2015 KBW Community Bank Investor Conference
Welcome to TowneBank (TOWN) The Towne story began in my home garage in the summer of 1998 when a small group of long-tjme friends and banking associates came together to lay the foundatjon for what was to become TowneBank. With caring as a specifjc business strategy and a deep-rooted passion for service to others, our defjned culture for Towne set us on a course to begin building a great community asset for our hometown community in the Hampton Roads Region of Virginia. Our initjal stock ofgering was substantjally oversubscribed as over 4,000 community shareholders invested over $50 million in what was the largest capitalizatjon of a new bank in Virginia history. In another fjrst, we actually returned $13 million to our subscribers and limited any one shareholder to a maximum investment of $250,000. This extraordinary level of capital coupled with the reputatjon our bankers enjoyed with the banking regulators allowed the bank to open with 90 hometown bankers and three banking centers located in the citjes of Virginia Beach, Chesapeake and Portsmouth. More than a bank, Towne has emerged as a family of companies providing wealth management, insurance, real estate brokerage, residentjal and vacatjon property management along with commercial and residentjal mortgage services. As a tribute to our early investors and community supporters, Towne now has assets exceeding $6 billion, an enviable record of 15 consecutjve years of increased earnings, and has returned over $79 million in common dividends since our opening on April 8, 1999. Today, our journey contjnues as we prepare to take our special style of hometown banking to the Richmond, Virginia market with the acquisitjon of the $1.1 billion Franklin Financial Corporatjon (FRNK). As you review the informatjon contained in this Investor Presentatjon, please know that we welcome you to join our TowneBank family of investors and supporters as we embark on a new and contjnued journey as a growth company. Sincerely, G. Robert Aston, Jr. Chairman and Chief Executjve Offjcer
Towne’s Model • Caring as the Foundation for our Company Culture and as a Specifjc Marketing Strategy • Deep Commitment to Community Engagement • 8 Banking Regions with Local Decision Making and the “Best Bankers” • “HomeTowne Banker” Approach to Delivering Exquisite Service • $100 Million Branch Strategy • Diversifjed Financial Services driving Noninterest Income Towne Family of Companies
Hampton Roads Market Share Overview Bank 1999 2005 2010 2014 Wells Fargo 28.7 22.7 20.3 20.4 SunTrust 15.6 14.0 15.6 16.2 BB&T 22.1 14.5 12.2 13.5 Bank of America 15.6 15.2 10.2 10.8 Total Top Four 81.8 66.5 58.2 60.8 Deposit Data as of June 30, 2014
Hampton Roads Market Share Overview Bank 1999 2005 2010 2014 Wells Fargo 28.7 22.7 20.3 20.4 TowneBank 1.9 8.8 14.4 16.7 SunTrust 15.6 14.0 15.6 16.2 BB&T 22.1 14.5 12.2 13.5 Bank of America 15.6 15.2 10.2 10.8 Total 83.9 75.2 72.7 77.6 Deposit Data as of June 30, 2014
Strong Market Position Virginia Beach-Norfolk-Newport News, VA-NC ¹ Deposits in Average Market Rank Institution (ST) Branches Market Branch Size Share (%) ($mm) ($mm) 1 Wells Fargo & Co. (CA) 54 4,405 20.37 81.57 2 TowneBank (VA) 26 3,612 16.70 138.91 3 SunTrust Banks Inc. (GA) 39 3,496 16.16 89.64 4 BB&T Corp. (NC) 51 2,917 13.48 57.19 5 Bank of America Corp. (NC) 36 2,343 10.83 65.08 6 Monarch Financial Hldgs (VA) 11 774 3.58 70.40 7 Old Point Financial Corp. (VA) 20 717 3.32 35.87 8 Hampton Roads Bankshares Inc. (VA) 17 622 2.87 36.56 9 PNC Financial Services Group (PA) 12 360 1.67 30.02 10 Farmers Bankshares Inc. (VA) 5 333 1.54 66.53 1) Data as of 6/30/2014 FDIC Summary of Deposits
Recent M&A Acquisition Fueling Growth Strategy • Closed transaction on January 2, 2015 • Successfully completed systems integration and conversion Franklin • Offering complete array of Towne products and services Financial • Launched brand awareness campaign during Q1 2015 Update • Cost save targets fully achieved • Executed lease for expansion into Downtown Richmond • $67 MM YTD new originations; Strong pipeline • Building out Loan team with deep Richmond backgrounds – 8 experienced producers: • 3 New Producers with extensive middle market C&I and Growth private banking experience • Relocated CRE producer back to Richmond market • Senior Credit Administrator • Treasury Management Sales
Excellent Foundation for Market Expansion Richmond Deposit Market Share Average Number of Deposits Market Branch Size Institution (ST) Branches ($mm) Share ($mm) Bank of America Corp. (NC) 25 12,528 38.6 $ 501 Wells Fargo & Co. (CA) 63 6,350 19.5 $ 101 SunTrust Banks Inc. (GA) 45 3,630 11.2 $ 81 BB&T Corp. (NC) 43 2,870 8.8 $ 67 Total 78.1 TowneBank Richmond 8 688 2.1 $ 86 Deposit Data as of June 30, 2014
Market Statistics Projected Projected HH Total Population Population Median Income Population Change Change HH Change 2015 2010-2015 2015-2020 Income 2015-2020 MSA (Actual) (%) (%) 2015 ($) (%) Virginia Beach - Norfolk- Newport News, VA-NC 1,729,758 3.16 3.83 60,591 8.25 Richmond, VA 1,260,476 4.34 4.64 59,762 4.97 Outer Banks, NC 39,645 3.44 4.13 57,313 8.83 MSA Totals 3,029,879 Source: SNL
Total Assets $7,000 12% compounded annual $6,055 growth rate during credit $6,000 cycle (‘07 - ’12) $4,982 $5,000 $4,673 $4,406 $3,871 $4,082 $4,000 $3,606 $3,134 $3,000 $2,501 $2,195 $1,803 $2,000 $1,448 $932 $203 $385 $560 $764 $1,000 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Dollars in Millions
Net Income $50.0 26.8% compounded $40.0 annual growth rate for the past 15 years $30.0 $20.0 $10.0 $- $(10.0) (Dollars in Millions)
2015 Performance Highlights YTD Financial Highlights 2015 YTD 2014 2013 • Record Q2 earnings of $18 Million; Noninterest Income¹ $ 61,732 $ 96,744 $ 89,916 Net Income $ 32,350 $ 42,169 $ 41,762 an increase of 53% Y/Y Diluted Earnings per Share $ 0.63 $ 1.18 $ 1.14 Dividends Declared per Share $ 0.23 $ 0.43 $ 0.38 • YTD Earnings of $32 Million; an increase of 42% Y/Y Total Assets $ 6,055,181 $ 4,982,485 $ 4,672,997 Total Loans $ 4,228,127 $ 3,564,389 $ 3,381,194 Total Deposits $ 4,686,652 $ 3,846,602 $ 3,567,104 • Total Revenues climbed 26% to $78 Million for the fjrst six months Return on Average Assets 1.11% 0.87% 0.93% of 2015 Return on Average Tangible Common Equity 11.24% 10.95% 11.30% Net Interest Margin ² 3.52% 3.38% 3.61% • Strong Loan and Deposit growth Nonperforming Assets/Total Assets 0.89% 0.84% 1.12% Allowance for Loan and Losses/Total Loans 0.88% 1.06% 1.19% • Continued build out of Richmond Net Loan Charge-offs/Average loans 3 0.03% 0.09% 0.20% platform and Insurance M&A activity Common Equity Tier I 12.93% 1 Excludes gain(loss) on investment securitjes 2 Non-GAAP fjnancial measure. See appendix for reconciliatjon 3 YTD Annualized
Loan Portfolio at June 30, 2015 High-Quality, Stable Portfolio Highlights Consumer • Organic loan growth during Q2 of $134 MM and Other or 12.6% annualized 3% C&I Construction • Richmond platform contributed $67 Million 17% 13% of organic growth during fjrst half of 2015 • NPAs / Assets of .89% 1-4 Family • Allowance to NPLs of 5.0x 23% CRE-Owner • Top 10 loan relationships represent 9.31% of Occupied the held for investment portfolio CRE- 18% Investment related Multifamily properties 3% 23% $4.2 billion Yield on Loans: 4.7%
Strong Capital Position (1) Non-GAAP fjnancial measure. See appendix for reconciliatjon.
Distinguished Performance For the five-year period between 2009 and 2014, the KBW Bank Honor Roll members significantly outperformed their banking peers and the market .
Attractively Valued Versus Peers • Using a comparable group of similar asset-size public banks, TOWN is attractively priced • TOWN has solid asset and capital ratios and profjtability metrics but trades at a discount to peers Capital Position Profitability Asset Quality Valuation Price/ LLR/ NPAs²/ Tang. Total TCE/ Leverage Gross Total Book LTM Market Assets TA Ratio ROAA ROATCE Loans Assets Value EPS Value ($) (% ) (% ) (% ) (% ) (% ) (% ) (% ) (x) ($) Peers 1,3 4,269 8.39 9.60 0.87 11.34 0.92 0.95 190 17.8 743 TOWN 4 6,055 10.52 11.14 1.21 11.93 0.88 0.89 140 14.3 851 (1) Comparable peer group consists of UBSH, CARE, YDKN, BNCN, CFNL, FBNC, SSB (2) Nonperforming assets defjned as nonaccrual loans and leases, 90 days or more past due and leases, and real estate owned (3 )Pricing data as of 7/21/2015 and fjnancial data as of 3/31/2015 (4) Pricing data as of 7/21/2015 and fjnancial data as 0f 6/30/2015 Source: SNL Financial
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