RALEIGH, N.C., Aug. 05, 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”), released its financial results for the three and six months ended June 30, 2020.  The quarter and year-to-date net incomes were significantly impacted by the revenues of its wholly-owned subsidiary, Windsor Advantage, LLC (“Windsor”) as Windsor processed more than 13,500 Paycheck Protection Plan (“PPP”) loan applications totaling more than $2.3 billion for over 40 of its institutional lender clients, driving almost $14.2 million in gross revenues for the three months ended June 30, 2020.  In addition, the six-month net income results included a $4.1 million year-over-year increase in the provision for loan losses which was impacted by the global spread of the coronavirus ("COVID-19") and the related effects on the economic environment.  Highlights include the following:

• Second quarter net income of $6.3 million or $2.84 per diluted share, compared to net income of $5.9 million or $1.94 per diluted share for the second quarter of 2019.
• Provision for loan losses of $665,000 for the second quarter of 2020 compared to $477,000 for the same period in 2019.
• Return on average assets of 7.11%, compared to 5.70% for the second quarter of 2019.
• Return on average common equity of 35.34%, compared to 28.92% for the second quarter of 2019.
• Return on average tangible common equity (a non-GAAP financial measure) of 49.86%, compared to 41.06% for the second quarter of 2019.
• Windsor processing and servicing revenue of $14.2 million, compared to $2.0 million for the same period in 2019.
• Mortgage origination and sales revenue of $1.6 million as compared to $1.1 million for the same period in 2019.

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. Sound Bank, 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 Sound Bank, beginning on May 6, 2019, are deconsolidated from the financial results of the Company.  Therefore, on a comparative basis, the Company’s second quarter and year-to-date financial results for 2020 do not include any operating impact from Sound Bank, whereas the financial results for the same periods in 2019 are impacted by the performance of Sound Bank.

Eric Bergevin, President & CEO, commented, “We are extremely pleased with the results of our first full quarter since the COVID pandemic began.  The Company’s second quarter performance and year-to-date net incomes were the result of significantly increased revenues from Windsor.  We recognize that without the dedication Windsor’s staff demonstrated during this period, these efforts which provided PPP funds to approximately 350,000 small businesses would not have been possible.  In addition, mortgage-related activity resulted in a record setting quarter given the favorable rate environment.  The Company was also able to use the profits derived from its subsidiaries to retire all of its existing parent company debt.  We are also quite pleased with the growth in core deposits over the past 6 months.  The increase in part reflects the overall success the Company has had with targeted bank deposit products to underserved segments.  We will continue to embrace our government lending “Originate and Hold” strategy to further leverage our capital and enhance long-term earnings.”

BALANCE SHEET
At June 30, 2020, the Company’s total assets were $355.7 million, net loans held for investment were $234.0 million, loans held for sale were $23.1 million, total deposits were $265.0 million and total shareholders’ equity was $73.5 million.  Compared with December 31, 2019, total assets increased $41.1 million or 13%, net loans held for investment increased $14.4 million or 7%, loans held for sale increased $10.5 million or 84%, total deposits increased $44.5 million or 20%, and total shareholders’ equity increased $5.8 million or 9%.  The increases in assets and loans reflect the Banks’s participation in the PPP program for its existing customers as well as an “Originate and Hold” strategy which began in mid-first quarter of 2020 for Government Guaranteed Loans (“GGL”) whereby the Company holds the guaranteed portion of loans originated rather than selling them in the secondary market at a premium.  While this strategy has a short-term negative impact on profitability, the impact of leveraging the capital of the Company’s Bank subsidiary, earning the additional spread income and ultimately taking the gains on premium should enhance overall long-term profitability.   The increase in deposits in part reflects the overall success the Company has recently had in focusing on specific industries and banking those clients.  The Company was also able to use the profits derived from its subsidiaries to retire the existing parent company debt of approximately $5.95 million, leaving broad access to alternative cash sources from various lines of credit.  The increase in total shareholders’ equity was primarily a result of the income posted for the second quarter.

CAPITAL LEVELS
At June 30, 2020, 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 $28.12 at June 30, 2019 to $33.19 at June 30, 2020.  The Company’s tangible book value per common share (a non-GAAP financial measure) increased from $20.67 at June 30, 2019 to $23.90 at June 30, 2020 as a result of share repurchases over the period and the net income of the Company.

ASSET QUALITY

The Company’s nonperforming assets to total assets ratio decreased from 3.99% at December 31, 2019 to 3.45% at June 30, 2020, as management continued to address credit concerns surrounding the potential economic impact of COVID-19 and the widespread societal responses to the pandemic. Nonaccrual loans decreased $1.4 million as of June 30, 2020 as compared to December 31,2019 while foreclosed assets increased $1.1 million during the same period. During the fourth quarter of 2019, the Company formed Patriarch, LLC as a subsidiary of the holding company to expedite the liquidation and recovery of certain Bank assets and as of June 30, 2020, Patriarch held $4.2 million in foreclosed assets.  The Bank regularly conducts impairment analyses on all nonperforming assets with updated appraisals to ensure the assets are carried at the lower of fair market value or book value, with any deficits charged off immediately versus carrying specific reserves.

Despite improving asset quality ratios quarter over quarter, the Company recorded a $665,000 provision for loan losses during the second quarter of 2020, as compared to a provision of $477,000 in second quarter 2019, in response to concerns over deteriorating economic conditions driven by the ongoing COVID-19 pandemic.  Expected loss estimates consider the impacts of decreased economic activity and higher unemployment, partially offset by the mitigating benefits of government stimulus and industry wide loan modification efforts. The Company recorded $667,000 million in net charge-offs during the second quarter 2020.

NET INTEREST INCOME AND MARGIN
Net interest income for the three months ended June 30, 2020 decreased $797,000 or 19% in comparison to the second quarter of 2019, largely due to the deconsolidation of Sound Bank from the consolidated financial statements as of May 6, 2019.    The net interest margin was 4.70% for both the second quarter of 2019 and 2020.  However, there were decreases in both earning asset yield and interest-bearing costs as a result of the targeted fed funds rate decision by the Federal Open Market Committee, which decreased by 1.00% on March 15, 2020 in response to economic concerns over the COVID-19 pandemic.   Interest-earning asset yields decreased from 6.10% to 5.93% and interest-bearing liabilities cost decreased from 2.03% to 1.74% year-over-year between June 30 2019 and June 30, 2020.

Net interest income for the six months ended June 30, 2020 decreased $2.9 million or 29% in comparison to the same period in 2019, largely due to the deconsolidation of Sound Bank from the consolidated financial statements as of May 6, 2019.

NONINTEREST INCOME
Noninterest income for the three months ended June 30, 2020 was $16.2 million, an increase of $4.7 million or 41% as compared to the three months ended June 30, 2019.  Specific items to note include:

• Windsor, a subsidiary of the Company which offers an SBA and USDA loan servicing platform, had processing and servicing revenue totaling $14.2 million for the three months ended June 30, 2019, an increase of $12.2 million, or 620% as compared to the $2.0 million in income earned during the three months ended June 30, 2019.  The increase is directly attributable to the significant impact of the volume of PPP loans processed by the Company during the quarter as well as continued growth in the volume in the servicing portfolio as Windsor brings in new customers.
• GGL revenue was $37,000 in the second quarter of 2020, a decrease of $1.7 million or 98% in comparison to the same period in 2019.  GGL volume was impacted by the Company’s “Originate and Hold” strategy as the Company moved to leverage its balance sheet for long-term profitability.
• Mortgage revenue totaled $1.6 million, an increase of $460,000 or 41% as compared to the second quarter 2019.  Mortgage loans originated to sell to the secondary market increased from $22.2 million in the second quarter 2019 to $46.2 million in the second quarter 2020.

Noninterest income for the six months ended June 30, 2020 was $20.8 million, an increase of $6.1 million or 42% as compared to the $14.7 million in the same prior year period.  The most notable increase was due to Windsor revenues, which increased by $12.4 million period over period from $3.5 million in the six months ended June 30, 2019 to $15.9 million for the six months ended June 30, 2020.

NONINTEREST EXPENSE
Noninterest expense for the second quarter of 2020 was $10.8 million, an increase of $3.6 million or 50%, from $7.2 million for the second quarter of 2019.  The primary cause for the change was increased compensation expense including overtime and temporary assistance as a result of the significant workload associated with the PPP program which drove the additional Windsor revenues previously mentioned.  For the six-month period ended June 30, 2020, noninterest expense increased from $14.7 million in the first six months of 2019 to $16.9 million for the same period in 2020, also as a result of additional compensation due to the PPP program.

ABOUT WEST TOWN BANCORP, INC.
West Town Bancorp, Inc. is a financial holding company based in Raleigh, NC.  The Company is changing names to Integrated Financial Holdings, Inc in the third quarter 2020 after a successful shareholder vote approving the action on July 23, 2020.  A specific press release outlining the name change is anticipated to be published in early August 2020.  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.

Loan Concentrations

The top ten commercial loan concentrations as of June 30, 2020 were as follows: