TowneBank Reports Third Quarter Earnings

TowneBank Reports Third Quarter Earnings

SUFFOLK, Va., Oct. 25, 2013 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank
(the "Bank") (Nasdaq:TOWN) reported earnings of $10.42 million for the quarter
ended September 30, 2013, an 11.42% increase, or $1.07 million, over the
$9.35million reported for the comparative period in 2012.Earnings for the
year-to-date period increased 13.33% to $32.09 million as compared to the
$28.31million earned in the same period last year.

Net income available to common shareholders increased 13.55% to $9.08 million
after preferred dividend payments of $1.34 million.Fully diluted earnings per
share increased 7.69% to $0.28 per share compared to $0.26 per share for the
comparative period of 2012.For the nine-month period ended September30,
2013, fully diluted earnings per share increased 17.11% to $0.89 from $0.76 in
the comparative prior year period.

The Bank's common dividend was $0.10 per share for the quarter with the common
dividend totaling $3.53million.The current dividend represents an increase
of 25.0% over the dividend paid during the same quarter of 2012.

Earnings Highlights

Net interest income was $36.15million, an $832,000, or 2.25%, decrease from
the third quarter of 2012.The reduction in net interest income was primarily
driven by lower yields on the Bank's earning assets and was partially offset
by continued reductions in funding costs.The Bank's loan portfolio ended the
period at $3.21billion representing an increase of 5.88%, or
$178.06million.The Bank's net interest margin on a fully tax equivalent
basis decreased to 3.53%, down from 3.95% in the same period in 2012, and
3.67% in the second quarter of 2013.The declines in net interest margin are
primarily due to yield declines on earning assets and are consistent with the
continued low interest rate environment.

Noninterest income, excluding gains or losses on investment securities,
increased by $1.31million, or 6.06%, to $22.99million for the third quarter
of 2013, compared to the third quarter of 2012.The majority of the increase
is attributable to insurance commissions, which increased $1.50 million or
25.07%, while residential mortgage brokerage income declined due to a
combination of lower production volumes related to rising rates and lower
margins.

Noninterest expense increased by $3.15million, or 7.82%, compared to the
comparative quarter of 2012.A significant portion of the increase from the
comparative period in 2012 is related to expansions of our mortgage operations
into Pennsylvania and acquisition of two insurance agencies in July 2013 and
one agency in December 2012.

Balance Sheet

At September30, 2013, total Bank assets reached $4.57billion, an increase of
$252.60million, or 5.85%, over September30, 2012.The Bank's loan portfolio
ended the period at $3.21billion representing an increase of 5.88%, or
$178.06million, from the prior year.The loan portfolio has grown moderately
during the current year as loans increased $74.70million, or 2.38%, since
December 31, 2012.

Total deposits increased to $3.48billion, up $176.33million, or 5.34%, from
September30, 2012.Total deposits increased $101.41million, or 3.0%, from
December 31, 2012.The Bank saw continued growth in noninterest bearing demand
deposits, which ended the quarter at $1.06billion, a 10.74% increase from
September30, 2012.Noninterest deposits represented 30.40% of total deposits
at September30, 2013.

Capital Strength

The Bank's total equity at September30, 2013 rose to $577.41million, an
increase of $23.80million, or 4.30%, from September30, 2012.Common equity
increased 19.58%, or $80.70million, as the Bank's 8%Series A Preferred Stock
mandatorily converted on September1, 2013 into 3.19million shares of
TowneBank common stock reflecting a conversion price of $18.02 per share of
common stock.Total risk-based capital remained strong as total risk-based
capital, Tier 1 capital, Tier 1 leverage ratios, and Tier 1 common capital
ratios were 14.11%, 13.02%, 10.28%, 10.62%, respectively.All ratios exceed
the current regulatory standards for well capitalized status.

Credit Quality

The Bank's asset quality continued to improve as nonperforming assets totaled
$55.60million, or 1.22%, of Bank assets at September30, 2013, as compared to
$82.43million, or 1.91%, at September30, 2012, and $59.34million, or 1.29%,
at June 30, 2013.At September30, 2013, nonperforming loans were
$13.68million, or 0.43% of total period-end loans, from $51.52million, or
1.70%, at September30, 2012 30, 2012, and $11.75million, or 0.37%, at June
30, 2013.

The provision for loan losses decreased $4.65million compared to the third
quarter of 2012.The reduction in provision expense in the current year is a
result of consistent improvements in credit quality, combined with a reduction
in historical loss ratios and healthier economic conditions.Net charge-offs
were $804,000 in the third quarter of 2013 compared to $6.01million in the
comparative period of 2012 and $1.41million in the linked quarter.

                                                                
Asset Quality Indicators                                         
                                                                
(in thousands)              9/30/2013 6/30/2013 3/31/2013 12/31/2012 9/30/2012
                                                                
Nonperforming loans         $13,683 11,746    $17,389 $40,691  $51,519
                                                                
Foreclosed property         41,914    47,596    46,622    30,297     30,910
                                                                
Total nonperforming assets  $55,597 $59,342 $64,011 $70,988  $82,429
                                                                
Quarterly net loans charged $804    $1,410  $3,349  $1,868   $6,010
off
                                                                
Year-to-date net loans      $5,563  $4,759  $3,349  $15,468  $13,600
charged off

"We are pleased to report another quarter of solid earnings performance
despite the current sluggish level of economic activity throughout the region,
state, and country.We continue to see improved credit quality metrics, which
has driven our growth in earnings and allowed us to increase our common stock
dividend by 25% year-over-year," said G. Robert Aston, Jr., Chairman and Chief
Executive Officer.

As one of the top community banks in Virginia and North Carolina, TowneBank
operates 27 banking offices serving Chesapeake, Hampton, Newport News,
Norfolk, Portsmouth, Suffolk, Virginia Beach, Williamsburg, James City County
and York County in Virginia along with Moyock, Grandy, Camden, Southern
Shores, Corolla and Kill Devil Hills 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, Prudential Towne
Realty, Towne 1031 Exchange, LLC, and Corolla Classic Vacations.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 $4.57billion as of September30, 2013,
TowneBank is one of the largest banks headquartered in Virginia.

Forward-Looking Statements:

This release contains forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995.These statements may address issues
that involve significant risks, uncertainties, estimates and assumptions made
by management.Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include competitive
pressures in the banking industry that may increase significantly; changes in
the interest rate environment may reduce margins and/or the volumes and values
of loans made or held as well as the value of other financial assets held;
general economic conditions, either nationally or regionally, 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, may adversely affect our business; costs or difficulties related to
the integration of the business and 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; 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 regards to our market area and its heavy concentration of U. S.
military bases and related personnel.We assume no obligation to update
information contained in this release.

Selected Financial Highlights (unaudited)
TOWNEBANK
September 30, 2013
(dollars in thousands)
                                                               
                                                     Increase/  % Increase/
Three Months Ended September  2013         2012         (Decrease) (Decrease)
30,
                                                               
Results of Operations:                                          
Net interest income           $36,152    $36,984    $(832)     (2.25)%
Noninterest income (1)        22,987       21,674       1,313      6.06%
Gain (loss) on investment     150          508          (358)      (70.47)%
securities
Noninterest expenses          43,379       40,231       3,148      7.82%
Provision for loan losses     328          4,977        (4,649)    (93.41)%
Income before income tax and  15,583       13,958       1,625      11.64%
noncontrolling interest
Provision for income tax      4,407        4,063        344        8.47%
expense
Net income                    11,176       9,895        1,281      12.95%
Net income attributable to    (758)        (545)        (213)      39.08%
noncontrolling interest
Net income attributable to    10,418       9,350        1,068      11.42%
TowneBank
Preferred stock dividends     1,340        1,355        (15)       (1.11)%
Net income available to       9,078        7,995        1,083      13.55%
common shareholders
Net income per common share - 0.28         0.26         0.02       7.69%
basic
Net income per common share - 0.28         0.26         0.02       7.69%
diluted
Period End Data:                                                
Total assets                  $4,570,905 $4,318,309 $252,596 5.85%
Total assets - tangible       4,450,221    4,205,112    245,109    5.83%
Earning assets (2)            4,204,942    3,947,414    257,528    6.52%
Loans (net of unearned        3,208,204    3,030,141    178,063    5.88%
income)
Allowance for loan losses     38,560       39,336       (776)      (1.97)%
Goodwill and other            120,684      113,197      7,487      6.61%
intangibles
Nonperforming assets          55,597       82,429       (26,832)   (32.55)%
Noninterest bearing deposits  1,058,338    955,656      102,682    10.74%
Interest bearing deposits     2,423,121    2,349,469    73,652     3.13%
Total deposits                3,481,459    3,305,125    176,334    5.34%
Total equity                  577,409      553,606      23,803     4.30%
Total equity - tangible       456,725      440,409      16,316     3.70%
Common equity                 492,894      412,197      80,697     19.58%
Common equity - tangible      372,210      299,000      73,210     24.48%
Book value per common share   14.17        13.14        1.03       7.84%
Book value per common share – 10.70        9.53         1.17       12.28%
tangible
Daily Average Balances:                                         
Total assets                  $4,580,200 $4,239,838 $340,362 8.03%
Total assets - tangible       4,459,213    4,126,309    332,904    8.07%
Earning assets (2)            4,185,420    3,850,305    335,115    8.70%
Loans (net of unearned
income), excluding nonaccrual 3,168,042    2,958,789    209,253    7.07%
loans
Allowance for loan losses     39,113       40,463       (1,350)    (3.34)%
Goodwill and other            120,987      113,529      7,458      6.57%
intangibles
Noninterest bearing deposits  1,053,588    941,286      112,302    11.93%
Interest bearing deposits     2,439,789    2,391,559    48,230     2.02%
Total deposits                3,493,377    3,332,845    160,532    4.82%
Total equity                  576,257      552,541      23,716     4.29%
Total equity - tangible       455,270      439,012      16,258     3.70%
Common equity                 452,180      411,374      40,806     9.92%
Common equity - tangible      331,193      297,845      33,348     11.20%
Key Ratios:                                                     
Return on average assets      0.90%        0.88%        0.02%      2.27%
Return on average assets -    0.93%        0.90%        0.03%      3.33%
tangible
Return on average equity      7.17%        6.73%        0.44%      6.54%
Return on average equity -    9.08%        8.47%        0.61%      7.20%
tangible
Return on average common      7.97%        7.73%        0.24%      3.10%
equity
Return on average common      10.88%       10.68%       0.20%      1.87%
equity - tangible
Net interest margin-fully tax 3.53%        3.95%        (0.42)%    (10.63)%
equivalent (2)(3)
Net interest margin (2)       3.47%        3.87%        (0.40)%    (10.34)%
Average earning assets/total  91.38%       90.81%       0.57%      0.63%
average assets
Average loans/average         90.69%       88.78%       1.91%      2.15%
deposits
Average noninterest
deposits/total average        30.16%       28.24%       1.92%      6.80%
deposits
Allowance for loan            1.20%        1.30%        (0.10)%    (7.69)%
losses/period end loans
Nonperforming assets to       1.22%        1.91%        (0.69)%    (36.13)%
period end assets
Period end equity/period end  12.63%       12.82%       (0.19)%    (1.48)%
total assets
Efficiency ratio (1)          73.35%       68.59%       4.76%      6.94%
                                                               
(1) Excludes gain on investment securities
(2) Includes bank-owned life insurance
(3) Presented on a tax-equivalent basis


Selected Financial Highlights (unaudited)
TOWNEBANK
September 30, 2013
(dollars in thousands)
                                                               
                                                     Increase/  % Increase/
Nine Months Ended September   2013         2012         (Decrease) (Decrease)
30,
                                                               
Results of Operations:                                          
Net interest income           $107,439   $107,673   $(234)     (0.22)%
Noninterest income (1)        71,205       62,189       9,016      14.50%
Gain on investment securities 546          3,038        (2,492)    (82.03)%
Noninterest expenses          127,792      118,403      9,389      7.93%
Provision for loan losses     3,696        13,196       (9,500)    (71.99)%
Income before income tax and  47,702       41,301       6,401      15.50%
noncontrolling interest
Provision for income tax      13,480       11,518       1,962      17.03%
expense
Net income                    34,222       29,783       4,439      14.90%
Net income attributable to    (2,133)      (1,468)      (665)      45.31%
noncontrolling interest
Net income attributable to    32,089       28,315       3,774      13.33%
TowneBank
Preferred stock dividends     4,036        4,872        (836)      (17.16)%
Net income available to       28,053       23,443       4,610      19.66%
common shareholders
Net income per common share - 0.89         0.76         0.13       17.11%
basic
Net income per common share - 0.89         0.76         0.13       17.11%
diluted
Period End Data:                                                
Total assets                  $4,570,905 $4,318,309 $252,596 5.85%
Total assets - tangible       4,450,221    4,205,112    245,109    5.83%
Earning assets (2)            4,204,942    3,947,414    257,528    6.52%
Loans (net of unearned        3,208,204    3,030,141    178,063    5.88%
income)
Allowance for loan losses     38,560       39,336       (776)      (1.97)%
Goodwill and other            120,684      113,197      7,487      6.61%
intangibles
Nonperforming assets          55,597       82,429       (26,832)   (32.55)%
Noninterest bearing deposits  1,058,338    955,656      102,682    10.74%
Interest bearing deposits     2,423,121    2,349,469    73,652     3.13%
Total deposits                3,481,459    3,305,125    176,334    5.34%
Total equity                  577,409      553,606      23,803     4.30%
Total equity - tangible       456,725      440,409      16,316     3.70%
Common equity                 492,894      412,197      80,697     19.58%
Common equity - tangible      372,210      299,000      73,210     24.48%
Book value per common share   14.17        13.14        1.03       7.84%
Book value per common share - 10.70        9.53         1.17       12.28%
tangible
Daily Average Balances:                                         
Total assets                  $4,455,437 $4,147,376 $308,061 7.43%
Total assets - tangible       4,336,061    4,033,275    302,786    7.51%
Earning assets (2)            4,071,807    3,756,573    315,234    8.39%
Loans (net of unearned
income), excluding nonaccrual 3,140,516    2,873,429    267,087    9.30%
loans
Allowance for loan losses     40,009       40,251       (242)      (0.60)%
Goodwill and other            119,376      114,101      5,275      4.62%
intangibles
Noninterest bearing deposits  1,009,870    883,553      126,317    14.30%
Interest bearing deposits     2,385,832    2,367,208    18,624     0.79%
Total deposits                3,395,702    3,250,761    144,941    4.46%
Total equity                  571,399      541,302      30,097     5.56%
Total equity - tangible       452,023      427,201      24,822     5.81%
Common equity                 436,008      400,373      35,635     8.90%
Common equity - tangible      316,631      286,272      30,359     10.60%
Key Ratios:                                                     
Return on average assets      0.96%        0.91%        0.05%      5.49%
Return on average assets -    0.99%        0.94%        0.05%      5.32%
tangible
Return on average equity      7.51%        6.99%        0.52%      7.44%
Return on average equity -    9.49%        8.85%        0.64%      7.23%
tangible
Return on average common      8.60%        7.82%        0.78%      9.97%
equity
Return on average common      11.85%       10.94%       0.91%      8.32%
equity - tangible
Net interest margin-fully tax 3.64%        3.96%        (0.32)%    (8.08)%
equivalent (2)(3)
Net interest margin (2)       3.57%        3.88%        (0.31)%    (7.99)%
Average earning assets/total  91.39%       90.58%       0.81%      0.89%
average assets
Average loans/average         92.49%       88.39%       4.10%      4.64%
deposits
Average noninterest
deposits/total average        29.74%       27.18%       2.56%      9.42%
deposits
Allowance for loan            1.20%        1.30%        (0.10)%    (7.69)%
losses/period end loans
Nonperforming assets to       1.22%        1.91%        (0.69)%    (36.13)%
period end assets
Period end equity/period end  12.63%       12.82%       (0.19)%    (1.48)%
total assets
Efficiency ratio (1)          71.53%       69.71%       1.82%      2.61%
                                                               
(1) Excludes gain on investment securities
(2) Includes bank-owned life insurance
(3) Presented on a tax-equivalent basis


Selected Financial Highlights (unaudited)
TOWNEBANK
September 30, 2013
(dollars in thousands)
                                                               
                            September 30, June 30,     Increase/  % Increase/
Three Months Ended           2013          2013         (Decrease) (Decrease)
                                                               
Results of Operations:                                          
Net interest income          $36,152     $36,077    $75      0.21%
Noninterest income (1)       22,987        24,463       (1,476)    (6.03)%
Gain (loss) on investment    150           (208)        358        N/M
securities
Noninterest expenses         43,379        43,817       (438)      (1.00)%
Provision for loan losses    328           (202)        530        N/M
Income before income tax and 15,583        16,717       (1,134)    (6.78)%
noncontrolling interest
Provision for income tax     4,407         4,707        (300)      (6.37)%
expense
Net income                   11,176        12,010       (834)      (6.94)%
Net income attributable to   (758)         (811)        53         (6.54)%
noncontrolling interest
Net income attributable to   10,418        11,199       (781)      (6.97)%
TowneBank
Preferred stock dividends    1,340         1,344        (4)        (0.30)%
Net income available to      9,078         9,855        (777)      (7.88)%
common shareholders
Net income per common share  0.28          0.32         (0.04)     (12.50)%
- basic
Net income per common share  0.28          0.31         (0.03)     (9.68)%
- diluted
Period End Data:                                                
Total assets                 $4,570,905  $4,595,087 $(24,182)  (0.53)%
Total assets - tangible      4,450,221     4,477,114    (26,893)   (0.60)%
Earning assets (3)           4,204,942     4,230,005    (25,063)   (0.59)%
Loans (net of unearned       3,208,204     3,180,110    28,094     0.88%
income)
Allowance for loan losses    38,560        39,037       (477)      (1.22)%
Goodwill and other           120,684       117,973      2,711      2.30%
intangibles
Nonperforming assets         55,597        59,342       (3,745)    (6.31)%
Noninterest bearing deposits 1,058,338     1,076,898    (18,560)   (1.72)%
Interest bearing deposits    2,423,121     2,433,169    (10,048)   (0.41)%
Total deposits               3,481,459     3,510,067    (28,608)   (0.82)%
Total equity                 577,409       571,388      6,021      1.05%
Total equity - tangible      456,725       453,415      3,310      0.73%
Common equity                492,894       429,636      63,258     14.72%
Common equity - tangible     372,210       311,663      60,547     19.43%
Book value per common share  14.17         13.61        0.56       4.11%
Book value per common share  10.70         9.87         0.83       8.41%
- tangible
Daily Average Balances:                                         
Total assets                 $4,580,200  $4,439,414 $140,786 3.17%
Total assets - tangible      4,459,213     4,321,112    138,101    3.20%
Earning assets (2)           4,185,420     4,064,556    120,864    2.97%
Loans (net of unearned
income), excluding           3,168,042     3,150,527    17,515     0.56%
nonaccrual loans
Allowance for loan losses    39,113        40,127       (1,014)    (2.53)%
Goodwill and other           120,987       118,302      2,685      2.27%
intangibles
Noninterest bearing deposits 1,053,588     1,023,045    30,543     2.99%
Interest bearing deposits    2,439,789     2,354,032    85,757     3.64%
Total deposits               3,493,377     3,377,077    116,300    3.44%
Total equity                 576,257       571,955      4,302      0.75%
Total equity - tangible      455,270       453,653      1,617      0.36%
Common equity                452,180       430,652      21,528     5.00%
Common equity - tangible     331,193       312,350      18,843     6.03%
Key Ratios:                                                     
Return on average assets     0.90%         1.01%        (0.11)%    (10.89)%
Return on average assets -   0.93%         1.04%        (0.11)%    (10.58)%
tangible
Return on average equity     7.17%         7.85%        (0.68)%    (8.66)%
Return on average equity -   9.08%         9.90%        (0.82)%    (8.28)%
tangible
Return on average common     7.97%         9.18%        (1.21)%    (13.18)%
equity
Return on average common     10.88%        12.66%       (1.78)%    (14.06)%
equity - tangible
Net interest margin-fully    3.53%         3.67%        (0.14)%    (3.81)%
tax equivalent (2)(3)
Net interest margin (2)      3.47%         3.60%        (0.13)%    (3.61)%
Average earning assets/total 91.38%        91.56%       (0.18)%    (0.20)%
average assets
Average loans/average        90.69%        93.29%       (2.60)%    (2.79)%
deposits
Average noninterest
deposits/total average       30.16%        30.29%       (0.13)%    (0.43)%
deposits
Allowance for loan           1.20%         1.23%        (0.03)%    (2.44)%
losses/period end loans
Nonperforming assets to      1.22%         1.29%        (0.07)%    (5.43)%
period end assets
Period end equity/period end 12.63%        12.43%       0.20%      1.61%
total assets
Efficiency ratio (1)         73.35%        72.38%       0.97%      1.34%
                                                               
(1) Excludes gain on investment securities
(2) Includes bank-owned life insurance
(3) Presented on a tax-equivalent basis

CONTACT: G. Robert Aston, Jr., Chairman and CEO, (757) 638-6780
         Clyde E. McFarland, Jr., Senior Executive Vice President
         and CFO, 757-638-6801
 
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