Baylake Corp. Reports Financial Results for the Three Months and Six Months ended June 30, 2010.

Sturgeon Bay, Wisconsin – (PR Newswire) – July 21, 2010

Baylake Corp. (OTC BB: BYLK) today announced results for the second quarter of 2010.

 “The improved operating results from the second quarter were a direct result of our successful effort to improve our net interest margin,” said Robert J. Cera, Baylake Corp. President and Chief Executive Officer.

Baylake reported net income for the second quarter of 2010 of $1.3 million, or $0.17 per fully-diluted common share, compared to net income of $0.5 million or $0.07 per fully-diluted common share for the second quarter of 2009. This represents an increase in net income of $0.8 million, or $0.10 per fully-diluted common share.  The difference in operating results for the second quarter of 2010 compared to the second quarter of 2009 is primarily attributable to a $1.4 million increase in net interest income from $6.8 million for the second quarter of 2009 to $8.2 million for the second quarter of 2010.  This increase was offset in part by an increase in income tax expense of $0.8 million from the second quarter of 2009 to the second quarter of 2010.

Net interest margin increased 71 basis points from 2.97% for the quarter ended June 30, 2009 to 3.68% for the quarter ended June 30, 2010.  Interest expense as a percent of average interest bearing deposits decreased from 2.13% at June 30, 2009 to 1.36% at June 30, 2010.  Operating results were negatively impacted by a $0.1 million increase in the provision for loan losses, from $1.2 million for the quarter ended June 30, 2009 to $1.3 million for the quarter ended June 30, 2010. 

Non-performing loans decreased $27.9 million (54.1%) from $51.6 million at June 30, 2009 to $23.7 million at June 30, 2010.    As a percent of total loans, non-performing loans decreased from 7.3% at June 30, 2009 to 3.7% at June 30, 2010.  At June 30, 2010 and 2009, the allowance for loan losses as a percent of total loans was unchanged at 1.8%.  The allowance for loan losses as a percent of non-performing loans at June 30, 2010 was 48.3%, compared to 25.2% at June 30, 2009.  Net recoveries against the reserve for the quarter ended June 30, 2010 were $0.1 million compared to net charge-offs of $2.9 million for the quarter ended June 30, 2009.

 “A highlight during the second quarter was the successful completion on April 30, 2010 of our $9.45 million convertible subordinated debt offering,” said Cera.  “The funds raised in that offering strengthen our balance sheet and provide additional capital to support loan growth once demand begins to increase.”

Baylake’s total assets and shareholders’ equity were $1.0 billion and $78.2 million, respectively, at June 30, 2010, compared to $1.0 billion and $70.4 million at June 30, 2009.  Baylake’s total risk-based capital ratio improved to 13.3% at June 30, 2010 from 10.4% at June 30, 2009.  At June 30, 2010, both Baylake Corp. and Baylake Bank were above “well capitalized” thresholds established under applicable bank and bank holding company regulatory guidelines.

While total deposits decreased $12.0 million, or 1.4%, from $834.8 million at June 30, 2009 to $822.8 million at June 30, 2010, the decline was a result of a strategic decision to allow $37.5 million of brokered deposits to mature in an effort to reduce Baylake’s reliance on such deposits. Total deposits, excluding brokered deposits, increased $25.5 million, or 3.4, from $749.2 million at June 30, 2009 to $774.7 million at June 30, 2010.  Total loans decreased by $68.7 million, or 9.7%, from $709.8 million at June 30, 2009 to $641.1 million at June 30, 2010.

Baylake believes that it has more than adequate resources available to meet its short-term liquidity needs.  As of June 30, 2010, Baylake Bank had $30.0 million in established lines of credit with nonaffiliated banks, none of which had been drawn upon as of that date.  Additionally, Baylake Bank is approved to access, subject to pledging appropriate collateral, the Federal Reserve Discount Window for short term borrowing as necessary.

Baylake Corp., headquartered in Sturgeon Bay, Wisconsin, is the bank holding company for Baylake Bank.  Through Baylake Bank, Baylake Corp. provides a variety of banking and financial services from 28 financial centers located throughout Northeast and Central Wisconsin, in Brown, Door, Green Lake, Kewaunee, Manitowoc, Outagamie, Waupaca, and Waushara Counties.

The following appears in accordance with the Private Securities Litigation Reform Act of 1995:

This news release contains forward-looking statements about the financial condition, results of operations and business of Baylake Corp.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts.  They often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate" or words of similar meaning, or future or conditional verbs such as  "would," "should," "could" or "may."

Forward-looking statements, by their nature, are subject to risks and uncertainties.  A number of factors, many of which are beyond the control of Baylake Corp., could cause actual conditions, events or results to differ significantly from those indicated by the forward-looking statements.  These factors, which are described in this press release and in the annual and quarterly reports filed by Baylake Corp. with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2009 under “Item 1A. Risk Factors,” include certain credit, market, operational, liquidity and interest rate risks associated with the company’s business and operations.  Other factors include changes in general business and economic conditions, developments (including collection efforts) relating to the identified non-performing loans and other problem loans and assets, world events (especially those which could affect our customers’ tourism-related businesses), competition, fiscal and monetary policies and legislation.

Forward-looking statements speak only as of the date they are made, and Baylake Corp. does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Baylake Corp. and Subsidiaries

Summary Financial Data

The following tables set forth selected consolidated financial and other data for Baylake Corp. at the dates and for the period indicated.  The selected financial and other data at June 30, 2010 has not been audited, but in the opinion of management of Baylake Corp. reflects all necessary adjustments for a fair presentation of results as of the dates and for the periods covered. 

Selected Financial Condition Data

(at end of period) - UNAUDITED

At June 30, 2010

At December 31, 2009

At June 30, 2009

 

(dollars in thousands except per share data)

 

 

 

 

Total assets

$         1,041,330

$         1,044,457

$         1,042,025

Investment securities (1)

226,416

204,834

186,625

Total loans

641,145

654,461

709,820

Total deposits

822,811

831,629

834,777

Borrowings (2)

106,316

106,122

108,207

Subordinated debentures

16,100

16,100

16,100

Convertible debentures

9,450

5,350

0

Stockholders’ equity

78,156

74,598

70,386

Non-performing loans (3)

23,710

26,590

51,601

Non-performing assets (3)

39,672

41,585

59,281

Restructured loans, accruing

9,845

2,061

12

 

 

 

 

Shares outstanding

7,911,539

7,911,539

7,911,539

Book value per share

$9.88          

$9.43

$8.90

 

 

As of and for the Three Months

Ended June 30,

As of and for the Six Months

Ended June 30,

 

2010

2009

2010

2009

 

(dollars in thousands, except per share data)

(dollars in thousands, except per share data)

Selected Operations Data  UNAUDITED

 

 

 

 

Total interest income

$             11,492

$             11,579

$             22,839

$            24,093

Total interest expense

                3,312

                4,814

                6,938

                9,889

 

 

 

 

 

Net interest income

8,180

6,765

15,901

14,204

Provision for loan losses

                1,250

                1,200

                2,300

                2,400

 

 

 

 

 

Net interest income after provision for loan losses

                6,930

                5,565

              13,601                

              11,804

 

 

 

 

 

Total non-interest income

2,474

2,593

4,486

7,130

Total non-interest expense

                7,488

                7,814

              15,207

              15,242

 

__________

__________

__________

__________

Income (loss) before income taxes

1,916

344

2,880

3,692

Income tax expense (benefit)

                   567

                 (190)

                   714

                   876

 

 

 

 

 

Net income

$              1,349

$                   534 

$              2,166

$              2,816

Per Share Data (4):

 

 

 

 

Net income per share (basic)

$               0.17

$               0.07

$               0.27

$               0.36

Net income per share (diluted)

0.17

0.07

0.27

0.36

Cash dividends per common share

-

-

-

-

Book value per share

9.88

8.90

9.88

8.90

 

 

 

 

 

Performance Ratios (5):

 

 

 

 

Return on average total assets

0.59%

0.21%

0.42%

0.54%

Return on average total shareholders’ equity

7.01%

3.06%

5.72%

8.03%

Net interest margin (6)

3.68%

2.97%

3.57%

3.10%

Net interest spread (6)

3.58%

2.85%

3.47%

2.98%

Efficiency ratio (9)

71.47%

82.62%

74.31%

80.10%

Non-interest income to average assets

0.97%

1.00%

0.88%

1.36%

Non-interest expense to average assets

2.93%

3.00%

2.98%

2.91%

Net overhead ratio (7)

1.96%

2.01%

2.10%

1.55%

Average loan to average deposit ratio

79.62%

85.20%

79.22%

85.22%

Average interest earning assets to average interest                          bearing liabilities

106.75%

106.17%

106.21%

106.19%

 

 

 

 

 

Asset Quality Ratios (3)(5):

 

 

 

 

Non-performing loans to total loans

3.70%

7.27%

3.70%

7.27%

Allowance for loan losses to:

 

 

 

 

     Total loans

1.79%

1.83%

1.79%

1.83%

     Non-performing loans

48.31%

25.24%

48.31%

25.24%

Net charge-offs to average loans

-0.04%

1.61%

0.14%

0.82%

Non-performing assets to total assets

3.81%

5.69%

3.81%

5.69%

 

 

 

 

 

Capital Ratios (5)(8):

 

 

 

 

Shareholders’ equity to assets

7.51%

6.75%

7.51%

6.75%

Tier 1 risk-based capital

10.78%

9.12%

10.78%

9.12%

Total risk-based capital

13.29%

10.37%

13.29%

10.37%

Leverage ratio

7.98%

7.13%

7.98%

7.13%

 

 

 

 

 

Other:

 

 

 

 

Number of bank subsidiaries

1

1

1

1

Number of banking facilities

28

28

28

28

Number of full-time equivalent employees

298

304

298

304

(1)   Includes securities classified as available for sale.

(2)   Consists of Federal Home Loan Bank advances, federal funds purchased, and collateralized borrowings.

(3)   Non-performing loans consist of non-accrual loans and guaranteed loans 90 days or more past due but still accruing interest.  Non-performing assets consist of non-performing loans and other real estate owned.

(4)   Earnings per share are based on the weighted average number of shares outstanding for the period.

(5)   With the exception of end of the period ratios, all ratios are based on average daily balances and are annualized where appropriate.

(6)   Net interest margin represents net interest income as a percentage of average interest-earning assets.  Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(7)   Net overhead ratio represents the difference between non-interest expense and non-interest income, divided by average assets.

(8)   The capital ratios are presented on a consolidated basis.

(9)   Efficiency ratio is calculated as follows: non-interest expense divided by the sum of taxable equivalent net interest income plus non-interest income, excluding net investment security gains and excluding net gains on sale of fixed assets.