2016 AND F OURTH Q UARTER U PDATE
Corporate Headquarters Additional Information Please Contact: 6001 Harbour View Blvd William B. Littreal Suffolk, VA 23435 757-638-6813 757-638-6701 William.Littreal@townebank.net www.townebank.com Forward-Looking Statements Statements made in this presentation, other than those concerning reported historical financial information, may be considered forward-looking statements, which speak only as of the date of this presentation, are based on current expectations, and involve a number of assumptions. These include statements as to the anticipated benefits of TowneBank’s proposed merger with Paragon Commercial Corporation (“Paragon”), including future financial and operating results, cost savings and enhanced revenues that may be realized from the merger as well as other statements of expectations regarding the merger and any other statements regarding future results or expectations. 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. TowneBank’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors which could have a material effect on the operations and future prospects of TowneBank, and the resulting company after the proposed merger, include but are not limited to: the businesses of TowneBank and Paragon may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected timeframe; revenues following the merger may be lower than expected; customer and employee relationships and business operations may be disrupted by the merger; the ability to obtain required regulatory and stockholder approvals, and the ability to complete the merger on the expected timeframe may be more difficult, time-consuming or costly than expected; 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 the loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in the companies’ respective market areas; the companies’ respective implementation of new technologies and their ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; and 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 (“FDIC”) or Paragon with the Securities and Exchange Commission (“SEC”). TowneBank undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new 2 information, future events or otherwise.
Non-GAAP Financial Measures This presentation contains certain non-GAAP 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 earning, 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. 3
Welcome to TowneBank (TOWN) The Towne story began in my home garage in the summer of 1998 when a small group of long-time friends and banking associates came together to lay the foundation for what was to become TowneBank. With caring as a specific business strategy and a deep-rooted passion for service to others, our defined 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 and expanded to Richmond, VA MSA. Our initial stock offering was substantially oversubscribed as over 4,000 community shareholders invested over $50 million in what was the largest capitalization of a new bank in Virginia history. In another first, 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 reputation our bankers enjoyed with the banking regulators allowed the bank to open with 90 hometown bankers and three banking centers located in the cities 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, residential and vacation property management along with commercial and residential mortgage services. As a tribute to our early investors and community supporters, Towne now has assets over $8.6 billion, an enviable record of 18 consecutive years of increased earnings, and has returned over $178 million in common dividends since our opening on April 8, 1999. As you review the information contained in this Investor Presentation, please know that we welcome you to join our TowneBank family of investors and supporters as we embark on a new and continued journey as a growth company. Sincerely, G. Robert Aston, Jr. Chairman and Chief Executive Officer 4
Why TowneBank? Dominant Deposit Market Efficient Branch Strategy Disciplined Acquirer and Share Experienced Integrator Dominant deposit market share in Successfully completed and $176.9 million average branch size ¹ legacy markets and a scalable integrated two acquisitions since deposit platform in Paragon Bank’s 2014 and recently announced NC (PBNC) high-growth Raleigh acquisition of Paragon Bank NC and Charlotte markets (PBNC) Consistent Earnings Growth Diversified Business Model Strong Asset Quality & Credit Focused Culture NPAs ²/ Assets - 0.39% & NCOs / 17 consecutive years of earnings 42.5% of revenue base is comprised Average Loans HFI - 0.03% ¹ growth (inclusive of the financial of non-interest income driven by crisis) insurance and mortgage banking businesses ¹ ¹ Financial information as of or for the period ended September 30, 2017. 5 ² Nonperforming assets excluding restructured loans (nonaccrual loans, real estate owned and repossessed assets) as a percent of total assets.
Total Assets 12% compounded annual $12.0 15% compounded growth rate during credit annual growth rate cycle (‘07 – ’12) $10.5 for the last 5 years $10.0 $8.6 $8.0 $8.0 $6.3 $6.0 $3.6 $3.9 $4.1 $4.4 $4.7 $5.0 $4.0 $3.1 $2.2 $2.5 $0.9 $1.4 $1.8 $2.0 $0.2 $0.4 $0.6 $0.8 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Pro (Dollars in billions) 6 YTD forma* *Total assets estimated as of closing assuming the successful acquisition of Paragon Commercial Corporation ($1.74 billion in assets as of September 30, 2017) and continued organic growth.
Net Income $80.0 28% compounded annual growth rate $70.0 for the past 17 years $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $- 1 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016 2017 YTD YTD $(10.0) (Dollars in millions) 7 1) 2016 Core Earnings of $80.2 million, GAAP Earnings of $67.3 million excluding $12.9 of one-time charges, net of taxes
TowneBank Growth History Monarch Financial Holdings, Inc. Acquired - $2.7 Billion $1.2 billion in Total Assets Organic - $5.3 Billion Hampton Roads, VA MSA $9,000 $7,974 $8,000 Franklin Financial Corp. $7,000 $1.1 billion in Total Assets $6,297 Bank of Currituck Richmond, VA MSA $6,000 $173 million in Total Assets $4,982 NE N. Carolina (Outer Banks) $5,000 $4,406 $4,673 Millions $3,871 $4,082 Harbor Bank $4,000 $3,606 $272 million in Total Assets $3,134 $3,000 Newport News-Hampton, VA $2,501 $2,195 $1,803 $2,000 $1,448 $932 $1,000 $764 $560 $385 $203 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Organic Acquired 8
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