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

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RALEIGH, N.C., Aug. 01, 2018 (GLOBE NEWSWIRE) -- West Town Bancorp, Inc. (OTC:WTWB) (the "Company" or "West Town"), the multi-bank holding company for West Town Bank & Trust and Sound Bank, reported record quarterly net income of $7,671,000 or $2.47 per diluted share for the second quarter 2018 compared to net income of $514,000, or $0.34 per diluted share for the second quarter of 2017, an increase of $7,157,000, or 1,392%.  Return on average assets was 5.72% and return on average shareholders' equity was 41.73% as compared to 0.75% and 6.78%, respectively, in the second quarter 2017.

Eric Bergevin, President and CEO commented, "We are pleased to announce record quarterly earnings for the second consecutive quarter.  The Company completed the purchase of the remaining 56.5% of Windsor Advantage, LLC ("Windsor") during the second quarter and recognized a $4.8 million pre-tax gain on consolidation (approximately $3.6 million post tax gain).  Additionally, West Town Bank & Trust ("WTBT") reaped the full benefit of its ‘originate and hold' strategy for governmental guaranteed lending that was implemented in the fourth quarter of 2017.  WTBT sold the remaining inventory held from late-2017 and early-2018 originations into the secondary market and earned net revenue of $4,241,000 in the second quarter 2018 compared to $3,054,000 in the first quarter of 2018 and $730,000 in the second quarter of 2017. The governmental guaranteed lending division originated loans of $148 million in the first half of 2018 as compared to $53 million in the first half of 2017.  WTBT has a strong pipeline for the second half of 2018 and with $32 million in loans held for sale as of June 30, 2018, we expect continued success in government guaranteed lending.  Absent the one-time gain on the Windsor consolidation, our earnings remain strong as compared to prior years and we expect this trend to continue." 

Company Completes Windsor Acquisition with Remaining 56.5% Purchase
On April 30, 2018, the Company exercised its option and acquired the remaining 56.5% of Windsor, a loan servicing company specializing in packaging, servicing and liquidating government guaranteed loans.  The Company initially purchased a 43.5% non-managing stake in the company in early 2017 for $6,960,000 and locked in the option to purchase the remaining 56.5% for a fixed price.  The initial investment was accounted for using the equity method of accounting.  For the current fiscal year, the Company recorded gross revenue of $933,000 through April 30, 2018 from its initial investment in Windsor.

Based on an updated third-party valuation, the Company recorded a $4,776,000 pre-tax gain on consolidation for the original 43.5% interest held.  The Company paid $9,219,594 in cash and issued 29,248 shares of common stock, which had a value of approximately $820,406, for a purchase price of $10,040,000 for the remaining 56.5%.  The acquisition has been accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Windsor were recorded based on estimates of fair values as of April 30, 2018.  In connection with this transaction, the Company recorded $12.7 million in goodwill, which is non-deductible for tax purposes, and $9.0 million in other identifiable intangible assets.  Windsor earned gross revenue for the two-month period after acquisition date totaling $1,683,000.  Net income earned from Windsor since the acquisition date totaled $526,000 which equates to annualized net income totaling over $3.1 million.  Eric Bergevin commented, "Windsor has been an extremely successful investment and we have elected to exercise our purchase right on the remaining shares to capture the full potential of Windsor for our shareholders.  Windsor has grown significantly since we made our initial investment and we see continued growth in its servicing portfolio over the next few years as the industry becomes more aware of Windsor's expertise and high quality customer service."  Bergevin commented further, "Windsor provides the bank a strong source of fee income that provides a recurring source of revenue that we anticipate will significantly enhance the profitability of West Town Bancorp."

Second quarter 2018 highlights include:

  • Record quarterly net income of $7,671,000 driven by net revenue of $4,241,000 in government lending and a $4,776,000 pre-tax gain on consolidation from the Windsor acquisition.
    -- WTBT earned net income totaling $3,488,000 for the second quarter of 2018, resulting in a return on average assets of 4.53% and a return on average common shareholders' equity of 37.06%. 
    -- Sound Bank earned net income of $268,000 for the second quarter of 2018, resulting in a return on average assets of 0.51% and a return on average common equity of 3.87%.
    -- Windsor earned net income of $526,000 for the second quarter of 2018, beginning on the acquisition date of April 30, 2018.  
    -- The holding company earned net income of $3,389,000 for the second quarter of 2018, primarily driven by the gain on consolidation noted above.
  • Return on average assets of 5.72%, compared to 0.75% for the second quarter of 2017.
  • Return on average common shareholders' equity of 41.73%, compared to 6.97% for the second quarter of 2017.
  • Return on average tangible common shareholders' equity of 62.66%, compared to 6.78% for the second quarter of 2017.
 
Financial Performance (Consolidated)
(Includes Sound Bank as of 9/1/2017)
 
Dollars in thousands, except per share data; unaudited Three Months Ended   Year-to-Date
     6/30/18    3/31/18    12/31/17      9/30/17      6/30/17
     6/30/18    6/30/17  
Interest income                              
Interest and fees on loans $ 6,577 $ 6,036 $ 6,062   $ 4,223   $ 3,288   $ 12,613 $ 6,661  
Investment securities & deposits   231   184   155     142     78     415   151  
Total interest income   6,808   6,220   6,217     4,365     3,366     13,028   6,812  
Interest expense                              
Interest on deposits   815   771   792     712     684     1,586   1,361  
Interest on borrowed funds   474   378   191     102     92     852   148  
Total interest expense   1,289   1,149   983     814     776     2,438   1,509  
Net interest income   5,519   5,071   5,234     3,551     2,590     10,590   5,303  
Provision for loan losses   261   469   1,129     491     281     730   557  
Noninterest income                              
Government lending revenue   4,241   3,054   192     1,537     730     7,295   2,366  
Mortgage revenue   868   455   515     699     1,938     1,323   3,492  
Service charge revenue   222   219   203     89     15     441   32  
Bank owned life insurance income   64   57   60     42     37     121   68  
Income from Windsor investment   2,052   564   203     519     573     2,616   778  
Loss on sale of securities   0   0   0     (7 )   0     0   0  
Gain on consolidation   4,776   0   0     0     0     4,776   0  
Other noninterest income   133   172   373     134     119     305   232  
Total noninterest income   12,356   4,521   1,546     3,013     3,412     16,877   6,968  
Noninterest expense                              
Compensation   4,050   3,266   3,248     2,481     2,812     7,316   5,613  
Occupancy and equipment   462   413   434     303     314     875   680  
Loan and special assets   407   362   373     287     408     769   593  
Professional services   317   274   313     155     404     591   662  
Data processing   325   313   316     247     143     638   291  
Communication   203   235   188     112     85     438   169  
Advertising   418   54   109     91     77     472   169  
(Gain) loss on sale of foreclosed assets   41   0   0     0     0     41   (165 )
Transaction-related expenses   74   14   60     231     125     88   296  
Other operating expense   1,118   864   856     547     438     1,982   920  
Total noninterest expense   7,415   5,795   5,897     4,454     4,806     13,210   9,228  
Income (loss) before income taxes   10,199   3,328   (246 )   1,619     915     13,527   2,486  
Income tax expense (benefit)   2,528   847   (798 )   672     401     3,375   1,093  
Net income $ 7,671 $ 2,481 $ 552   $ 947   $ 514   $ 10,152 $ 1,393  
Basic earnings per common share (1) $ 2.58 $ 0.84 $ 0.21   $ 0.59   $ 0.35   $ 3.42 $ 0.95  
Diluted earnings per common share (1) $ 2.47 $ 0.80 $ 0.20   $ 0.56   $ 0.34   $ 3.27 $ 0.91  
Weighted average common shares outstanding (1)   2,980   2,952   2,649     1,626     1,467     2,966   1,466  
Diluted average common shares outstanding (1)   3,115   3,087   2,755     1,932     1,534     3,101   1,533  
                                     


 
Performance Ratios
 
  Three Months Ended   Year-to-Date
    6/30/18   3/31/18   12/31/17   9/30/17(1)   6/30/17(2)     6/30/18   6/30/17
                               
PER COMMON SHARE                              
Basic earnings per common share $ 2.58   $ 0.84   $ 0.21   $ 0.59   $ 0.35     $ 3.42   $ 0.95  
Diluted earnings per common share $ 2.47   $ 0.80   $ 0.20   $ 0.56   $ 0.34     $ 3.27   $ 0.91  
Book value per common share $ 25.11   $ 23.02   $ 22.21   $ 22.03   $ 20.62     $ 25.11   $ 20.38  
Tangible book value per common share $ 14.96   $ 19.94   $ 19.07   $ 18.69   $ 20.62     $ 14.96   $ 20.38  
                               
FINANCIAL RATIOS (ANNUALIZED)                              
Return on average assets   5.72 %   1.88 %   0.44 %   1.09 %   0.75 %     3.81 %   1.03 %
Return on average common shareholders' equity   41.73 %   15.02 %   3.62 %   9.62 %   6.78 %     29.08 %   9.96 %
Return on average tangible common shareholders' equity   61.68 %   18.30 %   4.31 %   9.99 %   6.96 %     38.04 %   9.96 %
Net interest margin (FTE)   4.68 %   4.26 %   4.66 %   4.58 %   4.27 %     4.47 %   4.25 %
Efficiency ratio   56.6 %   60.4 %   87.0 %   67.8 %   80.1 %     58.2 %   75.2 %
                                             


(1)  Calculation of book value per common share and tangible book value per common share for September 30, 2017, includes the 698,580 common shares that were issued in October 2017 for the Sound Bank acquisition and the convertible preferred equity as if converted to 329,130 shares of common stock.  These incremental shares are not included in EPS calculations for the quarter ended September 30, 2017.
(2) Calculation of book value per common share and tangible book value per common share for June 30, 2017 include the convertible preferred equity outstanding as of such dates as if converted to 21,739 shares of common stock.  These incremental shares are not included in the quarter-end EPS calculations as of June 30, 2017.
   


 
Noninterest Income and Expense Data (Consolidated)
(Includes Sound Bank as of 9/1/2017)
 
Dollars in thousands; unaudited Three Months Ended   Year-to-Date
    6/30/18   3/31/18   12/31/17   9/30/17   6/30/17      6/30/18   6/30/17
                               
Noninterest income                              
Government lending revenue $ 4,241   3,054   192   1,537     730     7,295   2,366  
Mortgage revenue   868   455   515   699     1,938     1,323   3,492  
Service charge revenue   222   219   203   89     15     441   32  
Bank owned life insurance income   64   57   60   42     37     121   68  
Income from Windsor investment   2,052   564   203   519     573     2,616   778  
Loss on sale of securities   0   0   0   (7 )   0     0   0  
Gain on consolidation   4,776   0   0   0     0     4,776   0  
Other noninterest income   133   172   373   134     119     305   232  
Total noninterest income $ 12,356   4,521   1,546   3,013     3,412     16,877   6,968  
                               
Noninterest expense                              
Compensation $ 4,050   3,266   3,248   2,481     2,812     7,316   5,613  
Occupancy and equipment   462   413   434   303     314     875   680  
Loan and special assets   407   362   373   287     408     769   593  
Professional services   317   274   313   155     404     591   662  
Data processing   325   313   316   247     143     638   291  
Communication   203   235   188   112     85     438   169  
Advertising   418   54   109   91     77     472   169  
(Gain) loss on sale of foreclosed assets   41   0   0   0     0     41   (165 )
Transaction-related expense   74   14   60   231     125     88   296  
Other operating expense   1,118   864   856   547     438     1,982   920  
Total noninterest expense $ 7,415   5,795   5,897   4,454     4,806     13,210   9,228  
                                   

Total noninterest income for the second quarter of 2018 was $12,356,000, an increase of $7,835,000 or 173% from $4,521,000 for the first quarter of 2018.  The increase in noninterest income was primarily attributable to the $4,776,000 pre-tax gain on consolidation in connection with the Windsor acquisition.  Other notable increases include a $1,187,000 or 38% increase in governmental lending revenue from sales into the secondary market revenue, a $1,488,000 or 263% increase in income from Windsor due to the Company's increased ownership to 100% as of April 30, 2018, and a $413,000 or 91% increase in mortgage revenue primarily due to seasonal effects on new originations. 

Total noninterest income for the second quarter of 2018 increased $8,944,000 or 262%, as compared to the second quarter of 2017 primarily due to a $3,511,000 or 481% increase in governmental lending revenue and the $4,776,000 pre-tax gain on consolidation.  Mortgage revenue was down $1,070,000 or 55% from the second quarter 2017 due to the Company's shift away from a national mortgage operation that was completed in mid-year 2017.  Revenue earned from Windsor increased $1,479,000 or 258% from the second quarter of 2017 due to the Company's increased ownership to 100% as of April 30, 2018.  Service charge revenue increased $207,000 or 1,380% as compared to the second quarter of 2017 due to the inclusion of Sound Bank in the second quarter of 2018.

Total noninterest expense was $7,415,000 for the second quarter of 2018, an increase of $1,620,000, or 28%, from the $5,795,000 for the linked quarter ended March 31, 2018.  The notable increases were primarily due to the inclusion of Windsor expenses beginning at acquisition date. 

Total noninterest expense increased $2,609,000, or 54%, from the $4,806,000 recorded in the second quarter 2017.  The increases are primarily related to activity in the first six months for Sound Bank and two months of Windsor that were not included in the 2017 results.


 
Selected Consolidated Balance Sheet Data
Dollars in thousands; unaudited Ending Balance
    6/30/18   3/31/18   12/31/17   9/30/17   6/30/17
Portfolio loans:                    
Originated loans $ 294,471   $ 265,887   $ 242,744   $ 206,133   $ 200,863  
Acquired loans, net   110,439     124,919     135,808     144,994     0  
Allowance for loan losses   (3,835 )   (3,791 )   (3,427 )   (2,841 )   (2,580 )
Portfolio loans, net   401,075     387,015     375,125     348,286     198,283  
Loans held for sale   31,994     61,286     66,706     21,023     30,166  
Investment securities and deposits   41,301     44,470     48,080     64,970     25,953  
Total interest-earning assets   474,370     492,771     489,911     433,896     254,402  
Loan servicing rights   4,598     4,969     5,237     5,568     5,721  
Goodwill   19,745     7,016     7,016     7,016     0  
Other intangible assets, net   10,837     2,102     2,272     2,450     0  
Total assets   544,488     549,427     544,134     487,904     283,628  
                     
Deposits                    
Noninterest-bearing deposits $ 88,172   $ 86,561   $ 84,178   $ 70,984   $ 24,141  
Interest-bearing deposits   289,416     298,711     308,556     317,714     201,072  
Total deposits   377,588     385,272     392,734     388,698     225,213  
Borrowings   81,154     87,814     78,903     19,309     22,599  
Total fundings   458,742     473,086     471,637     408,007     247,812  
                     
Shareholders' equity:                    
Preferred equity $ 0   $ 0   $ 0   $ 7,570   $ 500  
Common equity   47,418     47,337     47,300     39,485     13,218  
Retained earnings   28,436     20,765     18,284     17,895     16,949  
Accumulated other comprehensive income (loss)   (174 )   (134 )   (4 )   28     50  
Total shareholders' equity $ 75,680   $ 67,968   $ 65,580   $ 64,978   $ 30,717  
                               

Total assets were $544,488,000, a decrease of $4,939,000 or 1% as compared to total assets of $549,427,000 at March 31, 2018.  Total net portfolio loans were $401,075,000 at June 30, 2018, an increase of $14,060,000, or 4% as compared to $387,015,000 at March 31, 2018.  Loans held for sale decreased $29,292,000 or 48% to $31,994,000 as compared to $61,286,000 at March 31, 2018. 

Total deposits were $377,588,000 at June 30, 2018, a decrease of $7,684,000 or 2% as compared to total deposits of $385,272,000 at March 31, 2018.  Borrowings also decreased $6,660,000 or 8% quarter over quarter. 

Total shareholders' equity was $75,680,000 at June 30, 2018, an increase of $7,712,000 or 11% as compared to $67,968,000 at March 31, 2018.  At June 30, 2018, both banks' capital ratios exceed 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% 13.9% 11.7%
Tier 1 risk based capital ratio 8.0% 13.9% 11.7%
Total risk based capital ratio 10.0% 15.2% 12.1%
Tier 1 leverage ratio 5.0% 11.3% 9.5%
             

Acquired Loan Summary

                 
Dollars in thousands   6/30/18   3/31/18   12/31/17   9/30/17
                 
Performing acquired loans $ 107,404   $ 121,852   $ 132,846     142,087  
Less:  remaining fair market value (FMV) adjustments   (1,181 )   (1,400 )   (1,592 )   (1,783 )
Performing acquired loans, net $ 106,223   $ 120,452   $ 131,254     140,304  
FMV adjustment %   1.1 %   1.1 %   1.2 %   1.3 %
                 
Purchase credit impaired loans (PCI) $ 5,017   $ 5,293   $ 5,386     5,657  
Less:  remaining FMV adjustments   (801 )   (826 )   (832 )   (967 )
PCI loans, net $ 4,216   $ 4,467   $ 4,554     4,690  
FMV adjustment %   16.0 %   15.6 %   15.4 %   17.1 %
                 
Total acquired performing loans   106,223     120,452     131,254     140,304  
Total acquired PCI loans   4,216     4,467     4,554     4,690  
Total acquired loans   110,439     124,919     135,808     144,994  
FMV adjustment %   1.8 %   1.8 %   1.8 %   1.9 %
                         

The performing acquired loan pool decreased $14,229,000 during the second quarter of 2018.  The reduction is due to $9,936,000 in net principal payments and $4,293,000 in renewals which moved to the originated category at the time of renewal.  The PCI loan pool decreased $251,000 during the second quarter due primarily to net principal payments.  Income from accretion of net discounts totaled $238,000 in the second quarter of 2018, an increase of $52,000 or 28% as compared to the $186,000 in the first quarter of 2018.  The increase is primarily attributable to an increase in principal payments and renewals.

Asset Quality

The Company's nonperforming assets to total assets ratio increased 5 basis points during the second quarter of 2018 from 1.26% at March 31, 2018 to 1.31% at June 30, 2018. 

  • West Town Bank & Trust's nonperforming assets to total assets ratio increased from 1.85% at March 31, 2018 to 2.04% at June 30, 2018 while it's past due ratio decreased from 0.59% to 0.46% during the same period.  In comparison to June 30, 2017, West Town Bank & Trust's nonperforming assets to total assets ratio decreased from 2.62% to 2.04% and its past due ratio decreased from 1.73% to 0.46%. 
  • Sound Bank's nonperforming assets to total assets ratio increased from 0.41% to 0.44% during the second quarter of 2018 while its past due ratio decreased from 0.65% to 0.29% during the same period.

Excluding acquired loans, the Company's nonperforming assets to total loans and OREO declined 17 basis points, from 2.31% at March 31, 2018 to 2.14% at June 30, 2018. In comparison to the prior year, the Company's nonperforming assets to total loans and OREO ratio decreased 146 basis points from 3.60% at June 30, 2017 as nonaccrual loan balances have declined and the portfolio loans has doubled due in part to the Sound Bank acquisition. 

The Company recorded a $261,000 provision for loan losses during the second quarter of 2018, as compared to a provision of $469,000 in the first quarter 2018 and $281,000 in second quarter 2017.  Excluding acquired loans, the ratio of allowance for loan and lease losses as a percentage of total originated loans increased 2 basis points from one year earlier, from 1.28% at June 30, 2017 to 1.30% at June 30, 2018.

 
Dollars in thousands Ending Balance 
    6/30/18   3/31/18   12/31/17   9/30/17   6/30/17
                     
Nonaccrual loans – originated $ 6,233   $ 5,910   $ 6,218   $ 6,803   $ 6,967  
Nonaccrual loans – acquired   292     182     413     0     0  
OREO – originated   54     54     0     0     270  
OREO – acquired   0     0     0     0     0  
90 days past due – originated   8     186     0     0     0  
90 days past due – acquired   553     594     697     1,396     0  
Total nonperforming assets   7,140     6,926     7,328     8,199     7,237  
Total nonperforming assets – originated   6,295     6,150     6,218     6,803     7,237  
                     
Net charge-offs $ 216   $ 105   $ 543   $ 230   $ 238  
Annualized net charge-offs to total average portfolio loans   0.20 %   0.09 %   0.54 %   0.34 %   0.43 %
                     
Ratio of total nonperforming assets to total assets   1.31 %   1.26 %   1.35 %   1.68 %   2.55 %
Ratio of total nonperforming loans to total portfolio loans   1.77 %   1.78 %   1.95 %   2.35 %   3.51 %
Ratio of total allowance for loan losses to total portfolio loans   0.95 %   0.97 %   0.91 %   0.81 %   1.28 %
                     
Excluding acquired (Non-GAAP)                    
Ratio of nonperforming assets to loans and OREO   2.14 %   2.31 %   2.56 %   3.30 %   3.60 %
Ratio of nonperforming loans to loans   2.12 %   2.29 %   2.56 %   3.30 %   3.47 %
Ratio of allowance for loan losses to loans   1.30 %   1.43 %   1.41 %   1.38 %   1.28 %
                               


 
Net Interest Income and Margin
(Includes Sound Bank as of 9/1/2017)
 
Dollars in thousands Three Months Ended   Year-to-Date
    6/30/18   3/31/18   12/31/17   9/30/17   6/30/17     6/30/18   6/30/17
Quarterly average balances:                              
Loans $ 435,778 $ 446,857 $ 400,324 $ 273,225 $ 222,099   $ 441,287 $ 224,147
Investment securities   13,949   11,353   7,346   6,944   4,778     12,658   4,865
Interest-bearing balances and other   23,258   24,803   37,640   27,171   16,482     24,026   18,597
Total interest-earning assets   472,985   483,013   445,310   307,340   243,359     477,971   247,609
Noninterest-bearing deposits   82,971   82,849   75,707   40,028   21,089     82,910   21,828
Interest-bearing liabilities:                              
Interest-bearing deposits   292,409   302,119   312,155   239,475   201,027     297,237   200,218
Borrowed funds   78,457   76,422   31,574   13,748   15,680     77,445   15,963
Total interest-bearing liabilities   370,866   378,541   343,729   253,223   216,707     374,682   216,181
Total assets   538,249   536,185   495,958   343,328   274,137     537,222   273,082
Common shareholders' equity   73,725   67,013   60,432   40,848   29,629     70,387   29,026
Tangible common equity   49,882   57,799   50,795   37,617   29,629     53,818   29,026
                               


       
Dollars in thousands Three Months Ended   Year-to-Date
    6/30/18   3/31/18   12/31/17   9/30/17   6/30/17     6/30/18   6/30/17
Interest Income/Expense:                              
Loans $ 6,577   $ 6,036   $ 6,061   $ 4,223   $ 3,288     $ 12,613   $ 6,661  
Investment securities, tax   105     64     39     47     29       168     68  
Interest-bearing balances and other   126     120     117     95     49       247     83  
Total interest income   6,808     6,220     6,217     4,365     3,366       13,028     6,812  
Deposits   815     771     791     712     684       1,586     1,361  
Borrowings   474     378     192     102     92       852     148  
Total interest expense   1,289     1,149     983     814     776       2,438     1,509  
Net interest income $ 5,519   $ 5,071   $ 5,234   $ 3,551   $ 2,590     $ 10,590   $ 5,303  
                               
Average Yields and Costs:                              
Loans   6.05 %   5.48 %   6.01 %   6.13 %   5.94 %     5.76 %   5.99 %
Investment securities   3.01 %   2.25 %   2.12 %   2.71 %   2.43 %     2.65 %   2.81 %
Interest-bearing balances and other   2.17 %   1.96 %   1.23 %   1.39 %   1.19 %     2.07 %   1.06 %
Total interest-earning assets   5.77 %   5.22 %   5.54 %   5.63 %   5.55 %     5.50 %   5.55 %
Total interest-bearing deposits   1.12 %   1.03 %   1.01 %   1.18 %   1.36 %     1.08 %   1.37 %
Borrowed funds   2.42 %   2.01 %   2.41 %   2.94 %   2.35 %     2.22 %   1.87 %
Total interest-bearing liabilities   1.39 %   1.23 %   1.13 %   1.28 %   1.44 %     1.31 %   1.37 %
Cost of funds   1.14 %   1.01 %   0.93 %   1.10 %   1.31 %     1.07 %   1.28 %
Net interest margin   4.68 %   4.26 %   4.66 %   4.58 %   4.27 %     4.47 %   4.37 %
                                             

Net interest income for the second quarter of 2018 was $5,519,000, an increase of $448,000 from $5,071,000 for the first quarter of 2018. 

  • West Town Bank & Trust contributed $3,619,000 for the second quarter of 2018, as compared to $3,216,000 for the first quarter of 2018, an increase of $403,000 or 13%.  The increase is primarily due to increased accretion income related to several early loan payoffs in the government guaranteed lending portfolio.
  • Sound Bank contributed $2,044,000 for the second quarter of 2018, as compared to $1,925,000 for the first quarter of 2018, an increase of $119,000 or 6% primarily due to loan growth.
  • Interest expense at the holding company totaled $144,000 for the first quarter of 2018, as compared to $111,000 for the first quarter of 2018, an increase of $33,000 or 30% due to increased borrowings to affect the purchase of Windsor. 

Net interest margin was 4.68% for the second quarter of 2018, a 42 basis-point increase as compared to 4.26% for the first quarter of 2018.

  • West Town Bank & Trust's net interest margin was 5.05% for the second quarter 2018, as compared to 4.30% for the first quarter of 2018.  The increase is primarily due to several early loan payoffs which resulted in increased accretion income as noted above.
  • Sound Bank's net interest margin was 4.38% for the second quarter 2018, as compared to 4.45% for the first quarter.  Excluding accretion of the loan and deposit fair value marks, Sound Bank's net interest margin was 3.84% for the second quarter 2018, as compared to 3.95% for the first quarter 2018.  The reduction in net interest margin is primarily related to the increase in cost of funds at Sound Bank due to increased rates on its time deposit portfolio.
  • On a consolidated basis, the Company's cost of funds increased 13 basis points as compared to the first quarter of 2018.  This is primarily due to an increase in overnight borrowing costs and increased average borrowing balances, as well as an increase in rates on new and renewed time deposits. 

Average interest-earning assets for the second quarter of 2018 were $472,985,000, a decrease of $10,028,000, or 2% as compared to $483,013,000 for the first quarter of 2018. The decrease was primarily due to the "originate and hold" strategy that began to unwind late in the first quarter and was completed in early second quarter 2018.  Likewise, average interest-bearing liabilities were $370,866,000, a decrease of $7,675,000, or 2%, as compared to the $378,541,000 for the first quarter of 2018.

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, which is subject to state and federal regulatory approval, is expected to close during the third or fourth quarter of 2018.  In addition to the transfer of certain real property in Edenton, NC, the branch reorganization would result in the transfer of approximately $34.3 million in loan assets and $31.7 million in deposit liabilities to Sound Bank from its sister institution, West Town Bank & Trust.

About West Town Bancorp, Inc.
West Town Bancorp, Inc. is the multi-bank 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 and North Carolina, 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 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 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," and "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 Sound Banking Company acquisition; 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; 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.  

Contact: Eric Bergevin, 252-482-4400

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