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Highlights for Fourth Quarter 2021 Compared to Fourth Quarter 2020:

• Total revenues were $160.42 million, in fourth quarter 2021, a decrease from the prior year quarter of $11.42 million, or 6.65%. Increases in insurance and property management income were more than offset by a $16.56 million decrease in residential mortgage banking income as mortgage demand continued to normalize after the interest rate driven surge in 2020.

• Pre-provision, pre-tax, net revenues (non-GAAP) were $48.48 million, a decrease of $13.62 million, or 21.93%.

• Loans held for investment increased $0.21 billion, or 2.24%, in fourth quarter 2021. Excluding PPP loans, loans held for investment increased $0.30 billion, or 13.26% on an annualized basis, from the linked quarter.

• Total deposits were $13.57 billion, an increase of $0.56 billion, or 4.30%, from September 30, 2021, or 17.06% on an annualized basis.

• Noninterest bearing deposits increased by 26.79%, to $5.55 billion, compared to prior year, representing 40.86% of total deposits. Compared to the linked quarter, noninterest bearing deposits increased 11.16% on an annualized basis.

• In the quarter ended December 31, 2021, annualized return on average common shareholders' equity was 8.45% and annualized return on average tangible common shareholders' equity was 12.22% (non-GAAP). For the full 12 months, return on average common shareholders' equity was 11.70% and return on average tangible common shareholders' equity was 16.75% (non-GAAP).

• Net interest margin of 2.70% and taxable equivalent net interest margin of 2.72% (non-GAAP) compared to the prior year quarter of 2.97% and 2.98%, respectively.

• Effective tax rate of 18.97% compared to 17.21% in fourth quarter 2020 and 22.73% in the linked quarter.

"From a strategic perspective, we were encouraged to see loan growth momentum build in the back half of 2021. We have several new banking locations coming fully online in 2022 and expect to continue expanding our impressive suite of noninterest income sources. We are well-positioned to deploy our excess liquidity and should benefit in a rising rate environment," said J. Morgan Davis, Chief Executive Officer.

Quarterly Net Interest Income Compared to the Fourth Quarter of 2020:

• Net interest income was $100.79 million compared to $100.61 million for the quarter ended December 31, 2020.

• Taxable equivalent net interest margin (non-GAAP) was 2.72%, including purchase accounting accretion of 2 basis points and PPP accretion of 7 basis points, compared to 2.98%, including purchase accounting accretion of 5 basis points and PPP accretion of 10 basis points, for fourth quarter 2020.

• On an average basis, loans held for investment, with a yield of 4.05%, represented 63.26% of earning assets in the fourth quarter of 2021 compared to a yield of 4.28%, which represented 72.32% of earning assets in the fourth quarter of 2020.

• Interest and fee income on PPP loans was $3.85 million in fourth quarter 2021, compared to $7.77 million in the linked quarter, and $11.29 million in fourth quarter 2020.

• Total cost of deposits decreased to 0.16% from 0.37% at December 31, 2020.

• Average interest-earning assets totaled $14.80 billion at December 31, 2021 compared to $13.48 billion at December 31, 2020, an increase of 9.78%.

• Average interest-bearing liabilities totaled $8.26 billion, an increase of $0.23 billion, or 2.88%, from the prior year.

• We expect to continue positioning our earning asset portfolio to positively benefit interest margin in anticipation of a rising rate environment.

Quarterly Provision for Credit Losses:

• The quarterly provision for credit losses for on-balance-sheet loans was a benefit of $1.18 million compared to a provision expense of $1.21 million one year ago and a benefit of $1.60 million in the linked quarter.

• The fourth quarter 2021 included a release in the allowance for credit losses of $1.12 million that was driven by a combination of net recoveries and improvement in the current economic forecast, offset by core loan growth.

• Net recoveries were $0.06 million compared to net charge-offs of $0.11 million one year prior. The ratio of net charge-offs (recoveries) to average loans on an annualized basis was 0.00% in fourth quarter 2021 and 2020, and (0.03)% in the linked quarter.

• The allowance for credit losses on loans represented 1.12% of total loans compared to 1.15% at September 30, 2021 and 1.25% at December 31, 2020. Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses on loans (non-GAAP) was 1.13% at December 31, 2021, 1.18% at September 30, 2021, and 1.37% at December 31, 2020. The allowance for credit losses on loans was 17.76 times nonperforming loans compared to 12.68 times at September 30, 2021 and 10.74 times at December 31, 2020.

• Expected loss estimates are subject to change based on continuing review of models and assumptions, portfolio performance, changes in forecasted macroeconomic conditions and loan mix, which could result in material changes to the reserve in future periods.

Quarterly Noninterest Income Compared to Fourth Quarter 2020:

• Total noninterest income was $59.63 million compared to $71.23 million in 2020, a decrease of $11.60 million, or 16.29%. Residential mortgage banking income decreased $16.56 million, while insurance commissions increased $1.62 million, and property management income increased $3.43 million.

• Residential mortgage banking income was $20.95 million compared to $37.50 million in fourth quarter 2020. Loan volume in the current quarter was $1.15 billion, with purchase activity comprising 79.36%. Loan volume in fourth quarter 2020 was $1.69 billion, with purchase activity of 59.76%. Loan volume in the linked quarter was $1.31 billion with purchase activity of 77.45%. Mortgage rates have increased compared to prior periods, resulting in a decline in refinance activity.

• In addition to declines in mortgage volume and margin from prior periods, the income statement impact of derivative instruments in the fourth quarter of 2021 was a net loss of $2.90 million, compared to a net gain of $1.30 million in the fourth quarter of 2020, and a net loss of $0.77 million in the linked quarter.

• Total insurance segment revenue increased $2.26 million, or 13.31%, to $19.26 million in the fourth quarter of 2021. This increase is attributable to higher property and casualty commissions and contingency income, compared to the prior year quarter. We acquired an insurance agency in December 2020, which brought in $0.53 million in additional revenue in fourth quarter 2021.

• Property management fee revenue increased 60.62%, or $3.43 million, as compared to fourth quarter 2020 due to strong fourth quarter 2021 reservation activity. In July 2021, the Company acquired Venture Resorts, a cabin rental company in the Smoky Mountains of Tennessee, which brought in an additional $2.02 million in property management fees in the quarter.

Quarterly Noninterest Expense Compared to Fourth Quarter 2020:

• Total noninterest expense was $110.47 million compared to $105.93 million, an increase of $4.54 million, or 4.28%. This reflects increases of $3.34 million in salary and benefits expense, $1.16 million in data processing expense, and $1.21 million in advertising and marketing expenses. The Venture Resorts acquisition resulted in an additional $3.72 million of noninterest expenses during the quarter.

• Increases in salaries and benefits compared to fourth quarter 2020 were driven by second quarter 2021 annual base salary adjustments, business acquisitions, and year-end production-related bonuses.

• Higher credit card fees on vacation property reservation activities and increased costs associated with our core banking platform drove the increase in data processing expense.

• Advertising and marketing expenses increased, primarily in our Realty segment, driven by production based advertising programs in our property management companies and a consumer mortgage advertising program in our residential mortgage operations.

• We expect first quarter 2022 noninterest expenses to be slightly lower than the current quarter and average $107 million to $109 million on a quarterly basis throughout 2022.

Consolidated Balance Sheet Highlights:

• Total assets were $16.36 billion at December 31, 2021, an increase of 11.86%, compared to $14.63 billion at December 31, 2020. The increase was driven by increased liquidity levels related to strong deposit growth.

• Loans held for investment decreased $0.12 billion, or 1.28%, compared to year end 2020, but increased $0.21 billion compared to the linked quarter. Excluding PPP loans of $0.16 billion in fourth quarter 2021, $0.86 billion in fourth quarter 2020, and $0.25 billion in the linked quarter, loans held for investment increased $0.58 million, or 6.56%, compared to prior year, and $0.30 million, or 2.24%, compared to September 30, 2021, or 13.26% on an annualized basis.

• Average loans held for investment, excluding PPP loans, were $9.17 billion in fourth quarter 2021, an increase of $444.58 million, or 5.09%, compared to prior year. In the linked quarter comparison, average loans held for investment, excluding PPP loans, increased 3.16%, or $280.75 million, 12.53% on an annualized basis.

• Unamortized fee income related to PPP loans was $4.16 million at December 31, 2021 and $14.79 million at December 31, 2020.

• Mortgage loans held for sale decreased $0.18 billion, or 33.75%, compared to prior year and $0.07 billion, or 17.03%, compared to the linked quarter.

• Total deposits increased $2.0 billion, or 17.29%, over December 31, 2020, and increased $0.56 billion, or 4.30%, compared to the linked quarter.

• Total borrowings decreased $0.47 billion, or 49.59%, from prior year and $0.01 billion, or 1.16%, compared to the linked quarter.

Investment Securities:

• Total investment securities were $1.98 billion compared to $1.59 billion at September 30, 2021 and $1.42 billion at December 31, 2020. The weighted average duration of the portfolio at December 31, 2021 was 3.89 years. The carrying value of the AFS debt securities portfolio included $17.54 million in net unrealized gains compared to $58.32 million in net unrealized gains at December 31, 2020.

• We anticipate continuing to strategically deploy excess liquidity at a similar pace in the first half of 2022.

Loans and Asset Quality:

• Total loans held for investment were $9.51 billion at December 31, 2021 compared to $9.30 billion at September 30, 2021 and $9.63 billion at December 31, 2020.

• Nonperforming assets were $10.56 million, or 0.06% of total assets, compared to $16.21 million, or 0.11% of total assets, at December 31, 2020.

• Nonperforming loans were 0.06% of period end loans compared to 0.12% at December 31, 2020.

• Foreclosed property increased $0.30 million from $4.28 million at December 31, 2020. On January 14, 2022, the Company recognized a nominal gain on the sale of a foreclosed property, which had been carried on the balance sheet at $3.55 million at December 31, 2021.

Deposits and Borrowings:

• Total deposits were $13.57 billion compared to $13.01 billion at September 30, 2021 and $11.57 billion at December 31, 2020.

• Total loans held for investment to total deposits were 70.03% compared to 71.44% at September 30, 2021 and 83.20% at December 31, 2020.

• Non-interest bearing deposits were 40.86% of total deposits at December 31, 2021 compared to 41.45% at September 30, 2021 and 37.80% at December 31, 2020. Non-interest bearing deposits experienced typical seasonality during the fourth quarter.

• Total borrowings were $0.48 billion compared to $0.49 billion and $0.96 billion at September 30, 2021 and December 31, 2020, respectively.

Capital:

• Common equity tier 1 capital ratio of 12.36%.

• Tier 1 leverage capital ratio of 9.12%.

• Tier 1 risk-based capital ratio of 12.50%.

• Total risk-based capital ratio of 15.56%.

• Book value per share was $26.13 compared to $25.91 at September 30, 2021 and $24.31 at December 31, 2020.

• Tangible book value per share (non-GAAP) was $19.15 compared to $18.92 at September 30, 2021 and $17.46 at December 31, 2020.

Annual Meeting of Shareholders:
TowneBank intends to hold its 2022 Annual Meeting of Shareholders at 11:30 a.m. on Wednesday, May 25, 2022 at the Virginia Beach Convention Center, 1000 19th Street in Virginia Beach, Virginia.

About TowneBank:
Founded in 1999, TowneBank is a company built on relationships, offering a full range of banking and other financial services, with a mission of serving others and enriching lives. Dedicated to a culture of caring, Towne values all employees and members by embracing their diverse talents, perspectives, and experiences.

Today, TowneBank operates over 40 banking offices throughout Hampton Roads and Central Virginia, as well as Northeastern and Central North Carolina – serving as a local leader in promoting the social, cultural, and economic growth in each community. Towne offers a competitive array of business and personal banking solutions, delivered with only the highest ethical standards. Experienced local bankers providing a higher level of expertise and personal attention with local decision-making are key to the TowneBank strategy. TowneBank has grown its capabilities beyond banking to provide expertise through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations. With total assets of $16.36 billion as of December 31, 2021, TowneBank is one of the largest banks headquartered in Virginia.

Non-GAAP Financial Measures:

This press release contains certain 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, 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.

Forward-Looking Statements:
This press release contains certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only the beliefs, expectations, or opinions of TowneBank and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional terms, such as "will," "would," "should," "could," "may," "likely," "probably," or "possibly." 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 the impacts of the ongoing COVID-19 pandemic and the associated efforts to limit the spread of the virus; competitive pressures in the banking industry that may increase significantly; changes in the interest rate environment that may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; changes in the credit worthiness of customers and the possible impairment of the collectability of loans; general economic conditions, either nationally or regionally, that 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 and tax laws, that may adversely affect our business; costs or difficulties related to the integration of 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; cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain reliable electronic systems; 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 regard to our market area. Any forward-looking statements made by us or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events, or otherwise. For additional information on factors that could materially influence forward-looking statements included in this release, see the "Risk Factors" in TowneBank’s Annual Report on Form 10-K for the year ended December 31, 2020 and related disclosures in other filings that have been, or will be, filed by TowneBank with the Federal Deposit Insurance Corporation.

Media contact:
G. Robert Aston, Jr., Executive Chairman, 757-638-6780
J. Morgan Davis, Chief Executive Officer, 757-673-1673

Investor contact:
William B. Littreal, Chief Financial Officer, 757-638-6813