SUFFOLK, Va., July 27, 2023 (GLOBE NEWSWIRE) -- TowneBank ("Towne") (NASDAQ:TOWN) today reported earnings for the quarter ended June 30, 2023 of $41.72 million, or $0.56 per diluted share, compared to $46.55 million, or $0.64 per diluted share, for the quarter ended June 30, 2022. Excluding acquisition-related items and the gain on sale of Berkshire Hathaway HomeServices ("BHHS") Towne Realty, core earnings (non-GAAP) for the quarter ended June 30, 2023 were $38.66 million, or $0.52 per diluted share, compared to $46.60 million, or $0.64 per diluted share, for the quarter ended June 30, 2022.

"We continue to emphasize strong levels of on balance sheet liquidity, deposit growth, and prudent loan growth in the current environment. Our performance during the quarter delivered success on each of these important initiatives. Our HomeTowne Bankers generated nearly $170 million in deposit growth, or 5% on an annualized basis, which demonstrates the strength of our main street banking model. In addition, we increased reserve levels and grew tangible book value during the quarter. 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 Second Quarter 2023:

Total revenues were $181.57 million, an increase of $14.59 million, or 8.74%, compared to second quarter 2022. In addition to a $4.27 million increase in net interest income, noninterest income increased $10.32 million, driven by the $8.83 million gross gain on the sale of BHHS Towne Realty.
Loans held for investment were $11.21 billion, increases of $0.78 billion, or 7.50%, compared to June 30, 2022, and $34.23 million, or 0.31%, compared to March 31, 2023, 1.23% on an annualized basis. Towne completed the acquisition of Farmers Bankshares, Inc. and its wholly owned subsidiary, Farmers Bank, in January 2023. Excluding loans acquired in the first quarter, total loans would have increased $0.50 billion, or 4.84%, compared to June 30, 2022.
Total deposits were $13.77 billion, a decline of $229.45 million, or 1.64%, compared to second quarter 2022. Excluding $514.57 million in acquired deposits, total deposits would have decreased $744.02 million, or 5.32%, in the yearly comparison. In comparison to March 31, 2023, total deposits increased 1.24%, or $168.53 million, 4.97% on an annualized basis.
Noninterest bearing deposits decreased 16.57%, to $4.77 billion, compared to second quarter 2022 and represented 34.68% of total deposits. Compared to the linked quarter, noninterest bearing deposits decreased 5.81%.
Annualized return on common shareholders' equity was 8.52% compared to 10.03% in second quarter 2022. Annualized return on average tangible common shareholders' equity (non-GAAP) was 12.48% compared to 14.37% in second quarter 2022.
Net interest margin was 2.98% for the quarter and taxable equivalent net interest margin (non-GAAP) was 3.01% compared to the prior year quarter net interest margin of 2.88% and taxable equivalent net interest margin (non-GAAP) of 2.89%.
The effective tax rate of 18.41% in the quarter compared to 19.32% in second quarter 2022 and 20.03% in the linked quarter.

"We were pleased to announce the formation of BHHS RW Towne Realty, Inc during the quarter. Beyond the financial merits of the transaction, this combination brings two market-leading real estate brokerage operations together, each having distinct core competencies which will deliver unparalleled capabilities in Hampton Roads. The transaction also highlights TowneBank's proven approach to growing scale in our fee-based businesses whether organic, via acquisitions or by creating strategic partnerships," stated William I. Foster III, President and Chief Executive Officer.

Quarterly Net Interest Income:

Net interest income was $113.61 million compared to $109.34 million for the quarter ended June 30, 2022. The increase was driven by higher earning asset yields that were mostly offset by increased deposit costs.
Tax-equivalent net interest margin (non-GAAP) was 3.01%, including purchase accounting accretion of 4 basis points, compared to 2.89%, including purchase accounting accretion of 3 basis points, for second quarter 2022.
On an average basis, loans held for investment, with a yield of 5.00%, represented 73.24% of earning assets at June 30, 2023 compared to a yield of 3.99% and 66.91% of earning assets in the second quarter of 2022.
Total cost of deposits increased to 1.46% from 0.16% for the quarter ended June 30, 2022. Interest expense on deposits increased $43.10 million, or 773.34%, over the prior year quarter driven, primarily, by the increase in rate.
Higher mortgage rates, increased funding costs, and low home sale inventory, have adversely impacted our residential mortgage banking business.
Average interest-earning assets totaled $15.31 billion at June 30, 2023 compared to $15.24 billion at June 30, 2022, an increase of 0.40%.
Average interest-bearing liabilities totaled $9.68 billion, an increase of $0.92 billion, or 10.56% from prior year. Average short term FHLB borrowings were $802.75 million during the quarter.

Quarterly Provision for Credit Losses:

The quarterly provision for credit losses was an expense of $3.56 million compared to $0.06 million one year ago and $11.67 million in the linked quarter.
The allowance for credit losses on loans in second quarter 2023, compared to the linked quarter, increased $3.51 million. The increase in the allowance was driven by loan growth and changes in our portfolio composition, combined with changes to the macroeconomic forecast scenarios utilized in our models.
Net loan charge-offs were $9 thousand in the quarter compared to net recoveries of $80 thousand in the prior year quarter and $3.87 million in the linked quarter. The ratio of net charge-offs to average loans on an annualized basis was zero percent in second quarter 2023 and 2022, and 0.14% in the linked quarter.
The allowance for credit losses on loans represented 1.10% of total loans at June 30, 2023, 1.00% at June 30, 2022, and 1.07% at March 31, 2023. The allowance for credit losses on loans was 18.09 times nonperforming loans compared to 18.94 times at June 30, 2022 and 12.87 times at March 31, 2023.

Quarterly Noninterest Income:

Total noninterest income was $67.96 million compared to $57.64 million in 2022, an increase of $10.32 million, or 17.90%, $8.83 million of which was attributable to the gross gain on the sale of BHHS Towne Realty.
Residential mortgage banking income was $11.36 million compared to $13.18 million in second quarter 2022. Loan volume decreased to $616.50 million in second quarter 2023 from $837.81 million in 2022. The prolonged increase in mortgage rates has resulted in refinance activities dropping to 3.68% of total mortgage production volume, a historic low. Residential purchase activity comprised 96.32% of production volume in the second quarter of 2023 compared to 92.27% in the prior year quarter.
Gross margins on residential mortgage sales increased 4 basis points from 2.92% in second quarter 2022 to 2.96% in the current quarter.
Total net insurance commissions increased $2.75 million, or 13.94%, to $22.50 million in second 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 27.99%, or $2.65 million, to $12.10 million in second 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 $125.23 million compared to $108.73 million in 2022, an increase of $16.50 million, or 15.18%. Increases in salaries and employee benefits of $2.55 million, acquisition-related expenses of $2.95 million, FDIC and other insurance of $2.53 million, software expense of $1.41 million, and professional fees of $1.41 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 2022 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 a combination of timing and increased assessments in 2023.
Software and professional fee expenses increased due to a number of ongoing projects related to recent acquisitions and our loan portfolio.

Consolidated Balance Sheet Highlights:

Total assets were $17.23 billion for the quarter ended June 30, 2023, a $494.60 million increase compared to $16.73 billion at March 31, 2023. Total assets increased $361.04 million, or 2.14%, from $16.86 billion at June 30, 2022.
Loans held for investment increased $0.78 billion, or 7.50%, compared to prior year and $34.23 million, or 0.31%, compared to the linked quarter, 1.23% on an annualized basis. Excluding loans acquired in the prior quarter, total loans would have increased $0.50 billion, or 4.84%, compared to prior year.
Mortgage loans held for sale increased $17.79 million, or 8.40%, compared to prior year and $72.34 million, or 46.03%, compared to the linked quarter.
Excluding $514.57 million in acquired deposits, total deposits would have decreased $744.02 million, or 5.32%, compared to second quarter 2022. In the linked quarter comparison, total deposits increased $168.53 million, or 4.97%, on an annualized basis.
Total borrowings increased $459.58 million, or 76.59%, over second quarter 2022 and $253.33 million, or 31.42%, compared to the linked quarter. FHLB advances, which are included in total borrowings, increased $249.82 million in the quarter.

Investment Securities:

Total investment securities were $2.61 billion compared to $2.67 billion at March 31, 2023 and $2.48 billion at June 30, 2022. The weighted average duration of the portfolio at June 30, 2023 was 3.4 years. The carrying value of the available for sale debt securities portfolio included net unrealized losses of $195.98 million at June 30, 2023, compared to $165.71 million at March 31, 2023 and $120.41 million at June 30, 2022, related to market valuation adjustments due to rising interest rates.

Loans and Asset Quality:

Total loans held for investment were $11.21 billion at June 30, 2023 compared to $11.17 billion at March 31, 2023 and $10.43 billion at June 30, 2022.
Nonperforming assets were $9.35 million, or 0.05% of total assets, compared to $6.06 million, or 0.04%, at June 30, 2022.
Nonperforming loans were 0.06% of period end loans compared to 0.05% at June 30, 2022.
Other real estate owned increased to $2.52 million from $0.56 million at June 30, 2022, $1.78 million of which is former bank premises acquired in the Farmers transaction.

Deposits and Borrowings:

Total deposits were $13.77 billion compared to $13.60 billion at March 31, 2023 and $14.00 billion at June 30, 2022.
Total loans held for investment to deposits was 81.41% compared to 82.17% at March 31, 2023 and 74.49% at June 30, 2022.
Noninterest-bearing deposits were 34.68% of total deposits at June 30, 2023 compared to 37.28% at March 31, 2023 and 40.89% at June 30, 2022.
Total borrowings were $1.06 billion compared to $0.81 billion at March 31, 2023 and $0.60 billion at June 30, 2022.

Capital:

Common equity tier 1 capital ratio of 11.99%.
Tier 1 leverage capital ratio of 9.85%.
Tier 1 risk-based capital ratio of 12.11%.
Total risk-based capital ratio of 14.88%.
Book value per common share was $26.36 compared to $26.40 at March 31, 2023 and $25.48 at June 30, 2022.
Tangible book value per common share (non-GAAP) was $19.31 compared to $19.04 at March 31, 2023 and $18.58 at June 30, 2022.

BHHS Towne Realty

Effective April 27, 2023, the Company transferred its ownership interest in BHHS Towne Realty, which was formerly a subsidiary of TowneBank to BHHS RW Towne Realty, LLC, in exchange for a minority interest in that company.

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 $17.23 billion as of June 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; changes in the creditworthiness of customers and the possible impairment of the collectability of loans; general economic conditions, either nationally or regionally, that may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit or other services; 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, 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
	June 30,			March 31,			December 31,			September 30,			June 30,
	2023			2023			2022			2022			2022
Income and Performance Ratios:
Total revenue	$	181,568		$	184,144		$	175,307		$	179,236		$	166,980
Net income		43,368			38,478			46,494			50,671			47,054
Net income available to common shareholders		41,716			38,333			46,685			50,169			46,547
Pre-provision, pre-tax, net revenues^(non-GAAP)(1)		45,855			59,602			64,357			66,700			57,748
Net income per common share - diluted		0.56			0.52			0.64			0.69			0.64
Book value per common share		26.36			26.40			25.73			25.08			25.48
Book value per common share - tangible^(non-GAAP)		19.31			19.04			18.84			18.17			18.58
Return on average assets		0.99	%		0.95	%		1.16	%		1.22	%		1.13	%
Return on average assets - tangible^(non-GAAP)		1.10	%		1.05	%		1.25	%		1.31	%		1.22	%
Return on average equity		8.46	%		7.99	%		9.98	%		10.60	%		9.94	%
Return on average equity - tangible^(non-GAAP)		12.35	%		11.71	%		14.26	%		15.08	%		14.20	%
Return on average common equity		8.52	%		8.05	%		10.07	%		10.69	%		10.03	%
Return on average common equity - tangible^(non-GAAP)		12.48	%		11.83	%		14.44	%		15.27	%		14.37	%
Noninterest income as a percentage of total revenue		37.43	%		33.00	%		26.54	%		30.80	%		34.52	%
Regulatory Capital Ratios (1):
Common equity tier 1		11.99	%		11.68	%		11.92	%		11.92	%		11.83	%
Tier 1		12.11	%		11.80	%		12.04	%		12.05	%		11.97	%
Total		14.88	%		14.55	%		14.80	%		14.80	%		16.76	%
Tier 1 leverage ratio		9.85	%		9.86	%		9.87	%		9.52	%		9.19	%
Asset Quality:
Allowance for credit losses on loans to nonperforming loans	18.09x			12.87x			17.67x			20.48x			18.94x
Allowance for credit losses on loans to period end loans		1.10	%		1.07	%		1.03	%		1.02	%		1.00	%
Nonperforming loans to period end loans		0.06	%		0.08	%		0.06	%		0.05	%		0.05	%
Nonperforming assets to period end assets		0.05	%		0.06	%		0.04	%		0.03	%		0.04	%
Net charge-offs (recoveries) to average loans (annualized)		—	%		0.14	%		0.11	%	(0.01		)%		—	%
Net charge-offs (recoveries)	$	9		$	3,874		$	2,904		$	(187	)	$	(80	)

Nonperforming loans	$	6,827		$	9,322		$	6,273		$	5,250		$	5,493
Former bank premises		1,782			—			—			—			—
Foreclosed property		738			564			560			186			563
Total nonperforming assets	$	9,347		$	9,886		$	6,833		$	5,436		$	6,056
Loans past due 90 days and still accruing interest	$	360		$	206		$	324		$	725		$	232
Allowance for credit losses on loans	$	123,513		$	120,002		$	110,816		$	107,497		$	104,019
Mortgage Banking:
Loans originated, mortgage	$	409,050		$	280,401		$	299,298		$	458,254		$	588,529
Loans originated, joint venture		207,450			135,818			157,511			234,443			249,279
Total loans originated	$	616,500		$	416,219		$	456,809		$	692,697		$	837,808
Number of loans originated		1,715			1,249			1,355			1,983			2,282
Number of originators		196			194			186			194			201
Purchase %		96.32	%		94.99	%		95.08	%		93.20	%		92.27	%
Loans sold	$	525,078		$	346,288		$	483,254		$	701,908		$	759,073
Rate lock asset	$	1,551		$	1,435		$	482		$	859		$	1,935
Gross realized gain on sales and fees as a % of loans originated		2.96	%		3.11	%		2.93	%		3.02	%		2.92	%
Other Ratios:
Net interest margin		2.98	%		3.36	%		3.51	%		3.28	%		2.88	%
Net interest margin-fully tax equivalent^(non-GAAP)		3.01	%		3.39	%		3.53	%		3.31	%		2.89	%
Average earning assets/total average assets		90.96	%		90.98	%		91.51	%		91.92	%		92.22	%
Average loans/average deposits		83.72	%		82.40	%		80.14	%		76.82	%		74.57	%
Average noninterest deposits/total average deposits		36.07	%		38.35	%		41.07	%		41.77	%		40.56	%
Period end equity/period end total assets		11.56	%		11.89	%		11.92	%		11.56	%		11.09	%
Efficiency ratio^(non-GAAP)		70.41	%		65.64	%		61.99	%		61.03	%		63.51	%
(1) Current reporting period regulatory capital ratios are preliminary.

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)

Investment Securities										% Change
	Q2			Q2			Q1			Q2 23 vs.		Q2 23 vs.
*Available-for-sale securities, at fair value*	2023			2022			2023			Q2 22		Q1 23
U.S. agency securities	$	318,354		$	342,702		$	334,211		(7.10	)%	(4.74	)%
U.S. Treasury notes		26,874			27,496			27,272		(2.26	)%	(1.46	)%
Municipal securities		503,792			447,927			508,439		12.47	%	(0.91	)%
Trust preferred and other corporate securities		71,116			84,307			76,965		(15.65	)%	(7.60	)%
Mortgage-backed securities issued by GSE		1,086,947			1,012,690			1,132,746		7.33	%	(4.04	)%
Allowance for credit losses		(1,232	)		(1,111	)		(1,150	)	10.89	%	7.13	%
Total	$	2,005,851		$	1,914,011		$	2,078,483		4.80	%	(3.49	)%
*Gross unrealized gains (losses) reflected in financial statements*
Total gross unrealized gains	$	975		$	1,840		$	2,218		(47.01	)%	(56.04	)%
Total gross unrealized losses		(196,954	)		(122,253	)		(167,929	)	61.10	%	17.28	%
Net unrealized gains (losses) and other adjustments on AFS securities	$	(195,979	)	$	(120,413	)	$	(165,711	)	62.76	%	18.27	%
*Held-to-maturity securities, at amortized cost*
U.S. agency securities	$	101,469		$	100,718		$	101,281		0.75	%	0.19	%
U.S. Treasury notes		433,298			434,432			433,584		(0.26	)%	(0.07	)%
Municipal securities		5,226			5,138			5,203		1.71	%	0.44	%
Trust preferred corporate securities		2,198			2,248			2,210		(2.22	)%	(0.54	)%
Mortgage-backed securities issued by GSE		5,826			6,547			5,948		(11.01	)%	(2.05	)%
Allowance for credit losses		(87	)		(85	)		(88	)	2.35	%	(1.14	)%
Total	$	547,930		$	548,998		$	548,138		(0.19	)%	(0.04	)%

Total gross unrealized gains	$	272		$	448		$	392		(39.29	)%	(30.61	)%
Total gross unrealized losses		(25,914	)		(18,615	)		(24,018	)	39.21	%	7.89	%
Net unrealized gains (losses) in HTM securities	$	(25,642	)	$	(18,167	)	$	(23,626	)	41.15	%	8.53	%
Total unrealized (losses) gains on AFS and HTM securities	$	(221,621	)	$	(138,580	)	$	(189,337	)	59.92	%	17.05	%
										% Change
Loans Held For Investment	Q2			Q2			Q1			Q2 23 vs.		Q2 23 vs.
	2023			2022			2023			Q2 22		Q1 23
Real estate - construction and development	$	1,364,575		$	1,383,791		$	1,473,034		(1.39	)%	(7.36	)%
Commercial real estate - owner occupied		1,687,261			1,579,464			1,675,119		6.82	%	0.72	%
Commercial real estate - non owner occupied		3,034,548			2,757,651			2,908,791		10.04	%	4.32	%
Real estate - multifamily		520,464			371,658			505,237		40.04	%	3.01	%
Residential 1-4 family		1,790,225			1,513,662			1,734,698		18.27	%	3.20	%
HELOC		380,501			386,067			387,967		(1.44	)%	(1.92	)%
Commercial and industrial business (C&I)		1,259,282			1,261,279			1,297,707		(0.16	)%	(2.96	)%
Government		520,994			527,230			510,494		(1.18	)%	2.06	%
Indirect		562,161			555,638			582,306		1.17	%	(3.46	)%
Consumer loans and other		88,003			89,320			98,432		(1.47	)%	(10.60	)%
Total	$	11,208,014		$	10,425,760		$	11,173,785		7.50	%	0.31	%

										% Change
Deposits	Q2			Q2			Q1			Q2 23 vs.		Q2 23 vs.
	2023			2022			2023			Q2 22		Q1 23
Noninterest-bearing demand	$	4,774,830		$	5,723,415		$	5,069,363		(16.57	)%	(5.81	)%
Interest-bearing:
Demand and money market accounts		6,529,336			6,384,818			6,284,184		2.26	%	3.90	%
Savings		361,891			388,364			389,173		(6.82	)%	(7.01	)%
Certificates of deposits		2,100,604			1,499,514			1,855,411		40.09	%	13.22	%
Total		13,766,661			13,996,111			13,598,131		(1.64	)%	1.24	%

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

	Three Months Ended								Three Months Ended								Three Months Ended
	June 30, 2023								March 31, 2023								June 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)	$	11,209,641		$	139,814		5.00	%	$	11,097,626		$	133,536		4.88	%	$	10,199,019		$	101,463		3.99	%
Taxable investment securities		2,450,393			17,195		2.81	%		2,438,489			16,816		2.76	%		2,331,410			11,388		1.95	%
Tax-exempt investment securities		209,728			2,003		3.82	%		188,033			1,887		4.01	%		132,304			1,059		3.20	%
Total securities		2,660,121			19,198		2.89	%		2,626,522			18,703		2.85	%		2,463,714			12,447		2.02	%
Interest-bearing deposits		1,262,692			14,488		4.60	%		1,044,538			10,649		4.13	%		2,368,147			4,616		0.78	%
Loans held for sale		172,679			2,547		5.90	%		105,018			1,604		6.11	%		213,109			2,217		4.16	%
Total earning assets		15,305,133			176,047		4.61	%		14,873,704			164,492		4.49	%		15,243,989			120,743		3.18	%
Less: allowance for credit losses		(121,140	)							(114,447	)							(103,871	)
Total nonearning assets		1,642,972								1,589,783								1,389,692
Total assets	$	16,826,965							$	16,349,040							$	16,529,810
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,220,394		$	32,058		2.07	%	$	6,217,754		$	23,302		1.52	%	$	6,349,725		$	3,094		0.20	%
Savings		371,455			895		0.97	%		401,776			844		0.85	%		387,498			526		0.54	%
Certificates of deposit		1,968,623			15,718		3.20	%		1,683,354			9,788		2.36	%		1,392,474			1,953		0.56	%
Total interest-bearing deposits		8,560,472			48,671		2.28	%		8,302,884			33,934		1.66	%		8,129,697			5,573		0.27	%
Borrowings		863,255			10,345		4.74	%		355,833			3,915		4.40	%		128,276			135		0.42	%
Subordinated debt, net		255,264			2,236		3.50	%		250,066			2,169		3.47	%		496,862			5,091		4.10	%
Total interest-bearing liabilities		9,678,991			61,252		2.54	%		8,908,783			40,018		1.82	%		8,754,835			10,799		0.49	%
Demand deposits		4,829,395								5,164,415								5,547,936
Other noninterest-bearing liabilities		339,966								329,840								348,678
Total liabilities		14,848,352								14,403,038								14,651,449
Shareholders' equity		1,978,613								1,946,002								1,878,361
Total liabilities and equity	$	16,826,965							$	16,349,040							$	16,529,810
Net interest income (tax-equivalent basis) (4)				$	114,795							$	124,474							$	109,944
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment					(1,184	)							(1,096	)							(604	)
Net interest income (GAAP)				$	113,611							$	123,378							$	109,340

Interest rate spread (2)(4)							2.07	%							2.67	%							2.69	%
Interest expense as a percent of average earning assets							1.61	%							1.09	%							0.28	%
Net interest margin (tax equivalent basis) (3)(4)							3.01	%							3.39	%							2.89	%
Total cost of deposits							1.46	%							1.02	%							0.16	%

(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)

	Six Months Ended								Six Months Ended
	June 30, 2023								June 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)	$	11,153,944		$	273,349		4.94	%	$	9,935,337		$	197,059		4.00	%
Taxable investment securities		2,444,474			34,011		2.78	%		2,196,263			20,401		1.86	%
Tax-exempt investment securities		198,940			3,891		3.91	%		121,561			1,836		3.02	%
Total securities		2,643,414			37,902		2.87	%		2,317,824			22,237		1.92	%
Interest-bearing deposits		1,154,218			25,137		4.39	%		2,647,485			5,963		0.45	%
Loans held for sale		139,035			4,151		5.97	%		244,604			4,592		3.75	%
Total earning assets		15,090,611			340,539		4.55	%		15,145,250			229,851		3.06	%
Less: allowance for credit losses		(117,812	)							(105,015	)
Total nonearning assets		1,616,524								1,381,271
Total assets	$	16,589,323							$	16,421,506
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,219,081		$	55,360		1.80	%	$	6,264,444		$	5,355		0.17	%
Savings		386,532			1,739		0.91	%		385,182			1,037		0.54	%
Certificates of deposit		1,826,777			25,506		2.82	%		1,432,486			4,074		0.57	%
Total interest-bearing deposits		8,432,390			82,605		1.98	%		8,082,112			10,466		0.26	%
Borrowings		610,946			14,261		4.64	%		132,004			272		0.41	%
Subordinated debt, net		252,679			4,405		3.49	%		442,202			9,212		4.17	%
Total interest-bearing liabilities		9,296,015			101,271		2.20	%		8,656,318			19,950		0.46	%
Demand deposits		4,995,980								5,507,768
Other noninterest-bearing liabilities		334,930								368,166
Total liabilities		14,626,925								14,532,252
Shareholders' equity		1,962,398								1,889,254
Total liabilities and equity	$	16,589,323							$	16,421,506
Net interest income (tax-equivalent basis)(4)				$	239,268							$	209,901
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment					(2,280	)							(1,357	)
Net interest income (GAAP)				$	236,988							$	208,544

Interest rate spread (2)(4)							2.35	%							2.60	%
Interest expense as a percent of average earning assets							1.35	%							0.28	%
Net interest margin (tax equivalent basis) (3)(4)							3.20	%							2.79	%
Total cost of deposits							1.24	%							0.16	%

(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)


	June 30,			December 31,
	2023			2022
	(unaudited)			(audited)
ASSETS
Cash and due from banks	$	106,994		$	55,381
Interest-bearing deposits at FRB - Richmond		1,427,044			1,000,205
Federal funds sold and interest-bearing deposits in financial institutions		102,231			97,244
Total Cash and Cash Equivalents		1,636,269			1,152,830
Securities available for sale, at fair value (amortized cost of $2,203,062 and $2,033,040, and allowance for credit losses of $1,232 and $1,086 at June 30, 2023 and December 31, 2022, respectively)		2,005,851			1,840,902
Securities held to maturity, at amortized cost (fair value $522,375 and $518,993 at June 30, 2023 and December 31, 2022, respectively)		548,017			548,475
Less: allowance for credit losses		(87	)		(83	)
Securities held to maturity, net of allowance for credit losses		547,930			548,392
Other equity securities		13,798			6,424
FHLB stock		40,454			9,617
Total Securities		2,608,033			2,405,335
Mortgage loans held for sale		229,502			102,339
Loans, net of unearned income and deferred costs		11,208,014			10,794,602
Less: allowance for credit losses		(123,513	)		(110,816	)
Net Loans		11,084,501			10,683,786
Premises and equipment, net		326,686			304,802
Goodwill		456,695			458,482
Other intangible assets, net		71,106			43,163
BOLI		273,435			258,069
Other assets		538,848			436,461
TOTAL ASSETS	$	17,225,075		$	15,845,267

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	4,774,830		$	5,265,186
Interest-bearing:
Demand and money market accounts		6,529,336			6,185,075
Savings		361,891			374,987
Certificates of deposit		2,100,604			1,468,975
Total Deposits		13,766,661			13,294,223
Advances from the FHLB		754,319			29,674
Subordinated debt, net		255,365			247,420
Repurchase agreements and other borrowings		49,898			40,918
Total Borrowings		1,059,582			318,012
Other liabilities		408,333			344,275
TOTAL LIABILITIES		15,234,576			13,956,510
Preferred stock, authorized and unissued shares - 2,000,000		—			—
Common stock, $1.667 par value: 150,000,000 shares authorized
74,878,243 and 72,841,379 shares issued at
June 30, 2023 and December 31, 2022, respectively		124,805			121,426
Capital surplus		1,109,526			1,052,262
Retained earnings		884,901			840,777
Common stock issued to deferred compensation trust, at cost
977,334 and 931,030 shares at June 30, 2023 and December 31, 2022, respectively		(20,134	)		(18,974	)
Deferred compensation trust		20,134			18,974
Accumulated other comprehensive income (loss)		(145,392	)		(140,505	)
TOTAL SHAREHOLDERS' EQUITY		1,973,840			1,873,960
Noncontrolling interest		16,659			14,797
TOTAL EQUITY		1,990,499			1,888,757
TOTAL LIABILITIES AND EQUITY	$	17,225,075		$	15,845,267

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
INTEREST INCOME:
Loans, including fees	$	138,977		$	101,043		$	271,745		$	196,005
Investment securities		18,851			12,263			37,226			21,934
Interest-bearing deposits in financial institutions and federal funds sold		14,488			4,616			25,137			5,963
Mortgage loans held for sale		2,547			2,217			4,151			4,592
Total interest income		174,863			120,139			338,259			228,494
INTEREST EXPENSE:
Deposits		48,671			5,573			82,605			10,467
Advances from the FHLB		10,407			86			13,399			178
Subordinated debt, net		2,236			5,091			4,405			9,211
Repurchase agreements and other borrowings		(62	)		49			862			94
Total interest expense		61,252			10,799			101,271			19,950
Net interest income		113,611			109,340			236,988			208,544
PROVISION FOR CREDIT LOSSES		3,556			56			15,225			(1,393	)
Net interest income after provision for credit losses		110,055			109,284			221,763			209,937
NONINTEREST INCOME:
Residential mortgage banking income, net		11,360			13,176			20,732			27,814
Insurance commissions and other title fees and income, net		22,498			19,746			45,321			38,820
Property management income, net		12,098			9,452			27,633			26,599
Real estate brokerage income, net		1,834			3,412			3,625			5,966
Service charges on deposit accounts		3,018			2,446			5,870			5,020
Credit card merchant fees, net		1,682			1,906			3,226			3,281
BOLI		1,710			1,853			3,383			3,570
Other income		13,757			5,649			18,933			12,778
Total noninterest income		67,957			57,640			128,723			123,848
NONINTEREST EXPENSE:
Salaries and employee benefits		67,445			64,892			136,866			128,855
Occupancy		9,487			8,342			18,552			16,669
Furniture and equipment		4,389			3,643			8,633			7,333
Amortization - intangibles		3,610			2,684			7,134			5,501
Software expense		6,169			4,762			11,792			9,254
Data processing		4,011			3,556			7,364			7,150
Professional fees		3,166			1,761			6,178			3,788
Advertising and marketing		3,959			4,091			8,360			8,218
Other expenses		22,992			14,994			44,747			31,336
Total noninterest expense		125,228			108,725			249,626			218,104
Income before income tax expense and noncontrolling interest		52,784			58,199			100,860			115,681
Provision for income tax expense		9,416			11,145			19,014			22,377
Net income	$	43,368		$	47,054		$	81,846		$	93,304
Net income attributable to noncontrolling interest		(1,652	)		(507	)		(1,797	)		(1,171	)
Net income attributable to TowneBank	$	41,716		$	46,547		$	80,049		$	92,133
Per common share information

TowneBank Reports Second Quarter 2023 Earnings