NEWS RELEASE
Contact: Steven D. Jennerjohn
(920)-743-5551
Source: Baylake Corp.
BAYLAKE CORP. REPORTS FINANCIAL RESULTS FOR THE SIX AND THREE MONTHS ENDED JUNE
30, 2004
Sturgeon Bay, Wisconsin -(Business Wire)--July 28, 2004
Baylake Corp. (OTC BB: BYLK), a bank holding company with $1.0 billion
in assets, reported net income of $4.5 million or $0.59 basic earnings per share
for the six months ended June 30, 2004, as compared to $3.7 million or $0.49 per
share for the six months ended June 30, 2003. The increase in net income was
primarily due to increased net interest income, a reduction in the provision for
loan loss and a gain on sale of bank land. 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. Net income was $2.6 million for the three months
ended June 30, 2004, an increase of $726,000, or 38.9%, for the same period in
the prior year.
Diluted earnings per share were $0.58 for the first six months of 2004
compared to $0.48 a year earlier, and $0.33 for the second quarter of 2004, as
compared to $0.24 for that period in 2003. Return on assets (ROA) and return on
equity (ROE) increased for the first six months of 2004, to 0.91% and 12.69%,
respectively, from 0.82% and 11.18%, respectively, from the same period one year
ago. For the quarter ended June 30, 2004, ROA and ROE were 1.04% and 14.54%,
respectively, compared to 0.83% and 11.14%, respectively, for the same period
one year ago.
For the six months ended June 30, 2004, net interest income increased
$2.5 million to $16.2 million when compared to the first six months of 2003 due
primarily to an increase in net interest margin of 20 basis points for the
period in addition to an increase in average interest-earning assets of $83.1
million. Net interest income for the three months ended June 30, 2004 was $8.4
million compared to $6.9 million for the same period a year earlier. Net
interest income increased for the quarter as a result of an increase in net
interest margin of 30 basis points to 3.76% in addition to an increase in
average earning assets amounting to $86.6 million.
Net interest margin for the six months ended June 30, 2004 increased to
3.69% from 3.49% a year earlier as interest-bearing liabilities re-priced 76
basis points lower compared to a decrease of 50 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 period. The
major contributing factor in net interest income was an increase in average
interest-earning assets relative to interest paying liabilities. In addition,
interest spread increased to 3.50% for the six months ended June 30, 2004
compared to 3.24% for the same period in 2003.
As discussed below, the provision for loan losses in 2004 decreased in
both the six-month and three-month periods as compared to 2003.
Non-interest income was $4.7 million during the first six months of
2004, a decrease of $731,000 when compared to the same period last year.
Non-interest income for the three months ended June 30, 2004 decreased $69,000
to $2.7 million. The decrease in the six-month period was primarily attributable
to decreases in: gain on sale of subsidiary sold in 2003 totaling $350,000,
gains on sales of loans totaling $561,000; and a decrease in loan servicing fees
totaling $442,000. Those decreases were partially offset by increases in
fiduciary income of $69,000 and other income of $577,000. Non-interest income
for the quarter ended June 30, 2004 decreased, primarily due to decreased gains
on sales of loans amounting to $349,000 and decreased loan servicing fees
totaling $318,000. For both the six and three month periods, other income
included a gain on sale of bank land totaling $482,000.
For the six months ended June 30, 2004, non-interest expense increased
$773,000 over the same period last year. Personnel and benefit expense increased
approximately $463,000 due to additional staffing and normal salary increases as
well as significant increases in costs related to health care insurance.
Occupancy and equipment expense decreased $44,000 in spite of expansion in
existing markets and costs related to the modernization of various facilities.
Expenses on other real estate owned increased $134,000, the result of increased
holding costs relative to these properties during the six months ended June 30,
2004. For the three months ended June 30, 2004, non-interest expense increased
$433,000 from the three months ended June 30, 2003 to $6.5 million. Personnel
and benefit expense increased $299,000 as a result of additional staffing and
benefit costs. Other occupancy and equipment expense decreased $73,000. Expenses
from the operation of other real estate owned increased $112,000. Other
operating expense increased $89,000.
Income tax expense increased $599,000 for the six months and $536,000
for the three months ended June 30, 2004 when compared to the same period last
year, both the result of increased taxable income. Our recent SEC filings have
discussed factors which could affect our state tax obligations.
Total assets for Baylake Corp. increased 3.3% during the first half of
2004 to $1.0 billion at June 30, 2004 when compared to total assets of $975.2
million at December 31, 2003. Total loans increased 4.1% during the first half
of 2004 to $724.6 million at June 30, 2004, while deposits during the period
decreased 0.5% to $779.6 million. Total shareholders' equity increased 0.9% for
the first half of 2004 to $70.3 million at June 30, 2004 as compared with $69.6
million at December 31, 2003.
Baylake Corp. recorded provisions for loan losses totaling $1.5 million
during the first six months of 2004, as compared to $1.9 million for the same
period in 2003. The provision was $724,000 in the second quarter of 2004, as
compared to $1.0 million in 2003. The decrease in the provision occurred as a
result of a slight improvement in the grading of several non-performing loans
during the period. The allowance for loan losses increased $921,000 to $13.1
million during the six months ended June 30, 2004, reflecting the provision and
charge-offs during the period. During the six months ended June 30, 2004,
Baylake Corp. had net loan charge-offs totaling $577,000. The ratio of allowance
for loan losses to total loans was 1.81% at June 30, 2004, as compared to 1.75%
at December 31, 2003. Non-performing loans totaled $12.5 million and $16.2
million at June 30, 2004 and December 31, 2003, respectively. The ratio of
allowance for loan losses to non-performing loans was 104.6% and 75.0% at June
30, 2004 and December 31, 2003, respectively.
Foreclosed assets, net, at June 30, 2004 increased $343,000 from
December 31, 2003 primarily as the result of four commercial real estate
properties added as a result of foreclosures during the period.
Despite the relatively high level of non-performing loans at quarter's
end, Baylake Corp. believes the balance of the allowance for loan loss at June
30, 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 six-month period ended June 30, 2004 improved
by $627,000. Although liquidity tightened in the first six months as a result of
normal seasonal factors, Baylake Corp. anticipates that it has resources
available to meet its commitments. At June 30, 2004, Baylake Corp. had $60.4
million of established lines of credit with nonaffiliated banks, of which $32.3
million was outstanding at June 30, 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 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 "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 and quarterly reports filed by Baylake Corp.
with the Securities and Exchange Commission, including its Form 10-Q for the
quarter ended March 31, 2004 and 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, and recent actions taken by the Wisconsin Department of Revenue
relating to state tax obligations. 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. This summary
financial data is unaudited. In the opinion of Baylake management, the selected
consolidated financial and other data at June 30, 2004 and at and for the three
and six months ended June 30, 2004 reflects all necessary adjustments for a fair
presentation of results as of the dates and for the periods covered.
AT AT AT
JUNE 30, DECEMBER 31, JUNE 30,
2004 2003 2003
---------- ------------ ----------
(DOLLARS IN THOUSANDS)
SELECTED FINANCIAL CONDITION DATA (AT END OF PERIOD):
Total assets ............................................................... $1,007,186 $ 975,238 $ 910,001
Investment securities(1) ................................................... 199,434 195,847 154,773
Federal funds sold ......................................................... 0 0 9
Total loans ................................................................ 724,613 696,155 679,574
Total deposits ............................................................. 779,625 783,292 747,919
Borrowings(2) .............................................................. 133,773 98,451 70,932
Notes payable and subordinated debt ........................................ 0 53 53
Junior subordinated debentures issued to unconsolidated subsidiary ......... 16,598 16,598 16,100
Total shareholders' equity ................................................. 70,255 69,628 68,501
Non-performing loans, net of discount(3)(4) ................................ 12,502 16,222 19,515
Non-performing assets, net of discount(3)(4) ............................... 15,116 18,493 20,183
AS OF AND FOR THE AS OF AND FOR THE
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------- ----------------------
2004 2003 2004 2003
-------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SELECTED INCOME DATA:
Total interest income ........................................... $ 12,239 $ 11,864 $ 24,100 $ 23,762
Total interest expense .......................................... 3,887 4,968 7,920 10,055
-------- -------- -------- --------
Net interest income ............................................. 8,352 6,896 16,180 13,707
Provision for loan losses ....................................... 724 1,032 1,499 1,925
-------- -------- -------- --------
Net interest income after provision for loan losses ............. 7,628 5,864 14,681 11,782
Total non-interest income ....................................... 2,675 2,744 4,657 5,388
Total non-interest expense ...................................... 6,512 6,079 12,884 12,111
-------- -------- -------- --------
Income before income tax ........................................ 3,791 2,529 6,454 5,059
Income tax provision ............................................ 1,198 662 1,965 1,366
-------- -------- -------- --------
Net income ...................................................... $ 2,593 $ 1,867 $ 4,489 $ 3,693
======== ======== ======== ========
PER SHARE DATA:(5)
Net income per share (basic) .................................... $ 0.34 $ 0.25 $ 0.59 $ 0.49
Net income per share (diluted) .................................. 0.33 0.24 0.58 0.48
Cash dividends per common share ................................. 0.14 0.13 0.28 0.26
Book value per share ............................................ 9.18 9.09 9.18 9.09
PERFORMANCE RATIOS:(6)
Return on average total assets .................................. 1.04% 0.83% 0.91% 0.82%
Return on average total shareholders' equity .................... 14.54 11.14 12.69 11.18
Net interest margin(7) .......................................... 3.76 3.46 3.69 3.49
Net interest spread(7) .......................................... 3.57 3.19 3.50 3.24
Non-interest income to average assets ........................... 1.07 1.21 0.94 1.20
Non-interest expense to average assets .......................... 2.61 2.69 2.61 2.70
Net overhead ratio(8) ........................................... 1.54 1.48 1.66 1.50
Efficiency ratio ................................................ 57.63 61.08 60.23 61.35
Average loan-to-average deposit ratio ........................... 92.91 92.07 92.24 91.66
Average interest-earning assets to average interest-bearing
liabilities ................................................... 111.58 111.38 111.30 110.50
ASSET QUALITY RATIOS:(3)(4)(6)
Non-performing loans to total loans ............................. 1.73% 2.33% 1.73% 2.33%
Allowance for loan losses to:
Total loans ................................................ 1.81 1.90 1.81 1.90
Non-performing loans ....................................... 104.62 66.03 104.62 66.03
Net charge-offs to average loans ................................ 0.16 0.19 0.16 0.13
Non-performing assets to total assets ........................... 1.50 2.22 1.50 2.22
CAPITAL RATIOS:(6)(9)
Shareholders' equity to assets .................................. 6.98% 7.53% 6.98% 7.53%
Tier 1 risk-based capital ....................................... 9.69 9.78 9.69 9.78
Total risk-based capital ........................................ 10.94 11.03 10.94 11.03
Leverage ratio .................................................. 8.20 8.39 8.20 8.39
RATIO OF EARNINGS TO FIXED CHARGES:(10)
Including deposit interest ...................................... 1.98x 1.51x 1.81x 1.50x
Excluding deposit interest ...................................... 4.52 3.55 4.09 3.55
OTHER DATA AT END OF PERIOD:
Number of bank subsidiaries ..................................... 1 1 1 1
Number of banking facilities .................................... 27 26 27 26
Number of full-time equivalent employees ........................ 308 298 308 298
- -------------------------------------------
(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 six months ended June
30, 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.