Baylake Corp. Announces Third Quarter, Nine Months of 2014 Financial Results
Year-To-Date Net Income Rises 17%
STURGEON BAY, Wis., Oct. 30, 2014 /PRNewswire/ -- Baylake Corp. (the "Company") (NASDAQ:BYLK), holding company for Baylake Bank (the "Bank"), which provides full service banking and financial services from 21 locations in Northeast Wisconsin, today announced results for the three and nine month periods ended September 30, 2014.
In the third quarter of 2014, the Company's net income was $2.46 million or $0.26 per diluted share, up from $2.21 million or $0.24 per diluted share in the third quarter of 2013. Earnings in the third quarter of 2014 were the highest quarterly earnings in nearly two years, reflecting continuing contributions from lending activity and fee income, supported by expense management and strong asset quality. For the first nine months of 2014, net income was $6.68 million or $0.73 per diluted share, up 17.4% compared with net income of $5.69 million or $0.62 per diluted share for the first nine months of 2013.
Robert J. Cera, President and CEO, commented, "Steady gains in net income reflect year-over-year net interest income growth, relatively flat non-interest expense, and continued improvement in the Bank's asset quality metrics. Revenue is expanding from our broader reach as we continue to grow the Bank's presence in key served markets, and have entered the attractive Appleton, Wisconsin market. We believe our decisions to trim less productive assets and exit markets that were no longer a strategic fit have been validated by accelerating financial results."
"Despite the strong third quarter results, net income growth was impacted by increased costs relating to revaluation of foreclosed assets that are under contract for future sale. Continued attention to improving asset quality and careful expense management have contributed to earnings growth, and expeditiously removing non-performing assets from the balance sheet has served the Company's shareholders well. Disciplined loan underwriting and risk management practices have enabled us to build and maintain an increasingly strong and diversified loan portfolio. Investments in operations, facilities, and productivity are gaining traction, and we expect recent key additions to our team to assist in driving further positive results in coming periods."
THIRD QUARTER, NINE MONTHS OF 2014 HIGHLIGHTS
- Return on average assets ("ROAA") was 0.98% in the third quarter of 2014 compared to 0.91% in the third quarter of 2013. Return on average equity ("ROAE") increased to 9.64% in the third quarter of 2014 compared to 9.45% in the third quarter of 2013. ROAA for the nine months of 2014 increased to 0.91% from 0.79% for the same period in 2013. Additionally, ROAE rose to 9.18% for the nine months ended September 30, 2014 compared to 8.12% for the nine months ended September 30, 2013.
- Book value per share was $11.86 and tangible book value per share was $11.01 at September 30, 2014 compared with $11.81 and $10.96 a year prior. Book value and tangible book value growth per share were impacted by the conversion of $3.80 million of subordinated debentures into common stock during the quarter.
- At September 30, 2014, the Company had 8,590,821 total shares outstanding, up from 7,817,486 shares outstanding at September 30, 2013, reflecting the conversion of the subordinated debentures.
- Total stockholders' equity increased to $101.91 million at September 30, 2014, up 10.4% compared with $92.35 million a year ago.
- During the third quarter of 2014, the Company announced a quarterly cash dividend to common shareholders of $0.08 per share, a $0.01 per share increase from the second quarter of 2014 and the second dividend increase during the past year.
- Total gross loans outstanding at September 30, 2014 were $631.52 million, up from $612.17 million at September 30, 2013 and $617.96 million at December 31, 2013, reflecting growth led by commercial & industrial lending ("C&I"), commercial real estate and residential mortgages.
- Net interest income after provision for loan losses grew to $7.76 million for the third quarter of 2014, up 5.7% from $7.34 million for the third quarter of 2013, while net interest income after provision for loan losses for the first nine months of 2014 rose to $23.19 million, up 11.3% compared to the same period of 2013. Both the three and nine month periods of 2014 reflect year-over-year reductions in total interest expense and no loan loss provision.
- The Company trimmed total interest expense by 27.2% in the third quarter of 2014 versus the third quarter of 2013 and by 26.0% during the first nine months of 2014 compared to the same periods in 2013, reflecting prudent rate management of time deposits, increased levels of lower-cost core deposits, and opportunistic use of attractively priced wholesale borrowings.
- The efficiency ratio was 63.30% for the third quarter of 2014, an improvement from 68.72% in the second quarter of 2014, but comparable to the 63.90% efficiency ratio for the third quarter of 2013.
- Non-interest income increased slightly in the third quarter of 2014 compared to the third quarter of 2013, reflecting 14.3% growth in fees from fiduciary services and 20.1% year-over-year income growth from the Company's 49.8% equity ownership of United Financial Services, Inc. ("UFS"), a data processing and e-banking affiliate, offset in part by a 26.6% reduction in gains on sale of loans.
- Continued focus on asset quality and risk management resulted in a decline in the Company's ratio of non-performing assets to total assets to 1.11% at September 30, 2014 compared to 1.38% at September 30, 2013. The ratio of annualized net loan charge-offs for the third quarter of 2014 to average loans declined to 0.24% compared to 0.74% in the third quarter of 2013. The Company's allowance for loan losses ("AFLL") to non-performing loans ratio was 119.57% at September 30, 2014 compared to 118.58% at September 30, 2013.
- The Company was well capitalized for regulatory purposes at September 30, 2014, with capital ratios increasing year-over-year. The Company's Tier 1 risk-based capital ratio was 14.94%, total risk based capital ratio was 16.54% and Tier 1 leverage ratio was 10.79%.
Third Quarter 2014 Income Statement Highlights
Total interest income for the three months ended September 30, 2014 was $8.54 million compared to $8.62 million for the three months ended September 30, 2013, while total interest expense declined to $0.78 million for the third quarter of 2014 compared with $1.08 million for the third quarter of 2013. Net interest income after loan loss provision was $7.76 million for the third quarter of 2014, increasing from $7.34 million for the third quarter of 2013. As noted, year-over-year third quarter results reflect effective interest expense management and no loan loss provision recorded in the third quarter of 2014. Cera noted that by managing interest expense and maintaining a low cost of funds, the Company has worked to mitigate the downward pressure on loan rates resulting from competitive pressures.
Net interest margin for the third quarter of 2014 was 3.49%, down from 3.55% a year ago. The Company's net interest spread decreased to 3.41% for the third quarter of 2014 compared to 3.45% for the comparable quarter in 2013. Cera noted the Company's 26 basis point cost of interest-bearing deposits in the third quarter of 2014 was consistent with the second quarter of 2014, but down from 36 basis points a year ago. The Company's overall cost of funds on interest-bearing funding was 42 basis points in the third quarter of 2014, down from 59 basis points in the third quarter of 2013.
Total non-interest income for the third quarter of 2014 was $2.33 million, unchanged from the third quarter of 2013. Lower gains on residential mortgage loans sold for the quarter were offset by increased income contributions from UFS, as well as a 12.2% growth in fees on deposit accounts.
"As we expand our reach, particularly in the Green Bay and Appleton, Wisconsin metro areas, we are identifying numerous opportunities to build deeper banking relationships with clients, particularly through our wealth management and fee-based treasury services for business customers," Cera explained. "During the past year, we have strategically added bankers and wealth management talent to expand capabilities in each of our markets, and just recently added a seasoned financial advisor in Door County, Wisconsin to complement our existing strong wealth management team."
Cera noted that during the second quarter of 2014, Joseph Hockers joined Baylake to lead the Bank's commercial treasury services operation as Vice President, Director of Treasury Management. Hockers played an instrumental role in building the Bank's treasury management capabilities from 1998 to 2005, and returns to the Bank after several years as a vice president in treasury management with a regional competitor.
Despite the addition of key personnel, costs relating to the staffing and opening of the new Appleton full-service branch and investment in products and technology, total non-interest expense increased only marginally to $20.27 million for the first nine months of 2014 compared to $19.96 million during the same period in 2013. Increases in both the operation of foreclosed assets and occupancy costs during the third quarter of 2014 versus the comparable quarter of 2013 were offset in part by a 13.6% year-over-year decline in salary and employee benefit costs and an 11.4% decline in FDIC premiums.
Nine Months of 2014 Income Statement Highlights
Total interest income was $25.85 million for the nine month period of 2014 compared to $25.83 million for the comparable period of 2013. Total interest expense declined to $2.65 million for the nine months of 2014 compared to $3.59 million for the nine months of 2013. Net interest income after provision for loan losses was $23.19 million for the current period compared to $20.85 million for the same period a year ago, reflecting the positive contributions of lower total interest expense and no provision for loan losses during the first nine months of 2014. Total non-interest income for the first nine months of 2014 was $6.51 million; a decline from $7.18 million for the first nine months of 2013, primarily reflecting a reduction in gains on sales of mortgage loans, partially offset by 29.2% greater income from the Company's UFS investment. In the third quarter of 2014, UFS completed integrating its operational platform with that of Missouri Valley Technologies, which it acquired in 2013. Cera said the transition was completed with high levels of customer satisfaction and retention, and should generate increased operating efficiencies that will continue to positively impact UFS earnings performance and income contribution in fiscal 2015.
Non-interest expense for the first nine months of 2014 was $20.27 million compared to $19.96 million for the first nine months of 2013. Expenses for the nine-month period ended September 30, 2014 included higher occupancy, equipment and outside services costs offset in part by a reduction in salaries and benefit costs when compared to the first nine months of 2013.
Balance Sheet, Asset Quality Highlights
At September 30, 2014, total assets were $982.49 million compared with $982.99 million at September 30, 2013 and $996.78 million at December 31, 2013. Shareholders' equity-to-assets ratio increased to 10.37% at September 30, 2014 from 9.39% at the same date in 2013.
Total gross loans increased to $631.52 million at September 30, 2014 compared to $612.17 million at the same date a year ago and $617.96 at December 31, 2013. The growth from December 31, 2013 primarily reflected increased retention of originated 1-4 family residential mortgages and commercial loan growth as the Bank continued its emphasis on expanding its commercial lending business. Cera commented that he is particularly pleased with the early success in attracting C&I loans related to the professional practice owners specialty business line.
Total deposits were $753.00 million at September 30, 2014 compared to $761.81 million at September 30, 2013 and $744.21 million at December 31, 2013. Significant deposit declines from year-end 2013 resulting from branch sales and closings in 2012 and 2013 were partially offset by deposits acquired in conjunction with the Appleton branch purchase during the first quarter of 2014 and by enhanced organic deposit growth, particularly in non-interest bearing demand deposit accounts reflecting expanded commercial banking relationships.
The Bank's loan-to-deposit ratio (based on daily averages) was 83.46% at September 30, 2014, which reflected an increase from 78.56% at September 30, 2013, but was relatively consistent with reporting periods earlier in 2014.
Total non-performing assets, including loans and other real estate property, declined to $10.89 million at September 30, 2014 from $13.40 million at September 30, 2013 and $12.96 million at December 31, 2013. Non-performing loan totals were $5.90 million at September 30, 2014, down from $6.51 million at September 30, 2013 and $6.66 million at December 31, 2013.
Key asset quality ratios all improved compared to a year ago and are at levels management believes reflect significant balance sheet strength. At September 30, 2014, the ratio of non-performing loans to total loans was 0.93%, non-performing assets to total assets was 1.11%, AFLL to total loans was 1.12% and annualized net charge-offs for the third quarter of 2014 to average loans was 0.24%.
Cera concluded, "We feel our infrastructure and market presence has positioned us to grow efficiently and productively. The markets we serve continue to show economic stability, with encouraging signs of business expansion. With our bank able to provide a more diverse range of financial solutions to businesses and individuals, we look forward to building upon our momentum as we finish out 2014 and move into the new year."
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 21 financial centers located throughout Northeast Wisconsin, in Brown, Door, Kewaunee, and Outagamie 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, 2013 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 periods indicated. The selected consolidated financial and other data at September 30, 2014 and 2013 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) September 30 numbers are UNAUDITED |
September 30, 2014 |
December 31, 2013 |
September 30, 2013 |
|
| (dollars in thousands, except share and per share data) |
||||
| Total assets |
$ 982,485 |
$ 996,776 |
$ 982,992 |
|
| Investment securities (1) |
224,378 |
230,883 |
227,764 |
|
| Total gross loans |
631,523 |
617,960 |
612,168 |
|
| Total deposits |
753,003 |
744,212 |
761,806 |
|
| Borrowings (2) |
99,745 |
125,148 |
94,902 |
|
| Subordinated debentures |
16,100 |
16,100 |
16,100 |
|
| Convertible debentures |
4,375 |
9,400 |
9,400 |
|
| Stockholders' equity |
101,913 |
93,881 |
92,347 |
|
| Non-performing loans (3) |
5,903 |
6,658 |
6,514 |
|
| Non-performing assets (3) |
10,890 |
12,956 |
13,398 |
|
| Restructured loans, accruing |
8,656 |
9,009 |
9,020 |
|
| Shares outstanding |
8,590,821 |
7,809,997 |
7,817,486 |
|
| Book value per share |
$ 11.86 |
$ 12.02 |
$ 11.81 |
|
| Tangible book value per share |
$ 11.01 |
$ 11.17 |
$ 10.96 |
|
| As of and for the Three Months Ended |
As of and for the Nine Months Ended |
|||
| September 30, |
September 30, |
|||
| (dollars in thousands, except per share data) |
(dollars in thousands, except per share data) |
|||
| Selected Operations Data – UNAUDITED |
2014 |
2013 |
2014 |
2013 |
| Total interest income |
$ 8,541 |
$ 8,615 |
$ 25,848 |
$ 25,832 |
| Total interest expense |
783 |
1,076 |
2,654 |
3,587 |
| Net interest income before provision for loan losses |
7,758 |
7,539 |
23,194 |
22,245 |
| Provision for loan losses |
- |
200 |
- |
1,400 |
| Net interest income after provision for loan losses |
7,758 |
7,339 |
23,194 |
20,845 |
| Total non-interest income |
2,329 |
2,326 |
6,511 |
7,184 |
| Total non-interest expense |
6,508 |
6,474 |
20,270 |
19,961 |
| Income before income taxes |
3,579 |
3,191 |
9,435 |
8,068 |
| Income tax expense |
1,122 |
986 |
2,754 |
2,377 |
| Net income |
$ 2,457 |
$ 2,205 |
$ 6,681 |
$ 5,691 |
| Selected Operations Data – UNAUDITED |
||||
| Per Share Data: (4) |
||||
| Net income per share (basic) |
$ 0.29 |
$ 0.28 |
$ 0.82 |
$ 0.72 |
| Net income per share (diluted) |
$ 0.26 |
$ 0.24 |
$ 0.73 |
$ 0.62 |
| Cash dividends per common share |
$ 0.08 |
$ 0.06 |
$ 0.22 |
$ 0.15 |
| Book value per share |
$ 11.86 |
$ 11.81 |
$ 11.86 |
$ 11.81 |
| As of and for the Three Months Ended |
As of and for the Nine Months Ended |
|||
| September 30, |
September 30, |
|||
| 2014 |
2013 |
2014 |
2013 |
|
| Performance Ratios: (5) |
||||
| Return on average total assets |
0.98% |
0.91% |
0.91% |
0.79% |
| Return on average total shareholders' equity |
9.64% |
9.45% |
9.18% |
8.12% |
| Net interest margin (6) |
3.49% |
3.55% |
3.59% |
3.52% |
| Net interest spread (6) |
3.41% |
3.45% |
3.51% |
3.42% |
| Efficiency ratio (9) |
63.30% |
63.90% |
66.98% |
66.50% |
| Non-interest income to average assets |
0.93% |
0.96% |
0.89% |
1.00% |
| Non-interest expense to average assets |
2.59% |
2.67% |
2.78% |
2.77% |
| Net overhead ratio (7) |
1.66% |
1.71% |
1.89% |
1.77% |
| Average loan-to-average deposit ratio |
83.46% |
78.56% |
85.87% |
78.11% |
| Average interest-earning assets to average interest-bearing liabilities |
123.92% |
120.10% |
120.76% |
118.53% |
| Asset Quality Ratios: (3)(5) |
||||
| Non-performing loans to total loans |
0.93% |
1.09% |
0.93% |
1.09% |
| Allowance for loan losses to: |
||||
| Total loans |
1.12% |
1.29% |
1.12% |
1.29% |
| Non-performing loans |
119.57% |
118.58% |
119.57% |
118.58% |
| Net charge-offs to average loans (annualized) |
0.24% |
0.74% |
0.13% |
0.60% |
| Non-performing assets to total assets |
1.11% |
1.38% |
1.11% |
1.38% |
| Capital Ratios: (5)(8) |
||||
| Stockholders' equity to assets |
10.37% |
9.39% |
10.37% |
9.39% |
| Tier 1 risk-based capital |
14.94% |
14.04% |
14.94% |
14.04% |
| Total risk-based capital |
16.54% |
16.54% |
16.54% |
16.54% |
| Tier 1 leverage ratio |
10.79% |
10.19% |
10.79% |
10.19% |
| Other: |
||||
| Number of bank subsidiaries |
1 |
1 |
1 |
1 |
| Number of banking facilities |
21 |
22 |
21 |
22 |
| Number of full-time equivalent employees |
252 |
266 |
252 |
266 |
| (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. Diluted earnings per share is based on the dilutive effect of shares that would be issued if outstanding stock options were exercised, stock awards were fully vested and promissory notes were converted in addition to the weighted average number of shares outstanding for the period. |
| (5) |
With the exception of end of 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.
Related Links
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article