INVESTOR PRESENTATION SECOND QUARTER 2016 Forward-Looking Statement - - PowerPoint PPT Presentation

INVESTOR PRESENTATION SECOND QUARTER 2016

Forward-Looking Statement

Statements made in this presentation, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this presentation and are based on current expectations and involve a number of assumptions. 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

• f TowneBank include but are not limited to: the businesses of TowneBank and the recently-acquired Monarch Financial

Holdings, Inc. may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, and expected revenue synergies and cost savings from the acquisition may not be fully realized or realized within the expected timeframe; 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; the quality and composition of the loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in TowneBank’s market areas; the implementation of new technologies; the ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; changes in accounting standards, principles, policies and guidelines; mergers, acquisitions and dispositions; and other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation. TowneBank undertakes no

• bligation to update or clarify these forward-looking statements, whether as a result of new information, future events or
• therwise.

Non-GAAP Financial Measures

This slide presentation contains certain non-GAAP financial measures determined by methods other than in accordance with generally accepted accounting principles. Such non-GAAP financial measures include the following: fully tax-equivalent net interest margin, 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

Sincerely,

• G. Robert Aston, Jr.

Chairman and Chief Executive Officer 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

• ver $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

• f $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 approaching $8 billion, an enviable record of 16 consecutive years of increased earnings, and has returned over $136 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.

Welcome to TowneBank (TOWN)

3

$203 $385 $560 $764 $932 $1,448 $1,803 $2,195 $2,501 $3,134 $3,606 $3,871 $4,082 $4,406 $4,673 $4,982 $6,297 $7,941

$- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Assets

(Dollars in millions)

12% compounded annual growth rate during credit cycle (‘07-’12)

4

$36.7 $(10.0) $- $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0

Net Income

28% compounded annual growth rate for the past 16 years

(Dollars in millions) 2016 Core Earnings of $36.7 million, GAAP Earnings of $24.1 million

5

$24.1 $12.6

Rank Institution (ST) Branches Deposits in Market ($mm) Market Share (%) Average Branch Size ($mm)

1 TowneBank (VA) 28 4,712 20.64 168.29 2 Wells Fargo & Co 54 4,488 19.66 83.11 3 SunTrust Banks Inc. (GA) 39 3,835 16.80 98.33 4 BB&T Corp. (NC) 49 2,973 13.03 60.67 5 Bank of America Corp. (NC) 36 2,725 11.94 75.69 6 Hampton Roads Bankshares Inc. (VA) 23 906 3.97 39.39 7 Old Point Financial Corp. (VA) 20 726 3.18 36.30 8 Southern BancShares (NC) 11 474 2.07 43.09 9 PNC Financial Services Group (PA) 11 363 1.59 33.00 10 Farmers Bankshares Inc. (VA) 5 313 1.37 62.60 Total For Institutions In Market 332 22,826

Strong Market Position

(1) Data as of 6/30/2015 FDIC Summary of Deposits; presented for illustrative purposes only and does not indicate actual results of the combined company. Source: SNL Financial

Average Branch Size ($mm) Market Share (%) Deposits in Market ($mm) Number of Branches Institution (ST)

Virginia Beach-Norfolk-Newport News, VA-NC ¹

Rank

6

Hampton Roads Market Share Overview

1

1) Data as of 6/30/2015 FDIC Summary of Deposits

Bank 2015 1999 2010 2005

7

Excellent Foundation for Growth – Richmond VA MSA

1) Data as of 6/30/2015 FDIC Summary of Deposits. 2) Excludes Capital One.

• Closed transaction on January 2, 2015
• Successfully completed systems integration and conversion
• Loan growth Year over Year exceeding 27%
• Launched brand awareness campaign during Q1 2015
• Acquired 3 Insurance agencies in Central VA
• Opening Richmond Headquarters on August 1st

Richmond Update

Average Branch Size ($mm) Market Share (%) Deposits in Market ($mm) Number of Branches Institution (ST)

Richmond Deposit Market Share

8 TowneBank Richmond 8 655 1.83 $ 82

Monarch Bank Acquisition

• Upon closing, the combined company became the 2nd largest community bank in Virginia with approximately

$7.94 billion in assets, $6.2 billion in deposits and $5.6 billion in loans

• Combined Company is the only community bank with a #1 deposit market share in one of the 50 largest MSAs in

the U.S.¹

• #1 by deposit market share in the Virginia Beach-Norfolk-Newport News, VA-NC MSA
• Combined non-interest bearing deposits of $2.0 billion or approximately 32% of total combined deposits
• Supports continued expansion of TOWN’s non-interest income business lines (e.g. insurance, mortgage, etc.)

Strategically Compelling

• Immediate EPS accretion of approximately 17% in full year 2017
• Low single-digit tangible book value dilution, earned back in less than 2.5 years
• Strong capital, with TCE/TA of 9.8% post closing, which supports growth and capital management opportunities
• Significant cost savings due to branch and back office overlap
• Monarch Bank’s asset-sensitive balance sheet is well-positioned for a rising rate environment (not included in pro

forma financial modeling)

Financially Attractive

• Thorough multi-week due diligence process covering all aspects of MNRK’s operations
• 2.0 % FMV adjustment to loans reduces risk
• Strong familiarity - Members of management teams have known each other for many years
• Close proximity of Companies reduces execution risk
• Many of the MNRK customers are known to TOWN

Low Risk Profile

(1) Largest MSAs by population; for banks with assets less than $15 billion. Source: SNL Financial

9

Combined Company to be 2nd Largest Community Bank in Virginia

• Combined Company is firmly established as the largest bank by deposits in the Virginia Beach-Norfolk-Newport

News, VA-NC MSA and the second largest independent community bank in Virginia, which is one of the most attractive markets in the U.S.

• The only community bank with a #1 deposit market share in one of the 50 largest MSAs in the U.S.¹
• Combined Company is #1 by deposit market share in the Northeastern, NC MSA²
• 3rd largest community bank in the Richmond, VA MSA by deposit market share

(1) Largest MSAs by population; for banks with assets less than $15 billion. (2) Includes Camden, Currituck and Dare counties. (3) Data as of 6/30/2015 FDIC Summary of Deposits; presented for illustrative purposes only and does not indicate actual results of the combined company. Source: SNL Financial

Number Deposits Market

• f

in Market Share Rank Institution (ST) Branches ($mm) (%) 1 Wells Fargo & Co. (CA) 290 $36,737 20.06 2 Bank of America Corp. (NC) 142 27,609 15.08 3 BB&T Corp. (NC) 358 22,794 12.45 4 SunTrust Banks Inc. (GA) 209 18,786 10.26 5 Capital One Financial Corp. (VA) 80 10,649 5.82 6 Union Bkshs Corp (VA) 124 5,795 3.16 Pro Forma 32 5,208 2.84 7 TowneBank (VA) 32 4,340 2.37 8 United Bankshares Inc. (WV) 61 4,325 2.36 9 Carter Bank & Trust (VA) 88 3,885 2.12 10 PNC Financial Services Group (PA) 100 3,360 1.84 23 Monarch Financial Hldgs (VA) 11 868 0.47 Number Deposits Market

• f

in Market Share Rank Institution (ST) Branches ($mm) (%) 1 Pro Forma 27 4,712 20.64 1 Wells Fargo & Co. (CA) 54 $4,488 19.66 2 TowneBank (VA) 27 3,844 16.84 3 SunTrust Banks Inc. (GA) 39 3,835 16.80 4 BB&T Corp. (NC) 50 2,973 13.03 5 Bank of America Corp. (NC) 36 2,725 11.94 6 Monarch Financial Hldgs (VA) 11 868 3.80 7 Old Point Financial Corp. (VA) 20 726 3.18 8 Hampton Roads Bankshares Inc. (VA) 17 655 2.87 9 Southern BancShares (NC) (NC) 15 474 2.07 10 PNC Financial Services Group (PA) 11 363 1.59

Virginia Beach-Norfolk-Newport News, VA-NC ³ Virginia Deposit Market Share ³

10 10

Towne Business Model

11 11

The Heart Led Leader

“The essence of true leadership is rooted in humility and the ability to develop followership by engaging the hearts and minds of those around you.”

• G. Robert Aston, Jr.

12 12

The Disney Touch

13 13

The Ritz Carlton Standard

 Empower Through Trust  Select – Don’t Hire  Focus on Others  Ultimate Guest Experience

16 16

Hug Your People

 Teller Shopping  Fitness Center  Service Awards  Perfect Attendance  Birthday Holiday  Towne University

17 17

Hug Your People

18 18

Hug Your Customers

19 19

Built to Serve

Company Location Total VA Donations Altria Group Inc. Richmond $18,052,570 Dominion Resources Richmond 8,600,000 Wells Fargo San Francisco (Regional HQ: McLean) 7,072,340 MeadWestvaco Corp. Richmond 4,500,000 Potomac Health Foundation Woodbridge 4,137,566 Capital One Financial Corp. McLean 4,100,000 TowneBank Portsmouth 3,807,378 Anthem Blue Cross and Blue Shield Richmond 3,300,000 Norfolk Southern Corp. Norfolk 3,266,528 20 20

With Diversified Revenue Stream

LTM Fee Inc./Revenue: 39%

3 7 34 60

High Performing Bank Screen (1)(2) # of Banks

High Performing Community Bank

#1 DMS Rank in a Top 50 MSA (Based on Population size) Estimated EPS Growth (2015 – 2017E) > 15% Fee Income / Operating Revenue > 30% Last Twelve Months ROAA > 1.0% Publicly Traded U.S. Banks With Asset between $5 – 10 Billion

Key Attributes

Highly Profitable Bank

1.12% LTM ROAA

Strong Forecasted EPS growth

15.6% CAGR 2015-2017E

Top Deposit Market Share

#1 DMS Rank in VA Beach, MSA

Notes es

• 1. Financial data from SNL; reflects the period ending March 31, 2016
• 2. 2017 Estimated EPS from SNL; reflects IBES consensus medians as of July 18, 2016

21 21

For the six-year period between 2009 and 2015, the KBW Bank Honor Roll members significantly

• utperformed their banking peers and the market.

22 22

Distinguished Performance

22 22

Key Takeaways

• #1 Market share in Norfolk- Virginia Beach MSA
• Sustainability - Efficient branching strategy; $163.8 million Average Branch Size ¹
• Consistency - 16 years Increasing Earnings
• 32% Noninterest DDAs
• 43% Noninterest Income
• Culture of Caring
• Historically strong credit culture

23 23

• 1. Reflects the period ending June 30, 2016

THANK YOU!

Banking is our Business. Serving Others and Enriching Lives is our Passion.

24 24

• Appendix

25

APPENDIX

25 25

The Towne Model



Caring as the Foundation for our Company Culture and as a Specific 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



Diversified Financial Services driving Noninterest Income

26 26

Towne Family of Companies

27 27

Financial Highlights 2016 YTD 2015 2014 Noninterest Income¹ (in millions) 68,882 $ 116,379 $ 96,744 $ Net Income (in millions) 24,078 $ 62,382 $ 42,169 $ Diluted Earnings per Share 0.47 $ 1.22 $ 1.18 $ Dividends Declared per Share 0.25 $ 0.47 $ 0.43 $ Total Assets (in billions) 7,941 $ 6,297 $ 4,982 $ Total Loans (in billions) 5,560 $ 4,519 $ 3,564 $ Total Deposits (in billions) 6,186 $ 4,914 $ 3,847 $ Return on Average Assets 0.75% 1.03% 0.87% Return on Average Tangible Common Equity 7.92% 10.51% 10.95% Net Interest Margin ² 3.36% 3.45% 3.38% Nonperforming Assets/Total Assets 0.46% 0.68% 0.84% Allowance for Loan and Losses/Total Loans 0.71% 0.85% 1.01% Net Loan Charge-offs/Average loans 0.02% 0.01% 0.09% Common Equity Tier I 11.82% 12.59%

• YTD Core Operating Earnings
• f $36.7M, up $3.9MM or

11.7%

• YTD Total Revenues climbed

8.42% to $163 Million

• Loans outstanding grew $1.01

billion or 31.5%; Nonacquired growth YTD of $182.9 million

• Deposits up $1.5 billion or 32%,

Noninterest DDA up 43.07%

• Closed MNRK deal Q2 and

successfully converted Bank systems

2016 Performance Highlights

(1) Excludes gain(loss) on investment securities. (2) Non-GAAP financial measure. See appendix for reconciliation.

Financial Highlights 2016 YTD 2015 2014

28 28

Highlights:

Summary 2016 Earnings

(1) Excludes gain(loss) on investment securities and properties. (2) Non-GAAP financial measure. See Appendix for reconciliation.

29 29

March 31, Y/Y Linked Quarter Y/Y

Dollars in Thousands

2016 2015 2016   2016 2015  Net Interest Income $47,784 $44,884 $46,336 6% 3% $94,120 $88,440 6% Provision for Loan Losses 2,099 1,723 (259) 22% (910%) 1,840 2,045 (10%) Total Noninterest Income1 36,468 31,033 32,415 18% 13% 68,882 61,732 12% Realized Gain on Securities and Properties

• 2,052
• (100%)
• 2,102

(100%) Merger and Acquisition Expense 18,435 370 414 N/M N/M 18,849 784 N/M Other Noninterest Expense 53,464 48,697 51,747 10% 3% 105,211 98,723 7% Net Income before Taxes and NCI 10,254 27,179 26,849 (62%) (62%) 37,102 48,789 (24%) Tax Provision 2,375 8,201 8,188 (71%) (71%) 10,563 14,586 (28%) Effective Tax Rate (%) 27.51% 31.53% 31.48% (13%) (13%) 30.49% 31.08% (2%) Net Income 7,879 18,978 18,661 (58%) (58%) 26,539 34,203 (22%) Noncontrolling Interest 1,620 1,166 842 39% 92% 2,461 1,853 33% Preferred Dividends

• 13

(100%) Net Income Avail to Common (GAAP) 6,259 $ 17,812 $ 17,819 $ (65%) (65%) 24,078 $ 32,337 $ (26%) Acquisition-related expenses 18,435 370 414 N/M N/M 18,849 784 N/M Non-core charges 18,435 370 414 N/M N/M 18,849 784 N/M Income tax (expense) benefit (6,177) (130) (33) N/M N/M (6,210) (274) N/M Non-core charges, net of taxes 12,258 240 381 N/M N/M 12,639 510 N/M Core operating earnings (non-GAAP) 18,517 $ 18,052 $ 18,200 $ 3% 2% 36,717 $ 32,847 $ 12% Diluted EPS $0.12 $0.35 $0.35 (66%) (66%) $0.47 $0.63 (25%) Common Dividend $0.13 $0.12 $0.12 8% 8% $0.25 $0.24 4% NIM - fully tax equivalent2 3.36% 3.52% 3.37% (16bps) (1bp) 3.36% 3.52% (16bps) ROA 0.39% 1.21% 1.14% (68%) (66%) 0.75% 1.11% (32%) Three Months Ended Six Months Ended June 30, June 30,

Core Net Income by Segment – 2Q16 vs 2Q15

2016 2015

• Bank up 13.4% or $3.3

million

• Realty up 22% or $1.1

million

• Insurance increased

35% or $1.1 million

Insurance $4,070 11% Realty $6,038 16% Bank $27,733 73% Insurance $3,013 9% Realty $4,936 15% Bank $24,451 75%

Highlights:

30 30

Earnings Per Share (Diluted) Book Value

Financial Performance Trends

(1) Non-GAAP financial measure. See appendix for reconciliation. See reconciliation of Non-GAAP measures in our annual reports form 10-K for prior periods.

0.71 0.76 1.03 1.14 1.18 1.22 0.47 (0.40) (0.20) 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 2010 2011 2012 2013 2014 2015 2016 $12.05 $16.84 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 2016Y 2015Y 2014Y 2013Y 2012Y 2011Y 2010Y Tangible Book Value Per Share¹ Book Value Per Share 31 31

Net Income

(Dollars in thousands)

32 32

$11,131 $11,677 $12,126 $7,235 $14,538 $17,812 $17,566 $12,466 $17,819 $6,259 $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2

2015 Total $62,382 2014 Total $42,169 2016 Total $24,078

Net Interest Income (Fully Taxable Equivalent)

33 33 48,673 50,389 6 25 1445 601 289 13 29 6

45,000 46,000 47,000 48,000 49,000 50,000 51,000

Net Interest Margin

Net Interest Margin NII Sensitivity

3.52% 3.40% 3.36% 3.37% 3.36% 3.35% 3.44% 3.42% 3.34% 3.27% 3.31% 3.31%

3.10% 3.15% 3.20% 3.25% 3.30% 3.35% 3.40% 3.45% 3.50% 3.55% 4Q 14 1Q 15 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 Margin Margin exPAA

34 34 0.0% 3.8% 7.3% 10.7% 13.5% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Base +100 bp +200 bp +300 bp +400 bp

Noninterest Income

• Total noninterest income

(excluding investment gains) up 15.19% Y/Y

• Residential mortgage banking

income up 4.37% compared to 2015; new property management company added $2.66 million

• Record Mortgage volumes for Q2

2016

$- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 2010Y 2011Y 2012Y 2013Y 2014Y 2015Y 2016YTD 35 35

Noninterest Income

March 31, Y/Y Linked Quarter

Dollars in Thousands

2016 2015 2016  

Residential mortgage banking income, net 12,148 $ 10,251 $ 7,118 $ 18.51% 70.67% Real estate brokerage and property management, net 6,116 4,584 4,827 33.42% 26.70% Insurance commissions and other title fees and income, net 11,627 9,885 14,033 17.62% (17.15%) Service charges on deposit accounts 2,284 2,326 2,176 (1.81%) 4.96% Credit card merchant fees, net 1,113 566 895 96.64% 24.36% Other income 3,180 3,421 3,366 (7.04%) (5.53%) Subtotal before gain on investments 36,468 31,033 32,415 17.51% 12.50% Net gain on investment properties

• 1,933
• (100.00%)

N/M Net gain on investment securities

• 119
• (100.00%)

N/M Total noninterest income 36,468 $ 33,085 $ 32,415 $ 10.23% 12.50%

Three Months Ended June 30,

• Noninterest income

increased 17.51% when compared to comparable quarter last year

• Increase attributable to

residential mortgage banking income

Highlights:

36 36

Towne Insurance

Insurance Highlights:

• Ranked 68th of Top 100 Business

Insurance Agencies

• Broad areas of specialty and products
• Successful Acquirer and Integrator- 19

acquisitions since 2001; highly competitive landscape

• Strong consistent cash flows
• Dominant market share in legacy

footprint

• Opportunities to diversify in

complementary markets

(Dollars in millions)

Gross Commissions

$22.8 $25.8 $27.6 $34.3 $42.3 $47.5 $29.6 $- $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 $50.0 2010 2011 2012 2013 2014 2015 2016 YTD

2015 Best Practices Agency

37 37

Towne Insurance

Commission and fee income Property and casualty 8,815 $ 7,945 $ 870 $ 10.95% Employee benefits 2,907 2,505 402 16.05% Travel insurance 1,163 910 253 27.80% Specialized benefit services 152 135 17 12.59% Total commissions and fees 13,037 11,495 1,542 13.41% Contingency and bonus revenue 445 391 54 13.81% Other income 52 47 5 10.64% Total revenue 13,534 $ 11,933 $ 1,601 $ 13.42% Employee commission expense 2,254 2,325 (71) (3.05%) Revenue, net of commission expense 11,280 $ 9,608 $ 1,672 $ 17.40% Total operating expenses 8,777 7,403 1,374 18.56% Net Income Before Tax 2,503 2,205 298 13.51% Plus: Acquisition related expenses 277 176 101 57.39% Plus: Amortization of intangible assets 692 540 152 28.15% Operating earnings before income taxes (non-GAAP) $3,472 $2,921 $551 18.86%

38 38 June 30, 2016 June 30, 2015 Variance $ %

• Y/Y Growth in Revenue

driven by three acquisitions during Q4 15; Contributed $1.1 million additional revenue during the quarter

• Commercial lines up 17.3%

YTD over 2015

• Continued growth in Travel

and Benefits

Highlights:

Towne Investment Group

Assets Under Management (Includes Direct Held Assets)

Wealth Management Highlights:

• 2,500+ households
• Stable fee income
• Addition of $225MM+ in Asset

Under Management from Monarch team

(Dollars in millions)

39 39 $752 $870 $997 $1,194 $1,376 $1,564 $1,994 $- $500 $1,000 $1,500 $2,000 $2,500 2010 2011 2012 2013 2014 2015 2016

• A Top 20 Berkshire Hathaway

HomeServices Affiliate

• 414 Real Estate Agents
• No. 2 in Market Share
• Generates Mortgage Activity
• Manages 1,552 Housing Units
• Beach Properties Manages 345

Vacation Homes in Hilton Head, South Carolina

• Oak Island Accommodations

Manages 687 Vacation Homes in Oak Island, North Carolina

Realty Highlights :

Berkshire Hathaway HomeServices

Towne Realty

(Dollars in millions)

Sales Volume

$817 $827 $850 $994 $1,009 $1,081 $597 $- $200 $400 $600 $800 $1,000 $1,200 40 40

Towne Mortgage

Mortgage Highlights :

• Record Q2 volume of $592

million; Strong pipeline

• Historically strong purchase

money volumes driven by Real Estate companies

• Aggressive efforts to scale
• perations consistent with

production

• Disciplined underwriting; No

material losses through cycle

(Dollars in millions) *includes Joint Venture volumes

Origination Volume*

41 41 $948 $771 $1,327 $1,434 $1,222 $1,573 $905 $- $500 $1,000 $1,500 $2,000 $2,500 $3,000 2010 2011 2012 2013 2014 2015 2016 YTD Mortgage only market Core

Noninterest Expense

• Noninterest expense, excluding

M&A, increased 6.57% compared to 2015

• Additional acquisition related

expenses of $18.07 million combined with increased

• perating expenses of $4.3

million from acquired Insurance and Property Management businesses drove the increase

2016

$- $50,000 $100,000 $150,000 $200,000 $250,000 2010Y 2011Y 2012Y 2013Y 2014Y 2015Y 2016YTD 42 42

Noninterest Expense

June 30, $  2016 Q2 Q-2 '15 %  Non-interest Expenses Salaries and benefits $30,093 $3,549 13.37% Occupancy expense 5,157 301 6.20% Furniture and equipment 2,381 13 0.53% Other Advertising and marketing 1,978 (87) (4.23%) Acquisition-related expenses 18,435 18,065 4885.70% Charitable Contributions 1,373 (202) (12.83%) Bank franchise tax/SCC fees 941 271 40.49% FDIC and other insurance 1,280 (58) (4.35%) Telephone and Postage 1,202 47 4.10% Travel/meals/entertainment 489 134 37.69% Outside processing 1,395 254 22.25% Professional fees 1,159 (326) (21.93%) Stationery and supplies 546 20 3.71% Software expense 1,538 46 3.05% Intangible Amortization 1,100 298 37.19% Foreclosed property expenses 458 (68) (13.00%) Directors fees and expenses 329 37 12.55% Other 2,045 540 35.89% Total Other 34,268 18,970 124.00% Total noninterest expense $71,899 $22,832 46.53%

43 43

• Noninterest expense

increased 46.53% when compared to comparable quarter last year

• Additional acquisition related

expenses of $18.07 million combined with increased

• perating expenses of $2.3

million from acquired Insurance and Property Management businesses drove the increase Highlights:

June 30, 2016 Q2 $ ∆ Q-2 ‘15 % ∆

Efficiency Ratio

Efficiency Ratio (excluding securities, gains, OREO cost, M&A cost, and Intangible Amortizations)

44 44 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2

60% 62% 65% 62% 60% 59% 68% 94% 81% 62% 70% 70% 89% 58% 69% 61% 64% 72% 64% 62%

Efficiency Ratio

Bank Segment Realty Segment Insurance Segment Consolidated

June 30, March 31, June 30,

(Dollars in Thousands)

2016 2016 2015 Total Cash & Securities 1,128,085 $ 1,108,542 $ 1,048,788 $ Gross Loans 5,559,949 4,552,260 4,228,127 Loan Loss Reserve 39,618 37,760 37,290 Total Net Loans 5,520,331 4,514,500 4,190,837 Other Assets 1,292,325 742,127 815,556 Total Assets 7,940,741 $ 6,365,169 $ 6,055,181 $ Total Deposits 6,186,279 $ 4,955,126 $ 4,686,652 $ FHLB Borrowings 500,798 428,940 437,584 Other Debt 44,008 39,442 35,737 Total Debt 544,806 468,382 473,321 Total Other Liabilities 148,108 105,658 92,317 Total Liabilities 6,879,193 $ 5,529,166 $ 5,252,290 $ Equity ($000) Common Equity 1,050,360 826,875 794,018 Equity Attributable to Parent Company 1,050,360 826,875 794,018 Noncontrolling Interests 11,188 9,128 8,873 Total Equity 1,061,548 $ 836,003 $ 802,891 $

Balance Sheet Summary

• Stable core funding;

32% noninterest DDA

• Core Return on Average

Tangible Equity 11.70%

• Conservative securities

portfolio with 1.3 year average duration

June 30, 2016 June 30, 2015 March 31, 2016 (Dollars in Thousands)

45 45

Highlights:

June 30, $  %  Monarch Purchase Legacy Legacy 2016 Q-2 '15 Q-2 '15 Price Allocation $  % 

(dollars in thousands)

Total cash and cash equivalents $221,974 36,864 $ 19.91% $67,444 ($30,580) (16.52%) Total securities 906,111 42,433 4.91% 20,818 21,615 2.50% Mortgage loans held for sale 474,978 308,984 186.14% 283,528 25,456 15.34% Loans, net of unearned income and deferred 5,559,949 1,331,822 31.50% 818,119 513,703 12.15% Allowance for loan losses (39,618) (2,328) 6.24%

• (2,328)

6.24% Premises and equipment, net 202,333 29,841 17.30% 23,998 5,843 3.39% OREO 25,707 (19,794) (43.50%)

• (19,794)

(43.50%) Bank-owned life insurance policies 164,933 18,204 12.41% 13,129 5,075 3.46% Goodwill and intangibles 299,000 123,793 70.66% 113,816 9,977 5.69% Other assets 125,373 15,741 14.37% 46,223 (30,482) (27.80%) Total Assets $7,940,741 $1,885,560 31.14% $1,387,075 $498,485 8.23% Total deposits $6,186,279 $1,499,626 32.00% $1,061,620 $438,006 9.35% Total borrowings 544,806 71,485 12.81% 82,046 (10,561) (2.23%) Other liabilities 148,108 55,792 15.10% 20,900 34,892 37.80% Total Liabilities $6,879,193 1,626,903 60.43% 1,164,566 462,337 8.80% Total Equity 1,061,548 258,657 32.22% 222,509 36,148 4.50% Total Liabilities and Shareholders' Equity $7,940,741 $1,885,560 31.14% $1,387,075 $498,485 8.23%

Balance Sheet Profile

June 30, 2016 $ ∆ Q-2 ‘15 % ∆ Q-2 ‘15 Legacy $ ∆ Legacy % ∆ Monarch Purchase Price Allocation

(dollars in thousands)

46 46

Loan Portfolio at June 30, 2016

High-Quality, Stable Portfolio

• Q2 nonacquired loan growth of $251

million or 11.17% annualized; Strong pipeline

• Richmond platform contributed $74.15

million of growth for Q2

• NPAs / Assets of .46%; Outstanding

asset quality metrics

• Allowance to NPLs of 3.74x
• Top 10 loan relationships represent 8.9%
• f the held for investment portfolio

$5.56 billion Yield on Loans: 4.47% QTD/4.49% YTD Highlights:

47 47

1-4 Family 21% Construction 15% CRE-Owner Occupied 16% CRE- Investment related properties 22% Multifamily 3% C&I 19% Consumer and

• ther

4%

Deposit Growth by Region

Deposit Growth Actual Actual Region 6/30/2016 6/30/2015 $  %  Richmond 735,021,354 655,163,816 79,857,538 12.19% Virginia Beach 1,566,445,134 1,121,352,208 445,092,926 39.69% Portsmouth 834,468,389 707,101,284 127,367,105 18.01% Chesapeake 816,376,597 550,126,315 266,250,282 48.40% Norfolk 793,628,191 482,511,839 311,116,352 64.48% Peninsula 725,827,618 636,634,271 89,193,347 14.01% Currituck 514,818,276 369,810,132 145,008,144 39.21% Williamsburg 321,098,604 215,460,393 105,638,212 49.03% Hampton Roads 5,572,662,808 4,082,996,441 1,489,666,367 36.48% TFSG 379 296 83 28.25% Corp/Eliminations (121,406,361) (51,508,187) (69,898,174) 135.70% Consolidated 6,186,278,180 4,686,652,366 1,499,625,814 32.00%

48 48

Actual 6/30/2016 $ ∆ % ∆ Deposit Growth Region Actual 6/30/2015

Loan Growth by Region

Loan Growth Actual Actual Region 6/30/2016 6/30/2015 $  %  Richmond 677,279,674 532,851,763 144,427,911 27.10% Virginia Beach 1,441,048,172 1,097,592,729 343,455,443 31.29% Peninsula 922,808,187 760,320,061 162,488,126 21.37% Chesapeake 735,443,733 475,104,862 260,338,872 54.80% Portsmouth 639,529,791 556,220,551 83,309,240 14.98% Norfolk 592,892,242 402,315,660 190,576,581 47.37% Currituck 275,929,296 183,492,404 92,436,892 50.38% Williamsburg 241,696,584 224,695,507 17,001,077 7.57% Hampton Roads 4,849,348,005 3,699,741,775 1,149,606,230 31.07% TFSG 46,005,189 9,158,587 36,846,602 402.32% Eliminations (12,683,896) (13,624,900) 941,005 (6.91%) Consolidated 5,559,948,972 4,228,127,224 1,331,821,748 31.50%

49 49

Actual 6/30/2016 $ ∆ % ∆ Loan Growth Region Actual 6/30/2015

11.82% 11.89% 12.50% 12.36% 12.45% 12.54% 14.01% 9.54% 12.65% 13.14% 15.27% 9.91% 4.50% 6.00% 8.00% 4.00%

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% Tier 1 Common Equity (CET1) RB Ratio¹ Tier 1 Ratio¹ Total RBC Ratio¹ Tier 1 Leverage¹ TOWN US Commercial Banks VA Commercial Banks Regulatory Minimum

Strong Capital Position

(1) Non-GAAP financial measure. See appendix for reconciliation.

50 50

• Targeting 8% Annualized Loan Growth; 18%-20% in Richmond market
• No significant ALLL releases anticipated
• Stable asset quality and charge-offs
• Continued reduction in NPAs
• Continue integration of Mortgage operations
• Primary focus on organic growth to build out existing markets
• Leverage excess Capital
• Opportunistic M&A in Banking and Insurance segments

Loans and Asset Quality Strategic

• Slight NIM expansion in Q3
• Focused noninterest expense control
• Drive Efficiency Ratio
• Near term Return on Average Assets range of 1.0% - 1.1%

Profitability

2016 Outlook Summary

51 51

Quarter Ended Quarter Ended June 30, 2016 March 31, 2016 Total assets

7,940,741 $ 6,365,169 $

Less: Goodwill

(257,485) (157,659)

Less: Intangible assets, net

(41,516) (29,286)

Tangible assets

7,641,740 $ 6,178,224 $

Total equity

1,061,549 $ 836,003 $

Less: Goodwill

(257,485) (157,659)

Less: Intangible assets, net

(41,516) (29,286)

Less: Noncontrolling interest

(11,189) (9,128)

Less: Preferred stock

• Tangible common equity

751,360 $ 639,930 $

Risk-based capital: Common equity tier 1 capital

768,087 $ 653,295 $

Tier 1

772,776 $ 657,142 $

Total

812,394 $ 694,902 $

Risk weighted assets

6,499,191 $ 5,161,961 $

Total assets for leverage capital purposes

6,253,394 $ 6,139,674 $

Tier 1 capital ratio

11.89% 12.73%

Total

12.50% 13.46%

Common equity Tier 1

11.82% 12.66%

Tier 1 leverage ratio

12.36% 10.70%

Non-GAAP Reconciliations

(Dollars in thousands)

Quarter Ended June 30, 2016 Quarter Ended March 31, 2016 52 52

Quarter Ended Quarter Ended Quarter Ended Quarter Ended June 30, 2016 March 31, 2016 December 31, 2015 September 30, 2015 Net interest margin - tax-equivalent (Non-GAAP) 3.36% 3.37% 3.36% 3.40% Adjustments to net interest margin: Income from bank-owned life insurance (0.04) (0.04) (0.07) (0.04) Tax-equivalent basis adjustment (0.05) (0.04) (0.04) (0.04) Net interest margin (GAAP) 3.27% 3.29% 3.25% 3.32% June 30, 2016 Book value (GAAP) 16.84 $ Impact of excluding average goodwill and other intangibles and amortization (4.79) Tangible book value (Non-GAAP) 12.05 $

Non-GAAP Reconciliations

Quarter Ended June 30, 2016 Quarter Ended March 31, 2016 Quarter Ended December 31, 2015 Quarter Ended September 30, 2015 June 30, 2016 53 53

Non-GAAP Reconciliations

Q2 '16 Q1 '16 Q4 '15 Q3 '15 Q2 '15

Total revenue 84,251,977 $ 78,750,237 $ 71,418,807 $ 75,974,056 $ 77,969,154 $ Net gain (loss) on OREO Sales 32,353 314,847 (45,460) (60,092) 73,856 Net gain (loss) on investment securities

• 735,506

119,359 Adjusted non-int inc 84,219,624 78,435,390 71,464,267 75,298,642 77,775,939 Total noninterest expenses 71,898,606 52,161,451 52,742,904 49,906,439 49,066,960 Less: Excl Expenses - M&A, Intangible Amortization, & OREO expenses 19,989,281 1,618,610 1,066,845 1,733,678 1,697,299 Adj Non int exp 51,909,325 $ 50,542,841 $ 51,676,059 $ 48,172,761 $ 47,369,661 $ Efficiency Ratio 85.4% 66.2% 73.9% 66.3% 63.1% Core efficiency Ratio (non-GAAP) 61.6% 64.4% 72.3% 64.0% 60.9%

Q2 '16 Q1 '16 Q4 '15 Q3 '15 Q2 '15

Total revenue 52,431,180 $ 51,423,723 $ 51,191,178 $ 50,902,593 $ 50,278,097 $ Net gain (loss) on OREO Sales 32,353 314,847 (45,460) (60,092) 73,856 Net gain (loss) on investment securities

• 735,506

119,359 Adjusted non-int inc 52,398,827 51,108,876 51,236,638 50,227,179 50,084,882 Total noninterest expenses 49,976,266 32,181,249 33,578,408 31,748,895 30,676,001 Less: Excl Expenses - M&A, Intangible Amortization, & OREO expenses 18,532,427 489,679 468,877 770,162 735,043 Adj Non int exp 31,443,839 $ 31,691,570 $ 33,109,531 $ 30,978,733 $ 29,940,958 $ Efficiency Ratio 95.4% 62.6% 65.6% 63.2% 61.2% Core efficiency Ratio (non-GAAP) 60.0% 62.0% 64.6% 61.7% 59.8%

Consolidated Banking Q2 '16 Q1 '16 Q4 '15 Q3 '15 Q2 '15

Total revenue 24,540,098 $ 13,412,379 $ 11,392,764 $ 15,614,996 $ 18,083,053 $ Net gain (loss) on OREO Sales

• Net gain (loss) on investment securities
• Adjusted non-int inc

20,540,098 13,412,379 11,392,764 15,614,996 18,083,053 Total noninterest expenses 13,144,924 11,184,668 10,961,094 10,858,419 10,988,433 Less: Excl Expenses - M&A, Intangible Amortization, & OREO expenses 486,868 367,995 256,579 256,579 246,361 Adj Non int exp 1,265,056 $ 10,816,673 $ 10,704,515 $ 10,601,840 $ 10,742,072 $ Efficiency Ratio 64.0% 83.4% 96.2% 69.5% 60.8% Core efficiency Ratio (non-GAAP) 61.4% 80.6% 94.0% 67.9% 59.4%

Q2 '16 Q1 '16 Q4 '15 Q3 '15 Q2 '15

Total revenue 11,280,699 $ 13,914,135 $ 8,834,865 $ 9,456,467 $ 9,608,004 $ Net gain (loss) on OREO Sales

• Net gain (loss) on investment securities
• Adjusted non-int inc

11,280,699 13,914,135 8,834,865 9,456,467 9,608,004 Total noninterest expenses 8,777,416 8,795,534 8,203,402 7,299,125 7,402,526 Less: Excl Expenses - M&A, Intangible Amortization, & OREO expenses 969,986 760,936 341,389 706,937 715,895 Adj Non int exp 7,807,430 $ 8,034,598 $ 7,862,013 $ 6,592,188 $ 6,686,631 $ Efficiency Ratio 77.8% 63.2% 92.9% 77.2% 77.0% Core efficiency Ratio (non-GAAP) 69.2% 57.7% 89.0% 69.7% 69.6%

Insurance Realty

54 54

Q2’16

Consolidated

Q1’16 Q4’15 Q3’15 Q2’15 Q2’16

Realty

Q1’16 Q4’15 Q3’15 Q2’15 Q2’16

Banking

Q1’16 Q4’15 Q3’15 Q2’15 Q2’16

Insurance

Q1’16 Q4’15 Q3’15 Q2’15

Non-GAAP Reconciliations

Six Months Ended June 30, 2016 Consolidated Banking Realty Insurance Totals Net income available to common shareholders (GAAP) 15,421 $ 4,797 $ 3,860 $ 24,078 $ Acquisition-related expenses 18,346 354 149 18,849 Non-core charges 18,346 354 149 18,849 Income tax (expense) benefit (6,034) (124) (52) (6,210) Non-core charges, net of taxes 12,312 230 97 12,639 Core net income (non-GAAP) 27,733 $ 5,027 $ 3,957 $ 36,717 $ Average tangible equity 654,577 $ Core return on average tangible assets (non-GAAP) 11.70% Six Months Ended June 30, 2015 Consolidated Banking Realty Insurance Totals Net income available to common shareholders (GAAP) 24,164 $ 5,374 $ 2,799 $ 32,337 $ Acquisition-related expenses 422 356 6 784 Non-core charges 422 356 6 784 Income tax (expense) benefit (147) (125) (2) (274) Non-core charges, net of taxes 275 231 4 510 Core net income (non-GAAP) 24,439 $ 5,605 $ 2,803 $ 32,847 $ Average tangible equity 609,928 $ Core return on average tangible assets (non-GAAP) 11.21%

55 55

Six Months Ended June 30, 2016 Banking Realty Insurance Consolidated Totals Six Months Ended June 30, 2016 Banking Realty Insurance Consolidated Totals

Contact Information

William B. Littreal Chief Investment Relations Officer and CSO 757-638-6813

• G. Robert Aston, Jr.

Chairman and CEO 757-638-6780 Clyde E. McFarland, Jr. Senior Executive Vice President and CFO 757-638-6801

56 56