SUFFOLK, Va., Jan. 26, 2023 (GLOBE NEWSWIRE) -- TowneBank ("Towne") (NASDAQ:TOWN) today reported financial results for the full year and the fourth quarter ended December 31, 2022. For the year ended December 31, 2022, earnings were $188.99 million, or $2.60 per diluted share, compared to $215.38 million, or $2.97 per diluted share, for the year ended December 31, 2021. Earnings in the fourth quarter of 2022 were $46.69 million, or $0.64 per diluted share, compared to fourth quarter 2021 earnings of $40.18 million, or $0.55 per diluted share.

"We were pleased with our results for 2022, which exceeded our expectations entering the year. We achieved an increase in total revenues despite significant headwinds in our residential mortgage business and reduced fee income related to the Paycheck Protection Program. Our credit quality remains strong and we prudently built our reserve levels in this uncertain economic environment. Once again, TowneBank enjoyed a #1 market share position for our home market in Hampton Roads. Looking ahead, our strong balance sheet, diversified business model and valuable deposit franchise should position our company to outperform in a wide range of economic environments. I wish to thank all of our nearly 2,800 team members who embrace and define our culture of caring each day," said G. Robert Aston, Jr., Executive Chairman.

Annual Highlights for 2022 Compared to 2021:

Total revenues increased $6.61 million, or 0.97%, to $686.94 million, compared to prior year. Increases in net interest income of $59.00 million were partially offset by a $52.39 million decline in noninterest income. Net interest income increased due to a combination of strong first half 2022 organic loan growth and higher interest rates. The decrease in noninterest income was driven by a decline in residential mortgage banking income of $62.15 million, partially offset by increases in insurance commissions of $8.04 million and property management income of $2.07 million.
Pre-provision, pre-tax, net revenues (non-GAAP) were $244.17 million, a decrease of $9.23 million, or 3.64%, driven by the decline in noninterest income and an increase in noninterest expense of $24.01 million, or 5.75%.
Loans held for investment increased $1.29 billion, or 13.55%, from December 31, 2021. The balances at December 31, 2022 and 2021 included $4.82 million and $157.72 million, respectively, of loans originated under the Paycheck Protection Program ("PPP"). Excluding PPP loans, loans held for investment increased $1.44 billion, or 15.42%, compared to prior year.
Interest and fee income on PPP loans declined 86.91%, or $28.91 million, to $4.36 million for the year ended December 31, 2022.
Total deposits were $13.29 billion, a decrease of $0.28 billion, or 2.06%, compared to prior year, driven by a decline in commercial deposits and escrow balances.
Return on average common shareholders' equity was 10.15%, and return on average tangible common shareholders' equity was 14.54% (non-GAAP).
Net interest margin of 3.08% and taxable equivalent net interest margin of 3.10% (non-GAAP) compared to prior year net interest margin of 2.84% and taxable equivalent net interest margin of 2.86% (non-GAAP).
Effective tax rate of 19.77% compared to 20.28% in 2021.

Highlights for Fourth Quarter 2022:

Total revenues were $175.31 million in fourth quarter 2022, an increase from the prior year quarter of $14.88 million, or 9.28%. Increases in net interest income of $27.99 million, or 27.77%, outpaced a $13.11 million, or 21.98%, decline in noninterest income in the quarterly comparison. The primary source of the decline in noninterest income was mortgage banking income.
Pre-provision, pre-tax, net revenues (non-GAAP) were $64.36 million, an increase of $15.87 million, or 32.74%, compared to the prior year quarter.
Loans held for investment increased $0.23 billion, or 8.83% on an annualized basis, from September 30, 2022.
Total deposits were $13.29 billion, a decrease of $0.12 billion, or 3.49% on an annualized basis, compared to the linked quarter September 30, 2022.
Noninterest bearing deposits decreased 5.07%, to $5.27 billion, compared to prior year, representing 39.61% of total deposits. Compared to the linked quarter, noninterest bearing deposits decreased $0.31 billion.
In the quarter ended December 31, 2022, annualized return on average common shareholders' equity was 10.07% and annualized return on average tangible common shareholders' equity was 14.44% (non-GAAP).
Net interest margin was 3.51% and taxable equivalent net interest margin was 3.53% (non-GAAP) compared to the prior year quarter net interest margin of 2.70% and taxable equivalent net interest margin of 2.72% (non-GAAP).
Effective tax rate of 19.90% compared to 18.97% in fourth quarter 2021 and 20.08% in the linked quarter.

"From a strategic perspective, we were pleased to close the Farmers Bank transaction earlier this month. We also focused on building out our footprint and investing in our teams through talent acquisition across all business lines during 2022. As we look ahead to 2023, we expect to continue expanding our impressive suite of noninterest income businesses. We continue to prioritize liquidity and responsible balance sheet growth as we serve our members, shareholders and communities," said William I. Foster, III, President and Chief Executive Officer.

Quarterly Net Interest Income:

Net interest income was $128.78 million compared to $100.79 million for the quarter ended December 31, 2021. This increase was driven by higher interest rates and increases in loan and investment securities balances, partially offset by increased deposit costs.
Taxable equivalent net interest margin (non-GAAP) was 3.53%, including purchase accounting accretion of 1 basis point, compared to 2.72%, including purchase accounting accretion of 2 basis points and PPP interest and fees of 7 basis points, for fourth quarter 2021.
On an average basis, loans held for investment with a yield of 4.60%, which represented 73.41% of earning assets in the fourth quarter of 2022, compared to a yield of 4.05%, which represented 63.28% of earning assets in the fourth quarter of 2021.
Total cost of deposits increased to 0.60% from 0.30% in the linked quarter and 0.16% at December 31, 2021.
Rising funding costs negatively impacted profitability in our residential mortgage banking business.
Average interest-earning assets totaled $14.58 billion at December 31, 2022 compared to $14.81 billion at December 31, 2021, a decrease of 1.57%.
Average interest-bearing liabilities totaled $8.26 billion, a decrease of $0.01 billion, or 0.08%, compared to the prior year.

Quarterly Provision for Credit Losses:

The quarterly provision for credit losses for on-balance-sheet loans was an expense of $6.22 million in the current quarter and $3.29 million in the linked quarter, compared to a provision benefit of $1.18 million one year ago.
In the linked quarter comparison, fourth quarter 2022 included an increase in the allowance for credit losses on loans of $3.32 million that was driven by loan growth and a modest weakening in the macroeconomic forecast scenarios used by management to assist in estimating credit losses.
Net charge-offs were $2.90 million, driven primarily by a fraud-related charge-off of a single credit relationship, compared to net recoveries of $0.06 million one year prior. The ratio of net charge-offs (recoveries) to average loans on an annualized basis was 0.11% in fourth quarter 2022, zero in fourth quarter 2021, and (0.01)% in the linked quarter.
The allowance for credit losses on loans represented 1.03% of total loans compared to 1.02% at September 30, 2022 and 1.12% at December 31, 2021. The allowance for credit losses on loans was 17.67 times nonperforming loans compared to 20.48 times at September 30, 2022 and 17.75 times at December 31, 2021.

Quarterly Noninterest Income:

Total noninterest income was $46.52 million compared to $59.63 million in 2021, a decrease of $13.11 million, or 21.98%. Increased insurance commissions were offset by a decline in residential mortgage banking income.
Residential mortgage banking income was $7.37 million compared to $20.95 million in fourth quarter 2021. Loan volume in the current quarter was $0.46 billion, with purchase activity comprising 95.08%. Loan volume in fourth quarter 2021 was $1.15 billion, with purchase activity of 79.36%. Loan volume in the linked quarter was $0.69 billion, with purchase activity of 93.20%. Increases in mortgage rates and limited housing inventory have contributed to a significant decline in production and refinance activity.
Gross margins on residential mortgages declined 49 basis points from 3.42% in fourth quarter 2021 to 2.93% in the current quarter.
Real estate commissions were negatively impacted by a combination of increased mortgage loan rates and low inventories.
Property management fee revenue decreased 14.76%, or $1.34 million, as compared to fourth quarter 2021, which is more comparable to lower pre-pandemic reservation levels.
Total insurance segment revenue increased $1.84 million, or 11.87%, to $17.32 million in the fourth quarter of 2022. This increase is attributable to higher property and casualty commissions compared to the prior year quarter.

Quarterly Noninterest Expense:

Total noninterest expense was $111.14 million compared to $110.47 million, an increase of $0.67 million, or 0.61%. This reflects increases in software expenses of $1.10 million, occupancy expenses of $0.88 million, and professional fees of $0.88 million offset by a decrease of $3.51 million in salary and benefits expense.
Lower salaries and benefits compared to fourth quarter 2021 were driven by reductions in incentive income and employee benefit costs, partially offset by increases in annual base salaries.
Higher costs associated with our core banking platform drove the increase in software expense.
The increase in occupancy expense was driven by lower tenant income in 2022 and relocation expenses related to moving our mortgage division.

Consolidated Balance Sheet Highlights:

Total assets were $15.85 billion at December 31, 2022, a decrease of 3.15%, compared to $16.36 billion at December 31, 2021. The decrease was driven by a decline in deposits.
Loans held for investment increased $1.29 billion, or 13.55%, compared to year end 2021 and $0.23 billion compared to the linked quarter.
Average loans held for investment, excluding PPP loans, were $10.69 billion in fourth quarter 2022, an increase of $1.52 billion, or 16.56%, compared to prior year.
Mortgage loans held for sale decreased $0.26 billion, or 71.44%, compared to prior year and $0.06 billion, or 37.99%, compared to the linked quarter.
Total deposits decreased $0.28 billion, or 2.06%, compared to December 31, 2021 and $0.12 billion, or 0.88%, compared to the linked quarter.
Total loans held for investment to total deposits were 81.20% compared to 78.73% at September 30, 2022 and 70.03% at December 31, 2021.
Total borrowings decreased $0.16 billion, or 34.00%, from prior year.

Investment Securities:

Total investment securities were $2.41 billion compared to $2.45 billion at September 30, 2022 and $1.98 billion at December 31, 2021. The weighted average duration of the portfolio at December 31, 2022 was 3.5 years. The carrying value of the AFS debt securities portfolio included $191.05 million in net unrealized losses, related to rising rates, at December 31, 2022 compared to $17.54 million in net unrealized gains at December 31, 2021.

Loans and Asset Quality:

Total loans held for investment were $10.79 billion at December 31, 2022 compared to $10.56 billion at September 30, 2022 and $9.51 billion at December 31, 2021.
Nonperforming assets were $6.83 million, or 0.04% of total assets, compared to $10.56 million, or 0.06% of total assets, at December 31, 2021.
Nonperforming loans were 0.06% of period end loans at both December 31, 2022 and 2021.
Foreclosed property decreased to $0.56 million from $4.58 million at December 31, 2021.

Deposits and Borrowings:

Total deposits were $13.29 billion compared to $13.41 billion at September 30, 2022 and $13.57 billion at December 31, 2021.
Noninterest-bearing deposits were 39.61% of total deposits at December 31, 2022 compared to 41.56% at September 30, 2022 and 40.86% at December 31, 2021. Noninterest-bearing deposits have declined the last two quarters driven by declines in noninterest-bearing escrow balances.
Total borrowings were $0.32 billion compared to $0.48 billion at December 31, 2021.

Capital:

Common equity tier 1 capital ratio of 11.92%.
Tier 1 leverage capital ratio of 9.87%.
Tier 1 risk-based capital ratio of 12.04%.
Total risk-based capital ratio of 14.80%.
Book value per share was $25.73 compared to $25.08 at September 30, 2022 and $26.13 at December 31, 2021.
Tangible book value per share (non-GAAP) was $18.84 compared to $18.17 at September 30, 2022 and $19.15 at December 31, 2021.

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 40 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 controlled divisions and subsidiaries that include 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. With total assets of $15.85 billion as of December 31, 2022, 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, tangible book value per common share, total risk-based capital ratio, tier one leverage ratio, tier one capital ratio, and the tangible common equity to tangible assets ratio. Management uses these non-GAAP financial measures to assess the performance of TowneBank's core business and the strength of its capital position. Management believes that these non-GAAP financial measures provide meaningful additional information about TowneBank to assist investors in evaluating operating results, financial strength, and capitalization. The non-GAAP financial measures should be considered as additional views of the way our financial measures are affected by significant charges for credit costs and other factors. These non-GAAP financial measures should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The computations of the non-GAAP financial measures used in this presentation are referenced in a footnote or in the appendix to this presentation.

Forward-Looking Statements:

This press release contains certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only the beliefs, expectations, or opinions of TowneBank and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional terms, such as "will," "would," "should," "could," "may," "likely," "probably," or "possibly." These statements may address issues that involve significant risks, uncertainties, estimates, and assumptions made by management. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include competitive pressures in the banking industry that may increase significantly; changes in the interest rate environment that may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; changes in the credit worthiness of customers and the possible impairment of the collectability of loans; general economic conditions, either nationally or regionally, that may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit or other services; unusual and infrequently occurring events, such as weather-related disasters, terrorist acts 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, 2021 and related disclosures in other filings that have been, or will be, filed by TowneBank with the Federal Deposit Insurance Corporation.

Media contact:

G. Robert Aston, Jr., Executive Chairman, 757-638-6780

William I. Foster, III, President and Chief Executive Officer, 757-417-6482

Investor contact:

William B. Littreal, Chief Financial Officer, 757-638-6813

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

		Three Months Ended
		December 31,				September 30,			June 30,			March 31,			December 31,
			2022				2022			2022			2022			2021
Income and Performance Ratios:
	Total revenue, net of interest expense	$	175,307			$	179,236		$	166,980		$	165,412		$	160,424
	Net income		46,494				50,671			47,054			46,250			41,657
	Net income available to common shareholders		46,685				50,169			46,547			45,586			40,183
	Pre-provision, pre-tax, net revenues ^(non-GAAP)		64,357				66,700			57,748			55,369			48,483
	Net income per common share - diluted		0.64				0.69			0.64			0.63			0.55
	Book value per common share		25.73				25.08			25.48			25.61			26.13
	Book value per share - tangible ^(non-GAAP)		18.84				18.17			18.58			18.67			19.15
	Return on average assets		1.16	%			1.22	%		1.13	%		1.13	%		0.99	%
	Return on average assets - tangible ^(non-GAAP)		1.25	%			1.31	%		1.22	%		1.23	%		1.08	%
	Return on average equity		9.98	%			10.60	%		9.94	%		9.73	%		8.38	%
	Return on average equity - tangible ^(non-GAAP)		14.26	%			15.08	%		14.20	%		13.91	%		12.08	%
	Return on average common equity		10.07	%			10.69	%		10.03	%		9.81	%		8.45	%
	Return on average common equity - tangible ^(non-GAAP)		14.44	%			15.27	%		14.37	%		14.08	%		12.22	%
	Noninterest income as a percentage of total revenue		26.54	%			30.80	%		34.52	%		40.03	%		37.17	%
Regulatory Capital Ratios (1):
	Common equity tier 1		11.92	%			11.92	%		11.83	%		12.16	%		12.36	%
	Tier 1		12.04	%			12.05	%		11.97	%		12.31	%		12.51	%
	Total		14.80	%			14.80	%		16.76	%		17.34	%		15.56	%
	Tier 1 leverage ratio		9.87	%			9.52	%		9.19	%		9.16	%		9.11	%
Asset Quality:
	Allowance for credit losses on loans to nonperforming loans	17.67x				20.48x			18.94x			21.52x			17.75x
	Allowance for credit losses on loans to period end loans		1.03	%			1.02	%		1.00	%		1.05	%		1.12	%
	Allowance for credit losses on loans to period end loans excluding PPP loans^(non-GAAP)		1.03	%			1.02	%		1.00	%		1.06	%		1.13	%
	Nonperforming loans to period end loans		0.06	%			0.05	%		0.05	%		0.05	%		0.06	%
	Nonperforming assets to period end assets		0.04	%			0.03	%		0.04	%		0.03	%		0.06	%
	Net charge-offs (recoveries) to average loans (annualized)		0.11	%		(0.01)%				—	%		0.01	%		—	%
	Net charge-offs (recoveries)		2,904				(187)			(80)			126			(60)

	Nonperforming loans	$	6,273			$	5,250		$	5,493		$	4,825		$	5,973
	Foreclosed property		560				186			563			560			4,583
	Total nonperforming assets	$	6,833			$	5,436		$	6,056		$	5,385		$	10,556
	Loans past due 90 days and still accruing interest	$	324			$	725		$	232		$	40		$	372
	Allowance for credit losses on loans		110,816				107,497			104,019			103,833			106,059
Mortgage Banking:
	Loans originated, mortgage	$	299,298			$	458,254		$	588,529		$	583,008		$	851,021
	Loans originated, joint venture		157,511				234,443			249,279			236,980			303,362
	Total loans originated	$	456,809			$	692,697		$	837,808		$	819,988		$	1,154,383
	Number of loans originated		1,355				1,983			2,282			2,237			3,408
	Number of originators		186				194			201			207			213
	Purchase %		95.08	%			93.20	%		92.27	%		77.93	%		79.36	%
	Loans sold	$	483,254			$	701,908		$	759,073		$	853,808		$	1,150,996
	Rate lock asset	$	482			$	859		$	1,935		$	3,009		$	3,455

	Gross realized gain on sales and fees as a % of loans originated		2.93	%			3.02	%		2.92	%		3.01	%		3.42	%
Other Ratios:
	Net interest margin		3.51	%			3.28	%		2.88	%		2.67	%		2.70	%
	Net interest margin-fully tax equivalent ^(non-GAAP)		3.53	%			3.31	%		2.89	%		2.69	%		2.72	%
	Average earning assets/total average assets		91.51	%			91.92	%		92.22	%		92.24	%		92.13	%
	Average loans/average deposits		80.14	%			76.82	%		74.57	%		71.61	%		70.68	%
	Average noninterest deposits/total average deposits		41.07	%			41.77	%		40.56	%		40.49	%		41.42	%
	Period end equity/period end total assets		11.92	%	¹		11.56	%		11.09	%		11.28	%		11.71	%
	Efficiency ratio^(non-GAAP)		61.99	%			61.03	%		63.51	%		64.42	%		67.03	%
	(1) Current reporting period regulatory capital ratios are preliminary.

TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)


Investment Securities										% Change
	Q4			Q4			Q3			Q4 22 vs.		Q4 22 vs.
*Available-for-sale securities, at fair value*		2022			2021			2022		Q4 21		Q3 22
U.S. agency securities	$	293,894		$	310,587		$	331,297		(5.37)%		(11.29)%
U.S. Treasury notes		26,693			1,000			26,399		2,569.30	%	1.11	%
Municipal securities		431,299			385,673			426,720		11.83	%	1.07	%
Trust preferred and other corporate securities		78,436			53,950			79,501		45.39	%	(1.34)%
Mortgage-backed securities issued by GSE and GNMA		1,011,666			1,055,183			1,027,331		(4.12)%		(1.52)%
Allowance for credit losses		(1,086	)		(210	)		(1,112	)	417.14	%	(2.34)%
Total	$	1,840,902		$	1,806,183		$	1,890,136		1.92	%	(2.60)%
*Gross unrealized gains (losses) reflected in financial statements*
Total gross unrealized gains	$	1,111		$	32,054		$	1,292		(96.53)%		(14.01)%
Total gross unrealized losses		(192,163	)		(14,514	)		(201,127	)	1,223.98	%	(4.46)%
Net unrealized gain (loss) on AFS securities	$	(191,052	)	$	17,540		$	(199,835	)	(1,189.24)%		(4.40)%

*Held-to-maturity securities, at amortized cost*
U.S. agency securities	$	101,092		$	73,360		$	100,905		37.80	%	0.19	%
U.S. Treasury notes		433,866			66,326			434,148		554.14	%	(0.06)%
Municipal securities		5,181			5,095			5,159		1.69	%	0.43	%
Trust preferred and other corporate securities		2,223			2,272			2,235		(2.16)%		(0.54)%
Mortgage-backed securities issued by GSE and GNMA		6,113			7,168			6,298		(14.72)%		(2.94)%
Allowance for credit losses		(83	)		(94	)		(83	)	(11.70)%		—	%
Total	$	548,392		$	154,127		$	548,662		255.81	%	(0.05)%
*Gross unrealized gains (losses) not reflected in financial statements*
Total gross unrealized gains	$	320		$	1,561		$	153		(79.50)%		109.15	%
Total gross unrealized losses		(29,802	)		(106	)		(31,116	)	N/M		(4.22)%
Net unrealized gain (loss) on HTM securities	$	(29,482	)	$	1,455		$	(30,963	)	(2,126.25)%		(4.78)%

Loans Held For Investment (1)										% Change
	Q4			Q4			Q3			Q4 22 vs.		Q4 22 vs.
		2022			2021			2022		Q4 21		Q3 22
Real estate - construction and development	$	1,428,376		$	1,125,863		$	1,324,831		26.87	%	7.82	%
Commercial real estate - owner occupied		1,580,099			1,494,000			1,590,371		5.76	%	(0.65)%
Commercial real estate - non owner occupied		2,830,620			2,620,334			2,799,363		8.03	%	1.12	%
Multifamily		496,190			332,659			458,803		49.16	%	8.15	%
Residential 1-4 family		1,634,062			1,305,915			1,567,024		25.13	%	4.28	%
HELOC		395,526			380,834			388,305		3.86	%	1.86	%
Commercial and industrial business (C&I)		1,256,697			1,206,911			1,251,350		4.13	%	0.43	%
Government		512,265			525,358			520,198		(2.49)%		(1.52)%
Indirect		568,190			394,802			572,710		43.92	%	(0.79)%
Consumer loans and other		92,577			119,576			86,656		(22.58)%		6.83	%
Total	$	10,794,602		$	9,506,252		$	10,559,611		13.55	%	2.23	%
(1) PPP loans totaling $4.82 million, $157.72 million and $12.65 million, primarily in C&I, are included in Q4 2022, Q4 2021 and Q3 2022, respectively.

Deposits										% Change
	Q4			Q4			Q3			Q4 22 vs.		Q4 22 vs.
		2022			2021			2022		Q4 21		Q3 22
Noninterest-bearing demand	$	5,265,186		$	5,546,665		$	5,574,528		(5.07)%		(5.55)%
Interest-bearing:
Demand and money market accounts		6,185,075			6,139,714			6,042,417		0.74	%	2.36	%
Savings		374,987			371,356			387,622		0.98	%	(3.26)%
Certificates of deposits		1,468,975			1,515,891			1,407,495		(3.09)%		4.37	%
Total	$	13,294,223		$	13,573,626		$	13,412,062		(2.06)%		(0.88)%

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

	Three Months Ended								Three Months Ended								Three Months Ended
	December 31, 2022								September 30, 2022								December 31, 2021
				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), (2)(3)	$	10,701,612		$	124,064		4.60	%	$	10,465,441		$	112,225		4.25	%	$	9,372,187		$	95,696		4.05	%
Taxable investment securities		2,288,344			14,251		2.49	%		2,385,218			12,943		2.17	%		1,625,683			10,217		2.51	%
Tax-exempt investment securities		140,108			1,262		3.60	%		147,184			1,054		2.86	%		157,855			292		0.74	%
Total securities		2,428,452			15,513		2.56	%		2,532,402			13,997		2.21	%		1,783,538			10,509		2.36	%
Interest-bearing deposits		1,321,964			11,387		3.42	%		1,800,798			9,509		2.09	%		3,274,392			1,215		0.15	%
Mortgage loans held for sale		124,949			1,842		5.90	%		188,737			2,446		5.18	%		379,808			2,750		2.90	%
Total earning assets		14,576,977			152,806		4.16	%		14,987,378			138,177		3.66	%		14,809,925			110,170		2.95	%
Less: allowance for credit losses		(108,288	)							(104,178	)							(107,215	)
Total nonearning assets		1,461,067								1,421,094								1,372,799
Total assets	$	15,929,756							$	16,304,294							$	16,075,509
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,022,582		$	13,903		0.92	%	$	6,084,753		$	6,542		0.43	%	$	5,853,873		$	2,148		0.15	%
Savings		378,816			763		0.80	%		391,437			628		0.64	%		371,901			534		0.57	%
Certificates of deposit		1,468,589			5,452		1.47	%		1,456,746			3,060		0.83	%		1,541,483			2,707		0.70	%
Total interest-bearing deposits		7,869,987			20,118		1.01	%		7,932,936			10,230		0.51	%		7,767,257			5,389		0.28	%
Borrowings		138,510			909		2.57	%		94,411			139		0.58	%		245,622			360		0.58	%
Subordinated debt, net		247,319			2,108		3.41	%		320,518			3,117		3.89	%		249,555			2,962		4.75	%
Total interest-bearing liabilities		8,255,816			23,135		1.11	%		8,347,865			13,486		0.64	%		8,262,434			8,711		0.42	%
Demand deposits		5,484,477								5,690,020								5,492,894
Other noninterest-bearing liabilities		334,033								387,835								417,707
Total liabilities		14,074,326								14,425,720								14,173,035
Shareholders' equity		1,855,430								1,878,574								1,902,474
Total liabilities and equity	$	15,929,756							$	16,304,294							$	16,075,509
Net interest income (tax-equivalent basis) (6)				$	129,671							$	124,691							$	101,459
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment					(888	)							(653	)							(667	)
Net interest income (GAAP)				$	128,783							$	124,038							$	100,792
Interest rate spread (4)(6)							3.05	%							3.02	%							2.53	%
Interest expense as a percent of average earning assets							0.63	%							0.36	%							0.23	%
Net interest margin (tax equivalent basis) (5)(6)							3.53	%							3.30	%							2.72	%
Total cost of deposits							0.60	%							0.30	%							0.16	%

(1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 21%.

(2) December 31, 2022, December 31, 2021, and September 30, 2022 balances include average PPP balances of $10.60 million, $199.74 million, and $18.68 million and related interest and fee income of $0.12 million, $3.85 million, and $0.62 million, respectively.

(3) December 31, 2021 loan balance includes previously excluded average nonaccrual loans of $7.69 million.

(4) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.

(5) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.

(6) Non-GAAP.

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

	Year Ended December 31,
		2022								2021								2020
				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
Assets:
Loans (net of unearned income and deferred costs)(2)(3)	$	10,262,095		$	433,350		4.22	%	$	9,473,081		$	397,877		4.20	%	$	9,436,628		$	411,421		4.36	%
Taxable investment securities		2,267,099			47,594		2.10	%		1,426,493			29,857		2.09	%		1,252,926			30,181		2.41	%
Tax-exempt investment securities		132,694			4,351		3.28	%		137,848			1,755		1.27	%		140,078			2,997		2.14	%
Total securities		2,399,793			51,945		2.16	%		1,564,341			31,612		2.02	%		1,393,004			33,178		2.38	%
Interest-bearing deposits		2,099,970			26,859		1.28	%		2,640,191			3,432		0.13	%		689,715			2,603		0.38	%
Mortgage loans held for sale		200,363			8,880		4.43	%		471,767			13,227		2.80	%		505,502			15,252		3.02	%
Total earning assets		14,962,221			521,034		3.48	%		14,149,380			446,148		3.15	%		12,024,849			462,454		3.85	%
Less: allowance for credit losses		(105,629	)							(113,113	)							(85,570	)
Total nonearning assets		1,411,422								1,348,395								2,232,927
Total assets	$	16,268,014							$	15,384,662							$	14,172,206
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	6,158,190		$	25,802		0.42	%	$	5,359,321		$	8,323		0.16	%	$	4,070,562		$	13,105		0.32	%
Savings		385,154			2,427		0.63	%		352,333			2,117		0.60	%		297,441			2,254		0.76	%
Certificates of deposit		1,447,701			12,586		0.87	%		1,788,985			16,669		0.93	%		2,378,281			42,502		1.79	%
Total interest-bearing deposits		7,991,045			40,815		0.51	%		7,500,639			27,109		0.36	%		6,746,284			57,861		0.86	%
Borrowings		124,168			1,320		1.05	%		395,045			2,159		0.54	%		1,269,064			10,306		0.80	%
Subordinated debt, net		362,410			14,436		3.98	%		249,335			11,816		4.74	%		248,736			11,847		4.76	%
Total interest-bearing liabilities		8,477,623			56,571		0.67	%		8,145,019			41,084		0.50	%		8,264,084			80,014		0.97	%
Demand deposits		5,547,835								5,034,851								3,924,797
Other noninterest-bearing liabilities		364,520								348,844								262,266
Total liabilities		14,389,978								13,528,714								12,451,147
Shareholders' equity		1,878,036								1,855,948								1,721,059
Total liabilities and equity	$	16,268,014							$	15,384,662							$	14,172,206
Net interest income (tax-equivalent basis) (6)				$	464,463							$	405,064							$	382,440
Reconciliation of Non-GAAP Financial Measures
Tax-equivalent basis adjustment					(3,098	)							(2,695	)							(2,296	)
Net interest income (GAAP)				$	461,365							$	402,369							$	380,144
Interest rate spread (4)(6)							2.81	%							2.65	%							2.88	%
Interest expense as a percent of average earning assets							0.38	%							0.29	%							0.67	%
Net interest margin (tax-equivalent basis) (5)(6)							3.10	%							2.86	%							3.18	%
Total cost of deposits							0.30	%							0.22	%							0.54	%

(1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory rate of 21%.

(2) Includes, previously excluded average nonaccrual loans of $10.63 million in 2021, and $16.04 million in 2020.

(3) December 31, 2022, December 31, 2021 and December 31, 2020 balances include average PPP balances of $51.04 million, $530.39 million and $737.16 million and related interest and fee income of $4.36 million, $33.27 million and $26.94 million, respectively.

(4) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.

(5) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.

(6) Non-GAAP.

TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except per share data)

		2022			2021
	(unaudited)			(audited)
ASSETS
Cash and due from banks	$	55,381		$	17,373
Interest-bearing deposits at FRB - Richmond		1,000,205			3,244,484
Interest-bearing deposits in financial institutions		97,244			34,779
Total Cash and Cash Equivalents		1,152,830			3,296,636
Securities available for sale, at fair value (amortized cost of $2,033,040 and $1,788,853, and allowance for credit losses of $1,085 and $210 at December 31, 2022 and December 31, 2021, respectively.		1,840,902			1,806,183
Securities held to maturity, at amortized cost (fair value $518,993 and $155,676 at December 31, 2022 and December 31, 2021, respectively.		548,475			154,221
Less: allowance for credit losses		(83	)		(94	)
Securities held to maturity, net of allowance for credit losses		548,392			154,127
Other equity securities		6,424			6,759
FHLB stock		9,617			13,146
Total Securities		2,405,335			1,980,215
Mortgage loans held for sale		102,339			358,303
Loans, net of unearned income and deferred costs		10,794,602			9,506,252
Less: allowance for credit losses		(110,816	)		(106,059	)
Net Loans		10,683,786			9,400,193
Premises and equipment, net		304,802			270,772
Goodwill		458,482			457,187
Other intangible assets, net		43,163			50,379
BOLI		258,069			251,805
Other assets		436,461			295,897
TOTAL ASSETS	$	15,845,267		$	16,361,387
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	5,265,186		$	5,546,665
Interest-bearing:
Demand and money market accounts		6,185,075			6,139,714
Savings		374,987			371,356
Certificates of deposit		1,468,975			1,515,891
Total Deposits		13,294,223			13,573,626
Advances from the FHLB		29,674			155,367
Subordinated debt, net		247,420			249,652
FRB PPP Lending Facility		—			—
Repurchase agreements and other borrowings		40,918			76,797
Total Borrowings		318,012			481,816
Other liabilities		344,275			389,771
TOTAL LIABILITIES		13,956,510			14,445,213
Preferred stock
Authorized and unissued shares - 2,000,000		—			—
Common stock, $1.667 par: Authorized shares - 150,000,000
Issued and outstanding shares 72,841,379 in 2022 and 72,683,985 in 2021		121,426			121,164
Capital surplus		1,052,262			1,050,948
Retained earnings		840,777			716,605
Common stock issued to deferred compensation trust, at cost
931,030 shares in 2022 and 911,458 shares in 2021		18,974			18,257
Deferred compensation trust		(18,974	)		(18,257	)
Accumulated other comprehensive income (loss)		(140,505	)		10,597
TOTAL SHAREHOLDERS' EQUITY		1,873,960			1,899,314
Noncontrolling interest		14,797			16,860
TOTAL EQUITY		1,888,757			1,916,174
TOTAL LIABILITIES AND EQUITY	$	15,845,267		$	16,361,387

TOWNEBANK

Consolidated Statements of Income

(dollars in thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31,

2022

2021

2022

2021

(unaudited)

(audited)

INTEREST INCOME:

Loans, including fees

123,395

95,054

TowneBank Reports Full Year and Fourth Quarter Financial Results for 2022