West Town Bancorp, Inc. Announces First Quarter 2017 Financial Results

RALEIGH, N.C., May 1, 2017 /PRNewswire/ -- West Town Bancorp, Inc. (OTC PINK: WTWB) (the "Company"), the holding company for West Town Bank & Trust (the "Bank"), announced today its financial results for the quarter ended March 31, 2017 and reported the Bank earned net income of $1,050,000 resulting in the Company earning net income of $879,000, or $0.57 per diluted common share, an increase of $91,000, or 11.2%, as compared to net income of $788,000, or $0.55 per diluted common share for the quarter ended March 31, 2016. Return on average total assets was 1.31% and return on average shareholders' equity was 12.57% as compared to 1.44% and 12.82% respectively for the first quarter of 2016. 

On February 17, 2017, the Company announced that it had entered into a definitive agreement with Sound Banking Company ("Sound Bank") whereby the Company will acquire all of the outstanding shares of Sound Bank, a North Carolina chartered bank. The acquisition will be accomplished through the merger of Sound Bank with and into SBC Interim Bank, which is an interim bank formed under North Carolina law by the Company for purposes of effecting the acquisition of Sound Bank.  The Company anticipates the merger to be legally closed during the third quarter 2017, subject to receipt of regulatory approvals, the approval of the merger by the shareholders of Sound Bank and the satisfaction of other customary closing conditions. A complete copy of the amended and restated merger agreement with Sound Bank may be found by visiting the News and Events page of the Company's website at www.westtownbank.com.

Select financial highlights for 1Q 2017:

• The Bank's net income for the first quarter totaled $1,050,000, a 33% increase over the $788,000 reported for the first quarter of 2016.
• Total assets increased $45,735,000 or 19.9% from $229,608,000 to $275,343,000 year over year. Increase in net interest income of $552,000 or 25.5% as compared to March 31, 2016.
• Increase in total deposits of $51,285,000 or 30.0% as compared to March 31, 2016.
• The Bank's nonperforming assets ("NPAs") to total assets decreased 7 basis points from 1.55% at March 31, 2016 to 1.48% at March 31, 2017. In total dollars, NPAs increased $432,000 from $3,554,000 at March 31, 2016 to $3,986,000 at March 31, 2017.
• The Bank's Allowance for Loan and Lease Losses to loans held for investment increased 29 basis points to 1.44% as of March 31, 2017, from 1.14% one year earlier. The increase is primarily attributable to the significant growth in our governmental guaranteed lending portfolio.

Eric Bergevin, President and CEO commented, "Our first quarter results were driven by solid loan growth and increased net interest income. While noninterest income declined year over year due to reduced mortgage volumes, we are quite pleased with the increased income earned in governmental guaranteed lending for the first quarter. As we anticipated in our budget process for 2017, our governmental guaranteed lending pipeline has seasonality based on loan/industry mix, we are expecting lower income in the second quarter as compared to the same quarter last year. However, we expect the seasonality to be isolated to the second quarter with a stronger second half of the year than last year. We are excited about the pending acquisition of Sound Bank. Our senior management team is focused on planning for the successful integration of the Sound Bank franchise to ensure the transition is smooth and seamless for its customers and employees."

STRONG YEAR-OVER-YEAR LOAN AND DEPOSIT GROWTH
At March 31, 2017, the Company's total assets were $275,343,000, loans held for sale were $45,266,000, net loans held for investment were $173,325,000, total deposits were $224,104,000 and total shareholder's equity was $29,338,000. Compared with March 31, 2016, total assets increased $45,735,000 or 19.9%, loans held for sale increased $15,944,000 or 54.4%, loans held for investment increased $11,848,000 or 7.3%, total deposits increased $51,285,000 or 30.0% and total shareholders' equity increased $4,320,000 or 17.3%.

Total loan originations for the Bank across all sectors for the three months ended March 31, 2017 totaled $68,841,000, a decrease of $14,611,000 or 17.5% as compared to the same prior year three months of $83,452,000. The primary driver to the origination decrease was a $12,247,000 or 26.5% reduction in mortgage originations. 

Interest checking deposits increased $11,419,000 or 88.5%, total money market deposits increased $36,596,000 or 161.9%, while retail CDs decreased $28,761,000 or 25.2% year-over-year. 

CAPITAL LEVELS
The Bank continued to exceed "well capitalized" requirements for each of the four primary capital levels monitored by state and federal regulators:

The book value per common share increased from $18.21 at March 31, 2016 to $20.01 at March 31, 2017.

ASSET QUALITY
The Bank's nonperforming assets to total assets ratio decreased 6 basis points during the first quarter of 2017 from 1.54% at December 31, 2016 to 1.48% at March 31, 2017. The reduction is primarily related to the sale of one of the Bank's OREO properties during the first quarter. The sale of the property resulted in a gain of $165,000.

The Company recorded a $276,000 provision for loan losses during the first quarter of 2017, as compared to a provision of $123,000 during the same period in 2016. The Company recorded $58,000 in net charge-offs during the quarter with the remaining provision expense due to volume growth primarily in the governmental guaranteed lending portfolio. The ratio of allowance for loan and lease losses as a percentage of total loans held for investment increased from 1.15% at March 31, 2016 and 1.36% at December 31, 2016 to 1.44% at March 31, 2017. Total reserves represented 68.3% of the non-accrual loan balances as of March 31, 2017, as compared to 58.8% a year earlier.

NET INTEREST INCOME IMPROVES YEAR OVER YEAR
Net interest income for the three months ended March 31, 2017 was $2,712,000, an increase of $552,000 or 25.5% as compared to $2,160,000 reported for the same prior year period. The increase was fueled by a $709,000 or 26.6% increase in interest and fee income earned on the Bank's loan portfolio which was driven by volume growth. The Company's net interest margin was 4.39%, unchanged from the same period last year and up 11 basis points as compared to the 4.28% reported for the linked quarter ending December 31, 2016.

NONINTEREST INCOME
Noninterest income for the three months ended March 31, 2017 was $3,556,000, a decrease of $403,000 or 10.2% as compared to the same prior year period. Specific items to note:

• Mortgage revenue decreased $626,000 or 28.7% year over year;
• Gains on the sale of government guaranteed loans increased $507,000 or 47.3% year over year;
• The fair value adjustment on loan servicing rights decreased $391,000 or 87.5% as compared to the quarter ended March 31, 2016. The reduction is attributable to several factors:
• Current origination volume is more heavily weighted towards the USDA portfolio as compared to the previous year. USDA loans in general have a lower servicing fee thereby resulting in a lower fair value adjustment;
• Higher prepayment speeds due to rising rate environment; and
• Overall fair value marks on an individual loan basis are decreasing due to the rising rate environment (as prepayments are expected to increase).

NONINTEREST EXPENSE
Noninterest expense for the three months ended March 31, 2017 totaled $4,421,000, a decrease of $68,000 or 1.5% as compared to the same prior-year period. Specific items to note as compared to the quarter ended March 31, 2017:

• Salaries and benefits expenses increased 7.4% or $194,000 due to a "catch-up" of ASC 310-20 (previously FAS 91) salary deferrals in the first quarter of 2016;
• Loan expenses decreased $165,000 or 50.2% due to decreased mortgage volumes;
• Advertising expenses decreased $145,000 or 61.4% due to decreased mortgage volumes as well as a concentrated effort to reduce overall advertising expenses for the Company;
• Merger and acquisition expenses related to the pending acquisition of Sound Bank totaled $172,000 for the quarter. Note that a large majority of these expenses are not tax deductible, thereby contributing to the Company's increased current year effective tax rate from 38.5% to 41.5%.

About West Town Bancorp, Inc.
West Town Bancorp, Inc. is the holding company for West Town Bank & Trust, a North Riverside, IL based state-chartered bank. The Bank provides banking services through its offices in Illinois and North Carolina and also maintains loan production offices in North Carolina, New York, Maryland, Pennsylvania, Florida and New Jersey. Its primary deposit products are checking, savings, and time certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans. Additionally, the Bank engages in mortgage banking activities and, as such, originates and sells one-to-four family residential mortgage loans in multiple states. The Company is registered with, and supervised by, the Federal Reserve, and the Bank's primary regulators are the Illinois Department of Financial and Professional Regulation and FDIC.

For more information, visit www.westtownbank.com.

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: required governmental and shareholder approvals for the Sound Bank acquisition may be delayed or not received at all; 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 banking regulations and accounting principles, policies or guidelines; 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.

SOURCE West Town Bancorp, Inc.

Related Links

http://www.westtownbank.com