Baylake Corp. Reports Financial Results for the Three Months and Nine Months ended September 30, 2010.

Sturgeon Bay, Wisconsin – (PR Newswire) –  November 8, 2010

Baylake Corp. (OTC BB: BYLK) today announced results for the third quarter of 2010.
• Net loss of $0.5 million or $0.06 per share.
• Earnings from core operations (before taxes, provision for loan losses and securities gains) were $2.3 million, an increase of $0.2 million from third quarter 2009.
• Net interest income increased to $8.2 million compared to $7.4 million for third quarter 2009, an increase of $0.8 million or 10.8%.
• Net interest margin rose 36 basis points to 3.55% from third quarter 2009.
• Nonperforming loans decreased $21.6 million, or 53.3%, from $40.5 million at September 30, 2009 to $18.9 million at September 30, 2010.
• The allowance for loan losses as a percent of non-performing loans increased to 69.9% from 34.5% at September 30, 2009.

Baylake reported a 2010 third quarter net loss of $0.5 million, or $0.06 per fully-diluted common share, compared to net income of $0.8 million or $0.11 per fully-diluted common share for the third quarter of 2009. This represents a decrease in net income of $1.3 million, or $0.17 per fully-diluted common share. The difference in operating results for the third quarter of 2010 compared to the third quarter of 2009 is primarily attributable to a $3.4 million increase in the provision for loan losses, from $1.2 million for the third quarter of 2009 to $4.6 million for the third quarter of 2010. This increase was offset in part by a decrease in income tax expense of $0.8 million from the third quarter of 2009 to the third quarter of 2010. Operating results were also favorably impacted by realized gains of $1.0 million from the sale of securities during the third quarter of 2010.

Net interest income increased $0.8 million, or 10.8%, from $7.4 million during the third quarter of 2009 to $8.2 million for the third quarter of 2010. Net interest margin increased 36 basis points from 3.19% for the quarter ended September 30, 2009 to 3.55% for the quarter ended September 30, 2010. Interest expense as a percent of average interest bearing deposits decreased 56 basis points, from 1.96% at September 30, 2009 to 1.40% at September 30, 2010.

“Our third quarter operating performance is indicative of the continued meaningful progress being made in improving the overall asset quality of the bank”, said Robert J. Cera, Baylake Corp. President and Chief Executive Officer. “We recognize that our net operating performance was not at an acceptable level in the third quarter, but it reflects the continued reality of a difficult and challenging economy affecting us and many of our customers.”

“The loss recorded in the quarter was primarily the result of a $3.4 million increase in the provision for loan losses,” Cera added. “We believe that the increase in our allowance for loan losses properly reflects the remaining risk embedded in the loan portfolio as we near the end of a downturn in the bank’s credit cycle. The positive changes in the risk profile of the bank during the last few quarters afford us a greater opportunity to shift our focus toward improving the bank’s performance in 2011 and beyond.”

Non-performing loans decreased $21.6 million (53.3%) from $40.5 million at September 30, 2009 to $18.9 million at September 30, 2010. As a percent of total loans, non-performing loans decreased from 6.0% at September 30, 2009 to 3.0% at September 30, 2010. At September 30, 2010 and 2009, the allowance for loan losses as a percent of total loans was unchanged at 2.1%. The allowance for loan losses as a percent of non-performing loans at September 30, 2010 was 69.9%, compared to 34.5% at September 30, 2009. Net charge-offs against the reserve for the quarter ended September 30, 2010 were $2.8 million compared to net charge-offs of $0.2 million for the quarter ended September 30, 2009.

Baylake’s total assets and shareholders’ equity were $1.1 billion and $79.8 million, respectively, at September 30, 2010, compared to $1.0 billion and $74.9 million, respectively, at September 30, 2009. Baylake’s total risk-based capital ratio improved to 12.9% at September 30, 2010 from 10.4% at September 30, 2009. At September 30, 2010, both Baylake Corp. and Baylake Bank were above “well capitalized” thresholds established under applicable bank and bank holding company regulatory guidelines.

Total deposits increased $13.3 million, or 1.6%, from $832.1 million at September 30, 2009 to $845.4 million at September 30, 2010. Total deposits, excluding brokered deposits, increased $13.1 million, or 1.7%, from $768.2 million at September 30, 2009 to $781.3 million at September 30, 2010. Total loans decreased by $37.9 million, or 5.6%, from $675.6 million at September 30, 2009 to $637.7 million at September 30, 2010.

Baylake believes that it has more than adequate resources available to meet its short-term liquidity needs. As of September 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 27 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 September 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 September 30, 2010

At December 31, 2009

At September 30, 2009

 

(dollars in thousands except per share data)

 

 

 

 

Total assets

$         1,051,813

 

$         1,044,457

$         1,045,561

Investment securities (1)

254,900

204,834

209,612

Total loans

637,727

654,461

675,634

Total deposits

845,354

831,629

832,124

Borrowings (2)

92,471

106,122

106,221

Subordinated debentures

16,100

16,100

16,100

Convertible debentures

9,450

5,350

4,200

Stockholders’ equity

79,765

74,598

74,915

Non-performing loans (3)

18,925

26,590

40,473

Non-performing assets (3)

34,423

41,585

50,652

Restructured loans, accruing

11,416

2,061

11

 

 

 

 

Shares outstanding

7,911,539

7,911,539

7,911,539

Book value per share

$10.08          

$9.43

$9.47


 

 

As of and for the Three Months

Ended September 30,

As of and for the Nine Months

Ended September 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

$             11,265

$             11,828

$             34,104

$            35,922

Total interest expense

                3,070

                4,410

              10,008

              14,300

 

 

 

 

 

Net interest income

8,195

7,418

24,096

21,622

Provision for loan losses

                4,550

                1,200

                6,850

                3,600

 

 

 

 

 

Net interest income after provision for loan losses

                3,645

                6,218

              17,246               

              18,022

 

 

 

 

 

Total non-interest income

3,267

2,090

7,751

9,219

Total non-interest expense

                8,238

                7,429

                23,443

              22,671

 

__________

__________

__________

__________

Income (loss) before income taxes

(1,326)

879

1,554

4,570

Income tax expense (benefit)

                 (814)

                     44

                (101)

                  919

 

 

 

 

 

Net income

$              (512)

$                   835 

$              1,655

$              3,651

Per Share Data (4):

 

 

 

 

Net income per share (basic)

$               (0.06)

$               0.11

$               0.21

$               0.46

Net income per share (diluted)

(0.06)

0.11

0.21

0.46

Cash dividends per common share

-

-

-

-

Book value per share

10.08

9.47

10.08

9.47

 

 

 

 

 

Performance Ratios (5):

 

 

 

 

Return on average total assets

-0.21%

0.31%

0.21%

0.46%

Return on average total shareholders’ equity

-2.54%

4.61%

2.85%

6.87%

Net interest margin (6)

3.55%

3.19%

3.56%

3.13%

Net interest spread (6)

3.44%

3.06%

3.46%

3.00%

Efficiency ratio (9)

75.96%

75.53%

74.88%

78.70%

Non-interest income to average assets

1.23%

0.79%

1.00%

1.17%

Non-interest expense to average assets

3.11%

2.80%

3.02%

2.88%

Net overhead ratio (7)

1.88%

2.01%

2.02%

1.71%

Average loan to average deposit ratio

75.99%

82.03%

78.11%

84.15%

Average interest earning assets to average interest                          bearing liabilities

108.99%

107.61%

107.15%

106.66%

 

 

 

 

 

Asset Quality Ratios (3)(5):

 

 

 

 

Non-performing loans to total loans

2.97%

5.99%

2.97%

5.99%

Allowance for loan losses to:

 

 

 

 

     Total loans

2.07%

2.07%

2.07%

2.07%

     Non-performing loans

69.89%

34.52%

69.89%

34.52%

Net charge-offs to average loans

1.73%

0.14%

0.67%

0.60%

Non-performing assets to total assets

3.27%

4.84%

3.27%

4.84%

 

 

 

 

 

Capital Ratios (5)(8):

 

 

 

 

Shareholders’ equity to assets

7.58%

7.17%

7.58%

7.17%

Tier 1 risk-based capital

10.40%

9.55%

10.40%

9.55%

Total risk-based capital

12.91%

11.34%

12.91%

11.34%

Leverage ratio

7.56%

7.16%

7.56%

7.16%

 

 

 

 

 

Other:

 

 

 

 

Number of bank subsidiaries

1

1

1

1

Number of banking facilities

27

28

27

28

Number of full-time equivalent employees

303

306

303

306

 (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.

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