Towne Bancorp Reports Record Earnings for the Third Quarter

  
    
  
  
    
      Towne Bancorp, the parent company of Towne Bank of Arizona (OTCBB: 
      TWNE), today reported that continued strong loan growth led to record 
      third quarter profits of $529,000, or $.30 per diluted share, compared 
      to $172,000, or $.10 per diluted share, in the third quarter a year ago. 
      For the nine months ended at 9-30-06, net income totaled $1,068,000, or 
      $.61 per diluted share, compared to a loss of $284,000, or ($.16) per 
      diluted share, in the first nine months of 2005.
    
    
      “Two and one half years after opening, we 
      continue to be presented with significant quality business loan and 
      deposit relationship opportunities in the Valley which are producing 
      gratifying net income returns and furthering the establishment of a 
      strong and healthy community bank franchise,” 
      said S. Rick Meikle, president and CEO.
    
    
      Net interest income before provision for loan losses grew by 135% to 
      $1,978,000 in the third quarter of ‘06 
      compared to the third quarter of ‘05. Total 
      non interest expense increased to $911,000 at 9/30/06 from $575,000 at 
      9/30/05. However, after the bank’s first full 
      quarter of complete implementation of FASB 91 regarding the recognition 
      of fee income, the company was able to report a return on average assets 
      (ROAA) of 1.56% & 1.20% for the third quarter and year to date, 
      respectively. “To achieve these levels of 
      return on assets after only 30 short months of operation is indeed 
      impressive and a tribute to the entire staff and board of directors of 
      the bank,” noted Meikle.
    
    
      Net loans increased 157% to $133.4 million at the end of the third 
      quarter 2006, compared to $51.9 million a year earlier. Loans have 
      increased 90% or $63.4 million during the first nine months of 2006. Net 
      interest margin (NIM) remains very strong at 5.84% for the third quarter 
      of ‘06 compared to 5.54% in the third quarter 
      a year earlier. Year to date NIM for September 30, 2005 & 2006 were 
      5.17% & 6.53% respectively. “Even with the 
      current yield curve presenting ever increasing challenges to funding and 
      the heightened competition in the Valley, we are very pleased with our 
      performance in the all important area of net interest margin,” 
      said Meikle.
    
    
      Credit quality remains very good with $-0- and $11,000 in net 
      charge-offs for the third quarter and year to date, respectively. The 
      company’s allowance for loan losses stands at 
      1.29% of gross loans compared to 1.03% at 9-30-05.
    
    
      Total deposits increased 153% to $103.8 million at 9-30-06, compared to 
      $41.0 million at 9-30-05. Non-interest bearing deposits increased 175% 
      to $6.1 million at 9-30-06, compared to $2.2 million at 9-30-05. 
      Interest bearing deposits decreased 3% to $6.2 million at 9-30-06, 
      compared to $6.4 million at 9-30-05. Time deposits increased 182% to 
      $91.5 million at 9-30-06, compared to $32.4 million at 9-30-05.
    
    
      “With the addition of a seasoned in-market 
      dedicated deposit gathering professional we are continuing to make 
      progress with respect to adding local core deposit relationships and 
      obtaining the maximum deposit benefit from our loan customers,” 
      noted Meikle.
    
    
      Statements concerning future performance, developments or events, 
      expectations for earnings, growth and market forecasts, and any other 
      guidance on future periods, constitute forward-looking statements, which 
      are subject to a number of risks and uncertainties that are beyond Towne 
      Bancorp's control and might cause actual results to differ materially 
      from the expectations and stated objectives. Factors which could cause 
      actual results to differ materially include, but are not limited to, 
      regional and general economic conditions, management's ability to 
      generate continued improvement in asset quality and profitability, 
      changes in interest rates, deposit flows, real estate values, 
      competition, loan delinquency rates, the successful operation of the 
      newly opened branches and loan offices, changes in accounting 
      principles, practices, policies or guidelines, changes in legislation or 
      regulation, other economic, competitive, governmental, regulatory and 
      technological factors affecting operations, pricing, products and 
      services. Accordingly, these factors should be considered in evaluating 
      the forward-looking statements, and undue reliance should not be placed 
      on such statements. Towne Bancorp undertakes no responsibility to update 
      or revise any forward-looking statements.
    
    
      
        
          (All dollars in thousands except per share data)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          QUARTERLY TRENDS
        
        
        
        
          YEAR-TO-DATE
        
        
        
        
        
      
      
        
          Income Statement Data (unaudited)
        
        
          3rd Qtr 2006
        
        
        
        
          3rd Qtr 2005
        
        
        
        
          2006 Change 
        
        
        
        
          Sep 2006
        
        
        
        
          Sep 2005
        
        
        
        
          2006 Change 
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net interest income
        
        
          $1,978 
        
        
        
        
          $848 
        
        
        
        
          134.96%
        
        
        
        
          $5,757 
        
        
        
        
          $1,653 
        
        
        
        
          248.24%
        
        
        
        
        
      
      
        
          Provision for loan losses
        
        
          $194 
        
        
        
        
          $108 
        
        
        
        
          79.49%
        
        
        
        
          $1,037 
        
        
        
        
          $340 
        
        
        
        
          205.02%
        
        
        
        
        
      
      
        
          Total non-interest income
        
        
          $9 
        
        
        
        
          $6 
        
        
        
        
          41.88%
        
        
        
        
          $3 
        
        
        
        
          $11 
        
        
        
        
          -69.42%
        
        
        
        
        
      
      
        
          Total non-interest expense
        
        
          $911 
        
        
        
        
          $575 
        
        
        
        
          58.42%
        
        
        
        
          $2,943 
        
        
        
        
          $1,608 
        
        
        
        
          83.02%
        
        
        
        
        
      
      
        
          Federal Taxes
        
        
          $353 
        
        
        
        
          $0 
        
        
        
        
          n/a 
        
        
        
        
          $712 
        
        
        
        
          $0 
        
        
        
        
          n/a 
        
        
        
        
        
      
      
        
          Net income
        
        
          $529 
        
        
        
        
          $172 
        
        
        
        
          208.62%
        
        
        
        
          $1,068 
        
        
        
        
          ($284)
        
        
        
        
          476.51%
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Selected Balance Sheet Data (unaudited)
        
        
          Sep 2006
        
        
        
        
          Jun 2006
        
        
        
        
          3rd Quarter 2006 Change
        
        
        
        
          Dec 2005
        
        
        
        
          YTD 2006 Change
        
        
        
        
          Sep 2005
        
        
        
        
          
            Year Over Year Change
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total assets
        
        
          $139,517 
        
        
        
        
          $128,128 
        
        
        
        
          $11,389 
        
        
        
        
          $75,349 
        
        
        
        
          $64,168 
        
        
        
        
          $74,357 
        
        
        
        
          $65,160 
        
      
      
        
          Net Loans
        
        
          $133,408 
        
        
        
        
          $117,433 
        
        
        
        
          $15,976 
        
        
        
        
          $70,054 
        
        
        
        
          $63,354 
        
        
        
        
          $51,908 
        
        
        
        
          $81,500 
        
      
      
        
          Total Deposits
        
        
          $103,797 
        
        
        
        
          $93,144 
        
        
        
        
          $10,653 
        
        
        
        
          $41,128 
        
        
        
        
          $62,670 
        
        
        
        
          $41,007 
        
        
        
        
          $62,790 
        
      
      
        
          Total Equity Cap
        
        
          $35,109 
        
        
        
        
          $34,580 
        
        
        
        
          $529 
        
        
        
        
          $34,027 
        
        
        
        
          $1,082 
        
        
        
        
          $33,161 
        
        
        
        
          $1,949 
        
      
      
        
          Book value per share
        
        
          $22.15 
        
        
        
        
          $21.83 
        
        
        
        
          $0.29 
        
        
        
        
          $21.47 
        
        
        
        
          $0.68 
        
        
        
        
          $20.97 
        
        
        
        
          $1.18 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          QUARTERLY TRENDS
        
        
        
        
          YEAR-TO-DATE
        
        
        
        
        
      
      
        
          Selected Ratios (unaudited)
        
        
          3rd Qtr 2006
        
        
        
        
          3rd Qtr 2005
        
        
        
        
          2006 Change 
        
        
        
        
          Sep 2006
        
        
        
        
          Sep 2005
        
        
        
        
          2006 Change 
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net Interest Margin
        
        
          5.84%
        
        
        
        
          5.54%
        
        
        
        
          5.44%
        
        
        
        
          6.53%
        
        
        
        
          5.17%
        
        
        
        
          26.44%
        
        
        
        
        
      
      
        
          Return on assets
        
        
          1.56%
        
        
        
        
          1.11%
        
        
        
        
          40.75%
        
        
        
        
          1.20%
        
        
        
        
          -0.87%
        
        
        
        
          238.83%
        
        
        
        
        
      
      
        
          Return on equity
        
        
          6.05%
        
        
        
        
          4.47%
        
        
        
        
          35.36%
        
        
        
        
          4.13%
        
        
        
        
          -3.44%
        
        
        
        
          220.10%
        
        
        
        
        
      
      
        
          Efficiency Ratio
        
        
          45.86%
        
        
        
        
          67.31%
        
        
        
        
          -31.87%
        
        
        
        
          51.09%
        
        
        
        
          96.61%
        
        
        
        
          -47.12%
        
        
        
        
        
      
      
        
          Net charge-offs to Total Loans
        
        
          0.00%
        
        
        
        
          -0.01%
        
        
        
        
          100.00%
        
        
        
        
          0.01%
        
        
        
        
          0.01%
        
        
        
        
          -35.89%
        
        
        
        
        
      
      
        
          ALLL to Gross Loans %
        
        
          1.29%
        
        
        
        
          1.03%
        
        
        
        
          25.91%
        
        
        
        
          1.29%
        
        
        
        
          1.03%
        
        
        
        
          25.91%
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Per Share data (unaudited)
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Net income per share
        
        
          $0.33 
        
        
        
        
          $0.19 
        
        
        
        
        
        
        
        
          $0.67 
        
        
        
        
          ($0.65)
        
        
        
        
        
        
        
        
        
      
      
        
          Net income per share (diluted)
        
        
          $0.30 
        
        
        
        
          $0.10 
        
        
        
        
        
        
        
        
          $0.61 
        
        
        
        
          ($0.16)
        
        
        
        
        
        
        
        
        
      
      
        
          Total Outstanding Shares
        
        
          1,584,856 
        
        
        
        
          1,581,656 
        
        
        
        
        
        
        
        
          1,584,856 
        
        
        
        
          1,581,656 
        
        
        
        
        
      
    
  
Towne Bancorp, the parent company of Towne Bank of Arizona (OTCBB:
TWNE), today reported that continued strong loan growth led to record
third quarter profits of $529,000, or $.30 per diluted share, compared
to $172,000, or $.10 per diluted share, in the third quarter a year
ago. For the nine months ended at 9-30-06, net income totaled
$1,068,000, or $.61 per diluted share, compared to a loss of $284,000,
or ($.16) per diluted share, in the first nine months of 2005.

   "Two and one half years after opening, we continue to be presented
with significant quality business loan and deposit relationship
opportunities in the Valley which are producing gratifying net income
returns and furthering the establishment of a strong and healthy
community bank franchise," said S. Rick Meikle, president and CEO.

   Net interest income before provision for loan losses grew by 135%
to $1,978,000 in the third quarter of '06 compared to the third
quarter of '05. Total non interest expense increased to $911,000 at
9/30/06 from $575,000 at 9/30/05. However, after the bank's first full
quarter of complete implementation of FASB 91 regarding the
recognition of fee income, the company was able to report a return on
average assets (ROAA) of 1.56% & 1.20% for the third quarter and year
to date, respectively. "To achieve these levels of return on assets
after only 30 short months of operation is indeed impressive and a
tribute to the entire staff and board of directors of the bank," noted
Meikle.

   Net loans increased 157% to $133.4 million at the end of the third
quarter 2006, compared to $51.9 million a year earlier. Loans have
increased 90% or $63.4 million during the first nine months of 2006.
Net interest margin (NIM) remains very strong at 5.84% for the third
quarter of '06 compared to 5.54% in the third quarter a year earlier.
Year to date NIM for September 30, 2005 & 2006 were 5.17% & 6.53%
respectively. "Even with the current yield curve presenting ever
increasing challenges to funding and the heightened competition in the
Valley, we are very pleased with our performance in the all important
area of net interest margin," said Meikle.

   Credit quality remains very good with $-0- and $11,000 in net
charge-offs for the third quarter and year to date, respectively. The
company's allowance for loan losses stands at 1.29% of gross loans
compared to 1.03% at 9-30-05.

   Total deposits increased 153% to $103.8 million at 9-30-06,
compared to $41.0 million at 9-30-05. Non-interest bearing deposits
increased 175% to $6.1 million at 9-30-06, compared to $2.2 million at
9-30-05. Interest bearing deposits decreased 3% to $6.2 million at
9-30-06, compared to $6.4 million at 9-30-05. Time deposits increased
182% to $91.5 million at 9-30-06, compared to $32.4 million at
9-30-05.

   "With the addition of a seasoned in-market dedicated deposit
gathering professional we are continuing to make progress with respect
to adding local core deposit relationships and obtaining the maximum
deposit benefit from our loan customers," noted Meikle.

   Statements concerning future performance, developments or events,
expectations for earnings, growth and market forecasts, and any other
guidance on future periods, constitute forward-looking statements,
which are subject to a number of risks and uncertainties that are
beyond Towne Bancorp's control and might cause actual results to
differ materially from the expectations and stated objectives. Factors
which could cause actual results to differ materially include, but are
not limited to, regional and general economic conditions, management's
ability to generate continued improvement in asset quality and
profitability, changes in interest rates, deposit flows, real estate
values, competition, loan delinquency rates, the successful operation
of the newly opened branches and loan offices, changes in accounting
principles, practices, policies or guidelines, changes in legislation
or regulation, other economic, competitive, governmental, regulatory
and technological factors affecting operations, pricing, products and
services. Accordingly, these factors should be considered in
evaluating the forward-looking statements, and undue reliance should
not be placed on such statements. Towne Bancorp undertakes no
responsibility to update or revise any forward-looking statements.

-0-
*T
(All dollars in thousands except per share data)


                                           QUARTERLY TRENDS
                                --------------------------------------
Income Statement Data
 (unaudited)                    3rd Qtr 2006 3rd Qtr 2005 2006 Change
                                ------------ ------------ ------------

Net interest income                  $1,978         $848       134.96%
Provision for loan losses              $194         $108        79.49%
Total non-interest income                $9           $6        41.88%
Total non-interest expense             $911         $575        58.42%
Federal Taxes                          $353           $0          n/a
Net income                             $529         $172       208.62%


Selected Balance Sheet Data                               3rd Quarter
 (unaudited)                      Sep 2006     Jun 2006    2006 Change
                                ------------ ------------ ------------

Total assets                       $139,517     $128,128      $11,389
Net Loans                          $133,408     $117,433      $15,976
Total Deposits                     $103,797      $93,144      $10,653
Total Equity Cap                    $35,109      $34,580         $529
Book value per share                 $22.15       $21.83        $0.29


                                           QUARTERLY TRENDS
                                --------------------------------------
Selected Ratios (unaudited)     3rd Qtr 2006 3rd Qtr 2005 2006 Change
                                ------------ ------------ ------------

Net Interest Margin                    5.84%        5.54%        5.44%
Return on assets                       1.56%        1.11%       40.75%
Return on equity                       6.05%        4.47%       35.36%
Efficiency Ratio                      45.86%       67.31%      -31.87%
Net charge-offs to Total Loans         0.00%       -0.01%      100.00%
ALLL to Gross Loans %                  1.29%        1.03%       25.91%


Per Share data (unaudited)
Net income per share                  $0.33        $0.19
Net income per share (diluted)        $0.30        $0.10
Total Outstanding Shares          1,584,856    1,581,656


                                  YEAR-TO-DATE
                       ----------------------------------
Income Statement Data
 (unaudited)            Sep 2006   Sep 2005  2006 Change
                       ---------- ---------- ------------

Net interest income       $5,757     $1,653       248.24%
Provision for loan
 losses                   $1,037       $340       205.02%
Total non-interest
 income                       $3        $11       -69.42%
Total non-interest
 expense                  $2,943     $1,608        83.02%
Federal Taxes               $712         $0          n/a
Net income                $1,068      ($284)      476.51%


Selected Balance Sheet            YTD 2006                 Year Over
 Data (unaudited)       Dec 2005    Change     Sep 2005    Year Change
                       ---------- ---------- ------------ ------------

Total assets             $75,349    $64,168      $74,357      $65,160
Net Loans                $70,054    $63,354      $51,908      $81,500
Total Deposits           $41,128    $62,670      $41,007      $62,790
Total Equity Cap         $34,027     $1,082      $33,161       $1,949
Book value per share      $21.47      $0.68       $20.97        $1.18


                                  YEAR-TO-DATE
                       ----------------------------------
Selected Ratios
 (unaudited)            Sep 2006   Sep 2005  2006 Change
                       ---------- ---------- ------------

Net Interest Margin         6.53%      5.17%       26.44%
Return on assets            1.20%     -0.87%      238.83%
Return on equity            4.13%     -3.44%      220.10%
Efficiency Ratio           51.09%     96.61%      -47.12%
Net charge-offs to
 Total Loans                0.01%      0.01%      -35.89%
ALLL to Gross Loans %       1.29%      1.03%       25.91%


Per Share data
 (unaudited)
Net income per share       $0.67     ($0.65)
Net income per share
 (diluted)                 $0.61     ($0.16)
Total Outstanding
 Shares                1,584,856  1,581,656
*T