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 ratio	6.50%	7.00%	14.47%
Tier 1 risk-based capital ratio	8.00%	8.50%	14.47%
Total risk-based capital ratio	10.00%	10.50%	15.73%
Tier 1 leverage ratio	5.00%	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)	3/31/20	12/31/19	9/30/19	6/30/19	3/31/19
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)	3/31/20	12/31/19	9/30/19	6/30/19	3/31/19
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
	3/31/20	12/31/19	9/30/19	6/30/19	3/31/19
Average yields and costs:
Loans	8.16%	7.14%	7.75%	7.04%	6.56%
Investment securities	1.59%	1.52%	1.44%	1.91%	3.16%
Interest-bearing balances and other	1.81%	2.03%	2.48%	2.06%	2.61%
Total interest-earning assets	7.17%	6.38%	6.89%	6.10%	6.00%
Interest-bearing deposits	2.06%	2.17%	2.19%	1.89%	1.70%
Borrowed funds	2.68%	3.62%	4.43%	4.01%	3.50%
Total interest-bearing liabilities	2.11%	2.22%	2.27%	2.03%	1.88%
Cost of funds	1.62%	1.73%	1.80%	1.56%	1.44%
Net interest margin	5.72%	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 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

	Ending Balance
(Dollars in thousands, unaudited)	3/31/20	12/31/19	9/30/19	6/30/19	3/31/19
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 share	Three Months Ended
and per share data; unaudited)	3/31/20	12/31/19	9/30/19	6/30/19	3/31/19
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
	3/31/20	12/31/19	9/30/19	6/30/19	3/31/19
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