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Equity Research Coverage of Integrated Financial Holdings, Inc. – Q2 2020

Integrated Financial Holdings, Inc. (IFHI – OTC Pink) (Formerly West Town Bancorp, Inc.)

Background Integrated Financial Holdings, Inc. (“Integrated Financial”) is the Raleigh, NC based holding company for West Town Bank & Trust, a North Riverside, IL based state-chartered bank. (The name was recently changed to reflect the fact that its scope of services is much broader than a typical bank’s.) The Company is also the parent company of several subsidiaries, two of which are Windsor Advantage, LLC, (“Windsor”) a loan servicing company, and West Town Insurance Agency, Inc., an insurance agency. The Company is registered with, and supervised by, the Federal Reserve. West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC…

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Equity Research Coverage of West Town Bancorp, Inc. – Q1 2020

West Town Bancorp, Inc. (WTWB – OTC Pink)

Background West Town Bancorp, Inc. (“West Town”) is the Raleigh, NC based holding company for West Town Bank & Trust, a North Riverside, IL based state-chartered bank. The Company is also the parent company of several subsidiaries, two of which are Windsor Advantage, LLC, (“Windsor”) a loan servicing company, and West Town Insurance Agency, Inc., an insurance agency. (We will discuss more about the other subsidiaries in our next report.) The Company is registered with, and supervised by, the Federal Reserve. West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC….

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West Town Bancorp, Inc. Announces First Quarter 2020 Financial Results

RALEIGH, N.C., May 08, 2020 (GLOBE NEWSWIRE) — West Town Bancorp, Inc. (OTC PINK: WTWB) (the “Company” or “West Town”), the financial holding company for West Town Bank & Trust (“the Bank”), announced today its financial results for the three months ended March 31, 2020, reflecting a $3.3 million year-over-year increase in the provision for loan losses which was impacted by the global spread of the coronavirus (“COVID-19”) and its effects on the economic environment.  Highlights include the following:

  • First quarter net loss of $832,000 or $0.37 per diluted share, compared to net income of $1.1 million or $0.34 per diluted share for the first quarter of 2019.
  • Provision for loan losses of $3.5 million for the first quarter of 2020 compared to $173,000 for the first quarter of 2019.
  • Return on average assets of -1.08%, compared to 0.74% for the first quarter of 2019.
  • Return on average common equity of -4.93%, compared to 5.43% for the first quarter of 2019.
  • Return on average tangible common equity (a non-GAAP financial measure) of -7.09%, compared to 8.73% for the first quarter of 2019.
  • Windsor Advantage, LLC (“Windsor”) processing and servicing revenue of $1.7 million as compared to $1.5 million for the same period last year.
  • Mortgage origination and sales revenue of $1.4 million as compared to $435,000 for the same period last year.

As previously announced, on May 6, 2019, Sound Bank, formerly a wholly owned subsidiary of West Town, completed a recapitalization that resulted in a significant reduction in West Town’s ownership position in the bank. Sound Bank, effective October 1, 2019, changed its name to Dogwood State Bank.  Due to the reduction in West Town’s ownership position, the financial results for Sound Bank beginning on May 6, 2019 are deconsolidated from the financial results of the Company.  Therefore, on a comparative basis, the Company’s financial results for the first quarter of 2020 do not include any operating impact from Sound Bank whereas the financial results for the first quarter of 2019 are impacted by the performance of Sound Bank.    

“The COVID-19 pandemic has created never-before-seen challenges for our nation, our communities and the businesses West Town Bank & Trust serves.  In late March, we built a technology centric framework that enabled our organization to accept and seamlessly process Paycheck Protection Program (PPP) loan applications in accordance with the U.S. Small Business Administration’s guidelines and the related CARES Act signed into law on March 27, 2020.  As of May 5, 2020, WTBT closed and funded 200 loan applications in excess of $21.5 million.  I want to thank our dedicated staff members for their commitment to provide the expertise needed to help our small business clients navigate these difficult times,” said Eric Bergevin, President and CEO of West Town Bancorp, Inc.  “The way our partners at Windsor Advantage, LLC and SBA Loan Documentation Services, LLC responded to the situation was nothing short of incredible. During this same period, Windsor’s team of 35 full-time employees helped authorize over 10,600 applications totaling more than $2.0 billion for approximately 40 of its institutional lender clients, helping create and preserve jobs for roughly 350,000 employees across the U.S.  In addition, the team at SBA Loan Documentation Services helped to document and review over 580 PPP loan closing packages on behalf of its numerous bank clients to ensure that PPP loan closings complied with the CARES Act and the SBA’s guidelines. My extreme gratitude goes out to all of those employees within our family of companies that made it possible for small businesses and their employees, most in need of funds, to gain access to the PPP program and obtain funds needed to sustain their viability.”

Balance Sheet

At March 31, 2020, the Company’s total assets were $312.2 million, net loans held for investment were $211.5 million, loans held for sale were $11.8 million, total deposits were $221.4 million and total shareholders’ equity was $67.0 million.  Compared with December 31, 2019, total assets decreased $1.9 million or 1%, net loans held for investment decreased $8.1 million or 4%, loans held for sale decreased $729,000 or 6%, total deposits increased $977,000 or 0.4%, and total shareholders’ equity decreased $715,000 or 1%.  The decreases in assets and loans are reflective of an overall slowdown in the economy as a result of the COVID-19 pandemic.  The decrease in total shareholders’ equity was primarily a result of the loss posted for the quarter. 

During the first quarter of 2020, the Company issued 40,217 shares associated with various stock-based compensation program and repurchased 25,000 shares of its voting common stock. 

Capital Levels

At March 31, 2020, the regulatory capital ratios of West Town Bank & Trust exceeded the minimum thresholds established for well-capitalized banks under applicable banking regulations.

 “Well Capitalized”
Minimums
Basel III Fully
Phased-In
West Town
Bank & Trust
Tier 1 common equity ratio6.50%7.00%14.47%
Tier 1 risk-based capital ratio8.00%8.50%14.47%
Total risk-based capital ratio10.00%10.50%15.73%
Tier 1 leverage ratio5.00%4.00%12.18%

The Company’s book value per common share increased from $25.70 at March 31, 2019 to $30.25 at March 31, 2020.  The Company’s tangible book value per common share (a non-GAAP financial measure) increased from $16.17 at March 31, 2019 to $20.88 at March 31, 2020 primarily due to the gain on deconsolidation of Sound Bank and the subsequent removal of the intangible assets associated with Sound Bank from the consolidated financial statements. 

Asset Quality

The Company’s nonperforming assets to total assets ratio increased from 3.99% at December 31, 2019 to 4.16% at March 31, 2020, primarily due to the Company’s efforts to address credit concerns surrounding the potential economic impact of COVID-19 and the widespread societal responses to the pandemic. Nonaccrual loans decreased $1.5 million as of March 31, 2020 as compared to the prior year end while foreclosed assets increased $1.9 million from December 31, 2019 to March 31, 2020. During the fourth quarter of 2019, the Company formed Patriarch, LLC as a subsidiary to expedite the liquidation and recovery of certain Bank assets and as of March 31, 2020, Patriarch held $3.8 million in foreclosed assets.  The Bank regularly conducts impairment analyses on all nonperforming assets with updated appraisals to ensure the assets are carried at the lower of fair market value or book value with any deficits charged off immediately versus carrying specific reserves.

The Company recorded a $3.5 million provision for loan losses during the first quarter of 2020 as compared to a provision of $173,000 in first quarter 2019 in response to the increasing nonperforming asset ratios, increased levels of charge-offs and forecasted credit weaknesses due to deteriorating economic conditions driven by the current COVID-19 pandemic.  Expected loss estimates consider the impacts of decreased economic activity and higher unemployment and the mitigating benefits of government stimulus and industry wide loan modification efforts. The Company recorded $2.4 million in net charge-offs during the first quarter 2020. Most of the charge-offs were in the hospitality industry. 

  (Dollars in thousands)3/31/2012/31/199/30/196/30/193/31/19
Nonaccrual loans – originated$7,732 $9,200 $4,813 $3,290 $4,666 
Nonaccrual loans – acquired         262 
Foreclosed assets 5,243  3,370  2,028  2,069  2,493 
90 days past due and still accruing – originated         407 
90 days past due and still accruing – acquired         421 
Total nonperforming assets 12,975  12,570  6,841  5,359  8,249 
Total nonperforming assets – originated 12,975  12,570  6,841  5,359  7,566 
      
Net charge-offs$2,390 $779 $138 $200 $58 
Annualized net charge-offs to total average portfolio loans 4.39% 1.36% 0.25% 0.27% 0.05%
      
Ratio of total nonperforming assets to total assets 4.16% 3.99% 2.21% 1.77% 1.40%
Ratio of total nonperforming loans to total loans 3.66% 4.19% 2.31% 1.57% 1.38%
Ratio of total allowance for loan losses to total loans 2.27% 1.72% 1.64% 1.62% 0.98%

Net Interest Income and Margin

Net interest income for the three months ended March 31, 2020 decreased $2.1 million or 36% in comparison to the first quarter 2019, primarily due to the deconsolidation of Sound Bank from the consolidated financial statements as of May 6, 2019. The net interest margin increased from 4.61% for the first quarter 2019 to 5.72% for the first quarter 2020.  The margin improvement is largely related to the increase in loan yield from 6.56% to 8.16%, due in part to a change in the makeup of the loan portfolio as the percentage of consumer-related loans decreased while higher yielding commercially-focused loans associated with the Government Guaranteed Lending (“GGL”) department became a larger portion of the portfolio with the deconsolidation of Sound Bank loans.  In addition, the annualized impact of several large loan pay-offs in the first quarter of 2020 which had associated loan discounts that were brought into income during the period helped to increase loan yield.   

 Three Months Ended
  (Dollars in thousands)3/31/2012/31/199/30/196/30/193/31/19
Average balances:     
Loans$226,683$229,941$220,939$297,501$435,583
Investment securities 23,861 21,572 21,111 20,960 21,119
Interest-bearing balances and other 17,046 16,259 16,801 47,025 54,690
Total interest-earning assets 267,590 267,772 258,851 365,486 511,392
Noninterest deposits 56,329 52,456 47,199 75,643 112,836
Interest-bearing liabilities:     
Interest-bearing deposits 166,567 179,195 170,390 234,603 338,682
Borrowed funds 16,475 6,129 6,452 17,204 37,852
Total interest-bearing liabilities 183,042 185,324 176,842 251,807 376,534
Total assets 313,476 311,312 300,011 416,840 576,640
Common shareholders’ equity 68,445 67,172 68,448 82,090 78,698
Tangible common equity (1) 47,570 46,448 47,636 57,825 48,918
      
Interest income/expense:     
Loans$4,559$4,139$4,315$5,218$7,122
Investment securities 95 82 76 100 167
Interest-bearing balances and other 76 83 105 241 356
Total interest income 4,730 4,304 4,496 5,559 7,645
Deposits 845 979 942 1,104 1,432
Borrowings 109 56 72 172 330
Total interest expense 954 1,035 1,014 1,276 1,762
Net interest income$3,776$3,269$3,482$4,283$5,883
      
  (1) Non-GAAP financial measure. Tangible common equity is calculated by subtracting intangible assets from common shareholders’ equity
 Three Months Ended 
 3/31/2012/31/199/30/196/30/193/31/19
Average yields and costs:     
Loans8.16%7.14%7.75%7.04%6.56%
Investment securities1.59%1.52%1.44%1.91%3.16%
Interest-bearing balances and other1.81%2.03%2.48%2.06%2.61%
Total interest-earning assets7.17%6.38%6.89%6.10%6.00%
Interest-bearing deposits2.06%2.17%2.19%1.89%1.70%
Borrowed funds2.68%3.62%4.43%4.01%3.50%
Total interest-bearing liabilities2.11%2.22%2.27%2.03%1.88%
Cost of funds1.62%1.73%1.80%1.56%1.44%
Net interest margin5.72%4.84%5.34%4.70%4.61%

Noninterest Income

Noninterest income for the three months ended March 31, 2020 was $4.6 million, an increase of $1.4 million or 45% as compared to the same prior year period.  Specific items to note include:

  • Windsor, a subsidiary of the Company which offers a SBA and USDA loan servicing platform, had processing and servicing revenue totaling $1.7 million, an increase of $226,000, or 15% as compared to the $1.5 million in income earned from the investment in Windsor during the same prior year period.  The increase is directly attributable to the continued growth in the volume in the servicing portfolio as Windsor brings in new customers. 
  • GGL revenue of $775,000 was decreased by $125,000 or 14% in comparison to the first quarter of 2019.  GGL volume was impacted by the restrictions put in place throughout the country as Shelter-In-Place orders in the states in which the Company operates, and reduced economic activity slowed deal flows for the Company.
  • Mortgage revenue totaled $1.4 million, an increase of $983,000 or 226% as compared to the first quarter 2019.  Mortgage loans originated for secondary market sale increased from $10.4 million in the first quarter 2019 to $20.9 million in the first quarter 2020.

Noninterest Expense

Noninterest expense for the first quarter 2020 was $6.0 million, a decrease of $1.4 million or 19%, from $7.5 million for the first quarter 2019.  The decreases in all noninterest expense categories, including compensation, occupancy, data processing, communications and other operating expenses are primarily related to the deconsolidation of Sound Bank from the consolidated financial statements as of May 6, 2019.  

About West Town Bancorp, Inc.

West Town Bancorp, Inc. is a financial holding company based in Raleigh, NC.  The Company is the holding company for West Town Bank & Trust, an Illinois state-chartered bank.  West Town Bank & Trust provides banking services through its two full-service offices located in the greater Chicago area. The Company is also the parent company of: Windsor Advantage, LLC, a loan servicing company; West Town Insurance Agency, Inc., an insurance agency; Patriarch, LLC, a real estate management company; SBA Loan Documentation Services, LLC, a loan documentation origination company; and Glenwood Structured Finance, LLC, a loan broker and large loan syndication company.  The Company is registered with, and supervised by, the Federal Reserve.  West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC. 

For more information, visit http://www.westtownbank.com/

Important Note Regarding Forward-Looking Statements

This release contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of the Company and on the information available to management at the time this release was prepared. These statements can be identified by the use of words such as “expect,” “anticipate,” “estimate,” “believe,” variations of these words, and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand, and asset quality, including real estate and other collateral values; changes in Small Business Administration rules, regulations, or loan products, including the section 7(a) program; changes in other government guaranteed loan programs or our ability to participate in such programs; changes in tax law, including the impact of such changes on our tax assets and liabilities; future governmental shutdowns that may impact revenues associated with our lending and other operations that are dependent on government guaranteed loan programs; changes in banking regulations and accounting principles, policies, or guidelines; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with the Company’s acquisition and divesture activities; the failure of our strategic investments or acquisitions to perform as anticipated and the impact of any impairments to our intangible assets, such as goodwill; the impact of our strategic initiatives on our ability to retain key employees, and the impact of competition from traditional or new sources. These, and other factors that may emerge, could cause decisions and actual results to differ materially from current expectations. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.    

Consolidated Balance Sheet
 Ending Balance
  (Dollars in thousands, unaudited)3/31/2012/31/199/30/196/30/193/31/19
Assets     
Cash and due from banks$5,928 $5,021 $4,085 $2,665 $5,433 
Interest-bearing deposits 8,518  9,849  16,068  14,450  69,636 
Total cash and cash equivalents 14,446  14,870  20,153  17,115  75,069 
Interest-bearing time deposits 2,746  2,746  2,746  2,746  2,746 
Securities, at fair value 24,946  21,087  21,804  20,716  21,031 
Loans held for sale 11,839  12,568  13,965  14,902  11,037 
Loans held for investment:     
Originated loans 216,423  223,470  211,647  209,492  336,505 
Acquired loans, net         81,978 
Allowance for loan and lease losses (4,907) (3,837) (3,462) (3,400) (4,115)
Loans held for investment, net 211,516  219,633  208,185  206,092  414,368 
Premises and equipment, net 4,740  4,761  4,795  4,832  12,099 
Foreclosed assets 5,243  3,370  2,028  2,069  2,493 
Loan servicing assets 3,528  3,358  3,053  3,220  3,619 
Bank owned life insurance 5,048  5,021  4,993  4,964  9,090 
Accrued interest receivable 1,067  1,116  1,079  1,196  1,637 
Goodwill 13,161  13,150  12,721  12,721  19,737 
Other intangible assets, net 7,596  7,782  7,968  8,154  9,827 
Other assets 6,370  4,729  5,779  4,638  8,066 
Total assets$312,246 $314,191 $309,269 $303,365 $590,819 
      
Liabilities and Shareholders’ Equity     
Liabilities     
Deposits:     
Noninterest-bearing$59,360 $49,573 $54,380 $46,068 $128,435 
Interest-bearing 162,059  170,869  177,472  164,619  345,581 
Total deposits 221,419  220,442  231,852  210,687  474,016 
Borrowings 17,649  19,295  2,382  5,868  26,294 
Accrued interest payable 433  429  424  433  927 
Other liabilities 5,735  6,300  8,092  7,562  9,860 
Total liabilities 245,236  246,466  242,750  224,550  511,097 
Shareholders’ equity:     
Common stock, voting 2,193  2,166  2,206  2,674  2,749 
Common stock, non-voting 22  22  22  129  329 
Additional paid in capital 24,162  24,245  24,771  38,557  45,287 
Retained earnings 40,371  41,203  39,446  37,375  31,273 
Accumulated other comprehensive income 262  89  74  80  84 
Total shareholders’ equity 67,010  67,725  66,519  78,815  79,722 
Total liabilities and shareholders’ equity$312,246 $314,191 $309,269 $303,365 $590,819 
Financial Performance (Consolidated)
  (Dollars in thousands except shareThree Months Ended
  and per share data; unaudited)3/31/2012/31/199/30/196/30/193/31/19
Interest income     
Loans$4,559 $4,139$4,315 $5,218$7,122
Investment securities and deposits 171  165 181  341 523
Total interest income 4,730  4,304 4,496  5,559 7,645
Interest expense     
Interest on deposits 845  979 942  1,104 1,432
Interest on borrowed funds 109  56 72  172 330
Total interest expense 954  1,035 1,014  1,276 1,762
Net interest income 3,776  3,269 3,482  4,283 5,883
Provision for loan losses 3,460  1,155 200  477 173
Noninterest income     
Windsor processing and servicing revenue 1,713  2,256 1,774  1,970 1,487
Government lending 755  2,288 983  1,754 880
Mortgage 1,418  716 975  1,113 435
Bank-owned life insurance 27  28 29  44 56
Service charge 19  29 23  99 226
Gain on deconsolidation of Sound Bank      6,425 
Other noninterest 709  98 153  92 122
Total noninterest income 4,641  5,415 3,937  11,497 3,206
Noninterest expense     
Compensation 3,753  3,750 3,199  3,385 4,261
Occupancy and equipment 256  221 343  338 506
Loan and special asset expenses 242  318 (523) 510 179
Professional services 490  359 432  569 582
Data processing 148  109 161  198 345
Software 249  172 160  199 226
Communications 89  80 33  110 226
Advertising 55  86 51  109 112
Transaction-related 17  16 1  916 43
Amortization of intangibles 186  186 186  233 330
Other operating expenses 545  464 335  643 644
Total noninterest expense 6,030  5,761 4,378  7,210 7,454
Income (loss) before income taxes (1,073) 1,768 2,841  8,093 1,462
Income tax expense (benefit) (241) 37 687  2,174 397
Net income (loss)$(832)$1,731$2,154 $5,919$1,065
      
Basic earnings (loss) per common share$(0.38)$0.79$0.93 $1.97$0.35
Diluted earnings (loss) per common share$(0.37)$0.78$0.91 $1.94$0.34
Weighted average common shares outstanding 2,193  2,196 2,328  2,997 3,054
Diluted average common shares outstanding 2,232  2,234 2,369  3,045 3,115
      
Performance Ratios
 Three Months Ended
 3/31/2012/31/199/30/196/30/193/31/19
PER COMMON SHARE     
Basic earnings (loss) per common share$(0.38)$0.79 $0.93 $1.97 $0.35 
Diluted earnings (loss) per common share$(0.37)$0.77 $0.91 $1.94 $0.34 
Book value per common share$30.25 $30.78 $29.86 $28.12 $25.70 
Tangible book value per common share$20.88 $21.27 $20.57 $20.67 $16.17 
      
FINANCIAL RATIOS (ANNUALIZED)     
Return on average assets -1.08% 2.21% 2.85% 5.70% 0.74%
Return on average common shareholders’ equity -4.93% 10.22% 12.49% 28.92% 5.43%
Return on average tangible common equity -7.09% 14.79% 17.94% 41.06% 8.73%
Net interest margin 5.72% 4.84% 5.34% 4.70% 4.61%
Efficiency ratio (1) 71.4% 66.2% 59.0% 67.3% 81.5%

Contact: Eric Bergevin, 252-482-4400

West Town Bancorp, Inc. Announces Fourth Quarter 2019 Financial Results

RALEIGH, N.C., Feb. 18, 2020 (GLOBE NEWSWIRE) — West Town Bancorp, Inc. (OTC PINK: WTWB) (the “Company” or “West Town”), the financial holding company for West Town Bank & Trust (“the Bank”), announced today its financial results for the three months ended December 31, 2019.  Highlights include the following:

Fourth quarter net income of $1.73 million or $0.83 per diluted share, compared to $956,000 or $0.30 per diluted share for the fourth quarter of 2018.

  • Return on average assets of 2.21%, compared to 0.68% for the fourth quarter of 2018.
  • Return on average common equity of 10.22%, compared to 4.87% for the fourth quarter of 2018.
  • Return on average tangible common equity (a non-GAAP financial measure) of 15.79%, compared to 7.95% for the fourth quarter of 2018.
  • Windsor Advantage, LLC (“Windsor”) processing and servicing revenue of $2.26 million as compared to $1.49 million for the same period last year.

As previously announced, on May 6, 2019, Sound Bank, formerly a wholly owned subsidiary of West Town, completed a recapitalization that resulted in a significant reduction in West Town’s ownership position in the bank, which, effective October 1, 2019, changed its name to Dogwood State Bank.  Due to the reduction in West Town’s ownership position, the financial results for the Company beginning on May 6, 2019 are deconsolidated from the financial results of Sound Bank.  Therefore, on a comparative basis, the Company’s financial results for the fourth quarter of 2019 do not include any operating impact from Sound Bank whereas the financial results for the fourth quarter of 2018 are impacted by the performance of Sound Bank.    

Eric Bergevin, President and CEO commented, “We are pleased with our fourth quarter results and 2019 overall.  The Company went through transformational changes in 2019 by divesting our controlling interest in Sound Bank, repurchasing upwards of a third of our shares outstanding, launching new intuitive deposit programs and expanding our product offerings that are synergistic with our core government guaranteed lending (“GGL”) focus.  The Company was able to deliver strong fourth quarter results, including a 7th consecutive quarter of increased servicing revenue from Windsor Advantage and enhanced revenues from GGL loans of $2.3 million in revenue on $22.9 million of originated loan commitments.  The strong fourth quarter resulted in one of our most profitable years to date with total after tax income exceeding $11 million dollars and over $4.00 per share in earnings.  Our new deposit initiatives for West Town Bank & Trust (excluding Sound Bank) have resulted in a one-year growth in core deposits of over 21% and growth in noninterest-bearing deposits of over 53%.  These funding strategies, coupled with strong capital levels, will allow for future growth.  We are optimistic that 2020 will yield modestly enhanced core earnings, with accretive core earnings per share, as we keep our focus on our core competencies.”

During the fourth quarter of 2019, the Company repurchased 27,500 shares of its voting common stock. 

Balance Sheet

At December 31, 2019, the Company’s total assets were $314.9 million, net loans held for investment were $223.5 million, loans held for sale were $12.6 million, total deposits were $220.4 million and total shareholders’ equity was $67.7 million.  Compared with December 31, 2018, total assets decreased $240.4 million or 43%, loans held for investment decreased $187.1 million or 58%, loans held for sale decreased $4.0 million or 24%, total deposits decreased $212.5 million or 49%, and total shareholders’ equity decreased $9.8 million or 13%.  The decreases in assets, loans and deposits were a result of the Sound Bank recapitalization and deconsolidation of Sound Bank from the consolidated financials as of May 6, 2019.  The decrease in total shareholders’ equity resulted from the Company’s stock repurchase program, partially offset by an increase in retained earnings.

Capital Levels

At December 31, 2019, the regulatory capital ratios of West Town Bank & Trust exceeded the minimum thresholds established for well-capitalized banks under applicable banking regulations.

 “Well Capitalized”
Minimums
West Town
Bank & Trust
Tier 1 common equity ratio6.50%14.95%
Tier 1 risk-based capital ratio8.00%14.95%
Total risk-based capital ratio10.00%16.21%
Tier 1 leverage ratio5.00%12.65%

The Company’s book value per common share increased from $25.52 at December 31, 2018 to $30.78 at December 31, 2019.  The Company’s tangible book value per common share (a non-GAAP financial measure) increased from $15.68 at December 31, 2018 to $21.27 at December 31, 2019 due primarily to the gain on deconsolidation of Sound Bank and the subsequent removal of the intangible assets associated with Sound Bank from the consolidated financial statements. 

Asset Quality

The Company’s nonperforming assets to total assets ratio increased from 1.41% at December 31, 2018 to 3.99% at December 31, 2019 primarily due to the removal of Sound Bank from the consolidated financial statements.  Nonaccrual loans increased $2.4 million as of December 31, 2019 as compared to the prior year while foreclosed assets increased $2.6 million compared to December 31, 2018. The Company has formed Patriarch, LLC as a subsidiary to expedite the liquidation and recovery of certain Bank assets and as of December 31, 2019 Patriarch held $1.8 million in assets (included in the foreclosed assets number) while the Bank also held $1.3 million of guaranteed portions of GGL loans both of which are included in the Company’s nonperforming ratio.  The Bank also regularly conducts impairment analyses on all nonperforming assets with updated appraisals, less cost to sell, to ensure the assets are carried at fair market value with any deficits charged off immediately versus carrying specific reserves.

The Company recorded a $1.2 million provision for loan losses during the fourth quarter of 2019 as compared to a provision of $434,000 in fourth quarter 2018 in response to the increasing nonperforming asset ratios.  The Company recorded $779,000 in net charge-offs during the fourth quarter 2019 with the remaining provision expense due to volume growth.

  (Dollars in thousands)12/31/199/30/196/30/193/31/1912/31/18
Nonaccrual loans – originated$9,200 $4,813 $3,290 $4,666 $6,538 
Nonaccrual loans – acquired       262  272 
Foreclosed assets 3,370  2,028  2,069  2,493  723 
90 days past due and still accruing – originated       407  67 
90 days past due and still accruing – acquired       421  251 
Total nonperforming assets 12,570  6,841  5,359  8,249  7,851 
Total nonperforming assets – originated 12,570  6,841  5,359  7,566  7,328 
                
Net charge-offs$779 $138 $200 $58 $334 
Annualized net charge-offs to total average portfolio loans 1.36% 0.25% 0.27% 0.05% 0.31%
                
Ratio of total nonperforming assets to total assets 3.99% 2.21% 1.77% 1.40% 1.41%
Ratio of total nonperforming loans to total net portfolio loans 4.19% 2.31% 1.57% 1.38% 1.74%
Ratio of total allowance for loan losses to total portfolio loans 1.72% 1.64% 1.62% 0.98% 0.97%

Net Interest Income and Margin

Net interest income for the three months ended December 31, 2019 decreased $2.6 million or 49% in comparison to the fourth quarter 2018, primarily due to the deconsolidation of Sound Bank from the consolidated financial statements as of May 6, 2019. The net interest margin increased from 4.77% for the fourth quarter 2018 to 4.84% for the fourth quarter 2019.  The margin improvement is largely related to the increase in loan yield from 6.54% to 7.14%, due primarily to a change in the makeup of the loan portfolio as the percentage of consumer-related loans decreased while the higher yielding commercially focused loan associated with the GGL department became a larger portion of the portfolio with the deconsolidation of Sound Bank.  

 Three Months Ended Year-to-Date
  (Dollars in thousands)12/31/199/30/196/30/193/31/1912/31/18 12/31/1912/31/18
Average balances:        
Loans$229,941 $220,939 $297,501 $435,583 $424,758 $295,228 $433,308
Investment securities 21,572  21,111  20,960  21,119  21,060  21,192  15,461
Interest-bearing balances and other 16,259  16,801  47,025  54,690  41,472  33,537  29,546
Total interest-earning assets 267,772  258,851  365,486  511,392  487,290  349,957  478,315
Noninterest deposits 52,456  47,199  75,643  112,836  96,068  71,802  88,032
Interest-bearing liabilities:        
Interest-bearing deposits 179,195  170,390  234,603  338,682  319,900  230,107  302,260
Borrowed funds 6,129  6,452  17,204  37,852  50,792  16,803  67,176
Total interest-bearing liabilities 185,324  176,842  251,807  376,534  370,692  246,910  369,436
Total assets 311,312  300,011  416,840  576,640  553,855  400,199  541,150
Common shareholders’ equity 67,172  68,448  82,090  78,698  77,817  74,064  73,959
Tangible common equity (1) 43,486  47,636  57,825  48,918  47,695  46,836  50,472
         
Interest income/expense:        
Loans$4,139 $4,315 $5,218 $7,122 $7,002 $20,794 $27,005
Investment securities 82  76  100  167  171  343  450
Interest-bearing balances and other 83  105  241  356  248  867  665
Total interest income 4,304  4,496  5,559  7,645  7,421  22,004  28,120
Deposits 979  942  1,104  1,432  1,169  4,457  3,661
Borrowings 56  72  172  330  396  630  1,679
Total interest expense 1,035  1,014  1,276  1,762  1,565  5,087  5,340
Net interest income$3,269 $3,482 $4,283 $5,883 $5,856 $16,917 $22,780
         
(1) Non-GAAP financial measure. Tangible common equity is calculated by subtracting intangible assets from common shareholders’ equity 
 Three Months Ended   Year-to-Date
 12/31/199/30/196/30/193/31/1912/31/18 12/31/1912/31/18
Average yields and costs:        
Loans7.14%7.75%7.04%6.63%6.54% 7.04%6.23%
Investment securities1.52%1.44%1.91%3.16%3.25% 1.62%2.91%
Interest-bearing balances and other2.03%2.48%2.06%2.64%2.37% 2.59%2.25%
Total interest-earning assets6.38%6.89%6.10%6.06%6.04% 6.28%5.87%
Interest-bearing deposits2.17%2.19%1.89%1.71%1.45% 1.94%1.21%
Borrowed funds3.62%4.43%4.01%3.54%3.09% 3.75%2.50%
Total interest-bearing liabilities2.22%2.27%2.03%1.90%1.67% 2.06%1.45%
Cost of funds1.73%1.80%1.56%1.46%1.33% 1.60%1.17%
Net interest margin4.84%5.34%4.70%4.67%4.77% 4.83%4.76%

Noninterest Income

Noninterest income for the three months ended December 31, 2019 was $5.4 million, an increase of $697,000 as compared to the same prior year period.  Specific items to note include:

  • Windsor processing and servicing revenue totaled $2.3 million, an increase of $763,000, or 51% as compared to the $1.5 million in income earned from the investment in Windsor during the same prior year period.  The increase is directly attributable to the continued growth in the volume in the servicing portfolio as Windsor brings in new customers. 
  • GGL revenue of $2.3 million was an increase of $495,000 or 28% in comparison to the fourth quarter of 2018.
  • Mortgage revenue totaled $716,000, an increase of $357,000 or 99% as compared to the fourth quarter 2018.  Mortgage loans originated for secondary market sale increased from $11.4 million in the fourth quarter 2018 to $20.6 million in the fourth quarter 2019.

Noninterest Expense

Noninterest expense for the fourth quarter 2019 was $5.8 million, a decrease of $2.4 million or 30%, from $8.2 million for the fourth quarter 2018.  The decreases in all noninterest expense categories, including compensation, occupancy, data processing, communications and other operating expenses are primarily related to the deconsolidation of Sound Bank from the consolidated financial statements as of May 6, 2019.  

About West Town Bancorp, Inc.

West Town Bancorp, Inc. is a financial holding company based in Raleigh, NC.  The Company is the holding company for West Town Bank & Trust, an Illinois state-chartered bank.  West Town Bank & Trust provides banking services through its two full-service offices located in the greater Chicago area. The Company is also the parent company of: Windsor Advantage, LLC, a loan servicing company; West Town Insurance Agency, Inc., an insurance agency; Patriarch, LLC, a real estate management company; SBA Loan Documentation Services, LLC, a loan documentation origination company; and Glenwood Structured Finance, LLC, a loan broker and large loan syndication company.  The Company is registered with, and supervised by, the Federal Reserve.  West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC. 

For more information, visit http://www.westtownbank.com/

Important Note Regarding Forward-Looking Statements

This release contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of the Company and on the information available to management at the time this release was prepared. These statements can be identified by the use of words such as “expect,” “anticipate,” “estimate,” “believe,” variations of these words, and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand, and asset quality, including real estate and other collateral values; changes in Small Business Administration rules, regulations, or loan products, including the section 7(a) program; changes in other government guaranteed loan programs or our ability to participate in such programs; changes in tax law, including the impact of such changes on our tax assets and liabilities; future governmental shutdowns that may impact revenues associated with our lending and other operations that are dependent on government guaranteed loan programs; changes in banking regulations and accounting principles, policies, or guidelines; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with the Company’s acquisition and divesture activities; the failure of our strategic investments or acquisitions to perform as anticipated and the impact of any impairments to our intangible assets, such as goodwill; the impact of our strategic initiatives on our ability to retain key employees, and the impact of competition from traditional or new sources. These, and other factors that may emerge, could cause decisions and actual results to differ materially from current expectations. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.    

Consolidated Balance Sheet
 Ending Balance
  (Dollars in thousands, unaudited)12/31/199/30/196/30/193/31/1912/31/18
Assets     
Cash and due from banks$5,021 $4,085 $2,665 $5,433 $5,005 
Interest-bearing deposits 12,595  18,814  17,196  72,382  43,448 
Total cash and cash equivalents 17,616  22,899  19,861  77,815  48,453 
Securities, at fair value 21,087  21,804  20,716  21,031  21,332 
Loans held for sale 12,568  13,965  14,902  11,037  16,552 
Loans held for investment:     
Originated loans 223,470  211,647  209,492  336,505  322,038 
Acquired loans, net       81,978  88,556 
Allowance for loan and lease losses (3,837) (3,462) (3,400) (4,115) (4,000)
Net loans held for investment 219,633  208,185  206,092  414,368  406,594 
Premises and equipment, net 4,762  4,795  4,832  12,099  12,166 
Foreclosed assets 3,370  2,028  2,069  2,493  723 
Servicing assets 3,358  3,053  3,220  3,619  3,952 
Bank owned life insurance 5,021  4,993  4,964  9,090  9,034 
Accrued interest receivable 1,116  1,079  1,196  1,637  1,637 
Goodwill 13,150  12,721  12,721  19,737  19,745 
Other intangible assets, net 7,782  7,968  8,154  9,827  10,157 
Other assets 5,428  5,779  4,638  8,066  4,979 
Total assets$314,891 $309,269 $303,365 $590,819 $555,324 
      
Liabilities and Shareholders’ Equity     
Liabilities     
Deposits:     
Noninterest bearing$49,573 $54,380 $46,068 $128,435 $97,777 
Interest-bearing 170,869  177,472  164,619  345,581  335,140 
Total deposits 220,442  231,852  210,687  474,016  432,917 
Borrowings 19,295  2,382  5,868  26,294  33,781 
Accrued interest payable 429  424  433  927  868 
Other liabilities 7,000  8,092  7,562  9,860  10,189 
Total liabilities 247,166  242,750  224,550  511,097  477,755 
Shareholders’ equity:     
Common stock, voting 2,178  2,206  2,674  2,749  2,686 
Common stock, non-voting 22  22  129  329  329 
Additional paid in capital 24,233  24,771  38,557  45,287  44,760 
Retained earnings 41,203  39,446  37,375  31,273  29,928 
Accumulated other comprehensive income (loss) 89  74  80  84  (134)
Total shareholders’ equity 67,725  66,519  78,815  79,722  77,569 
Total liabilities and shareholders’ equity$314,891 $309,269 $303,365 $590,819 $555,324 
Financial Performance (Consolidated)
  (Dollars in thousands except shareThree Months Ended Twelve Months Ended
  and per share data; unaudited)12/31/199/30/196/30/193/31/1912/31/18 12/31/1912/31/18
Interest income        
Loans$4,139$4,315 $5,218$7,122$7,002 $20,794$27,005
Investment securities and deposits 165 181  341 523 419  1,210 1,115
Total interest income 4,304 4,496  5,559 7,645 7,421  22,004 28,120
Interest expense        
Interest on deposits 979 942  1,104 1,432 1,169  4,457 3,661
Interest on borrowed funds 56 72  172 330 396  630 1,679
Total interest expense 1,035 1,014  1,276 1,762 1,565  5,087 5,340
Net interest income 3,269 3,482  4,283 5,883 5,856  16,917 22,780
Provision for loan losses 1,155 200  477 173 434  2,005 1,953
Noninterest income        
Windsor processing and servicing        
revenue 2,256 1,774  1,970 1,487 1,493  7,487 3,906
Government lending 2,288 983  1,754 880 1,793  5,905 10,209
Mortgage 716 975  1,113 435 359  3,239 2,173
Bank-owned life insurance 28 29  44 56 58  157 238
Service charge 29 23  99 226 228  377 865
Gain on deconsolidation of Sound Bank    6,635    6,635 
Gain on consolidation of Windsor         4,776
Other noninterest 97 153  92 122 163  464 1,612
Total noninterest income 5,414 3,937  11,707 3,206 4,094  24,264 23,779
Noninterest expense        
Compensation 3,750 3,199  3,385 4,261 4,689  14,595 16,250
Occupancy and equipment 221 343  338 506 536  1,408 1,933
Loan and special assets 318 (523) 510 179 437  484 1,273
Professional services 360 432  569 582 511  1,943 1,539
Data processing 109 161  198 345 381  813 1,345
Communications 80 33  110 226 208  449 837
Advertising 86 51  109 112 135  358 754
Loss on sale of foreclosed assets    35 21   56 41
Transaction-related expenses 16 1  916 43 31  976 124
Other operating expenses 820 681  1,040 1,179 1,259  3,720 4,254
Total noninterest expense 5,760 4,378  7,210 7,454 8,187  24,802 28,350
Income before income taxes 1,768 2,841  8,303 1,462 1,329  14,374 16,256
Income tax expense 37 687  2,174 397 373  3,295 4,120
Net income$1,731$2,154 $6,129$1,065$956 $11,079$12,136
         
Basic earnings per common share$0.85$0.97 $2.03$0.35$0.31 $4.20$4.07
Diluted earnings per common share$0.83$0.95 $2.00$0.34$0.30 $4.12$3.90
Weighted average common shares        
outstanding 2,196 2,328  2,997 3,054 3,008  2,639 2,984
Diluted average common shares        
outstanding 2,234 2,369  3,045 3,115 3,124  2,688 3,110
Performance Ratios
 Three Months Ended Year-to-Date
 12/31/199/30/196/30/193/31/1912/31/18 12/31/1912/31/18
PER COMMON SHARE        
Basic earnings per common share$0.85 $0.97 $2.03 $0.35 $0.31  $4.20 $4.07 
Diluted earnings per common share$0.83 $0.95 $2.00 $0.34 $0.30  $4.12 $3.90 
Book value per common share$30.78 $29.86 $28.12 $25.70 $25.52  $30.78 $25.52 
Tangible book value per common share$21.27 $20.57 $20.67 $16.17 $15.68  $21.27 $15.68 
         
FINANCIAL RATIOS (ANNUALIZED)       
Return on average assets 2.21% 2.85% 5.90% 0.75% 0.68%  2.77% 2.24%
Return on average common shareholders’       
equity 10.22% 12.49% 29.95% 5.49% 4.87%  14.96% 16.41%
Return on average tangible common        
equity 15.79% 17.94% 42.51% 8.83% 7.95%  23.65% 24.05%
Net interest margin (FTE) 4.84% 5.34% 4.70% 4.67% 4.77%  4.83% 4.76%
Efficiency ratio (1) 66.2% 59.0% 67.3% 81.5% 82.0%  69.0% 67.6%
         
(1) Efficiency ratio is calculated by dividing noninterest expense less transaction-related costs by the sum of net interest income and noninterest income, less gains or losses on sale of securities and consolidation and the fair value adjustment on the equity investment in Sound Bank

Contact: Eric Bergevin, 252-482-4400

West Town Bancorp, Inc. Announces Third Quarter 2019 Financial Results

RALEIGH, N.C., Nov. 01, 2019 (GLOBE NEWSWIRE) — West Town Bancorp, Inc. (OTC PINK: WTWB) (the “Company” or “West Town”), the financial holding company for West Town Bank & Trust, announced today its financial results for the three months ended September 30, 2019.  Highlights include the following:

Third quarter net income of $2.15 million or $0.95 per diluted share, compared to $1.03 million or $0.33 per diluted share for the third quarter of 2018.

  • Return on average assets of 2.93%, compared to 0.76% for the third quarter of 2018.
  • Return on average common equity of 12.49%, compared to 5.29% for the third quarter of 2018.
  • Return on average tangible common equity (a non-GAAP financial measure) of 17.94%, compared to 8.74% for the third quarter of 2018.
  • Windsor Advantage, LLC (“Windsor”) processing and servicing revenue of $2.39 million as compared to $1.79 million for the same period last year.

As previously announced, on May 6, 2019 Sound Bank, formerly a wholly owned subsidiary of West Town, completed a recapitalization that resulted in a significant reduction in West Town’s ownership position in the bank, which, effective October 1, 2019, changed its name to Dogwood State Bank.  Due to the reduction in West Town’s ownership position, the financial results for the Company for the third quarter of 2019 are deconsolidated from the financial results of Sound Bank.  Therefore, on a comparative basis, the Company’s financial results for the third quarter of 2019 do not include any operating impact from Sound Bank whereas the financial results for the third quarter of 2018 are impacted by the performance of Sound Bank.    

Eric Bergevin, President and CEO, commented, “We are pleased with the results of our first full quarter since the Sound Bank recapitalization.  The Company was able to deliver net income which, excluding past fair value adjustments and gains on consolidation, showed significant improvement over previous pre-recapitalization quarters, and we were able to do so with a smaller asset base and reduced outstanding share levels as a result of our recent stock repurchase program.  This resulted in a strong improvement in our earnings per share.  Windsor had another good quarter with $2.4 million in revenue, driven by a 6th consecutive quarter of increased servicing revenue.   In addition, our government guaranteed lending department originated loan commitments of $22.9 million and earned $983,000 in revenue for the third quarter.  Finally, given the strong liquidity position of the Company following the divestiture of our controlling interest in Sound Bank, we believe the share repurchases we made were an effective use of our excess cash, resulting in an accretive impact on our earnings per share this quarter and, we anticipate, in future periods.”

During the third quarter of 2019, the Company repurchased 574,919 shares of its voting and nonvoting common stock and all of its outstanding warrants.  In addition, the Company paid off a $1.9 million line of credit balance while keeping the line available for future use if needed.

Balance Sheet

At September 30, 2019, the Company’s total assets were $309.3 million, net loans held for investment were $211.8 million, loans held for sale were $14.0 million, total deposits were $231.9 million and total shareholder’s equity was $66.5 million.  Compared with September 30, 2018, total assets decreased $242.2 million or 44%, loans held for investment decreased $95.5 million or 31%, loans held for sale decreased $1.9 million or 12%, total deposits decreased $168.2 million or 42%, and total shareholders’ equity decreased $9.9 million or 13%.  The decreases in assets, loans and deposits were a result of the Sound Bank recapitalization and elimination of Sound Bank from the consolidated financials as of May 6, 2019.  The decrease in total shareholders’ equity resulted from the Company’s stock repurchase program partially offset by an increase in retained earnings.

Capital Levels

At September 30, 2019, the regulatory capital ratios of West Town Bank & Trust exceeded the minimum thresholds established for well-capitalized banks under applicable banking regulations.

 “Well Capitalized”
Minimums
West Town
Bank & Trust
Tier 1 common equity ratio6.50%15.32%
Tier 1 risk-based capital ratio8.00%15.32%
Total risk-based capital ratio10.00%16.58%
Tier 1 leverage ratio5.00%13.09%

The Company’s book value per common share increased from $25.31 at September 30, 2018 to $29.86 at September 30, 2019.  The Company’s tangible book value per common share (a non-GAAP financial measure) increased from $15.30 at September 30, 2018 to $20.57 at September 30, 2019 due primarily to the gain on deconsolidation of Sound Bank and the subsequent removal of the intangible assets associated with Sound Bank from the consolidated financial statements. 

Asset Quality

The Company’s nonperforming assets to total assets ratio increased 91 basis points from 1.30% at September 30, 2018 to 2.21% at September 30, 2019 primarily due to the removal of Sound Bank from the consolidated financial statements.  Nonaccrual loans decreased $993,000 as of September 30, 2019 as compared to the prior year while foreclosed assets increased $1.2 million compared to September 30, 2018.

The Company recorded a $200,000 provision for loan losses during the third quarter of 2019 as compared to a provision of $789,000 in third quarter 2018.  The Company recorded $138,000 in net charge-offs during the third quarter 2019 with the remaining provision expense due to volume growth.

  (Dollars in thousands)9/30/196/30/193/31/1912/31/189/30/18
Nonaccrual loans – originated$4,813 $3,290 $4,666 $6,538 $5,806 
Nonaccrual loans – acquired     262  272  280 
Foreclosed assets – originated 2,028  2,069  2,493  723  796 
90 days past due and still accruing – originated     407  67  3 
90 days past due and still accruing – acquired     421  251  280 
Total nonperforming assets 6,841  5,359  8,249  7,851  7,165 
Total nonperforming assets – originated 6,841  5,359  7,566  7,328  6,605 
                
Net charge-offs$138 $200 $58 $334 $725 
Annualized net charge-offs to total average portfolio loans 0.25% 0.27% 0.05% 0.31% 0.68%
                
Ratio of total nonperforming assets to total assets 2.21% 1.77% 1.40% 1.41% 1.30%
Ratio of total nonperforming loans to total net portfolio loans 2.31% 1.57% 1.38% 1.74% 1.56%
Ratio of total allowance for loan losses to total portfolio loans 1.64% 1.62% 0.98% 0.97% 0.95%

Net Interest Income and Margin

Net interest income for the three months ended September 30, 2019 decreased $2.4 million or 46% in comparison to the third quarter 2018, primarily due to the deconsolidation of Sound Bank from the consolidated financial statements as of May 6, 2019. The net interest margin decreased from 4.45% for the third quarter 2018 to 4.39% for the third quarter 2019.  The margin compression is largely related to the increase in the cost of funds from 1.18% to 1.80%, due primarily to the deconsolidation of Sound Bank from the Company’s consolidated financial statements and the inclusion of the $9,990,000 resulting equity investment in Sound Bank in the Company’s investment portfolio, which reduced the Company’s average yield on assets and net interest margin by approximately 23 basis points and 18 basis points, respectively, due to the lack of dividend income. 

 Three Months Ended   Year-to-Date
  (Dollars in thousands)9/30/196/30/193/31/1912/31/189/30/18 9/30/199/30/18
Average balances:        
Loans$220,939$297,501$435,583$424,758$426,160 $317,221$436,189
Investment securities 21,111 20,960 21,119 21,060 15,377  21,063 13,575
Interest-bearing balances and other 16,801 47,025 54,690 41,472 28,481  39,367 25,527
Total interest-earning assets 258,851 365,486 511,392 487,290 470,018  377,651 475,291
Noninterest deposits 47,199 75,643 112,836 96,068 90,073  78,319 85,324
Interest-bearing liabilities:               
Interest-bearing deposits 170,390 234,603 338,682 319,900 294,502  247,275 296,315
Borrowed funds 6,452 17,204 37,852 50,792 63,356  20,387 72,697
Total interest-bearing liabilities 176,842 251,807 376,534 370,692 357,858  267,662 369,012
Total assets 300,011 416,840 576,640 553,855 536,172  430,151 536,869
Common shareholders’ equity 68,448 82,090 78,698 77,817 77,129  76,375 72,659
Tangible common equity (1) 47,636 57,825 48,918 47,695 46,667  51,456 51,408
                
Interest income/expense:               
Loans$3,698$4,607$6,523$6,379$6,329 $14,828$18,942
Investment securities 76 100 167 171 111  343 280
Interest-bearing balances and other 105 241 356 248 170  702 416
Total interest income 3,879 4,948 7,046 6,798 6,610  15,873 19,638
Deposits 942 1,104 1,432 1,169 906  3,478 2,492
Borrowings 72 172 330 396 431  574 1,283
Total interest expense 1,014 1,276 1,762 1,565 1,337  4,052 3,775
Net interest income$2,865$3,672$5,284$5,233$5,273 $11,821$15,863
         
(1) Non-GAAP financial measure. Tangible common equity is calculated by subtracting intangible assets from common shareholders’ equity
 Three Months Ended   Year-to-Date
 9/30/196/30/193/31/1912/31/189/30/18 9/30/199/30/18
Average yields and costs:        
Loans6.64%6.21%6.07%5.96%5.89% 6.25%5.76%
Investment securities1.44%1.91%3.16%3.25%2.89% 2.17%2.65%
Interest-bearing balances and other2.48%2.06%2.64%2.37%2.37% 2.38%2.07%
Total interest-earning assets5.95%5.43%5.59%5.53%5.58% 5.61%5.50%
Interest-bearing deposits2.19%1.89%1.71%1.45%1.22% 1.88%1.08%
Borrowed funds4.43%4.01%3.54%3.09%2.70% 3.76%2.22%
Total interest-bearing liabilities2.27%2.03%1.90%1.67%1.48% 2.02%1.31%
Cost of funds1.80%1.56%1.46%1.33%1.18% 1.57%1.07%
Net interest margin4.39%4.03%4.19%4.26%4.45% 4.18%4.47%

Noninterest Income

Noninterest income for the three months ended September 30, 2019 was $4.6 million, an increase of $685,000 as compared to the same prior year period.  Specific items to note include:

  • Windsor processing and servicing revenue totaled $2.4 million, an increase of $600,000 or 34% as compared to the $1.8 million in income earned from the investment in Windsor during the same prior year period.  The increase is directly attributable to the continued growth in the volume in the servicing portfolio as the company brings in new customers. 
  • Government lending revenue of $983,000 was a decrease of $138,000 or 12% in comparison to the third quarter of 2018.
  • Mortgage revenue totaled $975,000, an increase of $484,000 or 99% as compared to the third quarter 2018.  Loans originated for secondary market sale increased from $13.6 million in the third quarter 2018 to $26.4 million in the third quarter 2019.          

Noninterest Expense

Noninterest expense for the third quarter 2019 was $4.4 million, a decrease of $2.6 million or 37%, from $7.0 million for the third quarter 2018.  The decreases in compensation, occupancy, data processing, communications and other operating expenses are primarily related to the deconsolidation of Sound Bank from the consolidated financial statements as of May 6, 2019.  Also impacting noninterest expenses for the quarter were decreased loan and legal related expenses pertaining to the guaranteed loan portfolio as the Company was able to recapture some of its previously expensed costs due to pari passu loss sharing and expense sharing agreements resulting in a negative expense for the quarter, which is nonrecurring.  

About West Town Bancorp, Inc.

West Town Bancorp, Inc. is a financial holding company based in Raleigh, NC.  The Company is the holding company for West Town Bank & Trust, an Illinois state-chartered bank.  West Town Bank & Trust provides banking services through its two full-service offices located in the greater Chicago area. The Company is also the parent company of: Windsor Advantage, LLC, a loan servicing company; West Town Insurance Agency, Inc., an insurance agency; Patriarch, LLC, a real estate management company; SBA Loan Documentation Services, LLC, a loan documentation origination company; and Glenwood Structured Finance, LLC, a loan broker and large loan syndication company.  The Company is registered with, and supervised by, the Federal Reserve.  West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC. 

For more information, visit http://www.westtownbank.com/

Important Note Regarding Forward-Looking Statements

This release contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of the Company and on the information available to management at the time this release was prepared. These statements can be identified by the use of words such as “expect,” “anticipate,” “estimate,” “believe,” variations of these words, and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand, and asset quality, including real estate and other collateral values; changes in Small Business Administration rules, regulations, or loan products, including the section 7(a) program; changes in other government guaranteed loan programs or our ability to participate in such programs; changes in tax law, including the impact of such changes on our tax assets and liabilities; future governmental shutdowns that may impact revenues associated with our lending and other operations that are dependent on government guaranteed loan programs; changes in banking regulations and accounting principles, policies, or guidelines; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with the Company’s acquisition and divesture activities; the failure of our strategic investments or acquisitions to perform as anticipated and the impact of any impairments to our intangible assets, such as goodwill; the impact of our strategic initiatives on our ability to retain key employees, and the impact of competition from traditional or new sources. These, and other factors that may emerge, could cause decisions and actual results to differ materially from current expectations. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.    

Consolidated Balance Sheet
 Ending Balance
  (Dollars in thousands, unaudited)9/30/196/30/193/31/1912/31/189/30/18
Assets               
Cash and due from banks$4,085 $2,665 $5,433 $5,005  5,292 
Interest-bearing deposits 18,814  17,196  72,382  43,448  38,779 
 Total cash and cash equivalents 22,899  19,861  77,815  48,453  44,071 
Securities, at fair value 21,804  20,716  21,031  21,332  20,615 
Loans held for sale 13,965  14,902  11,037  16,552  15,819 
Loans held for investment:               
 Originated loans 211,647  209,492  336,505  322,038  307,166 
 Acquired loans, net     81,978  88,556  101,311 
 Allowance for loan and lease losses (3,462) (3,400) (4,115) (4,000) (3,900)
  Net loans held for investment 208,185  206,092  414,368  406,594  404,577 
Premises and equipment, net 4,795  4,832  12,099  12,166  12,263 
Foreclosed assets 2,028  2,069  2,493  723  796 
Servicing assets 3,053  3,220  3,619  3,952  4,280 
Bank owned life insurance 4,993  4,964  9,090  9,034  8,977 
Accrued interest receivable 1,079  1,196  1,637  1,637  1,758 
Goodwill 12,721  12,721  19,737  19,745  19,745 
Other intangible assets, net 7,968  8,154  9,827  10,157  10,493 
Other assets 5,779  4,638  8,066  4,979  8,100 
   Total assets$309,269 $303,365 $590,819 $555,324 $551,494 
                   
Liabilities and Shareholders’ Equity               
Liabilities               
Deposits:               
 Noninterest bearing$54,380 $46,068 $128,435 $97,777 $94,829 
 Interest-bearing 177,472  164,619  345,581  335,140  305,257 
  Total deposits 231,852  210,687  474,016  432,917  400,086 
Borrowings 2,382  5,868  26,294  33,781  65,667 
Accrued interest payable 424  433  927  868  550 
Other liabilities 8,092  7,562  9,860  10,189  8,746 
 Total liabilities 242,750  224,550  511,097  477,755  475,049 
Shareholders’ equity:               
Common stock, voting 2,206  2,674  2,749  2,686  2,666 
Common stock, non-voting 22  129  329  329  329 
Additional paid in capital 24,771  38,557  45,287  44,760  44,576 
Retained earnings 39,446  37,375  31,273  29,928  29,154 
Accumulated other comprehensive income (loss)  74  80  84  (134) (280)
 Total shareholders’ equity 66,519  78,815  79,722  77,569  76,445 
   Total liabilities and shareholders’ equity$309,269 $303,365 $590,819 $555,324 $551,494 
Financial Performance (Consolidated)
  (Dollars in thousands except shareThree Months Ended   Nine Months Ended
  and per share data; unaudited)9/30/196/30/193/31/1912/31/189/30/18 9/30/199/30/18
Interest income                
Loans$3,698 $4,607$6,523$6,379$6,329 $14,828$18,942
Invesment securities and deposits 181  341 523 419 281  1,045 696
Total interest income 3,879  4,948 7,046 6,798 6,610  15,873 19,638
Interest expense                
Interest on deposits 942  1,104 1,432 1,169 906  3,478 2,492
Interest on borrowed funds 72  172 330 396 431  574 1,283
Total interest expense 1,014  1,276 1,762 1,565 1,337  4,052 3,775
Net interest income 2,865  3,672 5,284 5,233 5,273  11,821 15,863
Provision for loan losses 200  477 173 434 789  850 1,519
Noninterest income                
Windsor processing and servicing                
revenue 2,391  2,581 2,086 2,116 1,791  7,058 3,474
Government lending 983  1,754 880 1,793 1,121  3,617 8,416
Mortgage 975  1,113 435 359 491  2,523 1,814
Bank-owned life insurance 29  44 56 58 59  129 180
Service charge 23  99 226 228 196  348 637
Gain on deconsolidation of Sound Bank   6,635     6,635 
Gain on consolidation of Windsor         4,776
Income from Windsor investment         933
Other noninterest 153  92 122 163 211  367 516
Total noninterest income 4,554  12,318 3,805 4,717 3,869  20,677 20,746
Noninterest expense                
Compensation 3,199  3,385 4,261 4,689 4,245  10,845 11,561
Occupancy and equipment 343  338 506 536 522  1,187 1,397
Loan and special assets (523) 510 179 437 67  166 836
Professional services 432  569 582 511 437  1,583 1,028
Data processing 161  198 345 381 326  704 964
Communications 33  110 226 208 191  369 629
Advertising 51  109 112 135 147  272 619
Loss on sale of foreclosed assets   35 21    56 41
Transaction-related expenses 1  916 43 31 5  960 93
Other operating expenses 681  1,040 1,179 1,259 1,013  2,900 2,995
Total noninterest expense 4,378  7,210 7,454 8,187 6,953  19,042 20,163
Income before income taxes 2,841  8,303 1,462 1,329 1,400  12,606 14,927
Income tax expense 687  2,174 397 373 372  3,258 3,747
Net income$2,154 $6,129$1,065$956$1,028 $9,348$11,180
                 
Basic earnings per common share$0.97 $2.03$0.35$0.31$0.34 $2.58$3.76
Diluted earnings per common share$0.95 $2.00$0.34$0.30$0.33 $2.47$3.60
Weighted average common shares                
outstanding 2,328  2,997 3,054 3,008 2,996  2,980 2,976
Diluted average common shares                
outstanding 2,369  3,045 3,115 3,124 3,127  3,115 3,106
Performance Ratios
  Three Months Ended   Year-to-Date
  9/30/196/30/193/31/1912/31/189/30/18 9/30/199/30/18
PER COMMON SHARE        
 Basic earnings per common share$0.97 $2.03 $0.35 $0.31 $0.34  $2.58 $3.76 
 Diluted earnings per common share$0.95 $2.00 $0.34 $0.30 $0.33  $2.47 $3.60 
 Book value per common share$29.86 $28.12 $25.70 $25.52 $25.31  $29.86 $25.31 
 Tangible book value per common share$20.57 $20.67 $16.17 $15.68 $15.30  $20.57 $15.30 
                        
FINANCIAL RATIOS (ANNUALIZED)                      
 Return on average assets 2.93% 5.98% 0.75% 0.68% 0.76%  2.91% 2.78%
 Return on average common shareholders’ equity 12.49% 30.35% 5.48% 4.87% 5.29%  16.36% 20.56%
 Return on tangible common equity 17.94% 42.51% 8.83% 7.95% 8.40%  24.29% 29.08%
 Net interest margin (FTE) 4.39% 4.03% 4.19% 4.26% 4.45%  4.18% 4.46%
 Efficiency ratio (1) 59.0% 77.1% 82.0% 82.3% 76.1%  69.9% 63.0%
          
 (1) Efficiency ratio is calculated by dividing noninterest expense less transaction-related costs by the sum of net interest income and noninterest income, less gains or losses on sale of securities and consolidation and the fair value adjustment on the equity investment in Sound Bank

Contact: Eric Bergevin, 252-482-4400

West Town Bancorp, Inc. Announces Second Quarter 2019 Financial Results

RALEIGH, N.C., July 29, 2019 (GLOBE NEWSWIRE) — West Town Bancorp, Inc. (OTC PINK: WTWB) (the “Company” or “West Town”), the financial holding company for West Town Bank & Trust, announced today its financial results for the three months ended June 30, 2019.  Highlights include the following:

Second quarter net income of $6,129,000 or $2.00 per diluted share, compared to $7,671,000 or $2.47 per diluted share for the second quarter of 2018.

  • Return on average assets of 5.98%, compared to 5.72% for the second quarter of 2018.
  • Return on average common equity of 30.35%, compared to 41.73% for the second quarter of 2018.
  • Return on average tangible common equity (a non-GAAP financial measure) of 42.51%, compared to 61.68% for the second quarter of 2018.
  • Windsor Advantage, LLC (“Windsor”) revenue of $2,581,000 as compared to $2,052,000 for the same period last year, due primarily to West Town acquiring 100% of Windsor on April 30, 2018.

Sound Bank Recapitalization

As previously announced, on May 6, 2019 Sound Bank, formerly a wholly-owned subsidiary of West Town, completed a recapitalization that resulted in West Town’s ownership position in the bank being significantly diluted.  As part of the recapitalization, West Town sold a substantial portion of its interest in Sound Bank through a series of concurrent secondary sales of shares of Sound Bank common stock, which resulted in gross proceeds to West Town of $28,010,000 and a pre-tax gain of approximately $6.6 million.  West Town retains an ownership interest in Sound Bank’s voting common stock of approximately 4.9% and a 9.9% total equity interest in Sound Bank.

Eric Bergevin, President and CEO commented, “We are pleased with the positive financial impact of the Sound Bank recapitalization, whereby West Town successfully monetized its investment with an over 20% return on investment in just over one and a half years.  The $6.6 million pre-tax gain obviously impacted our financial performance for the second quarter; however, at the same time, we continue to perform on all cylinders.  Our government guaranteed lending department originated loan commitments of $65.9 million and earned $1.8 million in revenue for the second quarter, while Windsor turned in a record quarter of $2.6 million in revenue, driven by a 5th consecutive quarter of increased servicing revenue.  Additionally, we paid off the Company’s outstanding $1.9 million line of credit balance while keeping the line available and deployed capital from the Sound Bank transaction into a stock repurchase program.  As of June 30, 2019, we had completed the repurchase of 103,793 shares of the Company’s voting common stock and 200,000 shares of non-voting common stock.”

Balance Sheet

At June 30, 2019, the Company’s total assets were $303,365,000, net loans held for investment were $206,092,000, loans held for sale were $14,902,000, total deposits were $210,687,000 and total shareholder’s equity was $78,815,000.  Compared with June 30, 2018, total assets decreased $241,123,000 or 44%, loans held for investment decreased $194,983,000 or 49%, loans held for sale decreased $17,092,000 or 53%, total deposits decreased $166,901,000 or 44%, and total shareholders’ equity increased $3,135,000 or 4%.  The decreases in assets, loans and deposits were a result of the Sound Bank recapitalization and elimination from the consolidated financials as of May 6, 2019.  The increase in total shareholders’ equity resulted from retained earnings, partially offset by the Company’s stock repurchase program.

Capital Levels

At June 30, 2019, the regulatory capital ratios of West Town Bank & Trust exceeded the minimum thresholds established for well-capitalized banks under applicable banking regulations.

 

“Well Capitalized”
Minimums


West Town
Bank & Trust
Tier 1 common equity ratio6.5%15.37%
Tier 1 risk-based capital ratio8.0%15.37%
Total risk-based capital ratio10.0%16.62%
Tier 1 leverage ratio5.0%12.64%

The Company’s book value per common share increased from $25.11 at June 30, 2018 to $28.12 at June 30, 2019.  The Company’s tangible book value per common share (a non-GAAP financial measure) increased from $14.96 at June 30, 2018 to $20.67 at June 30, 2019 due primarily to the gain on sale of Sound Bank and the subsequent removal of the intangible assets associated with Sound Bank from the consolidated financial statements. 

Asset Quality

The Company’s nonperforming assets to total assets ratio increased 46 basis points from 1.31% at June 30, 2018 to 1.77% at June 30, 2019 primarily due to the removal of Sound Bank from the consolidated financial statements.  Non-acquired nonaccrual loans decreased $2,943,000 as of June 30, 2019 as compared to the prior year while foreclosed assets increased $2,015,000.

The Company recorded a $477,000 provision for loan losses during the second quarter of 2019 as compared to a provision of $261,000 in second quarter 2018.  The Company recorded $200,000 in net charge-offs during the second quarter 2019 with the remaining provision expense due to volume growth.

Dollars in thousandsEnding Balance 
 6/30/193/31/1912/31/189/30/186/30/18
           
Nonaccrual loans – originated$3,290 $4,666 $6,538 $5,806 $6,233 
Nonaccrual loans – acquired 0  262  272  280  292 
Foreclosed assets – originated 2,069  2,493  723  796  54 
90 days past due – originated 0  407  67  3  8 
90 days past due – acquired 0  421  251  280  553 
Total nonperforming assets 5,359  8,249  7,851  7,165  7,140 
Total nonperforming assets – originated 5,359  7,566  7,328  6,605  6,295 
           
Net charge-offs$200 $58 $334 $725 $216 
Annualized net charge-offs to total average portfolio loans 0.27% 0.05% 0.31% 0.68% 0.20%
           
Ratio of total nonperforming assets to total assets 1.77% 1.40% 1.41% 1.30% 1.31%
Ratio of total nonperforming loans to total portfolio loans 1.57% 1.38% 1.74% 1.56% 1.75%
Ratio of total allowance for loan losses to total portfolio loans 1.62% 0.98% 0.97% 0.95% 0.95%

Net Interest Income and Margin

Net interest income for the three months ended June 30, 2019 decreased $1,847,000 or 33% in comparison to the second quarter 2018, primarily due to the removal of Sound Bank from the consolidated financial statements as of May 6, 2019. The net interest margin decreased from 4.68% for the second quarter 2018 to 4.03% for the second quarter 2019.  The margin compression is largely related to the increase in the cost of funds from 1.14% to 1.56%, due primarily to the deconsolidation of Sound Bank from the Company’s consolidated financial statements and the inclusion of the $9,990,000 resulting equity investment in Sound Bank in the Company’s investment portfolio, which reduced the Company’s average yield on assets by approximately 10 basis points due to it not earning dividend income. 

Dollars in thousandsThree Months EndedYear-to-Date
 6/30/193/31/1912/31/189/30/186/30/186/30/196/30/18
Quarterly average balances:               
Loans$297,501$435,583$424,758$ 426,160$435,778 $366,161$441,287
Investment securities 20,960 21,119 21,060  15,377 13,949  21,039 12,658
Interest-bearing balances and other 47,025 54,690 41,472  28,481 23,258  50,836 24,026
Total interest-earning assets 365,486 511,392 487,290  470,018 472,985  438,036 477,971
Noninterest-bearing deposits 75,643 112,836 96,068  90,073 82,971  94,137 82,910
Interest-bearing liabilities:               
Interest-bearing deposits 234,603 338,682 319,900  294,502 292,409  286,355 297,237
Borrowed funds 17,204 37,852 50,792  63,356 78,457  27,470 77,445
Total interest-bearing liabilities 251,807 376,534 370,692  357,858 370,866  313,825 374,682
Total assets 416,840 576,640 553,855  536,172 538,249  496,299 537,222
Common shareholders’ equity 82,090 78,698 77,817  77,129 73,725  80,403 70,387
Tangible common equity (1) 57,825 48,918 47,695  46,667 49,882  53,396 53,818

(1) Non-GAAP financial measure.  Tangible common equity is calculated by subtracting intangible assets from common shareholders’ equity.

Dollars in thousandsThree Months Ended Year-to-Date
6/30/193/31/1912/31/189/30/186/30/186/30/196/30/18
Interest Income/Expense:               
Loans$4,607 $6,523 $6,379 $ 6,329 $6,577  $11,130 $12,613 
Investment securities 100  167  171   111  105   267  168 
Interest-bearing balances and other 241  356  248   170  126   597  247 
Total interest income 4,948  7,046  6,798   6,610  6,808   11,994  13,028 
Deposits 1,104  1,432  1,169   906  815   2,536  1,586 
Borrowings 172  330  396   431  474   502  852 
Total interest expense 1,276  1,762  1,565   1,337  1,289   3,038  2,438 
Net interest income$3,672 $5,284 $5,233 $ 5,273 $5,519  $8,956 $10,590 
                
Average Yields and Costs:               
Loans 6.21% 6.07% 5.96% 5.89% 6.05%  6.13% 5.76%
Investment securities 1.91% 3.16% 3.25% 2.89% 3.01%  2.54% 2.65%
Interest-bearing balances and other 2.06% 2.64% 2.37% 2.37% 2.17%  2.37% 2.07%
Total interest-earning assets 5.43% 5.59% 5.53% 5.58% 5.77%  5.51% 5.50%
Total interest-bearing deposits 1.89% 1.71% 1.45% 1.22% 1.12%  1.79% 1.08%
Borrowed funds 4.01% 3.54% 3.09% 2.70% 2.42%  3.69% 2.22%
Total interest-bearing liabilities 2.03% 1.90% 1.67% 1.48% 1.39%  1.95% 1.31%
Cost of funds 1.56% 1.46% 1.33% 1.18% 1.14%  1.50% 1.07%
Net interest margin 4.03% 4.19% 4.26% 4.45% 4.68%  4.12% 4.47%

Noninterest Income

Noninterest income for the three months ended June 30, 2019 was $12,318,000, a decrease of $38,000 as compared to the same prior year period.  Specific items to note include:

  • Government lending revenue of $1,754,000 was a decrease of $2,487,000 or 59% in comparison to the second quarter of 2018 primarily due to the unwinding in the first six months of 2018 of the originate-and-hold strategy instituted in the fourth quarter of 2017; and
  • Windsor revenue totaled $2,581,000, an increase of $529,000 or 26% as compared to the $2,052,000 income earned from the investment in Windsor during the same prior year period.  The increase is directly attributable to the Company’s acquisition of the remaining 56.5% of Windsor on April 30, 2018. 
  • Mortgage revenue totaled $1,113,000, an increase of $245,000 or 28% as compared to the second quarter 2018.  Loans originated for secondary market sale increased from $21,175,000 in the second quarter 2018 to $22,195,000 in the second quarter 2019.
  • The fair value adjustment on the Sound Bank equity investment was $6,635,000 for the quarter and was based on the Sound Bank recapitalization pricing.

Noninterest Expense

Noninterest expense for the second quarter 2019 was $7,210,000, a decrease of $205,000 or 3%, from $7,415,000 for the second quarter 2018.  The decreases in compensation, occupancy, data processing, communications and other operating expenses are primarily related to the removal of Sound Bank from the consolidated financial statements as of May 6, 2019.  Also impacting noninterest expenses for the quarter were increased legal fees and transaction-related expenses pertaining to the Sound Bank recapitalization.  

Expanded Stock Repurchase Program

Following the close of the 2019 second quarter, the Company received approval from the Federal Reserve Bank of Chicago to expand its current stock repurchase program and has since repurchased an additional 436,014 of the Company’s voting common shares and 107,380 of the Company’s non-voting common shares.  These most recent share repurchases occurred subsequent to June 30th and are not reflected in the Company’s reported June 30, 2019 financial information.  In commenting on the Company’s repurchase activity, Mr. Bergevin said, “We are pleased with the participation in the repurchase program to date and still have capacity to repurchase about an additional $2 million of common stock.  Given the strong liquidity position of the Company following the divestiture of our controlling interest in Sound Bank, we believe the share repurchases are an effective use of our excess cash, while also offering additional liquidity options to our shareholders.  With the reduction in the number of outstanding shares of Company common stock, we expect the repurchases will be accretive to our earnings per share in future periods.”

About West Town Bancorp, Inc.

West Town Bancorp, Inc. is the financial holding company for West Town Bank & Trust, an Illinois state-chartered bank.  West Town Bank & Trust provides banking services through its two full-service offices located in the greater Chicago area. Primary deposit products are checking, savings, and certificate of deposit accounts, and primary lending products are government guaranteed lending, residential mortgage, commercial, and installment loans. The Company is also the parent company of Windsor Advantage, LLC, a loan servicing company, and West Town Insurance Agency, Inc., an insurance agency.  The Company is registered with, and supervised by, the Federal Reserve.  West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC. 

For more information, visit http://www.westtownbank.com/

Important Note Regarding Forward-Looking Statements

This release contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of the Company and on the information available to management at the time this release was prepared. These statements can be identified by the use of words such as “expect,” “anticipate,” “estimate,” “believe,” variations of these words, and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand, and asset quality, including real estate and other collateral values; changes in Small Business Administration rules, regulations, or loan products, including the section 7(a) program; changes in other government guaranteed loan programs or our ability to participate in such programs; changes in tax law, including the impact of such changes on our tax assets and liabilities; future governmental shutdowns that may impact revenues associated with our lending and other operations that are dependent on government guaranteed loan programs; changes in banking regulations and accounting principles, policies, or guidelines; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with the Company’s acquisition and divesture activities; the failure of our strategic investments or acquisitions to perform as anticipated and the impact of any impairments to our intangible assets, such as goodwill; the impact of our strategic initiatives on our ability to retain key employees, and the impact of competition from traditional or new sources. These, and other factors that may emerge, could cause decisions and actual results to differ materially from current expectations. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.    

Consolidated Balance Sheet
Dollars in thousands; unauditedEnding Balance 
 6/30/193/31/1912/31/189/30/186/30/18
Assets          
  Cash and due from banks$2,665 $5,433 $5,005 $5,292 $4,961 
  Interest-bearing deposits 17,196  72,382  43,448  38,779  27,532 
  Total cash and cash equivalents 19,861  77,815  48,453  44,071  32,493 
  Securities available for sale, at fair value 20,716  21,031  21,332  20,615  13,769 
  Loans held for sale 14,902  11,037  16,552   15,819  31,994 
  Loans held for investment:          
  Originated loans 209,492   336,505   322,038   307,166  294,471 
  Acquired loans, net 0   81,978   88,556   101,311  110,439 
  Allowance for loan losses  (3,400)  (4,115)  (4,000)  (3,900) (3,835)
  Net loans held for investment 206,092   414,368   406,594   404,577  401,075 
  Premises and equipment, net 4,832  12,099  12,166  12,263  11,586 
  Foreclosed assets 2,069  2,493  723  796  54 
  Servicing assets 3,220  3,619  3,952   4,280  4,598 
  Bank owned life insurance 4,964  9,090  9,034  8,977  8,917 
  Accrued interest receivable 1,196  1,637  1,637  1,758  1,776 
  Goodwill 12,721   19,737   19,745   19,745  19,745 
  Other intangible assets, net 8,154   9,827   10,157   10,493  10,837 
  Other assets 4,638  8,066  4,979  8,100  7,644 
Total assets$303,365 $590,819 $555,324 $551,494 $544,488 
           
Liabilities and Shareholders’ Equity          
Liabilities          
  Deposits:          
  Noninterest-bearing$46,068 $128,435 $97,777 $94,829 $88,172 
  Interest-bearing 164,619  345,581  335,140  305,257  289,416 
  Total deposits 210,687  474,016  432,917  400,086  377,588 
  Short term borrowings 1,968  20,000  27,000  58,400  73,400 
  Long term borrowings 3,900  6,294  6,781  7,267  7,754 
  Accrued interest payable 433  927  868  550  466 
  Other liabilities 7,562  9,860  10,189  8,746  9,600 
  Total liabilities 224,550  511,097  477,755  475,049  468,808 
Shareholders’ equity          
  Preferred stock 0  0  0  0  0 
  Common stock, voting 2,674  2,749  2,686  2,666  2,660 
  Common stock, non-voting 129  329  329  329  329 
  Additional paid-in capital 38,557  45,287  44,760  44,576  44,429 
  Retained earnings 37,375  31,273  29,928  29,154  28,436 
  Accumulated other comprehensive income (loss) 80   84   (134)  (280) (174)
  Total shareholders’ equity 78,815   79,722   77,569   76,445   75,680 
Total liabilities and shareholders’ equity$303,365 $590,819 $555,324 $551,494 $544,488 
Financial Performance (Consolidated)
Dollars in thousands, except per share data; unauditedThree Months EndedYear-to-Date
 6/30/193/31/1912/31/189/30/186/30/186/30/19 6/30/18 
Interest income                
Interest and fees on loans$4,607$6,523$6,379$6,329$6,577 $11,130$12,613 
Investment securities & deposits 341 523 419 281 231  864 415 
Total interest income 4,948 7,046 6,798 6,610 6,808  11,994 13,028 
Interest expense                
Interest on deposits 1,104 1,432 1,169 906 815  2,536 1,586 
Interest on borrowed funds 172 330 396 431 474  502 852 
Total interest expense 1,276 1,762 1,565 1,337 1,289  3,038 2,438 
Net interest income 3,6725,2845,2335,2735,5198,95610,590 
Provision for loan losses 477 173 434 789 261  650 730 
Noninterest income                
Government lending revenue 1,754 880 1,793 1,121 4,241  2,634 7,295 
Mortgage revenue 1,113 435 359 491 868  1,548 1,323 
Service charge revenue 99 226 228 196 222  325 441 
Bank owned life insurance income 44 56 58 59 64  100 121 
Windsor revenue 2,581 2,086 2,116 1,791 1,683  4,667 2,616 
Income from Windsor investment 0 0 0 0 369  0 0 
Fair value adjustment on equity investment 6,635 0 0 0 0  6,635 0 
Gain on consolidation of Windsor 0 0 0 0 4,776  0 4,776 
Other noninterest income 92 122 163 211 133  214 305 
Total noninterest income 12,318 3,805 4,717 3,869 12,356  16,123 16,877 
Noninterest expense                
Compensation 3,385 4,261 4,689 4,245 4,050  7,646 7,316 
Occupancy and equipment 338 506 536 522 462  844 875 
Loan and special assets 510 179 437 67 407  689 769 
Professional services 569 582 511 437 317  1,151 591 
Data processing 198 345 381 326 325  543 638 
Communication 110 226 208 191 203  336 438 
Advertising 109 112 135 147 418  221 472 
Loss on sale of foreclosed assets 35 21 0 0 41  56 41 
Transaction-related expenses 916 43 31 5 74  959 88 
Other operating expense 1,040 1,179 1,259 1,013 1,118  2,219 1,982 
Total noninterest expense 7,210 7,454 8,187 6,953 7,415  14,664 13,210 
Income before income taxes 8,303 1,462 1,329 1,400 10,199  9,765 13,527 
Income tax expense 2,174 397 373 372 2,528  2,571 3,375 
Net income$6,129$1,065$956$1,028$7,671$7,194$10,152 
Basic earnings per common share$2.03$0.35$0.31$0.34$2.58 $2.38$3.42 
Diluted earnings per common share$2.00$0.34$0.30$0.33$2.47 $2.34$3.27 
Weighted average common shares outstanding 2,997 3,054 3,008 2,996 2,980  3,025 2,966 
Diluted average common shares outstanding 3,045 3,115 3,124 3,127 3,115  3,080 3,101 
Performance Ratios
Three Months EndedYear-to-Date
 6/30/193/31/1912/31/189/30/186/30/186/30/196/30/18
PER COMMON SHARE               
Basic earnings per common share$2.03 $0.35 $0.31 $0.34 $2.58  $2.38 $3.42 
Diluted earnings per common share$2.00 $0.34 $0.30 $0.33 $2.47  $2.34 $3.27 
Book value per common share$28.12 $25.70 $25.52 $25.31 $25.11  $28.12 $25.11 
Tangible book value per common share$20.67 $16.17 $15.68 $15.30 $14.96  $20.67 $14.96 
                
FINANCIAL RATIOS (ANNUALIZED)               
Return on average assets 5.98% 0.75% 0.68% 0.76% 5.72%  2.96% 3.81%
Return on average common shareholders’ equity 30.35% 5.48% 4.87% 5.29% 41.73%  18.25% 29.08%
Return on tangible common equity 42.51% 8.83% 7.95% 8.74% 61.68%  27.17% 38.04%
Net interest margin (FTE) 4.03% 4.19% 4.26% 4.45% 4.68%  4.12% 4.47%
Efficiency ratio(1) 77.1% 82.0% 82.3% 76.1% 56.6%  79.5% 58.2%

(1)       Efficiency ratio is calculated by dividing noninterest expense by the sum of net interest income and noninterest income, less gains or losses on sale of securities or consolidation.

Contact: Eric Bergevin, 252-482-4400

West Town Bancorp, Inc. Announces Stock Repurchase Program

RALEIGH, N.C., May 17, 2019 (GLOBE NEWSWIRE) — West Town Bancorp, Inc. (OTC PINK: WTWB) (the “Company”), parent company of West Town Bank & Trust, announced today that its Board of Directors has authorized a new stock repurchase program under which the Company may repurchase up to 9.9% of its currently issued and outstanding common stock, or approximately 307,079 shares based on the 3,101,810 shares of Company common stock currently outstanding.

Purchases made pursuant to the program will be made in either the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price, and amount of any repurchase will be determined by the Company in its discretion and will be subject to economic and market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, applicable legal requirements, and other factors. The Company has no obligation to repurchase any shares under this program, and the program may be terminated, suspended, or discontinued at any time.

In commenting on the repurchase program, Eric Bergevin, President and CEO of the Company, said, “The Board of Directors believes the repurchase program is an important option within the Company’s overall capital management strategy and reflects their commitment to maximize shareholder returns and proactively manage capital. The action reaffirms the confidence the Board of Directors has in the Company’s financial strength and gives the Company additional opportunity to provide liquidity to shareholders and increase shareholder value.”

About West Town Bancorp, Inc.

West Town Bancorp, Inc. is the financial holding company for West Town Bank & Trust, an Illinois state-chartered bank. West Town Bank & Trust provides banking services through its two full-service offices located in the greater Chicago area. Primary deposit products are checking, savings, and certificate of deposit accounts, and primary lending products are government guaranteed, residential mortgage, commercial, and installment loans. The Company is also the parent company of Windsor Advantage, LLC, a loan servicing company, and West Town Insurance Agency, Inc., an insurance agency. The Company is registered with, and supervised by, the Federal Reserve. West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC.

For more information, visit http://www.westtownbank.com/

Important Note Regarding Forward-Looking Statements

This release contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of the Company and on the information available to management at the time this release was prepared. These statements can be identified by the use of words such as “expect,” “anticipate,” “estimate,” “believe,” variations of these words, and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; fluctuations in the Company’s stock price that may make purchases under the repurchase program less desirable; changes in interest rates, deposit flows, loan demand, and asset quality, including real estate and other collateral values that affect the Company’s financial condition; changes in banking regulations and accounting principles, policies, or guidelines; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with the Company’s acquisition and divesture activities; the failure of our strategic investments or acquisitions to perform as anticipated and the impact of any impairments to our intangible assets, such as goodwill; the impact of our strategic initiatives on our ability to retain key employees, and the impact of competition from traditional or new sources. These, and other factors that may emerge, could cause decisions and actual results to differ materially from current expectations. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.

Contact: Eric Bergevin, (252) 482-4400

West Town Bancorp, Inc. Announces First Quarter 2019 Financial Results

RALEIGH, N.C., May 08, 2019 (GLOBE NEWSWIRE) — West Town Bancorp, Inc. (OTC PINK: WTWB) (the “Company” or “West Town”), announced today its financial results for the three months ended March 31, 2019.  Highlights include the following:

First quarter net income of $1,065,000 or $0.34 per diluted share, compared to $2,481,000 or $0.80 per diluted share for the first quarter of 2018.

  • Return on average assets of 0.75%, compared to 1.88% for the first quarter of 2018.
  • Return on average common equity of 5.48%, compared to 15.02% for the first quarter of 2018.
  • Return on average tangible common equity (a non-GAAP financial measure) of 8.83%, compared to 18.30% for the first quarter of 2018.
  • Net interest income increased 4% quarter over quarter.
  • Windsor Advantage LLC (“Windsor”) revenue of $2.1 million as compared to $0.6 million for the same period last year, due primarily to West Town acquiring 100% of Windsor on April 30, 2018.
  • Noninterest expenses increased $1.7 million as compared to the same period last year due to the impact of the Windsor consolidation, as well as increased compensation and legal fees related to the previously announced Sound Bank recapitalization transaction (“Recapitalization”), which was consummated on May 6, 2019.        

Eric Bergevin, President and CEO commented, “The primary driver to the Company’s first quarter performance was the 35-day government shutdown effectively halting loan submission, approvals and sales for our government guaranteed lending (“GGL”) department and Windsor.  Upon the government reopening there was still some delay in moving the pipeline forward due to the tremendous back log created, further impacting performance.  As a result, our GGL revenue was $1.2 million for the quarter as compared to $3.3 million for the same period last year.  Additionally, impacting the comparison performance to the prior year’s quarter was the unwinding of our “originate and hold” strategy that was implemented in the fourth quarter of 2017, which increased our sales in the secondary market in the first quarter of 2018 and as planned, at lower tax rates.  These items are somewhat offset by the increased revenue from the acquisition of the remaining interest of Windsor as noted above.  Heading into mid-2019, our GGL pipeline is robust and we anticipate originations and sales returning to annually budgeted targets by the end of year.”

Strong Year-Over-Year Loan Balance Sheet Growth

At March 31, 2019, the Company’s total assets were $590,819,000, net loans held for investment were $414,368,000, loans held for sale were $11,037,000, total deposits were $474,016,000 and total shareholder’s equity was $79,722,000.  Compared with March 31, 2018, total assets increased $41,392,000 or 8%, loans held for investment increased $27,353,000 or 7%, loans held for sale decreased $50,249,000 or 82%, total deposits increased $88,744,000 or 23%, and total shareholders’ equity increased $11,754,000 or 17%.  The decrease in loans held for sale was primarily due to the high level of held for sale inventory at March 31, 2018 as the Company began to unwind its “originate and hold” strategy initiated in the fourth quarter of 2017.

Noninterest-bearing deposits increased $41,874,000 or 48% year over year, while interest-bearing deposits increased $46,870,000 or 16% during the same time-period.  The increase in noninterest-bearing deposits at March 31, 2019, is primarily related to an escrow account established at Sound Bank, which temporarily held investor funds in connection with the Recapitalization. 

Acquired Loan Summary

The following table presents details of the Company’s acquired loan portfolio:


Dollars in thousands
 3/31/19 12/31/18 9/30/186/30/183/31/18
Performing acquired loans$79,150 $85,600 $98,482 $107,404 $121,852 
Less:  remaining fair market value (FMV) adjustments (840) (929) (1,063) (1,181) (1,400)
Performing acquired loans, net$78,310 $84,671 $97,419 $106,223 $120,452 
FMV adjustment % 1.1% 1.1% 1.1% 1.1% 1.1%
Purchase credit impaired loans (PCI)$4,172 $4,398 $4,446 $5,017 $5,293 
Less:  remaining FMV adjustments (504) (513) (554) (801) (826)
PCI loans, net$3,668 $3,885 $3,892 $4,216 $4,467 
FMV adjustment % 12.1% 11.7% 12.5% 16.0% 15.6%
           
Total acquired performing loans 78,310  84,671  97,419  106,223  120,452 
Total acquired PCI loans 3,668  3,885  3,892  4,216  4,467 
Total acquired loans 81,978  88,556  101,311  110,439  124,919 
FMV adjustment % 1.6% 1.6% 1.6% 1.8% 1.8%

In comparison to March 31, 2018, the performing acquired loan pool decreased $42,702,000 or 35% due to principal payments and renewals. The PCI loan pool decreased $1,121,000 or 21% year-over-year due to principal payments, charge-offs and foreclosures.  

Capital Levels

At March 31, 2019, the capital ratios of both West Town Bank & Trust and Sound Bank exceeded the minimum thresholds established for well-capitalized banks by regulatory measures.

“Well Capitalized”
Minimums
West Town
Bank & Trust
Sound Bank
Tier 1 common equity ratio6.5%15.32%10.74%
Tier 1 risk-based capital ratio8.0%15.32%10.74%
Total risk-based capital ratio10.0%16.57%11.19%
Tier 1 leverage ratio5.0%12.19%8.33%

The Company’s book value per common share increased from $23.02 at March 31, 2018 to $25.70 at March 31, 2019.  The Company’s tangible book value per common share (a non-GAAP financial measure) decreased from $19.94 at March 31, 2018 to $16.17 at March 31, 2019 due to the impact of the Company’s acquisition of the remaining 56.5% of Windsor, which occurred on April 30, 2018.  The tangible book value per common share increased from $14.96 at June 30, 2018 (post acquisition) to $16.17 at March 31, 2019.  The impact of the Sound Bank Recapitalization, which closed on May 6, 2019 and subsequent to quarter end, is not reflected in the foregoing book value calculations.

Asset Quality

The Company’s nonperforming assets to total assets ratio increased 14 basis points from 1.26% at March 31, 2018 to 1.40% at March 31, 2019. Compared to the prior year, non-acquired nonaccrual loan balances declined $1,244,000 while foreclosed assets increased $2,493,000. 

The Company recorded a $173,000 provision for loan losses during the first quarter of 2019 as compared to a provision of $469,000 in first quarter 2018.  The Company recorded $58,000 in net charge-offs during the 2019 first quarter with the remaining provision expense due to volume growth.

Dollars in thousandsEnding Balance
 3/31/1912/31/189/30/186/30/183/31/18
Nonaccrual loans – originated$4,666 $6,538 $5,806 $6,233 $5,910 
Nonaccrual loans – acquired 262  272  280  292  182 
Foreclosed assets – originated 2,493  723  796  54  54 
90 days past due – originated 407  67  3  8  186 
90 days past due – acquired 421  251  280  553  594 
Total nonperforming assets 8,249  7,851  7,165  7,140  6,926 
Total nonperforming assets – originated 7,566  7,328  6,605  6,295  6,150 
           
Net charge-offs$58 $334 $725 $216 $105 
Annualized net charge-offs to total average portfolio loans 0.05% 0.31% 0.68% 0.20% 0.09%
Ratio of total nonperforming assets to total assets 1.40% 1.41% 1.30% 1.31% 1.26%
Ratio of total nonperforming loans to total portfolio loans 1.39% 1.75% 1.57% 1.77% 1.78%
Ratio of total allowance for loan losses to total portfolio loans 0.98% 0.97% 0.95% 0.95% 0.97%

Net Interest Income and Margin

Net interest income for the three months ended March 31, 2019 increased $213,000 or 4% in comparison to the first quarter of 2018, while the net interest margin decreased from 4.26% for the first quarter of 2018 to 4.19% for the first quarter of 2019.  The margin compression is largely related to the increase in the cost of funds from 1.01% to 1.46% due to increased deposit competition and short-term interest rates.

Dollars in thousandsThree Months EndedYear-to-Date
 3/31/1912/31/189/30/186/30/183/31/183/31/193/31/18
Quarterly average balances:               
Loans$435,583$424,758$ 426,160$435,778$446,857 $435,583$446,857
Investment securities 21,119 21,060  15,377 13,949 11,353  21,119 11,353
Interest-bearing balances and other 54,690 41,472  28,481 23,258 24,803  54,690 24,803
Total interest-earning assets 511,392 487,290  470,018 472,985 483,013  511,392 483,013
Noninterest-bearing deposits 112,836 96,068  90,073 82,971 82,849  112,836 82,849
Interest-bearing liabilities:               
Interest-bearing deposits 338,682 319,900  294,502 292,409 302,119  338,682 302,119
Borrowed funds 37,852 50,792  63,356 78,457 76,422  37,852 76,422
Total interest-bearing liabilities 376,534 370,692  357,858 370,866 378,541  376,534 378,541
Total assets 576,640 553,855  536,172 538,249 536,185  576,640 536,185
Common shareholders’ equity 78,698 77,817  77,129 73,725 67,013  78,698 67,013
Tangible common equity (1) 48,918 47,695  46,667 49,882 57,799  48,918 57,799

(1) Non-GAAP financial measure.  Tangible common equity is calculated by subtracting intangible assets from common shareholders’ equity.

Dollars in thousandsThree Months Ended Year-to-Date
3/31/1912/31/189/30/186/30/183/31/183/31/193/31/18
Interest Income/Expense:               
Loans$6,523 $6,379 $ 6,329 $6,577 $6,036  $6,523 $6,036 
Investment securities 167  171   111  105  64   167  64 
Interest-bearing balances and other 356  248   170  126  120   356  120 
Total interest income 7,046  6,798   6,610  6,808  6,220   7,046  6,220 
Deposits 1,432  1,169   906  815  771   1,432  771 
Borrowings 330  396   431  474  378   330  378 
Total interest expense 1,762  1,565   1,337  1,289  1,149   1,762  1,149 
Net interest income$5,284 $5,233 $ 5,273 $5,519 $5,071  $5,284 $5,071 
                
Average Yields and Costs:               
Loans 6.07% 5.96% 5.89% 6.05% 5.48%  6.07% 5.48%
Investment securities 3.16% 3.25% 2.89% 3.01% 2.25%  3.16% 2.25%
Interest-bearing balances and other 2.64% 2.37% 2.37% 2.17% 1.96%  2.64% 1.96%
Total interest-earning assets 5.59% 5.53% 5.58% 5.77% 5.22%  5.59% 5.22%
Total interest-bearing deposits 1.71% 1.45% 1.22% 1.12% 1.03%  1.71% 1.03%
Borrowed funds 3.54% 3.09% 2.70% 2.42% 2.01%  3.54% 2.01%
Total interest-bearing liabilities 1.90% 1.67% 1.48% 1.39% 1.23%  1.90% 1.23%
Cost of funds 1.46% 1.33% 1.18% 1.14% 1.01%  1.46% 1.01%
Net interest margin 4.19% 4.26% 4.45% 4.68% 4.26%  4.19% 4.26%

Noninterest Income

Noninterest income for the three months ended March 31, 2019 was $3,805,000, a decrease of $716,000 or 16% as compared to the same prior year period.  Specific items to note for the first quarter of 2019 include:

  • Governmental lending revenue of $880,000 was a decrease of $2,174,000 or 71% in comparison to the first quarter of 2018 primarily due to the impact of the government shutdown as well as the partial unwinding in the first three months of 2018 of the originate-and-hold strategy instituted in the fourth quarter of 2017; and
  • Windsor revenue totaled $2,086,000, an increase of $1,522,000 or 270% as compared to the $564,000 income earned from the investment in Windsor during the same prior year period.  The increase is directly attributable to the Company’s acquisition of the remaining 56.5% of Windsor on April 30, 2018. 

Noninterest Expense

Noninterest expense for the first quarter of 2019 was $7,454,000, an increase of $1,638,000 or 28% from $5,795,000 for the first quarter of 2018.  The increases in compensation, occupancy, and other operating expenses are primarily related to the inclusion of Windsor expenses for the full three-month period in 2019 as compared to no expenses in the first quarter of 2018.  Also impacting noninterest expenses for the quarter were increased compensation and legal fees related to the previously announced Sound Bank Recapitalization, which was consummated on May 6, 2019.   

About West Town Bancorp, Inc.

West Town Bancorp, Inc. is the financial holding company for West Town Bank & Trust, an Illinois state-chartered bank.  West Town Bank & Trust provides banking services through its two full-service offices located in the greater Chicago area. Primary deposit products are checking, savings, and certificate of deposit accounts, and primary lending products are government guaranteed lending, residential mortgage, commercial, and installment loans. The Company is also the parent company of Windsor Advantage, LLC, a loan servicing company, and West Town Insurance Agency, Inc., an insurance agency.  The Company is registered with, and supervised by, the Federal Reserve.  West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC. 

For more information, visit http://www.westtownbank.com/

Important Note Regarding Forward-Looking Statements

This release contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of the Company and on the information available to management at the time this release was prepared. These statements can be identified by the use of words such as “expect,” “anticipate,” “estimate,” “believe,” variations of these words, and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand, and asset quality, including real estate and other collateral values; changes in Small Business Administration rules, regulations, or loan products, including the section 7(a) program; changes in other government guaranteed loan programs or our ability to participate in such programs; changes in tax law, including the impact of such changes on our tax assets and liabilities; future governmental shutdowns that may impact revenues associated with our lending and other operations that are dependent on government guaranteed loan programs; changes in banking regulations and accounting principles, policies, or guidelines; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with the Company’s acquisition and divesture activities; the failure of our strategic investments or acquisitions to perform as anticipated and the impact of any impairments to our intangible assets, such as goodwill; the impact of our strategic initiatives on our ability to retain key employees, and the impact of competition from traditional or new sources. These, and other factors that may emerge, could cause decisions and actual results to differ materially from current expectations. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.    

Consolidated Balance Sheet
Dollars in thousands; unauditedEnding Balance
 3/31/1912/31/189/30/186/30/183/31/18
Assets          
Cash and due from banks$5,433 $5,005 $5,292 $4,961 $4,725 
Interest-bearing deposits 72,382  43,448  38,779  27,532  30,299 
Total cash and cash equivalents 77,815  48,453  44,071  32,493  35,024 
Securities available for sale, at fair value 21,031  21,332  20,615  13,769  14,171 
Loans held for sale 11,037  16,552   15,819  31,994  61,286 
Loans held for investment:          
Originated loans  336,505   322,038   307,166  294,471  265,887 
Acquired loans, net  81,978   88,556   101,311  110,439  124,919 
Allowance for loan losses  (4,115)  (4,000)  (3,900) (3,835) (3,791)
Net loans held for investment  414,368   406,594   404,577  401,075  387,015 
Premises and equipment, net 12,099  12,166  12,263  11,586  11,502 
Foreclosed assets 2,493  723  796  54  54 
Servicing assets 3,619  3,952   4,280  4,598  4,969 
Bank owned life insurance 9,090  9,034  8,977  8,917  8,853 
Accrued interest receivable 1,637  1,637  1,758  1,776  1,870 
Goodwill  19,737   19,745   19,745  19,745  7,016 
Other intangible assets, net  9,827   10,157   10,493  10,837  2,102 
Other assets 8,066  4,979  8,100  7,644  15,565 
Total assets$590,819 $555,324 $551,494 $544,488 $549,427 
           
Liabilities and Shareholders’ Equity          
Liabilities          
Deposits:          
Noninterest-bearing$128,435 $97,777 $94,829 $88,172 $86,561 
Interest-bearing 345,581  335,140  305,257  289,416  298,711 
Total deposits 474,016  432,917  400,086  377,588  385,272 
Short term borrowings 20,000  27,000  58,400  73,400  81,500 
Long term borrowings 6,294  6,781  7,267  7,754  6,314 
Accrued interest payable 927  868  550  466  389 
Other liabilities 9,860  10,189  8,746  9,600  7,984 
Total liabilities 511,097  477,755  475,049  468,808  481,459 
Shareholders’ equity          
Preferred stock 0  0  0  0  0 
Common stock, voting 2,749  2,686  2,666  2,660  2,623 
Common stock, non-voting 329  329  329  329  329 
Additional paid-in capital 45,287  44,760  44,576  44,429  44,385 
Retained earnings 31,273  29,928  29,154  28,436  20,765 
Accumulated other comprehensive income (loss)  84   (134)  (280) (174) (134)
 Total shareholders’ equity 79,722   77,569   76,445   75,680  67,968 
 Total liabilities and shareholders’ equity$590,819 $555,324 $551,494 $544,488 $549,427 
Financial Performance (Consolidated)
Dollars in thousands, except per share data; unauditedThree Months Ended Year-to-Date 
 3/31/1912/31/189/30/186/30/183/31/183/31/19 3/31/18 
Interest income                
Interest and fees on loans$6,523$6,379$6,329$6,577$6,036 $6,523$6,036 
Investment securities & deposits 523 419 281 231 184  523 184 
Total interest income 7,046 6,798 6,610 6,808 6,220  7,046 6,220 
Interest expense                
Interest on deposits 1,432 1,169 906 815 771  1,432 771 
Interest on borrowed funds 330 396 431 474 378  330 378 
Total interest expense 1,762 1,565 1,337 1,289 1,149  1,762 1,149 
Net interest income 5,2845,2335,2735,5195,0715,2845,071 
Provision for loan losses 173 434 789 261 469  173 469 
Noninterest income                
Government lending revenue 880 1,793 1,121 4,241 3,054  880 3,054 
Mortgage revenue 435 359 491 868 455  435 455 
Service charge revenue 226 228 196 222 219  226 219 
Bank owned life insurance income 56 58 59 64 57  56 57 
Windsor revenue 2,086 2,116 1,791 1,683 0  2,086 0 
Income from Windsor investment 0 0 0 369 564  0 564 
Loss on sale of securities 0 0 0 0 0  0 0 
Gain on consolidation of Windsor 0 0 0 4,776 0  0 0 
Other noninterest income 122 163 211 133 172  122 172 
Total noninterest income 3,805 4,717 3,869 12,356 4,521  3,805 4,521 
Noninterest expense                
Compensation 4,261 4,689 4,245 4,050 3,266  4,261 3,266 
Occupancy and equipment 506 536 522 462 413  506 413 
Loan and special assets 179 437 67 407 362  179 362 
Professional services 582 511 437 317 274  582 274 
Data processing 345 381 326 325 313  345 313 
Communication 226 208 191 203 235  226 235 
Advertising 112 135 147 418 54  112 54 
Loss on sale of foreclosed assets 21 0 0 41 0  21 0 
Transaction-related expenses 43 31 5 74 14  43 14 
Other operating expense 1,179 1,259 1,013 1,118 864  1,179 864 
Total noninterest expense 7,454 8,187 6,953 7,415 5,795  7,454 5,795 
Income before income taxes 1,462 1,329 1,400 10,199 3,328  1,462 3,328 
Income tax expense 397 373 372 2,528 847  397 847 
Net income$1,065$956$1,028$7,671$2,481$1,065$2,481 
Basic earnings per common share$0.35$0.31$0.34$2.58$0.84 $0.35$0.84 
Diluted earnings per common share$0.34$0.30$0.33$2.47$0.80 $0.34$0.80 
Weighted average common shares outstanding 3,054 3,008 2,996 2,980 2,952  3,054 2,952 
Diluted average common shares outstanding 3,115 3,124 3,127 3,115 3,087  3,115 3,087 
Performance Ratios
Three Months EndedYear-to-Date
 3/31/1912/31/189/30/186/30/183/31/183/31/193/31/18
PER COMMON SHARE               
Basic earnings per common share$0.35 $0.31 $0.34 $2.58 $0.84  $0.35 $0.84 
Diluted earnings per common share$0.34 $0.30 $0.33 $2.47 $0.80  $0.34 $0.80 
Book value per common share$25.70 $25.52 $25.31 $25.11 $23.02  $25.70 $23.02 
Tangible book value per common share$16.17 $15.68 $15.30 $14.96 $19.94  $16.17 $19.94 
                
FINANCIAL RATIOS (ANNUALIZED)               
Return on average assets 0.75% 0.68% 0.76% 5.72% 1.88%  0.75% 1.88%
Return on average common shareholders’ equity 5.48% 4.87% 5.29% 41.73% 15.02%  5.48% 15.02%
Return on tangible common equity 8.83% 7.95% 8.74% 61.68% 18.30%  8.83% 18.30%
Net interest margin (FTE) 4.19% 4.26% 4.45% 4.68% 4.26%  4.19% 4.26%
Efficiency ratio(1) 82.0% 82.3% 76.1% 56.6% 60.4%  82.0% 60.4%

(1)Efficiency ratio is calculated by dividing noninterest expense by the sum of net interest income and noninterest income, less gains or losses on sale of securities or consolidation.

Contact: Eric Bergevin, 252-482-4400

West Town Bancorp, Inc. Announces Recapitalization of Sound Bank

ALEIGH, N.C., May 07, 2019 (GLOBE NEWSWIRE) — West Town Bancorp, Inc. (OTC PINK: WTWB) (“West Town”) announced today that Sound Bank has successfully completed a recapitalization as part of the bank’s plan to grow its franchise into a high performing, statewide North Carolina community bank.  As part of the recapitalization, West Town sold a substantial portion of its interest in Sound Bank through a series of concurrent secondary sales of shares of Sound Bank common stock to certain third-party purchasers, which secondary sales resulted in gross proceeds to West Town of $28,010,000.  Simultaneous with West Town’s completion of these secondary sales, Sound Bank completed a private placement of newly issued shares of Sound Bank common stock, which primary sales by Sound Bank resulted in gross proceeds to the bank of approximately $62 million, before fees and expenses of the bank offering.  Following the concurrent closings of West Town’s secondary sales and Sound Bank’s primary offering, which are referred to collectively as the recapitalization, West Town retains an approximate 4.9% ownership interest in Sound Bank’s voting common stock and a 9.9% total equity interest in Sound Bank.

The $28,010,000 in cash proceeds received by West Town equates to 168% of Sound Bank’s tangible common equity as of March 31, 2019.  As a result of the transaction, Sound Bank will no longer be a consolidated entity, and West Town will recognize a pre-tax gain of approximately $6.5 million.  In addition, as of March 31, 2019, West Town carried $8.5 million of intangible assets related to Sound Bank, which will no longer be included in its financial statements.  Together, the gain and elimination of Sound Bank intangible assets will result in an approximate 26.5%, or $4.28, increase in the tangible book value per share of West Town.   West Town intends to deploy a portion of the new capital to West Town Bank & Trust, its Chicago-based subsidiary bank, for continued expansion of the bank’s government-guaranteed lending department and will retain the remaining proceeds for general corporate purposes. Two members of West Town’s board of directors will continue to serve on Sound Bank’s board of directors, which is being reconstituted in connection with the recapitalization.  West Town was also issued a warrant by Sound Bank in connection with the recapitalization, which warrant has a five-year exercise period and entitles West Town to purchase an additional 99,900 shares of Sound Bank non-voting common stock at a $10.00 per share exercise price.

Eric Bergevin, President and CEO of West Town, commented, “The recapitalization represents the successful monetization of our investment in Sound Bank with an over 20% return on investment in just over one and half years. We continue to remain committed to the Sound Bank franchise and will support its growth in North Carolina through our ongoing ownership and board representation.  Moving forward, our primary focus is on the growth of West Town Bank & Trust into a robust, full-service community bank franchise.” 

Wyrick Robbins Yates & Ponton LLP served as legal counsel to West Town on the recapitalization, and Raymond James & Associates, Inc. issued a fairness opinion to West Town’s Board of Directors.

About West Town Bancorp, Inc.

West Town Bancorp, Inc. is the financial holding company for West Town Bank & Trust, a North Riverside, IL based state-chartered bank.  West Town Bank & Trust provides banking services through its two offices in Illinois. Primary deposit products are checking, savings, and certificate of deposit accounts, and primary lending products are government guaranteed lending, residential mortgage, commercial, and installment loans. West Town is also the parent company of Windsor Advantage, LLC, a loan servicing company, and West Town Insurance Agency, Inc., an insurance agency.  West Town is registered with, and supervised by, the Federal Reserve.  West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC. 

For more information, visit http://www.westtownbank.com/

Important Note Regarding Forward-Looking Statements

This release contains certain forward-looking statements with respect to the financial condition, results of operations, business, and future plans of West Town., its subsidiaries, and Sound Bank. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of West Town’s management and on the information available to management at the time this release was prepared. Forward-looking statements can be identified by the use of words such as “expect,” “anticipate,” “estimate,” “believe,” variations of these words, and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause a difference include, among others: increased or unexpected costs and expenses associated with the recapitalization; the inability of Sound Bank to achieve its growth goals or expand its business; the diversion of West Town management’s time towards transition issues associated with Sound Bank’s new initiatives; changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand, and asset quality, including real estate and other collateral values; changes in Small Business Administration rules, regulations, or loan products, including the section 7(a) program; changes in other government-guaranteed loan programs or West Town’s ability to participate in such programs; changes in tax law, including the impact of such changes on our tax assets and liabilities; changes in banking regulations and accounting principles, policies, or guidelines; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with West Town’s acquisition activities; the failure of West Town’s strategic investments or acquisitions to perform as anticipated and the impact of any impairments to its intangible assets, such as goodwill; the impact of West Town’s strategic initiatives on its ability to retain key employees, and the impact of competition from traditional or new sources. These, and other factors that may emerge, could cause decisions and actual results to differ materially from current expectations. West Town assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.   

Contact: Eric Bergevin, (252) 482-4400