TOWN TowneBank

TowneBank (the “Bank” or “Company”) (NASDAQ: TOWN) today reported record financial results of $24.71 million, or $0.36  per diluted share, for the quarter ended March 31, 2018, compared to $21.97 million, or  $0.35 per diluted share, for the quarter ended March 31, 2017.

Excluding acquisition-related expenses, earnings for the quarter ended March 31, 2018 were $31.79 million (non-GAAP), or $0.46 (non-GAAP) per diluted share, compared to the $22.04 million (non-GAAP), or $0.35 (non-GAAP) per diluted share, earned in the same period of 2017.

“Our results for the first quarter were a reflection of our strong operating performance and top-line growth as we successfully completed our merger with Paragon Commercial Corporation and continued to build on the momentum from last year,” said G. Robert Aston, Jr., Executive Chairman.  “We continued to experience strong credit results, a widening of net interest margin, and strong capital and liquidity levels while producing revenue growth of 20.07% and a return on average assets of 1.02%.”

Highlights for the First Quarter of 2018 Compared to the First Quarter of 2017:

• Total revenues were $126.28 million, an increase of $21.11 million, or 20.07%.
• Successful closing of the merger with Paragon Commercial Corporation ("Paragon") resulted in the addition of loans of $1.43 billion and deposits of $1.25 billion.
• Loans held for investment increased $1.56 billion, or 26.33%, from March 31, 2017, and $1.52 billion, or 25.61%, from December 31, 2017.  Excluding loans acquired in the Paragon merger of $1.43 billion, loans increased $90.69 million, or 6.18% annualized, from December 31, 2017.
• Total deposits were $7.83 billion, an increase of $1.63 billion, or 26.40%.
• Noninterest bearing deposits increased by 21.96%, to $2.50 billion, representing 31.99% of total deposits.
• Annualized return of average tangible common shareholders' equity (non-GAAP) of 11.77%.
• Taxable equivalent net interest margin of 3.54%, up 9 basis points.
• Effective tax rate of 19.74% benefiting from the Tax Cuts and Jobs Act of 2017.

“During the first quarter, we successfully completed the integration and systems conversion process related to the Paragon merger, and we are extremely excited about the transformational opportunity provided by the merger as we enter the robust Raleigh and Charlotte, North Carolina markets,” said J. Morgan Davis, President and Chief Executive Officer.

Quarterly Net Interest Income Compared to the First Quarter of 2017:

• Net interest income was $76.34 million compared to $60.28 million at March 31, 2017.
• Taxable equivalent net interest margin was 3.54%, including accretion of 15 basis points, compared to 3.45%, including accretion of 9 basis points, for 2017.
• Total cost of deposits increased to 0.53% from 0.40% at March 31, 2017.
• Average interest-earning assets totaled $8.81 billion at March 31, 2018 compared to $7.18 billion at March 31, 2017, an increase of 22.74%.
• Average loans held for investment represented 78.95% of average earning assets at March 31, 2018 compared to 81.68% in the first quarter of 2017.
• Average interest-bearing liabilities totaled $6.03 billion, an increase of $1.20 billion from prior year.

The following table sets forth an estimate of the expected effects of the estimated aggregate acquisition accounting adjustments on pre-tax net interest income for the periods shown (in thousands):

		Discount Accretion (Premium Amortization)
		For the three months ended
		June 30,				September 30,				December 31,				March 31,
		2018				2018				2018				2019
Assets:
Investment Securities		$	(75	)		$	(72	)		$	(71	)		$	(72	)
Loans		2,506				2,229				1,703				1,611
Liabilities:
Deposits		128				104				91				60
Total estimated effect on net interest income		$	2,303			$	2,053			$	1,541			$	1,479
Note:  This information is intended for informational purposes only and is not necessarily indicative of future results. Actual
results may differ due to factors such as changes in estimated prepayment speeds or projected credit loss rates.

Quarterly Provision for Loan Losses:

• Recorded a provision for loan losses of $1.95 million compared to $0.87 million in the prior quarter and $2.54 million a year ago.
• Net charge-offs were $0.35 million compared to $1.35 million one year prior.  The ratio of net charge-offs to average loans on an annualized basis was 0.02% compared to 0.01% in the prior quarter and 0.09% for the first quarter of 2017.
• The allowance for loan losses represented 0.63% of total loans compared to 0.76% at December 31, 2017 and 0.73% at March 31, 2017.  Loan loss reserve as a percentage of total loans, excluding purchased loans, remained steady at 0.86%, unchanged from December 31, 2017, and March 31, 2017.  The allowance for loan losses was 10.40 times nonperforming loans compared to 9.39 times at December 31, 2017 and 3.74 times at March 31, 2017.

Quarterly Noninterest Income Compared to the First Quarter of 2017:

• Total noninterest income was $49.93 million compared to $44.89 million, an increase of $5.05 million.  This reflects increases of $5.44 million in real estate brokerage and property management income and $0.41 million in service charges on deposit accounts offset by a decrease of $1.43 million in insurance commissions and other title fees primarily related to the timing of revenue due to the adoption of the new accounting guidance on revenue recognition.
• Property management fee revenue increased $5.20 million, or 147.13%, primarily related to the purchase of a resort property management company in April 2017 and a change in the timing of revenue recognition due to the adoption of new accounting guidance on revenue recognition.  The change in accounting guidance resulted in an increase of property management fee income for the first quarter of approximately $3.04 million.
• Insurance segment total revenue decreased 6.87% to $15.69 million due to a change in the timing of revenue recognition related to the adoption of new accounting guidance on revenue recognition.  The change in accounting guidance resulted in a reduction of insurance commission revenue for the first quarter of approximately $2.13 million.
• Residential mortgage banking income was $17.60 million compared to $17.63 million in first quarter 2017.  Loan volume in the current quarter was $703.20 million, with purchases comprising $574.90 million and refinancing activity accounting for $128.30 million.  Loan volume in first quarter 2017 was $706.06 million, with purchase activity of $576.86 million and refinancing activity of $129.20 million.

Quarterly Noninterest Expense Compared to the First Quarter of 2017:

• Total noninterest expense was $92.30 million compared to $70.25 million, an increase of $22.06 million, or 31.40%.  This reflects increases of $10.87 million in salary and benefits expense, $8.73 million in acquisition-related expenses, $0.73 million in intangible amortization expense, $0.49 million in outside processing fees, and $0.36 million in furniture and equipment expense.
• Noninterest expense included operational expenses of entities acquired subsequent to first quarter 2017, including Paragon bank division expenses of $5.70 million, acquired resort property management company expenses of $1.83 million, and acquired insurance agency expenses of $0.46 million.

Quarterly Income Taxes Compared to the First Quarter of 2017:

• Income tax expense was $6.08 million compared to $9.39 million, one year prior.  This represents an effective tax rate of 19.74% compared to 29.94% in the first quarter of 2017.
• The decrease in the effective tax rate from the prior year is due to the Tax Cuts and Jobs Act of 2017, signed into law on December 22, 2017.  The reduction from 35% to 21% of the U.S. federal corporate tax rate was among the key changes to U.S. tax law, effective January 1, 2018.

Investment Securities:

• Total investment securities were $1.34 billion compared to $958.55 million at December 31, 2017 and $822.19 million at March 31, 2017.  The carrying value of the available-for-sale portfolio included $17.95 million of net unrealized losses compared to $6.43 million at December 31, 2017, and $4.62 million in net unrealized losses at March 31, 2017.  The carrying value of the held-to-maturity portfolio does not reflect $0.88 million in net unrealized gains compare to $1.58 million in net unrealized gains at December 31, 2017 and $1.79 million in net unrealized gains at March 31, 2017.

Loans:

• Total loans held for investment were $7.47 billion at March 31, 2018 compared to $5.95 billion at December 31, 2017 and $5.91 billion at March 31, 2017.

													% Change
	Q1				Q1				Q4				Q1 18 vs.			Q1 18 vs.
(dollars in thousands)	2018				2017				2017				Q1 17			Q4 17
Construction and land development	$	996,159			$	898,540			$	930,426			10.86	%		7.06	%
Commercial real estate - investment related properties	1,853,737				1,362,184				1,344,774				36.09	%		37.85	%
Commercial real estate - owner occupied	1,164,923				907,049				938,767				28.43	%		24.09	%
Multifamily real estate	297,085				236,782				198,720				25.47	%		49.50	%
1-4 family residential real estate	1,566,449				1,215,278				1,217,349				28.90	%		28.68	%
Commercial and industrial business loans	1,328,357				1,086,273				1,087,157				22.29	%		22.19	%
Consumer loans and other	263,441				206,974				229,772				27.28	%		14.65	%
Total	$	7,470,151			$	5,913,080			$	5,946,965			26.33	%		25.61	%

Asset Quality:

• Nonperforming assets declined to $28.48 million, or 0.27% of total assets compared to $35.81 million, or 0.44%, at March 31, 2017.
• Nonperforming loans were 0.06% of period end loans.
• Foreclosed property increased to $21.73 million.

Deposits and borrowings:

• Total deposits were $7.83 billion compared to $6.45 billion at December 31, 2017 and $6.19 billion at March 31, 2017.  The increase in deposits includes $1.25 billion acquired in the Paragon merger.  Loans to deposits were 95.46% compared to 92.23% at December 31, 2017 and 95.51% at March 31, 2017.
• Non-interest bearing deposit were 31.99% of total deposits at March 31, 2018 compared to 33.46% at December 31, 2017 and 33.16% at March 31, 2017.
• Total borrowings were $1.18 billion compared to $798.97 million and $722.68 million at December 31, 2017 and March 31, 2017, respectively.

													% Change
	Q1				Q1				Q4				Q1 18 vs.			Q1 18 vs.
(dollars in thousands)	2018				2017				2017				Q1 17			Q4 17
Noninterest-bearing demand	$	2,503,246			$	2,052,598			$	2,157,338			21.96	%		16.03	%
Interest-bearing:
Demand and money market accounts	3,001,256				2,270,025				2,225,211				32.21	%		34.88	%
Savings	309,077				320,104				315,889				(3.44	)%		(2.16	)%
Certificates of deposits	2,011,843				1,548,045				1,749,782				29.96	%		14.98	%
Total	$	7,825,422			$	6,190,772			$	6,448,220			26.40	%		21.36	%

Capital:

• Common equity tier 1 capital ratio of 11.75%.
• Tier 1 leverage capital ratio of 10.06%.
• Tier 1 risk-based capital ratio of 11.78%.
• Total risk-based capital ratio of 15.36%.
• Book value was $19.90 compared to $18.06 at December 31, 2017 and $17.42 at March 31, 2017.
• Tangible book value was $13.34 compared to $13.13 at December 31, 2017 and $12.59 at March 30, 2017.

		Q1			Q1			Q4
		2018			2017			2017
Common Equity Tier 1		11.75	%		11.94	%		12.19	%
Tier 1		11.78	%		11.98	%		12.23	%
Total		15.36	%		12.62	%		16.48	%
Tier 1 Leverage Ratio		10.06	%		10.49	%		10.17	%

About TowneBank:As one of the top community banks in Virginia and North Carolina, TowneBank operates 40 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 Raleigh, Cary, Charlotte, 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 Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne 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 $10.62 billion as of March 31, 2018, 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 its 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.  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:Certain statements contained in this release constitute forward-looking statements within the meaning of U.S. federal securities laws.  These forward-looking statements speak only as of the date of this release, are based on current expectations, and involve a number of assumptions. These include statements regarding TowneBank’s future economic performance, financial condition, prospects, growth, strategies and expectations, and objectives of management, and are generally identified by the use of words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” or “project” or similar expressions.  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. You should not place undue reliance on forward-looking statements, which are subject to assumptions that are subject to change. TowneBank’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ from those indicated or implied in the forward-looking statements and such differences may be material.  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 System; the quality and composition of TowneBank’s loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBank’s market area; implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; 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 (the “FDIC”).  TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

Media contact:G. Robert Aston, Jr., Executive Chairman, 757-638-6780J. Morgan Davis, President and 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)
										Increase/				% Increase/
Three Months Ended March 31,		2018				2017				(Decrease)				(Decrease)
Results of Operations:
	Net interest income	$	76,344			$	60,281			$	16,063			26.65	%
	Noninterest income	49,932				44,886				5,046				11.24	%
	Total Revenue	126,276				105,167				21,109				20.07	%
	Acquisition-related expenses	8,726				(5		)		8,731				N/M
	Noninterest expenses, excluding acquisition-related expenses	83,577				70,253				13,324				18.97	%
	Provision for loan losses	1,953				2,541				(588		)		(23.14	)%
	Income before income tax and noncontrolling interest	32,020				32,378				(358		)		(1.11	)%
	Provision for income tax expense	6,077				9,386				(3,309		)		(35.25	)%
	Net income	25,943				22,992				2,951				12.83	%
	Net income attributable to noncontrolling interest	(1,238		)		(1,024		)		(214		)		20.90	%
	Net income attributable to TowneBank	24,705				21,968				2,737				12.46	%
	Net income available to common shareholders	24,705				21,968				2,737				12.46	%
	Net income per common share - basic	0.36				0.35				0.01				2.86	%
	Net income per common share - diluted	0.36				0.35				0.01				2.86	%
Period End Data:
	Total assets	$	10,620,415			$	8,174,786			$	2,445,629			29.92	%
	Total assets - tangible	10,146,133				7,872,823				2,273,310				28.88	%
	Earning assets	9,569,201				7,362,550				2,206,651				29.97	%
	Loans (net of unearned income)	7,470,151				5,913,080				1,557,071				26.33	%
	Allowance for loan losses	46,735				43,195				3,540				8.20	%
	Goodwill and other intangibles	474,282				301,962				172,320				57.07	%
	Nonperforming assets	28,479				35,809				(7,330		)		(20.47	)%
	Noninterest bearing deposits	2,503,246				2,052,598				450,648				21.96	%
	Interest bearing deposits	5,322,176				4,138,174				1,184,002				28.61	%
	Total deposits	7,825,422				6,190,772				1,634,650				26.40	%
	Total equity	1,449,350				1,101,245				348,105				31.61	%
	Total equity - tangible	975,068				799,283				175,785				21.99	%
	Common equity	1,438,480				1,089,760				348,720				32.00	%
	Common equity - tangible	964,198				787,798				176,400				22.39	%
	Book value per common share	19.90				17.42				2.48				14.24	%
	Book value per common share - tangible	13.34				12.59				0.75				5.96	%
Daily Average Balances:
	Total assets	$	9,848,364			$	8,000,366			$	1,847,998			23.10	%
	Total assets - tangible	9,425,542				7,698,310				1,727,232				22.44	%
	Earning assets	8,809,558				7,177,697				1,631,861				22.74	%
	Loans (net of unearned income), excluding nonaccrual loans	6,954,777				5,862,799				1,091,978				18.63	%
	Allowance for loan losses	46,199				42,610				3,589				8.42	%
	Goodwill and other intangibles	422,822				302,056				120,766				39.98	%
	Noninterest bearing deposits	2,303,125				1,957,887				345,238				17.63	%
	Interest bearing deposits	4,949,775				4,102,109				847,666				20.66	%
	Total deposits	7,252,900				6,059,996				1,192,904				19.68	%
	Total equity	1,354,984				1,093,490				261,494				23.91	%
	Total equity - tangible	932,161				791,433				140,728				17.78	%
	Common equity	1,344,541				1,082,324				262,217				24.23	%
	Common equity - tangible	921,719				780,268				141,451				18.13	%
Key Ratios:
	Return on average assets	1.02		%		1.11		%		(0.09		)%		(8.11	)%
	Return on average assets - tangible	1.15		%		1.22		%		(0.07		)%		(5.74	)%
	Return on average equity	7.39		%		8.15		%		(0.76		)%		(9.33	)%
	Return on average equity - tangible	11.64		%		11.88		%		(0.24		)%		(2.02	)%
	Return on average common equity	7.45		%		8.23		%		(0.78		)%		(9.48	)%
	Return on average common equity - tangible	11.77		%		12.05		%		(0.28		)%		(2.32	)%
	Net interest margin-fully tax equivalent (1)	3.54		%		3.45		%		0.09		%		2.61	%
	Net interest margin	3.51		%		3.41		%		0.10		%		2.93	%
	Average earning assets/total average assets	89.45		%		89.72		%		(0.27		)%		(0.30	)%
	Average loans/average deposits	95.89		%		96.75		%		(0.86		)%		(0.89	)%
	Average noninterest deposits/total average deposits	31.75		%		32.31		%		(0.56		)%		(1.73	)%
	Allowance for loan losses/period end loans	0.63		%		0.73		%		(0.10		)%		(13.70	)%
	Nonperforming assets to period end assets	0.27		%		0.44		%		(0.17		)%		(38.64	)%
	Period end equity/period end total assets	13.65		%		13.47		%		0.18		%		1.34	%
	Efficiency ratio	73.10		%		66.80		%		6.30		%		9.43	%
(1) Presented on a tax-equivalent basis

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
		March 31,				December 31,				Increase/				% Increase/
Three Months Ended		2018				2017				(Decrease)				(Decrease)
Results of Operations:
	Net interest income	$	76,344			$	65,664			$	10,680			16.26	%
	Noninterest income	49,932				43,477				6,455				14.85	%
	Total Revenue	126,276				109,141				17,135				15.70	%
	Acquisition-related expenses	8,726				526				8,200				N/M
	Noninterest expenses, excluding acquisition-related expenses	83,577				73,134				10,443				14.28	%
	Provision for loan losses	1,953				869				1,084				124.74	%
	Income before income tax and noncontrolling interest	32,020				34,612				(2,592		)		(7.49	)%
	Provision for income tax expense	6,077				21,325				(15,248		)		(71.50	)%
	Net income	25,943				13,287				12,656				95.25	%
	Net income attributable to noncontrolling interest	(1,238		)		(954		)		(284		)		29.77	%
	Net income attributable to TowneBank	24,705				12,333				12,372				100.32	%
	Net income available to common shareholders	24,705				12,333				12,372				100.32	%
	Net income per common share - basic	0.36				0.20				0.16				80.00	%
	Net income per common share - diluted	0.36				0.20				0.16				80.00	%
Period End Data:
	Total assets	$	10,620,415			$	8,522,176			$	2,098,239			24.62	%
	Total assets - tangible	10,146,133				8,213,358				1,932,775				23.53	%
	Earning assets	9,569,201				7,706,747				1,862,454				24.17	%
	Loans (net of unearned income)	7,470,151				5,946,965				1,523,186				25.61	%
	Allowance for loan losses	46,735				45,131				1,604				3.55	%
	Goodwill and other intangibles	474,282				308,819				165,463				53.58	%
	Nonperforming assets	28,479				28,094				385				1.37	%
	Noninterest bearing deposits	2,503,246				2,157,338				345,908				16.03	%
	Interest bearing deposits	5,322,176				4,290,882				1,031,294				24.03	%
	Total deposits	7,825,422				6,448,220				1,377,202				21.36	%
	Total equity	1,449,350				1,142,505				306,845				26.86	%
	Total equity - tangible	975,068				833,686				141,382				16.96	%
	Common equity	1,438,480				1,131,240				307,240				27.16	%
	Common equity - tangible	964,198				822,421				141,777				17.24	%
	Book value per common share	19.90				18.06				1.84				10.19	%
	Book value per common share - tangible	13.34				13.13				0.21				1.60	%
Daily Average Balances:
	Total assets	$	9,848,364			$	8,579,705			$	1,268,659			14.79	%
	Total assets - tangible	9,425,542				8,269,760				1,155,782				13.98	%
	Earning assets	8,809,558				7,729,862				1,079,696				13.97	%
	Loans (net of unearned income), excluding nonaccrual loans	6,954,777				5,920,302				1,034,475				17.47	%
	Allowance for loan losses	46,199				44,704				1,495				3.34	%
	Goodwill and other intangibles	422,822				309,946				112,876				36.42	%
	Noninterest bearing deposits	2,303,125				2,162,271				140,854				6.51	%
	Interest bearing deposits	4,949,775				4,336,175				613,600				14.15	%
	Total deposits	7,252,900				6,498,403				754,497				11.61	%
	Total equity	1,354,984				1,149,888				205,096				17.84	%
	Total equity - tangible	932,161				839,942				92,219				10.98	%
	Common equity	1,344,541				1,138,936				205,605				18.05	%
	Common equity - tangible	921,719				828,991				92,728				11.19	%
Key Ratios:
	Return on average assets	1.02		%		0.57		%		0.45		%		78.95	%
	Return on average assets - tangible	1.15		%		0.65		%		0.50		%		76.92	%
	Return on average equity	7.39		%		4.26		%		3.13		%		73.47	%
	Return on average equity - tangible	11.64		%		6.39		%		5.25		%		82.16	%
	Return on average common equity	7.45		%		4.30		%		3.15		%		73.26	%
	Return on average common equity - tangible	11.77		%		6.47		%		5.30		%		81.92	%
	Net interest margin-fully tax equivalent (1)	3.54		%		3.41		%		0.13		%		3.81	%
	Net interest margin	3.51		%		3.37		%		0.14		%		4.15	%
	Average earning assets/total average assets	89.45		%		90.09		%		(0.64		)%		(0.71	)%
	Average loans/average deposits	95.89		%		91.10		%		4.79		%		5.26	%
	Average noninterest deposits/total average deposits	31.75		%		33.27		%		(1.52		)%		(4.57	)%
	Allowance for loan losses/period end loans	0.63		%		0.76		%		(0.13		)%		(17.11	)%
	Nonperforming assets to period end assets	0.27		%		0.33		%		(0.06		)%		(18.18	)%
	Period end equity/period end total assets	13.65		%		13.41		%		0.24		%		1.79	%
	Efficiency ratio	73.10		%		67.49		%		5.61		%		8.31	%
(1) 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
	March 31, 2018											December 31, 2017											March 31, 2017
					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	$	6,954,777			$	82,032			4.78	%		$	5,920,302			$	70,044			4.69	%		$	5,862,799			$	64,979			4.49		%
Taxable investment securities	915,166				5,025				2.20	%		657,297				3,237				1.97	%		627,338				2,843				1.81		%
Tax-exempt investment securities	73,037				567				3.10	%		46,825				361				3.09	%		50,485				375				2.97		%
Interest-bearing deposits	627,475				2,362				1.53	%		812,741				2,662				1.30	%		450,076				887				0.80		%
Loans held for sale	239,103				2,379				3.98	%		292,697				2,874				3.93	%		186,999				1,727				3.69		%
Total earning assets	8,809,558				92,365				4.25	%		7,729,862				79,178				4.06	%		7,177,697				70,811				4.00		%
Less: allowance for loan losses	(46,199		)									(44,704		)									(42,610		)
Total nonearning assets	1,085,005											894,547											865,279
Total assets	$	9,848,364										$	8,579,705										$	8,000,366
Liabilities and Equity:
Interest-bearing deposits
Demand and money market	$	2,774,347			$	2,969			0.43	%		$	2,247,745			$	2,091			0.37	%		$	2,272,911			$	1,865			0.33		%
Savings	308,539				876				1.15	%		320,218				870				1.08	%		320,319				757				0.96		%
Certificates of deposit	1,866,889				5,641				1.23	%		1,768,212				5,141				1.15	%		1,508,879				3,381				0.91		%
Total interest-bearing deposits	4,949,775				9,486				0.78	%		4,336,175				8,102				0.74	%		4,102,109				6,003				0.59		%
Borrowings	820,967				2,878				1.40	%		554,039				1,819				1.28	%		723,506				3,803				2.10		%
Subordinated capital debentures	259,205				3,158				4.87	%		247,152				2,880				4.66	%		—				—				—
Total interest-bearing liabilities	6,029,947				15,522				1.04	%		5,137,366				12,801				0.99	%		4,825,615				9,806				0.82		%
Demand deposits	2,303,125											2,162,271											1,957,887
Other noninterest-bearing liabilities	160,308											130,180											123,374
Total liabilities	8,493,380											7,429,817											6,906,876
Shareholders’ equity	1,354,984											1,149,888											1,093,490
Total liabilities and equity	$	9,848,364										$	8,579,705										$	8,000,366
Net interest income (tax-equivalent basis)					$	76,843										$	66,377										$	61,005
Reconcilement of Non-GAAP Financial     Measures
Tax-equivalent basis adjustment					(499		)									(713		)									(724		)
Net interest income (GAAP)					$	76,344										$	65,664										$	60,281
Interest rate spread (1)									3.21	%										3.07	%										3.18		%
Interest expense as a percent of average earning assets									0.71	%										0.66	%										0.55		%
Net interest margin (tax equivalent basis) (2)									3.54	%										3.41	%										3.45		%
Total cost of deposits									0.53	%										0.49	%										0.40		%

(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 - Five Quarter Trend
(dollars in thousands, except share data)
	March 31,				December 31,				September 30,				June 30,				March 31,
	2018				2017				2017				2017				2017
	(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
ASSETS
Cash and due from banks	$	479,453			$	504,095			$	651,425			$	474,819			$	420,364
Interest-bearing deposits in financial institutions	4,613				4,471				5,055				5,071				5,335
Total Cash and Cash Equivalents	484,066				508,566				656,480				479,890				425,699
Securities available for sale, at fair value	1,242,181				867,654				831,483				700,354				720,667
Securities held to maturity, at amortized cost	55,283				61,304				62,487				63,937				65,117
Federal Home Loan Bank stock, at amortized cost	46,400				29,595				29,586				29,586				36,402
Total Securities	1,343,864				958,553				923,556				793,877				822,186
Mortgage loans held for sale	293,731				313,256				318,595				388,523				214,047
Loans, net of unearned income and deferred costs:	7,470,151				5,946,965				5,910,479				5,949,061				5,913,080
Less: allowance for loan losses	(46,735		)		(45,131		)		(44,398		)		(44,131		)		(43,195		)
Net Loans	7,423,416				5,901,834				5,866,081				5,904,930				5,869,885
Premises and equipment, net	207,126				194,900				196,975				199,926				198,664
Goodwill	416,789				270,250				270,901				268,246				264,910
Other intangible assets, net	57,493				38,568				39,751				40,066				37,052
Bank-owned life insurance policies	232,039				195,775				193,823				192,339				190,917
Other assets	161,891				140,474				148,632				159,245				151,426
TOTAL ASSETS	$	10,620,415			$	8,522,176			$	8,614,794			$	8,427,042			$	8,174,786
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing demand	$	2,503,246			$	2,157,338			$	2,212,047			$	2,219,406			$	2,052,598
Interest-bearing:
Demand and money market accounts	3,001,256				2,225,211				2,253,746				2,292,978				2,270,025
Savings	309,077				315,889				320,028				318,714				320,104
Certificates of deposit	2,011,843				1,749,782				1,762,641				1,764,671				1,548,045
Total Deposits	7,825,422				6,448,220				6,548,462				6,595,769				6,190,772
Advances from the Federal Home Loan Bank	873,773				526,923				527,072				527,219				687,366
Subordinated debt, net	257,723				247,196				247,128				—				—
Repurchase agreements and other borrowings	52,509				24,850				23,195				28,571				35,318
Total Borrowings	1,184,005				798,969				797,395				555,790				722,684
Other liabilities	161,638				132,482				128,086				152,485				160,085
TOTAL LIABILITIES	9,171,065				7,379,671				7,473,943				7,304,044				7,073,541
Preferred stock
Authorized shares - 2,000,000	—				—				—				—				—
Common stock, $1.667 par value	120,472				104,403				104,387				104,386				104,307
Capital surplus	1,028,985				749,800				748,444				747,867				746,289
Retained earnings	304,896				282,729				279,165				260,783				243,337
Common stock issued to deferred compensation trust, at cost	(12,612		)		(12,524		)		(12,304		)		(11,492		)		(11,294		)
Deferred compensation trust	12,612				12,524				12,304				11,492				11,294
Accumulated other comprehensive loss	(15,873		)		(5,692		)		(2,408		)		(2,355		)		(4,173		)
TOTAL SHAREHOLDERS’ EQUITY	1,438,480				1,131,240				1,129,588				1,110,681				1,089,760
Noncontrolling interest	10,870				11,265				11,263				12,317				11,485
TOTAL EQUITY	1,449,350				1,142,505				1,140,851				1,122,998				1,101,245
TOTAL LIABILITIES AND EQUITY	$	10,620,415			$	8,522,176			$	8,614,794			$	8,427,042			$	8,174,786

TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)
	Three Months Ended
	March 31,				December 31,				September 30,				June 30,				March 31,
	2018				2017				2017				2017				2017
INTEREST INCOME:
Loans, including fees	$	81,533			$	69,332			$	68,969			$	71,443			$	64,255
Investment securities	5,592				3,598				3,076				3,171				3,218
Interest-bearing deposits in financial institutions and          federal funds sold	2,362				2,661				2,745				1,188				887
Mortgage loans held for sale	2,379				2,874				3,081				2,879				1,727
Total Interest Income	91,866				78,465				77,871				78,681				70,087
INTEREST EXPENSE:
Deposits	9,486				8,102				7,810				6,877				6,003
Advances from the Federal Home Loan Bank	2,838				1,791				1,750				2,521				3,772
Subordinated capital debentures	3,158				2,880				2,368				—				—
Repurchase agreements and other borrowings	40				28				20				30				31
Total Interest Expense	15,522				12,801				11,948				9,428				9,806
Net Interest Income	76,344				65,664				65,923				69,253				60,281
PROVISION FOR LOAN LOSSES	1,953				869				696				1,320				2,541
Net Interest Income after Provision for Loan Losses	74,391				64,795				65,227				67,933				57,740
NONINTEREST INCOME:
Residential mortgage banking income, net	17,604				17,537				19,087				21,594				17,632
Insurance commissions and other title fees and income, net	13,372				12,115				12,116				12,902				14,800
Real estate brokerage and property management income, net	10,429				4,823				10,042				7,629				4,993
Service charges on deposit accounts	2,883				2,809				2,670				2,644				2,472
Credit card merchant fees, net	1,168				1,204				1,388				1,298				1,118
Bank owned life insurance	1,532				1,941				1,425				1,421				1,474
Other income	2,941				3,048				2,688				2,856				2,397
Net gain (loss) on investment securities	3				—				—				(1		)		—
Total Noninterest Income	49,932				43,477				49,416				50,343				44,886
NONINTEREST EXPENSE:
Salaries and employee benefits	50,784				41,965				43,101				44,464				39,919
Occupancy expense	6,477				6,878				6,635				6,658				6,684
Furniture and equipment	3,698				3,456				3,710				3,563				3,343
Other expenses	31,344				21,361				20,740				23,434				20,302
Total Noninterest Expense	92,303				73,660				74,186				78,119				70,248
Income before income tax expense and noncontrolling interest	32,020				34,612				40,457				40,157				32,378
Provision for income tax expense	6,077				21,325				11,862				12,240				9,386
Net income	25,943				13,287				28,595				27,917				22,992
Net income attributable to noncontrolling interest	(1,238		)		(954		)		(1,445		)		(1,704		)		(1,024		)
Net income attributable to TowneBank	$	24,705			$	12,333			$	27,150			$	26,213			$	21,968
Net income available to common shareholders	$	24,705			$	12,333			$	27,150			$	26,213			$	21,968
Per common share information
Basic earnings	$	0.36			$	0.20			$	0.44			$	0.42			$	0.35
Diluted earnings	$	0.36			$	0.20			$	0.44			$	0.42			$	0.35
Basic weighted average shares outstanding	68,939,573				62,239,028				62,210,834				62,145,045				62,075,983
Diluted weighted average shares outstanding	69,112,637				62,462,629				62,410,591				62,364,260				62,262,789
Cash dividends declared	$	0.14			$	0.14			$	0.14			$	0.14			$	0.13

TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
													Increase/(Decrease)
	Three Months Ended												March 31, 2018							March 31, 2018
	March 31,								December 31, 2017				March 31, 2017							December 31, 2017
	2018				2017								Amount				Percent			Amount				Percent
Revenue
Net interest income	$	74,042			$	58,444			$	63,031			$	15,598			26.69	%		$	11,011			17.47	%
Service charges on deposit accounts	2,883				2,472				2,809				411				16.63	%		74				2.63	%
Credit card merchant fees	1,168				1,118				1,204				50				4.47	%		(36		)		(2.99	)%
Other income	3,959				3,106				4,318				853				27.46	%		(359		)		(8.31	)%
Total noninterest income	8,010				6,696				8,331				1,314				19.62	%		(321		)		(3.85	)%
Total revenue	82,052				65,140				71,362				16,912				25.96	%		10,690				14.98	%
Provision for loan losses	1,953				2,541				869				(588		)		(23.14	)%		1,084				124.74	%
Expenses
Salaries and employee benefits	30,202				20,065				21,134				10,137				50.52	%		9,068				42.91	%
Occupancy expense	4,016				4,128				4,418				(112		)		(2.71	)%		(402		)		(9.10	)%
Furniture and equipment	2,532				2,274				2,326				258				11.35	%		206				8.86	%
Advertising and marketing	1,171				1,041				774				130				12.49	%		397				51.29	%
Charitable contributions	1,485				1,313				891				172				13.10	%		594				66.67	%
Outside processing	1,403				1,154				1,055				249				21.58	%		348				32.99	%
Foreclosed property expenses	211				130				296				81				62.31	%		(85		)		(28.72	)%
FDIC and other insurance	1,043				987				668				56				5.67	%		375				56.14	%
Professional fees	1,436				1,280				1,912				156				12.19	%		(476		)		(24.90	)%
Telephone and postage	796				904				859				(108		)		(11.95	)%		(63		)		(7.33	)%
Other expenses	14,424				5,073				5,653				9,351				184.33	%		8,771				155.16	%
Total expenses	58,719				38,349				39,986				20,370				53.12	%		18,733				46.85	%
Income before income tax,     corporate allocation and     noncontrolling interest	21,380				24,250				30,507				(2,870		)		(11.84	)%		(9,127		)		(29.92	)%
Corporate allocation	456				484				533				(28		)		(5.79	)%		(77		)		(14.45	)%
Income before income tax     provision and noncontrolling     interest	21,836				24,734				31,040				(2,898		)		(11.72	)%		(9,204		)		(29.65	)%
Provision for income tax expense	3,881				6,765				19,510				(2,884		)		(42.63	)%		(15,629		)		(80.11	)%
Net income	17,955				17,969				11,530				(14		)		(0.08	)%		6,425				55.72	%
Noncontrolling interest	(2		)		(2		)		—				—				N/M			(2		)		N/M
Net income attributable to     TowneBank	$	17,953			$	17,967			$	11,530			$	(14	)		(0.08	)%		$	6,423			55.71	%
Efficiency ratio	71.56		%		58.87		%		56.03		%		12.69		%		21.56	%		15.53		%		27.72	%

TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
													Increase/(Decrease)
	Three Months Ended												March 31, 2018							March 31, 2018
	March 31,								December 31,				March 31, 2017							December 31, 2017
	2018				2017				2017				Amount				Percent			Amount				Percent
Revenue
Residential mortgage brokerage       income, net	$	17,661			$	17,775			$	17,544			$	(114	)		(0.64	)%		$	117			0.67	%
Real estate brokerage income, net	1,698				1,460				2,092				238				16.30	%		(394		)		(18.83	)%
Title insurance and settlement fees	315				355				431				(40		)		(11.27	)%		(116		)		(26.91	)%
Property management fees, net	8,731				3,533				2,731				5,198				147.13	%		6,000				219.70	%
Income from unconsolidated       subsidiary	94				124				116				(30		)		(24.19	)%		(22		)		(18.97	)%
Net interest and other income	2,546				2,203				3,050				343				15.57	%		(504		)		(16.52	)%
Total revenue	31,045				25,450				25,964				5,595				21.98	%		5,081				19.57	%
Expenses
Salaries and employee benefits	13,877				13,695				14,279				182				1.33	%		(402		)		(2.82	)%
Occupancy expense	1,894				1,964				1,894				(70		)		(3.56	)%		—				—	%
Furniture and equipment	980				869				960				111				12.77	%		20				2.08	%
Amortization of intangible assets	672				559				571				113				20.21	%		101				17.69	%
Other expenses	6,294				5,991				6,259				303				5.06	%		35				0.56	%
Total expenses	23,717				23,078				23,963				639				2.77	%		(246		)		(1.03	)%
Income before income tax, corporate allocation and noncontrolling interest	7,328				2,372				2,001				4,956				208.94	%		5,327				266.22	%
Corporate allocation	(289		)		(307		)		(370		)		18				(5.86	)%		81				(21.89	)%
Income before income tax provision and noncontrolling interest	7,039				2,065				1,631				4,974				240.87	%		5,408				331.58	%
Provision for income tax expense	1,559				627				1,160				932				148.64	%		399				34.40	%
Net income	5,480				1,438				471				4,042				281.08	%		5,009				N/M
Noncontrolling interest	(622		)		(512		)		(695		)		(110		)		21.48	%		73				(10.50	)%
Net income attributable to TowneBank	$	4,858			$	926			$	(224	)		$	3,932			424.62	%		$	5,082			N/M
Efficiency ratio	76.40		%		90.68		%		92.29		%		(14.28		)%		(15.75	)%		(15.89		)%		(17.22	)%

TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
													Increase/(Decrease)
	Three Months Ended												March 31, 2018							March 31, 2018
	March 31,								December 31,				March 31, 2017							December 31, 2017
	2018				2017				2017				Amount				Percent			Amount				Percent
Commission and fee income
Property and casualty	$	9,356			$	8,457			$	8,198			$	899			10.63	%		$	1,158			14.13	%
Employee benefits	3,196				2,974				3,164				222				7.46	%		32				1.01	%
Travel insurance	1,768				1,627				912				141				8.67	%		856				93.86	%
Specialized benefit services	169				165				170				4				2.42	%		(1		)		(0.59	)%
Total commissions and fees	14,489				13,223				12,444				1,266				9.57	%		2,045				16.43	%
Contingency and bonus revenue	1,133				3,539				1,654				(2,406		)		(67.99	)%		(521		)		(31.50	)%
Other income	70				88				80				(18		)		(20.45	)%		(10		)		(12.50	)%
Total revenue	15,692				16,850				14,178				(1,158		)		(6.87	)%		1,514				10.68	%
Employee commission expense	2,513				2,273				2,362				240				10.56	%		151				6.39	%
Revenue, net of commission expense	13,179				14,577				11,816				(1,398		)		(9.59	)%		1,363				11.54	%
Salaries and employee benefits	6,705				6,159				6,552				546				8.87	%		153				2.34	%
Occupancy expense	567				592				566				(25		)		(4.22	)%		1				0.18	%
Furniture and equipment	185				200				169				(15		)		(7.50	)%		16				9.47	%
Amortization of intangible assets	702				697				726				5				0.72	%		(24		)		(3.31	)%
Other expenses	1,708				1,173				1,698				535				45.61	%		10				0.59	%
Total operating expenses	9,867				8,821				9,711				1,046				11.86	%		156				1.61	%
Income before income tax, corporate allocation and noncontrolling interest	3,312				5,756				2,105				(2,444		)		(42.46	)%		1,207				57.34	%
Corporate allocation	(167		)		(177		)		(164		)		10				(5.65	)%		(3		)		1.83	%
Income before income tax provision and noncontrolling interest	3,145				5,579				1,941				(2,434		)		(43.63	)%		1,204				62.03	%
Provision for income tax expense	637				1,994				655				(1,357		)		(68.05	)%		(18		)		(2.75	)%
Net income	2,508				3,585				1,286				(1,077		)		(30.04	)%		1,222				95.02	%
Noncontrolling interest	(614		)		(510		)		(259		)		(104		)		20.39	%		(355		)		137.07	%
Net income attributable to TowneBank	$	1,894			$	3,075			$	1,027			$	(1,181	)		(38.41	)%		$	867			84.42	%
Efficiency ratio	74.87		%		60.51		%		82.19		%		14.36		%		23.73	%		(7.32		)%		(8.91	)%

TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
	Three Months Ended
	March 31,				March 31,				December 31,
	2018				2017				2017
Return on average assets (GAAP)	1.02		%		1.11		%		0.57		%
Impact of excluding average goodwill and other       intangibles and amortization	0.13		%		0.11		%		0.08		%
Return on average tangible assets (non-GAAP)	1.15		%		1.22		%		0.65		%
Return on average equity (GAAP)	7.39		%		8.15		%		4.26		%
Impact of excluding average goodwill and other       intangibles and amortization	4.25		%		3.73		%		2.13		%
Return on average tangible equity (non-GAAP)	11.64		%		11.88		%		6.39		%
Return on average common equity (GAAP)	7.45		%		8.23		%		4.30		%
Impact of excluding average goodwill and other        intangibles and amortization	4.32	%		3.82		%		2.17		%
Return on average tangible common equity(non-GAAP)	11.77		%		12.05		%		6.47		%
Book value (GAAP)	$	19.90			$	17.42			$	18.06
Impact of excluding average goodwill and other       intangibles and amortization	6.56				4.83				4.93
Tangible book value (non-GAAP)	$	13.34			$	12.59			$	13.13

TOWNEBANK
Reconcilement of Non-GAAP Financial Measures
(dollars in thousands, except per share data)
Reconcilement of GAAP Earnings to OperatingEarnings Excluding Certain Items AffectingComparability		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
		2018				2017				2017				2017				2017
Net income (GAAP)		$	24,705			$	12,333			$	27,150			$	26,213			$	21,968
Purchase accounting corrections		—				—				—				(3,889		)		—
Acquisition-related expenses		8,726				526				466				1,281				(5		)
Total charges		8,726				526				466				(2,608		)		(5		)
Income tax expense -tax reform legislation		—				10,112				—				—				—
Income tax expense (benefit) - other items		(1,639		)		(98		)		(117		)		1,167				75
Income tax expense (benefit)		(1,639		)		10,014				(117		)		1,167				75
Total charges, net of taxes		7,087				10,540				349				(1,441		)		70
Operating earnings, excluding certain items affectingcomparability (non-GAAP)		$	31,792			$	22,873			$	27,499			$	24,772			$	22,038
Weighted average diluted shares		69,112,637				62,462,629				62,410,561				62,364,260				62,262,789
Diluted EPS (GAAP)		$	0.36			$	0.20			$	0.44			$	0.42			$	0.35
Diluted EPS, excluding certain items affectingcomparability (non-GAAP)		$	0.46			$	0.37			$	0.44			$	0.40			$	0.35
Average assets		$	9,848,364			$	8,579,705			$	8,570,019			$	8,180,959			$	8,000,366
Average tangible equity		$	932,161			839,942				$	824,787			$	807,085			$	791,433
Return on average assets, excluding certain items       affecting comparability (non-GAAP)		1.31		%		1.06		%		1.27		%		1.21		%		1.12		%
Return on average tangible equity, excluding certainitems affecting comparability (non-GAAP)		14.72		%		11.37		%		13.84		%		12.96		%		11.91		%
Efficiency ratio, excluding certain items affecting       comparability (non-GAAP)		66.19		%		67.01		%		63.92		%		66.41		%		66.80		%