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

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

As previously announced, on May 6, 2019, Sound Bank, formerly a wholly owned subsidiary of West Town, completed a recapitalization that resulted in a significant reduction in West Town’s ownership position in the bank. Sound Bank, effective October 1, 2019, changed its name to Dogwood State Bank.  Due to the reduction in West Town’s ownership position, the financial results for Sound Bank, beginning on May 6, 2019, are deconsolidated from the financial results of the Company.  Therefore, on a comparative basis, the Company’s second quarter and year-to-date financial results for 2020 do not include any operating impact from Sound Bank, whereas the financial results for the same periods in 2019 are impacted by the performance of Sound Bank.

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

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

CAPITAL LEVELS
At June 30, 2020, the regulatory capital ratios of West Town Bank & Trust exceeded the minimum thresholds established for well-capitalized banks under applicable banking regulations.

		“Well Capitalized” Minimum	Basel III Fully Phased-In	West Town Bank & Trust
	Tier 1 common equity ratio	6.50%	7.00%	13.50%
	Tier 1 risk-based capital ratio	8.00%	8.50%	13.50%
	Total risk-based capital ratio	10.00%	10.50%	14.76%
	Tier 1 leverage ratio	5.00%	4.00%	10.33%

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

ASSET QUALITY

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

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

(Dollars in thousands)	6/30/20			3/31/20			12/31/19			9/30/19			6/30/19
Nonaccrual loans	$	7,799		$	7,732		$	9,200		$	4,813		$	3,290
Foreclosed assets		4,464			5,243			3,370			2,028			2,069
90 days past due and still accruing		-			-			-			-			-
Total nonperforming assets		12,263			12,975			12,570			6,841			5,359
Net charge-offs	$	667		$	2,390		$	779		$	138		$	200
Annualized net charge-offs to total average portfolio loans		1.13	%		4.39	%		1.36	%		0.25	%		0.27	%
Ratio of total nonperforming assets to total assets		3.45	%		4.16	%		3.99	%		2.21	%		1.77	%
Ratio of total nonperforming loans to total loans		3.33	%		3.66	%		4.19	%		2.31	%		1.60	%
Ratio of total allowance for loan losses to total loans		2.05	%		2.27	%		1.72	%		1.64	%		1.62	%

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

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

	Three Months Ended											Year-To-Date
(Dollars in thousands)	6/30/20		3/31/20		12/31/19		9/30/19		6/30/19			6/30/20		6/30/19
Average balances:
Loans	$	250,125	$	226,683	$	229,965	$	220,939	$	297,501		$	238,404	$	366,542
Investment securities		24,743		23,861		21,572		21,111		20,960			24,302		21,040
Interest-bearing balances and other		22,326		17,046		16,238		16,801		47,025			19,686		50,858
Total interest-earning assets		297,194		267,590		267,775		258,851		365,486			282,392		438,439
Noninterest-bearing deposits		64,617		56,329		52,464		47,199		75,643			60,473		94,240
Interest-bearing liabilities:
Interest-bearing deposits		185,507		166,567		179,162		170,390		234,603			176,037		286,643
Borrowed funds		23,459		16,475		6,167		6,452		17,204			19,967		27,528
Total interest-bearing liabilities		208,966		183,042		185,329		176,842		251,807			196,004		314,171
Total assets		353,179		313,476		311,293		300,011		416,840			333,327		496,740
Common shareholders' equity		71,035		68,445		67,078		68,448		82,090			69,740		80,394
Tangible common equity (1)		50,343		47,570		46,448		47,637		57,825			48,957		53,371
Interest income/expense:
Loans	$	4,283	$	4,559	$	4,139	$	4,315	$	5,218		$	8,842	$	12,340
Investment securities		72		95		82		76		100			167		267
Interest-bearing balances and other		36		76		83		105		241			112		597
Total interest income		4,391		4,730		4,304		4,496		5,559			9,121		13,204
Deposits		835		845		979		942		1,104			1,680		2,536
Borrowings		70		109		56		72		172			179		502
Total interest expense		905		954		1,035		1,014		1,276			1,859		3,038
Net interest income	$	3,486	$	3,776	$	3,269	$	3,482	$	4,283		$	7,262	$	10,166
(1) Non-GAAP financial measure. Tangible common equity is calculated by subtracting intangible assets from common shareholders' equity

	Three Months Ended											Year-To-Date
	6/30/20		3/31/20		12/31/19		9/30/19		6/30/19			6/30/20		6/30/19
Average yields and costs:
Loans	6.87	%	8.07	%	7.14	%	7.75	%	7.04	%		7.44	%	6.79	%
Investment securities	1.16	%	1.59	%	1.52	%	1.44	%	1.91	%		1.37	%	2.54	%
Interest-bearing balances and other	0.65	%	1.79	%	2.03	%	2.48	%	2.06	%		1.14	%	2.37	%
Total interest-earning assets	5.93	%	7.09	%	6.38	%	6.89	%	6.10	%		6.48	%	6.07	%
Interest-bearing deposits	1.81	%	2.03	%	2.17	%	2.19	%	1.89	%		1.91	%	1.78	%
Borrowed funds	1.20	%	2.65	%	3.60	%	4.43	%	4.01	%		1.80	%	3.68	%
Total interest-bearing liabilities	1.74	%	2.09	%	2.22	%	2.27	%	2.03	%		1.90	%	1.95	%
Cost of funds	1.33	%	1.60	%	1.73	%	1.80	%	1.56	%		1.45	%	1.50	%
Net interest margin	4.70	%	5.66	%	4.84	%	5.34	%	4.70	%		5.16	%	4.68	%

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

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

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

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

ABOUT WEST TOWN BANCORP, INC.
West Town Bancorp, Inc. is a financial holding company based in Raleigh, NC.  The Company is changing names to Integrated Financial Holdings, Inc in the third quarter 2020 after a successful shareholder vote approving the action on July 23, 2020.  A specific press release outlining the name change is anticipated to be published in early August 2020.  The Company is the holding company for West Town Bank & Trust, an Illinois state-chartered bank.  West Town Bank & Trust provides banking services through its two full-service offices located in the greater Chicago area. The Company is also the parent company of: Windsor Advantage, LLC, a loan servicing company; West Town Insurance Agency, Inc., an insurance agency; Patriarch, LLC, a real estate management company; SBA Loan Documentation Services, LLC, a loan documentation origination company; and Glenwood Structured Finance, LLC, a loan broker and large loan syndication company.  The Company is registered with, and supervised by, the Federal Reserve.  West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC.

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

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

Consolidated Balance Sheet
				Ending Balance
(Dollars in thousands, unaudited)				6/30/20			3/31/20			12/31/19			9/30/19			6/30/19
Assets
Cash and due from banks				$	6,183		$	5,928		$	5,021		$	4,085		$	2,665
Interest-bearing deposits					11,644			8,518			9,849			16,068			14,450
	Total cash and cash equivalents				17,827			14,446			14,870			20,153			17,115
Interest-bearing time deposits					2,746			2,746			2,746			2,746			2,746
Securities, at fair value					26,081			24,946			21,087			21,804			20,716
Loans held for sale					23,072			11,839			12,568			13,965			14,902
Loans held for investment:
	Originated loans				238,926			216,423			223,470			211,647			209,492
	Allowance for loan and lease losses				(4,906	)		(4,907	)		(3,837	)		(3,462	)		(3,400	)
		Loans held for investment, net			234,020			211,516			219,633			208,185			206,092
Premises and equipment, net					4,761			4,740			4,761			4,795			4,832
Foreclosed assets					4,464			5,243			3,370			2,028			2,069
Loan servicing assets					3,262			3,528			3,358			3,053			3,220
Bank owned life insurance					5,082			5,048			5,021			4,993			4,964
Accrued interest receivable					1,422			1,067			1,116			1,079			1,196
Goodwill					13,161			13,161			13,150			12,721			12,721
Other intangible assets, net					7,409			7,596			7,782			7,968			8,154
Other assets					12,349			6,370			4,729			5,779			4,638
			Total assets	$	355,656		$	312,246		$	314,191		$	309,269		$	303,365
Liabilities and Shareholders' Equity
Liabilities
Deposits:
	Noninterest-bearing			$	66,874		$	59,360		$	49,573		$	54,380		$	46,068
	Interest-bearing				198,108			162,059			170,869			177,472			164,619
		Total deposits			264,982			221,419			220,442			231,852			210,687
Borrowings					6,000			17,649			19,295			2,382			5,868
Accrued interest payable					391			433			429			424			433
Other liabilities					10,771			5,735			6,300			8,092			7,562
	Total liabilities				282,144			245,236			246,466			242,750			224,550
Shareholders’ equity:
Common stock, voting					2,193			2,193			2,166			2,206			2,674
Common stock, non-voting					22			22			22			22			129
Additional paid in capital					24,357			24,162			24,245			24,771			38,557
Retained earnings					46,629			40,371			41,203			39,446			37,375
Accumulated other comprehensive income					311			262			89			74			80
	Total shareholders’ equity				73,512			67,010			67,725			66,519			78,815
			Total liabilities and shareholders’ equity	$	355,656		$	312,246		$	314,191		$	309,269		$	303,365

Financial Performance (Consolidated)
(Dollars in thousands except share	Three Months Ended																Year-To-Date
and per share data; unaudited)	6/30/20			3/31/20			12/31/19			9/30/19			6/30/19				6/30/20			6/30/19
Interest income
Loans	$	4,283		$	4,559		$	4,139		$	4,315		$	5,218			$	8,842		$	12,340
Investment securities and deposits		108			171			165			181			341				279			864
Total interest income		4,391			4,730			4,304			4,496			5,559				9,121			13,204
Interest expense
Interest on deposits		835			845			979			942			1,104				1,680			2,536
Interest on borrowed funds		70			109			56			72			172				179			502
Total interest expense		905			954			1,035			1,014			1,276				1,859			3,038
Net interest income		3,486			3,776			3,269			3,482			4,283				7,262			10,166
Provision for loan losses		665			3,460			1,155			200			477				4,125			650
Noninterest income
Windsor processing and servicing
revenue		14,186			1,713			2,256			1,774			1,970				15,899			3,457
Government guaranteed lending		37			755			2,288			983			1,754				792			2,634
Mortgage		1,573			1,418			716			975			1,113				2,991			1,548
Bank-owned life insurance		34			27			28			29			44				61			100
Service charge		11			19			29			23			99				30			325
Gain on deconsolidation of Sound Bank		-			-			-			-			6,425				-			6,425
Other noninterest		367			709			98			153			92				1,076			214
Total noninterest income		16,208			4,641			5,415			3,937			11,497				20,849			14,703
Noninterest expense
Compensation		5,682			3,753			3,750			3,199			3,385				9,435			7,646
Occupancy and equipment		519			256			221			343			338				775			844
Loan and special asset expenses		816			242			318			(523	)		510				1,058			689
Professional services		676			490			359			432			569				1,166			1,151
Data processing		165			148			109			161			198				313			543
Software		1,913			249			172			160			199				2,162			425
Communications		82			89			80			33			110				171			336
Advertising		215			55			86			51			109				270			221
Transaction-related		4			17			16			1			916				21			959
Amortization of intangibles		186			186			186			186			233				372			563
Other operating expenses		589			545			464			335			643				1,134			1,287
Total noninterest expense		10,847			6,030			5,761			4,378			7,210				16,877			14,664
Income (loss) before income taxes		8,182			(1,073	)		1,768			2,841			8,093				7,109			9,555
Income tax expense (benefit)		1,924			(241	)		37			687			2,174				1,683			2,571
Net income (loss)	$	6,258		$	(832	)	$	1,731		$	2,154		$	5,919			$	5,426		$	6,984
Basic earnings (loss) per common share	$	2.87		$	(0.38	)	$	0.79		$	0.93		$	1.97			$	2.48		$	2.38
Diluted earnings (loss) per common share	$	2.84		$	(0.37	)	$	0.78		$	0.91		$	1.94			$	2.44		$	2.34
Weighted average common shares
outstanding		2,177			2,193			2,196			2,328			2,997				2,204			3,025
Diluted average common shares
outstanding		2,185			2,232			2,234			2,369			3,045				2,221			3,080

Performance Ratios
		Three Months Ended																Year-To-Date
		6/30/20			3/31/20			12/31/19			9/30/19			6/30/19				6/30/20			6/30/19
PER COMMON SHARE
	Basic earnings (loss) per common share	$	2.87		$	(0.38	)	$	0.79		$	0.93		$	1.97			$	2.48		$	2.38
	Diluted earnings (loss) per common share		2.84			(0.37	)		0.78			0.91			1.94				2.44			2.34
	Book value per common share		33.19			30.25			30.78			29.86			28.12				33.19			28.12
	Tangible book value per common share		23.90			20.88			21.27			20.57			20.67				23.90			20.67
FINANCIAL RATIOS (ANNUALIZED)
	Return on average assets		7.11	%		-1.06	%		2.21	%		2.85	%		5.70	%			3.26	%		2.84	%
	Return on average common shareholders'
	equity		35.34	%		-4.88	%		10.24	%		12.49	%		28.92	%			15.60	%		17.52	%
	Return on average tangible common
	equity		49.86	%		-7.02	%		14.79	%		17.94	%		41.06	%			22.23	%		26.39	%
	Net interest margin		4.70	%		5.66	%		4.84	%		5.34	%		4.70	%			5.16	%		4.68	%
	Efficiency ratio (1)		55.1	%		71.4	%		66.2	%		59.0	%		67.3	%			60.0	%		74.3	%
	(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.

Loan Concentrations

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

			% of
			Commercial
(in millions)	Amount		Loans
Solar Electric Power Generation	$	48.7	29	%
Hotels (except Casino Hotels) and Motels		13.5	8	%
Lessors of Nonresidential Buildings (except Miniwarehouses)		18.9	11	%
Lessors of Residential Buildings and Dwellings		9.3	5	%
Other Activities Related to Real Estate		7.6	4	%
General Freight Trucking, Local		4.7	3	%
Golf Courses and Country Clubs		4.4	3	%
Lessors of Other Real Estate Property		6.3	4	%
Child Day Care Services		3.7	2	%
Colleges, Universities, and Professional Schools		3.5	2	%

Contact: Eric Bergevin, 252-482-4400

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