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Baylake Corp. (BYLK) President and CEO Robert J. Cera Interviews with The Wall Street Transcript

67 WALL STREET, New York - February 5, 2013 - The Wall Street Transcript has just published its Southeast & Midwestern Banks Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Heightened M&A Activity - Consolidation in Regional Banking - Growth in U.S. Midwest - Regulatory Obstacles and Fee Income Replacement - Rise of Commercial and Industrial Lending

Companies include: Baylake Corp. (BYLK) and many more.

In the following excerpt from the Southeast & Midwestern Banks Report, the President and CEO of Baylake Corp. (BYLK) discusses the outlook for his regional bank and the industry:

TWST: What's your outlook at this point for Wisconsin's economy?

Mr. Cera: If you look at the economic data through the end of 2012, you'll find that the Midwest in general - from an employment perspective and from an economic perspective - has fared slightly better than the nation as a whole. Then within that, I think Wisconsin itself has probably fared predominantly a little bit better than the rest of the Midwest. I think that's attributable in part to the fact that: A, Wisconsin has not seen the highs and lows of the housing booms and bust; and B, we trade in a little bit more narrow market and we didn't see the exaggerated bubbles. There's just a much more stable residential market. I think in part as a result of that, we have a fairly hefty and stable base of manufacturing.

Many different segments have been aided by the parts of the economy that have actually done OK through the recession, and then those that have benefited more quickly out of the recession. In part, some of that is defense-related. We've had some companies that have been very involved in building ships and building other defense-related items; second and third-tier supplier-type business relationships to other defense contractors. That's been an important segment. Our health care industries and health insurance industries in Wisconsin have fared very well these last few years as a result of the emphasis in health care. So I think Wisconsin has done pretty well.

TWST: It appears that Baylake had a strong if not decent 2012. For the third quarter, you reported significant year-over-year earnings, nonperforming loans to total loans declined by about 2% and nonperforming loans declined 51%. Can you put those results in perspective relative to your competitors?

Mr. Cera: About four years ago, we entered a period in the bank's history that we really had not ever seen before. We were dealing with an exaggerated level of problem loans and really suffered from a performance standpoint. As a result, when the country then went into a recession, our prior emphasis on asset quality improvement was slightly ahead of our competitors.

We hit the depths of our asset quality problems about 18 months sooner than most other banks. As a result of our entrance into that period of time, the bank went through a regulatory action that was put on us by the Federal Reserve Bank, and they required additional remedies that we needed to implement to get the bank back to strong health. We came out of that period aggressively focused on increasing capital and improving asset quality. You're seeing the results of our efforts that may have been realized later for other banks that identified their problems later than we did.

We see 2012 as a year that is a validation of the fact that we really put a great emphasis on strengthening the bank's asset quality and capital and then the residual flow through to earnings improvement because of the attention we placed on managing both deposit and funding costs. As a result of improved asset quality, we were able to lower our loan and collection expenses slightly and some other noninterest expense categories...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.