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CST: 21/05/2019 00:01:50   

West Town Bancorp, Inc. Announces Fourth Quarter 2018 Financial Results

98 Days ago

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 4th 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 4th 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.

NET INTEREST INCOME AND MARGIN
(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

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