TowneBank Reports Second Quarter Earnings

SUFFOLK, Va., July 28, 2016 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank (the “Bank”) (NASDAQ:TOWN) today reported financial results for the quarter and six months ended June 30, 2016.  Earnings for the quarter ended June 30, 2016 were $6.26 million compared to $17.81 million for the same quarter in 2015.  Fully diluted earnings per share were $0.12 compared to $0.35 for the second quarter of 2015.  Earnings in the second quarter of 2016 included after-tax acquisition-related expenses of $12.26 million as compared to $0.24 million in the second quarter of 2015.

Excluding after-tax acquisition-related expenses, earnings for the quarter ended June 30, 2016 were $18.52 million (non-GAAP) compared to $18.05 million (non-GAAP) for the same quarter in 2015.  Fully diluted earnings per share, excluding after-tax acquisition-related expenses, were $0.36 (non-GAAP measure) compared to $0.35 for the second quarter of 2015.

Earnings for the year-to-date period were $24.08 million as compared to the $32.35 million earned in the same period of 2015.  Fully diluted earnings per share were $0.47 compared to $0.63 for the six months ended June 30, 2015.  Earnings in 2016 included after-tax acquisition-related expenses of $12.64 million as compared to $0.51 million in 2015.  Earnings per share were also affected by the issuance of 10.49 million new common shares in conjunction with the acquisition of Monarch Financial Holdings, Inc. (“Monarch”) on June 24, 2016.

Excluding after-tax acquisition-related expenses, earnings for the year-to-date period were $36.72 million (non-GAAP) as compared to the $32.86 million (non-GAAP) earned in the same period of 2015.  Fully diluted earnings per share were $0.71 (non-GAAP) compared to $0.64 (non-GAAP) for the six months ended June 30, 2015.

		Three Months Ended								Three Months Ended
		June 30, 2016								June 30, 2015
(dollars in thousands, except per share amounts)		Net Income				Diluted Earnings Per Share				Net Income				Diluted Earnings Per Share
Net income, excluding after-tax merger-related expenses (Non-GAAP)		$	18,517			$	0.36			$	18,052			$	0.35
Less: After tax acquisition-related expenses		(12,258		)		(0.24		)		(240		)		—
Net income (GAAP)		$	6,259			$	0.12			$	17,812			$	0.35

		Six Months Ended								Six Months Ended
		June 30, 2016								June 30, 2015
(dollars in thousands, except per share amounts)		Net Income				Diluted Earnings Per Share				Net Income				Diluted Earnings Per Share
Net income, excluding after-tax merger-related expenses (Non-GAAP)		$	36,717			$	0.71			$	32,860			$	0.64
Less: After tax acquisition-related expenses		(12,639		)		(0.24		)		(510		)		(0.01		)
Net income (GAAP)		$	24,078			$	0.47			$	32,350			$	0.63
Core and other non-GAAP measures are defined in the "Reconcilement of Non-GAAP Measures"

The Bank’s common dividend was $0.13 per share for the quarter with the common dividend totaling $8.11 million.  The current dividend represents an increase of 8.3% over the dividend paid during the same quarter of 2015.

“Our strong operating performance continued this quarter, as we delivered record quarterly revenue and successfully completed our merger with Monarch,” said G. Robert Aston, Jr., Chairman and Chief Executive Officer.  “We saw an increase in core operating earnings to $18.52 million and core diluted earnings per share to $0.36 while producing a core return on average assets of 1.14% and a core return on average tangible equity of 11.60%."

"We are pleased to report that our operations team has successfully completed the entire integration and systems conversion process including targeted implementation of estimated cost saves.  We believe the merger with our long-time friends at Monarch presents an exciting opportunity to increase shareholder value and better serve the financial needs of our members as we take the next step in the Towne growth story," said Aston.

Second Quarter 2016 Performance Highlights

• Total revenues were a record $84.25 million, an increase of $8.22 million, or 10.81%, from second quarter 2015, excluding the 2015 gain of $1.93 million on the sale of investment properties
  • Taxable equivalent net interest margin was 3.36%, including accretion of 0.05%, compared to 3.52%, including accretion of 0.10%, for second quarter 2015
  • Insurance segment total revenue increased 13.42% from second quarter 2015, to $13.53 million
     
• Core operating earnings were $18.52 million, an increase of 2.58% from June 30, 2015
   
• Loans held for investment increased $1.33 billion, or 31.50%, from June 30, 2015, which included $818.12 million of loans acquired in the Monarch merger
   
• Total deposits were $6.19 billion, an increase of $1.50 billion, or 32.00%, from second quarter 2015, which included $1.06 billion of deposits acquired in the Monarch merger
  • Noninterest bearing deposits increased by 43.07%, to $1.95 billion and represent 31.53% of total deposits
  • Total cost of deposits increased to 0.42% from 0.39% at June 30, 2015 reflective of an increase in higher cost time deposits
     
• Asset quality showed continued strength
  • Nonperforming assets declined to $36.29 million, or 0.46% of total assets compared to $53.61 million, or 0.89%, at June 30, 2015
  • Nonperforming loans were 0.19% of period end loans
  • Foreclosed property decreased 44.30% to $25.71 million
     
• The Bank remained well-capitalized
  • Common equity tier 1 capital ratio of 11.82%
  • Tier 1 leverage capital ratio of 12.36%
  • Tier 1 risk-based capital ratio of 11.89%
  • Total risk-based capital ratio of 12.50%

Second Quarter 2016 Earnings Compared to Second Quarter 2015

Net income for the second quarter was $6.26 million, or $0.12 per diluted share, versus $17.81 million, or $0.35 per diluted share, in second quarter 2015.  Excluding after-tax acquisition-related expenses of $12.26 million, net income for the second quarter was $18.52 million, or $0.36 per diluted share.

Net Interest Income
Net interest income increased to $47.78 million, a $2.90 million, or 6.46%, increase from the second quarter of 2015.  The primary driver was the increase in average earning assets, which increased $617.52 million, or 11.42%, from second quarter 2015.  Tax-equivalent net interest margin was 3.36% in the current quarter as compared to 3.52% in second quarter 2015.  Accretion income added $0.61 million, or 5 basis points, to margin in the current quarter as compared to $1.08 million, or 10 basis points, in the second quarter of 2015.

Noninterest Income
Noninterest income, excluding gains or losses on investments, was $36.47 million for the second quarter of 2016, an increase of $5.44 million, or 17.51%, from the second quarter of 2015.  Residential mortgage banking income increased $1.90 million, or 18.51%, from second quarter 2015 due to improved pricing and higher production volumes.  Mortgage production was $591.79 million in the second quarter of 2016, which was $125.55 million greater than second quarter 2015.  Insurance commissions and other title fees increased $1.74 million, or 17.62%, primarily due to the acquisition of three insurance agencies in the third and fourth quarters of 2015.  Additionally, real estate brokerage and property management income increased $1.53 million, or 33.42%, from the second quarter of 2015 primarily due to the acquisition of a resort property management company in Oak Island, North Carolina ("Oak Island") in first quarter 2016.

Noninterest Expense
Noninterest expense increased by $22.83 million, or 46.53%, from the comparative quarter of 2015.  The primary driver was an increase of $18.07 million of pre-tax acquisition-related expenses combined with increased operating expenses of $1.09 million related to insurance agencies acquired in 2015 and operating expenses of $1.21 million related to the North Carolina resort property management acquisition.  Excluding the additional noninterest expense from acquisition-related expenses, the insurance agencies acquired in 2015, and the resort property management company acquired in 2016, core expenses increased by $2.10 million, or 4.28%, in second quarter 2016.

Second Quarter 2016 Earnings Compared to First Quarter 2016

Net income for the second quarter, excluding after-tax acquisition-related expenses of $12.26 million, was $18.52 million, or $0.36 per diluted share, versus $18.05 million, or $0.35 per diluted share, in first quarter 2016.  The increase in earnings was reflective of seasonal improvement and growth in our Realty segment.

Performance Highlights

• Record revenues of $84.25 million, a $5.50 million, or 6.99%, increase from first quarter 2016
  • Taxable equivalent net interest margin was 3.36%, including accretion of 0.05%, compared to 3.37%, including accretion of 0.06%, for first quarter 2016
  • Noninterest income increased $4.05 million due to seasonality and growth in our Realty segment
     
• Loans held for investment increased $1.01 billion from March 31, 2016, with $818.12 million of loans acquired in the Monarch merger
   
• Noninterest bearing deposits increased by $501.16 million, or 34.57% during the quarter
   
• Nonperforming assets decreased 3.71% during the quarter

Net Interest Income
On a linked quarter basis, net interest income increased by $1.45 million, or 3.13%, in second quarter 2016 versus first quarter 2016, while tax-equivalent net interest margin was 3.36%, a decrease of 1 basis point from the first quarter of 2016.  Accretion income added $0.61 million, or 5 basis points, to margin in the current quarter, as compared to $0.65 million, or 6 basis points, in the linked quarter.

Noninterest Income
In comparison to the first quarter of 2016, noninterest income, excluding gains and losses on investment securities, increased $4.05 million, or 12.50%.  Residential mortgage banking income increased by $5.03 million, or 70.67%, from the first quarter of 2016 as mortgage production saw a seasonally driven increase of $278.65 million combined with improved pricing.  Additionally, real estate brokerage and property management income increased due to seasonal improvements in our resort property management and real estate brokerage businesses.  Partially offsetting the increase from the linked quarter was a decline in insurance commissions due to lower contingent commission revenue, which is mostly received during the first quarter of each year.

Noninterest Expense
Noninterest expense increased by $19.74 million, or 37.84%, from the first quarter of 2016.  Driving the increase were additional pre-tax acquisition-related expenses of $18.02 million.  Excluding the additional noninterest expense from acquisition-related expenses, core expenses increased by $1.72 million, or 3.32% in second quarter 2016.

Noninterest Income													% Change
	Q2				Q2				Q1				Q2 16 vs.			Q2 16 vs.
(dollars in thousands)	2016				2015				2016				Q2 15			Q1 16
Residential mortgage banking income, net	$	12,148			$	10,251			$	7,118			18.51	%		70.67	%
Real estate brokerage and property management, net	6,116				4,584				4,827				33.42	%		26.70	%
Insurance commissions and other title fees and  income, net	11,627				9,885				14,033				17.62	%		(17.15	)%
Service charges on deposit accounts	2,284				2,326				2,176				(1.81	)%		4.96	%
Credit card merchant fees, net	1,113				566				895				96.64	%		24.36	%
Other income	3,180				3,421				3,366				(7.04	)%		(5.53	)%
Subtotal before gain on investments	36,468				31,033				32,415				17.51	%		12.50	%
Net gain on investment properties	—				1,933				—				(100.00	)%		N/M
Net gain on investment securities	—				119				—				(100.00	)%		N/M
Total noninterest income	$	36,468			$	33,085			$	32,415			10.23	%		12.50	%

Noninterest Expense													% Change
	Q2				Q2				Q1				Q2 16 vs.			Q2 16 vs.
(dollars in thousands)	2016				2015				2016				Q2 15			Q1 16
Salaries and benefits	$	30,093			$	26,544			$	30,187			13.37	%		(0.31	)%
Occupancy expense	5,157				4,856				5,017				6.20	%		2.79	%
Furniture and equipment	2,381				2,369				2,357				0.51	%		1.02	%
Other expenses	15,833				14,928				14,186				6.06	%		11.61	%
Core noninterest expense	53,464				48,697				51,747				9.79	%		3.32	%
Acquisition-related expenses	18,435				370				414				N/M			N/M
Total noninterest expense	$	71,899			$	49,067			$	52,161			46.53	%		37.84	%

Segment Results

The following table presents our segment results:

														$ Change
(in thousands)		Q2				Q2				Q1				Q2 16 vs.				Q2 16 vs.
Segment Net Income		2016				2015				2016				Q2 15				Q1 16
Banking		$	1,290			$	13,067			$	14,133			$	(11,777	)		$	(12,843	)
Realty		3,765				3,727				1,033				38				2,732
Insurance		1,204				1,018				2,653				186				(1,449		)
Total net income		$	6,259			$	17,812			$	17,819			$	(11,553	)		$	(11,560	)

Second Quarter 2016 Compared to Second Quarter 2015

Banking
Net income for the three months ended June 30, 2016 for the Banking segment was $1.29 million as compared to $13.07 million in the comparative 2015 quarter, as the current quarter results included an increase in acquisition-related expenses of $17.83 million related to the Monarch transaction.  Total Banking segment revenue increased to a record $52.43 million, as net interest income climbed by $2.81 million due to an increase in earning assets, as average loan balances increased $541.52 million.  Also contributing to the variance from second quarter 2015 was an increase in the loan loss provision driven by loan growth and increased personnel costs.

Realty
For the three months ended June 30, 2016, the Realty segment had net income of $3.77 million compared to $3.73 million the second quarter of 2015.  The current quarter results were driven by an increase in residential mortgage banking income of $2.03 million, or 19.44%, due to higher production volumes.  Additionally, property management fees increased by $1.10 million, or 42.15%, primarily due to our purchase of Oak Island in January 2016.

Insurance
The Insurance segment had net income of $1.20 million for the three months ended June 30, 2016, an increase of $0.19 million as compared to the second quarter of 2015.  Insurance agencies acquired in 2015 contributed additional revenue, net of commission expense, of $1.09 million in second quarter 2016.  Contributing to the increase was an improvement in benefits insurance lines and commissions from travel insurance, partially offset by a slight decline in commercial lines, excluding the acquired agencies.  The acquired agencies resulted in additional noninterest expenses of $1.09 million of noninterest expenses, including acquisition-related expenses.

Second Quarter 2016 Compared to First Quarter 2016

Banking
The decrease in earnings from $14.13 million in the first quarter of 2015 was driven by an increase in noninterest expenses of $17.80 million, of which $17.70 million resulted from the Monarch merger.  Also contributing was an increase in the loan loss provision of $2.36 million, primarily due to loan growth.  Increased revenue partially offset the merger costs and loan loss provision increase as net interest income grew by $1.07 million as average earning assets increased by $209.65 million.

Realty
Net income in the Realty segment increased by $2.73 million from the linked quarter ended March 31, 2016.  The increase resulted from a combination of higher residential mortgage banking income of $5.18 million and seasonal increases in real estate brokerage and resort property management businesses.

Insurance
Net income decreased $1.45 million from the first quarter of 2015.  The variance from the linked quarter was driven by a decrease in contingency and bonus revenue of $2.97 million, which was partially offset by a seasonal increase in property and casualty commission income of $0.55 million.  Contingent commissions are seasonal in nature and are mostly received during the first quarter of each year.

Balance Sheet

At June 30, 2016, total Bank assets reached $7.94 billion, an increase of $1.89 billion, or 31.14%, over June 30, 2015.

Loans

													% Change
	Q2				Q2				Q1				Q2 16 vs.			Q2 16 vs.
(dollars in thousands)	2016				2015				2016				Q2 15			Q1 16
Construction and land development	$	824,609			$	554,053			$	635,992			48.83	%		29.66	%
Commercial real estate - investment related properties	1,221,488				987,945				998,082				23.64	%		22.38	%
Commercial real estate - owner occupied	896,620				760,622				764,230				17.88	%		17.32	%
Multifamily real estate	171,501				137,378				160,246				24.84	%		7.02	%
1-4 family residential real estate	1,183,818				948,138				988,432				24.86	%		19.77	%
Commercial and industrial business loans	1,075,736				732,936				852,005				46.77	%		26.26	%
Consumer loans and other	186,177				107,055				153,273				73.91	%		21.47	%
Total	$	5,559,949			$	4,228,127			$	4,552,260			31.50	%		22.14	%

The Bank’s loan portfolio ended the period at $5.56 billion representing an increase of 31.50%, or $1.33 billion, from the prior year and an increase of 22.14%, or $1.01 billion, from March 31, 2016.  In addition to organic growth, the increase in loans is related to the acquisition of $818.12 million loans in the Monarch merger on June 24, 2016.

Deposits

													% Change
	Q2				Q2				Q1				Q2 16 vs.			Q2 16 vs.
(dollars in thousands)	2016				2015				2016				Q2 15			Q1 16
Noninterest-bearing demand	$	1,950,816			$	1,363,551			$	1,449,660			43.07	%		34.57	%
Interest-bearing:
Demand and money market accounts	2,174,154				1,680,038				1,769,414				29.41	%		22.87	%
Savings	317,071				300,203				302,373				5.62	%		4.86	%
Certificates of deposits	1,744,238				1,342,860				1,433,679				29.89	%		21.66	%
Total	$	6,186,279			$	4,686,652			$	4,955,126			32.00	%		24.85	%

The Bank continued to experience solid deposit growth with total deposits increasing to $6.19 billion, up $1.50 billion, or 32.00%, from June 30, 2015.  Growth in total deposits includes $1.06 billion of deposits acquired in the Monarch merger.  The Bank saw continued growth in noninterest bearing demand deposits, which ended the quarter at $1.95 billion, a 43.07% increase from June 30, 2015.  Noninterest deposits represented 31.53% of total deposits at June 30, 2016.

Capital Ratios

		Q2			Q2			Q1
		2016			2015			2016
Common Equity Tier 1		11.82	%		12.96	%		12.66	%
Tier 1		11.89	%		13.07	%		12.73	%
Total		12.50	%		13.84	%		13.46	%
Tier 1 leverage ratio		12.36	%		11.12	%		10.70	%

The Bank’s total equity at June 30, 2016 rose to $1.06 billion, an increase of $258.66 million, or 32.22%, from June 30, 2015.  Total risk-based capital remained strong as total risk-based capital, Tier 1 capital, Tier 1 leverage ratios, and common equity Tier 1 capital ratios were 12.50%, 11.89%, 12.36%, 11.82%, respectively.  All ratios exceed the current regulatory standards for well capitalized status.

Asset Quality

(in thousands)	6/30/2016				3/31/2016				12/31/2015				9/30/2015				6/30/2015
Nonperforming loans	$	10,580			$	7,944			$	8,670			$	8,477			$	7,455
Foreclosed property	25,707				29,740				34,420				39,509				46,154
Total nonperforming assets	$	36,287			$	37,684			$	43,090			$	47,986			$	53,609
Quarterly net loans charged off (recovered)	$	241			$	340			$	(156	)		$	69			$	339
Year-to-date net loans charged off	$	581			$	340			$	585			$	741			$	672

														Change
		Q2				Q2				Q1				Q2 16 vs.				Q2 16 vs.
(dollars in thousands)		2016				2015				2016				Q2 15				Q1 16
Total loans 90 days past due and still accruing		$	—			$	277			$	—			$	(277	)		$	—
Total loans 30-89 days past due		$	5,041			$	5,283			$	12,055			$	(242	)		$	(7,014	)
Allowance for loan losses		$	39,618			$	37,290			$	37,760			$	2,328			$	1,858
Total performing TDRs		$	28,184			$	31,714			$	24,955			$	(3,530	)		$	3,229
Nonperforming loans to period end loans		0.19		%		0.18		%		0.17		%		0.01		%		0.02		%
Nonperforming assets to period end assets		0.46		%		0.89		%		0.59		%		(0.43		)%		(0.13		)%
Allowance for loan losses to period end loans		0.71		%		0.88		%		0.83		%		(0.17		)%		(0.12		)%
Allowance for loan losses (originated) to originated period end loans		0.90		%		1.00		%		0.92		%		(0.10		)%		(0.02		)%
Net charge-offs (recoveries) to average loans (annualized)		0.02		%		0.03		%		0.03		%		(0.01		)%		(0.01		)%
Ratio of allowance for loan losses to nonperforming loans		3.74x				5.00x				4.75x				(1.26)x				(1.01)x

Continued strength in credit quality contributed to the Bank's financial results as net charge-offs were $0.24 million in the second quarter of 2016 compared to $0.34 million in the second quarter of 2015 and $0.34 million in the linked quarter.  Total nonperforming assets were $36.29 million, or 0.46% of Bank assets, at June 30, 2016, as compared to $53.61 million, or 0.89%, at June 30, 2015, and $37.68 million, or 0.59%, at March 31, 2016.  The allowance for loan losses was $39.62 million, increased from $37.29 million at June 30, 2015 and $37.76 million at March 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, TFA 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 $7.94 billion as of June 30, 2016, 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 June 30,		2016				2015				(Decrease)				(Decrease)
Results of Operations:
	Net interest income	$	47,784			$	44,884			$	2,900			6.46	%
	Noninterest income (1)	36,468				31,033				5,435				17.51	%
	Gain on investment securities	—				119				(119		)		(100.00	)%
	Gain on investment properties	—				1,933				(1,933		)		(100.00	)%
	Total Revenue	84,252				77,969				6,283				8.06	%
	Acquisition-related expenses	18,435				370				18,065				N/M
	Noninterest expenses, excluding acquisition-related expenses	53,464				48,697				4,767				9.79	%
	Provision for loan losses	2,099				1,723				376				21.82	%
	Income before income tax and noncontrolling interest	10,254				27,179				(16,925		)		(62.27	)%
	Provision for income tax expense	2,375				8,201				(5,826		)		(71.04	)%
	Net income	7,879				18,978				(11,099		)		(58.48	)%
	Net income attributable to noncontrolling interest	(1,620		)		(1,166		)		(454		)		38.94	%
	Net income attributable to TowneBank	6,259				17,812				(11,553		)		(64.86	)%
	Net income available to common shareholders	6,259				17,812				(11,553		)		(64.86	)%
	Net income per common share - basic	0.12				0.35				(0.23		)		(65.71	)%
	Net income per common share - diluted	0.12				0.35				(0.23		)		(65.71	)%
Period End Data:
	Total assets	$	7,940,741			$	6,055,181			$	1,885,560			31.14	%
	Total assets - tangible	7,641,740				5,879,975				1,761,765				29.96	%
	Earning assets (2)	7,310,561				5,576,243				1,734,318				31.10	%
	Loans (net of unearned income)	5,559,949				4,228,127				1,331,822				31.50	%
	Allowance for loan losses	39,618				37,290				2,328				6.24	%
	Goodwill and other intangibles	299,000				175,207				123,793				70.66	%
	Nonperforming assets	36,287				53,609				(17,322		)		(32.31	)%
	Noninterest bearing deposits	1,950,816				1,363,551				587,265				43.07	%
	Interest bearing deposits	4,235,463				3,323,101				912,362				27.46	%
	Total deposits	6,186,279				4,686,652				1,499,627				32.00	%
	Total equity	1,061,548				802,891				258,657				32.22	%
	Total equity - tangible	762,548				627,685				134,863				21.49	%
	Common equity	1,050,360				794,018				256,342				32.28	%
	Common equity - tangible	751,360				618,812				132,548				21.42	%
	Book value per common share	16.84				15.40				1.44				9.35	%
	Book value per common share - tangible	12.05				12.00				0.05				0.42	%
Daily Average Balances:
	Total assets	$	6,534,063			$	5,900,816			$	633,247			10.73	%
	Total assets - tangible	6,339,815				5,724,957				614,858				10.74	%
	Earning assets (2)	6,025,033				5,407,516				617,517				11.42	%
	Loans (net of unearned income), excluding nonaccrual loans	4,702,825				4,161,304				541,521				13.01	%
	Allowance for loan losses	38,419				36,854				1,565				4.25	%
	Goodwill and other intangibles	194,248				175,858				18,390				10.46	%
	Noninterest bearing deposits	1,538,370				1,307,075				231,295				17.70	%
	Interest bearing deposits	3,544,493				3,241,276				303,217				9.35	%
	Total deposits	5,082,863				4,548,351				534,512				11.75	%
	Total equity	859,938				800,369				59,569				7.44	%
	Total equity - tangible	665,690				624,511				41,179				6.59	%
	Common equity	850,393				791,915				58,478				7.38	%
	Common equity - tangible	656,145				616,057				40,088				6.51	%
Key Ratios:
	Return on average assets	0.39		%		1.21		%		(0.82		)%		(67.77	)%
	Return on average assets - tangible	0.44		%		1.28		%		(0.84		)%		(65.63	)%
	Return on average equity	2.93		%		8.93		%		(6.00		)%		(67.19	)%
	Return on average equity - tangible	4.19		%		11.77		%		(7.58		)%		(64.40	)%
	Return on average common equity	2.96		%		9.02		%		(6.06		)%		(67.18	)%
	Return on average common equity - tangible	4.25		%		11.93		%		(7.68		)%		(64.38	)%
	Net interest margin-fully tax equivalent (2)(3)	3.36		%		3.52		%		(0.16		)%		(4.55	)%
	Net interest margin (2)	3.27		%		3.43		%		(0.16		)%		(4.66	)%
	Average earning assets/total average assets	92.21		%		91.64		%		0.57		%		0.62	%
	Average loans/average deposits	92.52		%		91.49		%		1.03		%		1.13	%
	Average noninterest deposits/total average deposits	30.27		%		28.74		%		1.53		%		5.32	%
	Allowance for loan losses/period end loans	0.71		%		0.88		%		(0.17		)%		(19.32	)%
	Nonperforming assets to period end assets	0.46		%		0.89		%		(0.43		)%		(48.31	)%
	Period end equity/period end total assets	13.37		%		13.26		%		0.11		%		0.83	%
	Efficiency ratio (1)	85.34		%		64.63		%		20.71		%		32.04	%
(1) Excludes gain on investment securities and properties
(2) Includes bank-owned life insurance
(3) Presented on a tax-equivalent basis

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
										Increase/				% Increase/
Six Months Ended June 30,		2016				2015				(Decrease)				(Decrease)
Results of Operations:
	Net interest income	$	94,120			$	88,440			$	5,680			6.42	%
	Noninterest income (1)	68,882				59,799				9,083				15.19	%
	Gain on investment securities	—				169				(169		)		(100.00	)%
	Gain on investment properties	—				1,933				(1,933		)		(100.00	)%
	Total Revenue	163,002				150,341				12,661				8.42	%
	Acquisition-related expenses	18,849				784				18,065				N/M
	Noninterest expenses, excluding acquisition-related expenses	105,211				98,723				6,488				6.57	%
	Provision for loan losses	1,840				2,045				(205		)		(10.02	)%
	Income before income tax and noncontrolling interest	37,102				48,789				(11,687		)		(23.95	)%
	Provision for income tax expense	10,563				14,586				(4,023		)		(27.58	)%
	Net income	26,539				34,203				(7,664		)		(22.41	)%
	Net income attributable to noncontrolling interest	(2,461		)		(1,853		)		(608		)		32.81	%
	Net income attributable to TowneBank	24,078				32,350				(8,272		)		(25.57	)%
	Preferred stock dividends	—				13				(13		)		(100.00	)%
	Net income available to common shareholders	24,078				32,337				(8,259		)		(25.54	)%
	Net income per common share - basic	0.47				0.64				(0.17		)		(26.56	)%
	Net income per common share - diluted	0.47				0.63				(0.16		)		(25.40	)%
Period End Data:
	Total assets	$	7,940,741			$	6,055,181			$	1,885,560			31.14	%
	Total assets - tangible	7,641,740				5,879,975				1,761,765				29.96	%
	Earning assets (2)	7,310,561				5,576,243				1,734,318				31.10	%
	Loans (net of unearned income)	5,559,949				4,228,127				1,331,822				31.50	%
	Allowance for loan losses	39,618				37,290				2,328				6.24	%
	Goodwill and other intangibles	299,000				175,207				123,793				70.66	%
	Nonperforming assets	36,287				53,609				(17,322		)		(32.31	)%
	Noninterest bearing deposits	1,950,816				1,363,551				587,265				43.07	%
	Interest bearing deposits	4,235,463				3,323,101				912,362				27.46	%
	Total deposits	6,186,279				4,686,652				1,499,627				32.00	%
	Total equity	1,061,548				802,891				258,657				32.22	%
	Total equity - tangible	762,548				627,685				134,863				21.49	%
	Common equity	1,050,360				794,018				256,342				32.28	%
	Common equity - tangible	751,360				618,812				132,548				21.42	%
	Book value per common share	16.84				15.40				1.44				9.35	%
	Book value per common share - tangible	12.05				12.00				0.05				0.42	%
Daily Average Balances:
	Total assets	$	6,423,650			$	5,865,372			$	558,278			9.52	%
	Total assets - tangible	6,233,169				5,684,147				549,022				9.66	%
	Earning assets (2)	5,920,207				5,349,362				570,845				10.67	%
	Loans (net of unearned income), excluding nonaccrual loans	4,609,551				4,114,156				495,395				12.04	%
	Allowance for loan losses	38,487				36,453				2,034				5.58	%
	Goodwill and other intangibles	190,481				181,224				9,257				5.11	%
	Noninterest bearing deposits	1,477,081				1,281,690				195,391				15.24	%
	Interest bearing deposits	3,522,050				3,245,034				277,016				8.54	%
	Total deposits	4,999,131				4,526,724				472,407				10.44	%
	Total equity	845,058				791,152				53,906				6.81	%
	Total equity - tangible	654,577				609,928				44,649				7.32	%
	Common equity	835,830				780,014				55,816				7.16	%
	Common equity - tangible	645,349				598,790				46,559				7.78	%
Key Ratios:
	Return on average assets	0.75		%		1.11		%		(0.36		)%		(32.43	)%
	Return on average assets - tangible	0.82		%		1.19		%		(0.37		)%		(31.09	)%
	Return on average equity	5.73		%		8.25		%		(2.52		)%		(30.55	)%
	Return on average equity - tangible	7.81		%		11.04		%		(3.23		)%		(29.26	)%
	Return on average common equity	5.79		%		8.36		%		(2.57		)%		(30.74	)%
	Return on average common equity - tangible	7.92		%		11.24		%		(3.32		)%		(29.54	)%
	Net interest margin-fully tax equivalent (2)(3)	3.36		%		3.52		%		(0.16		)%		(4.55	)%
	Net interest margin (2)	3.28		%		3.43		%		(0.15		)%		(4.37	)%
	Average earning assets/total average assets	92.16		%		91.20		%		0.96		%		1.05	%
	Average loans/average deposits	92.21		%		90.89		%		1.32		%		1.45	%
	Average noninterest deposits/total average deposits	29.55		%		28.31		%		1.24		%		4.38	%
	Allowance for loan losses/period end loans	0.71		%		0.88		%		(0.17		)%		(19.32	)%
	Nonperforming assets to period end assets	0.46		%		0.89		%		(0.43		)%		(48.31	)%
	Period end equity/period end total assets	13.37		%		13.26		%		0.11		%		0.83	%
	Efficiency ratio (1)	76.11		%		67.13		%		8.98		%		13.38	%
(1) Excludes gain on investment securities and properties
(2) Includes bank-owned life insurance
(3) Presented on a tax-equivalent basis

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
		June 30,				March 31,				Increase/				% Increase/
Three Months Ended		2016				2016				(Decrease)				(Decrease)
Results of Operations:
	Net interest income	$	47,784			$	46,336			$	1,448			3.13	%
	Noninterest income (1)	36,468				32,415				4,053				12.50	%
	Total Revenue	84,252				78,751				5,501				6.99	%
	Acquisition-related expenses	18,435				414				18,021				N/M
	Noninterest expenses, excluding acquisition-related expenses	53,464				51,747				1,717				3.32	%
	Provision for loan losses	2,099				(259		)		2,358				(910.42	)%
	Income before income tax and noncontrolling interest	10,254				26,849				(16,595		)		(61.81	)%
	Provision for income tax expense	2,375				8,188				(5,813		)		(70.99	)%
	Net income	7,879				18,661				(10,782		)		(57.78	)%
	Net income attributable to noncontrolling interest	(1,620		)		(842		)		(778		)		92.40	%
	Net income attributable to TowneBank	6,259				17,819				(11,560		)		(64.87	)%
	Net income available to common shareholders	6,259				17,819				(11,560		)		(64.87	)%
	Net income per common share - basic	0.12				0.35				(0.23		)		(65.71	)%
	Net income per common share - diluted	0.12				0.35				(0.23		)		(65.71	)%
Period End Data:
	Total assets	$	7,940,741			$	6,365,169			$	1,575,572			24.75	%
	Total assets - tangible	7,641,740				6,178,224				1,463,516				23.69	%
	Earning assets (2)	7,310,561				5,896,763				1,413,798				23.98	%
	Loans (net of unearned income)	5,559,949				4,552,260				1,007,689				22.14	%
	Allowance for loan losses	39,618				37,760				1,858				4.92	%
	Goodwill and other intangibles	299,000				186,945				112,055				59.94	%
	Nonperforming assets	36,287				37,684				(1,397		)		(3.71	)%
	Noninterest bearing deposits	1,950,816				1,449,660				501,156				34.57	%
	Interest bearing deposits	4,235,463				3,505,466				729,997				20.82	%
	Total deposits	6,186,279				4,955,126				1,231,153				24.85	%
	Total equity	1,061,548				836,003				225,545				26.98	%
	Total equity - tangible	762,548				649,058				113,490				17.49	%
	Common equity	1,050,360				826,875				223,485				27.03	%
	Common equity - tangible	751,360				639,930				111,430				17.41	%
	Book value per common share	16.84				16.00				0.84				5.25	%
	Book value per common share - tangible	12.05				12.38				(0.33		)		(2.67	)%
Daily Average Balances:
	Total assets	$	6,534,063			$	6,313,238			$	220,825			3.50	%
	Total assets - tangible	6,339,815				6,126,524				213,291				3.48	%
	Earning assets (2)	6,025,033				5,815,383				209,650				3.61	%
	Loans (net of unearned income), excluding nonaccrual loans	4,702,825				4,516,277				186,548				4.13	%
	Allowance for loan losses	38,419				38,555				(136		)		(0.35	)%
	Goodwill and other intangibles	194,248				186,714				7,534				4.04	%
	Noninterest bearing deposits	1,538,370				1,415,793				122,577				8.66	%
	Interest bearing deposits	3,544,493				3,499,607				44,886				1.28	%
	Total deposits	5,082,863				4,915,400				167,463				3.41	%
	Total equity	859,938				830,178				29,760				3.58	%
	Total equity - tangible	665,690				643,464				22,226				3.45	%
	Common equity	850,393				821,268				29,125				3.55	%
	Common equity - tangible	656,145				634,554				21,591				3.40	%
Key Ratios:
	Return on average assets	0.39		%		1.14		%		(0.75		)%		(65.79	)%
	Return on average assets - tangible	0.44		%		1.21		%		(0.77		)%		(63.64	)%
	Return on average equity	2.93		%		8.63		%		(5.70		)%		(66.05	)%
	Return on average equity - tangible	4.19		%		11.56		%		(7.37		)%		(63.75	)%
	Return on average common equity	2.96		%		8.73		%		(5.77		)%		(66.09	)%
	Return on average common equity - tangible	4.25		%		11.72		%		(7.47		)%		(63.74	)%
	Net interest margin-fully tax equivalent (2)(3)	3.36		%		3.37		%		(0.01		)%		(0.30	)%
	Net interest margin (2)	3.27		%		3.29		%		(0.02		)%		(0.61	)%
	Average earning assets/total average assets	92.21		%		92.11		%		0.10		%		0.11	%
	Average loans/average deposits	92.52		%		91.88		%		0.64		%		0.70	%
	Average noninterest deposits/total average deposits	30.27		%		28.80		%		1.47		%		5.10	%
	Allowance for loan losses/period end loans	0.71		%		0.83		%		(0.12		)%		(14.46	)%
	Nonperforming assets to period end assets	0.46		%		0.59		%		(0.13		)%		(22.03	)%
	Period end equity/period end total assets	13.37		%		13.13		%		0.24		%		1.83	%
	Efficiency ratio (1)	85.34		%		66.24		%		19.10		%		28.83	%
(1) Excludes gain on investment securities
(2) Includes bank-owned life insurance
(3) 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
	June 30, 2016									March 31, 2016									June 30, 2015
				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	$	4,702,825		$	52,232		4.47	%		$	4,516,277		$	50,781		4.52	%		$	4,161,304		$	48,730		4.70	%
Taxable investment securities	671,792			2,734			1.63	%		754,514			3,055			1.62	%		818,000			2,825			1.38	%
Tax-exempt investment securities	52,398			405			3.09	%		52,979			410			3.09	%		63,255			496			3.14	%
Interest-bearing deposits	289,698			364			0.51	%		265,256			330			0.50	%		87,709			56			0.25	%
Loans held for sale	156,425			1,294			3.31	%		76,503			693			3.62	%		131,305			1,161			3.54	%
Bank-owned life insurance	151,895			1,817			4.81	%		149,854			1,802			4.84	%		145,943			2,044			5.62	%
Total earning assets	6,025,033			58,846			3.93	%		5,815,383			57,071			3.95	%		5,407,516			55,312			4.10	%
Less: allowance for loan losses	(38,419		)							(38,555		)							(36,854		)
Total nonearning assets	547,449									536,410									530,154
Total assets	$	6,534,063								$	6,313,238								$	5,900,816
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	1,813,502		$	1,298		0.29	%		$	1,782,908		$	1,328		0.30	%		$	1,646,075		$	1,144		0.28	%
Savings	301,542			709			0.95	%		300,070			700			0.94	%		301,020			692			0.92	%
Certificates of deposit	1,429,449			3,260			0.92	%		1,416,629			3,185			0.90	%		1,294,181			2,606			0.81	%
Total interest-bearing deposits	3,544,493			5,267			0.60	%		3,499,607			5,213			0.60	%		3,241,276			4,442			0.55	%
Borrowings	469,939			3,190			2.69	%		468,798			3,185			2.69	%		460,993			3,382			2.90	%
Total interest-bearing liabilities	4,014,432			8,457			0.85	%		3,968,405			8,398			0.85	%		3,702,269			7,824			0.85	%
Demand deposits	1,538,370									1,415,793									1,307,075
Other noninterest-bearing liabilities	121,323									98,862									91,103
Total liabilities	5,674,125									5,483,060									5,100,447
Shareholders’ equity	859,938									830,178									800,369
Total liabilities and equity	$	6,534,063								$	6,313,238								$	5,900,816
Net interest income (tax-equivalent basis)				$	50,389								$	48,673								$	47,488
Reconcilement of Non-GAAP Financial Measures
Bank-owned life insurance				(1,817		)							(1,802		)							(2,044		)
Tax-equivalent basis adjustment				(788		)							(535		)							(560		)
Net interest income (GAAP)				$	47,784								$	46,336								$	44,884
Interest rate spread (1)							3.08	%								3.10	%								3.26	%
Interest expense as a percent of average earning assets							0.56	%								0.58	%								0.58	%
Net interest margin (tax equivalent basis) (2)							3.36	%								3.37	%								3.52	%
Total cost of deposits							0.42	%								0.43	%								0.39	%

(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
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
	Six Months Ended									Six Months Ended									Six Months Ended June 30, 2016
	June 30, 2016									June 30, 2015									Compared with June 30, 2015
				Interest			Average						Interest			Average
	Average			Income/			Yield/			Average			Income/			Yield/			Increase			Change due to
	Balance			Expense			Rate			Balance			Expense			Rate			(Decrease)			Rate			Volume
Assets:
Loans (net of unearned income and deferred costs), excluding  nonaccrual loans	$	4,609,551		$	103,012		4.49	%		$	4,114,156		$	96,619		4.74	%		$	6,394		$	(26,189	)	$	32,583
Taxable investment securities	713,152			5,790			1.62	%		783,896			5,626			1.44	%		164			2,502			(2,338		)
Tax-exempt investment securities	52,689			814			3.09	%		65,024			1,032			3.17	%		(218		)	(26		)	(192		)
Interest-bearing deposits	277,477			694			0.50	%		144,962			181			0.25	%		513			268			245
Loans held for sale	116,464			1,987			3.41	%		98,093			1,726			3.52	%		261			(327		)	588
Bank-owned life insurance	150,874			3,619			4.82	%		143,231			3,797			5.35	%		(178		)	(1,178		)	1,000
Total earning assets	5,920,207			115,916			3.94	%		5,349,362			108,981			4.11	%		6,936			(24,950		)	31,886
Less: allowance for loan losses	(38,487		)							(36,453		)
Total nonearning assets	$	541,930								$	552,463
Total assets	$	6,423,650								$	5,865,372
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	1,798,205		$	2,626		0.29	%		$	1,640,794		$	2,255		0.28	%		$	371		$	142		$	229
Savings	300,806			1,409			0.94	%		303,007			1,375			0.92	%		34			92			(58		)
Certificates of deposit	1,423,039			6,445			0.91	%		1,301,233			5,236			0.81	%		1,209			685			524
Total interest-bearing deposits	3,522,050			10,480			0.60	%		3,245,034			8,866			0.55	%		1,614			919			695
Borrowings	469,368			6,375			2.69	%		454,134			6,770			2.96	%		(394		)	(1,606		)	1,212
Total interest-bearing liabilities	3,991,418			16,855			0.85	%		3,699,168			15,636			0.85	%		1,220			(687		)	1,907
Demand deposits	1,477,081									1,281,690
Other noninterest-bearing liabilities	110,093									93,362
Total liabilities	5,578,592									5,074,220
Shareholders’ equity	845,058									791,152
Total liabilities and equity	$	6,423,650								$	5,865,372
Net interest income (tax-equivalent basis)				$	99,061								$	93,345					$	5,716		$	(24,263	)	$	29,979
Reconcilement of Non-GAAP Financial Measures
Bank-owned life insurance				(3,619		)							(3,797		)				178
Tax-equivalent basis adjustment				(1,322		)							(1,108		)				(214		)
Net interest income (GAAP)				$	94,120								$	88,440					$	5,680
Interest rate spread (1)							3.09	%								3.26	%
Interest expense as a percent of average earning assets							0.57	%								0.59	%
Net interest margin (tax equivalent basis) (2)							3.36	%								3.52	%
Total cost of deposits							0.42	%								0.39	%
(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)
	June 30,								December 31,
	2016				2015				2015
	(unaudited)								(audited)
ASSETS
Cash and due from banks	$	188,183			$	184,099			$	250,836
Interest-bearing deposits in financial institutions	33,777				1,011				1,001
Federal funds sold	14				—				—
Total Cash and Cash Equivalents	221,974				185,110				251,837
Securities available for sale, at fair value	812,375				759,425				723,489
Securities held to maturity, at amortized cost	65,728				80,195				69,045
Federal Home Loan Bank stock, at amortized cost	28,008				24,058				23,691
Total Securities	906,111				863,678				816,225
Mortgage loans held for sale	474,978				165,994				102,346
Loans, net of unearned income and deferred costs:
Real estate - residential 1-4 family	1,183,818				948,138				973,331
Real estate - commercial	2,118,108				1,748,567				1,784,393
Real estate - construction and land development	824,609				554,053				598,875
Real estate - multifamily	171,501				137,378				167,371
Commercial and industrial business	1,075,736				732,936				857,036
Consumer and other loans	186,177				107,055				138,387
Loans, net of unearned income and deferred costs	5,559,949				4,228,127				4,519,393
Less:  Allowance for loan losses	(39,618		)		(37,290		)		(38,359		)
Net Loans	5,520,331				4,190,837				4,481,034
Premises and equipment, net	202,333				172,492				173,695
Goodwill	257,485				153,191				154,842
Other intangible assets, net	41,515				22,016				26,153
Bank-owned life insurance policies	164,933				146,729				149,452
Other assets	151,081				155,134				140,990
TOTAL ASSETS	$	7,940,741			$	6,055,181			$	6,296,574
LIABILITIES AND EQUITY
Liabilities
Deposits:
Noninterest-bearing demand	$	1,950,816			$	1,363,551			$	1,393,264
Interest-bearing:
Demand and money market accounts	2,174,154				1,680,038				1,824,226
Savings	317,071				300,203				300,408
Certificates of deposit	1,744,238				1,342,860				1,396,129
Total Deposits	6,186,279				4,686,652				4,914,027
Advances from the Federal Home Loan Bank	500,798				437,584				429,080
Repurchase agreements and other borrowings	44,008				35,737				37,434
Total Borrowings	544,806				473,321				466,514
Other liabilities	148,108				92,317				95,839
TOTAL LIABILITIES	6,879,193				5,252,290				5,476,380
Shareholders’ Equity
Preferred stock:
Authorized and unissued shares - 2,000,000	—				—				—
Common stock, $1.667 par: 90,000,000 shares authorized
62,365,197; 51,551,312; and 51,605,521 shares issued at
June 30, 2016 and 2015 and December 31, 2015, respectively	103,963				85,936				86,026
Capital surplus	742,228				532,646				535,094
Retained earnings	202,565				175,145				192,795
Common stock issued to deferred compensation trust, at cost
674,899; 651,738; and 648,350 shares at
June 30, 2016 and 2015 and December 31, 2015, respectively	(10,785		)		(10,110		)		(10,172		)
Deferred compensation trust	10,785				10,110				10,172
Accumulated other comprehensive income (loss)	1,604				291				(2,994		)
TOTAL SHAREHOLDERS’ EQUITY	1,050,360				794,018				810,921
Noncontrolling interests	11,188				8,873				9,273
TOTAL EQUITY	1,061,548				802,891				820,194
TOTAL LIABILITIES AND EQUITY	$	7,940,741			$	6,055,181			$	6,296,574

TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2016				2015				2016				2015
INTEREST INCOME:
Loans, including fees	$	51,444			$	48,170			$	101,690			$	95,511
Investment securities	3,139				3,321				6,604				6,658
Interest-bearing deposits in financial institutions and federal funds sold	364				56				694				181
Mortgage loans held for sale	1,294				1,161				1,987				1,726
Total Interest Income	56,241				52,708				110,975				104,076
INTEREST EXPENSE:
Deposits	5,267				4,442				10,480				8,866
Advances from the Federal Home Loan Bank	3,158				3,365				6,321				6,739
Repurchase agreements and other borrowings	32				17				54				31
Total Interest Expense	8,457				7,824				16,855				15,636
Net Interest Income	47,784				44,884				94,120				88,440
PROVISION FOR LOAN LOSSES	2,099				1,723				1,840				2,045
Net Interest Income after Provision for Loan Losses	45,685				43,161				92,280				86,395
NONINTEREST INCOME:
Residential mortgage banking income, net	12,148				10,251				19,266				18,694
Real estate brokerage and property management income, net	6,116				4,584				10,943				8,539
Insurance commissions and other title fees and income, net	11,627				9,885				25,660				20,934
Service charges on deposit accounts	2,284				2,326				4,460				4,523
Credit card merchant fees, net	1,113				566				2,008				998
Other income	3,180				5,354				6,545				8,044
Net gain on investment securities	—				119				—				169
Total Noninterest Income	36,468				33,085				68,882				61,901
NONINTEREST EXPENSE:
Salaries and employee benefits	30,093				26,544				60,279				54,223
Occupancy expense	5,157				4,856				10,174				9,786
Furniture and equipment	2,381				2,369				4,739				4,738
Other expenses	34,268				15,298				48,868				30,760
Total Noninterest Expense	71,899				49,067				124,060				99,507
Income before income tax expense and noncontrolling interest	10,254				27,179				37,102				48,789
Provision for income tax expense	2,375				8,201				10,563				14,586
Net income	7,879				18,978				26,539				34,203
Net income attributable to noncontrolling interest	(1,620		)		(1,166		)		(2,461		)		(1,853		)
Net income attributable to TowneBank	$	6,259			$	17,812			$	24,078			$	32,350
Preferred stock dividends	—				—				—				13
Net income available to common shareholders	$	6,259			$	17,812			$	24,078			$	32,337
Per common share information
Basic earnings	$	0.12			$	0.35			$	0.47			$	0.64
Diluted earnings	$	0.12			$	0.35			$	0.47			$	0.63
Cash dividends declared	$	0.13			$	0.12			$	0.25			$	0.23

TOWNEBANK
Consolidated Statements of Comprehensive Income (unaudited)
(dollars in thousands)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2016				2015				2016				2015
Net income	$	7,879			$	18,978			$	26,539			$	34,203
Other comprehensive income (loss)
Unrealized gains (losses) on securities
Unrealized holding gains (losses) arising during the period	2,329				(3,200		)		6,809				(286		)
Deferred tax benefit (expense)	(815		)		1,120				(2,383		)		100
Realized gains reclassified into earnings	—				—				—				(49		)
Deferred tax benefit	—				—				—				17
Net unrealized gains (losses)	1,514				(2,080		)		4,426				(218		)
Pension and postretirement benefit plans
Actuarial gains	—				—				109				—
Deferred tax expense	—				—				(38		)		—
Amortization of prior service costs	115				—				153				—
Deferred tax expense	(40		)		—				(53		)		—
Amortization of net actuarial loss	(2		)		18				2				78
Deferred tax benefit (expense)	1				(6		)		(1		)		(27		)
Change in defined benefit retirement plan, net of tax	74				12				172				51
Other comprehensive income (loss), net of tax	1,588				(2,068		)		4,598				(167		)
Comprehensive income	$	9,467			$	16,910			$	31,137			$	34,036

TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
	June 30,				March 31,				December 31,				September 30,				June 30,
	2016				2016				2015				2015				2015
	(unaudited)				(unaudited)				(audited)				(unaudited)				(unaudited)
ASSETS
Cash and due from banks	$	188,183			$	195,161			$	250,836			$	284,625			$	184,099
Interest-bearing deposits in financial institutions	33,777				1,006				1,001				1,000				1,011
Federal funds sold	14				—				—				—				—
Total Cash and Cash Equivalents	221,974				196,167				251,837				285,625				185,110
Securities available for sale, at fair value	812,375				821,551				723,489				542,634				759,425
Securities held to maturity, at amortized cost	65,728				66,921				69,045				75,154				80,195
Federal Home Loan Bank stock, at amortized cost	28,008				23,903				23,691				24,058				24,058
Total Securities	906,111				912,375				816,225				641,846				863,678
Mortgage loans held for sale	474,978				97,491				102,346				99,330				165,994
Loans, net of unearned income and deferred costs:	5,559,949				4,552,260				4,519,393				4,367,039				4,228,127
Less: allowance for loan losses	(39,618		)		(37,760		)		(38,359		)		(37,351		)		(37,290		)
Net Loans	5,520,331				4,514,500				4,481,034				4,329,688				4,190,837
Premises and equipment, net	202,333				178,154				173,695				172,940				172,492
Goodwill	257,485				157,659				154,842				152,438				153,191
Other intangible assets, net	41,515				29,286				26,153				23,080				22,016
Bank-owned life insurance policies	164,933				150,623				149,452				147,949				146,729
Other assets	151,081				128,914				140,990				320,995				155,134
TOTAL ASSETS	$	7,940,741			$	6,365,169			$	6,296,574			$	6,173,891			$	6,055,181
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	1,950,816			$	1,449,660			$	1,393,264			$	1,445,978			$	1,363,551
Interest-bearing:
Demand and money market accounts	2,174,154				1,769,414				1,824,226				1,676,623				1,680,038
Savings	317,071				302,373				300,408				295,952				300,203
Certificates of deposit	1,744,238				1,433,679				1,396,129				1,369,325				1,342,860
Total Deposits	6,186,279				4,955,126				4,914,027				4,787,878				4,686,652
Advances from the Federal Home Loan Bank	500,798				428,940				429,080				437,282				437,584
Repurchase agreements and other borrowings	44,008				39,442				37,434				33,784				35,737
Total Borrowings	544,806				468,382				466,514				471,066				473,321
Other liabilities	148,108				105,658				95,839				98,878				92,317
TOTAL LIABILITIES	6,879,193				5,529,166				5,476,380				5,357,822				5,252,290
Preferred stock
Authorized and unissued shares - 2,000,000	—				—				—				—				—
Common stock, $1.667 par value	103,963				86,151				86,026				85,985				85,936
Capital surplus	742,228				536,294				535,094				533,609				532,646
Retained earnings	202,565				204,413				192,795				186,522				175,145
Common stock issued to deferred compensation trust, at cost	(10,785		)		(10,288		)		(10,172		)		(10,151		)		(10,110		)
Deferred compensation trust	10,785				10,288				10,172				10,151				10,110
Accumulated other comprehensive income (loss)	1,604				17				(2,994		)		1,036				291
TOTAL SHAREHOLDERS’ EQUITY	1,050,360				826,875				810,921				807,152				794,018
Noncontrolling interest	11,188				9,128				9,273				8,917				8,873
TOTAL EQUITY	1,061,548				836,003				820,194				816,069				802,891
TOTAL LIABILITIES AND EQUITY	$	7,940,741			$	6,365,169			$	6,296,574			$	6,173,891			$	6,055,181

TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)
	Three Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,
	2016				2016				2015				2015				2015
INTEREST INCOME:
Loans, including fees	$	51,444			$	50,247			$	50,319			$	48,906			$	48,170
Investment securities	3,139				3,464				3,415				3,728				3,321
Interest-bearing deposits in financial institutions and federal funds sold	364				330				212				107				56
Mortgage loans held for sale	1,294				693				865				1,246				1,161
Total Interest Income	56,241				54,734				54,811				53,987				52,708
INTEREST EXPENSE:
Deposits	5,267				5,213				5,119				4,881				4,442
Advances from the Federal Home Loan Bank	3,158				3,163				3,326				3,422				3,365
Repurchase agreements and other borrowings	32				22				35				14				17
Total Interest Expense	8,457				8,398				8,480				8,317				7,824
Net Interest Income	47,784				46,336				46,331				45,670				44,884
PROVISION FOR LOAN LOSSES	2,099				(259		)		852				130				1,723
Net Interest Income after Provision for Loan Losses	45,685				46,595				45,479				45,540				43,161
NONINTEREST INCOME:
Residential mortgage banking income, net	12,148				7,118				7,255				8,262				10,251
Real estate brokerage and property management income, net	6,116				4,827				2,438				5,349				4,584
Insurance commissions and other title fees and income, net	11,627				14,033				8,997				9,710				9,885
Service charges on deposit accounts	2,284				2,176				2,254				2,388				2,326
Credit card merchant fees, net	1,113				895				767				823				566
Other income	3,180				3,366				3,368				3,036				5,354
Net gain on investment securities	—				—				—				736				119
Total Noninterest Income	36,468				32,415				25,079				30,304				33,085
NONINTEREST EXPENSE:
Salaries and employee benefits	30,093				30,187				30,826				28,910				26,544
Occupancy expense	5,157				5,017				5,156				4,703				4,856
Furniture and equipment	2,381				2,357				2,390				2,211				2,369
Other expenses	34,268				14,600				14,371				14,082				15,298
Total Noninterest Expense	71,899				52,161				52,743				49,906				49,067
Income before income tax expense and noncontrolling interest	10,254				26,849				17,815				25,938				27,179
Provision for income tax expense	2,375				8,188				4,846				7,444				8,201
Net income	7,879				18,661				12,969				18,494				18,978
Net income attributable to noncontrolling interest	(1,620		)		(842		)		(503		)		(928		)		(1,166		)
Net income attributable to TowneBank	$	6,259			$	17,819			$	12,466			$	17,566			$	17,812
Preferred stock dividends	—				—				—				—				—
Net income available to common shareholders	$	6,259			$	17,819			$	12,466			$	17,566			$	17,812
Per common share information
Basic earnings	$	0.12			$	0.35			$	0.24			$	0.34			$	0.35
Diluted earnings	$	0.12			$	0.35			$	0.24			$	0.34			$	0.35
Basic weighted average shares outstanding	51,994,473				51,290,010				51,267,447				51,153,205				51,089,051
Diluted weighted average shares outstanding	52,116,772				51,392,857				51,440,440				51,263,382				51,151,512
Cash dividends declared	$	0.13			$	0.12			$	0.12			$	0.12			$	0.12

TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
													Increase/(Decrease)
	Three Months Ended												June 30, 2016							June 30, 2016
	June 30,								March 31,				June 30, 2015							March 31, 2016
	2016				2015				2016				Amount				Percent			Amount				Percent
Commission and fee income
Property and casualty	$	8,815			$	7,945			$	8,263			$	870			10.95	%		$	552			6.68	%
Employee benefits	2,907				2,505				2,721				402				16.05	%		186				6.84	%
Travel insurance	1,163				910				1,456				253				27.80	%		(293		)		(20.12	)%
Specialized benefit services	152				135				153				17				12.59	%		(1		)		(0.65	)%
Total commissions and fees	13,037				11,495				12,593				1,542				13.41	%		444				3.53	%
Contingency and bonus revenue	445				391				3,411				54				13.81	%		(2,966		)		(86.95	)%
Other income	52				47				77				5				10.64	%		(25		)		(32.47	)%
Total revenue	$	13,534			$	11,933			$	16,081			$	1,601			13.42	%		$	(2,547	)		(15.84	)%
Employee commission expense	2,254				2,325				2,168				(71		)		(3.05	)%		86				3.97	%
Revenue, net of commission expense	$	11,280			$	9,608			$	13,913			$	1,672			17.40	%		$	(2,633	)		(18.92	)%
Salaries and employee benefits	5,723				4,734				5,968				989				20.89	%		(245		)		(4.11	)%
Occupancy expense	517				480				529				37				7.71	%		(12		)		(2.27	)%
Furniture and equipment	259				225				224				34				15.11	%		35				15.63	%
Amortization of intangible assets	692				540				685				152				28.15	%		7				1.02	%
Other expenses	1,586				1,424				1,390				162				11.38	%		196				14.10	%
Total operating expenses	8,777				7,403				8,796				1,374				18.56	%		(19		)		(0.22	)%
Income before income tax provision and noncontrolling interest	$	2,503			$	2,205			$	5,117			$	298			13.51	%		$	(2,614	)		(51.08	)%
Plus: Acquisition related expenses	277				176				76				101				57.39	%		201				264.47	%
Plus: Amortization of intangible assets	692				540				685				152				28.15	%		7				1.02	%
Operating earnings before income taxes (non-GAAP)	$	3,472			$	2,921			$	5,878			$	551			18.86	%		$	(2,406	)		(40.93	)%

TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
	Six Months Ended								Increase/(Decrease)
	June 30,								2016 over 2015
	2016				2015				Amount				Percent
Net commission and fee income
Property and casualty	$	16,961			$	14,410			$	2,551			17.70	%
Employee benefits	5,806				5,223				583				11.16	%
Travel insurance	2,619				2,041				578				28.32	%
Specialized benefit services	305				268				37				13.81	%
Total commissions and fees	25,691				21,942				3,749				17.09	%
Contingency and bonus revenue	3,796				2,849				947				33.24	%
Other income	129				95				34				35.79	%
Total revenues	$	29,616			$	24,886			$	4,730			19.01	%
Employee commission expense	4,421				4,349				72				1.66	%
Revenue, net of commission expense	$	25,195			$	20,537			$	4,658			22.68	%
Salaries and employee benefits	$	11,692			$	9,528			$	2,164			22.71	%
Occupancy expense	1,045				936				109				11.65	%
Furniture and equipment	483				466				17				3.65	%
Amortization of intangible assets	1,377				1,066				311				29.17	%
Other expenses	2,976				2,667				309				11.59	%
Total operating expenses	17,573				14,663				2,910				19.85	%
Income before income tax provision and noncontrolling interest	$	7,622			$	5,874			$	1,748			29.76	%
Plus: Acquisition related expenses	354				356				(2		)		(0.56	)%
Plus: Amortization of intangible assets	1,377				1,066				311				29.17	%
Operating earnings before income taxes (non-GAAP)	$	9,353			$	7,296			$	2,057			28.19	%

TOWNEBANK
Purchase Price Allocation - Monarch
(dollars in thousands)
Fair value of assets acquired:
Cash and cash equivalents			$	67,457
Securities available for sale			20,818
Securities held to maturity			283,528
Net loans			818,119
Bank premise and equipment			23,998
Core deposit intangible			13,210
Other assets			59,352
Total assets			$	1,286,482
Fair value of liabilities assumed:
Deposits			$	1,061,620
Long-term borrowings			82,046
Other liabilities			20,978
Total liabilities			$	1,164,644
Net identifiable assets acquired			$	121,838
Goodwill			100,606
Net assets acquired			$	222,444
Purchase Price:
Company common shares issued			10,487,069
Purchase price per share of Company’s common stock			$	21.21
Common stock issued			$	222,431
Cash exchanged for fractional shares			13
Fair value of total consideration transferred			$	222,444

TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
		Three Months Ended												Six Months Ended
		June 30,				June 30,				December 31,				June 30,				June 30,
		2016				2015				2015				2016				2015
Return on average assets (GAAP basis)		0.39		%		1.21		%		0.78		%		0.75		%		1.11		%
Impact of excluding average goodwill and other intangibles and amortization		0.05		%		0.07		%		0.07		%		0.07		%		0.08		%
Return on average tangible assets (Non-GAAP)		0.44		%		1.28		%		0.85		%		0.82		%		1.19		%
Return on average equity (GAAP basis)		2.93		%		8.93		%		6.00		%		5.73		%		8.25		%
Impact of excluding average goodwill and other intangibles and amortization		1.26		%		2.84		%		2.11		%		2.08		%		2.79		%
Return on average tangible equity (Non-GAAP)		4.19		%		11.77		%		8.11		%		7.81		%		11.04		%
Return on average common equity (GAAP basis)		2.96		%		9.02		%		6.07		%		5.79		%		8.36		%
Impact of excluding average goodwill and other intangibles and amortization		1.29		%		2.91		%		2.15		%		2.13		%		2.88		%
Return on average tangible common equity (Non-GAAP)		4.25		%		11.93		%		8.22		%		7.92		%		11.24		%
Book value (GAAP basis)		$	16.84			15.40				$	15.71			$	16.84			$	15.40
Impact of excluding average goodwill and other intangibles and amortization		(4.79		)		(3.40		)		(3.50		)		(4.79		)		(3.40		)
Tangible book value		$	12.05			$	12.00			$	12.21			$	12.05			$	12.00

TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands)
		Three Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
Reconcilement of GAAP Earnings to Core Operating Earnings		2016				2016				2015				2015				2015
Net income available to common shareholders (GAAP)		$	6,259			$	17,819			$	12,466			$	17,566			$	17,812
Acquisition-related expenses		18,435				414				285				243				370
Non-core charges		18,435				414				285				243				370
Income tax (expense) benefit		(6,177		)		(33		)		(100		)		(85		)		(130		)
Non-core charges, net of taxes		12,258				381				185				158				240
Core operating earnings (non-GAAP)		$	18,517			$	18,200			$	12,651			$	17,724			$	18,052
Weighted average diluted shares		52,116,772				51,392,857				51,440,440				51,263,382				51,151,512
Diluted EPS (GAAP)		$	0.12			$	0.35			$	0.24			$	0.34			$	0.35
Core diluted EPS (non-GAAP)		$	0.36			$	0.35			$	0.25			$	0.35			$	0.35
Average assets		$	6,534,063			$	6,313,238			$	6,305,571			$	6,115,681			$	5,900,816
Average tangible equity		$	665,690			$	643,464			$	638,855			$	637,179			$	624,511
Core return on average tangible assets (non-GAAP)		1.14		%		1.16		%		0.80		%		1.15		%		1.23		%
Core return on average tangible equity (non-GAAP)		11.60		%		11.80		%		8.23		%		11.35		%		11.92		%

TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands)
		Six Months Ended
		June 30,				June 30,
Reconcilement of GAAP Earnings to Core Operating Earnings		2016				2015
Net income available to common shareholders (GAAP)		$	24,078			$	32,337
Acquisition-related expenses		18,849				784
Non-core charges		18,849				784
Income tax (expense) benefit		(6,210		)		(274		)
Non-core charges, net of taxes		12,639				510
Core operating earnings (non-GAAP)		$	36,717			$	32,847
Weighted average diluted shares		51,711,472				50,936,409
Diluted EPS (GAAP)		$	0.47			$	0.63
Core diluted EPS (non-GAAP)		$	0.71			$	0.64
Average assets		$	6,423,650			$	5,865,372
Average tangible equity		$	654,577			$	609,928
Core return on average tangible assets (non-GAAP)		1.15		%		1.13		%
Core return on average tangible equity (non-GAAP)		11.70		%		11.21		%