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

Company Release - 8/1/2018 4:00 PM ET

RALEIGH, N.C., Aug. 01, 2018 (GLOBE NEWSWIRE) -- West Town Bancorp, Inc. (OTC PINK: 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; unauditedThree 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; unauditedThree 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; unauditedEnding 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 ratio6.5%13.9%11.7%
Tier 1 risk based capital ratio8.0%13.9%11.7%
Total risk based capital ratio10.0%15.2%12.1%
Tier 1 leverage ratio5.0%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 thousandsEnding 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 thousandsThree 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 thousandsThree 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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Source: West Town Bancorp