SUFFOLK, Va., Oct. 24, 2019 (GLOBE NEWSWIRE) — TowneBank (the “Company”) (NASDAQ: TOWN) today reported earnings for the quarter ended September 30, 2019 of $37.66 million, or $0.52 per diluted share, compared to $38.29 million, or $0.53 per diluted share, for the quarter ended September 30, 2018.
“Our third quarter continued the trend of solid growth in top-line revenues which climbed to $145.88 million, or a 5.78% increase, over the same period in 2018 driven by strong performances in our noninterest income sources.  Noninterest bearing deposits increased 10.74% on an annualized basis during the quarter and represents 32.11% of our total deposits.  During the past year, we continued to increase our deposit market share and remain the market leader in the Hampton Roads, Virginia MSA while our leadership teams in Richmond and the North Carolina markets provided an outstanding deposit growth rate of 19.67% and 27.70%, respectively, compared to the quarter ended September 30, 2018,” said G. Robert Aston, Jr., Executive Chairman.  “The year 2019 has been a year of significant investment in the future, as we have absorbed the expense related to enhancements in company infrastructure driven by changing industry standards and increased regulatory expectations due to crossing the $10 billion asset threshold.  Additionally, we have successfully recruited 27 new staff members on the production and revenue side of the bank, expanding Towne’s presence into Greensboro and Greenville, North Carolina as well as adding an eight person Corporate Banking team in the Hampton Roads market,” added Aston.Highlights for the Third Quarter of 2019 Compared to the Third Quarter of 2018:Total revenues were $145.88 million, an increase of $7.97 million, or 5.78%.Loans held for investment increased $301.14 million, or 3.82%, from September 30, 2018, and $56.10 million, or 0.69%, from June 30, 2019, or 2.74% on an annualized basis.Total deposits were $9.44 billion, an increase of $1.14 billion, or 13.72%, compared to prior year and $0.17 billion, or 1.83%, from June 30, 2019, or 7.24% on an annualized basis.  In comparison to September 30, 2018, total deposits increased 8.52% in our Hampton Roads region, 19.67% in our Richmond region, and 27.70% in our North Carolina region.Noninterest bearing deposits increased by 13.44%, to $3.03 billion, representing 32.11% of total deposits.  Compared to the linked quarter, noninterest bearing deposits increased 2.71%, or 10.74% on an annualized basis.Annualized return on common shareholders’ equity was 9.29% and annualized return on average tangible common shareholders’ equity was 14.36% (non-GAAP).Net interest margin for the quarter was 3.41% and taxable equivalent net interest margin was 3.43% (non-GAAP).Effective tax rate of 16.95% in the quarter compared to 19.30% in the third quarter of 2018.“Continued diversity in our revenue composition has been a consistent objective of our Company for many years.  As pressures on net interest margin and required infrastructure investments continue to challenge our bottom line returns, it is important to keep our focus on growing top-line revenues.  We were pleased to announce the completion of a strategic insurance acquisition in Charlotte, North Carolina, which will serve to strengthen our product delivery in one of our key growth markets,” stated J. Morgan Davis, President and Chief Executive Officer.Quarterly Net Interest Income Compared to the Third Quarter of 2018:Net interest income was $91.10 million compared to $88.70 million at September 30, 2018.Taxable equivalent net interest margin (non-GAAP) was 3.43%, including accretion of 11 basis points, compared to 3.64%, including accretion of 18 basis points, for 2018.Average loans held for investment, with an average yield of 5.02%, represented 76.35% of average earning assets at September 30, 2019 compared to an average yield of 4.95% and 80.45% of average earning assets in the third quarter of 2018.Total cost of deposits increased to 1.01% from 0.72% at September 30, 2018.Average interest-earning assets totaled $10.60 billion at September 30, 2019 compared to $9.73 billion at September 30, 2018, an increase of 9.03%.Average interest-bearing liabilities totaled $7.03 billion, an increase of $0.46 billion from prior year.Quarterly Provision for Loan Losses:Recorded a provision for loan losses of $1.51 million compared to $1.24 million one year ago and $2.82 million in the linked quarter.Net charge-offs were $0.61 million compared to $0.54 million one year prior.  The ratio of net charge-offs to average loans on an annualized basis was 0.03% compared to 0.08% in the prior quarter and 0.03% in the third quarter of 2018.The allowance for loan losses represented 0.68% of total loans compared to 0.67% at June 30, 2019 and 0.64% at September 30, 2018.  Loan loss reserve as a percentage of total loans, excluding purchased loans, was 0.81% at September 30, 2019, and June 30, 2019, compared to 0.82% at September 30, 2018.  The allowance for loan losses was 3.95 times nonperforming loans compared to 3.00 times at June 30, 2019 and 7.25 times at September 30, 2018.Quarterly Noninterest Income Compared to the Third Quarter of 2018:Total noninterest income was $54.78 million compared to $49.22 million in 2018, an increase of $5.56 million, or 11.29%.  Residential mortgage banking income increased $3.05 million in the quarter, insurance commissions and other title fees increased $2.19 million, real estate brokerage and property management income increased $0.90 million, while service charges on deposit accounts decreased $0.78 million.Residential mortgage banking income was $18.86 million compared to $15.80 million in third quarter 2018.  Loan volume in the current quarter was $963.66 million, with purchase activity comprising 68.83% of that volume.  Loan volume in third quarter 2018 was $811.50 million, with purchase activity of 89.72%. Total Insurance segment revenue increased 16.59% to $19.62 million in the third quarter due primarily to additional commission income from insurance agencies that were acquired in November 2018 and January 2019.  An additional insurance agency, Angel Insurance and Financial Services, Inc., was acquired, effective September 1, 2019.Property management fee revenue increased 13.47%, or $0.78 million, as compared to third quarter 2018 due to increases in reservation levels.Quarterly Noninterest Expense Compared to the Third Quarter of 2018:Total noninterest expense was $97.29 million compared to $88.26 million in 2018, an increase of $9.03 million, or 10.23%.  This reflects increases of $5.29 million in salary and benefits expense, $1.66 million in professional fees, $0.94 million in occupancy expense, and $0.56 million in advertising and marketing expenses.In addition to growth in production related expenses, changing industry standards and increased regulatory expectations related to exceeding $10 billion in assets, have resulted in enhancements to Company infrastructure, resulting in increased salary and benefits expense and professional fees. Areas of enhancement include: information technology, risk and compliance, accounting, and internal audit.Noninterest expense included operational expenses of $1.86 million related to insurance agencies acquired subsequent to third quarter 2018.Quarterly Income Taxes Compared to the Third Quarter of 2018:
Income tax expense was $7.68 million compared to $9.16 million one year prior.  This represents an effective tax rate of 16.95% compared to 19.30% in the third quarter of 2018.Consolidated Balance Sheet September 30, 2019 Compared to September 30, 2018Total assets were $12.02 billion for the quarter ended September 30, 2019, an increase of 7.69%, or 10.28% on an annualized basis, compared to $11.16 billion at December 31, 2018.  Total assets increased $0.90 billion, or 8.09%, from $11.12 billion at September 30, 2018.  This increase was driven primarily by growth in cash and cash equivalents, available for sale securities, and loans held for investment.  Year-over-year, other assets increased $49.66 million due to the adoption of the leasing standard.Loans held for investment increased $0.16 billion, or 2.05%, or 2.74% on an annualized basis, compared to year end 2018, and $0.30 billion, or 3.82% compared to September 30, 2018.Total liabilities were $10.38 billion at September 30, 2019, an increase of $758.15 million, or 7.88%, compared to December 31, 2018 and $761.35 million, or 7.91%, compared to September 30, 2018.Total deposits increased $1.07 billion, or 12.75%, or 17.05% on an annualized basis, over December 31, 2018 and $1.14 billion, or 13.72%, over September 30, 2018.Total borrowings declined $0.42 billion, or 38.49%, or 51.46% on an annualized basis from December 31, 2018 and $0.49 billion from September 30, 2018.Investment Securities:
Total investment securities were $1.41 billion compared to $1.35 billion at June 30, 2019 and $1.16 billion at September 30, 2018.  The weighted average duration of the portfolio at September 30, 2019 was 3.6 years.  The carrying value of the available-for-sale portfolio included $26.07 million of net unrealized gains compared to $19.66 million at June 30, 2019 and $26.22 million in net unrealized losses at September 30, 2018.  The increase in net unrealized gains was primarily due to further declines in interest rates.  The carrying value of the held-to-maturity portfolio does not reflect $1.68 million in net unrealized gains compared to $1.58 million in net unrealized gains at June 30, 2019 and $0.17 million in net unrealized gains at September 30, 2018.Loans and Asset Quality:Total loans held for investment were $8.18 billion at September 30, 2019 compared to $8.13 billion at June 30, 2019 and $7.88 billion at September 30, 2018.Nonperforming assets were $31.04 million, or 0.26% of total assets, compared to $27.33 million, or 0.25%, at September 30, 2018.Nonperforming loans were 0.17% of period end loans.Foreclosed property decreased to $15.52 million from $18.15 million at September 30, 2018.Deposits and Borrowings:Total deposits were $9.44 billion compared to $9.27 billion at June 30, 2019 and $8.30 billion at September 30, 2018.Total loans to deposits were 86.70% compared to 87.68% at June 30, 2019 and 94.97% at September 30, 2018.Non-interest bearing deposits were 32.11% of total deposits at September 30, 2019 compared to 31.83% at June 30, 2019 and 32.19% at September 30, 2018.Total borrowings were $0.67 billion compared to $0.84 billion and $1.17 billion at June 30, 2019 and September 30, 2018, respectively.Capital:Common equity tier 1 capital ratio of 11.52%.Tier 1 leverage capital ratio of 9.84%.Tier 1 risk-based capital ratio of 11.55%.Total risk-based capital ratio of 14.70%.Book value was $22.38 compared to $21.95 at June 30, 2019 and $20.54 at September 30, 2018.Tangible book value (non-GAAP)was $15.44 compared to $15.05 at June 30, 2019 and $13.83 at September 30, 2018.Outlook:
Management reforecasts on a quarterly basis and anticipates: Annualized loan growth to be in the low-to-mid single digits for the remainder of 2019.Our quarterly noninterest expense run rate will range between $94 – $96 million for 2019.About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 41 banking offices serving Chesapeake, Chesterfield County, Glen Allen, Hampton, James City County, Mechanicsville, Newport News, Norfolk, Portsmouth, Richmond, Suffolk, Virginia Beach, Williamsburg, and York County in Virginia, along with Raleigh, Cary, Charlotte, Greenville, Moyock, Grandy, Camden County, Southern Shores, Corolla and Nags Head in North Carolina.  TowneBank also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations.  Local decision-making is a hallmark of its hometown banking strategy that is delivered through the leadership of each group’s President and Board of Directors.  With total assets of $12.02 billion as of September 30, 2019, TowneBank is one of the largest banks headquartered in Virginia.Non-GAAP Financial Measures:
This press release contains financial information determined by methods other than in accordance with GAAP.  The Company’s management uses these non-GAAP financial measures in its analysis of the Company’s performance.  These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that are infrequent in nature.  Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses.  These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP disclosures are included as tables at the end of this release.Forward-Looking Statements:
Certain statements contained in this release constitute forward-looking statements within the meaning of U.S. federal securities laws.  These forward-looking statements speak only as of the date of this release, are based on current expectations, and involve a number of assumptions. These include statements regarding TowneBank’s future economic performance, financial condition, prospects, growth, strategies and expectations, and objectives of management, and are generally identified by the use of words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” or “project” or similar expressions.  TowneBank intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. You should not place undue reliance on forward-looking statements, which are subject to assumptions that are subject to change. TowneBank’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ from those indicated or implied in the forward-looking statements and such differences may be material.  Factors which could have a material effect on the operations and future prospects of TowneBank include but are not limited to: changes in interest rates, general economic and business conditions; legislative/regulatory changes; the monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; the quality and composition of TowneBank’s loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBank’s market area; implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; changes in accounting principles, policies and guidelines; and other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation.  TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.Media contact:
G. Robert Aston, Jr., Executive Chairman, 757-638-6780
J. Morgan Davis, President and Chief Executive Officer, 757-673-1673Investor contact:
William B. Littreal, Chief Financial Officer, 757-638-6813


(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.
(3) Non-GAAP.(1) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities.  Fully tax equivalent.
(2) Net interest margin is net interest income expressed as a percentage of average earning assets.  Fully tax equivalent.
(3) Non-GAAP.








 

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