"Sometimes they give it to me for one week, sometimes twoweeks, but not more. They keep saying the drug has not arrivedfrom NACO," said Rekha, referring to India's National AIDSControl Organisation (NACO), a part of the healthcare ministry.

The community motivator at an HIV/AIDS support group, whodeclined to give her surname, cannot afford to buy the drugs onthe open market.

Like thousands of other HIV/AIDS sufferers, she relies onfree antiretroviral drugs handed out at state-run healthcareproviders supplied by NACO through a tender process.

But they are facing shortfalls that have been blamed onsupply bottlenecks, late payments to drugmakers and at least onelarge Indian manufacturer boycotting the process.

Some drugmakers stopped participating in the government'stender process over the past year because of delays in getting paid, said Leena Menghaney, an activist with the medical charityMedecins Sans Frontieres (MSF).

India had the third largest number of people living with HIVin the world at the end of 2013 and accounts for about four outof 10 people living with HIV in the Asian region, according tothe U.N. AIDS programme UNAIDS.

Out of 2.1 million HIV/AIDS patients in India, about 750,000people depend on the free distribution of drugs throughgovernment-run centres, according to NACO.

CIPLA STOPS BIDDING - NACO

A senior official at the Maharashtra State AIDS ControlSociety, a government body, said the agency was facing ashortage of three HIV/AIDS drugs - two for treating children andone for adults.

The society, in the western Maharashtra state whose capitalis Mumbai, is looking to get those drugs from other states whereit is available, said the official, who declined to be named.

"There have been complaints, I won't deny that. But whatthey (NACO officials) say is that the situation is not asalarming as has been painted, so I have asked them to give methe facts," India's Health Secretary Lov Verma told Reuters.

"We are looking into that matter, we are trying to find outwhere the shortages exist and how we can address them."

Activists and A.S. Rathore, deputy director general of NACO,named Indian drugmaker Cipla Ltd as one of the firmsthat had stopped bidding in the tender process. Activists saiddelayed payments were the reason for the dropout.

It was not immediately clear which other companies hadwithdrawn from the bidding process in the recent past. A largenumber of domestic and overseas companies participate in theprocess to supply HIV/AIDS medicines and testing kits.

Cipla, which made headlines in 2001 by making antiretroviralmedicines to treat AIDS in Africa for under $1 per day and is amajor producer of HIV drugs for children, did not respond to arequest for comment.

Rathore said HIV/AIDS drugs were not out of stock in India,and the government agency had advised state governments to usecontingency funds to buy drugs from the retail market in case ofshortages. He denied the department had delayed payments.

"Cipla is making drugs for tuberculosis, leprosy and cancer,etc, but for HIV they are not bidding because they are gettingmore margins from exporting the drugs," he said. "Individuallywe cannot pursue companies."

Several government distribution centres in states includingMaharashtra, Gujarat and Karnataka are facing shortfalls becauseNACO has not supplied adequate quantities, activists said.

NACO's Rathore said states were often to blame because theyfailed to provide a proper estimate of the number of drugsrequired. He added that NACO was working towards communicatingbetter with states to resolve this problem.

UNDERFUNDED SYSTEM

With around 40 percent of the population in India livingbelow the poverty line, healthcare is a luxury for many.

The poorest patients beg for treatment outside a chronicallyunderfunded and overstretched healthcare system. Corruption anda sometimes dysfunctional supply chain mean drugs procured fromcompanies for free distribution often do not reach them.

India has been providing free antiretroviral drugs for HIVtreatment since 2004, but only 50 percent of those eligible forthe treatment were getting it in 2012, a report last year by theWorld Health Organisation said.

According to industry officials, the first line of HIV/AIDS drugs costs about 3,000 rupees ($50) for one month's supply inthe retail market in a country where, according to the WorldBank, one in three were living on under $1.25 a day in 2009/10.

Drugmakers in India, the world's largest source of cheapgenerics, have been hit in the recent past by a raft ofregulatory changes that included expansion of a list of drugswhose prices are capped.

"There are always payment issues when working with theIndian government," said Ramesh Adige, a pharmaceutical industryconsultant and former executive director of Ranbaxy LaboratoriesLtd.

"Lots of companies say they are getting nothing out of theseprogrammes, but they cannot ignore the market," he said.

Delhi Network of Positive People, a trust that works withHIV/AIDS patients, is planning to file a lawsuit against thegovernment over the shortage of the life-saving drugs in variousstates, said its president, Vikas Ahuja.

($1 = 60.4650 Indian rupees) (Additional reporting Aman Shah in MUMBAI and Frank Jack Danielin NEW DELHI; Writing by Sumeet Chatterjee; Editing by MikeCollett-White and Matt Driskill)

SUFFOLK, Va., July 23, 2014 (GLOBE NEWSWIRE) -- Hampton Roads based TowneBank (the "Bank") (Nasdaq:TOWN) reported earnings of $11.68 million for the quarter ended June 30, 2014, a 4.27% increase, or $478,000, over the $11.20 million reported for the comparative period in 2013. Earnings for the year-to-date period increased 5.25% to $22.81 million as compared to the $21.67 million earned in the same period last year.

Net income available to common shareholders increased 16.55% to $11.49 million after preferred dividend payments of $191,000. Fully diluted earnings per share increased 6.45% to $0.33 per share compared to $0.31 per share for the comparative period of 2013. For the six-month period ended June 30, 2014, fully diluted earnings per share increased 6.67% to $0.64 from $0.60 in the comparative prior year period.

The Bank's common dividend was $0.11 per share for the quarter with the common dividend totaling $3.90 million. The current dividend represents an increase of 22.22% over the dividend paid during the same quarter of 2013.

Earnings Highlights

Net interest income increased to $36.54 million, a $461,000, or 1.28%, increase from the second quarter of 2013. The primary driver of the increase was growth in average earning assets of $348.58 million, which was partially offset by a 24 basis point narrowing of the tax-equivalent net interest margin to 3.43% in the current quarter from 3.67% in the second quarter of 2013. On a linked quarter basis, net interest income increased $1.35 million, or 3.82%, in second quarter 2014 versus the first quarter, while tax-equivalent net interest margin was essentially flat at 3.43% versus 3.44% for first quarter of 2014.

Noninterest income, excluding gains or losses on investment securities, increased by $883,000, or 3.61%, to $25.35 million for the second quarter of 2014, compared to the second quarter of 2013. The majority of the increase is attributable to insurance commissions, which increased $2.06 million, or 30.06%, from the comparative period in 2013 due to the acquisition of two insurance agencies in the third quarter of 2013 and the acquisition of Southern Insurance Agency, Inc., based in Kitty Hawk, North Carolina, in May 2014. The increase was partially offset by decreases in residential mortgage banking income, which decreased $1.18 million, or 13.27%, from the comparative period in 2013 due to lower margins and decreased production volumes. However, Realty segment net income increased $1.46 million from a $25,000 loss in the first quarter of 2014. Mortgage production was $334.88 million in the second quarter of 2014, which was $131.11 million higher than first quarter 2014.

Noninterest expense increased by $851,000, or 1.94%, compared to the comparative quarter of 2013. The insurance acquisitions and the opening of two new banking offices in the second half of 2013 and one new banking office in June 2014 led to $1.47 million in additional expenses when compared to the second quarter of 2013. These increases were partially offset with bank-wide cost cutting initiatives which continue to improve our operating efficiencies.

Balance Sheet

At June 30, 2014, total Bank assets reached $4.91 billion, an increase of $314.76 million, or 6.85%, over June 30, 2013. The Bank's loan portfolio ended the period at $3.33 billion representing an increase of 4.61%, or $146.74 million, from the prior year.

The Bank continued to experience solid deposit growth with total deposits increasing to $3.80 billion, up $285.76 million, or 8.14%, from June 30, 2013. The Bank saw continued growth in noninterest bearing demand deposits, which ended the quarter at $1.20 billion, an 11.71% increase from June 30, 2013. Noninterest deposits represented 31.69% of total deposits at June 30, 2014.

Capital Strength

The Bank's total equity at June 30, 2014 rose to $604.81 million, an increase of $33.42 million, or 5.85%, from June 30, 2013. Common equity increased 20.92%, or $89.90 million, as the Bank's 8% Series A Preferred Stock mandatorily converted on September 1, 2013 into 3.19 million shares of TowneBank common stock reflecting a conversion price of $18.02 per share of common stock. Total risk-based capital remained strong as total risk-based capital, Tier 1 capital, Tier 1 leverage ratios, and Tier 1 common capital ratios were 13.79%, 12.83%, 10.16%, 10.53%, respectively. All ratios exceed the current regulatory standards for well capitalized status.

Credit Quality

Continued improvements in credit quality contributed to the Bank's financial results as nonperforming loans decreased to $7.50 million from $11.75 million, at June 30, 2013 and $10.98 million at March 31, 2014. As a result of the improvements in credit quality and a reduction in historical loss ratios, a negative provision for loan losses of $833,000 was recorded in the second quarter of 2014 a decrease of $631,000 as compared to the same quarter of 2013. Net charge-offs were $925,000 in the second quarter of 2014 compared to $1.41 million in the second quarter of 2013 and $1.17 million in the linked quarter. Total nonperforming assets were $49.91 million, or 1.02%, of Bank assets at June 30, 2014, as compared to $59.34 million, or 1.29%, at June 30, 2013, and $52.49 million, or 1.10%, at March 31, 2014.

On July 15, 2014, the Company announced the signing of a definitive agreement to acquire Franklin Financial Corporation ("Franklin") based in Richmond, Virginia. At March 31, 2014, Franklin had total assets of $1.10 billion, gross loans of $554.79 million, and total deposits of $670.62 million. The Company anticipates closing the transaction in the fourth quarter of 2014, subject to customary closing conditions, including the receipt of regulatory approvals and the approval of each company's shareholders.

"We are pleased to report solid second quarter results, demonstrating improvements in both revenues and operating expenses. We are also excited about the opportunity to expand our business to the Richmond market, which has been provided to us through the transaction with Franklin. In addition to acquiring a great foundation for our entry into the Richmond market, because of Franklin's strong capital base, the transaction will provide capital for additional expansion and the retirement of preferred stock relating to our participation in the Small Business Lending Fund. As we look forward to this new opportunity, we are delighted with the progress our Company has achieved for our members, our community, and our shareholders," said G. Robert Aston, Jr., Chairman and Chief Executive Officer.

As one of the top community banks in Virginia and North Carolina, TowneBank operates 28 banking offices serving Chesapeake, Hampton, Newport News, Norfolk, Portsmouth, Suffolk, Virginia Beach, Williamsburg, James City County and York County in Virginia along with Moyock, Grandy, Camden, Southern Shores, Corolla and Kill Devil Hills in North Carolina. 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, and Corolla Classic Vacations. 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 $4.91 billion as of June 30, 2014, TowneBank is one of the largest banks headquartered in Virginia.

Forward-Looking Statements:

Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions. These include statements as to the anticipated benefits of the merger, 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 forward-looking statements to be covered by the safe harbor provisions for forward-looking 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 Franklin Financial Corporation may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger or other pending or recently completed acquisitions 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, time-consuming 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 TowneBank's market areas; the implementation of new technologies; the 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 forward-looking statements, whether as a result of new information, future events or otherwise.

Additional Information About the Merger and Where to Find It:

In connection with the proposed merger, TowneBank will file with the FDIC a proxy statement/prospectus. TowneBank will deliver a definitive joint proxy statement/prospectus to its stockholders seeking their approval of the merger and related matters. In addition, TowneBank may file other relevant documents concerning the proposed merger with the FDIC.

Investors and stockholders 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 in connection with the proposed merger because they will contain important information. 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) 638-6794), or by accessing TowneBank's website at https://townebank.com under "Investor Relations." The information on TowneBank's website is not, and shall not be deemed to be, a part of this release or incorporated into other filings TowneBank makes with the FDIC.

TowneBank and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of TowneBank in connection with the merger. Information about the directors and executive officers of TowneBank is set forth in the proxy statement for TowneBank's 2014 annual meeting of stockholders filed with the FDIC on April 18, 2014. 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.