TowneBank Announces Pricing of Subordinated Notes Offering

Rhea-AI Summary

TowneBank (Nasdaq: TOWN) announced the pricing of $250 million in 3.125% fixed-to-floating rate subordinated notes due 2032. Initially, the notes will earn 3.125% interest until February 15, 2027, after which the rate will reset quarterly based on Three-Month Term SOFR plus 168 basis points. The offering is expected to close around February 9, 2022, with proceeds used for general corporate purposes, including redeeming existing debt and supporting regulatory capital levels. The notes will not be insured by the FDIC and are junior to existing senior debts.

Positive

• Issuance of $250 million in subordinated notes strengthens capital structure.
• Proceeds will support growth, redeem existing high-interest debt, and enhance regulatory capital.

Negative

• Notes are subordinated and will rank junior to existing debts, increasing risk for investors.
• Notes are not insured or guaranteed by the FDIC, posing a potential risk.

SUFFOLK, Va., Feb. 02, 2022 (GLOBE NEWSWIRE) -- TowneBank (the “Company”) (Nasdaq: TOWN) announced today the pricing of its offering of $250 million of its 3.125% fixed-to-floating rate subordinated notes due 2032 (the “Notes”). The Notes will initially bear interest at 3.125% per annum, with interest payable semiannually in arrears, commencing on the issue date, to, but excluding, February 15, 2027. Commencing February 15, 2027, the interest rate on the Notes will reset quarterly to a floating rate per annum equal to a benchmark rate that is expected to be Three-Month Term SOFR (which is defined in the Notes) plus 168 basis points, with interest payable quarterly in arrears. The Company may redeem the Notes, in whole or in part, on and after February 15, 2027, at a price equal to 100% of the principal amount of the Notes being redeemed plus accrued and unpaid interest. The Notes will mature on February 15, 2032 if they are not earlier redeemed.

The Company expects to close the transaction, subject to customary conditions, on or about February 9, 2022. The Company intends to use the net proceeds of this offering for general corporate purposes, which may include, among other things, redeeming the Company’s 4.5% fixed-to-floating rate subordinated notes due 2027 after they become callable on July 30, 2022, financing organic growth or strategic acquisitions, repurchases of shares of the Company’s common stock, supporting regulatory capital levels, and ongoing working capital needs. The Notes are intended to qualify as Tier 2 capital for regulatory purposes.

Piper Sandler & Co. served as sole book-running manager for the offering.

The Notes will be unsecured and subordinated obligations of the Company and will rank junior in right of payment to all of the Company’s existing and future senior indebtedness (including deposits and claims of general creditors). The Notes will not be guaranteed by any of the Company’s subsidiaries or affiliates.

The Notes will be issued in reliance upon an exemption from registration under Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), because the Notes are being offered by a bank. The Notes will not be savings accounts or other deposits and will be neither insured nor guaranteed by the Federal Deposit Insurance Corporation. The Notes have not been and will not be registered under the Securities Act or under the securities laws of any state and may not be offered or sold absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state or other jurisdictions’ securities laws.

This press release does not constitute an offer to sell or a solicitation of an offer to buy the Notes in the offering, nor shall there be any sale of the Notes in the offering in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful under the securities laws of any such jurisdiction.

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, TowneBank 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. TowneBank 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.

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. 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 information on the 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.

For more information, contact:
G. Robert Aston, Jr. 757-638-6780
William B. Littreal 757-638-6813

FAQ

What are the features of TowneBank's new subordinated notes?

TowneBank's subordinated notes have a fixed interest rate of 3.125% until February 15, 2027, after which it will convert to a floating rate based on Three-Month Term SOFR plus 168 basis points.

When will TowneBank's subordinated notes mature?

The subordinated notes will mature on February 15, 2032, unless redeemed earlier.

How does TowneBank plan to use the proceeds from the subordinated notes offering?

TowneBank intends to use the proceeds for general corporate purposes, including redeeming higher-interest debt and financing growth.

What is the significance of the subordinated notes for TowneBank's investors?

The subordinated notes will rank junior to all senior debts, which could increase investment risk, despite their potential to improve capital structure.