STURGEON BAY, Wis., Jan. 22, 2015 /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 twelve month periods ended December 31, 2014.
In the fourth quarter of 2014, the Company's net income was $2.24 million or $0.24 per diluted share, compared with $2.32 million or $0.25 per diluted share in the fourth quarter of 2013. For the twelve months of 2014, net income was $8.92 million or $0.97 per diluted share, up 11% compared with net income of $8.01 million or $0.87 per diluted share for the twelve months of 2013. Results for the quarter and year ended December 31, 2014 included a net reduction to the Company's 2014 net income of approximately $0.20 million relating to a tax strategy reorganization of United Financial Services, Inc. ("UFS"), a data processing and e-banking entity in which the Company indirectly holds a 49.8% equity stake through its wholly owned subsidiary, the Bank. The reorganization was launched in the third quarter of 2014 in order to provide a more favorable tax structure to UFS and its shareholders. The transaction was completed in the fourth quarter of 2014 with the Bank agreeing to reimburse $0.66 million to UFS's other 49.8% shareholder for the disproportionate share of the tax liability borne by that shareholder in the overall restructuring transaction. Additionally, the Bank incurred costs of approximately $0.12 million and was able to reduce income tax expense by $0.58 million in the fourth quarter of 2014 due to the ability to reverse a previously recorded deferred tax liability relating to UFS.
Robert J. Cera, President and CEO, commented, "In many ways, 2014 was a break-through year for the Company. Total assets climbed to $1.02 billion, after declining below a billion for a period of time as the Company strived to refocus its efforts on higher performing markets and exited certain non-core markets. Throughout 2014, we demonstrated prudent interest expense management and improved asset quality, each of which contributed to the increase in net interest income for the year. Initiatives to broaden Baylake's reach in attractive markets were reflected in year-over-year loan and deposit growth."
"We have expanded our size and scale, particularly in the Green Bay and Appleton, Wisconsin metro areas, and are focused on winning new business and building deeper banking relationships with existing customers. Additions to our commercial banking and wealth management teams, and an expanded line of treasury services for business customers present opportunities to build fee based income. Our organization built significant momentum going into 2015, which we expect will result in the financial benefits reflecting our efforts in 2014 to position the Company for quality and sustainable growth."
FOURTH QUARTER, TWELVE MONTHS 2014 HIGHLIGHTS
-- Return on average assets ("ROAA") for the twelve months of 2014
increased to 0.91% from 0.83% for the same period in 2013. Return on
average equity ("ROAE") rose to 8.99% for the twelve months ended
December 31, 2014 from 8.55% for the twelve months ended December 31,
2013.
-- Total stockholders' equity increased to $105.50 million at December 31,
2014, up 12% compared with $93.88 million a year ago.
-- Total gross loans outstanding at December 31, 2014 were $679.36 million,
up from $617.96 million at December 31, 2013 reflecting diversified loan
growth in commercial & industrial ("C&I") and commercial real estate
lending as well as residential mortgages.
-- Net interest income after provision for loan losses grew to $8.24
million for the fourth quarter of 2014, up 4% from $7.96 million for the
fourth quarter of 2013, while net interest income after provision for
loan losses for the twelve months of 2014 rose to $31.43 million, up 9%
compared to the same period of 2013. Net interest income after
provision for loan losses was positively impacted in both the three and
twelve month periods of 2014 by no loan loss provision being recorded
and reductions in total interest expense compared to the same periods in
2013.
-- The Company trimmed total interest expense by 31% in the fourth quarter
of 2014 versus the fourth quarter of 2013 and by 27% during the twelve
months of 2014 compared to the same period 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 improved to 68.19% for the fourth quarter of 2014,
down from 70.67% from the fourth quarter of 2013 after adjusting for
one-time expenses or income and unusual items (see note 9 on the
following data schedule).
-- Non-interest income in 2014 was highlighted by 29% growth ($0.27
million) in net income from the Company's equity stake in UFS.
-- 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 0.92% at December 31, 2014 compared to 1.30% at December 31, 2013.
The ratio of annualized net loan charge-offs for the fourth quarter of
2014 to average loans was 0.0% compared to 0.15% in the fourth quarter
of 2013. The Company's allowance for loan losses ("AFLL") to
non-performing loans ratio was 136.78% at December 31, 2014 compared to
115.02% at December 31, 2013.
-- The Company was well capitalized for regulatory purposes at December 31,
2014, with capital ratios increasing year-over-year. The Company's Tier
1 risk-based capital ratio was 14.96%, total risk based capital ratio
was 16.14% and Tier 1 leverage ratio was 11.27%.
Fourth Quarter 2014 Income Statement Highlights
Total interest income for the three months ended December 31, 2014 was $8.90 million, relatively unchanged compared to $8.91 million for the three months ended December 31, 2013, while total interest expense declined to $0.66 million for the fourth quarter of 2014 compared with $0.95 million for the fourth quarter of 2013. Net interest income after loan loss provision was $8.24 million for the fourth quarter of 2014, increasing from $7.96 million for the fourth quarter of 2013. Year-over-year fourth quarter results reflected interest expense management and no loan loss provision recorded in the fourth quarter of 2014. Cera noted that although pressure on interest margins in the current low-interest rate environment and competition for quality loans continues, prudent interest expense management of maintaining a low cost of funding has enabled the Company to significantly mitigate the downward pressure on loan yields.
Net interest margin for the fourth quarter of 2014 was 3.74%, down slightly from 3.77% a year ago. The Company's net interest spread was 3.67% for the fourth quarter of 2014 compared to 3.68% for the comparable quarter in 2013. The Company's interest bearing cost of liabilities in the fourth quarter of 2014 was 36 basis points, compared to 53 basis points a year ago.
Total non-interest income for the fourth quarter of 2014 was $2.56 million, a 3% decrease from the fourth quarter of 2013 primarily reflecting lower net gains from the sale of securities. However, in a comparison of the fourth quarter of 2014 to the fourth quarter of 2013, gains from loan sales increased to $0.20 million from $0.11 million. Additionally, the fourth quarter of 2013 included $0.12 million of gains resulting from the sale of deposits associated with closing of branches, which were not repeated in the fourth quarter of 2014.
Total non-interest expense in the fourth quarter of 2014 was $8.05 million, up 9.7% compared with $7.34 million in the fourth quarter of 2013, with the increase primarily reflecting the $0.66 million one-time, after-tax expense related to the UFS reorganization and related professional fees included in other operating expense, partially offset by a $0.58 million reduction of income tax expense resulting from the reversal of deferred tax liabilities associated with the reorganization. The UFS reorganization is expected to result in a more favorable tax structure for the Bank's ownership going forward. Salaries and employee benefits expenses rose 5% during the fourth quarter of 2014 compared to the same period of 2013, primarily reflecting the addition of key personnel in commercial banking and wealth management. Occupancy costs increased 21% when comparing fourth quarter 2014 to the same period in 2013. The higher costs in 2014 are primarily attributable to a loss of rental income and related reimbursement for operating costs and real estate taxes, which had the impact of lowering net occupancy expenses during the prior year.
Twelve Months of 2014 Income Statement Highlights
Total interest income was $34.74 million for the twelve month period of 2014, which was consistent with the comparable period of 2013. Total interest expense declined to $3.31 million for the twelve months of 2014 compared to $4.54 million for the twelve months of 2013, reflecting disciplined interest expense management. Net interest income after provision for loan losses was $31.43 million for the current twelve-month period compared to $28.80 million for the same period a year ago, reflecting the positive contributions of lower total interest expense and no provision for loan losses recorded during the twelve months of 2014.
Total non-interest income for the twelve months of 2014 was $9.07 million; down from $9.83 million for the twelve months of 2013, primarily reflecting lower gains on sales of residential mortgage loans, reduced gains from the sale of securities and no gains from the sale of deposits recorded in 2013.
Non-interest expense for the twelve months of 2014 was $28.32 million compared to $27.30 million for the twelve months of 2013 primarily resulting from an increase in occupancy expense, reflecting the Bank's investment in the Appleton branch during 2014.
Balance Sheet, Asset Quality Highlights
At December 31, 2014, total assets were $1.02 billion compared with $996.78 million at December 31, 2013. Shareholders' equity-to-assets ratio increased to 10.33% at December 31, 2014 from 9.42% as of the same date in 2013.
Total gross loans increased to $679.36 million at December 31, 2014 compared to $617.96 million at December 31, 2013. The increase from December 31, 2013 reflected the Bank's continued emphasis on expanding its commercial lending business. Cera noted the Bank has demonstrated success growing its commercial lending business, particularly through its recent efforts to enhance its professional practice specialty business line. Growth occurred in the residential lending portfolio as well.
Total deposits were $765.54 million at December 31, 2014 compared to $744.21 million at December 31, 2013. The growth reflected deposits acquired in conjunction with the Appleton branch purchase in the first quarter of 2014, as well as organic deposit growth, particularly in non-interest bearing demand deposit accounts associated with new and expanded commercial banking relationships.
Asset quality improved year-over-year, with total non-performing assets, including loans and other real estate property, declining to $9.42 million at December 31, 2014 from $12.96 million at December 31, 2013. Non-performing assets to total assets were 0.92% at December 31, 2014 compared with 1.30% at December 31, 2013. Non-performing loan totals were $5.16 million at December 31, 2014, down from $6.66 million at December 31, 2013. The ratio of non-performing loans to total loans declined to 0.76% at December 31, 2014 compared with 1.08% at December 31, 2013.
Capital ratios continue to exceed accepted regulatory standards for well capitalized institutions. Shareholders' equity to assets increased to 10.33% at December 31, 2014 from 9.42% a year earlier. Certain measures of shareholder value were impacted by an increase in the Company's total shares outstanding, which increased to 9.05 million shares at December 31, 2014 from 7.81 million shares at December 31, 2013, reflecting $7.75 million of subordinated debentures that were converted into 1.56 million shares during the year. Additionally, 0.34 million shares were repurchased by the Company during the year under its Stock Repurchase Program originally approved by the Company's board of directors in May 2013. Book value per share was $11.65 and tangible book value per share was $10.84 at December 31, 2014 compared with $12.02 and $11.17 a year prior, reflecting the conversion of subordinated debentures into common stock. The Company enhanced shareholder value during the year, increasing its quarterly cash dividend to common shareholders to $0.08 per share beginning in the third quarter of 2014. Total dividends paid in 2014 increased to $0.30 per share compared to $0.22 per share in 2013. The Company's common stock dividend yield during 2014, based on book value at December 31, 2014 was at 2.58%.
Cera concluded: "We anticipate an expanding commercial banking operation and the resulting revenue impact, with a strong focus on our key Green Bay and Appleton markets. We expect investments made in new personnel additions to drive revenue growth in the coming year. All our served markets continue to show economic stability, with business and economic expansion occurring that provides opportunities for new business. We believe there is significant potential to build value for our shareholders going forward."
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 press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding the Company's results of operations or financial position and in comparing the Company's results of operations and financial position over different periods. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
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 December 31, 2014 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 December 31, 2014 December 31, 2013
(at end of period)
December 2014
numbers are
UNAUDITED
------------------
(dollars in thousands,
except share and per
share data)
Total assets $1,021,623 $996,776
Investment
securities (1) 208,524 230,883
Total gross loans 679,357 617,960
Total deposits 765,542 744,212
Borrowings (2) 125,324 125,148
Subordinated
debentures 16,100 16,100
Convertible
debentures 1,650 9,400
Stockholders' equity 105,504 93,881
Non-performing
loans (3) 5,155 6,658
Non-performing
assets (3) 9,421 12,956
Restructured loans,
accruing 8,656 9,009
Shares outstanding 9,054,821 7,809,997
Book value per share $11.65 $12.02
Tangible book value
per share $10.84 $11.17
As of and for As of and for the
the Three Twelve Months
Months Ended Ended
December 31, December 31,
(dollars in (dollars in
thousands, thousands,
except per except per share
share data) data)
Selected Operations Data -
UNAUDITED 2014 2013 2014 2013
-------------------------- ---- ---- ---- ----
Total interest income $8,895 $8,908 $34,743 $34,740
Total interest expense 659 953 3,313 4,540
--- --- ----- -----
Net interest income before
provision for loan losses 8,236 7,955 31,430 30,200
Provision for loan losses - - - 1,400
--- --- --- -----
Net interest income after
provision for loan losses 8,236 7,955 31,430 28,800
Total non-interest income 2,556 2,646 9,067 9,830
Total non-interest expense 8,052 7,341 28,322 27,302
----- ----- ------ ------
Income before income taxes 2,740 3,260 12,175 11,328
Income tax expense 498 942 3,252 3,319
--- --- ----- -----
Net income $2,242 $2,318 $8,923 $8,009
====== ====== ====== ======
Selected Operations Data -
UNAUDITED
--------------------------
Per Share Data: (4)
------------------
Net income per share (basic) $0.25 $0.30 $1.07 $1.01
Net income per share
(diluted) $0.24 $0.25 $0.97 $0.87
Cash dividends per common
share $0.08 $0.07 $0.30 $0.22
Book value per share $11.65 $12.02 $11.65 $12.02
As of and for the As of and for the
Three Months Ended Twelve Months
Ended
December 31, December 31,
2014 2013 2014 2013
---- ---- ---- ----
Performance Ratios: (5)
----------------------
Return on average total
assets 0.90% 0.96% 0.91% 0.83%
Return on average total
shareholders' equity 8.46% 9.82% 8.99% 8.55%
Net interest margin (6) 3.74% 3.77% 3.63% 3.58%
Net interest spread (6) 3.67% 3.68% 3.55% 3.48%
Efficiency ratio (9) 68.19% 70.67% 67.30% 67.57%
Non-interest income to
average assets 1.03% 1.10% 0.93% 1.02%
Non-interest expense to
average assets 3.24% 3.05% 2.89% 2.84%
Net overhead ratio (7) 2.21% 1.95% 1.96% 1.82%
Average loan-to-average
deposit ratio 87.53% 82.88% 86.29% 79.28%
Average interest-earning
assets to average
interest-bearing
liabilities 125.69% 120.84% 121.98% 119.10%
Asset Quality Ratios:
(3)(5)
---------------------
Non-performing loans to
total loans 0.76% 1.08% 0.76% 1.08%
Allowance for loan losses
to:
Total loans 1.04% 1.24% 1.04% 1.24%
Non-performing loans 136.78% 115.02% 136.78% 115.02%
Net charge-offs to
average loans
(annualized) 0.00% 0.15% 0.10% 0.48%
Non-performing assets to
total assets 0.92% 1.30% 0.92% 1.30%
Capital Ratios: (5)(8)
---------------------
Stockholders' equity to
assets 10.33% 9.42% 10.33% 9.42%
Tier 1 risk-based capital 14.96% 14.26% 14.96% 14.26%
Total risk-based capital 16.14% 16.71% 16.14% 16.71%
Tier 1 leverage ratio 11.27% 10.48% 11.27% 10.48%
Other:
------
Number of bank
subsidiaries 1 1 1 1
Number of banking
facilities 21 20 21 20
Number of full-time
equivalent employees 243 258 243 258
As of and for the As of and for the
Three Months Twelve Months Ended
Ended
December 31, December 31,
(dollars in (dollars in
thousands) thousands)
2014 2013 2014 2013
---- ---- ---- ----
Efficiency
Ratio:
GAAP to
Non-
GAAP
reconciliation:
(9)
---------------
Non-
interest
Expense $8,052 $7,341 $28,322 $27,302
Less:
Payment
under
UFS tax
strategy
make-
whole
agreement 661 - 661 -
--- --- --- ---
Non-
interest
Expense
(non-
GAAP) $7,391 $7,341 $27,661 $27,302
====== ====== ======= =======
Net
Interest
Income $8,236 $7,955 $31,430 $30,200
Plus:
Tax
equivalent
adjustment
relating
to tax
exempt
loans
and
investment
securities 260 266 1,052 1,070
--- --- ----- -----
Non-
interest
Income
(non-
GAAP) $8,496 $8,221 $32,482 $31,270
====== ====== ======= =======
Non-
interest
Income $2,556 $2,646 $9,067 $9,830
Less:
net
gains
(losses)
on sale
of
investments 214 365 446 574
Less:
net
gains
(losses)
on
disposal
of
fixed
assets - (7) 1 (3)
Less:
net
gains
on sale
of
deposits - 122 - 122
--- --- --- ---
Non-
interest
Income
(non-
GAAP) $2,342 $2,166 $8,620 $9,137
====== ====== ====== ======
Efficiency
Ratio 74.61% 69.25% 69.94% 68.20%
Efficiency
Ratio
(non-
GAAP) -
tax
equivalent 68.19% 70.67% 67.30% 67.57%
(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
less significant, non-recurring
expenses divided by the sum of
tax-equivalent net interest
income plus non-interest income,
excluding net investment security
gains, net gains on sale of fixed
assets and land held for sale and
significant, non-recurring income
items. This efficiency ratio is
presented on a tax-equivalent
basis, which adjusts net interest
income for the tax-favored status
of certain loans and investment
securities. Management believes
this measure to be the preferred
industry measurement of net
interest income as it enhances the
comparability of such income
arising from both taxable and non-
taxable sources. However, as
calculated, this efficiency ratio
is not considered to be in
accordance with Generally Accepted
Accounting Principles ("GAAP") and
as such, a reconciliation of GAAP
to non-GAAP is presented as well.
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SOURCE Baylake Corp.
