Townebank Reports First Quarter Earnings

SUFFOLK, Va., April 27, 2017 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank (the “Bank” or “Company”) (NASDAQ:TOWN) today reported earnings of $21.97 million for the quarter ended March 31, 2017, as compared to the $17.82 million reported for the comparative period in 2016, representing a 23.28% increase. Fully diluted earnings per share were $0.35 per share, unchanged from the comparative period of 2016.

The Bank’s quarterly dividend was $0.13 per share resulting in total common dividends of $8.13 million. The current dividend represents an increase of 8.3% over the dividend paid during the same quarter of 2016.

“We are pleased to announce another quarter of strong earnings with solid loan and deposit growth,” said G. Robert Aston, Jr., Chairman and Chief Executive Officer. “We saw continued growth in our noninterest income streams and a reduction in noninterest expenses from fourth quarter 2016, while producing a return on average assets of 1.11% and a return on average tangible equity of 11.88%.”

First Quarter 2017 Performance Highlights

• Total revenues were $105.17 million, an increase of $26.42 million, or 33.54% from first quarter 2016

Taxable equivalent net interest margin was 3.45%, including accretion of 9 basis points, compared to 3.33%, including accretion of 6 basis points, for 2016
Insurance segment total revenue increased 4.78% to $16.85 million

• Loans held for investment increased $1.36 billion, or 29.89%, from March 31, 2016 with organic growth of $552.68 million, or 12.14%, excluding $808.14 million of loans acquired in the Monarch Financial Holdings, Inc. (“Monarch”) merger on June 24, 2016

• Total deposits were $6.19 billion, an increase of $1.24 billion, or 24.94%, from 2016. The increase included $1.06 billion deposits acquired in the Monarch merger

Noninterest bearing deposits increased by 41.59%, to $2.05 billion, representing 33.16% of total deposits
Total cost of deposits decreased to 0.40% from 0.43% at March 31, 2016

• Asset quality showed continued strength

Nonperforming assets declined to $35.81 million, or 0.44% of total assets compared to $37.68 million, or 0.59%, at March 31, 2016
Nonperforming loans were 0.20% of period end loans
Foreclosed property decreased to $21.47 million

• The Bank remained well-capitalized

Common equity tier 1 capital ratio of 11.94%
Tier 1 leverage capital ratio of 10.49%
Tier 1 risk-based capital ratio of 11.98%
Total risk-based capital ratio of 12.62%
Tangible book value increased to $12.59

First Quarter 2017 Earnings Compared to First Quarter 2016

Net income for the first quarter was $21.97 million, or $0.35 per diluted share, versus $17.82 million, or $0.35 per diluted share, in 2016, reflecting strong growth in net interest income as compared to the prior year period.

Net Interest Income
Net interest income increased to $60.28 million, a $13.95 million, or 30.10%, increase from first quarter 2016. The primary driver was the growth in average earning assets, which increased $1.51 billion, or 26.71%, while tax-equivalent net interest margin increased to 3.45% in the current quarter from 3.33% in first quarter 2016. Accretion income added $1.13 million, or 9 basis points, to margin in the current quarter as compared to $0.65 million, or 6 basis points, in the first quarter of 2016.

Noninterest Income
Noninterest income was $44.89 million for the first quarter of 2017, an increase of $12.47 million, or 38.47%, from the first quarter of 2016. Residential mortgage banking income increased $10.51 million, or 147.71%, from the first quarter of 2016 primarily due to higher production volumes resulting from the Monarch merger. Mortgage production was $706.06 million in first quarter 2017, which was $392.92 million higher than first quarter 2016 production of $313.14 million. Insurance commissions and other title fees increased $0.77 million, or 5.47%, primarily due to organic growth across the lines of business.

Noninterest Expense
Noninterest expense increased by $18.09 million, or 34.68%, from the comparative quarter of 2016. The primary driver was an increase of $10.02 million in salaries and benefits expense due to the addition of staff related to the Monarch acquisition and organic growth. Also contributing were increases in occupancy expenses of $1.67 million and furniture and equipment expenses of $0.99 million primarily related to mortgage facilities acquired in the Monarch acquisition.

First Quarter 2017 Earnings Compared to Fourth Quarter 2016
Net income for the first quarter was $21.97 million, or $0.35 per diluted share, versus $19.0 million, or $0.31 per diluted share, in fourth quarter 2016, reflecting the seasonality in our Insurance and Realty segments.

Performance Highlights

• Total revenues were $105.17 million compared to $101.67 million in the fourth quarter of 2016

Taxable equivalent net interest margin was 3.45%, including accretion of 9 basis points, compared to 3.52%, including accretion of 15 basis points, in the fourth quarter of 2016
Noninterest income, excluding gains on investment securities, increased $5.37 million due to seasonality in our Insurance and Realty segments

• Total loans held for investment increased $105.86 million, or 7.29% on an annualized basis, from December 31, 2016

Net Interest Income
On a linked quarter basis, net interest income decreased by $1.87 million or 3.01%, in first quarter 2017 versus fourth quarter 2016, while tax-equivalent net interest margin was 3.45% versus 3.52% for the fourth quarter of 2016. The decrease in net interest income was primarily due to seasonally lower loans held for sale average balances combined with a decrease in accretion income. Accretion income added $1.13 million, or 9 basis points, to margin in the current quarter, as compared to $2.34 million, or 15 basis points, in the linked quarter.

Noninterest Income
In comparison to the fourth quarter of 2016, noninterest income increased $5.37 million, or 13.58%. The increase was driven by insurance commission income, which grew by $4.98 million, or 50.67%, due to organic growth and with higher contingent commission revenue, which is mostly received during the first quarter of each year. Additionally, real estate brokerage and property management income was higher due to a seasonal increase related to our resort property management business. Residential mortgage banking income decreased by $0.46 million, or 2.56%, from the fourth quarter of 2016 primarily due to a seasonal decrease in mortgage production of $299.93 million, from $1.01 billion in fourth quarter 2016 to $706.06 million in first quarter 2017.

Noninterest Expense
Noninterest expense decreased by $2.59 million, or 3.55%, from the fourth quarter of 2016. The primary driver was a decrease in salaries and benefits expenses of $2.86 million related to decreases in employee profit-sharing and incentive plan expenses.

Noninterest Income

							% Change
	Q1		Q1		Q4		Q1 17 vs.		Q1 17 vs.
(dollars in thousands)	2017		2016		2016		Q1 16		Q4 16
Residential mortgage banking income, net	$	17,632	$	7,118	$	18,096	147.71	%	(2.56	)%
Insurance commissions and other title fees and income, net	14,800		14,033		9,823		5.47	%	50.67	%
Real estate brokerage and property management, net	4,993		4,827		2,925		3.44	%	70.70	%
Service charges on deposit accounts	2,472		2,176		2,535		13.60	%	(2.49	)%
Credit card merchant fees, net	1,118		895		1,135		24.92	%	(1.50	)%
Other income	3,871		3,366		4,998		15.00	%	(22.55	)%
Subtotal before gain on investment securities	44,886		32,415		39,512		38.47	%	13.60	%
Net gain on investment securities	—		—		6		—		(100.00	)%
Total noninterest income	$	44,886	$	32,415	$	39,518	38.47	%	13.58	%

Noninterest Expense

									% Change
	Q1			Q1		Q4			Q1 17 vs.		Q1 17 vs.
(dollars in thousands)	2017			2016		2016			Q1 16		Q4 16
Salaries and benefits	$	40,208		$	30,187	$	43,071		33.20	%	(6.65	)%
Occupancy expense	6,684			5,017		6,885			33.23	%	(2.92	)%
Furniture and equipment	3,343			2,357		3,378			41.83	%	(1.04	)%
Acquisition-related expenses	(5		)	414		(707		)	(101.21	)%	(99.29	)%
Other expenses	20,018			14,186		20,207			41.11	%	(0.94	)%
Total noninterest expense	$	70,248		$	52,161	$	72,834		34.68	%	(3.55	)%

Segment Results

							$ Change
(in thousands)	Q1		Q1		Q4		Q1 17 vs.			Q1 17 vs.
Segment Net Income (Loss)	2017		2016		2016		Q1 16			Q4 16
Banking	$	17,967	$	14,133	$	17,931	$	3,834		$	36
Realty	926		1,033		673		(107		)	253
Insurance	3,075		2,653		392		422			2,683
Total net income	$	21,968	$	17,819	$	18,996	$	4,149		$	2,972

First Quarter 2017 Compared to First Quarter 2016

Banking
Net income for the three months ended March 31, 2017 for the Banking segment was $17.97 million, increasing $3.83 million, or 27.13% from comparative 2016, as net interest income climbed by $12.62 million primarily due to the increase in earning assets from the Monarch merger. Also contributing to the variance was an increase in noninterest income of $1.10 million, which included increases in service charges and credit card merchant fees. These factors were partially offset by increases in the provision for loan losses of $2.80 million and noninterest expenses of $6.17 million.

Realty
For the three months ended March 31, 2017, the Realty segment net income decreased to $0.93 million from $1.03 million from comparative quarter 2016. The decrease was driven by additional noninterest expenses of $11.89 million primarily due to an increase in mortgage operational expenses related to the merger with Monarch, including an increase in personnel costs of $7.00 million. The decrease was mostly offset by an increase in residential mortgage banking income of $10.47 million, or 143.16%, due to higher production volumes resulting from the Monarch merger. Additionally, net interest and other income increased by $1.44 million as higher production volume led to higher average mortgage loans held for sale.

Insurance
The Insurance segment had net income of $3.08 million for the three months ended March 31, 2017, an increase of $0.42 million compared to first quarter 2016. The increase in net income was driven by organic growth in property and casualty insurance, employee benefit insurance, and travel insurance commission income.

First Quarter 2017 Compared to Fourth Quarter 2016

Banking
Earnings increased slightly by $0.04 million, or 0.20% from the fourth quarter of 2016 as decreases in personnel costs of $3.43 million were partially offset by decreases in net interest income and bank-owned life insurance income. Additionally, loan growth in the quarter led to an increase of $0.74 million in the provision for loan losses.

Realty
Net income in the Realty segment increased by $0.25 million from the linked quarter ended December 31, 2016. The increase was primarily a result of a seasonal increase in resort property management fees of $2.37 million, partially offset by seasonal decreases in the Bank's mortgage and real estate brokerage businesses.

Insurance
Net income increased $2.68 million from the fourth quarter of 2016 driven by an increase in contingency and bonus revenue of $3.47 million. Contingent commissions are seasonal in nature and are mostly received during the first half of each year. Additionally, commissions from travel insurance increased by $0.80 million and property and casualty commissions increased by $0.84 million due to organic growth and seasonal increases.

Balance Sheet

At March 31, 2017, total Bank assets reached $8.17 billion, an increase of $1.81 billion, or 28.43%, over March 31, 2016.

Loans

							% Change
	Q1		Q1		Q4		Q1 17 vs.		Q1 17 vs.
(dollars in thousands)	2017		2016		2016		Q1 16		Q4 16
Construction and land development	$	898,540	$	635,992	$	826,027	41.28	%	8.78	%
Commercial real estate - investment related properties	1,362,184		998,082		1,322,466		36.48	%	3.00	%
Commercial real estate - owner occupied	907,049		764,230		928,846		18.69	%	(2.35	)%
Multifamily real estate	236,782		160,246		222,791		47.76	%	6.28	%
1-4 family residential real estate	1,215,278		988,432		1,215,823		22.95	%	(0.04	)%
Commercial and industrial business loans	1,086,273		852,005		1,089,539		27.50	%	(0.30	)%
Consumer loans and other	206,974		153,273		201,729		35.04	%	2.60	%
Total	$	5,913,080	$	4,552,260	$	5,807,221	29.89	%	1.82	%

The Bank’s loan portfolio ended the period at $5.91 billion representing an increase of 29.89%, or $1.36 billion, from the prior year, and an increase of $105.86 million, or 1.82%, from December 31, 2016. In addition to organic growth, the increase from the prior year is related to loans acquired in the Monarch merger on June 24, 2016.

Deposits

							% Change
	Q1		Q1		Q4		Q1 17 vs.		Q1 17 vs.
(dollars in thousands)	2017		2016		2016		Q1 16		Q4 16
Noninterest-bearing demand	$	2,052,598	$	1,449,660	$	1,947,312	41.59	%	5.41	%
Interest-bearing:
Demand and money market accounts	2,270,025		1,769,414		2,263,894		28.29	%	0.27	%
Savings	320,104		302,373		319,611		5.86	%	0.15	%
Certificates of deposits	1,548,045		1,433,679		1,504,380		7.98	%	2.90	%
Total	$	6,190,772	$	4,955,126	$	6,035,197	24.94	%	2.58	%

The Bank continued to experience solid deposit growth with total deposits increasing to $6.19 billion, up $1.24 billion, or 24.94%, from March 31, 2016. The increase was primarily due to the deposits acquired in the Monarch merger. The Bank saw continued growth in noninterest-bearing demand deposits, which ended the quarter at $2.05 billion, a 41.59% increase from the prior year. Noninterest-bearing deposits represented 33.16% of total deposits at March 31, 2017.

Capital Ratios

	Q1		Q1		Q4
	2017		2016		2016
Common Equity Tier 1	11.94	%	12.66	%	11.75	%
Tier 1	11.98	%	12.73	%	11.82	%
Total	12.62	%	13.46	%	12.44	%
Tier 1 Leverage Ratio	10.49	%	10.70	%	10.44	%

The Bank’s total equity at March 31, 2017 rose to $1.10 billion, an increase of $265.24 million, or 31.73%, from March 31, 2016. Total risk-based capital remained strong as common equity Tier 1, Tier 1 capital, total risk-based capital, and Tier 1 leverage capital ratios were 11.94%, 11.98%, 12.62%, 10.49%, respectively. All ratios exceed the current regulatory standards for well capitalized status.

Asset Quality


(in thousands)	3/31/2017		12/31/2016		9/30/2016		6/30/2016		3/31/2016
Nonperforming loans	$	11,538	$	13,099	$	11,337	$	10,580	$	7,944
Former bank premises	2,798		3,494		—		—		—
Foreclosed property	21,473		21,011		22,884		25,707		29,740
Total nonperforming assets	$	35,809	$	37,604	$	34,221	$	36,287	$	37,684
Quarterly net loans charged off	$	1,347	$	485	$	649	$	241	$	340
Year-to-date net loans charged off	$	1,347	$	1,715	$	1,230	$	581	$	340

										Change
	Q1			Q1			Q4			Q1 17 vs.			Q1 17 vs.
(dollars in thousands)	2017			2016			2016			Q1 16			Q4 16
Total loans 90 days past due and still accruing	$	35		$	—		$	76		$	35		$	(41	)
Total loans 30-89 days past due	$	11,424		$	12,055		$	10,459		$	(631	)	$	965
Allowance for loan losses	$	43,195		$	37,760		$	42,001		$	5,435		$	1,194
Total performing TDRs	$	26,659		$	24,955		$	31,351		$	1,704		$	(4,692	)


Nonperforming loans to period end loans	0.20		%	0.17		%	0.23		%	0.03			(0.03		)
Nonperforming assets to period end assets	0.44		%	0.59		%	0.47		%	(0.15		)	(0.03		)
Allowance for loan losses to period end loans	0.73		%	0.83		%	0.72		%	(0.10		)	0.01
Allowance for loan losses (originated) to originated period end loans	0.86		%	0.92		%	0.87		%	(0.06		)	(0.01		)
Net charge-offs to average loans (annualized)	0.09		%	0.03		%	0.03		%	0.06			0.06
Ratio of allowance for loan losses to nonperforming loans		3.74	x		4.75	x		3.21	x	(1.01		)x	.53		x

Continued strength in credit quality contributed to the Bank's financial results as net charge-offs totaled $1.35 million in the first quarter of 2017 compared to $0.34 million in the first quarter of 2016 and $0.49 million in the linked quarter. Total nonperforming assets were $35.81 million, or 0.44%, of Bank assets at March 31, 2017, as compared to $37.68 million, or 0.59%, at March 31, 2016, and $37.60 million, or 0.47%, at December 31, 2016. The allowance for loan losses was $43.20 million, increased from $37.76 million at March 31, 2016 and $42.00 million at December 31, 2016.

About TowneBank:
As one of the top community banks in Virginia and North Carolina, TowneBank operates 37 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 Moyock, Grandy, Camden County, Southern Shores, Corolla and Nags Head in North Carolina. Towne also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Beach Properties of Hilton Head. 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 $8.17 billion as of March 31, 2017, 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 their 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. Since the presentation of these GAAP performance measures and their impact differ between companies, 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:
Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions 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. TowneBank’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. 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; the quality and composition of the loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBank’s market areas; TowneBank’s implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; and 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.

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
								Increase/			% Increase/
Three Months Ended March 31,		2017			2016			(Decrease)			(Decrease)

Results of Operations:
	Net interest income	$	60,281		$	46,336		$	13,945		30.10	%
	Noninterest income	44,886			32,415			12,471			38.47	%
	Total Revenue	105,167			78,751			26,416			33.54	%
	Acquisition-related expenses	(5		)	414			(419		)	(101.21	)%
	Noninterest expenses, excluding acquisition-related expenses	70,253			51,747			18,506			35.76	%
	Provision for loan losses	2,541			(259		)	2,800			N/M
	Income before income tax and noncontrolling interest	32,378			26,849			5,529			20.59	%
	Provision for income tax expense	9,386			8,188			1,198			14.63	%
	Net income	22,992			18,661			4,331			23.21	%
	Net income attributable to noncontrolling interest	(1,024		)	(842		)	(182		)	21.62	%
	Net income attributable to TowneBank	21,968			17,819			4,149			23.28	%
	Net income available to common shareholders	21,968			17,819			4,149			23.28	%
	Net income per common share - basic	0.35			0.35			—			—	%
	Net income per common share - diluted	0.35			0.35			—			—	%
Period End Data:
	Total assets	$	8,174,786		$	6,365,169		$	1,809,617		28.43	%
	Total assets - tangible	7,872,823			6,178,224			1,694,599			27.43	%
	Earning assets	7,362,550			5,745,710			1,616,840			28.14	%
	Loans (net of unearned income)	5,913,080			4,552,260			1,360,820			29.89	%
	Allowance for loan losses	43,195			37,760			5,435			14.39	%
	Goodwill and other intangibles	301,962			186,945			115,017			61.52	%
	Nonperforming assets	35,809			37,684			(1,875		)	(4.98	)%
	Noninterest bearing deposits	2,052,598			1,449,660			602,938			41.59	%
	Interest bearing deposits	4,138,174			3,505,466			632,708			18.05	%
	Total deposits	6,190,772			4,955,126			1,235,646			24.94	%
	Total equity	1,101,245			836,003			265,242			31.73	%
	Total equity - tangible	799,283			649,058			150,225			23.15	%
	Common equity	1,089,760			826,875			262,885			31.79	%
	Common equity - tangible	787,798			639,930			147,868			23.11	%
	Book value per common share	17.42			16.00			1.42			8.88	%
	Book value per common share - tangible	12.59			12.38			0.21			1.70	%
Daily Average Balances:
	Total assets	$	8,000,366		$	6,313,238		$	1,687,128		26.72	%
	Total assets - tangible	7,698,310			6,126,524			1,571,786			25.66	%
	Earning assets	7,177,697			5,664,461			1,513,236			26.71	%
	Loans (net of unearned income), excluding nonaccrual loans	5,862,799			4,516,277			1,346,522			29.81	%
	Allowance for loan losses	42,610			38,555			4,055			10.52	%
	Goodwill and other intangibles	302,056			186,714			115,342			61.77	%
	Noninterest bearing deposits	1,957,887			1,415,793			542,094			38.29	%
	Interest bearing deposits	4,102,109			3,499,607			602,502			17.22	%
	Total deposits	6,059,996			4,915,400			1,144,596			23.29	%
	Total equity	1,093,490			830,178			263,312			31.72	%
	Total equity - tangible	791,433			643,464			147,969			23.00	%
	Common equity	1,082,324			821,268			261,056			31.79	%
	Common equity - tangible	780,268			634,554			145,714			22.96	%
Key Ratios:
	Return on average assets	1.11		%	1.14		%	(0.03		)%	(2.63	)%
	Return on average assets - tangible	1.22		%	1.21		%	0.01		%	0.83	%
	Return on average equity	8.15		%	8.63		%	(0.48		)%	(5.56	)%
	Return on average equity - tangible	11.88		%	11.56		%	0.32		%	2.77	%
	Return on average common equity	8.23		%	8.73		%	(0.50		)%	(5.73	)%
	Return on average common equity - tangible	12.05		%	11.72		%	0.33		%	2.82	%
	Net interest margin-fully tax equivalent (1)	3.45		%	3.33		%	0.12		%	3.60	%
	Net interest margin	3.41		%	3.29		%	0.12		%	3.65	%
	Average earning assets/total average assets	89.72		%	89.72		%	—		%	—	%
	Average loans/average deposits	96.75		%	91.88		%	4.87		%	5.30	%
	Average noninterest deposits/total average deposits	32.31		%	28.80		%	3.51		%	12.19	%
	Allowance for loan losses/period end loans	0.73		%	0.83		%	(0.10		)%	(12.05	)%
	Nonperforming assets to period end assets	0.44		%	0.59		%	(0.15		)%	(25.42	)%
	Period end equity/period end total assets	13.47		%	13.13		%	0.34		%	2.59	%
	Efficiency ratio	66.80		%	66.24		%	0.56		%	0.85	%
(1) Presented on a tax-equivalent basis

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)

		March 31,			December 31,			Increase/			% Increase/
Three Months Ended		2017			2016			(Decrease)			(Decrease)

Results of Operations:
	Net interest income	$	60,281		$	62,151		$	(1,870	)	(3.01	)%
	Noninterest income	44,886			39,518			5,368			13.58	%
	Total Revenue	105,167			101,669			3,498			3.44	%
	Acquisition-related expenses	(5		)	(707		)	702			(99.29	)%
	Noninterest expenses, excluding acquisition-related expenses	70,253			73,541			(3,288		)	(4.47	)%
	Provision for loan losses	2,541			1,831			710			38.78	%
	Income before income tax and noncontrolling interest	32,378			27,004			5,374			19.90	%
	Provision for income tax expense	9,386			7,160			2,226			31.09	%
	Net income	22,992			19,844			3,148			15.86	%
	Net income attributable to noncontrolling interest	(1,024		)	(848		)	(176		)	20.75	%
	Net income attributable to TowneBank	21,968			18,996			2,972			15.65	%
	Net income available to common shareholders	21,968			18,996			2,972			15.65	%
	Net income per common share - basic	0.35			0.31			0.04			12.90	%
	Net income per common share - diluted	0.35			0.31			0.04			12.90	%
Period End Data:
	Total assets	$	8,174,786		$	7,973,915		$	200,871		2.52	%
	Total assets - tangible	7,872,823			7,671,149			201,674			2.63	%
	Earning assets	7,362,550			7,157,391			205,159			2.87	%
	Loans (net of unearned income)	5,913,080			5,807,221			105,859			1.82	%
	Allowance for loan losses	43,195			42,001			1,194			2.84	%
	Goodwill and other intangibles	301,962			302,766			(804		)	(0.27	)%
	Nonperforming assets	35,809			37,605			(1,796		)	(4.78	)%
	Noninterest bearing deposits	2,052,598			1,947,312			105,286			5.41	%
	Interest bearing deposits	4,138,174			4,087,885			50,289			1.23	%
	Total deposits	6,190,772			6,035,197			155,575			2.58	%
	Total equity	1,101,245			1,086,558			14,687			1.35	%
	Total equity - tangible	799,283			783,792			15,491			1.98	%
	Common equity	1,089,760			1,075,102			14,658			1.36	%
	Common equity - tangible	787,798			772,337			15,461			2.00	%
	Book value per common share	17.42			17.20			0.22			1.28	%
	Book value per common share - tangible	12.59			12.36			0.23			1.86	%
Daily Average Balances:
	Total assets	$	8,000,366		$	7,965,438		$	34,928		0.44	%
	Total assets - tangible	7,698,310			7,661,845			36,465			0.48	%
	Earning assets	7,177,697			7,125,742			51,955			0.73	%
	Loans (net of unearned income), excluding nonaccrual loans	5,862,799			5,705,832			156,967			2.75	%
	Allowance for loan losses	42,610			41,188			1,422			3.45	%
	Goodwill and other intangibles	302,056			303,593			(1,537		)	(0.51	)%
	Noninterest bearing deposits	1,957,887			1,961,902			(4,015		)	(0.20	)%
	Interest bearing deposits	4,102,109			4,137,806			(35,697		)	(0.86	)%
	Total deposits	6,059,996			6,099,708			(39,712		)	(0.65	)%
	Total equity	1,093,490			1,087,382			6,108			0.56	%
	Total equity - tangible	791,433			783,789			7,644			0.98	%
	Common equity	1,082,324			1,076,277			6,047			0.56	%
	Common equity - tangible	780,268			772,683			7,585			0.98	%
Key Ratios:
	Return on average assets	1.11		%	0.95		%	0.16		%	16.84	%
	Return on average assets - tangible	1.22		%	1.05		%	0.17		%	16.19	%
	Return on average equity	8.15		%	6.95		%	1.20		%	17.27	%
	Return on average equity - tangible	11.88		%	10.27		%	1.61		%	15.68	%
	Return on average common equity	8.23		%	7.02		%	1.21		%	17.24	%
	Return on average common equity - tangible	12.05		%	10.42		%	1.63		%	15.64	%
	Net interest margin-fully tax equivalent (1)	3.45		%	3.52		%	(0.07		)%	(1.99	)%
	Net interest margin	3.41		%	3.47		%	(0.06		)%	(1.73	)%
	Average earning assets/total average assets	89.72		%	89.46		%	0.26		%	0.29	%
	Average loans/average deposits	96.75		%	93.54		%	3.21		%	3.43	%
	Average noninterest deposits/total average deposits	32.31		%	32.16		%	0.15		%	0.47	%
	Allowance for loan losses/period end loans	0.73		%	0.72		%	0.01		%	1.39	%
	Nonperforming assets to period end assets	0.44		%	0.47		%	(0.03		)%	(6.38	)%
	Period end equity/period end total assets	13.47		%	13.63		%	(0.16		)%	(1.17	)%
	Efficiency ratio	66.80		%	71.64		%	(4.84		)%	(6.76	)%
(1) Presented on a tax-equivalent basis

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

	Three Months Ended								Three Months Ended								Three Months Ended
	March 31, 2017								December 31, 2016								March 31, 2016
				Interest			Average					Interest			Average					Interest			Average
	Average			Income/			Yield/		Average			Income/			Yield/		Average			Income/			Yield/
	Balance			Expense			Rate		Balance			Expense			Rate		Balance			Expense			Rate
Assets:
Loans (net of unearned income and deferred costs), excluding nonaccrual loans	$	5,862,799		$	64,979		4.49	%	$	5,705,832		$	66,061		4.61	%	$	4,516,277		$	50,781		4.52	%
Taxable investment securities	627,338			2,843			1.81	%	666,936			2,762			1.66	%	754,514			3,055			1.62	%
Tax-exempt investment securities	50,485			375			2.97	%	52,199			390			2.99	%	52,979			410			3.09	%
Interest-bearing deposits	450,076			887			0.80	%	352,418			487			0.55	%	265,256			330			0.50	%
Loans held for sale	186,999			1,727			3.69	%	348,357			3,028			3.48	%	75,435			693			3.67	%
Total earning assets	7,177,697			70,811			4.00	%	7,125,742			72,728			4.06	%	5,664,461			55,269			3.92	%
Less: allowance for loan losses	(42,610		)						(41,188		)						(38,555		)

Total nonearning assets	865,279								880,884								687,332

Total assets	$	8,000,366							$	7,965,438							$	6,313,238

Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	2,272,911		$	1,865		0.33	%	$	2,230,198		$	1,742		0.31	%	$	1,782,908		$	1,328		0.30	%
Savings	320,319			757			0.96	%	316,211			728			0.92	%	300,070			700			0.94	%
Certificates of deposit	1,508,879			3,381			0.91	%	1,591,397			3,458			0.86	%	1,416,629			3,185			0.90	%
Total interest-bearing deposits	4,102,109			6,003			0.59	%	4,137,806			5,928			0.57	%	3,499,607			5,213			0.60	%
Borrowings	723,506			3,803			2.10	%	628,272			3,739			2.33	%	468,798			3,185			2.69	%
Total interest-bearing liabilities	4,825,615			9,806			0.82	%	4,766,078			9,667			0.81	%	3,968,405			8,398			0.85	%
Demand deposits	1,957,887								1,961,902								1,415,793

Other noninterest-bearing liabilities	123,374								150,076								98,862
Total liabilities	6,906,876								6,878,056								5,483,060

Shareholders’ equity	1,093,490								1,087,382								830,178

Total liabilities and equity	$	8,000,366							$	7,965,438							$	6,313,238

Net interest income (tax-equivalent basis)				$	61,005							$	63,061							$	46,870

Reconcilement of Non-GAAP Financial Measures
Tax-equivalent basis adjustment				(724		)						(910		)						(535		)
Net interest income (GAAP)				$	60,281							$	62,151							$	46,335

Interest rate spread (1)							3.18	%							3.25	%							3.07	%
Interest expense as a percent of average earning assets							0.55	%							0.54	%							0.60	%
Net interest margin (tax equivalent basis) (2)							3.45	%							3.52	%							3.33	%
Total cost of deposits							0.40	%							0.39	%							0.43	%

(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.

TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
	March 31,						December 31,
	2017			2016			2016
	(unaudited)			(unaudited)			(audited)
ASSETS
Cash and due from banks	$	420,192		$	195,161		$	130,967
Interest-bearing deposits in financial institutions	5,335			1,006			5,581
Total Cash and Cash Equivalents	425,527			196,167			136,548
Securities available for sale, at fair value	720,667			821,551			812,974
Securities held to maturity, at amortized cost	65,117			66,921			66,490
Federal Home Loan Bank stock, at amortized cost	36,402			23,903			35,937
Total Securities	822,186			912,375			915,401
Mortgage loans held for sale	214,047			97,491			314,117
Loans, net of unearned income and deferred costs:
Real estate-residential 1-4 family	1,215,278			988,432			1,215,823
Real estate-commercial	2,269,233			1,762,312			2,251,312
Real estate-construction and development	898,540			635,992			826,027
Real estate-multi-family	236,782			160,246			222,791
Commercial	1,086,273			852,005			1,089,539
Consumer and other loans	206,974			153,273			201,729
Loans, net of unearned income and deferred costs	5,913,080			4,552,260			5,807,221
Less: allowance for loan losses	(43,195		)	(37,760		)	(42,001		)
Net Loans	5,869,885			4,514,500			5,765,220
Premises and equipment, net	198,664			178,154			198,568
Goodwill	264,910			157,659			264,910
Other intangible assets, net	37,052			29,286			37,856
Bank-owned life insurance policies	190,917			150,623			189,499
Other assets	151,598			128,914			151,796
TOTAL ASSETS	$	8,174,786		$	6,365,169		$	7,973,915
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	2,052,598		$	1,449,660		$	1,947,312
Interest-bearing:
Demand and money market accounts	2,270,025			1,769,414			2,263,894
Savings	320,104			302,373			319,611
Certificates of deposit	1,548,045			1,433,679			1,504,380
Total Deposits	6,190,772			4,955,126			6,035,197
Advances from the Federal Home Loan Bank	687,366			428,940			687,511
Repurchase agreements and other borrowings	35,318			40,235			32,540
Total Borrowings	722,684			469,175			720,051
Other liabilities	160,085			104,865			132,109
TOTAL LIABILITIES	7,073,541			5,529,166			6,887,357
Preferred stock
Authorized and unissued shares - 2,000,000	—			—			—
Common stock, $1.667 par value
Authorized shares - 90,000,000
62,571,739; 51,680,059; and 62,492,168 shares issued at
March 31, 2017 and 2016 and December 31, 2016, respectively	104,307			86,151			104,174
Capital surplus	746,289			536,294			745,411
Retained earnings	243,337			204,413			229,503
Common stock issued to deferred compensation trust, at cost
693,654; 651,379; and 692,431 shares at
March 31, 2017 and 2016 and December 31, 2016, respectively	(11,294		)	(10,288		)	(11,168		)
Deferred compensation trust	11,294			10,288			11,168
Accumulated other comprehensive income (loss)	(4,173		)	17			(3,986		)
TOTAL SHAREHOLDERS’ EQUITY	1,089,760			826,875			1,075,102
Noncontrolling interest	11,485			9,128			11,456
TOTAL EQUITY	1,101,245			836,003			1,086,558
TOTAL LIABILITIES AND EQUITY	$	8,174,786		$	6,365,169		$	7,973,915

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

	Three Months Ended
	March 31,
	2017			2016
	(unaudited)			(unaudited)
INTEREST INCOME:
Loans, including fees	$	64,255		$	50,247
Investment securities	3,218			3,464
Interest-bearing deposits in financial institutions and federal funds sold	887			330
Mortgage loans held for sale	1,727			693
Total interest income	70,087			54,734
INTEREST EXPENSE:
Deposits	6,003			5,213
Advances from the Federal Home Loan Bank	3,772			3,163
Repurchase agreements and other borrowings, net of capitalized interest	31			22
Total interest expense	9,806			8,398
Net interest income	60,281			46,336

PROVISION FOR LOAN LOSSES	2,541			(259		)
Net interest income after provision for loan losses	57,740			46,595
NONINTEREST INCOME:
Residential mortgage banking income, net	17,632			7,118
Insurance commissions and other title fees and income, net	14,800			14,033
Real estate brokerage and property management income, net	4,993			4,827
Service charges on deposit accounts	2,472			2,176
Credit card merchant fees, net	1,118			895
Other income	3,871			3,366
Total noninterest income	44,886			32,415
NONINTEREST EXPENSE:
Salaries and employee benefits	40,208			30,187
Occupancy	6,684			5,017
Furniture and equipment	3,343			2,357
Other expenses	20,013			14,600
Total noninterest expense	70,248			52,161
Income before income tax expense & noncontrolling interest	32,378			26,849
Provision for income tax expense	9,386			8,188
Net income	$	22,992		$	18,661
Net income attributable to noncontrolling interest	(1,024		)	(842		)
Net income attributable to TowneBank	$	21,968		$	17,819
Net income available to common shareholders	$	21,968		$	17,819
Per common share information
Basic earnings	$	0.35		$	0.35
Diluted earnings	$	0.35		$	0.35
Cash dividends declared	$	0.13		$	0.12

TOWNEBANK
Consolidated Statements of Comprehensive Income
(dollars in thousands)

	Three Months Ended
	March 31,
	2017			2016
	(unaudited)			(unaudited)

Net income	$	22,992		$	18,661

Other comprehensive income (loss)

Unrealized gains on securities
Unrealized holding gains arising during the period	162			4,480
Deferred tax expense	(57		)	(1,568		)
Net unrealized gains	105			2,912

Pension and postretirement benefit plans
Actuarial gain (loss)	(538		)	109
Deferred tax benefit (expense)	188			(38		)
Amortization of prior service costs	51			38
Deferred tax expense	(18		)	(13		)
Amortization of actuarial loss	39			4
Deferred tax expense	(14		)	(1		)
Change in retirement plans, net of tax	(292		)	99

Other comprehensive income (loss), net of tax	(187		)	3,011

Comprehensive income	$	22,805		$	21,672

TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)

	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016			2016			2016			2016
	(unaudited)			(audited)			(unaudited)			(unaudited)			(unaudited)
ASSETS
Cash and due from banks	$	420,192		$	130,967		$	147,887		$	188,183		$	195,161
Interest-bearing deposits in financial institutions	5,335			5,581			6,891			33,777			1,006
Federal funds sold	—			—			—			14			—
Total Cash and Cash Equivalents	425,527			136,548			154,778			221,974			196,167
Securities available for sale, at fair value	720,667			812,974			704,418			812,375			821,551
Securities held to maturity, at amortized cost	65,117			66,490			70,304			65,728			66,921
Federal Home Loan Bank stock, at amortized cost	36,402			35,937			24,888			28,008			23,903
Total Securities	822,186			915,401			799,610			906,111			912,375
Mortgage loans held for sale	214,047			314,117			439,608			474,978			97,491
Loans, net of unearned income and deferred costs:	5,913,080			5,807,221			5,651,642			5,559,949			4,552,260
Less: allowance for loan losses	(43,195		)	(42,001		)	(40,655		)	(39,618		)	(37,760		)
Net Loans	5,869,885			5,765,220			5,610,987			5,520,331			4,514,500
Premises and equipment, net	198,664			198,568			202,955			202,333			178,154
Goodwill	264,910			264,910			264,578			257,485			157,659
Other intangible assets, net	37,052			37,856			39,747			41,515			29,286
Bank-owned life insurance policies	190,917			189,499			163,385			164,933			150,623
Other assets	151,598			151,796			154,494			151,081			128,914
TOTAL ASSETS	$	8,174,786		$	7,973,915		$	7,830,142		$	7,940,741		$	6,365,169
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	2,052,598		$	1,947,312		$	1,974,395		$	1,950,816		$	1,449,660
Interest-bearing:
Demand and money market accounts	2,270,025			2,263,894			2,207,962			2,174,154			1,769,414
Savings	320,104			319,611			315,477			317,071			302,373
Certificates of deposit	1,548,045			1,504,380			1,649,113			1,744,238			1,433,679
Total Deposits	6,190,772			6,035,197			6,146,947			6,186,279			4,955,126
Advances from the Federal Home Loan Bank	687,366			687,511			427,655			500,798			428,940
Repurchase agreements and other borrowings	35,318			32,540			31,927			44,008			40,235
Total Borrowings	722,684			720,051			459,582			544,806			469,175
Other liabilities	160,085			132,109			144,735			148,108			104,865
TOTAL LIABILITIES	7,073,541			6,887,357			6,751,264			6,879,193			5,529,166
Preferred stock
Authorized shares - 2,000,000	—			—			—			—			—

Common stock, $1.667 par value	104,307			104,174			104,000			103,963			86,151
Capital surplus	746,289			745,411			743,223			742,228			536,294
Retained earnings	243,337			229,503			218,631			202,565			204,413
Common stock issued to deferred compensation trust, at cost	(11,294		)	(11,168		)	(10,969		)	(10,785		)	(10,288		)
Deferred compensation trust	11,294			11,168			10,969			10,785			10,288
Accumulated other comprehensive income (loss)	(4,173		)	(3,986		)	1,339			1,604			17
TOTAL SHAREHOLDERS’ EQUITY	1,089,760			1,075,102			1,067,193			1,050,360			826,875
Noncontrolling interest	11,485			11,456			11,685			11,188			9,128
TOTAL EQUITY	1,101,245			1,086,558			1,078,878			1,061,548			836,003
TOTAL LIABILITIES AND EQUITY	$	8,174,786		$	7,973,915		$	7,830,142		$	7,940,741		$	6,365,169

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

	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016			2016			2016			2016
INTEREST INCOME:
Loans, including fees	$	64,255		$	65,151		$	64,623		$	51,444		$	50,247
Investment securities	3,218			3,152			3,099			3,139			3,464
Interest-bearing deposits in financial institutions and federal funds sold	887			487			(36		)	364			330
Mortgage loans held for sale	1,727			3,028			4,137			1,294			693
Total Interest Income	70,087			71,818			71,823			56,241			54,734
INTEREST EXPENSE:
Deposits	6,003			5,928			5,909			5,267			5,213
Advances from the Federal Home Loan Bank	3,772			3,546			3,276			3,158			3,163
Repurchase agreements and other borrowings	31			193			33			32			22
Total Interest Expense	9,806			9,667			9,218			8,457			8,398
Net Interest Income	60,281			62,151			62,605			47,784			46,336

PROVISION FOR LOAN LOSSES	2,541			1,831			1,686			2,099			(259		)
Net Interest Income after Provision for Loan Losses	57,740			60,320			60,919			45,685			46,595
NONINTEREST INCOME:
Residential mortgage banking income, net	17,632			18,096			21,430			12,148			7,118
Insurance commissions and other title fees and income, net	14,800			9,823			11,258			11,627			14,033
Real estate brokerage and property management income, net	4,993			2,925			6,647			6,116			4,827
Service charges on deposit accounts	2,472			2,535			2,552			2,284			2,176
Credit card merchant fees, net	1,118			1,135			1,365			1,113			895
Other income	3,871			4,998			3,569			3,180			3,366
Net gain on investment securities	—			6			—			—			—
Total Noninterest Income	44,886			39,518			46,821			36,468			32,415
NONINTEREST EXPENSE:
Salaries and employee benefits	40,208			43,071			40,497			30,093			30,187
Occupancy expense	6,684			6,885			6,656			5,157			5,017
Furniture and equipment	3,343			3,378			3,199			2,381			2,357
Other expenses	20,013			19,500			20,581			34,268			14,600
Total Noninterest Expense	70,248			72,834			70,933			71,899			52,161
Income before income tax expense and noncontrolling interest	32,378			27,004			36,807			10,254			26,849
Provision for income tax expense	9,386			7,160			10,974			2,375			8,188
Net income	22,992			19,844			25,833			7,879			18,661
Net income attributable to noncontrolling interest	(1,024		)	(848		)	(1,657		)	(1,620		)	(842		)
Net income attributable to TowneBank	$	21,968		$	18,996		$	24,176		$	6,259		$	17,819
Net income available to common shareholders	$	21,968		$	18,996		$	24,176		$	6,259		$	17,819
Per common share information
Basic earnings	$	0.35		$	0.31		$	0.39		$	0.12		$	0.35
Diluted earnings	$	0.35		$	0.31		$	0.39		$	0.12		$	0.35
Basic weighted average shares outstanding	62,075,983			61,963,948			61,908,316			51,994,473			51,290,010
Diluted weighted average shares outstanding	62,262,789			62,175,705			62,067,832			52,116,772			51,392,857
Cash dividends declared	$	0.13		$	0.13		$	0.13		$	0.13		$	0.12

TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)

										Increase/(Decrease)
	Three Months Ended									March 31, 2017					March 31, 2017
	March 31,						December 31,			March 31, 2016					December 31, 2016
	2017			2016			2016			Amount			Percent		Amount			Percent
Revenue
Net interest income	$	58,444		$	45,823		$	59,482		$	12,621		27.54	%	$	(1,038	)	(1.75	)%
Service charges on deposit accounts	2,472			2,176			2,535			296			13.60	%	(63		)	(2.49	)%
Credit card merchant fees	1,118			895			1,135			223			24.92	%	(17		)	(1.50	)%
Other income	3,106			2,530			4,125			576			22.77	%	(1,019		)	(24.70	)%
Net gain on investment securities	—			—			6			—			—		(6		)	(100.00	)%
Total noninterest income	6,696			5,601			7,801			1,095			19.55	%	(1,105		)	(14.16	)%
Total revenue	65,140			51,424			67,283			13,716			26.67	%	(2,143		)	(3.19	)%

Provision for loan losses	2,541			(259		)	1,801			2,800			N/M		740			41.09	%

Expenses
Salaries and employee benefits	20,341			17,513			23,770			2,828			16.15	%	(3,429		)	(14.43	)%
Occupancy expense	4,128			3,475			4,349			653			18.79	%	(221		)	(5.08	)%
Furniture and equipment	2,274			1,865			2,374			409			21.93	%	(100		)	(4.21	)%
Advertising and marketing	1,041			874			749			167			19.11	%	292			38.99	%
Charitable contributions	1,313			967			1,011			346			35.78	%	302			29.87	%
Outside processing	1,154			930			1,387			224			24.09	%	(233		)	(16.80	)%
Foreclosed property expenses	118			112			607			6			5.36	%	(489		)	(80.56	)%
FDIC and other insurance	987			1,050			848			(63		)	(6.00	)%	139			16.39	%
Professional fees	1,280			1,049			1,181			231			22.02	%	99			8.38	%
Telephone and postage	904			744			997			160			21.51	%	(93		)	(9.33	)%
Other expenses	4,809			3,602			4,242			1,207			33.51	%	567			13.37	%
Total expenses	38,349			32,181			41,515			6,168			19.17	%	(3,166		)	(7.63	)%
Income before income tax, corporate allocation and noncontrolling interest	24,250			19,502			23,967			4,748			24.35	%	283			1.18	%
Corporate allocation	484			360			519			$	124		34.44	%	(35		)	(6.74	)%
Income before income tax provision and noncontrolling interest	24,734			19,862			24,486			4,872			24.53	%	248			1.01	%
Provision for income tax expense	6,765			5,729			6,546			1,036			18.08	%	219			3.35	%
Net income	17,969			14,133			17,940			3,836			27.14	%	29			0.16	%
Noncontrolling interest	(2		)	—			(9		)	(2		)	N/M		7			(77.78	)%
Net income attributable to TowneBank	$	17,967		$	14,133		$	17,931		$	3,834		27.13	%	$	36		0.20	%
Efficiency ratio	58.87		%	62.58		%	61.71		%	(3.71		)%	(5.93	)%	(2.84		)%	(4.60	)%

TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)

										Increase/(Decrease)
	Three Months Ended									March 31, 2017					March 31, 2017
	March 31,						December 31,			March 31, 2016					December 31, 2016
	2017			2016			2016			Amount			Percent		Amount			Percent
Revenue
Residential mortgage brokerage income, net	$	17,775		$	7,310		$	18,378		$	10,465		143.16	%	$	(603	)	(3.28	)%
Real estate brokerage income, net	1,460			1,412			1,761			48			3.40	%	(301		)	(17.09	)%
Title insurance and settlement fees	355			350			422			5			1.43	%	(67		)	(15.88	)%
Property management fees, net	3,533			3,415			1,163			118			3.46	%	2,370			203.78	%
Income from unconsolidated subsidiary	124			165			218			(41		)	(24.85	)%	(94		)	(43.12	)%
Net interest and other income	2,203			762			2,959			1,441			189.11	%	(756		)	(25.55	)%
Total revenue	25,450			13,414			24,901			12,036			89.73	%	549			2.20	%

Expenses
Salaries and employee benefits	13,708			6,706			13,551			7,002			104.41	%	157			1.16	%
Occupancy expense	1,964			1,013			2,002			951			93.88	%	(38		)	(1.90	)%
Furniture and equipment	869			268			807			601			224.25	%	62			7.68	%
Amortization of intangible assets	559			353			565			206			58.36	%	(6		)	(1.06	)%
Other expenses	5,978			2,844			5,909			3,134			110.20	%	69			1.17	%
Total expenses	23,078			11,184			22,834			11,894			106.35	%	244			1.07	%

Income before income tax, corporate allocation and noncontrolling interest	2,372			2,230			2,067			142			6.37	%	305			14.76	%
Corporate allocation	(307		)	(170		)	(364		)	(137		)	80.59	%	57			(15.66	)%
Income before income tax provision and noncontrolling interest	2,065			2,060			1,703			5			0.24	%	362			21.26	%
Provision for income tax expense	627			659			355			(32		)	(4.86	)%	272			76.62	%
Net income	1,438			1,401			1,348			37			2.64	%	90			6.68	%
Noncontrolling interest	(512		)	(368		)	(675		)	(144		)	39.13	%	163			(24.15	)%
Net income attributable to TowneBank	$	926		$	1,033		$	673		$	(107	)	(10.36	)%	$	253		37.59	%
Efficiency ratio	90.68		%	83.38		%	91.70		%	7.30		%	8.76	%	(1.02		)%	(1.11	)%

TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)

										Increase/(Decrease)
	Three Months Ended									March 31, 2017					March 31, 2017
	March 31,						December 31,			March 31, 2016					December 31, 2016
	2017			2016			2016			Amount			Percent		Amount			Percent
Commission and fee income
Property and casualty	$	8,457		$	8,086		$	7,614		$	371		4.59	%	$	843		11.07	%
Employee benefits	2,974			2,898			2,930			76			2.62	%	44			1.50	%
Travel insurance	1,627			1,456			828			171			11.74	%	799			96.50	%
Specialized benefit services	165			153			164			12			7.84	%	1			0.61	%
Total commissions and fees	13,223			12,593			11,536			630			5.00	%	1,687			14.62	%

Contingency and bonus revenue	3,539			3,411			67			128			3.75	%	3,472			N/M
Other income	88			77			71			11			14.29	%	17			23.94	%
Total revenue	16,850			16,081			11,674			769			4.78	%	5,176			44.34	%

Employee commission expense	2,273			2,168			2,221			105			4.84	%	52			2.34	%
Revenue, net of commission expense	14,577			13,913			9,453			664			4.77	%	5,124			54.21	%

Salaries and employee benefits	6,159			5,968			5,749			191			3.20	%	410			7.13	%
Occupancy expense	592			529			535			63			11.91	%	57			10.65	%
Furniture and equipment	200			224			196			(24		)	(10.71	)%	4			2.04	%
Amortization of intangible assets	697			685			701			12			1.75	%	(4		)	(0.57	)%
Other expenses	1,173			1,390			1,304			(217		)	(15.61	)%	(131		)	(10.05	)%
Total operating expenses	8,821			8,796			8,485			25			0.28	%	336			3.96	%
Income before income tax, corporate allocation and noncontrolling interest	5,756			5,117			968			639			12.49	%	4,788			494.63	%
Corporate allocation	(177		)	(190		)	(155		)	13			(6.84	)%	(22		)	14.19	%
Income before income tax provision and noncontrolling interest	5,579			4,927			813			652			13.23	%	4,766			586.22	%
Provision for income tax expense	1,994			1,800			259			194			10.78	%	1,735			669.88	%
Net income	3,585			3,127			554			458			14.65	%	3,031			547.11	%
Noncontrolling interest	(510		)	(474		)	(162		)	(36		)	7.59	%	(348		)	214.81	%
Net income attributable to TowneBank	$	3,075		$	2,653		$	392		$	422		15.91	%	$	2,683		684.44	%
Efficiency ratio	60.51		%	63.22		%	89.76		%	(2.71		)%	(4.29	)%	(29.25		)%	(32.59	)%

TOWNEBANK
Reconcilement of Non-GAAP Financial Measures:

	Three Months Ended
	March 31,			March 31,			December 31,
	2017			2016			2016

Return on average assets (GAAP basis)	1.11		%	1.14		%	0.95		%
Impact of excluding average goodwill and other intangibles and amortization	0.11		%	0.07		%	0.10		%
Return on average tangible assets (Non-GAAP)	1.22		%	1.21		%	1.05		%

Return on average equity (GAAP basis)	8.15		%	8.63		%	6.95		%
Impact of excluding average goodwill and other intangibles and amortization	3.73		%	2.93		%	3.32		%
Return on average tangible equity (Non-GAAP)	11.88		%	11.56		%	10.27		%

Return on average common equity (GAAP basis)	8.23		%	8.73		%	7.02		%
Impact of excluding average goodwill and other intangibles and amortization	3.82		%	2.99		%	3.40		%
Return on average tangible common equity (Non-GAAP)	12.05		%	11.72		%	10.42		%

Book value (GAAP basis)	$	17.42		$	16.00		$	17.20
Impact of excluding average goodwill and other intangibles and amortization	(4.83		)	(3.62		)	(4.84		)
Tangible book value	$	12.59		$	12.38		$	12.36

Townebank Reports First Quarter Earnings

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