Baylake Corp. Reports Financial Results for the Three and Six Months Ended June 30,...

Baylake Corp. Reports Financial Results for the Three and Six Months Ended
June 30, 2008

STURGEON BAY, Wis., July 22 /PRNewswire-FirstCall/ -- Baylake Corp.
(OTC Bulletin Board: BYLK), a bank holding company with $1.1 billion in
assets, reported 2008 second quarter net income of $95,000 or $0.01 basic and
diluted earnings per share, as compared to net income of $1.4 million or
$0.18 basic and diluted earnings per share, for the second quarter of 2007.
Return on assets (ROA) and return on equity (ROE) decreased for the quarter
ended June 30, 2008 to 0.04% and 0.47%, respectively, compared to 0.51% and
7.17%, respectively, for the same period a year ago.
Baylake's total assets and shareholders' equity were $1.1 billion and
$78.8 million, respectively, at June 30, 2008, compared to $1.1 billion and
$80.3 million at December 31, 2007. The decrease in shareholders' equity was
primarily a result of $1.3 million in earnings for the combined first and
second quarters net of a decrease in accumulated other comprehensive income.
Baylake Corp.'s Tier 1 risk-based capital remained strong at 10.74% as of
June 30, 2008, compared to 9.90% as of the same date a year earlier. The
Corporation and Bank continue to be well capitalized under the guidelines
established by the Board of Governors of the Federal Reserve Bank.
Non-performing loans declined to $36.3 million as of June 30, 2008,
compared to $45.9 million at June 30, 2007. During the quarter ended June 30,
2008 net loan charge-offs equaled $548,000, compared to $2.3 million in net
loan charge-offs for the quarter ended June 30, 2007. A provision for loan
losses of $861,000 was recorded for the quarter ended June 30, 2008, for a
total of $1.2 million for the first six months of 2008 compared to
$6.0 million for the same period a year ago. The ratio of allowance for loan
losses to total loans equaled 1.66% as of June 30, 2008, compared to 1.42% as
of June 30, 2007. The ratio of allowance for loan losses to non-performing
loans was 33.95% and 31.53% at June 30, 2008 and December 31, 2007,
respectively.
"Deterioration in the repayment abilities of some of the Corporation's
commercial loan customers, as well as reductions in the current estimated fair
market values of the commercial real estate collateralizing certain of these
loans, hindered efforts to meaningfully reduce the Corporation's
non-performing loan levels during the quarter ended June 30, 2008. Given the
increasing overall softness in the local and regional real estate markets, it
may take more time and effort than originally anticipated for the Bank's
non-performing loans to return to more normal levels," said Robert J. Cera,
Baylake Corp. President and Chief Executive Officer. "However, Baylake Corp.
believes the balance of the allowance for loan losses is presently sufficient
to absorb probable incurred credit losses at June 30, 2008."
Total loans equaled $741.4 million as of June 30, 2008, compared to
$815.1 million as of June 30, 2007, a decline of $73.7 million or 9.04% from a
year earlier. Total deposits decreased $40.0 million, or 4.45%, to
$858.5 million as of June 30, 2008, compared to a year earlier as the Bank
chose to compete less aggressively for retail deposits.
Net interest margin for the quarter ending June 30, 2008 was 3.10%. This
represented a 2 basis point improvement over the 3.08% net interest margin
earned during the linked quarter ending March 31, 2008 and a 1 basis point
improvement over the 3.09% net interest margin earned during the second
quarter ended June 30, 2007. Interest rate cuts initiated by the Federal
Reserve during the first quarter of 2008 and competitive local loan pricing
negatively impacted the Bank's ability to widen net interest margins.
Legal and collection expenses, as well as expense related to operation of
other real estate significantly impacted net income for the quarter ended
June 30, 2008. Quarterly profits were further reduced by a write-down of
$1.0 million valuation reduction of Other Real Estate Owned. This write-down
was primarily the result of declining market values of several residential and
commercial properties obtained from borrowers in default and held for sale by
Baylake.
Baylake Corp. anticipates that it has more than adequate resources
available to meet its commitments. As of June 30, 2008, the Corporation had
$55.6 million in established lines of credit with nonaffiliated banks, of
which $55.6 million was available.
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 28 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, 2008 and Form 10-K for the year ended
December 31, 2007, 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, 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 period indicated. The
selected financial and other data at June 30, 2008 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) - June 30, December June 30,
UNAUDITED 2008 31, 2007 2007
(dollars in thousands, except per share data)
Total assets $ 1,076,991 $1,106,616 $1,101,580
Investment securities (1) 220,113 222,475 185,989
Total loans 741,402 760,951 815,147
Total deposits 858,544 884,185 898,544
Borrowings (2) 112,316 112,346 95,671
Subordinated debentures 16,100 16,100 16,100
Stockholders' equity 78,759 80,262 79,213
Non-performing loans (3) 36,312 37,555 45,873
Non-performing assets (3) 44,283 42,722 51,792
Shares outstanding 7,911,539 7,885,960 7,876,222
Book value per share $9.95 $10.18 $10.06

As of and for the Three As of and for the Six
Months Ended Months Ended
June 30, June 30,
Selected Operations
Data - UNAUDITED 2008 2007 2008 2007
(dollars in thousands, except per share data)

Total interest income $14,302 $17,367 $29,908 $35,017

Total interest expense 7,115 9,893 15,518 19,699

Net interest income 7,187 7,474 14,390 15,318
Provision for loan
losses 861 -- 1,161 5,985

Net interest income
after provision
for loan losses 6,326 7,474 13,229 9,333

Total non-interest
income 2,199 2,417 4,513 4,662
Total non-interest
expense 9,013 8,248 16,855 16,713

Income (loss) before
income taxes (489) 1,643 887 (2,718)

Income tax expense
(benefit) (584) 229 (373) (1,836)

Net income (loss) $95 $1,414 $1,260 ($882)

As of and for the Three As of and for the Six Months
Months Ended Ended
June 30, June 30,
2008 2007 2008 2007
Per Share Data: (4)
Net income ( loss) per
share (basic) $0.01 $0.18 $0.16 ($0.11)
Net income (loss) per
share (diluted) $0.01 $0.18 $0.16 ($0.11)
Cash dividends per
common share $-- $0.16 $-- $0.32
Book value per share $9.95 $10.18 $9.95 $10.18

Performance Ratios: (5)

Return on average total
assets 0.04% 0.51% 0.24% (0.16%)
Return on average
total shareholders'
equity 0.47% 7.17% 3.10% (2.20%)
Net interest margin (6) 3.10% 3.09% 3.09% 3.16%
Net interest spread (6) 2.88% 2.68% 2.86% 2.76%
Efficiency ratio (9) 92.67% 80.32% 87.24% 80.62%
Non-interest income to
average assets 0.82% 0.88% 0.84% 0.84%
Non-interest expense to
average assets 3.38% 2.99% 3.14% 3.03%
Net overhead ratio (7) 2.56% 2.12% 2.30% 2.18%
Average loan to average
deposit ratio 87.33% 92.98% 86.80% 93.35%

Average interest
earning assets
to average
interest bearing
liabilities 107.51% 110.46% 107.38% 110.36%

Asset Quality Ratios:
(3) (5)
Non-performing loans to
total loans 4.90% 5.63% 4.90% 5.63%
Allowance for loan
losses to:
Total loans 1.66% 1.42% 1.66% 1.42%
Non-performing loans 33.95% 25.17% 33.95% 25.17%
Net charge-offs to
average loans 0.30% 1.12% 0.18% 0.61%
Non-performing assets
to total assets 4.11% 4.70% 4.11% 4.70%

Capital Ratios: (5)(8)
Shareholders' equity to
assets 7.31% 7.19% 7.31% 7.19%
Tier 1 risk-based
capital 10.72% 9.90% 10.72% 9.90%
Total risk-based
capital 11.97% 11.15% 11.97% 11.15%
Leverage ratio 8.53% 8.29% 8.53% 8.29%

Other:

Number of bank
subsidiaries 1 1 1 1
Number of banking
facilities 28 28 28 28
Number of full-time
equivalent
employees 316 326 316 326

(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.
(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
excluding net gains on sale of fixed assets.

SOURCE Baylake Corp.

Kevin L. LaLuzerne of Baylake Corp., +1-920-743-5551