Baylake Corp. Reports Financial Results for the Three Months ended March 31, 2011.

Sturgeon Bay, Wisconsin – (PR Newswire) – April 21, 2011

Baylake Corp. (OTC BB: BYLK) today announced results for the first quarter of 2011.

“We are pleased to start fiscal 2011 off on a positive note in terms of overall asset quality improvement and net profit for the first quarter ending March 31, 2011,” said Robert J. Cera, Baylake Corp. President and Chief Executive Officer. “We are optimistic that we will continue to see further reduction in the level of nonperforming assets by year-end 2011 despite continued challenges that persist in the overall economic climate,” said Cera.

Baylake reported net income for the first quarter of 2011 of $0.7 million, or $0.08 per fully-diluted common share, compared to net income of $0.8 million or $0.10 per fully-diluted common share for the first quarter of 2010. This represents a decrease in net income of $0.1 million, or $0.02 per fully-diluted common share. 

Net interest margin increased 10 basis points from 3.46% for the quarter ended March 31, 2010 to 3.56% for the quarter ended March 31, 2011, contributing to an increase in net interest income from $7.7 million in the first quarter of 2010 to $8.0 million in the first quarter of 2011.  Interest expense as a percent of average interest bearing deposits decreased from 1.53% at March 31, 2010 to 1.06% at March 31, 2011.  Operating results were negatively impacted by a $1.0 million increase in non-interest expense, from $7.7 million for the quarter ended March 31, 2010 to $8.7 million for the quarter ended March 31, 2011.  The increase was largely attributable to a $0.7 million increase in other real estate owned expenses related to valuation adjustments, as well as costs incurred in the operation and disposition of foreclosed properties during the first quarter of 2011.

Non-performing loans decreased $0.2 million, or 1.1%, from $17.4 million at March 31, 2010 to $17.2 million at March 31, 2011.  Non-performing loans totaled $16.5 million at December 31, 2010.  At March 31, 2011, the allowance for loan losses as a percent of total loans was 1.95% compared to 1.57% at March 31, 2010.  The allowance for loan losses as a percent of non-performing loans at March 31, 2011 was 70.37%, compared to 58.40% at March 31, 2010.  Net charge-offs against the reserve for the quarter ended March 31, 2011 equaled 0.45% of average total loans on an annualized basis, compared to 0.32% of average total loans on an annualized basis for the quarter ended March 31, 2010.

Baylake’s total assets and shareholders’ equity were $1.0 billion and $79.0 million, respectively, at March 31, 2011, compared to $1.0 billion and $77.0 million, respectively, at March 31, 2010.  Baylake’s total risk-based capital ratio increased to 13.14% at March 31, 2011 from 12.63% at March 31, 2010.  At March 31, 2011, both Baylake Corp. and Baylake Bank were considered “well capitalized” under applicable bank and bank holding company regulatory guidelines.

“Continued asset quality improvement and maintaining our strong capital base remain our most important priorities for 2011” said Cera.  “We believe that our capital remains at an appropriate level to allow us to execute our operating plan for fiscal 2011.”

Total deposits increased $10.5 million, or 1.3%, from $813.4 million at March 31, 2010 to $823.9 million at March 31, 2011. Total loans decreased by $23.0 million, or 3.6%, from $643.7 million at March 31, 2010 to $620.7 million at March 31, 2011.  The decrease in loans primarily resulted from the bank’s continued desire to reduce its credit risk profile in certain segments of its commercial real estate portfolio.

Baylake believes that it has more than adequate resources available to meet its short-term liquidity needs.  As of March 31, 2011, 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, 2010 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 March 31, 2011 and 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

March 31, 2011

 

December 31, 2010

March 31, 2010

 

                                                    (dollars in thousands, except per share data)        

Total assets

$ 1,019,070

 

$ 1,052,453

$1,021,290

 

Investment securities (1)

263,864

 

266,760

231,588

 

Total loans

620,728

 

636,291

643,738

 

Total deposits

823,901

 

852,566

813,394

 

Borrowings (2)

82,021

 

89,236

99,663

 

Subordinated debentures

16,100

 

16,100

16,100

 

Convertible promissory notes

9,450

 

9,450

6,650

 

Stockholders’ equity

78,967

 

77,067

77,035

 

Non-performing loans (3)

17,192

 

16,500

17,355

 

Non-performing assets (3)

30,917

 

32,452

33,266

 

Restructured loans, accruing

22,777

 

13,090

9,809

 

Shares outstanding

7,911,539

 

7,911,539

7,911,539

 

Book value per share

$          9.98

 

$          9.74

$        9.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the Three Months Ended

 

 

 

March 31,

 

 

                (dollars in thousands, except per share data)

 

Selected Operations Data – UNAUDITED

2011

2010

 

 

 

 

 

 

Total interest income

 $  10,634

 $  11,347

 

 

Total interest expense

 2,604

 3,625

 

 

 

 

 

 

 

 

 

                                               

Net interest income before provision for loan losses

8,030

7,722

 

 

 

 

Provision for loan losses

  1,300

  1,050

 

 

 

 

Net interest income after provision for loan losses

6,730

6,672

 

 

 

 

 

 

 

 

 

 

 

Total non-interest income

2,614

2,011

 

 

 

 

Total non-interest expense

  8,714

  7,719

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

  630

  964

 

 

 

 

Income tax expense (benefit)

      (21)

      147

 

 

 

 

Net income

$       651

$       817

 

 

 

 

                 

 

 

 

As of and for the Three Months Ended

 

Selected Operations Data – UNAUDITED

March 31,

 

 

 

2011

2010

 

 

 

Per Share Data: (4)

 

 

 

 

 

Net income per share (basic)

$     0.08

$     0.10

 

 

 

Net income per share (diluted)

$     0.08

$     0.10

 

 

 

Cash dividends per common share

$         --

$         --

 

 

 

Book value per share

$     9.98

$     9.74

 

 

 

 

 

 

 

 

 

Performance Ratios: (5)

 

 

 

 

 

Return on average total assets

0.28%

0.32%

 

 

 

Return on average total shareholders’ equity

3.40%

4.40%

 

 

 

Net interest margin (6)

3.56%

3.46%

 

 

 

Net interest spread (6)

3.47%

3.37%

 

 

 

Efficiency ratio (9)

80.85%

77.31%

 

 

 

Non-interest income to average assets

1.02%

0.79%

 

 

 

Non-interest expense to average assets

3.39%

3.02%

 

 

 

Net overhead ratio (7)

2.37%

2.23%

 

 

 

Average loan to average deposit ratio

75.81%

78.81%

 

 

 

Average interest earning assets to average interest bearing liabilities

108.31%

105.67%

 

 

 

 

 

 

 

 

 

Asset Quality Ratios:  (3) (5)

 

 

 

 

 

Non-performing loans to total loans

2.77%

2.70%

 

 

 

Allowance for loan losses to:

 

 

 

 

 

     Total loans

1.95%

1.57%

 

 

 

     Non-performing loans

70.37%

58.40%

 

 

 

Net charge-offs to average loans

0.45%

0.32%

 

 

 

Non-performing assets to total assets

3.03%

3.26%

 

 

 

 

 

 

 

 

 

Capital Ratios: (5)(8)

 

 

 

 

 

Shareholders’ equity to assets

7.75%

7.54%

 

 

 

Tier 1 risk-based capital

10.60%

10.50%

 

 

 

Total risk-based capital

13.14%

12.63%

 

 

 

Leverage ratio

7.58%

7.74%

 

 

 

 

 

 

 

 

 

Other:

 

 

 

 

 

Number of bank subsidiaries

1

1

 

 

 

Number of banking facilities

27

28

 

 

 

Number of full-time equivalent employees

304

298

 

 

 

               

(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.

Member FDICEqual Housing Lender.  (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.