Welcome to TowneBank (TOWN) The Towne story began in my home - - PDF document

INVESTOR PRESENTATION - FIRST QUARTER 2016

Sincerely, G.RobertAston,Jr. Chairmanand ChiefExecutiveOfficer TheTownestorybeganinmyhomegarageinthesummerof1998whenasmallgroupoflongtimefriends andbankingassociatescametogethertolaythefoundationforwhatwastobecomeTowneBank.With caringasaspecificbusinessstrategyandadeeprootedpassionforservicetoothers,ourdefinedculturefor Townesetusonacoursetobeginbuildingagreatcommunityassetforourhometowncommunityinthe HamptonRoadsRegionofVirginia. Ourinitialstockofferingwassubstantiallyoversubscribedasover4,000communityshareholdersinvested

• ver$50millioninwhatwasthelargestcapitalizationofanewbankinVirginiahistory.Inanotherfirst,we

actuallyreturned$13milliontooursubscribersandlimitedanyoneshareholdertoamaximuminvestment

• f$250,000.Thisextraordinarylevelofcapitalcoupledwiththereputationourbankersenjoyedwiththe

bankingregulatorsallowedthebanktoopenwith90hometownbankersandthreebankingcenterslocated inthecitiesofVirginiaBeach,ChesapeakeandPortsmouth.Morethanabank,Townehasemergedasa familyofcompaniesprovidingwealthmanagement,insurance,realestatebrokerage,residentialand vacationpropertymanagementalongwithcommercialandresidentialmortgageservices. Asatributetoourearlyinvestorsandcommunitysupporters,Townenowhasassetsexceeding$6billion, anenviablerecordof16consecutiveyearsofincreasedearnings,andhasreturnedover$122millionin commondividendssinceouropeningonApril8,1999. AsyoureviewtheinformationcontainedinthisInvestorPresentation,pleaseknowthatwewelcomeyou tojoinourTowneBankfamilyofinvestorsandsupportersasweembarkonanewandcontinuedjourneyasa growthcompany.

Welcome to TowneBank (TOWN)

2

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

3

Towne Family of Companies

4

$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$6,365 $ $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Assets

(Dollarsinmillions)

12%compoundedannual growthrateduringcredit cycle(‘07’12)

5

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

Net Income

28%compounded annualgrowthrate forthepast16years

(Dollarsinmillions)

6

Financial Highlights 2016 YTD 2015 2014 NoninterestIncome¹ 32,415 $ 116,379 $ 96,744 $ NetIncome 17,819 $ 62,382 $ 42,169 $ DilutedEarningsperShare 0.35 $ 1.22 $ 1.18 $ DividendsDeclaredperShare 0.12 $ 0.47 $ 0.43 $ TotalAssets 6,365,169 $ 6,296,574 $ 4,982,485 $ TotalLoans 4,552,260 $ 4,519,393 $ 3,564,389 $ TotalDeposits 4,955,126 $ 4,914,027 $ 3,846,602 $ ReturnonAverageAssets 1.14% 1.03% 0.87% ReturnonAverageTangibleCommonEquity 11.72% 10.51% 10.95% NetInterestMargin² 3.37% 3.45% 3.38% NonperformingAssets/TotalAssets 0.59% 0.68% 0.84% AllowanceforLoanandLosses/TotalLoans 0.83% 0.85% 1.01% NetLoanChargeoffs/Averageloans 0.03% 0.01% 0.09% CommonEquityTierI 12.66% 12.59%

• YTD Earnings of $17.8 Million;

an increase of 22.57% Y/Y

• YTD Total Revenues climbed

8.81% to $78.8 Million

• Continued build out of Richmond

platform including Insurance M&A activity

2016 Performance Highlights

(1)Excludesgain(loss)oninvestmentsecurities. (2)NonGAAPfinancialmeasure.Seeappendixforreconciliation.

Financial Highlights 2016 YTD 2015 2014

7

Summary 2016 Earnings

(1)Excludesgain(loss)oninvestmentsecurities. (2)NonGAAPfinancialmeasure.SeeAppendixforreconciliation.

8

March31, Y/Y December31, LinkedQuarter

DollarsinThousands

2016 2015

• 2015
• NetInterestIncome

$46,336 $43,556 6% $46,331 0% ProvisionforLoanLosses (259) 323 (180%) 852 (130%) TotalNoninterestIncome1 32,415 28,767 13% 25,079 29% RealizedGainonSecurities

• 49

(100%)

• MergerandAcquisitionExpense

414 415

• (0%)

285 45% OtherNoninterestExpense 51,747 50,025 3% 52,458 (1%) NetIncomebeforeTaxesandNCI 26,849 21,609 24% 17,815 51% TaxProvision 8,188 6,385 28% 4,846 69% EffectiveTaxRate(%) 31.48% 30.52% 3% 27.99% 12% NetIncome 18,661 15,224 23% 12,969 44% NoncontrollingInterest 842 686 23% 503 67% PreferredDividends

• 13

(100%)

• NetIncomeAvailtoCommon

17,819 $ 14,525 $ 23% 12,466 $ 43% DilutedEPS $0.35 $0.29 21% $0.24 46% CommonDividend $0.12 $0.11 9% $0.12

• NIMfullytaxequivalent2

3.37% 3.52% (15bps) 3.36% 1bp ROA 1.14% 1.01% 13% 0.78% 46% ThreeMonthsEnded ThreeMonthsEnded

Towne Mortgage

Mortgage Highlights :

• Solid Q1 volume; 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

(Dollarsinmillions) *includesJointVenturevolumes

Origination Volume*

$948 $771 $1,327 $1,434 $1,222 $1,573 $313 $ $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2010 2011 2012 2013 2014 2015 2016 9

Insurance Segment

$ % InsuranceCommAB&DB,Net 6,799 $ 5,193 $ 1,606 $ 30.93% InsuranceContingencyInc 3,384

• 2,473
• 911
• 36.84%

BenefitCommissions,Net 2,044

• 1,951
• 93
• 4.77%

TravelCommissions,Net 1,456

• 1,131
• 325
• 28.74%

Other 230

• 181
• 49
• 27.07%

TotalNoninterestIncome 13,913

• 10,929
• 2,984
• 27.30%

NonInterestExpenses 8,796

• 7,260
• 1,536
• 21.16%

NetIncomeBeforeTax 5,117

• 3,669
• 1,448
• 39.47%

Plus:Acquisitionrelated expenses 76 180 (104) (57.78%) Plus:Amortizationof

• intangibleassets

685 526 159 30.23% Operatingearningsbeforeincometaxes(nonGAAP) $5,878 $4,375 $1,503 34.35% March31, 2016 March31, 2015 Variance

10 March 31, 2016 March 31, 2015 Variance $ %

Noninterest Expense

March31, $ 2016Q1 Q1'16 % $ % NoninterestExpenses Salariesandbenefits $30,187 $2,508 9.06% $1,287 $1,220 4.41% Occupancyexpense $5,017 87 1.76% 122

• (35)
• (0.71%)

Furnitureandequipment $2,357 (12) (0.51%) 68

• (80)
• (3.38%)

Other Advertisingandmarketing $1,902 122 6.85% 81

• 41
• 2.29%

Acquistionrelatedexpenses $414 (1) (0.24%) (1)

• 0.00%

CharitableContributions $1,048 (365) (25.83%)

• (365)
• (25.83%)

Bankfranchisetax/SCCfees $941 312 49.60%

• 312
• 49.65%

FDICandotherinsurance $991 (108) (9.83%)

• (108)
• (9.85%)

TelephoneandPostage $1,210 (17) (1.39%) 61

• (78)
• (6.39%)

Travel/meals/entertainment $380 101 36.20% 3

• 99
• 35.30%

Outsideprocessing $1,397 (25) (1.76%) 99

• (124)
• (8.75%)

Professionalfees $1,451 (13) (0.89%) 14

• (27)
• (1.84%)

Stationeryandsupplies $594 (72) (10.81%) 26

• (98)
• (14.76%)

Softwareexpense $1,622 329 25.44% 25

• 304
• 23.51%

IntangibleAmortization $1,092 247 29.23% 248

• (1)
• (0.06%)

Foreclosedpropertyexpenses $113 (760) (87.06%)

• (760)
• (87.06%)

Directorsfeesandexpenses $271 (61) (18.37%)

• (61)
• (18.37%)

Other 1,174 (551) (31.94%) 15

• (567)
• (32.84%)

TotalOther 14,600 (862) (5.57%) 572 (1,434) (9.27%) Totalnoninterestexpense $52,161 $1,721 3.41% $2,049 ($328) (0.65%) TotalImpactof Acquisions

11

Efficiency Ratio

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

66.0% 59.8% 61.7% 64.6% 62.0% 75.4% 59.4% 67.9% 94.0% 80.6% 60.0% 69.6% 69.7% 89.0% 57.7% 66.8% 60.9% 64.0% 72.3% 64.4%

EfficiencyRatio

BankSegment RealtySegment InsuranceSegment Consolidated

EfficiencyRatio(excludingsecurities,gains,OREOcost,M&Acost,andIntangibleAmortizations)

12

March 31, December 31, March 31,

(Dollars in Thousands)

2016 2015 2015 TotalCash&Securities 1,108,542 $ 1,068,062 $ 1,022,541 $ GrossLoans 4,552,260 4,519,393 4,095,695 LoanLossReserve 37,760 38,359 35,907 TotalNetLoans 4,514,500 4,481,034 4,059,788 OtherAssets 742,127 747,478 746,374 TotalAssets 6,365,169 $ 6,296,574 $ 5,828,703 $ TotalDeposits 4,955,126 $ 4,914,027 $ 4,505,618 $ FHLBBorrowings 428,940 429,080 397,884 OtherDebt 39,442 37,434 37,202 TotalDebt 468,382 466,514 435,086 TotalOtherLiabilities 105,658 95,839 96,419 TotalLiabilities 5,529,166 $ 5,476,380 $ 5,037,123 $ Equity($000) CommonEquity 826,875 810,921 783,156 EquityAttributabletoParentCompany 826,875 810,921 783,156 NoncontrollingInterests 9,128 9,273 8,424 TotalEquity 836,003 $ 820,194 $ 791,580 $

Balance Sheet Summary

• Stable core funding; 29%

noninterest DDA

• Return on Average Common

Equity - Tangible 11.72%

• Conservative securities

portfolio with 2.0 year average duration

March 31, 2016 March 31, 2015 December 31, 2015 (Dollars in Thousands)

13

Loan Portfolio at March 31, 2016

High-Quality, Stable Portfolio

• Q1 loan growth of $32.9 million or

2.92% annualized; Strong pipeline

• Richmond platform contributed $20.5

million of new originations* for Q1

• NPAs / Assets of .59%; Outstanding

asset quality metrics

• Allowance to NPLs of 4.75x
• Top 10 loan relationships represent

10.3% of the held for investment portfolio $4.55 billion Yield on Loans: 4.52% YTD Highlights:

*Originationsincludesnewproductionandadvancesonexistinglines

1-4 Family 22% Construction 14% CRE-Owner Occupied 17% CRE- Investment related properties 22% Multifamily 3% C&I 19% Consumer and other 3%

14

Deposit Growth by Region

Deposit Growth Actual Actual Region 3/31/2016 3/31/2015 $ % Richmond 733,656,534

• 655,661,606
• 77,994,928
• 11.90%

Chesapeake 602,939,976

• 543,777,220
• 59,162,756
• 10.88%

Currituck 303,297,589

• 292,361,988
• 10,935,600
• 3.74%

Norfolk 533,089,915

• 461,176,728
• 71,913,188
• 15.59%

Peninsula 692,020,893

• 574,078,800
• 117,942,093
• 20.54%

Portsmouth 733,480,638

• 683,297,501
• 50,183,137
• 7.34%

VirginiaBeach 1,197,290,037

• 1,135,659,308
• 61,630,728
• 5.43%

Williamsburg 232,372,298

• 219,607,562
• 12,764,736
• 5.81%

HamptonRoads 4,294,491,345

• 3,909,959,108
• 384,532,237
• 9.83%

TFSG 5,072

• 133
• 4,939
• N/M

Corp/Eliminations (73,026,268)

• (60,003,086)
• (13,023,182)
• 21.70%

Consolidated 4,955,126,682

• 4,505,617,761
• 449,503,982
• 9.98%

Loan Growth by Region

Loan Growth Actual Actual Region 3/31/2016 3/31/2015 $ % Richmond 604,158,830

• 505,116,550
• 99,042,280
• 19.61%

Chesapeake 509,848,513

• 467,311,602
• 42,536,911
• 9.10%

Currituck 209,517,485

• 178,043,739
• 31,473,746
• 17.68%

Norfolk 398,277,266

• 377,388,900
• 20,888,366
• 5.53%

Peninsula 858,163,112

• 753,273,148
• 104,889,964
• 13.92%

Portsmouth 602,099,022

• 546,052,263
• 56,046,759
• 10.26%

VirginiaBeach 1,146,135,020

• 1,054,562,518
• 91,572,502
• 8.68%

Williamsburg 235,739,190

• 221,452,187
• 14,287,003
• 6.45%

HamptonRoads 3,959,779,608

• 3,598,084,357
• 361,695,251
• 10.05%

TFSG 4,374,774

• 3,452,973
• 921,801
• 26.70%

Eliminations (16,053,475)

• (10,958,539)
• (5,094,936)
• 46.49%

Consolidated 4,552,259,737

• 4,095,695,341
• 456,564,396
• 11.15%

12.66% 12.73% 13.46% 10.70% 12.40% 12.52% 13.98% 9.51% 12.70% 13.14% 15.19% 10.19% 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% Tier1CommonEquity(CET1)RBRatio¹ Tier1Ratio¹ TotalRBCRatio¹ Tier1Leverage¹ TOWN USCommercialBanks VACommercialBanks RegulatoryMinimum

Strong Capital Position

(1)NonGAAPfinancialmeasure.Seeappendixforreconciliation.

17

MNRK Acquisition

• Upon closing, the combined company will be the 2nd largest community bank in Virginia with approximately $7.6

billion in assets, $6.1 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 $1.7 billion or approximately 30% 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 approximately 2.5 years
• Strong capital, with TCE/TA greater than 10% post closing, which supports growth and capital management
• pportunities
• 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; Credit review included:

1.5% credit mark 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
• FDIC has approved the merger application

Low Risk Profile

(1) LargestMSAsbypopulation;forbankswithassetslessthan$15billion. Source:SNLFinancial

18

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

inMarket Share Rank Institution(ST) Branches ($mm) (%) 1 WellsFargo&Co.(CA) 290 $36,737 20.06 2 BankofAmericaCorp.(NC) 142 27,609 15.08 3 BB&TCorp.(NC) 358 22,794 12.45 4 SunTrustBanksInc.(GA) 209 18,786 10.26 5 CapitalOneFinancialCorp.(VA) 80 10,649 5.82 6 UnionBkshsCorp(VA) 124 5,795 3.16 ProForma 32 5,208 2.84 7 TowneBank(VA) 32 4,340 2.37 8 UnitedBanksharesInc.(WV) 61 4,325 2.36 9 CarterBank&Trust(VA) 88 3,885 2.12 10 PNCFinancialServicesGroup(PA) 100 3,360 1.84 23 MonarchFinancialHldgs(VA) 11 868 0.47 Number Deposits Market

• f

inMarket Share Rank Institution(ST) Branches ($mm) (%) 1 ProForma 27 4,712 20.64 1 WellsFargo&Co.(CA) 54 $4,488 19.66 2 TowneBank(VA) 27 3,844 16.84 3 SunTrustBanksInc.(GA) 39 3,835 16.80 4 BB&TCorp.(NC) 50 2,973 13.03 5 BankofAmericaCorp.(NC) 36 2,725 11.94 6 MonarchFinancialHldgs(VA) 11 868 3.80 7 OldPointFinancialCorp.(VA) 20 726 3.18 8 HamptonRoadsBanksharesInc.(VA) 17 655 2.87 9 SouthernBancShares(NC)(NC) 15 474 2.07 10 PNCFinancialServicesGroup(PA) 11 363 1.59

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

19

Mortgage Operations

• Founded in 1999 and headquartered in Virginia Beach
• TowneBank Mortgage YTD Production as of March 31, 2016
• Core banking markets - $194 million
• Mortgage only markets - $119 million

Mortgage Originations ($mm)

• Founded in May 2007 and headquartered in Virginia Beach
• Monarch Mortgage YTD Production as of March 31, 2016
• Core banking markets - $164 million
• Mortgage only markets - $294 million

TowneBank Mortgage Monarch Mortgage

Mortgage Originations ($mm)

$75 $200 $577 $1,186 $1,630 $1,656 $2,703 $1,980 $1,504 $2,090 $458 $ $500 $1,000 $1,500 $2,000 $2,500 $3,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q2016 $626 $580 $552 $999 $949 $771 $1,327 $1,434 $1,222 $1,573 $313 $ $500 $1,000 $1,500 $2,000 $2,500 $3,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q2016

20

• 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
• Close MNRK transaction Q2 2016; System conversions scheduled
• 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

• Additional mid-single digit NIM compression for full year 2016
• Focused noninterest expense control; ~ $52 million per quarter run rate
• Drive Efficiency Ratio
• Near term Return on Average Assets range of 1.0% - 1.1%

Profitability

2016 Outlook Summary

21

Key Takeaways

#2 Market share in Hampton Roads ; Efficient branching strategy

• Proforma #1 upon completion of MNRK transaction

29% Noninterest DDAs Noninterest Income represents 41% of Total Revenues TOWN has a long track record of superior financial results: recognized by SNL as

• ne of the top 15 consistently high-performing banks since 2003

Franklin transaction created Richmond banking platform for Second Stage Growth 2nd largest independent Community Bank headquartered in Virginia TOWN is an experienced acquirer, having completed 29 financial services acquisitions over the last 16 years Opportunity to diversify shareholder base to support growth

22

• Appendix

23

APPENDIX

23

Earnings Per Share (Diluted) Book Value

Financial Performance Trends

(1)NonGAAPfinancialmeasure.Seeappendixforreconciliation.SeereconciliationofNonGAAPmeasuresinourannualreportsform10Kforpriorperiods.

0.71 0.76 1.03 1.14 1.18 1.22 0.35 (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 Q12016 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 TangibleBookValuePerShare¹ BookValuePerShare 24

Net Income

(Dollarsinthousands)

25

$11,131 $11,677 $12,126 $7,235 $14,538 $17,812 $17,566 $12,466 $17,819 $ $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

2015Total$62,382 2014Total$42,169

Net Interest Income (Fully Taxable Equivalent)

26 49,173 48,673 511 40 480 172 50 508 54 176 79

45,000 45,500 46,000 46,500 47,000 47,500 48,000 48,500 49,000 49,500 50,000

Net Interest Margin

Net Interest Margin NII Sensitivity

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

3.10% 3.15% 3.20% 3.25% 3.30% 3.35% 3.40% 3.45% 3.50% 3.55% 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Margin MarginexPAA

0.0% 1.6% 3.1% 4.6% 5.3% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Base +100bp +200bp +300bp +400bp 27

Noninterest Income

• Total noninterest income

(excluding Securities gains/losses) up 12.68% Y/Y

• Driven by insurance commissions

up 27.01% compared to 1Q2015; new property management company added $1.33 million

• Solid Mortgage volumes for Q1

2016

$ $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 2010Y 2011Y 2012Y 2013Y 2014Y 2015Y 2016YTD 28

Noninterest Expense

• Noninterest expense increased

3.41% when compared to comparable quarter last year

• Acquisitions in Insurance and

Property Management drove increases of $2.1 million partially

• ffset by decreases in foreclosed

property expenses 2016

$ $50,000 $100,000 $150,000 $200,000 $250,000 2010Y 2011Y 2012Y 2013Y 2014Y 2015Y 2016YTD 29

VirginiaBeachNorfolkNewportNews,VANC¹ Rank Institution(ST) Branches DepositsinMarket ($mm) MarketShare (%) Average BranchSize ($mm) 1 WellsFargo&Co.(CA) 54 4,488 19.66 83.11 2 TowneBank(VA) 27 3,844 16.84 142.37 3 SunTrustBanksInc.(GA) 39 3,835 16.80 98.33 4 BB&TCorp.(NC) 50 2,973 13.03 59.46 5 BankofAmericaCorp.(NC) 37 2,725 11.94 73.65 6 MonarchFinancialHldgs(VA) 11 868 3.80 78.91 7 OldPointFinancialCorp.(VA) 21 726 3.18 34.57 8 BankofHamptonRoads(VA) 18 655 2.87 36.39 9 PNCFinancialServicesGroup(PA) 11 363 1.59 33.00 10 FarmersBanksharesInc.(VA) 5 313 1.37 62.60

Strong Market Position

1)Dataasof6/30/2015FDICSummaryofDeposits

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

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

Rank

30

Hampton Roads Market Share Overview

1

1)Dataasof6/30/2015FDICSummaryofDeposits

Bank 2015 1999 2010 2005

31

Excellent Foundation for Growth – Richmond VA MSA

1)Dataasof6/30/2015FDICSummaryofDeposits. 2)ExcludesCapitalOne.

Closed transaction on January 2, 2015 Successfully completed systems integration and conversion Launched brand awareness campaign during Q1 2015 Acquired 3 Insurance agencies in Central VA

Richmond Update

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

Richmond Deposit Market Share

32

Market Statistics*

*Source:SNLFinancial

VirginiaBeachNorfolkNewportNews,VANC 1,734,823 3.46 3.53 59,454 4.21 Richmond,VA 1,274,616 5.51 4.66 59,885 4.47 OuterBanks,NC 39,777 3.78 4.00 55,937 4.70 MSATotals 3,049,216

• MSA

ProjectedHHIncome Change20162021(%) MedianHH Income2016($) ProjectedPopulation Change20162021(%) PopulationChange 20102016(%) Total Population 2016(Actual) Median HH Income 2016 ($) Projected Population Change 2016-2021 (%) Population Change 2010-2016 (%) Total Population 2016 (Actual) MSA Projected HH Income Change 2016-2021 (%)

33

Towne Insurance – TFA

Insurance Highlights:

• Ranked 77th of Top 100 Business

Insurance Agencies

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

acquisitions since 2001

• Strong consistent cash flows
• Dominant market share in legacy

footprint

• Opportunities to diversify in

complementary markets

(Dollarsinmillions)

Gross Commissions

$22.8 $25.8 $27.6 $34.3 $42.3 $47.5 $16.1 $ $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 2016YTD

2015 Best Practices Agency

34

Towne Investment Group

Assets Under Management (Includes Direct Held Assets)

Wealth Management Highlights:

• 2,000+ households
• Stable fee income
• Organic growth of 6% in a flat to

slightly down year for indexes

(Dollarsinmillions)

$752 $870 $997 $1,194 $1,376 $1,564 $1,631 $ $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2010 2011 2012 2013 2014 2015 2016 35

• A Top 20 Berkshire Hathaway

HomeServices Affiliate

• 419 Real Estate Agents
• No. 2 in Market Share
• Generates Mortgage Activity
• Manages 1,558 Housing Units
• Beach Properties Manages 339 Vacation

Homes in Hilton Head, South Carolina

• Oak Island Accommodations Manages 636

Vacation Homes in Oak Island, North Carolina

Realty Highlights :

Berkshire Hathaway HomeServices

Towne Realty

(Dollarsinmillions)

Sales Volume

$817 $827 $850 $994 $1,009$1,081 $225 $ $200 $400 $600 $800 $1,000 $1,200 36

Forward-Looking Statements

Statements made in this presentation, other than those concerning historical financial information, may be considered forwardlooking statements, which speak only as of the date of this presentation and are based on current expectations and involve a number of assumptions. These include statements as to the anticipated benefits of the merger with Monarch Financial Corporation and Monarch Bank, 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 forwardlooking statements to be covered by the safe harbor provisions for forwardlooking 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 merger, include but are not limited to: (1) the businesses of TowneBank and Monarch Financial Corporation may not be integrated successfully or such integration may be more difficult, timeconsuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected timeframe; (3) revenues following the merger may be lower than expected; (4) customer and employee relationships and business operations may be disrupted by the merger; (5) the ability to obtain required regulatory and stockholder approvals, and the ability to complete the merger on the expected timeframe may be more difficult, timeconsuming or costly than expected; (6) 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 the companies’ respective market areas; their implementation of new technologies; their ability to develop and maintain secure and reliable electronic systems; changes in the securities markets; and accounting principles, policies and guidelines, and (7) other risk factors detailed from time to time in filings made by TowneBank with the Federal Deposit Insurance Corporation (the “FDIC”). TowneBank undertakes no obligation to update or clarify these forwardlooking statements, whether as a result of new information, future events

• r otherwise.

In connection with the proposed merger, TowneBank has filed with the FDIC a preliminary proxy statement/prospectus and Monarch has filed with the Securities and Exchange Commission (the “SEC”) a preliminary proxy statement. TowneBank and Monarch will each deliver a definitive joint proxy statement/prospectus to their respective stockholders seeking approval of the merger and related matters. In addition, each of TowneBank and Monarch may file other relevant documents concerning the proposed merger with the FDIC and SEC. Investors and stockholders of both companies are urged to read the definitive joint proxy statement/prospectus when it becomes available and any other relevant documents to be filed with the FDIC and SEC in connection with the proposed merger because they will contain important information about TowneBank, Monarch and the proposed transaction. Investors and stockholders may obtain free copies of certain of these documents through the website maintained by the SEC at http://www.sec.gov. Free copies of the definitive joint proxy statement/prospectus, when available, also may be obtained by directing a request by telephone or mail to TowneBank, 6001 Harbour View Boulevard, Suffolk, Virginia 23425, Attention: Investor Relations (telephone: (757) 6386794), or Monarch Financial Holdings, Inc., 1435 Crossways Boulevard, Suite 301, Chesapeake, Virginia 23320, Attention: Investor Relations (telephone: (757) 3895112), or by accessing TowneBank’s website at https://townebank.com under “Investor Relations” or Monarch’s website at https://www.monarchbank.com under “Investor Relations.” The information on TowneBank’s and Monarch’s websites is not, and shall not be deemed to be, a part of this release or incorporated into other filings either company makes with the FDIC or SEC. TowneBank and Monarch, and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies from the stockholders of TowneBank and/or Monarch in connection with the merger. Information about the directors and executive officers of TowneBank is set forth in the proxy statement for TowneBank’s 2016 annual meeting of stockholders filed with the FDIC on April 15, 2016. Information about the directors and executive officers of Monarch is set forth in the proxy statement for Monarch’s 2015 annual meeting of stockholders filed with the SEC on April 2, 2015. Additional information regarding the interests of these participants and other persons who may be deemed participants in the merger may be obtained by reading the definitive joint proxy statement/prospectus regarding the merger when it becomes available.

37

Non-GAAP Financial Measures

ThisslidepresentationcontainscertainnonGAAPfinancialmeasuresdeterminedbymethodsotherthaninaccordancewith generallyacceptedaccountingprinciples.SuchnonGAAPfinancialmeasuresincludethefollowing:fullytaxequivalentnet interestmargin,tangiblebookvaluepercommonshare,totalriskbasedcapitalratio,tieroneleverageratio,tieronecapital ratio,andthetangiblecommonequitytotangibleassetsratio.ManagementusesthesenonGAAPfinancialmeasuresto assesstheperformanceofTowneBank’scorebusinessandthestrengthofitscapitalposition.Managementbelievesthat thesenonGAAPfinancialmeasuresprovidemeaningfuladditionalinformationaboutTowneBanktoassistinvestorsin evaluatingoperatingresults,financialstrength,andcapitalization.ThenonGAAPfinancialmeasuresshouldbeconsideredas additionalviewsofthewayourfinancialmeasuresareaffectedbysignificantchargesforcreditcostsandotherfactors. ThesenonGAAPfinancialmeasuresshouldnotbeconsideredasasubstituteforoperatingresultsdeterminedinaccordance withGAAPandmaynotbecomparabletoothersimilarlytitledmeasuresofothercompanies.Thecomputationsofthenon GAAPfinancialmeasuresusedinthispresentationarereferencedinafootnoteorintheappendixtothispresentation.

38

Quarter Ended Quarter Ended March 31, 2016 December 31, 2015 Totalassets

6,365,169 $ 6,296,574 $

Less:Goodwill

(157,659)

• (154,842)
• Less:Intangibleassets,net

(29,286)

• (26,153)
• Tangibleassets

6,178,224 $ 6,115,579 $

Totalshareholders'equity

826,875 $ 810,921 $

Less:Goodwill

(157,659)

• (154,842)
• Less:Intangibleassets,net

(29,286)

• (26,153)
• Less:Preferredstock
• Tangiblecommonequity

639,930 $ 629,926 $

Riskbasedcapital: Commonequitytier1capital

653,295 $ 649,657 $

Tier1

657,142 $ 655,337 $

Total

694,902 $ 693,695 $

Riskweightedassets

5,161,961 $ 5,161,728 $

Totalassetsforleveragecapitalpurposes

6,139,674 $ 6,141,313 $

Tier1capitalratio

12.73% 12.70%

Total

13.46% 13.44%

CommonequityTier1

12.66% 12.59%

Tier1leverageratio

10.70% 10.67%

Non-GAAP Reconciliations

(Dollarsinthousands)

Quarter Ended March 31, 2016 Quarter Ended December 31, 2015 39

Quarter Ended Quarter Ended Quarter Ended Quarter Ended March 31, 2016 December 31, 2015 September 30, 2015 June 30, 2015 Netinterestmargintaxequivalent(NonGAAP) 3.37% 3.36% 3.40% 3.52% Adjustmentstonetinterestmargin: Incomefrombankownedlifeinsurance (0.04)

• (0.07)
• (0.04)
• (0.06)
• Taxequivalentbasisadjustment

(0.04)

• (0.04)
• (0.04)
• (0.04)
• Netinterestmargin(GAAP)

3.29% 3.25% 3.32% 3.42% March 31, 2016 Bookvalue(GAAP)

16.00 $

Impactofexcludingaveragegoodwill andotherintangiblesandamortization (3.62)

• Tangiblebookvalue(NonGAAP)

12.38 $

Non-GAAP Reconciliations

Quarter Ended March 31, 2016 Quarter Ended December 31, 2015 Quarter Ended September 30, 2015 Quarter Ended June 30, 2015 March 31, 2016 40

Non-GAAP Reconciliations

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

Total revenue 78,750,237 $ 71,418,807 $ 75,974,056 $ 77,969,154 $ 72,372,853 $ Net gain (loss) on OREO Sales 314,847 (45,460) (60,092) 73,856 56,656 Net gain (loss) on investment securities

• 735,506

119,359 49,313 Adjusted non-int inc 78,435,390 71,464,267 75,298,642 77,775,939 72,266,884 Total noninterest expenses 52,161,451 52,742,904 49,906,439 49,066,960 50,440,522 Less: Excl Expenses - M&A, Intangible Amortization, & OREO expenses 1,618,610 1,066,845 1,733,678 1,697,299 2,133,444 Adj Non int exp 50,542,841 $ 51,676,059 $ 48,172,761 $ 47,369,661 $ 48,307,078 $ Efficiency Ratio 66.2% 73.9% 66.3% 63.1% 69.8% Core efficiency Ratio (non-GAAP) 64.4% 72.3% 64.0% 60.9% 66.8%

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

Total revenue 51,423,723 $ 51,191,178 $ 50,902,593 $ 50,278,097 $ 48,011,550 $ Net gain (loss) on OREO Sales 314,847 (45,460) (60,092) 73,856 56,656 Net gain (loss) on investment securities

• 735,506

119,359 49,313 Adjusted non-int inc 51,108,876 51,236,638 50,227,179 50,084,882 47,905,581 Total noninterest expenses 32,181,249 33,578,408 31,748,895 30,676,001 32,743,612 Less: Excl Expenses - M&A, Intangible Amortization, & OREO expenses 489,679 468,877 770,162 735,043 1,117,116 Adj Non int exp 31,691,570 $ 33,109,531 $ 30,978,733 $ 29,940,958 $ 31,626,496 $ Efficiency Ratio 62.6% 65.6% 63.2% 61.2% 68.4% Core efficiency Ratio (non-GAAP) 62.0% 64.6% 61.7% 59.8% 66.0%

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

Total revenue 13,412,379 $ 11,392,764 $ 15,614,996 $ 18,083,053 $ 13,431,381 $ Net gain (loss) on OREO Sales

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

13,412,379 11,392,764 15,614,996 18,083,053 13,431,381 Total noninterest expenses 11,184,668 10,961,094 10,858,419 10,988,433 10,436,157 Less: Excl Expenses - M&A, Intangible Amortization, & OREO expenses 367,995 256,579 256,579 246,361 310,322 Adj Non int exp 10,816,673 $ 10,704,515 $ 10,601,840 $ 10,742,072 $ 10,125,835 $ Efficiency Ratio 83.4% 96.2% 69.5% 60.8% 77.7% Core efficiency Ratio (non-GAAP) 80.6% 94.0% 67.9% 59.4% 75.4%

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

Total revenue 13,914,135 $ 8,834,865 $ 9,456,467 $ 9,608,004 $ 10,929,922 $ Net gain (loss) on OREO Sales

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

13,914,135 8,834,865 9,456,467 9,608,004 10,929,922 Total noninterest expenses 8,795,534 8,203,402 7,299,125 7,402,526 7,260,753 Less: Excl Expenses - M&A, Intangible Amortization, & OREO expenses 760,936 341,389 706,937 715,895 706,006 Adj Non int exp 8,034,598 $ 7,862,013 $ 6,592,188 $ 6,686,631 $ 6,554,747 $ Efficiency Ratio 63.2% 92.9% 77.2% 77.0% 66.4% Core efficiency Ratio (non-GAAP) 57.7% 89.0% 69.7% 69.6% 60.0%

Realty Insurance

41

Contact Information

William B. Littreal Chief Investment Relations Officer and COO 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

42