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 ratio	6.50%	14.95%
Tier 1 risk-based capital ratio	8.00%	14.95%
Total risk-based capital ratio	10.00%	16.21%
Tier 1 leverage ratio	5.00%	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)	12/31/19	9/30/19	6/30/19	3/31/19	12/31/18
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)	12/31/19	9/30/19	6/30/19	3/31/19	12/31/18		12/31/19	12/31/18
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
	12/31/19	9/30/19	6/30/19	3/31/19	12/31/18		12/31/19	12/31/18
Average yields and costs:
Loans	7.14	%	7.75	%	7.04	%	6.63	%	6.54	%		7.04	%	6.23	%
Investment securities	1.52	%	1.44	%	1.91	%	3.16	%	3.25	%		1.62	%	2.91	%
Interest-bearing balances and other	2.03	%	2.48	%	2.06	%	2.64	%	2.37	%		2.59	%	2.25	%
Total interest-earning assets	6.38	%	6.89	%	6.10	%	6.06	%	6.04	%		6.28	%	5.87	%
Interest-bearing deposits	2.17	%	2.19	%	1.89	%	1.71	%	1.45	%		1.94	%	1.21	%
Borrowed funds	3.62	%	4.43	%	4.01	%	3.54	%	3.09	%		3.75	%	2.50	%
Total interest-bearing liabilities	2.22	%	2.27	%	2.03	%	1.90	%	1.67	%		2.06	%	1.45	%
Cost of funds	1.73	%	1.80	%	1.56	%	1.46	%	1.33	%		1.60	%	1.17	%
Net interest margin	4.84	%	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)	12/31/19	9/30/19	6/30/19	3/31/19	12/31/18
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 share	Three Months Ended		Twelve Months Ended
and per share data; unaudited)	12/31/19	9/30/19	6/30/19	3/31/19	12/31/18		12/31/19	12/31/18
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
	12/31/19	9/30/19	6/30/19	3/31/19	12/31/18		12/31/19	12/31/18
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

Contact: Eric Bergevin, 252-482-4400

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 4^th 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 4^th 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.

(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