TowneBank : Investor Presentation - Earnings Release Third Quarter 2020

Investor Presentation - Third Quarter 2020	1

CAUTIONARY STATEMENTS

Forward-Looking Statements

This presentation 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 the impacts of the ongoing coronavirus (COVID-19) pandemic; 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 creditworthiness 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; 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 our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Report on Form 10-Q for the period ended June 30, 2020, and related disclosures in other filings that have been, or will be, filed by TowneBank with the Federal Deposit Insurance Corporation.

Non-GAAP Financial Measures

This presentation contains certain financial measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Such non-GAAP financial measures include the following: fully tax-equivalent net interest margin, core operating earnings, core net income, tangible book value per common share, total risk-based capital ratio, tier one leverage ratio, tier one capital ratio, and the tangible common equity to tangible assets ratio. Management uses these non-GAAP financial measures to assess the performance of TowneBank's core business and the strength of its capital position. Management believes that these non-GAAP financial measures provide meaningful additional information about TowneBank to assist investors in evaluating operating results, financial strength, and capitalization. The non-GAAP financial measures should be considered as additional views of the way our financial measures are affected by significant charges for credit costs and other factors. These non-GAAP financial measures should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The computations of the non-GAAP financial measures used in this presentation are referenced in a footnote or in the appendix to this presentation.

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PERFORMANCE HIGHLIGHTS

					QTD							YTD
Dollars in millions, except per share data		3Q20		2Q20	Change		3Q19	Change			3Q20		3Q19	Change
Net Interest Income	$	96.76	$	93.27	3.74%	$	91.10	6.21%		$	279.53	$	268.40	4.1%
Noninterest Income		95.38		69.38	37.46%		54.78	74.12%			212.96		155.88	36.6%
Total Revenue		192.14		162.66	18.12%		145.88	31.71%			492.49		424.27	16.1%
Noninterest Expense		101.98		91.02	12.04%		97.29	4.83%			289.89		285.97	1.4%
Net Income		34.46		34.61	(0.41%)		37.66	(8.49%)			95.45		103.71	-8.0%
Diluted Earnings Per Share		0.48	$	0.48	0.00%	$	0.52	(8.01%)		$	1.32	$	1.44	-8.1%
Dividends Declared Per Share		0.18		0.18	0.00%		0.18	0.00%			0.54		0.52	3.8%
Tangible Book Value Per Share		17.06		16.69	2.21%		15.44	10.47%			17.06		15.44	10.5%
Total Assets	$	14,795	$	15,580	(5.04%)	$	12,021	23.08%		$	14,779	$	12,021	22.9%
Total Loans		9,771		9,802	(0.32%)		8,183	19.40%			9,771		8,183	19.4%
Total Deposits		11,705		11,265	3.91%		9,438	24.02%			11,705		9,438	24.0%
Return on Average Assets		0.89%		0.97%	(0.08%)		1.26%	(0.38%)			0.91%		1.20%
Return on Average Tangible Common Equity		11.79%		12.44%	(0.65%)		14.36%	(2.57%)			11.44%		13.95%
Net Interest Margin (TE)		2.72%		2.87%	(0.15%)		3.43%	(0.71%)			3.19%		3.50%
Nonperforming Assets / Total Assets		0.20%		0.19%	0.01%		0.26%	(0.06%)			0.20%		0.26%
Allowance for Loan Losses / Total Loans		1.22%		0.92%	0.30%		0.68%	0.54%			1.22%		0.68%
Net Loan Charge-offs / Average Loans		-0.01%		0.00%	(0.01%)		0.03%	(0.04%)			0.00%		0.04%
Common Equity Tier 1 Ratio		11.75%		11.54%	0.21%		11.52%	0.23%			11.75%		11.52%

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Highlights

• Total revenue of $192.14 million, an increase of $46.26 million versus the same period of 2019
• Allowance for credit losses to total loans is 1.22%, excluding PPP loans is 1.37%
• Margin of 2.72% included accretion of 5bp
• Strong mortgage origination volumes of $1.79 billion in Q3
• Gain of $6.5 million on disposition of non-strategic travel insurance joint venture

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BALANCE SHEET SUMMARY

(Dollars in Millions)		Sep 30,	June 30,		Q/Q Change		Sep 30,		Y/Y Change
	2020		2020	Amount	%		2019	Amount	%
Cash, Cash Equivalents and Securities	$	3,186	$	4,015	$ (829) -20.7%	$	2,235	$	950	42.5%
Loans Held for Sale			669		610		59	9.7%		457		212	46.5%
Gross Loans		9,771		9,801		(30)	-0.3%		8,183		1,588	19.4%
Allowance for Loan Losses			(119)		(91)		(28)	30.8%		(55)		(64) 114.8%
Net Loans		9,652		9,710		(58)	-0.6%		8,127		1,524	18.8%
Other Assets			1,289		1,245		44	3.5%		1,202		87	7.2%
Total Assets		$	14,795	$	15,580	$	(785)	-5.0%	$	12,021	$2,774	23.1%
Noninterest-Bearing Deposits		$	4,464	$	4,226	$	238	5.6%	$	3,031	$	1,434	47.3%
Interest-Bearing Deposits		7,241		7,039		202	2.9%		6,408		833	13.0%
Total Deposits			11,705		11,265		440	3.9%		9,438		2,267	24.0%
FHLB Advances		731		907		(176) (19.4%)		381		350	91.9%
Debt and Other Borrowings			307		1,421	(1,114)	(78.4%)		291		16	5.4%
Other Liabilities		304		266		38	14.3%		272		31	11.5%
Total Liabilities			13,047		13,859		(812)	(5.9%)		10,383		2,664	25.7%
Shareholders' Equity			1,732		1,708		24	1.4%		1,625		106	6.5%
Noncontrolling Interests		17		14		3	21.6%		13		4	28.9%
Total Equity			1,749		1,722		27	1.6%		1,639		110	6.7%
Total Liabilites and Equity		$	14,795	$	15,580	$	(785)	-5.0%	$	12,021	$2,774	23.1%

Highlights:

• Loans held for investment up $1.59 billion compared to Q3 2019, which includes PPP loans totaling $1.10 billion
• Average earning assets in 3Q20 were up $3.66 billion compared to 3Q19
• Deployed excess liquidity to reduce borrowings during the quarter
• Noninterest deposits represent 38.14% of total deposits
• Securities portfolio with 4.1 year average duration

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