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CST: 15/11/2019 02:22:00   

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

13 Days ago

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.

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

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