Baylake Corp. Reports Third Quarter, Nine Month 2013 Results: Loan Growth and
Efficiencies Contribute to Year-Over-Year Earnings Growth
STURGEON BAY, Wis., Oct. 17, 2013
STURGEON BAY, Wis., Oct. 17, 2013 /PRNewswire/ -- Baylake Corp. (the
"Company") (OTCQB: BYLK), holding company for Baylake Bank (the "Bank"), which
provides full service banking and financial services from 22 locations in
Northeast and Central Wisconsin, today announced results for the three and
nine months ended September 30, 2013. The Company's results reflected
continuing earnings growth, significant year-over-year and consecutive quarter
reduction of non-performing assets, and improved operating efficiency.
For the quarter ended September 30, 2013, the Company's net income was $2.21
million or $0.24 per diluted share, up 6% compared with $2.09 million or $0.23
per diluted share for the quarter ended September 30, 2012. For the nine
months ended September 30, 2013, net income increased 21% to $5.69 million or
$0.62 per diluted share compared with $4.71 million or $0.52 per diluted share
for the comparable period in 2012. The third quarter and nine months of 2012
results included a $0.8 million gain on sale of four branches.
The year-over-year financial comparisons reflect the Company's ongoing focus
on streamlining its business operations, having sold four branch offices
located in Waupaca County, Wisconsin in September 2012 and closing one branch
location in the second quarter of 2013.In 2013, the Company announced the
pending sale of $26 million in deposits associated with two branch facilities
located in Berlin and Poy Sippi, Wisconsin, and the planned closing of those
branches in November 2013. Refocusing Baylake's branch network on more
profitable markets has contributed to a leaner balance sheet, and positioned
the Company to operate more efficiently and profitably, while directing
resources to markets with more robust commercial lending opportunities.
oReturn on average assets ("ROAA") increased to 0.91% in the third quarter
of 2013 compared with 0.79% in the third quarter of 2012, and return on
average equity ("ROAE") improved to 9.45% in the third quarter of 2013
compared with 9.25% in the third quarter of 2012.
oNet income in both the third quarter and first nine months of 2013
reflected the Company's continued focus on interest expense management,
increased productivity and efficiency, and continued reductions in the
Bank's loan loss provision due to improved asset quality.
oNet interest income after provision for loan losses was $7.34 million in
the third quarter of 2013 compared with $7.03 million in the third quarter
of 2012, reflecting solid loan growth, significantly reduced interest
expense, and an 82% year-over-year reduction in loan loss provision.
oRevenues from fiduciary services and financial services increased 14% for
the nine months ended September 30, 2013 compared with the same period in
2012, and Baylake experienced 34% income growth from United Financial
Services ("UFS"), the Company's co-owned data processing and e-banking
oTotal gross loans outstanding increased to $612.17 million at September
30, 2013 compared with $595.53 million at December 31, 2012, which
included growth from commercial and 1-4 family residential loans.
oThe Bank's loan loss coverage (allowance for loan losses as a percentage
of non-performing loans) was 121.19% at September 30, 2013 up from 88.71%
at September 30, 2012.
oThe Company's key measures of capital strength exceeded accepted
regulatory standards for a well-capitalized institution. At September 30,
2013, the Company had a Tier 1 risk-based capital ratio of 14.04%, total
risk based capital of 16.54% and a Tier 1 leverage ratio of 10.19%.
oOn July 16, 2013 the Company declared a dividend of $0.06 per share for
the third quarter of 2013 for shareholders of record as of August12,
2013; an increase of $0.01 per share from $0.05 per share declared for the
prior quarter, and was the fifth dividend increase declared by the Company
in seven consecutive quarters.
oShareholders' equity to assets was 9.39% at September 30, 2013 compared
with 9.25% a year earlier, while book value per share increased to $11.81
compared with $11.49 at September 30, 2012.
"Our ability to improve asset quality, enhance the productivity and efficiency
of our banking network, as well as achieve steady growth in areas such as
commercial lending and our fee-based business lines all contributed to
earnings growth," said Robert J. Cera, President and CEO. "Our asset quality
and efficiency ratio are improved, and we expect stability in those metrics.
We also anticipate that the pending sale of deposits associated with the
closing of two branch locations should further enhance our productivity, as we
focus on more profitable markets."
"We have been able to share these successes with shareholders through improved
value and increased shareholders' equity, as well as increased cash dividends.
We have deployed capital to fund organic growth and are looking to add to our
team of talented and experienced commercial bankers. The first three quarters
of 2013 saw us expand relationships with existing business customers, as well
as add several new Commercial and Industrial ("C&I") relationships, which
fueled the Bank's 25% growth in C&I lending compared with a year ago."
"Because C&I lending is an extremely competitive business, we are particularly
pleased with our growth in this area. We have re-focused efforts to enhance
our professional practice C&I lending business, and our team is actively
reaching out to medical, dental and veterinary practices, and accounting and
law firms in northeastern Wisconsin. We continue to focus on building balance
and diversity in our loan portfolio."
Three Months Ended September 30, 2013 Income Statement Highlights
Net interest income before loan loss provision was $7.54 million in the third
quarter of 2013 compared with $8.13 million in the third quarter of 2012,
primarily reflecting the impact of the 2012 sale of branches, offset in part
by reductions in interest expense and improved loan growth. "It's important
to note that following a significant reduction of income-generating assets in
2012, we have demonstrated net interest income growth that reflects new
lending activity," Cera explained.
Net interest income after provision for loan losses increased to $7.34 million
for the three months ended September 30, 2013, compared with $7.03 million for
the same period in 2012, partially reflecting a decline in loan loss provision
to $0.20 million in third quarter 2013 versus $1.10 million in the third
quarter of 2012. The Bank's net interest margin for the three months ended
September 30, 2013 increased to 3.55%, compared with 3.52% for the three
months ended September 30, 2012. The Bank's efficiency ratio improved to
63.90% at the end of third quarter 2013 compared with 66.80% at the end of
third quarter 2012.
"By focusing our balance sheet management on our most productive and
best-earning assets, we have maintained a relatively consistent net interest
margin in this on-going low interest rate environment," Cera explained. "We
continue to deliver a positive experience to our customers with strategically
located branches staffed by a knowledgeable and well-trained staff, and also a
comprehensive menu of electronic banking and treasury management options
offered for convenience. It's a carefully balanced mix that we believe
enables us to establish Baylake Bank as the bank of choice in northeastern
Total interest expense in the third quarter of 2013 was $1.08 million compared
with $1.59 million in the third quarter of 2012 due in part to a reduction in
Federal Home Loan Bank borrowings. Strong management of deposit interest
rates contributed to maintaining a net interest margin of 3.55% and a net
interest spread of 3.45% during the third quarter of 2013.
Total non-interest income in the third quarter of 2013 was $2.33 million,
compared with $3.25 million in the third quarter of 2012, which, as previously
noted, included a $0.8 million gain on the sale of branches. The Company had
lower gains on sales of loans and securities, and lower service charges on
deposit accounts, partially offset by increased fees from fiduciary services,
financial services, and income relating to the Company's equity stake in UFS.
Income from the Company's equity ownership of UFS increased 44% to $0.3
million for the third quarter 2013 compared with $0.2 million for the third
quarter of 2012.
"The growth of UFS has been very rewarding as the banking industry relies more
heavily on fee generating business lines," Cera explained. "The acquisition
UFS completed in June 2013 is generating positive results. We feel our
ownership position in UFS, which has a carrying value of $3.7 million, is
truly an overlooked asset in terms of its inherent market value and its proven
ability to generate income for Baylake Bank."
Non-interest expense in the third quarter of 2013 was $6.47 million compared
with $7.26 million in the third quarter of 2012. The decline primarily
reflected a significant reduction in operating costs related to foreclosed
properties as well as lower loan and collection fees, reduced occupancy and
employee salary and benefits costs related to sold and closed branches, and
reduced FDIC insurance premiums.
Nine Month 2013 Income Statement Highlights
Net interest income after provision for loan losses in the nine months of 2013
was $20.85 million, compared with $19.52 million in the nine months of 2012,
with the improvement primarily reflecting a decline in the Company's loan loss
provision to $1.40 million in the nine months of 2013 versus $5.13 million in
the nine months of 2012. Net interest income before loan loss provision was
$22.25 million in the nine months of 2013 compared with $24.65 million in the
nine months of 2012, with the year-over-year decline primarily reflecting the
2012 sale of branches. Total interest income declined to $25.83 million in
the nine months of 2013, compared with $30.02 million in the nine months of
2012. Total interest expense declined to $3.59 million in the nine months of
2013, compared with $5.38 million in the nine months of 2012. Both declines
most significantly reflected continued downward movement in the interest rate
environment affecting new loan originations and repricing of assets and
liabilities. Cera added that the Company continues to aggressively manage its
investment portfolio and investment duration to be better positioned for a
future rise in interest rates.
Total non-interest income in the nine months of 2013 was $7.18 million
compared with $10.64 million in nine months of 2012, which included a $1.59
million gain from the sale of securities, a $0.83 million gain on sale of
branches, a $0.58 million gain on sale of premises and equipment and a $0.50
million life insurance death benefit.
Cera commented: "In both the quarter and nine months ended September 30, 2013,
we demonstrated year-over-year growth in key components of non-interest income
– fees from our fiduciary services, increasing income from commercial treasury
management services, and income contributions from UFS. In 2013, we have
expanded our team and capabilities to grow relationship banking and wealth
management and financial services revenues. Our fee income gains reflect our
commitment to growing these business lines."
Total non-interest expense in the nine months of 2013 declined to $19.96
million compared with $23.96 million in the nine months of 2012. Reflecting
the Company's ongoing reduction of other real estate owned ("OREO"), expenses
related to operating foreclosed properties declined 80% in the nine months of
2013 compared with the same period in 2012. Strong improvements in asset
quality contributed to 50% lower FDIC insurance premiums and reduced loan and
collection expenses, while a decline in occupancy, and salary and employee
benefits expenses reflected a leaner branch network.
Balance Sheet, Asset Quality Highlights
At September 30, 2013, total assets were $982.99 million, compared with $1.02
billion at December 31, 2012, primarily reflecting branch sales late in 2012
and pay-offs of problem and substandard credits. Total gross loans were
$612.17 million at September 30, 2013, compared with $595.53 million at
December 31, 2012.
Total deposits were $761.81 million at September 30, 2013, compared with
$806.02 million at December 31, 2012. Cera said the Bank was able to
selectively lower pricing of retail deposits and continued to grow
non-interest bearing DDAs, which primarily reflects growing business banking
Total non-performing assets, including loans and OREO property, equaled $13.40
million at September 30, 2013, compared with $24.92 million at December 31,
2012. Non-performing loans declined to $6.51 million at September 30, 2013,
compared with $14.45 million at December 31, 2012. Non-performing loans were
1.06% of total gross loans, allowance for loan losses to total gross loans was
1.29%, and net charge-offs to average loans (annualized) were 0.74% of total
gross loans at September 30, 2013.
As previously noted, the Company's measures of capital strength were above
accepted regulatory standards for a well-capitalized institution. Retained
earnings were $42.95 million at September 30, 2013, compared with $38.45
million at December 31, 2012.
Cera concluded: "We are excited about opportunities for the Baylake franchise
to maximize the value of opportunities in our served markets. We continue to
actively review opportunities to grow in our markets and expand the scope of
our reach into contiguous markets. We have planned actions to continue
building value for our shareholders and attract new investors, enhancing the
opportunity to participate in the Company's future."
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 22 financial centers located
throughout Northeast and Central Wisconsin, in Brown, Door, Green Lake,
Kewaunee, Outagamie 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, 2012 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
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.
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
financial and other data at September 30, 2013 and 2012 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
September 30, September 30,
(at end of period) 2013 December 31, 2012 2012
September 30 numbers are
(dollars in thousands, except share
and per share data)
Total assets $ 982,992 $ 1,023,971 $ 984,600
Investment securities (1) 227,764 242,019 247,198
Gross loans 612,168 595,533 600,598
Total deposits 761,806 806,015 798,774
Borrowings (2) 94,902 91,568 60,904
Subordinated debentures 16,100 16,100 16,100
Convertible promissory 9,400 9,400 9,450
Shareholders' equity 92,347 93,144 91,052
Non-performing loans (3) 6,514 14,448 12,015
Non-performing assets (3) 13,398 24,924 22,466
Restructured loans, 9,020 3,931 4,425
Shares outstanding 7,817,486 7,937,347 7,927,347
Book value per share $ 11.81 $ 11.73 $ 11.49
As of and for the Three As of and for the Nine
Months Ended Months Ended
September 30, September 30,
(dollars in thousands, (dollars in thousands,
except per share data) except per share data)
Selected Operations 2013 2012 2013 2012
Data – UNAUDITED
Total interest income $ 8,615 $ 9,722 $ 25,832 $ 30,024
Total interest expense 1,076 1,592 3,587 5,376
Net interest income
before provision for 7,539 8,130 22,245 24,648
Provision for loan 200 1,100 1,400 5,125
Net interest income
after provision for 7,339 7,030 20,845 19,523
Total non-interest 2,326 3,250 7,184 10,636
Total non-interest 6,474 7,255 19,961 23,964
Income before income 3,191 3,025 8,068 6,195
Income tax expense 986 940 2,377 1,484
Net income $ 2,205 $ $ 5,691 $ 4,711
Data – UNAUDITED
Per Share Data: (4)
Net income per share $ 0.28 $ 0.26 $ 0.72 $ 0.59
Net income per share $ 0.24 $ 0.23 $ 0.62 $ 0.52
Cash dividends per $ 0.06 $ 0.02 $ 0.15 $ 0.04
Book value per share $ 11.81 $ 11.49 $ 11.81 $ 11.49
As of and for the Three As of and for the Nine
Months Ended Months Ended
September 30, September 30,
2013 2012 2013 2012
Performance Ratios: (5)
Return on average total assets 0.91% 0.79% 0.79% 0.60%
Return on average total 9.45% 9.25% 8.12% 7.14%
Net interest margin (6) 3.55% 3.52% 3.52% 3.53%
Net interest spread (6) 3.45% 3.41% 3.42% 3.43%
Efficiency ratio (9) 63.90% 66.80% 66.50% 72.43%
Non-interest income to average 0.96% 1.24% 1.00% 1.35%
Non-interest expense to average 2.67% 2.76% 2.77% 3.03%
Net overhead ratio (7) 1.71% 1.52% 1.77% 1.68%
Average loan to average deposit 78.56% 73.55% 78.11% 74.19%
Average interest earning assets
to average interest bearing 120.10% 115.15% 118.53% 113.18%
Asset Quality Ratios: (3)(5)
Non-performing loans to total 1.06% 1.99% 1.06% 1.99%
Allowance for loan losses to:
Total gross loans 1.29% 1.77% 1.29% 1.77%
Non-performing loans 121.19% 88.71% 121.19% 88.71%
Net charge-offs to average 0.74% 2.02% 0.60% 1.08%
Non-performing assets to total 1.36% 2.28% 1.36% 2.28%
Capital Ratios: (5)(8)
Shareholders' equity to assets 9.39% 9.25% 9.39% 9.25%
Tier 1 risk-based capital 14.04% 12.66% 14.04% 12.66%
Total risk-based capital 16.54% 15.28% 16.54% 15.28%
Tier 1 leverage ratio 10.19% 8.48% 10.19% 8.48%
Number of bank subsidiaries 1 1 1 1
Number of banking facilities 22 23 22 23
Number of full-time equivalent 266 293 266 293
(1) Includes securities classified as available for sale.
(2) Consists of Federal Home Loan Bank advances, federal funds purchased, and
(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.
(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 net gains on sale of fixed assets
and land held for sale.
SOURCE Baylake Corp.
Contact: Robert J. Cera, President & CEO, Baylake Bank, 920.743.5551, ext.
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