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 $3,389,000 for the second quarter of 2018, primarily driven by the gain on consolidation noted above.
- Return on average assets of 5.72%, compared to 0.75% for the second quarter of 2017.
- Return on average common shareholders’ equity of 41.73%, compared to 6.97% for the second quarter of 2017.
- Return on average tangible common shareholders’ equity of 62.66%, compared to 6.78% for the second quarter of 2017.
|Financial Performance (Consolidated)|
|(Includes Sound Bank as of 9/1/2017)|
|Dollars in thousands, except per share data; unaudited||Three Months Ended||Year-to-Date|
|Interest and fees on loans||$||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 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|
|Government lending revenue||4,241||3,054||192||1,537||730||7,295||2,366|
|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|
|Occupancy and equipment||462||413||434||303||314||875||680|
|Loan and special assets||407||362||373||287||408||769||593|
|(Gain) loss on sale of foreclosed assets||41||0||0||0||0||41||(165||)|
|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|