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

RALEIGH, N.C., Nov. 01, 2019 (GLOBE NEWSWIRE) — West Town Bancorp, Inc. (OTC PINK: WTWB) (the “Company” or “West Town”), the financial holding company for West Town Bank & Trust, announced today its financial results for the three months ended September 30, 2019.  Highlights include the following:
Third quarter net income of $2.15 million or $0.95 per diluted share, compared to $1.03 million or $0.33 per diluted share for the third quarter of 2018.Return on average assets of 2.93%, compared to 0.76% for the third quarter of 2018.Return on average common equity of 12.49%, compared to 5.29% for the third quarter of 2018.Return on average tangible common equity (a non-GAAP financial measure) of 17.94%, compared to 8.74% for the third quarter of 2018.Windsor Advantage, LLC (“Windsor”) processing and servicing revenue of $2.39 million as compared to $1.79 million for the same period last year.As previously announced, on May 6, 2019 Sound Bank, formerly a wholly owned subsidiary of West Town, completed a recapitalization that resulted in a significant reduction in West Town’s ownership position in the bank, which, effective October 1, 2019, changed its name to Dogwood State Bank.  Due to the reduction in West Town’s ownership position, the financial results for the Company for the third quarter of 2019 are deconsolidated from the financial results of Sound Bank.  Therefore, on a comparative basis, the Company’s financial results for the third quarter of 2019 do not include any operating impact from Sound Bank whereas the financial results for the third quarter of 2018 are impacted by the performance of Sound Bank.    Eric Bergevin, President and CEO, commented, “We are pleased with the results of our first full quarter since the Sound Bank recapitalization.  The Company was able to deliver net income which, excluding past fair value adjustments and gains on consolidation, showed significant improvement over previous pre-recapitalization quarters, and we were able to do so with a smaller asset base and reduced outstanding share levels as a result of our recent stock repurchase program.  This resulted in a strong improvement in our earnings per share.  Windsor had another good quarter with $2.4 million in revenue, driven by a 6th consecutive quarter of increased servicing revenue.   In addition, our government guaranteed lending department originated loan commitments of $22.9 million and earned $983,000 in revenue for the third quarter.  Finally, given the strong liquidity position of the Company following the divestiture of our controlling interest in Sound Bank, we believe the share repurchases we made were an effective use of our excess cash, resulting in an accretive impact on our earnings per share this quarter and, we anticipate, in future periods.”During the third quarter of 2019, the Company repurchased 574,919 shares of its voting and nonvoting common stock and all of its outstanding warrants.  In addition, the Company paid off a $1.9 million line of credit balance while keeping the line available for future use if needed.BALANCE SHEET
At September 30, 2019, the Company’s total assets were $309.3 million, net loans held for investment were $211.8 million, loans held for sale were $14.0 million, total deposits were $231.9 million and total shareholder’s equity was $66.5 million.  Compared with September 30, 2018, total assets decreased $242.2 million or 44%, loans held for investment decreased $95.5 million or 31%, loans held for sale decreased $1.9 million or 12%, total deposits decreased $168.2 million or 42%, and total shareholders’ equity decreased $9.9 million or 13%.  The decreases in assets, loans and deposits were a result of the Sound Bank recapitalization and elimination of Sound Bank from the consolidated financials as of May 6, 2019.  The decrease in total shareholders’ equity resulted from the Company’s stock repurchase program partially offset by an increase in retained earnings.

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.
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.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. 

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.  
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.    
Eric Bergevin, 252-482-4400

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