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 Reports Third Quarter 2023 Earnings