		2.22	%	$	6,158,190		$	25,802		0.42	%
Savings		368,440			3,639		0.99	%		385,154			2,427		0.63	%
Certificates of deposit		2,067,053			72,763		3.52	%		1,447,701			12,586		0.87	%
Total interest-bearing deposits		8,895,172			219,976		2.47	%		7,991,045			40,815		0.51	%
Borrowings		407,125			18,600		4.51	%		124,168			1,320		1.05	%
Subordinated debt, net		254,129			8,886		3.50	%		362,410			14,436		3.98	%
Total interest-bearing liabilities		9,556,426			247,462		2.59	%		8,477,623			56,571		0.67	%
Demand deposits		4,756,681								5,547,835
Other noninterest-bearing liabilities		368,585								364,520
Total liabilities		14,681,692								14,389,978
Shareholders' equity		1,974,994								1,878,036
Total liabilities and equity	$	16,656,686							$	16,268,014
Net interest income (tax-equivalent basis) (4)				$	462,439							$	464,463
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment					(4,659	)							(3,098	)
Net interest income (GAAP)				$	457,780							$	461,365
Interest rate spread (2)(4)							2.10	%							2.81	%
Interest expense as a percent of average earning assets							1.64	%							0.38	%
Net interest margin (tax-equivalent basis) (3)(4)							3.06	%							3.10	%
Total cost of deposits							1.61	%							0.30	%

_{⁽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 per share data)

		2023			2022
	(unaudited)			(audited)
ASSETS
Cash and due from banks	$	85,584		$	55,381
Interest-bearing deposits at FRB - Richmond		939,356			1,000,205
Federal funds sold and interest-bearing deposits in financial institutions		103,417			97,244
Total Cash and Cash Equivalents		1,128,357			1,152,830
Securities available for sale, at fair value (amortized cost of $2,292,963 and $2,033,040, and allowance for credit losses of $1,498 and $1,086 at December 31, 2023 and December 31, 2022, respectively.		2,129,342			1,840,902
Securities held to maturity, at amortized cost (fair value $462,656 and $518,993 at December 31, 2023 and December 31, 2022, respectively.		477,592			548,475
Less: allowance for credit losses		(84	)		(83	)
Securities held to maturity, net of allowance for credit losses		477,508			548,392
Other equity securities		13,792			6,424
FHLB stock		21,372			9,617
Total Securities		2,642,014			2,405,335
Mortgage loans held for sale		149,987			102,339
Loans, net of unearned income and deferred costs		11,329,021			10,794,602
Less: allowance for credit losses		(126,461	)		(110,816	)
Net Loans		11,202,560			10,683,786
Premises and equipment, net		337,598			304,802
Goodwill		456,335			458,482
Other intangible assets, net		64,634			43,163
BOLI		277,445			258,069
Other assets		576,109			436,461
TOTAL ASSETS	$	16,835,039		$	15,845,267
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	4,342,701		$	5,265,186
Interest-bearing:
Demand and money market accounts		6,757,619			6,185,075
Savings		336,492			374,987
Certificates of deposit		2,456,394			1,468,975
Total Deposits		13,893,206			13,294,223
Advances from the FHLB		203,958			29,674
Subordinated debt, net		255,796			247,420
Repurchase agreements and other borrowings		32,826			40,918
Total Borrowings		492,580			318,012
Other liabilities		393,375			344,275
TOTAL LIABILITIES		14,779,161			13,956,510
Preferred stock, authorized and unissued shares - 2,000,000		—			—
Common stock, $1.667 par: Authorized shares - 150,000,000
Issued and outstanding shares 74,893,462 in 2023 and 72,841,379 in 2022		124,847			121,426
Capital surplus		1,112,761			1,052,262
Retained earnings		921,126			840,777
Common stock issued to deferred compensation trust, at cost
1,004,717 shares in 2023 and 931,030 shares in 2022		20,813			18,974
Deferred compensation trust		(20,813	)		(18,974	)
Accumulated other comprehensive income (loss)		(118,762	)		(140,505	)
TOTAL SHAREHOLDERS' EQUITY		2,039,972			1,873,960
Noncontrolling interest		15,906			14,797
TOTAL EQUITY		2,055,878			1,888,757
TOTAL LIABILITIES AND EQUITY	$	16,835,039		$	15,845,267

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

	Three Months Ended					Twelve Months Ended
	December 31,					December 31,
		2023			2022		2023			2022
	(unaudited)			(unaudited)		(unaudited)			(audited)
INTEREST INCOME:
Loans, including fees	$	146,810		$	123,395	$	562,160		$	430,990
Investment securities		20,464			15,294		77,982			51,207
Interest-bearing deposits in financial institutions and federal funds sold		13,967			11,387		54,135			26,859
Mortgage loans held for sale		2,886			1,842		10,965			8,880
Total interest income		184,127			151,918		705,242			517,936
INTEREST EXPENSE:
Deposits		73,200			20,118		219,976			40,815
Advances from the FHLB		917			665		17,754			926
Subordinated debt, net		2,236			2,108		8,886			14,436
Repurchase agreements and other borrowings		41			244		846			394
Total interest expense		76,394			23,135		247,462			56,571
Net interest income		107,733			128,783		457,780			461,365
PROVISION FOR CREDIT LOSSES		2,446			6,074		18,679			8,606
Net interest income after provision for credit losses		105,287			122,709		439,101			452,759
NONINTEREST INCOME:
Residential mortgage banking income, net		8,035			7,368		39,415			47,150
Insurance commissions and other income, net		21,207			17,324		90,305			75,579
Property management income, net		7,358			7,756		47,791			44,246
Real estate brokerage (loss) income, net		(32	)		2,355		3,530			11,253
Service charges on deposit accounts		3,035			2,655		11,706			10,130
Credit card merchant fees, net		1,476			1,653		6,709			6,592
BOLI		2,206			1,985		7,402			7,140
Gain (loss) on sale of equity investment		(10	)		—		9,377			—
Other income		4,538			5,428		20,107			23,480
Total noninterest income		47,813			46,524		236,342			225,570
NONINTEREST EXPENSE:
Salaries and employee benefits		66,035			61,307		270,158			255,625
Occupancy		9,308			9,252		36,886			34,669
Furniture and equipment		4,445			3,983		17,178			15,080
Amortization - intangibles		3,411			2,475		14,155			10,620
Software expense		6,743			5,111		24,666			18,959
Data processing		3,529			3,096		15,033			13,874
Professional fees		3,339			3,605		12,286			10,020
Advertising and marketing		3,377			3,489		15,390			15,997
Other expenses		21,708			18,823		83,470			66,435
Total noninterest expense		121,895			111,141		489,222			441,279
Income before income tax expense and noncontrolling interest		31,205			58,092		186,221			237,050
Provision for income tax expense		2,660			11,598		31,085			46,581
Net income	$	28,545		$	46,494	$	155,136		$	190,469
Net (income) loss attributable to noncontrolling interest		259			191		(1,421	)		(1,482	)
Net income attributable to TowneBank	$	28,804		$	46,685	$	153,715		$	188,987

Per common share information
Basic earnings	$	0.39		$	0.64	$	2.06		$	2.60
Diluted earnings	$	0.39		$	0.64	$	2.06		$	2.60
Cash dividends declared	$	0.25		$	0.23	$	0.98		$	0.89

TOWNEBANK

Consolidated Balance Sheets - Five Quarter Trend

(dollars in thousands, except per share data)

December 31,

September 30,

June 30,

March 31,

December 31,

TowneBank Reports Full Year and Fourth Quarter Financial Results For 2023