TowneBank Reports Higher Earnings for Third Quarter 2009

SUFFOLK, Va., Nov. 5, 2009 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank reported record net income of $7.12 million for the quarter ended September 30, 2009 representing a 11.01% increase over the third quarter results in 2008.

Net income available to common shareholders was $4.78 million after accretion and preferred dividend payments of $2.34 million on the Bank's preferred equity issued during the third and fourth quarters of 2008. Accordingly fully diluted earnings per common share were reduced to $0.19 per share as compared to $0.25 for the prior year. The Bank's common dividend remained at $0.08 per share with the common dividend payout totaling $2.03 million.

For the third quarter, net interest income was $26.36 million, an increase of 14.98% over last year. The increase in net interest income was driven primarily by loan growth of $298.54 million, representing a 13.57% increase over last year. The Bank's net interest margin was 3.24% as compared to 3.12% in the linked quarter and 3.52% for the same period last year.

Noninterest income increased 32.38% to $15.52 million. This significant growth can be partially attributed to the rise in residential mortgage brokerage income, which increased $1.61 million or 120.86% from the comparative period in 2008. Real estate brokerage and property management revenue increased 50.69% to $4.17 million due largely to the formation of Prudential Towne Realty in the first quarter of 2009. Third quarter 2009 income also included a gain of $1.18 million on the sale of available-for-sale securities as a result of the continuation of management's strategy to shorten duration in the investment portfolio.

Noninterest expense increased $3.83 million or 15.92% over the prior year quarter, while decreasing from the linked quarter by $684 thousand or 2.40%. The Bank's second quarter results included a $1.57 million special assessment expense as the FDIC imposed an additional insurance premium on the banking industry to replenish the deposit insurance fund.

Balance Sheet

Total Bank assets grew to a record level of $3.58 billion, an increase of $560.38 million over third quarter 2008. Towne continues to meet the credit needs of the community with total loans reaching $2.50 billion, an increase of 13.57% over the prior year. Total deposits climbed to $2.65 billion, representing a 20.54% increase over the comparable period of 2008. The Bank's risk-based and tangible capital ratios remain well above regulatory standards for well-capitalized banks.

Asset Quality

The Bank's loan portfolio continues to perform well compared to the overall banking industry. Non-performing assets at September 30, 2009 were $27.51 million or 0.77% of total assets, up from a negligible 0.09% last year. Net losses for the quarter were $3.32 million or 0.54% of average loans. The loan loss provision, which increased in part due to loan growth, was $3.47 million as compared to $1.57 million for the same period last year. The Bank's loan loss reserve ended the quarter at 1.17%, up slightly from 1.16% for the comparable period last year.

"Our favorable operating results can be attributed to a great team effort on the part of our hometown bankers," stated G. Robert Aston, Jr., Chairman and CEO. "I am particularly proud of the caring our bankers are demonstrating in working with our community businesses to help restore their financial health. During these challenging economic conditions, it is a responsibility we take very seriously."

As one of Virginia's top community banks, TowneBank now operates 18 banking offices in Chesapeake, Hampton, Portsmouth, Newport News, Virginia Beach, Norfolk, Williamsburg and York County. Towne also offers a full range of financial services through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Insurance Agency, TFA Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Prudential Towne Realty, Towne 1031 Exchange, LLC, Corolla Classic Vacations and Corolla Real Estate. Through its strategic partnership with William E. Wood and Associates, the bank also offers mortgage services in all of their offices in Hampton Roads and Northeastern North Carolina. Local decision-making is a hallmark of its hometown banking strategy that is delivered through the leadership of each group's President and Board of Directors. With total assets of $3.58 billion as of September 30, 2009, TowneBank is one of the largest banks headquartered in Virginia.

Forward-Looking Statements:

This release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. 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 may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; general economic conditions, either nationally or regionally, 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; changes in the legislative or regulatory environment, including changes in accounting standards, may adversely affect our business; costs or difficulties; related to the integration of the business and 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; 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 regards to our market area and its heavy concentration of U. S. military bases and related personnel. We assume no obligation to update information contained in this release.

               Selected Financial Highlights (unaudited)
                               TOWNEBANK
                          September 30, 2009
                        (dollars in thousands)

                         Three Months Ended
                            September 30,
                       ----------------------  -----------------------
                                                Increase/  % Increase/
                          2009        2008     (Decrease)   (Decrease)
                       ----------  ----------  ----------  -----------

 Results of Operations:
  Net interest income  $   26,362  $   22,927  $    3,435       14.98%
  Noninterest income       15,522      11,725       3,797       32.38%
  Noninterest expenses     27,868      24,040       3,828       15.92%
  Provision for loan
   losses                   3,475       1,568       1,907      121.62%
  Pretax Income            10,367       9,029       1,338       14.82%
  Provision for income
   tax expense              3,246       2,614         632       24.18%
  Net income                7,121       6,415         706       11.01%
  Preferred stock
   dividends and
   accretion                2,341          --       2,341          N/M
  Net income available
   to common
   shareholders             4,780       6,415      (1,635)    (25.49%)
  Net income per
   common share - basic      0.19        0.26       (0.07)    (26.92%)
  Net income per
   common share -
   diluted                   0.19        0.25       (0.06)    (24.00%)
                       ----------  ----------  ----------  -----------
 Period End Data:
  Total assets         $3,575,889  $3,015,506  $  560,383       18.58%
  Total assets -
   tangible             3,493,147   2,942,613     550,534       18.71%
  Earning assets        3,271,999   2,587,869     684,130       26.44%
  Loans (net of
   unearned income)     2,498,021   2,199,486     298,535       13.57%
  Allowance for loan
   losses                  29,163      25,452       3,711       14.58%
  Goodwill and other
   intangibles             82,742      72,892       9,850       13.51%
  Nonperforming assets     27,512       2,734      24,778      906.29%
  Noninterest bearing
   deposits               612,158     561,040      51,118        9.11%
  Interest bearing
   deposits             2,037,793   1,637,320     400,473       24.46%
    Total deposits      2,649,951   2,198,360     451,591       20.54%
  Total equity            447,740     333,372     114,368       34.31%
  Total equity -
   tangible               364,998     260,480     104,518       40.13%
  Common equity           298,332     273,764      24,568        8.97%
  Common equity -
   tangible               215,590     200,872      14,718        7.33%
  Book value per
   common share             11.91       11.23        0.68        6.06%
  Book value per
   common share -
   tangible                  8.61        8.24        0.37        4.49%
                       ----------  ----------  ----------  -----------
 Daily Average
  Balances:
  Total assets         $3,538,954  $2,862,793  $  676,161       23.62%
  Total assets -
   tangible             3,455,956   2,789,811     666,145       23.88%
  Earning assets        3,231,192   2,593,447     637,745       24.59%
  Loans (net of
   unearned income),
   excluding
   nonaccrual loans     2,461,833   2,139,210     322,623       15.08%
  Allowance for loan
   losses                  29,164      24,562       4,602       18.74%
  Goodwill and other
   intangibles             82,998      72,982      10,016       13.72%
  Noninterest bearing
   deposits               591,717     506,676      85,041       16.78%
  Interest bearing
   deposits             2,037,733   1,563,047     474,686       30.37%
    Total deposits      2,629,450   2,069,723     559,727       27.04%
  Total equity            437,706     306,702     131,004       42.71%
  Total equity -
   tangible               354,708     233,720     120,988       51.77%
  Common equity           295,527     268,794      26,733        9.95%
  Common equity -
   tangible               212,529     195,812      16,716        8.54%
                       ----------  ----------  ----------  -----------
 Key Ratios:
  Return on average
   assets                   0.80%       0.89%      (0.09%)    (10.11%)
  Return on average
   assets - tangible        0.82%       0.91%      (0.09%)     (9.89%)
  Return on average
   equity                   6.45%       8.32%      (1.87%)    (22.48%)
  Return on average
   equity - tangible        7.96%      10.92%      (2.96%)    (27.11%)
  Return on common
   equity                   6.42%       9.49%      (3.07%)    (32.35%)
  Return on common
   equity - tangible        8.92%      13.03%      (4.11%)    (31.54%)
  Net interest margin       3.24%       3.52%      (0.28%)     (7.95%)
  Average earning
   assets/total
   average assets          91.30%      90.59%       0.71%        0.78%
  Average loans/
   average deposits        93.63%     103.36%      (9.73%)     (9.41%)
  Average noninterest
   deposits/total
   average deposits        22.50%      24.48%      (1.98%)     (8.09%)
  Allowance for loan
   losses/period end
   loans                    1.17%       1.16%       0.01%        0.86%
  Nonperforming assets
   to period end
   assets                   0.77%       0.09%       0.68%      755.56%
  Period end equity/
   period end total
   assets                  12.52%      11.06%       1.46%       13.20%
  Efficiency ratio         66.54%      69.37%      (2.83%)     (4.08%)
                       ----------  ----------  ----------  -----------

               Selected Financial Highlights (unaudited)
                               TOWNEBANK
                          September 30, 2009
                        (dollars in thousands)

                           Nine Months Ended
                             September 30,
                        ----------------------  ----------------------
                                                 Increase/  % Increase/
                           2009        2008     (Decrease)  (Decrease)
                        ----------  ----------  ----------  ----------

 Results of Operations:
  Net interest income   $   72,251  $   64,815  $    7,436      11.47%
  Noninterest income        47,832      34,671      13,161      37.96%
  Noninterest expenses      83,680      68,942      14,738      21.38%
  Provision for loan
   losses                    8,164       4,531       3,633      80.18%
  Pretax Income             28,303      25,959       2,344       9.03%
  Provision for income
   tax expense               8,253       7,510         743       9.89%
  Net income                20,050      18,449       1,601       8.68%
  Preferred stock
   dividends and
   accretion                 7,702          --       7,702         N/M
  Net income available
   to common
   shareholders             12,348      18,449      (6,101)   (33.07%)
  Net income per common
   share - basic              0.50        0.76       (0.26)   (34.21%)
  Net income per common
   share - diluted            0.49        0.73       (0.24)   (32.88%)
                        ----------  ----------  ----------  ----------
 Period End Data:
  Total assets          $3,575,889  $3,015,506  $  560,383      18.58%
  Total assets -
   tangible              3,493,147   2,942,613     550,534      18.71%
  Earning assets         3,271,999   2,587,869     684,130      26.44%
  Loans (net of
   unearned income)      2,498,021   2,199,486     298,535      13.57%
  Allowance for loan
   losses                   29,163      25,452       3,711      14.58%
  Goodwill and other
   intangibles              82,742      72,892       9,850      13.51%
  Nonperforming assets      27,512       2,734      24,778     906.29%
  Noninterest bearing
   deposits                612,158     561,040      51,118       9.11%
  Interest bearing
   deposits              2,037,793   1,637,320     400,473      24.46%
    Total deposits       2,649,951   2,198,360     451,591      20.54%
  Total equity             447,740     333,372     114,368      34.31%
  Total equity -
   tangible                364,998     260,480     104,518      40.13%
  Common equity            298,332     273,764      24,568       8.97%
  Common equity -
   tangible                215,590     200,872      14,718       7.33%
  Book value per share       11.91       11.23        0.68       6.06%
  Book value per share -
   tangible                   8.61        8.24        0.37       4.49%
                        ----------  ----------  ----------  ----------
 Daily Average Balances:
  Total assets          $3,375,160  $2,691,954  $  683,206      25.38%
  Total assets -
   tangible              3,293,976   2,619,406     674,570      25.75%
  Earning assets         3,098,152   2,431,290     666,862      27.43%
  Loans (net of
   unearned income),
   excluding nonaccrual
   loans                 2,421,991   1,992,759     429,232      21.54%
  Allowance for loan
   losses                   28,527      23,020       5,507      23.92%
  Goodwill and other
   intangibles              81,184      72,547       8,637      11.91%
  Noninterest bearing
   deposits                546,375     478,887      67,488      14.09%
  Interest bearing
   deposits              1,930,002   1,482,114     447,888      30.22%
    Total deposits       2,476,377   1,961,001     515,376      26.28%
  Total equity             430,086     278,079     152,007      54.66%
  Total equity -
   tangible                348,902     205,531     143,371      69.76%
  Common equity            292,938     265,351      27,587      10.40%
  Common equity -
   tangible                211,754     192,804      18,950       9.83%
                        ----------  ----------  ----------  ----------
 Key Ratios:
  Return on average
   assets                    0.79%       0.92%      (0.13%)   (14.13%)
  Return on average
   assets - tangible         0.81%       0.94%      (0.13%)   (13.83%)
  Return on average
   equity                    6.23%       8.86%      (2.63%)   (29.68%)
  Return on average
   equity - tangible         7.68%      11.99%      (4.31%)   (35.95%)
  Return on common
   equity                    5.64%       9.29%      (3.65%)   (39.29%)
  Return on common
   equity - tangible         7.80%      12.78%      (4.98%)   (38.97%)
  Net interest margin        3.12%       3.56%      (0.44%)   (12.36%)
  Average earning
   assets/total average
   assets                   91.79%      90.32%       1.47%       1.63%
  Average loans/average
   deposits                 97.80%     101.62%      (3.82%)    (3.76%)
  Average noninterest
   deposits/total
   average deposits         22.06%      24.42%      (2.36%)    (9.66%)
  Allowance for loan
   losses/period end
   loans                     1.17%       1.16%       0.01%       0.86%
  Nonperforming assets
   to period end assets      0.77%       0.09%       0.68%     755.56%
  Period end equity/
   period end total
   assets                   12.52%      11.06%       1.46%      13.20%
  Efficiency ratio          69.69%      69.30%       0.39%       0.56%
                        ----------  ----------  ----------  ----------

CONTACT:  TowneBank
          G. Robert Aston, Chairman and CEO
            757-638-6780
          Clyde E. McFarland, Jr., Senior Executive Vice President
           and CFO
            757-638-6801