FRNK (MM)

SUMMARY

This summary highlights selected information from this joint proxy statement/prospectus. We urge you to read carefully the joint proxy statement/prospectus and the other documents to which this joint proxy statement/prospectus refers to understand fully the merger and the other matters to be considered at the special meetings. See “Where You Can Find More Information” beginning on page 110. Each item in this summary includes a page reference directing you to a more complete description of that item.

The Parties to the Merger (page 104)

TowneBank

TowneBank is a Virginia chartered commercial bank headquartered in Portsmouth, Virginia providing diversified financial services through its banking and non-banking divisions and subsidiaries. TowneBank currently operates 28 financial services offices in its primary market area, which is the Greater Hampton Roads region in southeastern Virginia and northeastern North Carolina. As of June 30, 2014, TowneBank had total consolidated assets of approximately $4.9 billion, total consolidated loans, net of unearned income, of approximately $3.3 billion, total consolidated deposits of approximately $3.8 billion and consolidated stockholders’ equity of approximately $596.0 million.

The principal executive offices of TowneBank are located at 5716 High Street, Portsmouth, Virginia 23703, and its telephone number is (757) 638-7500. TowneBank’s website can be accessed at https://www.townebank.com. Information contained on TowneBank’s website does not constitute part of, and is not incorporated into, this joint proxy statement/prospectus. TowneBank’s common stock is traded on the NASDAQ Global Select Market under the symbol “TOWN.” Additional information about TowneBank is included in documents incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information.”

Franklin Financial Corporation and Franklin Federal Savings Bank

Franklin Financial Corporation is a savings and loan holding company headquartered in Glen Allen, Virginia providing traditional financial services through its wholly-owned federally chartered savings bank subsidiary, Franklin Federal Savings Bank. Franklin Bank currently operates eight full-service banking offices serving the Richmond, Virginia metropolitan area. As of June 30, 2014, Franklin had total consolidated assets of approximately $1.1 billion, total consolidated loans, net of unearned income, of approximately $543.8 million, total consolidated deposits through Franklin Bank of approximately $684.5 million and consolidated stockholders’ equity of approximately $244.7 million.

The principal executive offices of Franklin are located at 4501 Cox Road, Glen Allen, Virginia 23060, and its telephone number is (804) 967-7000. Franklin’s website can be accessed at https://www.franklinfederal.com. Information contained on Franklin’s website does not constitute part of, and is not incorporated into, this joint proxy statement/prospectus. Franklin’s common stock is traded on the NASDAQ Global Select Market under the symbol “FRNK.” Additional information about Franklin is included in documents incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information.”

The Merger (page 47)

TowneBank and Franklin Financial Corporation are proposing a combination of our companies through a merger of Franklin Financial Corporation and Franklin Federal Savings Bank, the wholly-owned bank subsidiary of Franklin, with and into TowneBank, pursuant to the terms and conditions of the merger agreement. The parties expect to complete the merger in early January 2015. The merger agreement is attached to this joint proxy statement/prospectus as Appendix A. We encourage you to read the merger agreement because it is the legal document that governs the merger.

Consideration to be Received in the Merger by Franklin Stockholders (page 79)

In the proposed merger, holders of Franklin common stock will receive 1.40 shares of TowneBank common stock for each of their shares of Franklin common stock outstanding on the effective date of the merger and cash in lieu of any fractional shares. The number of shares of TowneBank common stock delivered for each share of Franklin common stock in

the merger is referred to as the “exchange ratio.” This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the merger. Based on the closing sale price for TowneBank common stock on the NASDAQ Global Select Market on July 14, 2014 ($16.46), the last trading day before public announcement of the merger, the 1.40 exchange ratio represented approximately $23.04 in value for each share of Franklin common stock or approximately $275.0 million in the aggregate. Based on the closing sale price for TowneBank common stock on the NASDAQ Global Select Market on October 17, 2014 ($14.59), the last trading day before the date of this joint proxy statement/prospectus, the 1.40 exchange ratio represented approximately $20.43 in value for each share of Franklin common stock or approximately $240.0 million in the aggregate. It is expected that existing holders of Franklin common stock will own approximately 31% of TowneBank’s outstanding common stock, on a fully diluted basis, after the merger.

Shares of TowneBank common stock held by TowneBank stockholders will remain unchanged in the merger. It is expected that existing holders of TowneBank common stock will own approximately 69% of TowneBank’s outstanding common stock, on a fully diluted basis, after the merger.

Treatment of Franklin Stock Options and Restricted Stock Awards (page 79)

Stock Options. In the merger, each option to purchase shares of Franklin common stock, whether vested or unvested, that is outstanding immediately prior to the effective date of the merger will be converted into cash in an amount equal to the product of (i) the average of the closing price per share of TowneBank common stock for a specified period prior to the closing date of the merger multiplied by the exchange ratio minus the per share exercise price of such option, and (ii) the number of shares of Franklin common stock subject to such option.

Restricted Stock Awards. In the merger, all outstanding Franklin restricted stock awards will vest (if not already vested) and the restrictions thereon will lapse in accordance with the agreement relating to such award, and, as of the effective time of the merger, each share of Franklin common stock that was formerly a Franklin restricted stock award will be converted into 1.40 shares of TowneBank common stock.

Dividend Information (pages 93 and 102)

TowneBank is currently paying a quarterly cash dividend on shares of its common stock at a rate of $0.11 per share, and has consistently paid a dividend on its common stock since 2003. TowneBank has no current intention to change its dividend strategy of paying a quarterly cash dividend, but has and will continue to evaluate that decision based on a quarterly review of earnings, growth, capital and such other factors that the TowneBank board of directors considers relevant to the dividend decision process. Since its organization, Franklin has not paid a regular quarterly cash dividend on shares of its common stock but paid a special one-time dividend of $0.45 per share in November 2012.

Material U.S. Federal Income Tax Consequences (page 90)

The merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Subject to the limitations and qualifications described in “Material U.S. Federal Income Tax Consequences” (page 90), for U.S. federal income tax purposes, the merger generally will be tax-free to Franklin stockholders as to the shares of TowneBank common stock they receive in the merger. However, Franklin stockholders may recognize gain or loss in connection with cash received instead of any fractional shares of TowneBank common stock they would otherwise be entitled to receive. Additionally, it is a condition to Franklin’s and TowneBank’s obligations to complete the merger that they each receive a legal opinion from LeClairRyan, A Professional Corporation that the merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368 of the Code. This opinion, however, will not bind the Internal Revenue Service, which could take a different view.

The tax consequences of the merger to you will depend on your own situation and the consequences described in this joint proxy statement/prospectus may not apply to you. Franklin stockholders will also be required to file certain information with their federal income tax returns and to retain certain records with regard to the merger. In addition, you may be subject to state, local or foreign tax laws and consequences that are not addressed in this joint proxy statement/prospectus. You are urged to consult with your own tax advisor for a full understanding of the tax consequences of the merger to you.

TowneBank’s Board of Directors Unanimously Recommends that TowneBank Stockholders Vote “FOR” the TowneBank Merger Proposal and “FOR” the Adjournment Proposal (page 51)

TowneBank’s board of directors has determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are in the best interests of TowneBank and its stockholders and has unanimously approved the merger agreement. The TowneBank board of directors unanimously recommends that TowneBank stockholders vote “FOR” the TowneBank merger proposal and “FOR” the TowneBank adjournment proposal. In making its recommendations, a number of substantive reasons were considered by the TowneBank board, including, among others:

TowneBank also considered the oral opinion of Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”) delivered to the TowneBank board of directors on July 14, 2014 (which was subsequently confirmed in writing by delivery of Sandler O’Neill’s written opinion dated July 14, 2014) to the effect that, as of that date, and subject to and based on the various assumptions, considerations, qualifications and limitations set forth in the opinion, the exchange ratio in the merger agreement is fair, from a financial point of view, to TowneBank. For additional discussion of the factors considered by TowneBank’s board of directors in reaching its decision to approve the merger agreement, see “The Merger – TowneBank’s Reasons for the Merger; Recommendation of TowneBank’s Board of Directors.”

Franklin’s Board of Directors Unanimously Recommends that Franklin Stockholders Vote “FOR” the Franklin Merger Proposal and “FOR” the Other Proposals (page 52)

Franklin’s board of directors has determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are in the best interests of Franklin and its stockholders and has unanimously approved the merger agreement. The Franklin board of directors unanimously recommends that Franklin stockholders vote “FOR” the Franklin merger proposal, “FOR” the articles amendment proposal, “FOR” the compensation proposal and “FOR” the Franklin adjournment proposal. In making its recommendations, a number of substantive reasons were considered by the Franklin board, including, among others:

Franklin also considered the oral opinion of Keefe, Bruyette & Woods, Inc. (“KBW”) rendered to the Franklin board of directors on July 14, 2014 (which was subsequently confirmed in writing by delivery of KBW’s written opinion dated July 14, 2014) with respect to the fairness of the exchange ratio in the merger pursuant to the merger agreement, from a financial point of view, to the holders of Franklin common stock. For additional discussion of the factors considered by Franklin’s board of directors in reaching its decision to approve the merger agreement, see “The Merger – Franklin’s Reasons for the Merger; Recommendation of Franklin’s Board of Directors.”

Opinion of TowneBank’s Financial Advisor (page 55)

At the July 14, 2014 meeting of the TowneBank board of directors, Sandler O’Neill & Partners, L.P. rendered its oral opinion to the TowneBank board of directors, which was subsequently confirmed by delivery of its written opinion dated July 14, 2014 to the TowneBank board of directors, as of such date and based upon and subject to, assumptions, qualifications, limitations and other matters considered in connection with the preparation of its opinion that the exchange ratio provided for in the merger agreement was fair, from a financial point of view, to TowneBank.

A copy of the fairness opinion, setting forth the information reviewed, assumptions made and matters considered by Sandler O’Neill, is attached to this joint proxy statement/prospectus as Appendix B. We encourage you to read carefully the entire opinion of Sandler O’Neill. The opinion of Sandler O’Neill has not been updated prior to the date of this joint proxy statement/prospectus and does not reflect any change in circumstances after July 14, 2014.

Sandler O’Neill’s opinion as to the fairness, from a financial point of view, of the exchange ratio to TowneBank was provided to the TowneBank board of directors in connection with its evaluation of the exchange ratio from a financial point of view, does not address any other aspect of the merger and does not constitute a recommendation to any TowneBank stockholder as to how to vote or act with respect to the merger.

Opinion of Franklin’s Financial Advisor (page 64)

At the July 14, 2014 meeting of the Franklin board of directors, Keefe, Bruyette & Woods, Inc. rendered its oral opinion to the Franklin board of directors, which was subsequently confirmed by delivery of its written opinion dated July 14, 2014 to the Franklin board of directors, as of such date and based upon and subject to, assumptions, qualifications, limitations and other matters considered in connection with the preparation of its opinion that the exchange ratio in the merger pursuant to the merger agreement is fair, from a financial point of view, to the holders of Franklin common stock.

A copy of the fairness opinion, setting forth the information reviewed, assumptions made and matters considered by KBW, is attached to this joint proxy statement/prospectus as Appendix C. We encourage you to read carefully the entire opinion of KBW. The opinion of KBW has not been updated prior to the date of this joint proxy statement/prospectus and does not reflect any change in circumstances after July 14, 2014.

KBW’s opinion as to the fairness, from a financial point of view, of the exchange ratio to the holders of Franklin common stock was provided to the Franklin board of directors in connection with its evaluation of the exchange ratio from a financial point of view, does not address any other aspect of the merger and does not constitute a recommendation to any Franklin stockholder as to how to vote or act with respect to the merger. See “The Merger – Opinion of Franklin’s Financial Advisor” beginning on page 64.

Regulatory Approvals (page 77)

TowneBank, Franklin and Franklin Bank cannot complete the merger without prior approval from the Virginia State Corporation Commission (the “Virginia SCC”) and the FDIC posing no objection to the merger. On August 28 and 29, 2014, TowneBank filed applications with the FDIC and the Virginia SCC seeking their no objection and approval of the merger,

respectively. In addition, Franklin Bank filed a notification with the Office of the Comptroller of the Currency (the “OCC”) with respect to the merger. On September 18 and 29, 2014, TowneBank and Franklin filed further applications with the Virginia SCC in connection with the merger.

As of the date of this joint proxy statement/prospectus, we have not yet received the required approvals. While we do not know of any reason why we would not be able to obtain the necessary approvals in a timely manner, we cannot be certain when or if we will receive them.

Conditions to Completion of the Merger (page 85)

The parties’ respective obligations to complete the merger are subject to the fulfillment or waiver of certain conditions, including the following:

In addition, TowneBank’s obligation to complete the merger is subject to the satisfaction or waiver of the condition that Franklin must have total common stockholders’ equity, as calculated for purposes of the merger agreement, of not less than $240.0 million as of the month-end prior to the closing date of the merger.

Where the merger agreement and/or law permits, TowneBank or Franklin and Franklin Bank could choose to waive a condition to its obligation to complete the merger even if that condition has not been satisfied. We cannot be certain when, or if, the conditions to the merger will be satisfied or waived or that the merger will be completed.

Timing of the Merger (page 79)

TowneBank and Franklin expect to complete the merger after all conditions to the merger in the merger agreement are satisfied or waived, including after stockholder approvals are received at the respective special meetings of TowneBank and Franklin and the continuation of all required regulatory approvals. We currently expect to complete the merger in early January 2015. However, it is possible that factors outside of either party’s control could require us to complete the merger at a later time or not to complete it at all.

Interests of Certain Franklin Directors and Executive Officers in the Merger (page 74)

Some of the directors and executive officers of Franklin have interests in the merger that differ from, or are in addition to, their interests as stockholders of Franklin. These interests exist because of, among other things:

The members of the Franklin board of directors knew about these additional interests and considered them when they approved the merger agreement and the merger. See “The Merger – Interests of Certain Franklin Directors and Executive Officers in the Merger” on page 74.

No Solicitation (page 84)

Franklin has agreed that, while the merger agreement is in effect, it will not directly or indirectly:

The merger agreement does not, however, prohibit Franklin from considering an unsolicited bona fide acquisition proposal from a third party if certain specified conditions are met.

Termination of the Merger Agreement (page 86)

The merger agreement may be terminated and the merger abandoned by TowneBank, Franklin and Franklin Bank at any time before the merger is completed by mutual consent of the parties. In addition, the merger agreement may be terminated and the merger abandoned by TowneBank or Franklin and Franklin Bank at any time before the merger if:

The merger agreement may be terminated and the merger abandoned by Franklin and Franklin Bank at any time before the merger:

The merger agreement may be terminated and the merger abandoned by TowneBank at any time before the merger if:

Termination Fee and Expenses (pages 87 and 88)

TowneBank or Franklin must pay the other a termination fee of $11.0 million if the merger agreement is terminated by either party under certain specified circumstances. The termination and payment circumstances are more fully described elsewhere in this joint proxy statement/prospectus. See “The Merger Agreement – Termination Fee” on page 87 and in Article VIII of the merger agreement.

In general, whether or not the merger is completed, TowneBank and Franklin will each pay its respective expenses incident to preparing, entering into and carrying out the terms of the merger agreement. The parties will share the costs of printing and mailing this joint proxy statement/prospectus.

Amendment to Franklin’s Articles of Incorporation (page 74)

Under Virginia law, a Virginia chartered bank like TowneBank can only merge with an entity that is chartered with banking powers under federal or state law. In order to facilitate the merger of Franklin into TowneBank, the parties have agreed that Franklin seek stockholder approval of an amendment to its articles of incorporation to amend Article II, Purpose, therein so as to provide Franklin with banking powers under Virginia law solely for the purpose of consummating the merger. If the stockholders of either TowneBank or Franklin do not approve the TowneBank merger proposal or the Franklin merger proposal, respectively, Franklin will not amend its articles of incorporation, even if Franklin stockholders approve the articles amendment proposal. The form of the amendment to Franklin’s articles of incorporation amending the purpose article therein so as to provide Franklin with banking powers under Virginia law is attached as Appendix D to this joint proxy statement/prospectus.

The TowneBank Special Meeting (page 37)

The TowneBank special meeting will be held on December 3, 2014 at 9:00 a.m. local time, at Towne University, located at 6009 Harbour View Boulevard, Suffolk, Virginia.

At the special meeting, the stockholders of TowneBank will be asked to vote on the following matters:

The Franklin Special Meeting (page 41)

The Franklin special meeting will be held on December 3, 2014 at 11:00 a.m. local time, at The Cultural Arts Center at Glen Allen, 2880 Mountain Road, Glen Allen, Virginia.

At the special meeting, the stockholders of Franklin will be asked to vote on the following matters:

TowneBank Special Meeting – Record Date and Votes Required (page 37)

You can vote at the TowneBank special meeting of stockholders if you owned TowneBank common stock at the close of business on October 15, 2014. On that date, TowneBank had 35,670,820 shares of common stock outstanding and entitled to vote. For each proposal presented at the TowneBank special meeting, a stockholder can cast one vote for each share of TowneBank common stock owned on the record date.

The votes required to approve the proposals at the TowneBank special meeting are as follows:

Franklin Special Meeting – Record Date and Votes Required (page 41)

You can vote at the Franklin special meeting of stockholders if you owned Franklin common stock at the close of business on October 15, 2014. On that date, Franklin had 11,776,750 shares of common stock outstanding and entitled to vote. For each proposal presented at the Franklin special meeting, a stockholder can cast one vote for each share of Franklin common stock owned on the record date.

The votes required to approve the proposals at the Franklin special meeting are as follows:

Voting Agreements Entered into by Franklin Directors and Executive Officers (page 88)

Each of Franklin’s directors and executive officers has agreed, subject to several conditions and exceptions, to vote all of his or her shares of Franklin common stock in favor of the Franklin merger proposal and the articles amendment proposal and against any competing acquisition proposal. As of October 15, 2014, the record date for the Franklin special meeting, directors and executive officers of Franklin and their affiliates owned and are entitled to vote 1,973,391 shares of Franklin common stock, or approximately 16.8% of the total voting power of the shares of Franklin common stock outstanding on that date, of which 1,973,391 shares or 16.8% of the total voting power of the shares of Franklin common stock outstanding on that date are subject to voting agreements.

No Appraisal or Dissenters’ Rights (page 77)

Under Virginia law, the stockholders of TowneBank and Franklin are not entitled to appraisal or dissenters’ rights in connection with the merger.

Stockholders of TowneBank and Franklin Have Different Rights (page 95)

TowneBank and Franklin are Virginia corporations governed by the Virginia Stock Corporation Act (the “Virginia SCA”). In addition, the rights of TowneBank and Franklin stockholders are governed by their respective articles of incorporation and bylaws. Upon completion of the merger, Franklin stockholders will become stockholders of TowneBank, and as such their stockholder rights will then be governed by the articles of incorporation and bylaws of TowneBank, each as amended, and by the Virginia SCA. The rights of stockholders of TowneBank differ in certain respects from the rights of stockholders of Franklin.

The Merger Will Be Accounted for Under the Acquisition Method of Accounting (page 78)

TowneBank will use the acquisition method of accounting to account for the merger.

Listing of TowneBank Common Stock (pages 93 and 102)

TowneBank will list the shares of common stock to be issued in the merger on the NASDAQ Global Select Market, the market on which TowneBank’s common shares are currently listed.

Market Prices and Share Information (page 102)

TowneBank’s common stock is listed on the NASDAQ Global Select Market under the symbol “TOWN” and Franklin’s common stock is listed on the NASDAQ Global Select Market under the symbol “FRNK.” The following table sets forth the closing sale prices per share of TowneBank common stock and Franklin common stock as reported on the NASDAQ Global Select Market on July 14, 2014, the last trading day before we announced the signing of the merger agreement, and on October 17, 2014, the last trading day before the date of this joint proxy statement/prospectus.

TowneBank cannot assure Franklin stockholders that its stock price will continue to trade at or above the prices shown in the table above. You should obtain current stock price quotations for TowneBank common stock and Franklin common stock from a newspaper, via the Internet or by calling your broker.

Litigation Relating to the Merger (page 78)

On October 1, 2014, Andrew Malon, individually and purportedly on behalf of all other Franklin stockholders, filed a class action complaint against Franklin, its current directors, Franklin Bank (together, the “Franklin Defendants”) and TowneBank, in the U.S. District Court for the Eastern District of Virginia, Richmond Division (Case No. 3:14-cv-00671-HEH). The complaint alleges, among other things, that the Franklin directors breached their fiduciary duties by allegedly agreeing to sell the company

to TowneBank without first taking steps to ensure that Franklin stockholders would obtain adequate, fair and maximum consideration under the circumstances, by allegedly agreeing to terms with TowneBank that benefit themselves and/or TowneBank without regard for the Franklin stockholders and by allegedly agreeing to terms with TowneBank that discourage other bidders. The plaintiff also alleges that TowneBank aided and abetted in such breaches of duty. The complaint seeks, among other things, an order enjoining the defendants from proceeding with or consummating the merger, as well as other equitable relief and/or money damages in the event that the transaction is completed. On October 14 and 17, 2014, TowneBank and the Franklin Defendants, respectively, filed separate motions to dismiss the complaint. Franklin and TowneBank believe that the claims are without merit and intend to defend vigorously against the allegations in the complaint. See “The Merger – Litigation Relating to the Merger.”

Risk Factors (page 29)

You should consider all the information contained in or incorporated by reference into this joint proxy statement/prospectus in deciding how to vote for the proposals presented in the joint proxy statement/prospectus. In particular, you should consider the factors under “Risk Factors.”