RALEIGH, N.C., Feb. 18, 2020 (GLOBE NEWSWIRE) -- West Town Bancorp, Inc. (OTC PINK: WTWB) (the “Company” or “West Town”), the financial holding company for West Town Bank & Trust (“the Bank”), announced today its financial results for the three months ended December 31, 2019.  Highlights include the following:

Fourth quarter net income of $1.73 million or $0.83 per diluted share, compared to $956,000 or $0.30 per diluted share for the fourth quarter of 2018.

  • Return on average assets of 2.21%, compared to 0.68% for the fourth quarter of 2018.
  • Return on average common equity of 10.22%, compared to 4.87% for the fourth quarter of 2018.
  • Return on average tangible common equity (a non-GAAP financial measure) of 15.79%, compared to 7.95% for the fourth quarter of 2018.
  • Windsor Advantage, LLC (“Windsor”) processing and servicing revenue of $2.26 million as compared to $1.49 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 beginning on May 6, 2019 are deconsolidated from the financial results of Sound Bank.  Therefore, on a comparative basis, the Company’s financial results for the fourth quarter of 2019 do not include any operating impact from Sound Bank whereas the financial results for the fourth quarter of 2018 are impacted by the performance of Sound Bank.    

Eric Bergevin, President and CEO commented, “We are pleased with our fourth quarter results and 2019 overall.  The Company went through transformational changes in 2019 by divesting our controlling interest in Sound Bank, repurchasing upwards of a third of our shares outstanding, launching new intuitive deposit programs and expanding our product offerings that are synergistic with our core government guaranteed lending (“GGL”) focus.  The Company was able to deliver strong fourth quarter results, including a 7th consecutive quarter of increased servicing revenue from Windsor Advantage and enhanced revenues from GGL loans of $2.3 million in revenue on $22.9 million of originated loan commitments.  The strong fourth quarter resulted in one of our most profitable years to date with total after tax income exceeding $11 million dollars and over $4.00 per share in earnings.  Our new deposit initiatives for West Town Bank & Trust (excluding Sound Bank) have resulted in a one-year growth in core deposits of over 21% and growth in noninterest-bearing deposits of over 53%.  These funding strategies, coupled with strong capital levels, will allow for future growth.  We are optimistic that 2020 will yield modestly enhanced core earnings, with accretive core earnings per share, as we keep our focus on our core competencies.”

During the fourth quarter of 2019, the Company repurchased 27,500 shares of its voting common stock. 

BALANCE SHEET
At December 31, 2019, the Company’s total assets were $314.9 million, net loans held for investment were $223.5 million, loans held for sale were $12.6 million, total deposits were $220.4 million and total shareholders’ equity was $67.7 million.  Compared with December 31, 2018, total assets decreased $240.4 million or 43%, loans held for investment decreased $187.1 million or 58%, loans held for sale decreased $4.0 million or 24%, total deposits decreased $212.5 million or 49%, and total shareholders’ equity decreased $9.8 million or 13%.  The decreases in assets, loans and deposits were a result of the Sound Bank recapitalization and deconsolidation 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 December 31, 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 ratio6.50%14.95% 
 Tier 1 risk-based capital ratio8.00%14.95% 
 Total risk-based capital ratio10.00%16.21% 
 Tier 1 leverage ratio5.00%12.65% 

The Company’s book value per common share increased from $25.52 at December 31, 2018 to $30.78 at December 31, 2019.  The Company’s tangible book value per common share (a non-GAAP financial measure) increased from $15.68 at December 31, 2018 to $21.27 at December 31, 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 from 1.41% at December 31, 2018 to 3.99% at December 31, 2019 primarily due to the removal of Sound Bank from the consolidated financial statements.  Nonaccrual loans increased $2.4 million as of December 31, 2019 as compared to the prior year while foreclosed assets increased $2.6 million compared to December 31, 2018. The Company has formed Patriarch, LLC as a subsidiary to expedite the liquidation and recovery of certain Bank assets and as of December 31, 2019 Patriarch held $1.8 million in assets (included in the foreclosed assets number) while the Bank also held $1.3 million of guaranteed portions of GGL loans both of which are included in the Company’s nonperforming ratio.  The Bank also regularly conducts impairment analyses on all nonperforming assets with updated appraisals, less cost to sell, to ensure the assets are carried at fair market value with any deficits charged off immediately versus carrying specific reserves.

The Company recorded a $1.2 million provision for loan losses during the fourth quarter of 2019 as compared to a provision of $434,000 in fourth quarter 2018 in response to the increasing nonperforming asset ratios.  The Company recorded $779,000 in net charge-offs during the fourth quarter 2019 with the remaining provision expense due to volume growth.

  (Dollars in thousands)12/31/199/30/196/30/193/31/1912/31/18
Nonaccrual loans – originated$9,200 $4,813 $3,290 $4,666 $6,538 
Nonaccrual loans – acquired -  -  -  262  272 
Foreclosed assets 3,370  2,028  2,069  2,493  723 
90 days past due and still accruing – originated -  -  -  407  67 
90 days past due and still accruing – acquired -  -  -  421  251 
Total nonperforming assets 12,570  6,841  5,359  8,249  7,851 
Total nonperforming assets – originated 12,570  6,841  5,359  7,566  7,328 
                
Net charge-offs$779 $138 $200 $58 $334 
Annualized net charge-offs to total average portfolio loans 1.36% 0.25% 0.27% 0.05% 0.31%
                
Ratio of total nonperforming assets to total assets 3.99% 2.21% 1.77% 1.40% 1.41%
Ratio of total nonperforming loans to total net portfolio loans 4.19% 2.31% 1.57% 1.38% 1.74%
Ratio of total allowance for loan losses to total portfolio loans 1.72% 1.64% 1.62% 0.98% 0.97%
                

 

NET INTEREST INCOME AND MARGIN
Net interest income for the three months ended December 31, 2019 decreased $2.6 million or 49% in comparison to the fourth quarter 2018, primarily due to the deconsolidation of Sound Bank from the consolidated financial statements as of May 6, 2019. The net interest margin increased from 4.77% for the fourth quarter 2018 to 4.84% for the fourth quarter 2019.  The margin improvement is largely related to the increase in loan yield from 6.54% to 7.14%, due primarily to a change in the makeup of the loan portfolio as the percentage of consumer-related loans decreased while the higher yielding commercially focused loan associated with the GGL department became a larger portion of the portfolio with the deconsolidation of Sound Bank.  

    
 Three Months Ended Year-to-Date
  (Dollars in thousands)12/31/199/30/196/30/193/31/1912/31/18 12/31/1912/31/18
Average balances:        
Loans$229,941 $220,939 $297,501 $435,583 $424,758 $295,228 $433,308
Investment securities 21,572  21,111  20,960  21,119  21,060  21,192  15,461
Interest-bearing balances and other 16,259  16,801  47,025  54,690  41,472  33,537  29,546
Total interest-earning assets 267,772  258,851  365,486  511,392  487,290  349,957  478,315
Noninterest deposits 52,456  47,199  75,643  112,836  96,068  71,802  88,032
Interest-bearing liabilities:        
Interest-bearing deposits 179,195  170,390  234,603  338,682  319,900  230,107  302,260
Borrowed funds 6,129  6,452  17,204  37,852  50,792  16,803  67,176
Total interest-bearing liabilities 185,324  176,842  251,807  376,534  370,692  246,910  369,436
Total assets 311,312  300,011  416,840  576,640  553,855  400,199  541,150
Common shareholders' equity 67,172  68,448  82,090  78,698  77,817  74,064  73,959
Tangible common equity (1) 43,486  47,636  57,825  48,918  47,695  46,836  50,472
         
Interest income/expense:        
Loans$4,139 $4,315 $5,218 $7,122 $7,002 $20,794 $27,005
Investment securities 82  76  100  167  171  343  450
Interest-bearing balances and other 83  105  241  356  248  867  665
Total interest income 4,304  4,496  5,559  7,645  7,421  22,004  28,120
Deposits 979  942  1,104  1,432  1,169  4,457  3,661
Borrowings 56  72  172  330  396  630  1,679
Total interest expense 1,035  1,014  1,276  1,762  1,565  5,087  5,340
Net interest income$3,269 $3,482 $4,283 $5,883 $5,856 $16,917 $22,780
         
(1) Non-GAAP financial measure. Tangible common equity is calculated by subtracting intangible assets from common shareholders' equity 
         

  

 Three Months Ended   Year-to-Date
 12/31/199/30/196/30/193/31/1912/31/18 12/31/1912/31/18
Average yields and costs:        
Loans7.14%7.75%7.04%6.63%6.54% 7.04%6.23%
Investment securities1.52%1.44%1.91%3.16%3.25% 1.62%2.91%
Interest-bearing balances and other2.03%2.48%2.06%2.64%2.37% 2.59%2.25%
Total interest-earning assets6.38%6.89%6.10%6.06%6.04% 6.28%5.87%
Interest-bearing deposits2.17%2.19%1.89%1.71%1.45% 1.94%1.21%
Borrowed funds3.62%4.43%4.01%3.54%3.09% 3.75%2.50%
Total interest-bearing liabilities2.22%2.27%2.03%1.90%1.67% 2.06%1.45%
Cost of funds1.73%1.80%1.56%1.46%1.33% 1.60%1.17%
Net interest margin4.84%5.34%4.70%4.67%4.77% 4.83%4.76%

 NONINTEREST INCOME
Noninterest income for the three months ended December 31, 2019 was $5.4 million, an increase of $697,000 as compared to the same prior year period.  Specific items to note include:

  • Windsor processing and servicing revenue totaled $2.3 million, an increase of $763,000, or 51% as compared to the $1.5 million in income earned from the investment in Windsor during the same prior year period.  The increase is directly attributable to the continued growth in the volume in the servicing portfolio as Windsor brings in new customers. 
  • GGL revenue of $2.3 million was an increase of $495,000 or 28% in comparison to the fourth quarter of 2018.
  • Mortgage revenue totaled $716,000, an increase of $357,000 or 99% as compared to the fourth quarter 2018.  Mortgage loans originated for secondary market sale increased from $11.4 million in the fourth quarter 2018 to $20.6 million in the fourth quarter 2019.

             
NONINTEREST EXPENSE
Noninterest expense for the fourth quarter 2019 was $5.8 million, a decrease of $2.4 million or 30%, from $8.2 million for the fourth quarter 2018.  The decreases in all noninterest expense categories, including compensation, occupancy, data processing, communications and other operating expenses are primarily related to the deconsolidation of Sound Bank from the consolidated financial statements as of May 6, 2019.  

ABOUT WEST TOWN BANCORP, INC.
West Town Bancorp, Inc. is a financial holding company based in Raleigh, NC.  The Company is the holding company for West Town Bank & Trust, an Illinois state-chartered bank.  West Town Bank & Trust provides banking services through its two full-service offices located in the greater Chicago area. The Company is also the parent company of: Windsor Advantage, LLC, a loan servicing company; West Town Insurance Agency, Inc., an insurance agency; Patriarch, LLC, a real estate management company; SBA Loan Documentation Services, LLC, a loan documentation origination company; and Glenwood Structured Finance, LLC, a loan broker and large loan syndication company.  The Company is registered with, and supervised by, the Federal Reserve.  West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC. 

For more information, visit https://www.westtownbank.com/

Important Note Regarding Forward-Looking Statements
This release contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of the Company and on the information available to management at the time this release was prepared. These statements can be identified by the use of words such as "expect," "anticipate," "estimate," "believe," variations of these words, and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand, and asset quality, including real estate and other collateral values; changes in Small Business Administration rules, regulations, or loan products, including the section 7(a) program; changes in other government guaranteed loan programs or our ability to participate in such programs; changes in tax law, including the impact of such changes on our tax assets and liabilities; future governmental shutdowns that may impact revenues associated with our lending and other operations that are dependent on government guaranteed loan programs; changes in banking regulations and accounting principles, policies, or guidelines; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with the Company’s acquisition and divesture activities; the failure of our strategic investments or acquisitions to perform as anticipated and the impact of any impairments to our intangible assets, such as goodwill; the impact of our strategic initiatives on our ability to retain key employees, and the impact of competition from traditional or new sources. These, and other factors that may emerge, could cause decisions and actual results to differ materially from current expectations. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.    

      
Consolidated Balance Sheet     
      
 Ending Balance
  (Dollars in thousands, unaudited)12/31/199/30/196/30/193/31/1912/31/18
Assets     
Cash and due from banks$5,021 $4,085 $2,665 $5,433 $5,005 
Interest-bearing deposits 12,595  18,814  17,196  72,382  43,448 
Total cash and cash equivalents 17,616  22,899  19,861  77,815  48,453 
Securities, at fair value 21,087  21,804  20,716  21,031  21,332 
Loans held for sale 12,568  13,965  14,902  11,037  16,552 
Loans held for investment:     
Originated loans 223,470  211,647  209,492  336,505  322,038 
Acquired loans, net -  -  -  81,978  88,556 
Allowance for loan and lease losses (3,837) (3,462) (3,400) (4,115) (4,000)
Net loans held for investment 219,633  208,185  206,092  414,368  406,594 
Premises and equipment, net 4,762  4,795  4,832  12,099  12,166 
Foreclosed assets 3,370  2,028  2,069  2,493  723 
Servicing assets 3,358  3,053  3,220  3,619  3,952 
Bank owned life insurance 5,021  4,993  4,964  9,090  9,034 
Accrued interest receivable 1,116  1,079  1,196  1,637  1,637 
Goodwill 13,150  12,721  12,721  19,737  19,745 
Other intangible assets, net 7,782  7,968  8,154  9,827  10,157 
Other assets 5,428  5,779  4,638  8,066  4,979 
Total assets$314,891 $309,269 $303,365 $590,819 $555,324 
      
Liabilities and Shareholders' Equity     
Liabilities     
Deposits:     
Noninterest bearing$49,573 $54,380 $46,068 $128,435 $97,777 
Interest-bearing 170,869  177,472  164,619  345,581  335,140 
Total deposits 220,442  231,852  210,687  474,016  432,917 
Borrowings 19,295  2,382  5,868  26,294  33,781 
Accrued interest payable 429  424  433  927  868 
Other liabilities 7,000  8,092  7,562  9,860  10,189 
Total liabilities 247,166  242,750  224,550  511,097  477,755 
Shareholders’ equity:     
Common stock, voting 2,178  2,206  2,674  2,749  2,686 
Common stock, non-voting 22  22  129  329  329 
Additional paid in capital 24,233  24,771  38,557  45,287  44,760 
Retained earnings 41,203  39,446  37,375  31,273  29,928 
Accumulated other comprehensive income (loss) 89  74  80  84  (134)
Total shareholders’ equity 67,725  66,519  78,815  79,722  77,569 
Total liabilities and shareholders’ equity$314,891 $309,269 $303,365 $590,819 $555,324 
      


Financial Performance (Consolidated)      
         
  (Dollars in thousands except shareThree Months Ended Twelve Months Ended
  and per share data; unaudited)12/31/199/30/196/30/193/31/1912/31/18 12/31/1912/31/18
Interest income        
Loans$4,139$4,315 $5,218$7,122$7,002 $20,794$27,005
Investment securities and deposits 165 181  341 523 419  1,210 1,115
Total interest income 4,304 4,496  5,559 7,645 7,421  22,004 28,120
Interest expense        
Interest on deposits 979 942  1,104 1,432 1,169  4,457 3,661
Interest on borrowed funds 56 72  172 330 396  630 1,679
Total interest expense 1,035 1,014  1,276 1,762 1,565  5,087 5,340
Net interest income 3,269 3,482  4,283 5,883 5,856  16,917 22,780
Provision for loan losses 1,155 200  477 173 434  2,005 1,953
Noninterest income        
Windsor processing and servicing        
revenue 2,256 1,774  1,970 1,487 1,493  7,487 3,906
Government lending 2,288 983  1,754 880 1,793  5,905 10,209
Mortgage 716 975  1,113 435 359  3,239 2,173
Bank-owned life insurance 28 29  44 56 58  157 238
Service charge 29 23  99 226 228  377 865
Gain on deconsolidation of Sound Bank - -  6,635 - -  6,635 -
Gain on consolidation of Windsor - -  - - -  - 4,776
Other noninterest 97 153  92 122 163  464 1,612
Total noninterest income 5,414 3,937  11,707 3,206 4,094  24,264 23,779
Noninterest expense        
Compensation 3,750 3,199  3,385 4,261 4,689  14,595 16,250
Occupancy and equipment 221 343  338 506 536  1,408 1,933
Loan and special assets 318 (523) 510 179 437  484 1,273
Professional services 360 432  569 582 511  1,943 1,539
Data processing 109 161  198 345 381  813 1,345
Communications 80 33  110 226 208  449 837
Advertising 86 51  109 112 135  358 754
Loss on sale of foreclosed assets - -  35 21 -  56 41
Transaction-related expenses 16 1  916 43 31  976 124
Other operating expenses 820 681  1,040 1,179 1,259  3,720 4,254
Total noninterest expense 5,760 4,378  7,210 7,454 8,187  24,802 28,350
Income before income taxes 1,768 2,841  8,303 1,462 1,329  14,374 16,256
Income tax expense 37 687  2,174 397 373  3,295 4,120
Net income$ 1,731$ 2,154 $ 6,129$ 1,065$ 956 $ 11,079$ 12,136
         
Basic earnings per common share$0.85$0.97 $2.03$0.35$0.31 $4.20$4.07
Diluted earnings per common share$0.83$0.95 $2.00$0.34$0.30 $4.12$3.90
Weighted average common shares        
outstanding 2,196 2,328  2,997 3,054 3,008  2,639 2,984
Diluted average common shares        
outstanding 2,234 2,369  3,045 3,115 3,124  2,688 3,110
         


Performance Ratios        
         
 Three Months Ended Year-to-Date
 12/31/199/30/196/30/193/31/1912/31/18 12/31/1912/31/18
PER COMMON SHARE        
Basic earnings per common share$0.85 $0.97 $2.03 $0.35 $0.31  $4.20 $4.07 
Diluted earnings per common share$0.83 $0.95 $2.00 $0.34 $0.30  $4.12 $3.90 
Book value per common share$30.78 $29.86 $28.12 $25.70 $25.52  $30.78 $25.52 
Tangible book value per common share$21.27 $20.57 $20.67 $16.17 $15.68  $21.27 $15.68 
         
FINANCIAL RATIOS (ANNUALIZED)       
Return on average assets 2.21% 2.85% 5.90% 0.75% 0.68%  2.77% 2.24%
Return on average common shareholders'       
equity 10.22% 12.49% 29.95% 5.49% 4.87%  14.96% 16.41%
Return on average tangible common        
equity 15.79% 17.94% 42.51% 8.83% 7.95%  23.65% 24.05%
Net interest margin (FTE) 4.84% 5.34% 4.70% 4.67% 4.77%  4.83% 4.76%
Efficiency ratio (1) 66.2% 59.0% 67.3% 81.5% 82.0%  69.0% 67.6%
         
(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
 

Eric Bergevin, 252-482-4400