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 6^th 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 ratio	6.50	%	15.32	%
Tier 1 risk-based capital ratio	8.00	%	15.32	%
Total risk-based capital ratio	10.00	%	16.58	%
Tier 1 leverage ratio	5.00	%	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)	9/30/19	6/30/19	3/31/19	12/31/18	9/30/18
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)	9/30/19	6/30/19	3/31/19	12/31/18	9/30/18		9/30/19	9/30/18
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
	9/30/19	6/30/19	3/31/19	12/31/18	9/30/18		9/30/19	9/30/18
Average yields and costs:
Loans	6.64	%	6.21	%	6.07	%	5.96	%	5.89	%		6.25	%	5.76	%
Investment securities	1.44	%	1.91	%	3.16	%	3.25	%	2.89	%		2.17	%	2.65	%
Interest-bearing balances and other	2.48	%	2.06	%	2.64	%	2.37	%	2.37	%		2.38	%	2.07	%
Total interest-earning assets	5.95	%	5.43	%	5.59	%	5.53	%	5.58	%		5.61	%	5.50	%
Interest-bearing deposits	2.19	%	1.89	%	1.71	%	1.45	%	1.22	%		1.88	%	1.08	%
Borrowed funds	4.43	%	4.01	%	3.54	%	3.09	%	2.70	%		3.76	%	2.22	%
Total interest-bearing liabilities	2.27	%	2.03	%	1.90	%	1.67	%	1.48	%		2.02	%	1.31	%
Cost of funds	1.80	%	1.56	%	1.46	%	1.33	%	1.18	%		1.57	%	1.07	%
Net interest margin	4.39	%	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 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)	9/30/19	6/30/19	3/31/19	12/31/18	9/30/18
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 share	Three Months Ended				Nine Months Ended
and per share data; unaudited)	9/30/19	6/30/19	3/31/19	12/31/18	9/30/18		9/30/19	9/30/18
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
		9/30/19	6/30/19	3/31/19	12/31/18	9/30/18		9/30/19	9/30/18
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

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