Exhibit 99.1
NEWS RELEASE
Contact: Steven D. Jennerjohn
(920)-743-5551
Source: Baylake Corp.
BAYLAKE CORP. REPORTS FINANCIAL RESULTS FOR THE NINE AND THREE MONTHS ENDED
SEPTEMBER 30, 2004
Sturgeon Bay, Wisconsin -(PR Newswire)--November 2, 2004
Baylake Corp. (OTC BB: BYLK), a bank holding company with $1.0 billion
in assets, reported net income of $7.5 million or $0.99 basic earnings per share
for the nine months ended September 30, 2004, as compared to $5.9 million or
$0.79 per share for the nine months ended September 30, 2003. The increase in
net income was primarily due to increased net interest income and a reduction 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. Net income was $3.1 million for the three months ended
September 30, 2004, an increase of $833,000, or 37.2%, for the same period in
the prior year.
Diluted earnings per share were $0.97 for the first nine months of 2004
compared to $0.77 a year earlier, and $0.39 for the third quarter of 2004, as
compared to $0.29 for the same period in 2003. Return on assets (ROA) and return
on equity (ROE) increased for the first nine months of 2004, to 1.01% and
14.14%, respectively, from 0.88% and 11.83%, respectively, from the same period
one year ago. For the quarter ended September 30, 2004, ROA and ROE were 1.21%
and 17.04%, respectively, compared to 0.97% and 13.09%, respectively, for the
same period one year ago.
For the nine months ended September 30, 2004, net interest income
increased $3.6 million to $24.9 million when compared to the first nine months
of 2003 due primarily to an increase in net interest margin of 18 basis points
for the period in addition to an increase in average interest-earning assets of
$84.7 million. Net interest income for the three months ended September 30, 2004
was $8.8 million compared to $7.6 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 13 basis points to 3.85% in addition to an increase in
average earning assets of $87.9 million.
Net interest margin for the nine months ended September 30, 2004
increased to 3.70% from 3.52% a year earlier as interest-bearing liabilities
re-priced 63 basis points lower compared to a decrease of 39 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 3.48% for the nine months ended September
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 nine-month and three-month periods as compared to 2003.
Non-interest income was $7.1 million during the first nine months of
2004, a decrease of $1.4 million when compared to the same period last year.
Non-interest income for the three months ended September 30, 2004 decreased
$639,000 to $2.4 million. The decrease in the nine-month period was primarily
attributable to decreases in: reduced gain on sales of loans totaling $964,000;
a decrease in loan servicing fees of $687,000; and the effect of a non-recurring
gain on sale of subsidiary sold in the first quarter of 2003 totaling $350,000.
Those decreases were partially offset by the effect of a non-recurring gain on
sale of bank land in the second quarter of 2004 totaling $482,000 and increases
in fees for other services to customers of $120,000. The gain on sale of bank
land was located in the Green Bay market and occurred as a result of a purchase
of 19.2 acres by the Department of Transportation to facilitate its highway
expansion efforts. We do no expect the sale to substantially affect the
operations at that location. The increases in fees for other
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services to customer was due, in part, to the implementation of a overdraft
protection plan in the third quarter of 2004. Non-interest income for the
quarter ended September 30, 2004 decreased, primarily due to decreased gains on
sales of loans amounting to $403,000 and decreased loan servicing fees totaling
$245,000. For the nine-month period ended September 30, 2004, other income
included the aforementioned gain on sale of bank land totaling $482,000.
For the nine months ended September 30, 2004, non-interest expense
increased $967,000 over the same period last year. Personnel and benefit expense
increased approximately $602,000 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 $157,000 as a result of
decreased depreciation expense related to fixed assets. Expenses on other real
estate owned increased $128,000, the result of increased holding costs relative
to these properties during the nine months ended September 30, 2004. Other
operating expense increased $366,000 for the nine months ended September 30,
2004 as a result of an increase in other insurance expense. For the three months
ended September 30, 2004, non-interest expense increased $194,000 from the three
months ended September 30, 2003 to $6.6 million. Personnel and benefit expense
increased $139,000 as a result of additional staffing, benefit and insurance
costs. Other occupancy and equipment expense decreased $113,000. Other operating
expense increased $163,000 as a result of an increase in other insurance
expense.
Income tax expense increased $1.2 million for the nine months and
$627,000 for the three months ended September 30, 2004 when compared to the same
period last year, both the result of increased taxable income. Our recent SEC
filings have discussed other factors which could affect our past and future
state tax obligations.
Total assets for Baylake Corp. increased 5.7% during the first nine
months of 2004 to $1.0 billion at September 30, 2004 when compared to total
assets of $975.2 million at December 31, 2003. Total loans increased 5.5% during
the first nine months of 2004 to $754.5 million at September 30, 2004, while
deposits during the period increased 2.5% to $802.9 million. Total shareholders'
equity increased 7.2% for the first nine months of 2004 to $74.7 million at
September 30, 2004 as compared with $69.6 million at December 31, 2003.
Baylake Corp. recorded provisions for loan losses totaling $1.6 million
during the first nine months of 2004, as compared to $3.1 million for the same
period in 2003. The provision for loan losses was $70,000 in the third quarter
of 2004, as compared to $1.2 million in 2003. The provision for loan losses is
determined based on a quarterly process of evaluating the allowance for loan
losses which takes into account various factors including specific credit
allocations for individual loans, historical loss experience for category of
loans, consideration of concentrations and changes in portfolio volume, and
other qualitative factors. For the quarter ended September 30, 2004, this
calculation also took into account improvements in the grading of several
non-performing loans during the period. The allowance for loan losses increased
$798,000 to $13.0 million during the nine months ended September 30, 2004,
reflecting the provision and charge-offs during the period. During the nine
months ended September 30, 2004, Baylake Corp. had net loan charge-offs totaling
$771,000. The ratio of allowance for loan losses to total loans was 1.72% at
September 30, 2004, as compared to 1.70% at December 31, 2003. Non-performing
loans totaled $14.0 million and $16.2 million at September 30, 2004 and December
31, 2003, respectively. The decrease in non-performing loans during the nine
months ended September 30, 2004 was due, in part, to a shift, as a result of
foreclosure, of approximately $2.3 million in loans to other real estate owned
during 2004. The ratio of allowance for loan losses to non-performing loans was
92.7% and 75.0% at September 30, 2004 and December 31, 2003, respectively.
Foreclosed assets, net, at September 30, 2004 increased $249,000 from
December 31, 2003 primarily as the result of foreclosing four commercial real
estate properties during the period.
Baylake Corp. believes the balance of the allowance for loan loss at
September 30, 2004 is presently sufficient to absorb probable incurred losses.
Although future adjustments to the allowance for loan losses 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.
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Capital resources for the nine-month period ended September 30, 2004
improved by $5.0 million. Baylake Corp. anticipates that it has resources
available to meet its commitments. At September 30, 2004, Baylake Corp. had
$60.4 million of established lines of credit with nonaffiliated banks, of which
$26.8 million was outstanding at September 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 June 30, 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.
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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 September 30, 2004 and at and for the
three and nine months ended September 30, 2004 reflects all necessary
adjustments for a fair presentation of results as of the dates and for the
periods covered.
<Table>
<Caption>
AT AT AT
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2004 2003 2003
------------- ------------ -------------
(DOLLARS IN THOUSANDS)
SELECTED FINANCIAL CONDITION DATA (AT END OF PERIOD):
Total assets .......................................... $1,030,575 $ 975,238 $ 918,091
Securities(1) ......................................... 192,015 176,815 154,009
Total loans ........................................... 754,519 715,187 691,377
Total deposits ........................................ 802,880 783,292 753,556
Borrowings(2) ......................................... 128,560 98,451 73,376
Notes payable and subordinated debt ................... 0 53 53
Junior subordinated debentures issued to unconsolidated
subsidiary ............................................ 16,598 16,598 16,100
Total shareholders' equity ............................ 74,658 69,628 68,080
Non-performing loans, net of discount(3)(4) ........... 13,983 16,222 19,457
Non-performing assets, net of discount(3)(4) .......... 16,503 18,493 20,816
</Table>
<Table>
<Caption>
AS OF AND FOR THE AS OF AND FOR THE
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------------- ----------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SELECTED INCOME DATA:
Total interest income ..................................... $ 12,752 $ 11,951 $ 36,852 $ 35,713
Total interest expense .................................... 3,991 4,341 11,911 14,396
---------- ---------- ---------- ----------
Net interest income ....................................... 8,761 7,610 24,941 21,317
Provision for loan losses ................................. 70 1,212 1,569 3,137
---------- ---------- ---------- ----------
Net interest income after provision for loan losses ....... 8,691 6,398 23,372 18,180
Total non-interest income ................................. 2,416 3,055 7,073 8,443
Total non-interest expense ................................ 6,575 6,381 19,459 18,492
---------- ---------- ---------- ----------
Income before income tax .................................. 4,532 3,072 10,986 8,131
Income tax provision ...................................... 1,458 831 3,423 2,197
---------- ---------- ---------- ----------
Net income ................................................ $ 3,074 $ 2,241 $ 7,563 $ 5,934
========== ========== ========== ==========
PER SHARE DATA:(5)
Net income per share (basic) .............................. $ 0.40 $ 0.30 $ 0.99 $ 0.79
Net income per share (diluted) ............................ 0.39 0.29 0.97 0.77
Cash dividends per common share ........................... 0.14 0.13 0.42 0.39
Book value per share ...................................... 9.73 9.00 9.73 9.00
PERFORMANCE RATIOS:(6)
Return on average total assets ............................ 1.21% 0.97% 1.01% 0.88%
Return on average total shareholders' equity .............. 17.04 13.09 14.14 11.83
Net interest margin(7) .................................... 3.85 3.72 3.70 3.52
Net interest spread(7) .................................... 3.60 3.44 3.48 3.24
Non-interest income to average assets ..................... 0.95 1.32 0.94 1.24
Non-interest expense to average assets .................... 2.58 2.76 2.60 2.72
Net overhead ratio(8) ..................................... 1.63 1.44 1.65 1.48
Efficiency ratio(9) ....................................... 57.44 58.19 59.26 60.22
Average loan-to-average deposit ratio ..................... 92.99 91.91 93.98 93.25
Average interest-earning assets to average interest-bearing
liabilities ............................................... 114.51 114.25 113.27 112.71
ASSET QUALITY RATIOS:(3)(4)(6)
Non-performing loans to total loans ....................... 1.85% 2.27% 1.85% 2.27%
Allowance for loan losses to:
Total loans .......................................... 1.72 1.83 1.72 1.83
Non-performing loans ................................. 92.66 64.93 92.66 64.93
Net charge-offs to average loans .......................... 0.10 0.84 0.14 0.37
Non-performing assets to total assets ..................... 1.60 2.27 1.60 2.27
CAPITAL RATIOS:(6)(10)
Shareholders' equity to assets ............................ 7.24% 7.42% 7.24% 7.42%
Tier 1 risk-based capital ................................. 9.57 9.95 9.57 9.95
Total risk-based capital .................................. 10.83 11.20 10.83 11.20
Leverage ratio ............................................ 8.26 8.47 8.26 8.47
RATIO OF EARNINGS TO FIXED CHARGES:(11)
Including deposit interest ................................ 2.14x 1.71x 1.92x 1.56x
Excluding deposit interest ................................ 5.12 4.30 4.44 3.79
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 .................. 308 300 308 300
</Table>
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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 nine months ended
September 30, 2004 was due, in part, to a decrease in restructured loans
as a result of paydowns and performance of those loans.
(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 non-interest expense
and non-interest income, divided by average assets.
(9) Non-interest expense divided by the sum of taxable equivalent net
interest income plus non-interest income, excluding investment securities
gains, net.
(10) The capital ratios are presented on a consolidated basis.
(11) 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.
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