Earnings Presentation

3rd Quarter 2023

Cautionary Statements

Forward Looking:

This presentation contains certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only the beliefs, expectations, or opinions of TowneBank and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional terms, such as "will," "would," "should," "could," "may," "likely," "probably," or "possibly." These statements may address issues that involve significant risks, uncertainties, estimates, and assumptions made by management. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include competitive pressures in the banking industry that may increase significantly; changes in the interest rate environment that may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; changes in the creditworthiness of customers and the possible impairment of the collectability of loans; general economic conditions, either nationally or regionally, that may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit or other services; unusual and infrequently occurring events such as weather-related or natural disasters, acts of war or terrorism, or public health events (such as the COVID-19 pandemic); 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 presentation, see the "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022, our Quarterly Report on Form 10-Q for the period ended June 30, 2023, and related disclosures in other filings that have been, or will be, filed by TowneBank with the Federal Deposit Insurance Corporation.

Non-GAAP Financial Measures:

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

2

TowneBank at a Glance

Over

20 Years

Deposit Market Share

Consistent Earnings

#1 in Hampton Roads1

and Growth

Total Assets

Total Loans

Total Deposits

$16.7B

$11.2B

$13.9B

Ranked on

Top 50

Best Banks List2

Earnings Growth

25.9%

CAGR FY00 - FY22

Core ROAA

Core ROTCE

NIM (FTE)

1.06%

13.12%

2.98%

  1. Source: FDIC Summary of Deposits for the VA Beach-Norfolk-Newport News, VA MSA, data as of June 30,2023
  2. © 2022, Forbes Media LLC. Used with permission.
  3. Total Return as of 9/29/2023; Source: S&P Global, data collected 10/13/2023.
  4. Financial results for the quarter ending September 30, 2023.

NIB Deposits / Total Deposits

32.02%

10 Year Total Shareholder

Return3

109%

3

3rd Quarter 2023 Financial Results

4

Performance Highlights

Q3-FY23

Q2-FY23

Q/Q Change

Q3-FY22

Y/Y Change

Total Revenue

$172.9 million

$181.6 million

-4.8%

$179.2 million

-3.6%

Provision for Credit Losses

$1.0 million

$3.6 million

-71.7%

$3.9 million

-74.4%

Net Income Attributable to TowneBank

$44.9 million

$41.7 million

7.5%

$50.2 million

-10.6%

Earnings Per Share-Diluted

$0.60

$0.56

7.4%

$0.69

-13.2%

Return on Avg Assets

1.06%

0.99%

+7 bps

1.22%

-16 bps

Return on Avg Tangible Common Equity1

13.11%

12.48%

+64 bps

15.27%

-215 bps

Net Interest Margin (TE)1

2.98%

3.01%

-3 bps

3.31%

-33 bps

Assets

$16.7 billion

$17.2 billion

-3.2%

$16.0 billion

4.6%

Loans

$11.2 billion

$11.2 billion

-0.3%

$10.6 billion

5.8%

Deposits

$13.9 billion

$13.8 billion

0.8%

$13.4 billion

3.5%

Loans / Deposits

80.49%

81.41%

-92 bps

78.73%

+176 bps

Noninterest Bearing Deposits / Deposits

32.02%

34.68%

-266 bps

41.56%

-954 bps

Nonperforming Assets / Assets

0.05%

0.05%

0 bps

0.03%

+2 bps

Book Value per Share

$26.28

$26.36

(0.3%)

$25.08

4.8%

Tangible Book Value per Share1

$19.28

$19.31

-0.2%

$18.17

6.1%

Tangible Common Equity to Tangible Assets

8.94%

8.66%

+28 bps

8.57%

+37 bps

Total Risk Based Capital Ratio

15.09%

14.88%

+21 bps

14.80%

+29 bps

(1) Non-GAAP financial measure - see non-GAAP reconciliations

5

Income Statement Summary

QTD

Dollars in millions, except per share data

Q3-FY23

Q2-FY23

Q/Q Change

Q3-FY22

Y/Y Change

Interest Income

$

182.86

$

174.86

4.6%

$

137.52

33.0%

Interest Expense

69.80

61.25

14.0%

13.49

417.5%

Net Interest Income

113.06

113.61

(0.5%)

124.04

(8.9%)

Provision for Credit Losses

1.01

3.56

(71.7%)

3.93

(74.4%)

Net Interest Income after Provision for Credit Losses

112.05

110.06

1.8%

120.11

(6.7%)

Noninterest Income

59.81

67.96

(12.0%)

55.20

8.3%

Noninterest Expense

117.70

125.23

(6.0%)

112.03

5.1%

Minority Interest in Unconsolidated Subs

(0.12)

1.65

(107.1%)

0.50

(123.4%)

Income Before Taxes

54.27

51.13

6.1%

62.78

(13.5%)

Provision for Income Tax Expense

9.41

9.42

(0.1%)

12.61

(25.4%)

Net Income Attributable to TowneBank

$

44.86

$

41.72

7.5%

$

50.17

(10.6%)

Earnings Per Share-Diluted

$

0.60

$

0.56

7.4%

$

0.69

(13.2%)

Core Net Income1

One-time Adjustments After Taxes

$

0.02

$

(3.06)

nm

$

0.60

nm

Core Net Income

44.88

38.66

16.1%

50.77

(11.6%)

Core Earnings Per Share-Diluted

$

0.60

$

0.52

16.0%

$

0.70

(14.2%)

YTD

Q3-FY23

Q3-FY22

Y/Y Change

$

521.12

$

366.02

42.4%

171.07

33.44

411.6%

350.05

332.58

5.3%

16.23

2.53

541.1%

333.81

330.05

1.1%

188.53

179.05

5.3%

367.33

330.14

11.3%

1.68

1.67

0.4%

153.34

177.28

(13.5%)

28.42

34.98

(18.7%)

$

124.91

$

142.30

(12.2%)

$

1.67

$

1.96

(14.6%)

$

4.93

$

0.70

608.5%

129.85

143.00

(9.2%)

$

1.74

$

1.97

(11.7%)

(1) Non-GAAP financial measure - see non-GAAP reconciliations

6

Financial Performance Trends

Core Net Income1 [Dollars in millions]

Core EPS1

$216.2

$2.98

$190.0

$2.62

$139.5

$145.5

$129.8

$1.93

$2.01

$1.74

FY2019

FY2020

FY2021

FY2022 YTD Q3-FY23

FY2019

FY2020

FY2021

FY2022 YTD Q3-FY23

Core ROAA1

Core ROATCE1

1.20%

1.41%

1.17%

16.81%

14.62%

1.03%

1.04%

13.79%

12.75%

12.95%

FY2019

FY2020

FY2021

FY2022 YTD Q3-FY23

FY2019

FY2020

FY2021

FY2022 YTD Q3-FY23

(1) Non-GAAP financial measure - see non-GAAP reconciliations

7

Net Interest Income

Avg. Earning Assets & Yield (TE)1 [Dollars in millions]

$14,987

$14,577

$14,874

$15,305

$15,208

Net Interest Income & NIM (TE)1 [Dollars in millions]

$124.9

$129.7

$124.5

$114.8

$114.3

4.49% 4.61% 4.16%

3.66%

4.80%

3.31%

3.53%

3.39%

3.01%

2.98%

Q3-FY22

Q4-FY22

Q1-FY23

Q2-FY23

Q3-FY23

Avg. Interest Bearing Liabilities & Cost [Dollars in millions]

$9,679

$9,753

$8,909

$8,348

$8,256

2.84%

2.54%

1.82%

1.11% 0.64%

Q3-FY22

Q4-FY22

Q1-FY23

Q2-FY23

Q3-FY23

(1) Non-GAAP financial measures - see non-GAAP reconciliations

Q3-FY22Q4-FY22Q1-FY23Q2-FY23Q3-FY23

Interest Bearing Deposit Beta

Quarter

Cumulative

248.0%

196.0%

130.0%

40.0%

29.1%

40.0%

47.4%

1.6%

16.0%

17.2%

-12.0%-12.0%

-0.7%

7.7%

Q1-FY22

Q2-FY22

Q3-FY22

Q4-FY22

Q1-FY23Q2-FY23Q3-FY23

8

NIM & Net Interest Income Sensitivity

Net Interest Income & NIM (TE)1

Dollars in millions

Amount

NIM (%)

Q2-FY23

$

114.8

3.01%

Net Interest Income Sensitivity2

-3.07%

-6.22% -3.93% -3.16%

Loans HFI

4.5

0.09%

Recurring Accretion

0.1

0.00%

PPP Asset

(0.0)

0.00%

Loans HFS

1.4

0.02%

Investments & Cash

2.0

0.07%

-6.52%

-9.30%

Earning Assets Mix

0.01%

Deposits

(15.4)

-0.30%

Borrowings

7.0

0.01%

Sub Debt

(0.0)

0.00%

Interest Bearing Funding Mix

0.10%

Other

(0.0)

-0.03%

Q3-FY23

$

114.3

2.98%

-300 bp -200 bp -100 bp

Base

+100 bp +200 bp +300 bp

IRR - Current Qtr

IRR - Prior Qtr

Comments

  • Rising rate risk impacted by late cycle high incremental beta
  • Cumulative cycle-to-date beta of approximately 47%
  1. Non-GAAPfinancial measure - see non-GAAP reconciliations
  2. The interest sensitivity chart is a one-year result on net interest income of an instantaneous and permanent rate shock. The results include assumptions about deposit rate changes that may or may not occur.

9

Loans

Loans Balances & Yield (TE)1 [Dollars in millions]

4.99%

4.36%

4.20%

5.13%

4.22%

$10,795 $11,173

$9,629 $9,506

$8,419

FY2019

FY2020

FY2021

FY2022

Q3-FY23

Loans

Q3-FY23

% Total

Q/Q %

Y/Y %

(Dollars in millions)

Construction and Development

$

1,326

12%

-2.8%

0.1%

Commercial Real Estate

5,255

47%

0.3%

8.4%

Residential 1-4 Family

2,191

20%

0.9%

12.0%

Commercial and Industrial

1,238

11%

-1.7%

-1.1%

Government

523

5%

0.5%

0.6%

Indirect

549

5%

-2.4%

-4.2%

Consumer & Other

91

0%

3.6%

5.2%

Total Loans

$

11,173

100%

-0.3%

5.8%

(1) Non-GAAP financial measure - see non-GAAP reconciliations

Portfolio Highlights

  • Farmers Bank Day 1 balances = $277.9 million
  • Variable portfolio of $2.9 billion at the end of Q3-23, 90% is currently floating (not at floor or ceiling)

Loans % of Deposits and Assets

90.8%

83.2%

81.2%

80.5%

70.5%

65.8%

70.0%

68.1%

67.0%

58.1%

FY2019

FY2020

FY2021

FY2022

Q3-FY23

Loans / Deposits

Loans / Assets

Nonperforming Loans

$17.44

0.21%

$11.19

$5.97

$6.27

$7.11

0.12%

0.06%

0.06%

0.06%

FY2019

FY2020

FY2021

FY2022

Q3-FY23

Nonperforming Loans

NPLs / Loans

10

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Disclaimer

TowneBank published this content on 26 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 October 2023 12:21:37 UTC.