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    TOWN   US89214P1093

TOWNEBANK

(TOWN)
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TowneBank Reports Third Quarter 2021 Earnings

10/28/2021 | 08:31am EST

SUFFOLK, Va., Oct. 28, 2021 (GLOBE NEWSWIRE) -- TowneBank (the "Company" or "Towne") (NASDAQ: TOWN) today reported earnings for the quarter ended September 30, 2021 of $50.40 million, or $0.69 per diluted share, compared to $34.46 million, or $0.48 per diluted share, for the quarter ended September 30, 2020.

"TowneBank had another successful quarter highlighted by solid organic loan growth despite headwinds from historically low levels of line utilization. Our credit quality metrics are excellent, and our Company is poised to capitalize on growth opportunities across our markets. The strong momentum in our fee-based businesses continued during the quarter as we explore additional strategies to accelerate noninterest income growth," said G. Robert Aston, Jr., Executive Chairman.

Highlights for Third Quarter 2021 Compared to Third Quarter 2020:

  • Total revenues were $170.08 million, a decrease of $22.06 million, or 11.48%. This year-over-year decrease was driven by a 2020 gain on the sale of Red Sky Travel Insurance ("Red Sky"), totaling $17.63 million.
  • Pre-provision, pre-tax, net revenues (non-GAAP), were $63.65 million, an increase of $7.37 million, or 13.09%, excluding the 2020 gain on sale of Red Sky.
  • Loans held for investment were $9.30 billion, a decrease of $0.47 billion, or 4.84%, from September 30, 2020, and $0.13 billion, or 1.34%, from June 30, 2021. Excluding the decline in loans from the Paycheck Protection Program ("PPP"), loans held for investment increased $378.69 million, or 4.37%, compared to September 30, 2020, and $147.41 million, or 6.57%, on an annualized basis, from the linked quarter. Total loans at September 30, 2021, September 30, 2020, and June 30, 2021 included $0.25 billion, $1.10 billion, and $0.52 billion, respectively, of PPP loans.
  • Total deposits were $13.01 billion, an increase of $1.31 billion, or 11.18% compared to prior year and $0.05 billion, or 1.51% on an annualized basis, from June 30, 2021.
  • Noninterest bearing deposits increased by 20.85%, to $5.39 billion, representing 41.45% of total deposits. Compared to the linked quarter, noninterest bearing deposits increased 11.17%, on an annualized basis.
  • Annualized return on common shareholders' equity was 10.68% and annualized return on average tangible common shareholders' equity was 15.27% (non-GAAP).
  • Net interest margin for the quarter was 2.76% and taxable equivalent net interest margin (non-GAAP) was 2.78%.
  • Nonperforming assets were $13.86 million, or 0.09% of total assets, compared to $28.74 million, or 0.19%, at September 30, 2020, primarily due to the sale of several foreclosed properties.
  • Effective tax rate of 22.73% in the quarter compared to 18.53% in third quarter 2020, and 20.03% in the linked quarter.

"While facing continued pressure from the current rate environment on net interest margins, our Company delivered another strong performance for the quarter. Our diversified revenue model has afforded us the opportunity to patiently deploy excess liquidity and the recent rise in rates should provide more attractive entry points potentially increasing security purchases over the next several quarters," stated J. Morgan Davis, Chief Executive Officer.

Quarterly Net Interest Income Compared to Third Quarter 2020:

  • Net interest income was $100.44 million compared to $96.76 million as of September 30, 2020.
  • Tax-equivalent net interest margin (non-GAAP) was 2.78%, including purchase accounting accretion of 4 basis points and PPP interest and fees of 15 basis points, compared to 2.72%, including purchase accounting accretion of 5 basis points and a 17 basis point increase in PPP interest and fees, for third quarter 2020.
  • On an average basis, loans held for investment, with a yield of 4.24%, represented 64.01% of earning assets at September 30, 2021 compared to a yield of 4.22% and 68.38% of earning assets in the third quarter of 2020. Excluding PPP loans, loan yields were 4.06% in third quarter 2021 compared to 4.30% in third quarter 2020.
  • Interest and fee income on PPP loans was $7.77 million in third quarter 2021, compared to $10.02 million in the linked quarter, and $9.82 million in third quarter 2020.
  • Total cost of deposits decreased to 0.19% from 0.46% at September 30, 2020.
  • Average interest-earning assets totaled $14.43 billion at September 30, 2021 compared to $14.26 billion at September 30, 2020, an increase of 1.20%.
  • Average interest-bearing liabilities totaled $8.24 billion, a decrease of $0.98 billion from prior year.

Quarterly Provision for Credit Losses:

  • The quarterly provision for credit losses for on-balance-sheet loans was a benefit of $1.60 million compared to a provision expense of $28.26 million one year ago and a benefit of $8.08 million in the linked quarter.
  • The third quarter 2021 included a release in the allowance for credit losses of $0.95 million that was driven by a combination of net recoveries and a slight improvement in the quarterly economic forecast, offset by modest core loan growth.
  • Net loan recoveries were $0.64 million compared to $0.33 million one year prior and $0.14 million in the linked quarter. The ratio of net loan recoveries to average loans on an annualized basis was (0.03)% in third quarter 2021, (0.01)% in third quarter 2020, and (0.01)% in the linked quarter.
  • The provision expense for credit losses on off-balance-sheet commitments was $0.01 million compared to $3.50 million in the third quarter of 2020, and a benefit of $1.89 million in the linked quarter.
  • The allowance for credit losses on loans represented 1.15% of total loans at September 30, 2021 and June 30, 2021, compared to 1.22% at September 30, 2020. Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses (non-GAAP) was 1.18%, compared to 1.22% at June 30, 2021 and 1.37% at September 30, 2020. The allowance for credit losses on loans was 12.68 times nonperforming loans compared to 9.67 times at June 30, 2021 and 7.31 times at September 30, 2020.
  • Expected loss estimates are subject to change based on continuing review of models and assumptions, portfolio performance, changes in forecasted macroeconomic conditions and loan mix, which could result in material changes to the reserve in future periods.

Quarterly Noninterest Income Compared to Third Quarter 2020:

  • Total noninterest income was $69.63 million compared to $95.38 million in 2020, a decrease of $25.74 million, or 26.99%. Residential mortgage banking income decreased $12.11 million, while real estate brokerage and property management income increased $2.98 million. In the third quarter of 2020, noninterest income included a gain of $17.63 million on the sale of Red Sky, a travel insurance joint venture.
  • Residential mortgage banking recorded income of $25.42 million compared to $37.53 million in third quarter 2020. Margins declined 4 basis points between quarters and loan volume decreased to $1.31 billion in third quarter 2021 compared to $1.79 billion   in 2020. Residential purchase activity comprised 77.45% of production volume in the third quarter of 2021 compared to 61.21% in the prior year quarter.   In addition to the declines related to margin and volume, the income statement impact of derivative instruments in third quarter 2021 was a net loss of $0.77 million compared to a net gain on derivative instruments of $3.33 million in third quarter 2020.   Included in the third quarter 2021 derivative instrument loss was a loss on interest rate-locks of $1.67 million, compared to a gain of $3.28 million in third quarter 2020.
  • Margins on residential mortgages declined 41 basis points from the peak in December 2020. Management expects margin compression to continue through the end of the year to more normalized levels.
  • Total Insurance segment revenue decreased $17.24 million, or 45.06%, to $21.03 million in third quarter 2021 compared to 2020. This decline is attributable to the sale of Red Sky mid-third quarter 2020 and the gain on sale totaling $17.63 million that was recorded in other income in that quarter. After distributions to noncontrolling interests, Towne retained $6.52 million of the pre-tax gain. Partially offsetting the decline was the acquisition of a property and casualty insurance agency in December 2020, which brought in $0.73 million in additional revenue in third quarter 2021.
  • Property management fee revenue increased 37.95%, or $2.89 million, to $10.50 million compared to third quarter 2020. Demand for vacation rentals remains strong, keeping levels high. In July 2021, the Company acquired Venture Resorts, the largest cabin rental company in the Smoky Mountains of Tennessee, which brought in an additional $3.0 million in management fee revenue in the quarter.

Quarterly Noninterest Expense Compared to Third Quarter 2020:

  • Total noninterest expense was $104.09 million compared to $101.98 million in 2020, an increase of $2.11 million, or 2.06%. The higher level of expenses was attributable to increases in advertising and marketing expense of $2.0 million, software expense of $0.64 million, and data processing expense of $0.49 million.
  • Advertising and marketing expense increases, related primarily to our Realty segment, were driven by production based advertising programs in our property management companies and consumer mortgage advertising in our residential mortgage operations.
  • Increased costs associated with our core banking platform resulted in higher software expenses, and higher credit card fees on vacation property reservation activities drove the increase in data processing expense.
  • We expect the fourth quarter 2021 noninterest expense run rate to be consistent with the current quarter.

Consolidated Balance Sheet Highlights:

  • Total assets were $15.81 billion for the quarter ended September 30, 2021, a marginal increase compared to $15.80 billion at June 30, 2021. Total assets increased $1.02 billion, or 6.87%, from $14.80 billion at September 30, 2020. The year-over-year increase was driven by higher liquidity levels due to deposit growth.
  • Loans held for investment decreased $0.47 billion, or 4.84%, compared to prior year and $0.13 billion, or 1.34%, compared the linked quarter. Excluding PPP loans of $0.25 billion in third quarter 2021, $1.10 billion in third quarter 2020, and $0.52 billion in the linked quarter, loans held for investment increased $378.69 million, or 4.37%, compared to prior year, and $147.41 million, or 1.66%, compared to June 30, 2021, or 6.57% on an annualized basis.
  • Average loans held for investment, excluding PPP loans, were $8.88 billion in the third quarter of 2021, an increase of $220.80 million, or 2.55%, compared to prior year. In the linked quarter comparison, average loans held for investment, excluding PPP loans, increased 0.47%, or $41.38 million, 1.86% on an annualized basis.
  • Unamortized fee income related to PPP loans was $7.50 million at September 30, 2021.
  • Mortgage loans held for sale decreased $237.17 million, or 35.45%, compared to the prior year and $122.60 million, or 22.11%, compared to the linked quarter.
  • Total deposits increased $1.31 billion, or 11.18%, compared to the prior year and $0.05 billion, or 0.38%, compared to the linked quarter.
  • Total borrowings decreased $0.55 billion, or 53.05%, from prior year and $0.10 billion, or 17.40%, compared to the linked quarter.

Investment Securities:

  • Total investment securities were $1.59 billion compared to $1.49 billion at June 30, 2021 and $1.38 billion at September 30, 2020. The weighted average duration of the portfolio at September 30, 2021 was 4.0 years. The carrying value of the available for sale debt securities portfolio included $32.06 million, $61.43 million, and $42.18 million in net unrealized gains at September 30, 2021, September 30, 2020, and June 30, 2021, respectively.

Loans and Asset Quality:

  • Total loans held for investment were $9.30 billion at September 30, 2021 compared to $9.42 billion at June 30, 2021 and $9.77 billion at September 30, 2020.
  • Nonperforming assets were $13.86 million, or 0.09% of total assets, compared to $28.74 million, or 0.19%, at September 30, 2020.
  • Nonperforming loans were 0.09% of period end loans compared to 0.17% at September 30, 2020.
  • Foreclosed property decreased to $5.41 million from $11.69 million at September 30, 2020.
  • At September 30, 2021, we had $50.95 million in loan modifications made in accordance with section 4013 of the CARES Act, a decline of $1.82 billion, or 97.27%, from a reported peak of $1.87 billion at April 30, 2020.

Deposits and Borrowings:

  • Total deposits were $13.01 billion compared to $12.96 billion at June 30, 2021 and $11.70 billion at September 30, 2020.
  • Total loans held for investment to deposits were 71.44% compared to 72.69% at June 30, 2021 and 83.47% at September 30, 2020.
  • Non-interest bearing deposits were 41.45% of total deposits at September 30, 2021 compared to 40.44% at June 30, 2021 and 38.14% at September 30, 2020.
  • Total borrowings were $0.49 billion compared to $0.59 billion at June 30, 2021 and $1.04 billion at September 30, 2020.

Capital:

  • Common equity tier 1 capital ratio of 12.53%.
  • Tier 1 leverage capital ratio of 9.18%.
  • Tier 1 risk-based capital ratio of 12.69%.
  • Total risk-based capital ratio of 15.85%.
  • Book value per common share was $25.91 compared to $25.51 at June 30, 2021 and $23.83 at September 30, 2020.
  • Tangible book value per common share (non-GAAP) was $18.92 compared to $18.70 at June 30, 2021 and $17.06 at September 30, 2020.

About TowneBank:
Founded in 1999, TowneBank is a company built on relationships, offering a full range of banking and other financial services, with a mission 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.

Today, 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 Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations. With total assets of $15.81 billion as of September 30, 2021, 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, 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.

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 the impacts of the ongoing the impact of the COVID-19 pandemic and the associated efforts to limit its spread; 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; 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, 2020 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
J. Morgan Davis, Chief Executive Officer, 757-673-1673

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
  September 30, June 30, March 31, December 31, September 30,
 2021 2021 2021 2020 2020
Income and Performance Ratios:         
 Total Revenue$170,076  $167,321  $182,509  $171,848  $192,135 
 Net income52,743  58,002  72,631  53,891  50,715 
 Net income available to common shareholders50,400  55,803  68,995  50,082  34,464 
 Pre-provision, pre-tax, net revenues (non-GAAP)63,647  59,728  81,577  62,107  56,278 
 Net income per common share - diluted0.69  0.77  0.95  0.69  0.48 
 Book value per common share25.91  25.51  24.78  24.31  23.83 
 Book value per common share - tangible (non-GAAP)18.92  18.70  17.94  17.46  17.06 
 Return on average assets1.27% 1.48% 1.92% 1.35% 0.89%
 Return on average assets - tangible (non-GAAP)1.37% 1.59% 2.05% 1.46% 0.97%
 Return on average equity10.59% 12.21% 15.56% 11.26% 7.85%
 Return on average equity - tangible (non-GAAP)15.09% 17.38% 22.19% 16.28% 11.66%
 Return on average common equity10.68% 12.31% 15.70% 11.36% 7.91%
 Return on average common equity - tangible (non-GAAP)15.27% 17.57% 22.45% 16.48% 11.79%
 Noninterest income as a percentage of total revenue40.94% 39.55% 45.21% 41.45% 49.64%
Regulatory Capital Ratios (1):         
 Common equity tier 112.53% 12.42% 12.15% 11.87% 11.75%
 Tier 112.69% 12.57% 12.30% 12.04% 11.91%
 Total15.85% 15.76% 15.59% 15.42% 15.35%
 Tier 1 leverage ratio9.18% 9.44% 9.54% 8.99% 8.89%
Asset Quality:         
 Allowance for credit losses on loans to nonperforming loans12.68x 9.67x 9.09x 10.74x 7.31x
 Allowance for credit losses on loans to period end loans1.15% 1.15% 1.19% 1.25% 1.22%
 Allowance for credit losses on loans to period end loans excluding PPP loans (non-GAAP)1.18% 1.22% 1.31% 1.37% 1.37%
 Nonperforming loans to period end loans0.09% 0.12% 0.13% 0.12% 0.17%
 Nonperforming assets to period end assets0.09% 0.10% 0.11% 0.11% 0.19%
 Net charge-offs (recoveries) to average loans (annualized)(0.03)% (0.01)% 0.03% % (0.01)%
 Net charge-offs (recoveries)$(644) $(137) $669  $109  $(328)
           
 Nonperforming loans$8,451  $11,178  $12,768  $11,188  $16,295 
 Former bank premises    750  750  750 
 Foreclosed property5,409  4,041  3,748  4,276  11,695 
 Total nonperforming assets$13,860  $15,219  $17,266  $16,214  $28,740 
 Loans past due 90 days and still accruing interest$143  $1,584  $108  $528  $19 
 Allowance for credit losses on loans$107,177  $108,130  $116,077  $120,157  $119,058 
Mortgage Banking:         
 Loans originated, mortgage$939,272  $1,050,663  $1,187,595  $1,257,963  $1,292,801 
 Loans originated, joint venture370,865  403,864  417,177  429,848  498,100 
 Total loans originated$1,310,137  $1,454,527  $1,604,772  $1,687,811  $1,790,901 
 Number of loans originated3,917  4,514  5,164  5,481  5,817 
 Number of originators219  222  229  228  224 
 Purchase %77.45% 76.95% 53.45% 59.76% 61.21%
 Loans sold$1,394,166  $1,485,057  $1,601,480  $1,845,926  $1,833,590 
 Rate lock asset$6,087  $7,760  $12,522  $11,781  $10,480 
 Gross realized gain on sales and fees as a % of loans originated3.61% 3.64% 4.01% 4.02% 3.65%
Other Ratios:         
 Net interest margin2.76% 2.92% 3.04% 2.97% 2.70%
 Net interest margin-fully tax equivalent (non-GAAP)2.78% 2.94% 3.06% 2.98% 2.72%
 Average earning assets/total average assets91.89% 91.89% 91.46% 91.59% 92.09%
 Average loans/average deposits71.69% 78.22% 82.71% 83.42% 86.29%
 Average noninterest deposits/total average deposits40.40% 40.21% 38.39% 39.61% 37.76%
 Period end equity/period end total assets12.02% 11.83% 12.04% 12.20% 11.82%
 Efficiency ratio (non-GAAP)59.58% 61.46% 52.11% 60.02% 57.36%
 (1) Current reporting period regulatory capital ratios are preliminary      
        


TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
Investment Securities      % Change
 Q3 Q3 Q2 Q3 21 vs. Q3 21 vs.
Available-for-sale securities, at fair value2021 2020 2021 Q3 20 Q2 21
U.S. agency securities$207,949   $167,275   $206,151   24.32 % 0.87 %
U.S. Treasury notes1,007   1,006   1,013   0.10 % (0.59)%
Municipal securities350,980   292,792   334,633   19.87 % 4.89 %
Trust preferred and other corporate securities31,591   24,236   31,680   30.35 % (0.28)%
Mortgage-backed securities issued by GSE and GNMA969,017   825,378   881,078   17.40 % 9.98 %
Allowance for credit losses(142)  (4)  (134)  3,450.00 % 5.97 %
Total$1,560,402   $1,310,683   $1,454,421   19.05 % 7.29 %
Gross unrealized gains (losses) reflected in financial statements      
Total gross unrealized gains$40,906   $62,206   $65,152   (34.24)% (37.21)%
Total gross unrealized losses(8,845)  (773)  (22,968)  1,044.24 % (61.49)%
Net unrealized gains (losses) and other adjustments on AFS securities$32,061   $61,433   $42,184   (47.81)% (24.00)%
Held-to-maturity securities, at amortized cost         
Trust preferred corporate securities$2,285   $2,333   $2,297   (2.06)% (0.52)%
Municipal securities5,074   4,992   5,053   1.64 % 0.42 %
Mortgage-backed securities issued by GSE and GNMA7,539   9,806   8,039   (23.12)% (6.22)%
Allowance for credit losses(94)  (90)  (97)  4.44 % (3.09)%
Total$14,804   $17,041   $15,292   (13.13)% (3.19)%
          
Gross unrealized gains (losses) not reflected in financial statements        
Total gross unrealized gains$1,591   $1,971   $1,708   (19.28)% (6.85)%
Total gross unrealized losses          %  %
Net unrealized gains (losses) in HTM securities$1,591   $1,971   $1,708   (19.28)% (6.85)%
          
Loans Held For Investment (1)      % Change
 Q3 Q3 Q2 Q3 21 vs. Q3 21 vs.
 2021 2020 2021 Q3 20 Q2 21
Real estate - construction and development$1,005,592   $1,143,202   $1,029,811   (12.04)% (2.35)%
Commercial real estate - owner occupied1,463,000   1,378,443   1,445,328   6.13 % 1.22 %
Commercial real estate - non owner occupied2,647,625   2,338,532   2,597,405   13.22 % 1.93 %
Real estate - multifamily363,733   289,270   343,764   25.74 % 5.81 %
Residential 1-4 family1,233,125   1,229,732   1,166,898   0.28 % 5.68 %
HELOC389,974   430,803   390,726   (9.48)% (0.19)%
Commercial and industrial business (C&I)1,253,972   2,144,875   1,529,788   (41.54)% (18.03)%
Government471,037   354,926   479,664   32.71 % (1.80)%
Indirect348,864   270,371   310,492   29.03 % 12.36 %
Consumer loans and other120,643   190,416   129,702   (36.64)% (6.98)%
Total$9,297,565   $9,770,570   $9,423,578   (4.84)% (1.34)%
(1) Paycheck Protection Program loans totaling $0.25 billion, $1.10 billion, and $0.52 billion, primarily in C&I, are included in Q3 21, Q3 20, and Q2 21, respectively.
Deposits      % Change
 Q3 Q3 Q2 Q3 21 vs. Q3 21 vs.
 2021 2020 2021 Q3 20 Q2 21
Noninterest-bearing demand$5,394,952   $4,464,178   $5,243,073   20.85 % 2.90 %
Interest-bearing:         
Demand and money market accounts5,681,181   4,642,482   5,373,146   22.37 % 5.73 %
Savings366,165   312,444   349,552   17.19 % 4.75 %
Certificates of deposits1,571,752   2,285,859   1,998,828   (31.24)% (21.37)%
Total$13,014,050   $11,704,963   $12,964,599   11.18 % 0.38 %
                       


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Three Months Ended Three Months Ended Three Months Ended
 September 30, 2021 June 30, 2021 September 30, 2020
   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 (1)$9,238,922  $98,732  4.24% $9,604,805  $101,490  4.24% $9,752,746  $103,401  4.22%
Taxable investment securities1,421,347  6,560  1.85% 1,351,922  6,476  1.92% 1,206,679  6,726  2.23%
Tax-exempt investment securities125,523  487  1.55% 128,094  434  1.36% 144,999  779  2.15%
Total securities1,546,870  7,047  1.82% 1,480,016  6,910  1.87% 1,351,678  7,505  2.22%
Interest-bearing deposits3,179,010  1,182  0.15% 2,327,310  619  0.11% 2,523,644  632  0.10%
Loans held for sale468,323  3,406  2.91% 503,706  3,711  2.95% 634,309  4,587  2.89%
Total earning assets14,433,125  110,367  3.03% 13,915,837  112,730  3.25% 14,262,377  116,125  3.24%
Less: allowance for credit losses(108,478)     (116,025)     (95,594)    
Total nonearning assets1,382,351      1,344,076      1,320,369     
Total assets$15,706,998      $15,143,888      $15,487,152     
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$5,486,788  $2,095  0.15% $5,179,907  $2,004  0.16% $4,311,920  $2,663  0.25%
Savings358,739  533  0.59% 346,177  528  0.61% 304,753  555  0.72%
Certificates of deposit1,842,948  3,400  0.73% 1,816,283  4,612  1.02% 2,417,772  9,747  1.60%
Total interest-bearing deposits7,688,475  6,028  0.31% 7,342,367  7,144  0.39% 7,034,445  12,965  0.73%
Borrowings300,505  412  0.54% 476,122  565  0.47% 1,931,120  2,841  0.58%
Subordinated debt, net249,405  2,962  4.75% 249,260  2,962  4.75% 248,807  2,962  4.76%
Total interest-bearing liabilities8,238,385  9,402  0.45% 8,067,749  10,671  0.53% 9,214,372  18,768  0.81%
Demand deposits5,212,271      4,937,754      4,268,443     
Other noninterest-bearing liabilities367,891      304,793      257,304     
Total liabilities13,818,547      13,310,296      13,740,119     
Shareholders’ equity1,888,451      1,833,592      1,747,033     
Total liabilities and equity$15,706,998      $15,143,888      $15,487,152     
Net interest income (tax-equivalent basis)  $100,965      $102,059      $97,357   
Reconciliation of Non-GAAP Financial Measures                   
Tax-equivalent basis adjustment  (522)     (915)     (598)  
Net interest income (GAAP)  $100,443      $101,144      $96,759   
                  
Interest rate spread (2)(3)    2.58%     2.72%     2.43%
Interest expense as a percent of average earning assets      0.26%     0.31%     0.52%
Net interest margin (tax equivalent basis) (3)(4)      2.78%     2.94%     2.72%
Total cost of deposits    0.19%     0.23%     0.46%
                  

(1) September 30, 2021, September 30, 2020, and June 30, 2021 includes average PPP balances of $0.36 billion, $1.10 billion and $0.77 billion, and related interest and fee income of $7.77 million, $9.82 million, and $10.02 million, respectively.
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4) Non-GAAP.

TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Nine Months Ended Nine Months Ended Nine Months Ended September 30,
 September 30, 2021 September 30, 2020 2021 Compared with 2020
   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 (1)$9,495,456  $302,182  4.25% $9,309,256  $306,622  4.40% $(4,440) $(10,384) $5,944 
Taxable investment securities1,359,366  19,640  1.93% 1,253,783  23,304  2.48% (3,664) (5,507) 1,843 
Tax-exempt investment securities131,106  1,462  1.49% 140,248  2,476  2.35% (1,014) (862) (152)
Total securities1,490,472  21,102  1.89% 1,394,031  25,780  2.47% (4,678) (6,369) 1,691 
Interest-bearing deposits2,426,468  2,218  0.12% 615,466  2,168  0.47% 50  (2,552) 2,602 
Loans held for sale502,758  10,477  2.78% 477,964  11,386  3.18% (909) (1,478) 569 
Total earning assets13,915,154  335,979  3.23% 11,796,717  345,956  3.92% (9,977) (20,783) 10,806 
Less: allowance for credit losses(115,100)     (73,538)          
Total nonearning assets1,351,796      2,264,295           
Total assets$15,151,850      $13,987,474           
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$5,192,658  $6,175  0.16% $3,898,642  $10,472  0.36% $(4,297) $(7,044) $2,747 
Savings345,739  1,583  0.61% 290,684  1,702  0.78% (119) (408) 289 
Certificates of deposit1,872,393  13,963  1.00% 2,451,715  34,925  1.90% (20,962) (14,008) (6,954)
Total interest-bearing deposits7,410,790  21,721  0.39% 6,641,041  47,099  0.95% (25,378) (21,460) (3,918)
Borrowings445,399  1,798  0.53% 1,452,652  8,661  0.78% (6,863) (2,169) (4,694)
Subordinated debt, net249,261  8,854  4.74% 248,660  8,885  4.76% (31) (52) 21 
Total interest-bearing liabilities8,105,450  32,373  0.53% 8,342,353  64,645  1.04% (32,272) (23,681) (8,591)
Demand deposits4,880,493      3,687,791           
Other noninterest-bearing liabilities325,639      252,337           
Total liabilities13,311,582      12,282,481           
Shareholders’ equity1,840,268      1,704,993           
Total liabilities and equity$15,151,850      $13,987,474           
Net interest income (tax-equivalent basis)  $303,606      $281,311    $22,295  $2,898  $19,397 
Reconciliation of Non-GAAP Financial Measures                   
Tax-equivalent basis adjustment  (2,029)     (1,781)   (248)    
Net interest income (GAAP)  $301,577      $279,530    $22,047     
                  
Interest rate spread (2)(4)    2.69%     2.88%      
Interest expense as a percent of average earning assets      0.31%     0.73%      
Net interest margin (tax equivalent basis) (3)(4)   2.92%     3.19%      
Total cost of deposits    0.24%     0.61%      
                  
(1) September 30, 2021 and September 30, 2020 includes average PPP balances of $0.48 billion and $0.64 billion and related interest income of $29.42 million and $15.65 million.
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4) Non-GAAP.
 


TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except share data)
  
   
 September 30, December 31,
 2021 2020
 (unaudited) (audited)
ASSETS   
Cash and due from banks$75,370  $41,514 
Interest-bearing deposits at FRB - Richmond3,155,039  1,795,241 
Interest-bearing deposits in financial institutions33,506  27,532 
Total Cash and Cash Equivalents3,263,915  1,864,287 
Securities available for sale, at fair value (amortized cost of $1,528,483 and $1,310,250, and allowance for credit losses of $142 and $348 at September 30, 2021 and December 31, 2020, respectively.)1,560,402  1,368,224 
Securities held to maturity, at amortized cost (fair value $16,489 and $18,469 at September 30, 2021 and December 31, 2020, respectively.)14,898  16,512 
Less: allowance for credit losses(94) (97)
Securities held to maturity, net of allowance for credit losses14,804  16,415 
Other equity securities6,621  6,492 
FHLB stock13,146  30,135 
Total Securities1,594,973  1,421,266 
Mortgage loans held for sale431,846  540,798 
Loans, net of unearned income and deferred costs9,297,565  9,629,068 
Less: allowance for credit losses(107,177) (120,157)
Net Loans9,190,388  9,508,911 
Premises and equipment, net270,810  260,242 
Goodwill457,187  452,328 
Other intangible assets, net50,839  45,533 
BOLI249,862  246,109 
Other assets301,552  286,970 
TOTAL ASSETS$15,811,372  $14,626,444 
    
LIABILITIES AND EQUITY   
Deposits:   
Noninterest-bearing demand$5,394,952  $4,374,566 
Interest-bearing:   
Demand and money market accounts5,681,181  4,819,604 
Savings366,165  330,091 
Certificates of deposit1,571,752  2,048,905 
Total Deposits13,014,050  11,573,166 
Advances from the FHLB155,537  456,038 
Subordinated debt, net249,503  249,055 
FRB PPP lending facility  182,852 
Repurchase agreements and other borrowings82,413  67,786 
Total Borrowings487,453  955,731 
Other liabilities409,435  313,719 
TOTAL LIABILITIES13,910,938  12,842,616 
Preferred stock, authorized and unissued shares - 2,000,000   
Common stock, $1.667 par: 150,000,000 shares authorized   
72,683,529 and 72,667,541 shares issued at   
September 30, 2021 and December 31, 2020, respectively121,163  121,132 
Capital surplus1,049,367  1,046,642 
Retained earnings690,960  557,889 
Common stock issued to deferred compensation trust, at cost   
905,484 and 873,486 shares at September 30, 2021 and December 31, 2020, respectively(18,076) (16,969)
Deferred compensation trust18,076  16,969 
Accumulated other comprehensive income (loss)21,597  41,184 
TOTAL SHAREHOLDERS’ EQUITY1,883,087  1,766,847 
Noncontrolling interest17,347  16,981 
TOTAL EQUITY1,900,434  1,783,828 
TOTAL LIABILITIES AND EQUITY$15,811,372  $14,626,444 
 


TOWNEBANK
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
        
        
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2021 2020 2021 2020
INTEREST INCOME:       
Loans, including fees$98,258  $102,869  $300,268  $305,070 
Investment securities7,000  7,440  20,987  25,553 
Interest-bearing deposits in financial institutions and federal funds sold1,182  632  2,218  2,168 
Mortgage loans held for sale3,405  4,587  10,477  11,385 
Total interest income109,845  115,528  333,950  344,176 
INTEREST EXPENSE:       
Deposits6,028  12,966  21,721  47,099 
Advances from the FHLB247  1,901  1,017  6,990 
Subordinated debt, net2,962  2,962  8,854  8,885 
Repurchase agreements and other borrowings165  940  781  1,672 
Total interest expense9,402  18,769  32,373  64,646 
Net interest income100,443  96,759  301,577  279,530 
PROVISION FOR CREDIT LOSSES(1,582) 31,598  (15,665) 65,559 
Net interest income after provision for credit losses102,025  65,161  317,242  213,971 
NONINTEREST INCOME:       
Residential mortgage banking income, net25,422  37,531  88,359  74,662 
Insurance commissions and other title fees and income, net17,398  17,468  52,055  51,973 
Real estate brokerage and property management income, net14,283  11,301  43,201  29,020 
Service charges on deposit accounts2,524  1,986  7,104  6,314 
Credit card merchant fees, net1,660  1,506  4,630  3,793 
BOLI2,301  1,605  5,361  6,295 
Other income6,045  22,278  16,367  31,268 
Net gain/(loss) on investment securities  1,701  1,252  9,632 
Total noninterest income69,633  95,376  218,329  212,957 
NONINTEREST EXPENSE:       
Salaries and employee benefits61,230  61,408  181,030  174,201 
Occupancy expense7,656  8,396  23,286  23,124 
Furniture and equipment3,513  3,247  10,647  10,451 
Amortization - intangibles2,750  2,851  8,192  8,702 
Software expense4,209  3,572  12,896  10,556 
Data processing3,603  3,113  10,255  8,622 
Professional fees2,227  2,637  6,826  8,677 
Advertising and marketing3,865  1,870  10,090  7,440 
Other expenses15,033  14,887  43,583  38,121 
Total noninterest expense104,086  101,981  306,805  289,894 
Income before income tax expense and noncontrolling interest67,572  58,556  228,766  137,034 
Provision for income tax expense14,829  7,841  45,388  21,492 
Net income$52,743  $50,715  $183,378  $115,542 
Net income attributable to noncontrolling interest(2,343) (16,251) (8,177) (20,089)
Net income attributable to TowneBank$50,400  $34,464  $175,201  $95,453 
Per common share information       
Basic earnings$0.70  $0.48  $2.42  $1.32 
Diluted earnings$0.69  $0.48  $2.41  $1.32 
Cash dividends declared$0.20  $0.18  $0.38  $0.54 
                


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except share data)
 
          
 September 30, June 30, March 31, December 31, September 30,
 2021 2021 2021 2020 2020
 (unaudited) (unaudited) (unaudited) (audited) (unaudited)
ASSETS         
Cash and due from banks$75,370  $117,797  $141,545  $41,514  $114,604 
Interest-bearing deposits at FRB - Richmond3,155,039  2,970,490  1,936,458  1,795,241  1,670,186 
Interest-bearing deposits in financial institutions33,506  31,971  30,031  27,532  24,890 
Total Cash and Cash Equivalents3,263,915  3,120,258  2,108,034  1,864,287  1,809,680 
Securities available for sale1,560,402  1,454,421  1,418,006  1,368,224  1,310,683 
Securities held to maturity14,898  15,389  15,980  16,512  17,131 
Less: allowance for credit losses(94) (97) (97) (97) (90)
Securities held to maturity, net of allowance for credit losses14,804  15,292  15,883  16,415  17,041 
Other equity securities6,621  6,395  6,355  6,492  6,497 
FHLB stock13,146  16,909  16,909  30,135  41,829 
Total Securities1,594,973  1,493,017  1,457,153  1,421,266  1,376,050 
Mortgage loans held for sale431,846  554,447  582,905  540,798  669,020 
Loans, net of unearned income and deferred costs9,297,565  9,423,578  9,734,583  9,629,068  9,770,570 
Less: allowance for credit losses(107,177) (108,130) (116,077) (120,157) (119,058)
Net Loans9,190,388  9,315,448  9,618,506  9,508,911  9,651,512 
Premises and equipment, net270,810  265,644  261,831  260,242  256,909 
Goodwill457,187  452,328  452,328  452,328  446,725 
Other intangible assets, net50,839  42,271  44,808  45,533  45,781 
BOLI249,862  249,213  247,655  246,109  244,103 
Other assets301,552  311,209  306,176  286,970  295,637 
TOTAL ASSETS$15,811,372  $15,803,835  $15,079,396  $14,626,444  $14,795,417 
LIABILITIES AND EQUITY         
Deposits:         
Noninterest-bearing demand$5,394,952  $5,243,074  $4,840,678  $4,374,566  $4,464,178 
Interest-bearing:         
Demand and money market accounts5,681,181  5,373,146  5,062,461  4,819,604  4,642,482 
Savings366,165  349,552  342,554  330,091  312,444 
Certificates of deposit1,571,752  1,998,828  1,893,951  2,048,905  2,285,859 
Total Deposits13,014,050  12,964,600  12,139,644  11,573,166  11,704,963 
Advances from the FHLB155,537  255,706  255,872  456,038  731,202 
Subordinated debt, net249,503  249,353  249,204  249,055  248,906 
FRB PPP lending facility    183,164  182,852   
Repurchase agreements and other borrowings82,413  85,042  68,509  67,786  58,061 
Total Borrowings487,453  590,101  756,749  955,731  1,038,169 
Other liabilities409,435  379,278  366,697  313,719  303,582 
TOTAL LIABILITIES13,910,938  13,933,979  13,263,090  12,842,616  13,046,714 
Preferred stock         
Authorized shares - 2,000,000         
Common stock, $1.667 par value121,163  121,144  121,108  121,132  121,115 
Capital surplus1,049,367  1,048,332  1,047,312  1,046,642  1,045,170 
Retained earnings690,960  655,095  613,826  557,889  520,888 
Common stock issued to deferred compensation         
trust, at cost(18,076) (18,076) (17,063) (16,969) (16,951)
Deferred compensation trust18,076  18,076  17,063  16,969  16,951 
Accumulated other comprehensive income (loss)21,597  29,273  17,969  41,184  44,569 
TOTAL SHAREHOLDERS’ EQUITY1,883,087  1,853,844  1,800,215  1,766,847  1,731,742 
Noncontrolling interest17,347  16,012  16,091  16,981  16,961 
TOTAL EQUITY1,900,434  1,869,856  1,816,306  1,783,828  1,748,703 
TOTAL LIABILITIES AND EQUITY$15,811,372  $15,803,835  $15,079,396  $14,626,444  $14,795,417 
                    


TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except share data)
  
  
 Three Months Ended
 September 30, June 30, March 31, December 31, September 30,
 2021 2021 2021 2020 2020
INTEREST INCOME:         
Loans, including fees$98,258  $100,614  $101,396  $104,182  $102,869 
Investment securities7,000  6,871  7,117  7,499  7,440 
Interest-bearing deposits in financial institutions and federal funds sold1,182  619  416  435  632 
Mortgage loans held for sale3,405  3,711  3,361  3,867  4,587 
Total interest income109,845  111,815  112,290  115,983  115,528 
INTEREST EXPENSE:         
Deposits6,028  7,144  8,548  10,762  12,966 
Advances from the FHLB247  274  497  1,404  1,901 
Subordinated debt2,962  2,962  2,930  2,962  2,962 
Repurchase agreements and other borrowings165  291  325  241  940 
Total interest expense9,402  10,671  12,300  15,369  18,769 
Net interest income100,443  101,144  99,990  100,614  96,759 
PROVISION FOR CREDIT LOSSES(1,582) (10,055) (4,027) 1,617  31,598 
Net interest income after provision for credit losses102,025  111,199  104,017  98,997  65,161 
NONINTEREST INCOME:         
Residential mortgage banking income, net25,422  25,524  37,412  37,504  37,531 
Insurance commissions and other title fees and income, net17,398  18,331  16,325  13,868  17,468 
Real estate brokerage and property management income, net14,283  10,984  17,934  9,229  11,301 
Service charges on deposit accounts2,524  2,391  2,190  1,707  1,986 
Credit card merchant fees, net1,660  1,667  1,302  1,377  1,506 
BOLI2,301  1,541  1,519  1,990  1,605 
Other income6,045  5,487  4,837  5,559  22,278 
Net gain/(loss) on investment securities  252  1,000    1,701 
Total noninterest income69,633  66,177  82,519  71,234  95,376 
NONINTEREST EXPENSE:         
Salaries and employee benefits61,230  61,365  58,435  61,475  61,408 
Occupancy expense7,656  7,559  8,072  8,193  8,396 
Furniture and equipment3,513  3,622  3,512  3,462  3,247 
Amortization - intangibles2,750  2,719  2,723  2,797  2,851 
Software expense4,209  4,494  4,194  4,066  3,572 
Data processing3,603  3,414  3,239  2,363  3,113 
Professional fees2,227  2,259  2,339  2,591  2,637 
Advertising and marketing3,865  3,257  2,968  2,204  1,870 
Other expenses15,033  16,705  11,844  18,781  14,887 
Total noninterest expense104,086  105,394  97,326  105,932  101,981 
Income before income tax expense and noncontrolling interest67,572  71,982  89,210  64,299  58,556 
Provision for income tax expense14,829  13,980  16,579  10,408  7,841 
Net income52,743  58,002  72,631  53,891  50,715 
Net income attributable to noncontrolling interest(2,343) (2,199) (3,636) (3,809) (16,251)
Net income attributable to TowneBank$50,400  $55,803  $68,995  $50,082  $34,464 
Per common share information         
Basic earnings$0.70  $0.77  $0.95  $0.69  $0.48 
Diluted earnings$0.69  $0.77  $0.95  $0.69  $0.48 
Basic weighted average shares outstanding72,506,877  72,468,094  72,414,953  72,357,177  72,339,413 
Diluted weighted average shares outstanding72,591,281  72,560,234  72,517,008  72,455,096  72,375,736 
Cash dividends declared$0.20  $0.20  $0.18  $0.18  $0.18 
          


TOWNEBANK
Banking Segment Financial Information (unaudited)
(dollars in thousands)
 
          
 Three Months Ended Nine Months Ended Increase/(Decrease)
 September 30, June 30, September 30, 2021 over 2020
 2021 2020 2021 2021 2020 Amount Percent
Revenue             
Net interest income$97,668   $92,869   $98,134   $293,407   $269,941  $23,466   8.69 %
Service charges on deposit accounts2,524   1,986   2,391   7,104   6,315  789   12.49 %
Credit card merchant fees1,660   1,506   1,667   4,630   3,793  837   22.07 %
Other income6,334   4,876   5,404   16,706   15,826  880   5.56 %
Subtotal10,518   8,368   9,462   28,440   25,934  2,506   9.66 %
Net gain/(loss) on investment securities   1,701   252   1,252   9,632  (8,380)  (87.00)%
Total noninterest income10,518   10,069   9,714   29,692   35,566  (5,874)  (16.52)%
Total revenue108,186   102,938   107,848   323,099   305,507  17,592   5.76 %
              
Provision for credit losses(1,728)  31,070   (9,532)  (14,661)  64,170  (78,831)  (122.85)%
              
Expenses             
Salaries and employee benefits34,791   36,535   35,776   102,427   104,970  (2,543)  (2.42)%
Occupancy expense5,098   5,829   5,012   15,657   15,557  100   0.64 %
Furniture and equipment2,602   2,424   2,816   8,086   7,800  286   3.67 %
Amortization of intangibles862   1,063   912   2,737   3,341  (604)  (18.08)%
Other expenses16,580   15,793   18,392   49,020   45,214  3,806   8.42 %
Total expenses59,933   61,644   62,908   177,927   176,882  1,045   0.59 %
Income before income tax, corporate allocation and noncontrolling interest49,981   10,224   54,472   159,833   64,455  95,378   147.98 %
Corporate allocation1,241   595   1,249   3,782   1,891  1,891   100.00 %
Income before income tax provision and noncontrolling interest51,222   10,819   55,721   163,615   66,346  97,269   146.61 %
Provision for income tax expense10,225   474   10,535   30,461   9,304  21,157   227.40 %
Net income40,997   10,345   45,186   133,154   57,042  76,112   133.43 %
Noncontrolling interest2   (2)  1   (1)  2  (3)  (150.00)%
Net income attributable to TowneBank$40,999   $10,343   $45,187   $133,153   $57,044  $76,109   133.42 %
              
Efficiency ratio (non-GAAP)54.60 % 59.84 % 57.62 % 54.43 % 58.65% (4.22)% (7.20)%
                           


TOWNEBANK
Realty Segment Financial Information (unaudited)
(dollars in thousands)
 
    
 Three Months Ended Nine Months Ended Increase/(Decrease)
 September 30, June 30, September 30, 2021 over 2020
 2021 2020 2021 2021 2020 Amount Percent
Revenue             
Residential mortgage brokerage income, net$26,637   $38,074   $26,383   $90,898   $76,549   $14,349   18.74 %
Real estate brokerage income, net3,781   3,688   3,893   10,125   8,212   1,913   23.30 %
Title insurance and settlement fees706   654   684   1,917   1,728   189   10.94 %
Property management fees, net10,502   7,613   7,091   33,076   20,808   12,268   58.96 %
Income from unconsolidated subsidiary269   451   289   964   938   26   2.77 %
Net interest and other income3,154   4,101   3,336   9,223   10,262   (1,039)  (10.12)%
Total revenue45,049   54,581   41,676   146,203   118,497   27,706   23.38 %
              
Provision for credit losses146   528   (523)  (1,004)  1,389   (2,393)  (172.28)%
              
Expenses             
Salaries and employee benefits17,375   15,744   16,018   50,240   42,095   8,145   19.35 %
Occupancy expense1,926   1,906   1,935   5,732   5,595   137   2.45 %
Furniture and equipment693   620   592   1,934   2,007   (73)  (3.64)%
Amortization of intangible assets702   658   590   1,882   1,973   (91)  (4.61)%
Other expenses11,103   9,226   10,442   30,774   24,366   6,408   26.30 %
Total expenses31,799   28,154   29,577   90,562   76,036   14,526   19.10 %
              
Income before income tax, corporate allocation and noncontrolling interest13,104   25,899   12,622   56,645   41,072   15,573   37.92 %
Corporate allocation(1,000)  (356)  (1,000)  (3,000)  (1,119)  (1,881)  168.10 %
Income before income tax provision and noncontrolling interest12,104   25,543   11,622   53,645   39,953   13,692   34.27 %
Provision for income tax expense3,546   4,780   2,255   12,017   7,614   4,403   57.83 %
Net income8,558   20,763   9,367   41,628   32,339   9,289   28.72 %
Noncontrolling interest(2,345)  (4,790)  (2,200)  (8,176)  (7,996)  (180)  2.25 %
Net income attributable to TowneBank$6,213   $15,973   $7,167   $33,452   $24,343   $9,109   37.42 %
              
Efficiency ratio (non-GAAP)69.03 % 50.38 % 69.55 % 60.66 % 62.50 % (1.84)% (2.94)%
              


TOWNEBANK
Insurance Segment Financial Information (unaudited)
(dollars in thousands)
 
          
 Three Months Ended Nine Months Ended Increase/(Decrease)
 September 30, June 30, September 30, 2021 over 2020
 2021 2020 2021 2021 2020 Amount Percent
Commission and fee income             
Property and casualty$15,338   $14,072   $14,941   $44,467   $40,784   $3,683   9.03 %
Employee benefits3,820   3,825   3,430   11,135   11,534   (399)  (3.46)%
Travel insurance   1,399         3,526   (3,526)  (100.00)%
Specialized benefit services164   165   163   494   489   5   1.02 %
Total commissions and fees19,322   19,461   18,534   56,096   56,333   (237)  (0.42)%
              
Contingency and bonus revenue1,664   1,112   3,323   6,746   5,144   1,602   31.14 %
Other income40   17,697   43   157   17,906   (17,749)  (99.12)%
Total revenue21,026   38,270   21,900   62,999   79,383   (16,384)  (20.64)%
              
Employee commission expense4,185   3,654   4,103   12,395   10,900   1,495   13.72 %
Revenue, net of commission expense16,841   34,616   17,797   50,604   68,483   (17,879)  (26.11)%
              
Salaries and employee benefits9,064   9,129   9,571   28,363   27,136   1,227   4.52 %
Occupancy expense632   661   612   1,897   1,972   (75)  (3.80)%
Furniture and equipment218   203   214   626   644   (18)  (2.80)%
Amortization of intangible assets1,186   1,130   1,217   3,573   3,388   185   5.46 %
Other expenses1,254   1,060   1,295   3,857   3,836   21   0.55 %
Total operating expenses12,354   12,183   12,909   38,316   36,976   1,340   3.62 %
Income before income tax, corporate allocation and noncontrolling interest4,487   22,433   4,888   12,288   31,507   (19,219)  (61.00)%
Corporate allocation(241)  (239)  (249)  (782)  (772)  (10)  1.30 %
Income before income tax provision and noncontrolling interest4,246   22,194   4,639   11,506   30,735   (19,229)  (62.56)%
Provision for income tax expense1,058   2,587   1,190   2,910   4,574   (1,664)  (36.38)%
Net income3,188   19,607   3,449   8,596   26,161   (17,565)  (67.14)%
Noncontrolling interest   (11,459)        (12,095)  12,095   (100.00)%
Net income attributable to TowneBank$3,188   $8,148   $3,449   $8,596   $14,066   (5,470)  (38.89)%
              
Provision for income taxes1,058   2,587   1,190   2,910   4,574   (1,664)  (36.38)%
Depreciation, amortization and interest expense1,330   1,285   1,361   3,999   3,875   124   3.20 %
EBITDA (non-GAAP)$5,576   $12,020   $6,000   $15,505   $22,515   $(7,010)  (31.13)%
              
Efficiency ratio (non-GAAP)66.31 % 31.93 % 65.70 % 68.66 % 49.05 % 19.61 % 39.98 %
*Included in other income is the gross gain on the sale of Red Sky  $17,626       $17,626      
Efficiency ratio excluding gain  31.95 %     49.06 %    
                  


TOWNEBANK
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands)
     
 Three Months Ended Nine Months Ended
 September 30, September 30, June 30, September 30, September 30,
 2021 2020 2021 2021 2020
          
Return on average assets (GAAP)1.27 % 0.89 % 1.48 % 1.55 % 0.91 %
Impact of excluding average goodwill and other intangibles and amortization0.10 % 0.08 % 0.11 % 0.11 % 0.10 %
Return on average tangible assets (non-GAAP)1.37 % 0.97 % 1.59 % 1.66 % 1.01 %
          
Return on average equity (GAAP)10.59 % 7.85 % 12.21 % 12.73 % 7.48