updated 1/31/2011 6:46:40 PM ET 2011-01-31T23:46:40

SUFFOLK, Va., Jan. 31, 2011 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank (Nasdaq:TOWN) reported that its earnings for the full year ended December 31, 2010 reached a record level of $30.28 million, a 13.14% increase, or $3.52 million, over the $26.76 million reported for 2009, crossing a new threshold of earnings for the first time in its 11 year history.

Net income available to common shareholders for 2010 increased 25.16% to $20.92 million after accretion and preferred dividend payments of $9.36 million. Fully diluted earnings of $0.73 per share grew 10.61%, as compared to $0.66 in 2009, and reflected the issuance of 3.85 million shares of common stock since September 30, 2009. The Bank's common dividend remained at $0.32 per share for the year with the common dividend totaling $9.26 million.

Earnings Highlights

The growth in earnings was driven by a 22.22% increase in net interest income to $122.64 million, a $22.29 million improvement from 2009. The bank's net interest margin on a fully tax equivalent basis increased to 3.77%, up from 3.29% for the same period in 2009. The increase reflects the continued repricing of deposit liabilities to market rates coupled with a shift in the mix of the deposit portfolio away from higher cost certificate of deposits. Additionally, loan growth in the beginning of the year and the acquisition of loans from The Bank of the Currituck allowed loans to grow $165.44 million, or 6.45%, while maintaining good pricing levels in both fixed and variable loans. The upward trend in margin increased throughout the year as margin reached 4.03% in the fourth quarter of 2010, as compared to 3.74% in the third quarter of 2010 and 3.53% in the fourth quarter of 2009. Net interest income was also impacted by the reduction in higher costing borrowings and convertible debt as deposit growth exceeded loan growth allowing us to favorably reposition the liability side of our balance sheet.

Non-interest income, excluding gains on available for sale securities, increased 16.48% to $60.09 million in 2010, contributing significantly to the Bank's financial performance. The improvement was driven by insurance fees and commissions, which increased $6.24 million, or 47.03%, over the comparative prior year. Additionally, on January 18th, we announced the acquisition of W.T. Chapin Insurance Company located in Newport New, Virginia, which will further expand our property and casualty insurance business.

Residential mortgage brokerage income had a record year in 2010 with revenues of $13.00 million, up 9.14% from $11.91 million in 2009. During 2010, we entered the North Carolina market with a mortgage joint venture in the Raleigh area and also realized growth from our relationships with William E. Wood Realty and Prudential Towne Realty in the Hampton Roads market. Refinancing activity accounted for 35% of 2010 mortgage volume.

The bank also recognized a gain on available for sale securities of $5.96 million for the year as compared to the $11.15 million recorded for the same period in 2009 as the bank continues to reposition its securities portfolio while taking advantage of market volatility.

Balance Sheet

At December 31, 2010, total bank assets reached $3.87 billion, an increase of $264.57 million over 2009. Excluding the loans acquired from The Bank of Currituck transaction, loan growth was relatively modest with total loans of $2.65 billion representing a 3.28% increase.

Deposit growth was very good for the year with total deposits increasing 15.33% to $2.95 billion. Non-interest bearing demand deposits increased a very healthy 23.38% to end the year at $706.04 million.  Non-interest deposits represented 23.90% of total deposits.

During 2010 we continued to expand our banking presence through new locations and continued to gain market share acceptance of our services, which included these highlights:

  • TowneBank's deposit marketshare as reported by the FDIC remained in the number one position in the community bank segment and third among all banks operating in Hampton Roads. The bank ranks first among all banks in the cities of Chesapeake, Newport News and Portsmouth.
     
  • TowneBank opened new banking centers in the Princess Anne area of Virginia Beach and the Harbour View section of Suffolk, Virginia.
     
  • TowneBank acquired the deposit accounts of The Bank of Currituck and its six banking offices in northeastern North Carolina, including three banking offices on the Outer Banks. This allowed us to enter the adjacent northeastern North Carolina markets for which we share the same media coverage. Total deposits in North Carolina were $144.01 million at year end 2010.

Capital Strength

The bank's total equity at December 31, 2010 climbed to $499.51 million. Common equity increased 10.49% or $34.20 million which included the favorable impact of the conversion of $16.1 million convertible debt into common stock, along with additional shares purchased by the bank's various employee benefit plans and shareholder purchases and dividend reinvestment plans. Accordingly, total risk based capital, Tier 1 capital and Tier 1 leverage ratios were 13.68%, 12.06% and 10.59%, respectively. All ratios exceed the current regulatory standards for well capitalized status.

Credit Quality

The bank's loan portfolio continued to perform reasonably well compared to national, regional and local competitors. However, continued softness in the local residential real estate market had negative impact on the level of non-performing assets during 2010.

At 2010 year end, non-performing assets represented 2.01% of total assets or $77.62 million. This represented a $33.43 million increase that can be largely attributed to loans secured by residential building lots.

During 2010, the bank's loan loss provision increased to $22.6 million while net loans charged off were $17.7 million representing a net charge off ratio of 0.67% of average outstanding loans. The bank's loan loss reserve as a percentage of period-end loans at December 31, 2010 was 1.42%, up from 1.32% in 2009. 

Nonperforming assets 12/31/2010 9/30/2010 12/31/2009
 Nonperforming loans  $ 57,167  $ 43,833  $ 42,150
 Foreclosed property  20,452  14,411  2,043
 Total nonperforming assets  $ 77,619  $ 58,244  $ 44,193

"Excluding non-performing loans, we have been experiencing a downward trend in general loan delinquency over the past few months," stated G. Robert Aston, Chairman and CEO. "While we may see some continued increase in real estate related non-performance, the overall health of our local economy appears to be showing some positive signs."

Fourth Quarter Earnings

Net income for the fourth quarter increased 16.78% to $7.84 million up from $6.71 million in the comparative period of 2009.

Net earnings available to common shareholders increased 25.90% to $5.50 million after accretion and preferred dividend payments of $2.34 million. Fully diluted earnings per share increased 13.53% to $0.19 per share.

"Top line revenue growth was extremely good during 2010," added Aston. "Our pre-tax, pre-provision revenue excluding securities gains was up $30.8 million representing a 20.3% increase. It is also noteworthy that our net interest margin climbed back above 4% in the fourth quarter placing us in a favorable interest margin position going forward."

As one of the top community banks in Virginia and North Carolina, TowneBank operates 26 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. Through its strategic partnership with William E. Wood and Associates, the bank also offers mortgage services in all of their offices in Hampton Roads and Northeastern North Carolina. 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 $3.87 billion as of December 31, 2010, 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
December 31, 2010
(dollars in thousands)
         
       Increase/   % Increase/ 
Three Months Ended December 31, 2010 2009  (Decrease)   (Decrease) 
         
Results of Operations:        
Net interest income  $ 33,428  $ 28,092  $ 5,336 18.99%
Noninterest income (1)  13,399  12,043  1,356 11.25%
Gain on available for sale securities  3  2,863  (2,860) (99.89%)
Noninterest expenses  30,673  28,111  2,562 9.11%
Provision for loan losses  5,330  4,727  603 12.76%
Pretax Income  10,786  10,103  683 6.76%
Provision for income tax expense  2,951  3,394  (443) (13.05%)
Net income attributable to TowneBank  7,835  6,709  1,126 16.78%
Preferred stock dividends and accretion  2,337  2,342  (5) (0.21%)
Net income available to common shareholders  5,498  4,367  1,131 25.90%
Net income per common share - basic  0.19  0.17  0.02 11.76%
Net income per common share - diluted  0.19  0.17  0.02 13.53%
Period End Data:        
Total assets  $ 3,871,018  $ 3,606,451  $ 264,567 7.34%
Total assets - tangible  3,762,072  3,506,514  255,558 7.29%
Earning assets (2)  3,527,232  3,287,139  240,093 7.30%
Loans (net of unearned income)  2,731,352  2,565,910  165,442 6.45%
Allowance for loan losses  38,660  33,793  4,867 14.40%
Goodwill and other intangibles  108,946  99,937  9,009 9.01%
Nonperforming assets  77,619  44,193  33,426 75.64%
Noninterest bearing deposits  706,040  572,228  133,812 23.38%
Interest bearing deposits  2,248,474  1,989,474  259,000 13.02%
 Total deposits  2,954,514  2,561,702  392,812 15.33%
Total equity  499,512  464,321  35,191 7.58%
Total equity - tangible  390,566  364,384  26,182 7.19%
Common equity  360,038  325,842  34,196 10.49%
Common equity - tangible  251,092  225,905  25,187 11.15%
Book value per common share  12.46  11.87  0.59 4.97%
Book value per common share - tangible  8.69  8.23  0.46 5.59%
Daily Average Balances:        
Total assets  $ 3,794,991  $ 3,602,124  $ 192,866 5.35%
Total assets - tangible  3,697,737  3,518,639  179,098 5.09%
Earning assets (2)  3,455,772  3,331,481  124,291 3.73%
Loans (net of unearned income), excluding

 nonaccrual loans
 2,625,537  2,493,679  131,858 5.29%
Allowance for loan losses  35,848  29,771  6,077 20.42%
Goodwill and other intangibles  97,254  83,485  13,769 16.49%
Noninterest bearing deposits  706,300  625,954  80,346 12.84%
Interest bearing deposits  2,170,358  2,023,217  147,141 7.27%
 Total deposits  2,876,658  2,649,170  227,488 8.59%
Total equity  503,242  459,722  43,520 9.47%
Total equity - tangible  405,989  376,237  29,752 7.91%
Common equity  363,723  321,394  42,329 13.17%
Common equity - tangible  266,469  237,909  28,560 12.00%
Key Ratios:        
Return on average assets 0.82% 0.75% 0.07% 9.33%
Return on average assets - tangible 0.84% 0.75% 0.09% 12.00%
Return on average equity 6.18% 5.79% 0.39% 6.74%
Return on average equity - tangible 7.66% 7.06% 0.60% 8.50%
Return on average common equity 6.00% 5.40% 0.60% 11.11%
Return on average common equity - tangible 8.19% 7.30% 0.89% 12.19%
Net interest margin-fully tax equivalent (2)(3) 4.03% 3.53% 0.50% 14.16%
Net interest margin (2) 3.92% 3.44% 0.48% 13.95%
Average earning assets/total average assets 91.06% 91.20% (0.13%) (0.15%)
Average loans/average deposits 91.27% 94.13% (2.86%) (3.04%)
Average noninterest deposits/total average deposits 24.55% 23.63% 0.92% 3.89%
Allowance for loan losses/period end loans 1.42% 1.32% 0.10% 7.58%
Nonperforming assets to period end assets 2.01% 1.23% 0.78% 63.04%
Period end equity/period end total assets 12.90% 12.87% 0.04% 0.27%
Efficiency ratio (1) 65.50% 70.04% (4.54%) (6.48%)
 
(1) Excludes gain on available for sale securities        
(2) Includes bank-owned life insurance        
(3) Presented on a tax-equivalent basis        
 
Selected Financial Highlights (unaudited) 
TOWNEBANK
December 31, 2010
(dollars in thousands)
         
       Increase/   % Increase/ 
Twelve Months Ended December 31, 2010 2009  (Decrease)   (Decrease) 
         
Results of Operations:        
Net interest income  $ 122,635  $ 100,343  $ 22,292 22.22%
Noninterest income (1)  60,089  51,589  8,500 16.48%
Gain on available for sale securities  5,961  11,149  (5,188) (46.53%)
Noninterest expenses  122,745  111,791  10,954 9.80%
Provision for loan losses  22,565  12,891  9,674 75.05%
Pretax Income  42,732  38,406  4,326 11.27%
Provision for income tax expense   12,456  11,647  809 6.95%
Net income attributable to TowneBank  30,276  26,759  3,517 13.14%
Preferred stock dividends and accretion  9,355  10,044  (689) (6.86%)
Net income available to common shareholders  20,921  16,715  4,206 25.16%
Net income per common share - basic  0.74  0.67  0.07 10.45%
Net income per common share - diluted  0.73  0.66  0.07 10.61%
Period End Data:        
Total assets  $ 3,871,018 $ 3,606,451  $ 264,567 7.34%
Total assets - tangible  3,762,072  3,506,514  255,558 7.29%
Earning assets (2)  3,527,232  3,287,139  240,093 7.30%
Loans (net of unearned income)  2,731,352  2,565,910  165,442 6.45%
Allowance for loan losses  38,660  33,793  4,867 14.40%
Goodwill and other intangibles  108,946  99,937  9,009 9.02%
Nonperforming assets  77,619  44,193  33,426 75.64%
Noninterest bearing deposits  706,040  572,228  133,812 23.38%
Interest bearing deposits  2,248,474  1,989,474  259,000 13.02%
 Total deposits  2,954,514  2,561,702  392,812 15.33%
Total equity  499,512  464,321  35,191 7.58%
Total equity - tangible  390,566  364,384  26,182 7.19%
Common equity  360,038  325,842  34,196 10.49%
Common equity - tangible  251,092  225,905  25,187 11.15%
Book value per share  12.46  11.87  0.59 4.97%
Book value per share - tangible  8.69  8.23  0.46 5.59%
Daily Average Balances:        
Total assets  $ 3,721,155  $ 3,432,368  $ 288,787 8.41%
Total assets - tangible  3,622,944  3,350,603  272,341 8.13%
Earning assets (2)  3,383,057  3,190,132  192,925 6.05%
Loans (net of unearned income), excluding

 nonaccrual loans
 2,587,287  2,440,060  147,227 6.03%
Allowance for loan losses  35,158  28,841  6,317 21.90%
Goodwill and other intangibles  98,211  81,764  16,447 20.12%
Noninterest bearing deposits  649,841  566,434  83,407 14.72%
Interest bearing deposits  2,101,692  1,953,497  148,195 7.59%
 Total deposits  2,751,532  2,519,930  231,602 9.19%
Total equity  490,572  437,556  53,016 12.12%
Total equity - tangible  392,361  355,792  36,569 10.28%
Common equity  351,541  301,218  50,323 16.71%
Common equity - tangible  253,331  219,454  33,877 15.44%
Key Ratios:        
Return on average assets 0.81% 0.78% 0.03% 3.85%
Return on average assets - tangible 0.84% 0.80% 0.04% 5.00%
Return on average equity 6.17% 6.12% 0.05% 0.82%
Return on average equity - tangible 7.72% 7.52% 0.20% 2.66%
Return on average common equity 5.95% 5.55% 0.40% 7.21%
Return on average common equity - tangible 8.26% 7.62% 0.64% 8.40%
Net interest margin-fully tax equivalent (2)(3) 3.77% 3.29% 0.48% 14.59%
Net interest margin (2) 3.69% 3.21% 0.48% 14.95%
Average earning assets/total average assets 90.91% 91.64% (0.73%) (0.80%)
Average loans/average deposits 94.03% 96.83% (2.80%) (2.89%)
Average noninterest deposits/total average deposits 23.62% 22.48% 1.14% 5.07%
Allowance for loan losses/period end loans 1.42% 1.32% 0.10% 7.58%
Nonperforming assets to period end assets 2.01% 1.23% 0.78% 63.04%
Period end equity/period end total assets 12.90% 12.87% 0.04% 0.27%
Efficiency ratio (1) 67.18% 73.58% (6.40%) (8.70%)
 
(1) Excludes gain on available for sale securities        
(2) Includes bank-owned life insurance        
(3) Presented on a tax-equivalent basis        
CONTACT: For more information contact:
         G. Robert Aston, Chairman and CEO, 757-638-6780
         Clyde E. McFarland, Jr., Senior Executive Vice President and
         CFO, 757-638-6801

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