NEWS RELEASE
Contact: Steven D. Jennerjohn
(920)-743-5551
Source: Baylake Corp.
BAYLAKE CORP. REPORTS FINANCIAL RESULTS FOR THE QUARTER ENDED MARCH 31, 2004
Sturgeon Bay, Wisconsin - (Business Wire) -- May 4, 2004
Baylake Corp. (OTC BB: BYLK), a bank holding company with $993.0 million
in assets, reported net income of $1.9 million or $0.25 basic earnings per share
for the quarter ended March 31, 2004, as compared to $1.8 million or $0.24 per
share for the quarter ended March 31, 2003. The increase in net income was
primarily due to increased net interest income and a decrease in the provision
for loan loss. These increases were partially offset by a decrease in
non-interest income, an increase in non-interest expense and an increase in
income tax expense. Diluted earnings per share were $0.25 for the first quarter
of 2004 compared to $0.24 a year earlier. Return on assets (ROA) and return on
equity (ROE) decreased for the quarter, to 0.78% and 10.80%, respectively, from
0.82% and 11.23%, respectively, from the same quarter one year ago.
During the quarter ended March 31, 2004, net interest income increased
$1.0 million to $7.8 million when compared to the first quarter of 2003 due
primarily to an increase in net interest margin of 9 basis points for the
quarter in addition to an increase in average interest-earning assets of $80.0
million. Net interest margin for the first quarter 2004 increased to 3.62% from
3.53% a year earlier as interest-bearing liabilities re-priced 75 basis points
lower compared to a decrease of 62 basis points in interest-earning assets. The
increase in average interest-earning assets was primarily attributable to growth
in loan and investment portfolios during the quarter. Net interest margin
increased 9 basis points to 3.62% for the first quarter of 2004 when compared to
the first quarter of 2003. The major contributing factor to the increase in net
interest income was an increase in average interest-earning assets relative to
interest paying liabilities. In addition, interest spread increased to 3.42% for
the quarter ended March 31, 2004 compared to 3.29% for the same period in 2003.
Baylake Corp, like its peer group banks, continues to be challenged by
maintaining growth in its net interest income in the current interest rate
environment of relatively stable low interest rates.
Non-interest income was $2.0 million during the first quarter of 2004, a
decrease of $662,000 when compared to the same quarter last year. The decrease
was primarily attributable to decreases in: gain on sale of subsidiary in 2003
totaling $350,000, gains on sales of loans totaling $212,000, a decrease in loan
servicing fees totaling $124,000 and a decrease in other fees for other services
to customers totaling $104,000. The decreases were partially offset by increases
in fiduciary income of $40,000 and other income of $88,000.
For the quarter ended March 31, 2004, non-interest expense increased
$340,000 over the same quarter last year. Personnel and benefit expense
increased approximately $164,000 due to additional staffing and normal salary
increases as well as significant increases in costs related to health insurance.
Occupancy and equipment expense increased $29,000 due to expansion in existing
markets. Data processing expenses increased $11,000, a result of increased
customer transaction activity. Employee acquisition expenses increased $38,000,
the result of costs related to recruitment of various sales and administrative
staff. Expenses on other real estate owned increased $22,000, the result of
increased holding costs relative to these properties during the quarter.
Income tax expense increased $63,000 for the quarter ended March 31, 2004
when compared to the same quarter last year, the result of increased taxable
income.
Total assets for Baylake Corp. increased 1.8% during the first quarter of
2004 to $993.0 million at March 31, 2004 when compared to total assets of $975.2
million at December 31, 2003. Total loans
increased 2.7% during the first quarter of 2004 to $714.7 million at March 31,
2004, while deposits during the quarter decreased 1.2% to $774.1 million. Total
shareholders' equity increased 3.6% for the first quarter 2004 to $72.2 million
at March 31, 2004 as compared with $69.6 million at December 31, 2003.
Baylake Corp. recorded provisions for loan losses totaling $775,000 during
the first quarter of 2004, as compared to $893,000 for the same period in 2003.
The decrease in the provision occurred as a result of slight improvement in the
grading of several non-performing loans during the quarter. The allowance for
loan losses increased $492,000 to $12.7 million during the quarter, reflecting
the provision and charge-offs during the period. During the first quarter of
2004, Baylake Corp. had net loan charge-offs totaling $282,000. The ratio of
allowance for loan losses to total loans was 1.77% at March 31, 2004, as
compared to 1.75% at December 31, 2003. Non-performing loans totaled $16.0
million and $16.2 million at March 31, 2004 and December 31, 2003, respectively.
The ratio of allowance for loan losses to non-performing loans was 79.2% and
75.0% at March 31, 2004 and December 31, 2003, respectively.
Foreclosed assets, net, at March 31, 2004 increased $545,000 from December
31, 2003 primarily as the result of four commercial real estate properties added
as the result of foreclosures during the quarter.
Despite the high level of non-performing loans at quarter's end, Baylake
Corp. believes the balance of the allowance for loan loss at March 31, 2004 is
presently sufficient to absorb loan losses inherent in the portfolio, although
future adjustments to the allowance may be necessary based on changes in the
performance of the loan portfolio or in economic conditions and the impact that
these changes, if any, may have on the ability of borrowers to continue to
service or repay outstanding credits and on the value of the underlying
collateral securing these credits.
Capital resources for the three-month period ended March 31, 2004 improved
by $2.5 million. Although liquidity resources tightened in the first quarter as
a result of normal seasonal factors, Baylake Corp. anticipates that it has
resources available to meet its commitments. At March 31, 2004, Baylake Corp.
had $60.4 million of established lines of credit with nonaffiliated banks, of
which $39.4 million was outstanding at March 31, 2004.
Baylake Corp., headquartered in Sturgeon Bay, Wisconsin, is the bank holding
company for Baylake Bank. Through Baylake Bank, the Company provides a variety
of banking and financial services from 26 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 "will," "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. This press
release, and the most recent annual reports filed by Baylake Corp. with the
Securities and Exchange Commission, including its Form 10-K for the year ended
December 31, 2003, describe some of these factors, including 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, 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 periods indicated. The selected
consolidated financial and other data at March 31, 2004 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.
AT AT AT
MARCH 31, DECEMBER 31, MARCH 31,
2004 2003 2003
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(DOLLARS IN THOUSANDS)
SELECTED FINANCIAL CONDITION DATA (AT END OF PERIOD):
Total assets $993,032 $975,238 $907,064
Investment securities(1) 201,099 195,847 152,611
Federal funds sold 0 0 12
Total loans 714,706 696,155 681,684
Total deposits 774,062 783,292 742,646
Borrowings(2) 124,473 98,451 74,061
Notes payable and subordinated debt 0 53 53
Junior subordinated debentures issued to unconsolidated
subsidiary 16,598 16,598 16,100
Total shareholders' equity 72,151 69,628 66,434
Non-performing loans, net of discount(3)(4) 15,978 16,222 21,600
Non-performing assets, net of discount(3)(4) 18,794 18,493 22,226
AS OF AND FOR THE
THREE MONTHS
ENDED MARCH 31,
--------------------------
2004 2003
---------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
SELECTED INCOME DATA:
Total interest income $ 11,861 $ 11,898
Total interest expense 4,033 5,087
---------- ----------
Net interest income 7,828 6,811
Provision for loan losses 775 893
---------- ----------
Net interest income after provision for loan losses 7,053 5,918
Total non-interest income 1,982 2,644
Total non-interest expense 6,372 6,032
---------- ----------
Income before income tax 2,663 2,530
Income tax provision 767 704
---------- ----------
Net income $ 1,896 $ 1,826
========== ==========
PER SHARE DATA:(5)
Net income per share (basic) $ 0.25 $ 0.24
Net income per share (diluted) 0.25 0.24
Cash dividends per common share 0.14 0.13
Book value per share 9.46 8.84
PERFORMANCE RATIOS:(6)
Return on average total assets 0.78% 0.82%
Return on average total shareholders' equity 10.80 11.23
Net interest margin(7) 3.62 3.53
Net interest spread(7) 3.42 3.29
Non-interest income to average assets 0.81 1.19
Non-interest expense to average assets 2.61 2.72
Net overhead ratio(8) 1.80 1.53
Efficiency ratio 63.13 61.63
Average loan-to-average deposit ratio 91.57 91.25
Average interest-earning assets to average interest-bearing 111.01 109.61
liabilities
ASSET QUALITY RATIOS:(3)(4)(6)
Non-performing loans to total loans 2.24% 3.17%
Allowance for loan losses to:
Total loans 1.77 1.79
Non-performing loans 79.18 56.35
Non-performing assets 67.31 54.76
Net charge-offs to average loans 0.16 0.08
Non-performing assets to total assets 1.89 2.45
CAPITAL RATIOS:(6)(9)
Shareholders' equity to assets 7.27% 7.32%
Tier 1 risk-based capital 9.57 9.21
Total risk-based capital 10.82 10.47
Leverage ratio 8.18 7.96
RATIO OF EARNINGS TO FIXED CHARGES:(10)
Including deposit interest 1.66x 1.50x
Excluding deposit interest 3.62 3.55
OTHER DATA AT END OF PERIOD:
Number of bank subsidiaries 1 1
Number of banking facilities 26 26
Number of full-time equivalent employees 300 296
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(1) Includes securities classified as held-to-maturity and 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, guaranteed loans 90
days or more past due but still accruing interest and restructured loans.
Non-performing assets consist of non-performing loans and other real
estate owned.
(4) The decrease in non-performing assets during the three months ended March
31, 2004 was due, in part, to a decrease in non-accrual loans in the
fourth quarter of 2003, primarily as a result of a previously mentioned
loan charge-off in the amount of $2.6 million.
(5) Earnings and dividends per share are based on the weighted average number
of shares outstanding for the period.
(6) With the exception of end of period ratios, all ratios are based on
average monthly balances and are annualized where appropriate.
(7) Net interest margin represents net interest income as a percentage of
average interest-earning assets, and 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.
(8) Net overhead ratio represents the difference between noninterest expense
and noninterest income, divided by average assets.
(9) The capital ratios are presented on a consolidated basis
(10) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income before taxes plus interest and rent expense.
Fixed charges consist of interest and rent expense.