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		9/30/18		6/30/18		3/31/18
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 ratio	6.5	%	15.32	%	10.74	%
Tier 1 risk-based capital ratio	8.0	%	15.32	%	10.74	%
Total risk-based capital ratio	10.0	%	16.57	%	11.19	%
Tier 1 leverage ratio	5.0	%	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 thousands	Ending Balance
		3/31/19		12/31/18		9/30/18		6/30/18		3/31/18
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 thousands	Three Months Ended	Year-to-Date
		3/31/19		12/31/18		9/30/18		6/30/18		3/31/18			3/31/19		3/31/18
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 thousands	Three Months Ended		Year-to-Date
		3/31/19		12/31/18		9/30/18		6/30/18		3/31/18			3/31/19		3/31/18
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 https://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; unaudited	Ending Balance
		3/31/19		12/31/18		9/30/18		6/30/18		3/31/18
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; unaudited	Three Months Ended		Year-to-Date
		3/31/19		12/31/18		9/30/18		6/30/18		3/31/18			3/31/19		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		5,284		5,233		5,273		5,519		5,071			5,284		5,071
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 Ended		Year-to-Date
		3/31/19		12/31/18		9/30/18		6/30/18		3/31/18			3/31/19		3/31/18
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

RALEIGH, N.C., Feb. 11, 2019 (GLOBE NEWSWIRE) — West Town Bancorp, Inc. (OTC PINK: WTWB) (the “Company” or “West Town”), the multi-bank financial holding company for West Town Bank & Trust and Sound Bank, announced today its financial results for the year ended December 31, 2018.  Highlights for the fourth quarter of 2018 and the Company’s year-to-date performance include the following:

Fourth quarter net income of $956,000 or $0.30 per diluted share, compared to $552,000 or $0.20 per diluted share for the fourth quarter of 2017.

• Return on average assets of 0.68%, compared to 0.44% for the fourth quarter of 2017.
• Return on average common equity of 4.87%, compared 3.62% for the fourth quarter of 2017.
• Return on average tangible common equity (a non-GAAP financial measure) of 7.95%, compared to 4.31% for the fourth quarter of 2017.

For the year ending December 31, 2018, net income of $12,136,000 or $3.90 per diluted share, compared to $2,892,000 or $1.54 per diluted share for the year ending December 31, 2017.

• Return on average assets of 2.24%, compared to 0.83% for the prior year period.
• Return on average common equity of 16.41%, compared to 7.27% for the prior year period.
• Return on tangible common equity of 24.05% compared to 10.58% for the prior year period.

Eric Bergevin, President and CEO commented, “The Company’s record earnings in 2018 was the result of execution on our strategic initiatives deployed over the past two years, including the acquisition of Windsor Advantage LLC (“Windsor”) and the expansion of our governmental guaranteed loan (“GGL”) department.  As discussed in our second quarter press release, we recorded a gain of $4,776,000 on completion of the Windsor acquisition on April 30, 2018 and earned $2.0 million in net income from operations in the remaining 8 months of 2018 (not including the $933,000 in noninterest income earned prior to the acquisition date). We earned $10.2 million in GGL revenue, a record year for the Company in large part to the ‘originate and hold’ strategy that was put in place during the 4^th quarter of 2017 that helped us better leverage our capital and enhance earnings.  Additionally, we are quite pleased with the $40.2 million growth in total deposits from the prior year-end, with noninterest-bearing deposit balances accounting for $13.6 million of that total increase.  Heading into 2019, the management team is focused on the continued growth of shareholder value.”

Strong Year-Over-Year Loan Balance Sheet Growth

At December 31, 2018, the Company’s total assets were $555,324,000, net loans held for investment were $406,594,000, loans held for sale were $16,552,000, total deposits were $432,917,000 and total shareholder’s equity was $77,570,000.  Compared with December 31, 2017, total assets increased $11,190,000 or 2%, loans held for investment increased $31,469,000 or 8%, loans held for sale decreased $50,154,000 or 75%, total deposits increased $40,183,000 or 10% and total shareholders’ equity increased $11,990,000 or 18%.  The decrease in loans held for sale was due to the ‘originate and hold’ strategy in the 4^th quarter of 2017 that resulted in a large held for sale inventory at year-end.

Noninterest-bearing deposits increased $13,599,000 or 16% year over year, while interest-bearing deposits increased $26,584,000 or 9% during the same time period. 

Acquired Loan Summary

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

Dollars in thousands		12/31/18		9/30/18		6/30/18		3/31/18		12/31/17
Performing acquired loans	$	85,600		$	98,482		$	107,404		$	121,852		$	132,846
Less:  remaining fair market value (FMV) adjustments		(929	)		(1,063	)		(1,181	)		(1,400	)		(1,592	)
Performing acquired loans, net	$	84,671		$	97,419		$	106,223		$	120,452		$	131,254
FMV adjustment %		1.1	%		1.1	%		1.1	%		1.1	%		1.2	%
Purchase credit impaired loans (PCI)	$	4,398		$	4,446		$	5,017		$	5,293		$	5,386
Less:  remaining FMV adjustments		(513	)		(554	)		(801	)		(826	)		(832	)
PCI loans, net	$	3,885		$	3,892		$	4,216		$	4,467		$	4,554
FMV adjustment %		11.7	%		12.5	%		16.0	%		15.6	%		15.4	%
Total acquired performing loans		84,671			97,419			106,223			120,452			131,254
Total acquired PCI loans		3,885			3,892			4,216			4,467			4,554
Total acquired loans		88,556			101,311			110,439			124,919			135,808
FMV adjustment %		1.6	%		1.6	%		1.8	%		1.8	%		1.8	%

In comparison to December 31, 2017, the performing acquired loan pool decreased $47,246,000 or 36% due to principal payments and renewals.  The PCI loan pool decreased $988,000 or 18% year-over-year due to principal payments, charge-offs and foreclosures.  

Capital Levels

At December 31, 2018, both banks’ capital ratios 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 ratio	6.5	%	15.12	%	11.07	%
Tier 1 risk-based capital ratio	8.0	%	15.12	%	11.07	%
Total risk-based capital ratio	10.0	%	16.37	%	11.55	%
Tier 1 leverage ratio	5.0	%	11.40	%	9.42	%

The book value per common share increased from $22.21 at December 31, 2017 to $25.52 at December 31, 2018.  The tangible book value per common share (a non-GAAP financial measure) decreased from $19.07 at December 31, 2017 to $15.68 at December 31, 2018 due to 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 $15.68 at December 31, 2018.

Asset Quality

The Company’s nonperforming assets to total assets ratio increased 6 basis points from 1.35% at December 31, 2017 to 1.41% at December 31, 2018. Compared to the prior year, non-acquired nonaccrual loan balances grew $320,000 or 5%. 

The Company recorded a $434,000 provision for loan losses during the fourth quarter of 2018, as compared to a provision of $1,129,000 in fourth quarter 2017.  The Company recorded $334,000 in net charge-offs during the 2018 fourth quarter with the remaining provision expense due to volume growth.

Dollars in thousands	Ending Balance
		12/31/18		9/30/18		6/30/18		3/31/18		12/31/17
Nonaccrual loans – originated	$	6,538		$	5,806		$	6,233		$	5,910		$	6,218
Nonaccrual loans – acquired		272			280			292			182			413
OREO – originated		723			796			54			54			0
90 days past due – originated		67			3			8			186			0
90 days past due – acquired		251			280			553			594			697
Total nonperforming assets		7,851			7,165			7,140			6,926			7,328
Total nonperforming assets – originated		7,328			6,605			6,295			6,150			6,218
Net charge-offs	$	334		$	725		$	216		$	105		$	543
Annualized net charge-offs to total average portfolio loans		0.31	%		0.68	%		0.20	%		0.09	%		0.54	%
Ratio of total nonperforming assets to total assets		1.41	%		1.30	%		1.31	%		1.26	%		1.35	%
Ratio of total nonperforming loans to total portfolio loans		1.75	%		1.57	%		1.77	%		1.78	%		1.95	%
Ratio of total allowance for loan losses to total portfolio loans		0.97	%		0.95	%		0.95	%		0.97	%		0.91	%

Net Interest Income and Margin

Net interest income for the three months ended December 31, 2018 decreased $1,000 in comparison to the fourth quarter of 2017, while the net interest margin decreased from 4.66% for the fourth quarter of 2017 to 4.26% for the fourth quarter of 2018.  The margin compression is largely related to the increase in the cost of funds from 0.93% to 1.33% due to increased deposit competition and interest rates.

(Includes Sound Bank as of 9/1/2017)

Dollars in thousands	Three Months Ended		Twelve Months Ended
		12/31/18		9/30/18		6/30/18		3/31/18		12/31/17			12/31/18		12/31/17
Quarterly average balances:
Loans	$	424,758	$	426,160	$	435,778	$	446,857	$	400,324		$	433,308	$	280,924
Investment securities		21,060		15,377		13,949		11,353		7,346			15,461		6,014
Interest-bearing balances and other		41,472		28,481		23,258		24,803		37,640			29,546		24,238
Total interest-earning assets		487,290		470,018		472,985		483,013		445,310			478,315		311,176
Noninterest-bearing deposits		96,068		90,073		82,971		82,849		75,707			88,032		39,996
Interest-bearing liabilities:
Interest-bearing deposits		319,900		294,502		292,409		302,119		312,155			302,260		238,327
Borrowed funds		50,792		63,356		78,457		76,422		31,574			67,176		19,340
Total interest-bearing liabilities		370,692		357,858		370,866		378,541		343,729			369,436		257,667
Total assets		553,855		536,172		538,249		536,185		495,958			541,150		347,781
Common shareholders’ equity		77,817		77,129		73,725		67,013		60,432			73,959		39,746
Tangible common equity (1)		47,695		46,667		49,882		57,799		50,795			50,472		36,503

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

Dollars in thousands	Three Months Ended		Twelve Months Ended
		12/31/18		9/30/18		6/30/18		3/31/18		12/31/17			12/31/18		12/31/17
Interest Income/Expense:
Loans	$	6,379		$	6,329		$	6,577		$	6,036		$	6,061			$	25,321		$	16,945
Investment securities		171			111			105			64			39				450			144
Interest-bearing balances and other		248			170			126			120			117				665			304
Total interest income		6,798			6,610			6,808			6,220			6,217				26,436			17,393
Deposits		1,169			906			815			771			791				3,661			2,865
Borrowings		396			431			474			378			192				1,679			441
Total interest expense		1,565			1,337			1,289			1,149			983				5,340			3,306
Net interest income	$	5,233		$	5,273		$	5,519		$	5,071		$	5,234			$	21,096		$	14,087
Average Yields and Costs:
Loans		5.96	%		5.89	%		6.05	%		5.48	%		6.01	%			5.84	%		8.06	%
Investment securities		3.25	%		2.89	%		3.01	%		2.25	%		2.12	%			2.91	%		3.19	%
Interest-bearing balances and other		2.37	%		2.37	%		2.17	%		1.96	%		1.23	%			2.25	%		1.68	%
Total interest-earning assets		5.53	%		5.58	%		5.77	%		5.22	%		5.54	%			5.52	%		7.47	%
Total interest-bearing deposits		1.45	%		1.22	%		1.12	%		1.03	%		1.01	%			1.21	%		1.61	%
Borrowed funds		3.09	%		2.70	%		2.42	%		2.01	%		2.41	%			2.50	%		3.05	%
Total interest-bearing liabilities		1.67	%		1.48	%		1.39	%		1.23	%		1.13	%			1.45	%		1.72	%
Cost of funds		1.33	%		1.18	%		1.14	%		1.01	%		0.93	%			1.17	%		1.48	%
Net interest margin		4.26	%		4.45	%		4.68	%		4.26	%		4.66	%			4.41	%		6.05	%

Noninterest Income

Noninterest income for the three months ended December 31, 2018 was $4,717,000, an increase of $3,171,000 or 205% as compared to the same prior year period.  Specific items to note for the fourth quarter of 2018 include:

• Governmental lending revenue of $1,793,000 was an increase of $1,601,000 or 834% in comparison to the fourth quarter of 2017 primarily due to the originate-and-hold strategy instituted in the fourth quarter of 2017 that compressed gain on loan sales during that quarter; and
• Windsor revenue totaled $2,116,000, an increase of 1,913,000 or 924% as compared to the $213,000 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 fourth quarter of 2018 was $8,187,000, an increase of $2,290,000 or 39% from $5,897,000 for the three months ended December 31, 2017.  Most of the increases in compensation, occupancy, and other operating expenses are related to the inclusion of Windsor expenses for the full three-month period in 2018 as compared to no expenses in the fourth quarter of 2017 as well as new positions and annual salary increases. 

Branch Network Reorganization

On July 16, 2018, Sound Bank and West Town Bank & Trust entered into a purchase and assumption agreement pursuant to which Sound Bank would acquire West Town Bank & Trust’s two North Carolina branches located in Edenton, NC and Winterville, NC.  The branch transaction closed on October 26, 2018, following receipt of required regulatory approvals.  In addition to the transfer of certain real property in Edenton, NC, the branch reorganization resulted in the transfer of approximately $34.1 million in loan assets, $32.7 million in deposit liabilities, and $3.6 million in additional paid in capital to Sound Bank from its sister institution, West Town Bank & Trust. 

About West Town Bancorp, Inc.

West Town Bancorp, Inc. is the multi-bank financial holding company for West Town Bank & Trust, a North Riverside, IL based state-chartered bank, and Sound Bank, a Morehead City, NC based state-chartered bank. West Town Bank & Trust provides banking services through its offices in Illinois, while Sound Bank provides banking services through its offices in North Carolina. Primary deposit products are checking, savings, and time certificate 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.  Sound Bank’s primary regulators are the North Carolina Commissioner of Banks and the FDIC.

For more information, visit https://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 that these disclosures were prepared. These statements can be identified by the use of words like “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; recent 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 the Company’s acquisition 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

(Includes Sound Bank as of 9/1/2017)

Dollars in thousands; unaudited	Ending Balance
		12/31/18		9/30/18		6/30/18		3/31/18		12/31/17
Assets
Cash and due from banks	$	5,005		$	5,292		$	4,961		$	4,725		$	2,986
Interest-bearing deposits		43,448			38,779			27,532			30,299			40,961
Total cash and cash equivalents		48,453			44,071			32,493			35,024			43,947
Securities available for sale, at fair value		21,332			20,615			13,769			14,171			7,119
Loans held for sale		16,552			15,819			31,994			61,286			66,706
Loans held for investment:
Originated loans		322,038			307,166			294,471			265,887			242,744
Acquired loans, net		88,556			101,311			110,439			124,919			135,808
Allowance for loan losses		(4,000	)		(3,900	)		(3,835	)		(3,791	)		(3,427	)
Net loans held for investment		406,594			404,577			401,075			387,015			375,125
Premises and equipment, net		12,166			12,263			11,586			11,502			11,563
Foreclosed assets		723			796			54			54			0
Servicing assets		3,952			4,280			4,598			4,969			5,237
Bank owned life insurance		9,034			8,977			8,917			8,853			8,796
Accrued interest receivable		1,637			1,758			1,776			1,870			1,544
Goodwill		19,745			19,745			19,745			7,016			7,016
Other intangible assets, net		10,157			10,493			10,837			2,102			2,272
Other assets		4,979			8,100			7,644			15,565			14,809
Total assets	$	555,324		$	551,494		$	544,488		$	549,427		$	544,134
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	97,777		$	94,829		$	88,172		$	86,561		$	84,178
Interest-bearing		335,140			305,257			289,416			298,711			308,556
Total deposits		432,917			400,086			377,588			385,272			392,734
Short term borrowings		27,000			58,400			73,400			81,500			72,100
Long term borrowings		6,781			7,267			7,754			6,314			6,803
Accrued interest payable		868			550			466			389			296
Other liabilities		10,189			8,746			9,600			7,984			6,621
Total liabilities		477,755			475,049			468,808			481,459			478,554
Shareholders’ equity
Preferred stock		0			0			0			0			0
Common stock, voting		2,686			2,666			2,660			2,623			2,623
Common stock, non-voting		329			329			329			329			329
Additional paid-in capital		44,760			44,576			44,429			44,385			44,185
Retained earnings		29,928			29,154			28,436			20,765			18,447
Accumulated other comprehensive loss		(134	)		(280	)		(174	)		(134	)		(4	)
Total shareholders’ equity		77,569			76,445			75,680			67,968			65,580
Total liabilities and shareholders’ equity	$	555,324		$	551,494		$	544,488		$	549,427		$	544,134

Financial Performance (Consolidated)

(Includes Sound Bank as of 9/1/2017)

Dollars in thousands, except per share data; unaudited	Three Months Ended		Twelve Months Ended
		12/31/18		9/30/18		6/30/18		3/31/18		12/31/17			12/31/18		12/31/17
Interest income
Interest and fees on loans	$	6,379	$	6,329	$	6,577	$	6,036	$	6,062			$	25,321	$	16,946
Investment securities & deposits		419		281		231		184		155				1,115		448
Total interest income		6,798		6,610		6,808		6,220		6,217				26,436		17,394
Interest expense
Interest on deposits		1,169		906		815		771		792				3,661		2,865
Interest on borrowed funds		396		431		474		378		191				1,679		441
Total interest expense		1,565		1,337		1,289		1,149		983				5,340		3,306
Net interest income		5,233		5,273		5,519		5,071		5,234				21,096		14,088
Provision for loan losses		434		789		261		469		1,129				1,953		2,177
Noninterest income
Government lending revenue		1,793		1,121		4,241		3,054		192				10,209		4,095
Mortgage revenue		359		491		868		455		515				2,173		4,707
Service charge revenue		228		196		222		219		203				865		324
Bank owned life insurance income		58		59		64		57		60				238		170
Windsor revenue		2,116		1,791		1,683		0		0				5,590		0
Income from Windsor investment		0		0		369		564		203				933		1,500
Loss on sale of securities		0		0		0		0		0				0		(7	)
Gain on consolidation of Windsor		0		0		4,776		0		0				4,776		0
Other noninterest income		163		211		133		172		373				679		738
Total noninterest income		4,717		3,869		12,356		4,521		1,546				25,463		11,527
Noninterest expense
Compensation		4,689		4,245		4,050		3,266		3,248				16,250		11,342
Occupancy and equipment		536		522		462		413		434				1,933		1,417
Loan and special assets		437		67		407		362		373				1,273		1,087
Professional services		511		437		317		274		313				1,539		1,130
Data processing		381		326		325		313		316				1,345		854
Communication		208		191		203		235		188				837		469
Advertising		135		147		418		54		109				754		369
Loss on sale of foreclosed assets		0		0		41		0		0				41		0
Transaction-related expenses		31		5		74		14		60				124		588
Other operating expense		1,259		1,013		1,118		864		856				4,254		2,323
Total noninterest expense		8,187		6,953		7,415		5,795		5,897				28,350		19,579
Income (loss) before income taxes		1,329		1,400		10,199		3,328		(246	)			16,256		3,859
Income tax expense (benefit)		373		372		2,528		847		(798	)			4,120		967
Net income	$	956	$	1,028	$	7,671	$	2,481	$	552			$	12,136	$	2,892
Basic earnings per common share	$	0.31	$	0.34	$	2.58	$	0.84	$	0.21			$	4.07	$	1.60
Diluted earnings per common share	$	0.30	$	0.33	$	2.47	$	0.80	$	0.20			$	3.90	$	1.54
Weighted average common shares outstanding		3,008		2,996		2,980		2,952		2,649				2,984		1,804
Diluted average common shares outstanding		3,124		3,127		3,115		3,087		2,755				3,110		1,881

Performance Ratios

(Includes Sound Bank as of 9/1/2017)

	Three Months Ended		Twelve Months Ended
		12/31/18		9/30/18		6/30/18		3/31/18		12/31/17			12/31/18		12/31/17
PER COMMON SHARE
Basic earnings per common share	$	0.31		$	0.34		$	2.58		$	0.84		$	0.21			$	4.07		$	1.60
Diluted earnings per common share	$	0.30		$	0.33		$	2.47		$	0.80		$	0.20			$	3.90		$	1.54
Book value per common share	$	25.52		$	25.31		$	25.11		$	23.02		$	22.21			$	25.52		$	22.21
Tangible book value per common share	$	15.68		$	15.30		$	14.96		$	19.94		$	19.07			$	15.68		$	19.07
FINANCIAL RATIOS (ANNUALIZED)
Return on average assets		0.68	%		0.76	%		5.72	%		1.88	%		0.44	%			2.24	%		0.83	%
Return on average common shareholders’ equity		4.87	%		5.29	%		41.73	%		15.02	%		3.62	%			16.41	%		7.27	%
Return on tangible common equity		7.95	%		8.74	%		61.68	%		18.30	%		4.31	%			24.05	%		10.58	%
Net interest margin (FTE)		4.26	%		4.45	%		4.68	%		4.26	%		4.66	%			4.41	%		6.05	%
Efficiency ratio(1)		82.3	%		76.1	%		56.6	%		60.4	%		87.0	%			67.9	%		76.4	%

⁽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

RALEIGH, N.C., Nov. 02, 2018 (GLOBE NEWSWIRE) — West Town Bancorp, Inc. (OTC PINK: WTWB) (the “Company” or “West Town”), the multi-bank financial holding company for West Town Bank & Trust and Sound Bank, announced today its financial results for the quarter ended September 30, 2018.  Highlights for the third quarter of 2018 and the Company’s year-to-date performance include the following:

Third quarter net income of $1,028,000 or $0.33 per diluted share, compared to $947,000 or $0.56 per diluted share for the third quarter of 2017.

• Return on average assets of 0.76%, compared to 1.09% for the third quarter of 2017.
• Return on average common equity of 5.29%, compared 9.62% for the third quarter of 2017.
• Return on average tangible common equity of 8.74%, compared to 9.99% for the third quarter of 2017.

Year-to-date net income of $11,180,000 or $3.60 per diluted share, compared to $2,340,000 or $1.47 per diluted share for the nine-month period ending September 30, 2017.

• Return on average assets of 2.78%, compared to 1.05% for the prior year period.
• Return on average common equity of 20.56%, compared to 9.49% for the prior year period.
• Return on tangible common equity of 29.08%, compared to 9.81% for the prior year period.

Eric Bergevin, President and CEO, commented, “2018 is shaping up to be a banner year for the Company due to the impact of the Company’s strategic initiatives deployed, starting with the Sound Bank acquisition that occurred on September 1, 2017: 

• In comparison to September 30, 2017, portfolio loans have grown 16% and our emphasis on relationship and commercial banking has resulted in a 34% increase in noninterest deposits.
• The completion of our acquisition of Windsor Advantage LLC (“Windsor”) has resulted in a net income contribution by Windsor of $1.1 million since the acquisition date of April 30, 2018.  This does not include the $933,000 in noninterest income earned prior to the acquisition date.
• We have earned revenue of $12.5 million from loan sales in the secondary market due in large part to the ‘originate and hold’ strategy that was put in place during the 4^th quarter of 2017.
• Our efficiency ratio has improved to 63.3% in the first nine months of 2018 (excluding one-time gains on sale of assets and consolidation) from the 72.6% in the first nine months of 2017.  

As anticipated, our third quarter results were down in comparison to the prior two quarters of this year due to the completion of our ‘originate and hold’ governmental guaranteed loan strategy and the inherent seasonal impact tax equity investment has on utility scale solar finance and development.   Also, in comparison to the second quarter of 2018, earnings are down due to the pre-tax $4,776,000 gain on the consolidation of Windsor that occurred with the purchase of the remaining 56.5% of Windsor in the second quarter.  We anticipate finishing the year strong with a robust governmental guaranteed pipeline heading into the fourth quarter.”

Strong Year-Over-Year Loan Balance Sheet Growth

At September 30, 2018, the Company’s total assets were $551,494,000, net loans held for investment were $404,577,000, loans held for sale were $15,819,000, total deposits were $400,086,000 and total shareholder’s equity was $76,445,000.  Compared with September 30, 2017, total assets increased $62,295,000 or 13%, loans held for investment increased $56,291,000 or 16%, loans held for sale decreased $5,204,000 or 25%, total deposits increased $11,388,000 or 3% and total shareholders’ equity increased $11,467,000 or 18%.

Noninterest deposits increased $23,845,000 or 34% year over year while interest-bearing deposits decreased $12,457,000 or 4% during the same time-period. 

Acquired Loan Summary

Dollars in thousands		9/30/18		6/30/18		3/31/18		12/31/17		9/30/17
Performing acquired loans	$	98,482		$	107,404		$	121,852		$	132,846			142,087
Less:  remaining fair market value (FMV) adjustments		(1,063	)		(1,181	)		(1,400	)		(1,592	)		(1,783	)
Performing acquired loans, net	$	97,419		$	106,223		$	120,452		$	131,254			140,304
FMV adjustment %		1.1	%		1.1	%		1.1	%		1.2	%		1.3	%
Purchase credit impaired loans (PCI)	$	4,446		$	5,017		$	5,293		$	5,386			5,657
Less:  remaining FMV adjustments		(554	)		(801	)		(826	)		(832	)		(967	)
PCI loans, net	$	3,892		$	4,216		$	4,467		$	4,554			4,690
FMV adjustment %		12.5	%		16.0	%		15.6	%		15.4	%		17.1	%
Total acquired performing loans		97,419			106,223			120,452			131,254			140,304
Total acquired PCI loans		3,892			4,216			4,467			4,554			4,690
Total acquired loans		101,311			110,439			124,919			135,808			144,994
FMV adjustment %		1.6	%		1.8	%		1.8	%		1.8	%		1.9	%

In comparison to September 30, 2017, the performing acquired loan pool decreased $42,885,000 or 31% as of September 30, 2018.  The reduction is due to $34,114,000 in net principal payments and $8,884,000 in renewals which moved to the originated category at the time of renewal.  The PCI loan pool decreased $798,000 year-over-year due primarily to net principal payments and a $265,000 transfer to foreclosed properties. 

Capital Levels

At September 30, 2018, both banks’ capital ratios exceed the minimum thresholds established for well-capitalized banks by regulatory measures.

	“Well Capitalized” Minimums	West Town Bank & Trust	Sound Bank
Tier 1 common equity ratio	6.5%	13.3%	11.9%
Tier 1 risk-based capital ratio	8.0%	13.3%	11.9%
Total risk-based capital ratio	10.0%	14.6%	12.2%
Tier 1 leverage ratio	5.0%	11.5%	9.4%

The book value per common share increased from $22.03 at September 30, 2017 to $25.31 at September 30, 2018.  The tangible book value per common share decreased from $18.69 at September 30, 2017 to $15.30 at September 30, 2018 due to 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 to $15.30 at September 30, 2018.

Asset Quality

The Company’s nonperforming assets to total assets ratio decreased 38 basis points from 1.68% at September 30, 2017 to 1.30% at September 30, 2018. Excluding acquired loans, the Company’s nonperforming assets to total loans and OREO ratio decreased 116 bps from 3.30% at September 30, 2017 to 2.14% at September 30, 2018 as nonaccrual loan balances have declined and originated loans have increased $101,033,000 during the same 12-month period. 

The Company recorded a $789,000 provision for loan losses during the third quarter of 2018, as compared to a provision of $491,000 in third quarter 2017.  The Company recorded $725,000 in net charge-offs during the third quarter with the remaining provision expense due to volume growth.  Excluding acquired loans, the ratio of allowance for loan and lease losses as a percentage of total originated loans decreased 11 bps from one year earlier, from 1.38% at September 30, 2017 to 1.27% at September 30, 2018.

Dollars in thousands	Ending Balance
		9/30/18		6/30/18		3/31/18		12/31/17		9/30/17
Nonaccrual loans – originated	$	5,806		$	6,233		$	5,910		$	6,218		$	6,803
Nonaccrual loans – acquired		280			292			182			413			0
OREO – originated		796			54			54			0			0
OREO – acquired		0			0			0			0			0
90 days past due – originated		3			8			186			0			0
90 days past due – acquired		280			553			594			697			1,396
Total nonperforming assets		7,165			7,140			6,926			7,328			8,199
Total nonperforming assets – originated		6,605			6,295			6,150			6,218			6,803
Net charge-offs	$	725		$	216		$	105		$	543		$	230
Annualized net charge-offs to total average portfolio loans		0.68	%		0.20	%		0.09	%		0.54	%		0.34	%
Ratio of total nonperforming assets to total assets		1.30	%		1.31	%		1.26	%		1.35	%		1.68	%
Ratio of total nonperforming loans to total portfolio loans		1.57	%		1.77	%		1.78	%		1.95	%		2.35	%
Ratio of total allowance for loan losses to total portfolio loans		0.95	%		0.95	%		0.97	%		0.91	%		0.81	%
Excluding acquired (Non-GAAP)
Ratio of nonperforming assets to loans and OREO		2.14	%		2.14	%		2.31	%		2.56	%		3.30	%
Ratio of nonperforming loans to loans		1.89	%		2.12	%		2.29	%		2.56	%		3.30	%
Ratio of allowance for loan losses to loans		1.27	%		1.30	%		1.43	%		1.41	%		1.38	%

Net Interest Income and Margin

Net interest income for the three months ended September 30, 2018 increased $1,722,000 or 48% in comparison to the third quarter of 2017 while the net interest margin decreased from 4.58% for the third quarter of 2017 to 4.45% for the third quarter of 2018.  The increased net interest income is due to the acquisition of Sound Bank which occurred on September 1, 2017.  The margin compression is a combination of a reduction in the yield on earning assets from 5.63% to 5.58% and an increase in the cost of funds from 1.10% to 1.18% due to increased deposit competition and interest rates.

Net Interest Income and Margin

(Includes Sound Bank as of 9/1/2017)

Dollars in thousands	Three Months Ended		Year-to-Date
		9/30/18		6/30/18		3/31/18		12/31/17		9/30/17			9/30/18		9/30/17
Quarterly average balances:
Loans	$	426,160	$	435,778	$	446,857	$	400,324	$	273,225		$	436,189	$	240,686
Investment securities		15,377		13,949		11,353		7,346		6,944			13,575		5,566
Interest-bearing balances and other		28,481		23,258		24,803		37,640		27,171			25,527		19,722
Total interest-earning assets		470,018		472,985		483,013		445,310		307,340			475,291		265,974
Noninterest-bearing deposits		90,073		82,971		82,849		75,707		40,028			85,324		27,961
Interest-bearing liabilities:
Interest-bearing deposits		294,502		292,409		302,119		312,155		239,475			296,315		213,447
Borrowed funds		63,356		78,457		76,422		31,574		13,748			72,697		15,217
Total interest-bearing liabilities		357,858		370,866		378,541		343,729		253,223			369,012		228,664
Total assets		536,172		538,249		536,185		495,958		343,328			536,869		296,754
Common shareholders’ equity		77,129		73,725		67,013		60,432		40,848			72,659		32,983
Tangible common equity		46,667		49,882		57,799		50,795		37,617			51,408		31,894

Dollars in thousands	Three Months Ended		Year-to-Date
		9/30/18		6/30/18		3/31/18		12/31/17		9/30/17			9/30/18		9/30/17
Interest Income/Expense:
Loans	$	6,329		$	6,577		$	6,036		$	6,061		$	4,223			$	18,942		$	10,884
Investment securities, tax		111			105			64			39			47				280			105
Interest-bearing balances and other		170			126			120			117			95				416			188
Total interest income		6,610			6,808			6,220			6,217			4,365				19,638			11,177
Deposits		906			815			771			791			712				2,492			2,073
Borrowings		431			474			378			192			102				1,283			250
Total interest expense		1,337			1,289			1,149			983			814				3,775			2,323
Net interest income	$	5,273		$	5,519		$	5,071		$	5,234		$	3,551			$	15,863		$	8,854
Average Yields and Costs:
Loans		5.89	%		6.05	%		5.48	%		6.01	%		6.13	%			5.81	%		6.05	%
Investment securities		2.89	%		3.01	%		2.25	%		2.12	%		2.71	%			2.75	%		2.52	%
Interest-bearing balances and other		2.37	%		2.17	%		1.96	%		1.23	%		1.39	%			2.18	%		1.27	%
Total interest-earning assets		5.58	%		5.77	%		5.22	%		5.54	%		5.63	%			5.52	%		5.62	%
Total interest-bearing deposits		1.22	%		1.12	%		1.03	%		1.01	%		1.18	%			1.12	%		1.30	%
Borrowed funds		2.70	%		2.42	%		2.01	%		2.41	%		2.94	%			2.36	%		2.20	%
Total interest-bearing liabilities		1.48	%		1.39	%		1.23	%		1.13	%		1.28	%			1.37	%		1.36	%
Cost of funds		1.18	%		1.14	%		1.01	%		0.93	%		1.10	%			1.11	%		1.21	%
Net interest margin		4.45	%		4.68	%		4.26	%		4.66	%		4.58	%			4.46	%		4.45	%

Noninterest Income

Noninterest income for the three months ended September 30, 2018 was $3,869,000, an increase of $856,000 or 28% as compared to the same prior year period.  Specific items to note:

• Windsor revenue totaled $1,791,000, an increase of $1,272,000 or 245% as compared to the 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 that it did not previously own, which acquisition occurred during the 2018 second quarter and resulted in Windsor becoming a wholly owned subsidiary of the Company. 
• Service charges increased $107,000 or 120% as compared to the third quarter of 2017 due to the acquisition of Sound Bank that occurred on September 1, 2017;
• Governmental lending revenue decreased $416,000 or 27% in comparison to the third quarter of 2017; and
• Mortgage revenue decreased $208,000 or 30% in comparison to the third quarter of 2017.

Noninterest Expense

Noninterest expense for the third quarter of 2018 increased $2,499,000 or 56% from $4,454,000 for the three months ended September 30, 2017 to $6,953,000 for the three months ended September 30, 2018.  The increase is primarily due to the inclusion of Sound Bank and Windsor expenses for the full three-month period in 2018 as compared to one month of expenses included from Sound Bank and no expenses from Windsor in the third quarter of 2017.

Branch Network Reorganization

On July 16, 2018, Sound Bank and West Town Bank & Trust entered into a purchase and assumption agreement pursuant to which Sound Bank would acquire West Town Bank & Trust’s two North Carolina branches located in Edenton, NC and Winterville, NC.  The branch transaction closed on October 26, 2018, following receipt of required regulatory approvals.  In addition to the transfer of certain real property in Edenton, NC, the branch reorganization resulted in the transfer of approximately $34.1 million in loan assets, $32.7 million in deposit liabilities, and $3.6 million in additional paid in capital to Sound Bank from its sister institution, West Town Bank & Trust.  The closing of the transaction, which occurred subsequent to the quarter ending September 30, 2018, is not fully reflected in the results reported in this release.

About West Town Bancorp, Inc.

West Town Bancorp, Inc. is the multi-bank financial holding company for West Town Bank & Trust, a North Riverside, IL based state-chartered bank, and Sound Bank, a Morehead City, NC based state-chartered bank. West Town Bank & Trust provides banking services through its offices in Illinois, while Sound Bank provides banking services through its offices in North Carolina. Primary deposit products are checking, savings, and time certificate 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.  Sound Bank’s primary regulators are the North Carolina Commissioner of Banks and the FDIC.

For more information, visit https://investors.westtownbancorp.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 that these disclosures were prepared. These statements can be identified by the use of words like “expect,” “anticipate,” “estimate,” and “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; recent 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 the Company’s acquisition 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; 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

(Includes Sound Bank as of 9/1/2017)

Dollars in thousands; unaudited	Ending Balance
		9/30/18		6/30/18		3/31/18		12/31/17		9/30/17
Assets
Cash and due from banks	$	5,292		$	4,961		$	4,725		$	2,986		$	7,629
Interest-bearing deposits		38,779			27,532			30,299			40,961			57,502
Total cash and cash equivalents		44,071			32,493			35,024			43,947			65,131
Securities available for sale, at fair value		20,615			13,769			14,171			7,119			7,468
Loans held for sale		15,819			31,994			61,286			66,706			21,023
Loans held for investment:
Originated loans		307,166			294,471			265,887			242,744			206,133
Acquired loans, net		101,311			110,439			124,919			135,808			144,994
Allowance for loan losses		(3,900	)		(3,835	)		(3,791	)		(3,427	)		(2,841	)
Net loans held for investment		404,577			401,075			387,015			375,125			348,286
Premises and equipment, net		12,263			11,586			11,502			11,563			11,693
Foreclosed assets		796			54			54			0			0
Servicing assets		4,280			4,598			4,969			5,237			5,568
Bank owned life insurance		8,977			8,917			8,853			8,796			8,736
Accrued interest receivable		1,758			1,776			1,870			1,544			1,758
Goodwill		19,745			19,745			7,016			7,016			7,016
Other intangible assets, net		10,493			10,837			2,102			2,272			2,450
Other assets		8,100			7,644			15,565			14,809			10,070
Total assets	$	551,494		$	544,488		$	549,427		$	544,134		$	489,199
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	94,829		$	88,172		$	86,561		$	84,178		$	70,984
Interest-bearing		305,257			289,416			298,711			308,556			317,714
Total deposits		400,086			377,588			385,272			392,734			388,698
Short term borrowings		58,400			73,400			81,500			72,100			12,000
Long term borrowings		7,267			7,754			6,314			6,803			7,309
Accrued interest payable		550			466			389			296			218
Other liabilities		8,746			9,600			7,984			6,621			15,996
Total liabilities		475,049			468,808			481,459			478,554			424,221
Shareholders’ equity
Preferred stock		0			0			0			0			7,570
Common stock, voting		2,666			2,660			2,623			2,623			1,922
Common stock, non-voting		329			329			329			329			0
Additional paid-in capital		44,576			44,429			44,385			44,185			37,563
Retained earnings		29,154			28,436			20,765			18,447			17,895
Accumulated other comprehensive income (loss)		(280	)		(174	)		(134	)		(4	)		28
Total shareholders’ equity		76,445			75,680			67,968			65,580			64,978
Total liabilities and shareholders’ equity	$	551,494		$	544,488		$	549,427		$	544,134		$	489,199

Financial Performance (Consolidated)

(Includes Sound Bank as of 9/1/2017)

Dollars in thousands, except per share data; unaudited	Three Months Ended		Year-to-Date
		9/30/18		6/30/18		3/31/18		12/31/17		9/30/17			9/30/18		9/30/17
Interest income
Interest and fees on loans	$	6,329	$	6,577	$	6,036	$	6,062		$	4,223			$	18,942	$	10,884
Investment securities & deposits		281		231		184		155			142				696		293
Total interest income		6,610		6,808		6,220		6,217			4,365				19,638		11,177
Interest expense
Interest on deposits		906		815		771		792			712				2,492		2,073
Interest on borrowed funds		431		474		378		191			102				1,283		250
Total interest expense		1,337		1,289		1,149		983			814				3,775		2,323
Net interest income		5,273		5,519		5,071		5,234			3,551				15,863		8,854
Provision for loan losses		789		261		469		1,129			491				1,519		1,048
Noninterest income
Government lending revenue		1,121		4,241		3,054		192			1,537				8,416		3,903
Mortgage revenue		491		868		455		515			699				1,814		4,192
Service charge revenue		196		222		219		203			89				637		121
Bank owned life insurance income		59		64		57		60			42				180		110
Windsor revenue		1,791		1,683		0		0			0				3,474		0
Income from Windsor investment		0		369		564		203			519				933		1,297
Loss on sale of securities		0		0		0		0			(7	)			0		(7	)
Gain on consolidation of Windsor		0		4,776		0		0			0				4,776		0
Other noninterest income		211		133		172		373			134				516		365
Total noninterest income		3,869		12,356		4,521		1,546			3,013				20,746		9,981
Noninterest expense
Compensation		4,245		4,050		3,266		3,248			2,481				11,561		8,094
Occupancy and equipment		522		462		413		434			303				1,397		983
Loan and special assets		67		407		362		373			287				836		714
Professional services		437		317		274		313			155				1,028		817
Data processing		326		325		313		316			247				964		538
Communication		191		203		235		188			112				629		281
Advertising		147		418		54		109			91				619		260
(Gain) loss on sale of foreclosed assets		0		41		0		0			0				41		(165	)
Transaction-related expenses		5		74		14		60			231				93		528
Other operating expense		1,013		1,118		864		856			547				2,995		1,632
Total noninterest expense		6,953		7,415		5,795		5,897			4,454				20,163		13,682
Income (loss) before income taxes		1,400		10,199		3,328		(246	)		1,619				14,927		4,105
Income tax expense (benefit)		372		2,528		847		(798	)		672				3,747		1,765
Net income	$	1,028	$	7,671	$	2,481	$	552		$	947			$	11,180	$	2,340
Basic earnings per common share (1)	$	0.34	$	2.58	$	0.84	$	0.21		$	0.59			$	3.76	$	1.54
Diluted earnings per common share (1)	$	0.33	$	2.47	$	0.80	$	0.20		$	0.56			$	3.60	$	1.47
Weighted average common shares outstanding (1)		2,996		2,980		2,952		2,649			1,626				2,976		1,597
Diluted average common shares outstanding (1)		3,127		3,115		3,087		2,755			1,932				3,106		1,667

Performance Ratios

(Includes Sound Bank as of 9/1/2017)

	Three Months Ended		Year-to-Date
		9/30/18		6/30/18		3/31/18		12/31/17		9/30/17(1)			9/30/18		9/30/17
PER COMMON SHARE
Basic earnings per common share	$	0.34		$	2.58		$	0.84		$	0.21		$	0.59			$	3.76		$	1.54
Diluted earnings per common share	$	0.33		$	2.47		$	0.80		$	0.20		$	0.56			$	3.60		$	1.47
Book value per common share	$	25.31		$	25.11		$	23.02		$	22.21		$	22.03			$	25.31		$	22.03
Tangible book value per common share	$	15.30		$	14.96		$	19.94		$	19.07		$	18.69			$	15.30		$	18.69
FINANCIAL RATIOS (ANNUALIZED)
Return on average assets		0.76	%		5.72	%		1.88	%		0.44	%		1.09	%			2.78	%		1.05	%
Return on average common shareholders’ equity		5.29	%		41.73	%		15.02	%		3.62	%		9.62	%			20.56	%		9.49	%
Return on average tangible common shareholders’ equity		8.74	%		61.68	%		18.30	%		4.31	%		9.99	%			29.08	%		9.81	%
Net interest margin (FTE)		4.45	%		4.68	%		4.26	%		4.66	%		4.58	%			4.46	%		4.45	%
Efficiency ratio		76.1	%		56.6	%		60.4	%		87.0	%		67.8	%			63.3	%		72.6	%

⁽¹⁾  Calculation of book value per common share and tangible book value per common share for September 30, 2017, includes the 698,580 common shares that were issued in October 2017 for the Sound Bank acquisition and the convertible preferred equity as if converted to 329,130 shares of common stock.  These incremental shares are not included in EPS calculations for the quarter ended September 30, 2017.

Contact: Eric Bergevin, 252-482-4400