BALTIMORE, Feb. 11 /PRNewswire-FirstCall/ -- Bay National Corporation (Nasdaq: BAYN), the holding company for Bay National Bank, today reported a fourth quarter net loss per diluted share of $0.48 compared with a net loss per diluted share of $0.26 reported in the fourth quarter of 2007. The net loss was $1.024 million compared to a net loss of $564 thousand in the fourth quarter of last year. The current quarter results include a credit loss provision of $961 thousand and net charge-offs totaling $1.961 million, the majority of which were related to the residential real estate construction portfolio.

As of December 31, 2008, total assets were $270.6 million, an increase of 5.5% from December 31, 2007. Total deposits were $244.6 million and net loans were $242.7 million, increases of 21.1% and 2.8%, respectively, over the December 31, 2007 totals.

Hugh W. Mohler, Chairman and Chief Executive Officer, commented, "What began as a 'subprime crisis' in 2007, quickly became a full-blown global recession in 2008, causing the U.S. stock market to lose more than a third of its value in a year, while sending unemployment to its highest level since the 1980s. U.S. home prices went into a free-fall wreaking havoc on the financial industry. In terms of the impact of these forces on Bay National Bank's financial performance and condition, the buck stops with me, and I accept the responsibility for not asking enough hard questions about the risks associated with the residential housing market.

In 2008, several critical strategic decisions were made by Management and the Board of Directors to lay a foundation for future growth. These initiatives included: the Board of Directors voluntarily declining all Board fees, executive management willingly taking a 20% pay cut and no bonus; senior executives, of their own accord, taking a 10% pay cut and not receiving any bonuses; a salary freeze for all personnel; and no bonuses paid for 2008 and none budgeted for 2009 in an effort to restore the Corporation to its historically strong earnings pattern.

During 2009, we will remain focused on credit quality, controlling growth in order to further strengthen our capital structure, and drastically reduce our operating expenses. Under regulatory capital definitions, we remain adequately-capitalized at 9.57% total risk-based capital (slightly below the 10% well-capitalized level), and strongly believe our ongoing commitment to expense management and conservative lending practices will enhance our ability to return to historic levels of profitability when the economic cycle begins to improve.

It is important that our investors, customers and associates understand that despite this quarter's performance, Bay National Corporation has tremendous opportunities. We have strategically positioned ourselves as the 'local' bank, which our customers have genuinely embraced. Often, challenging times offer great opportunities and I am confident that this will be true with Bay National Bank."

On February 6, 2009, in cooperation with the Office of the Comptroller of the Currency (the "OCC"), Bay National Bank voluntarily agreed to the issuance of a Consent Order. The Consent Order is a formal agreement that, among other things, requires the Bank to submit to the OCC for approval a strategic plan in which the Board of Directors will outline its plan to remain independent and which addresses the resolution of problem assets (including related costs), viable sources of liquidity (including related costs), achievement and maintenance of enumerated capital requirements, and ongoing viability of the Bank based on current financial and market conditions. The Consent Order also requires the Bank and/or its Board to take certain other actions and adopt written policies designed to improve its financial strength, including policies to address liquidity, funding needs, management adequacy, loan portfolio management and asset diversification. Also under the Consent Order, the Bank's Board of Directors has agreed to establish a Compliance Committee to monitor, coordinate and report on compliance with the Consent Order. The Board of Directors, internally and independently, had previously established an action plan and engaged a financial advisor to explore strategic alternatives. It is important to note that deposits remain insured by the FDIC up to the maximum amount allowed by federal regulators.

About Bay National Bank

Bay National Bank was founded in 2000 in response to banking industry consolidation and the distinct void these mergers created in servicing, in particular, small and mid-size businesses and their owners, business professionals, and high net worth individuals. We believe that Bay National Bank now occupies a unique niche in the banking industry. We also believe that Bay National Bank is well positioned between the much larger banks, whose size and bureaucracy can preclude them from delivering exceptional and responsive service, and the much smaller banks, which may not be able to deliver the full range of products and services sought by growing businesses and sophisticated customers.

Bay National Bank has two full-service banking offices, Baltimore and Salisbury, Maryland, residential mortgage lending operations in both Baltimore and the Eastern Shore of Maryland, and a recently-opened commercial banking office in the Baltimore-Washington Corridor. It offers a complete range of commercial, private, cash management, retail, and residential mortgage banking services delivered with a high degree of respect and integrity.

The statements in this press release that are not historical facts constitute "forward-looking statements" as defined by Federal Securities laws. Forward-looking statements can generally be identified by the use of forward-looking terminology such as "believes," "expects," "intends," "may," "will," "should," "anticipates" or similar terminology. Such statements, specifically regarding Bay National Corporation's intentions during 2009 including controlling growth, strengthening its capital structure and reducing operating expenses, future lending practices and return to profitability, are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, further deterioration in real estate values and economic conditions generally, and changes in interest rates, deposit flows and loan demand, as well as changes in competitive, governmental, regulatory, technological and other factors which may affect Bay National Corporation specifically or the banking industry generally. Forward-looking statements speak only as of the date they are made. Bay National Corporation will not update forward-looking statements to reflect factual assumptions, circumstances or events that have changed after a forward-looking statement was made. For further information, please refer to the Bay National Corporation reports filed with the U.S. Securities and Exchange Commission.


    SELECTED UNAUDITED FINANCIAL DATA
    AS OF DECEMBER 31, 2008 and 2007
    (dollars in thousands, except per share data)

                                             2008        2007
                                             ----        ----
    Total assets                           $270,588   $256,536
    Cash and due from banks                   7,263      2,314
    Federal funds sold and other
     overnight investments                    2,023      4,859
    Investment securities available
     for sale                                     -        400
    Other equity securities                   1,240      1,715
    Loans, net                              242,676    235,956
    Deposits                                244,628    201,981
    Short-term borrowings                     1,864     25,372
    Subordinated debt                         8,000      8,000
    Stockholders' equity                     15,022     19,921

    Common shares outstanding             2,153,101  2,137,633
    Book value per share                      $6.98      $9.32
    Ratio of interest earning assets
     to interest bearing liabilities         127.07%    121.35%
    Stockholders' equity as a
     percentage of assets                      5.55%      7.77%


    SELECTED UNAUDITED FINANCIAL RATIOS
    FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2008 and 2007

    Weighted average yield/rate on:            2008       2007
                                               ----       ----
    Loans                                      6.15%      8.79%
    Investments and interest bearing
     cash balances                             1.47%      3.90%
    Interest bearing liabilities               3.20%      4.45%
    Net interest spread                        2.71%      3.95%
    Net interest margin                        3.30%      4.82%



    SELECTED UNAUDITED OPERATIONAL DATA
    FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2008 and 2007
    (dollars in thousands, except per share data)

                                        Three Months         Twelve Months
                                           Ended                 Ended
                                           ------                ------
                                         December 31           December 31
                                         -----------           -----------
                                       2008       2007       2008       2007
                                       ----       ----       ----       ----
    Interest income                  $3,521     $4,762    $15,325    $20,588
    Interest expense                  1,705      2,057      6,763      8,765
    Net interest income               1,816      2,705      8,562     11,823
    Provision for credit losses         961      1,776      6,478      2,126
    Net interest income after
     provision for credit losses        855        929      2,084      9,697
    Non-interest income                 150        204        763        725
    Non-interest expenses             2,840      2,206     11,106      8,993
    (Loss) income before income
     taxes                           (1,836)    (1,073)    (8,259)     1,429
    Income tax (benefit) expense       (812)      (509)    (3,194)       492
    Net (loss) income               $(1,024)     $(564)   $(5,065)      $937

    PER COMMON SHARE
    Basic net (loss) income per
     share*                           $(.48)     $(.26)    $(2.37)      $.44
    Diluted net (loss) income
     per share*                       $(.48)     $(.26)    $(2.37)      $.42
    Average shares outstanding
     (Basic)*                     2,129,698  2,137,633  2,140,793  2,133,174
    Average shares outstanding
     (Diluted)*                   2,129,698  2,137,633  2,140,793  2,210,151

    STOCK PRICE
          High*                       $5.96     $18.00     $11.70     $18.00
          Low*                        $1.50      $9.70      $1.50      $9.70
          Close*                      $2.40      $9.75      $2.40      $9.75

    * All periods have been adjusted to reflect a 1.1 to 1 stock split in
    the form of a 10% stock dividend recorded on June 29, 2007




    SUPPLEMENTAL INFORMATION:
    (dollars in thousands)

                                             December    December
    Reconciliation of total deposits to         31,         31,
     core deposits:                            2008        2007
                                               ----        ----
    Total deposits                          $244,628    $201,981
    Commercial paper sweep balances                -       6,026
    National market certificates of deposit  (94,920)    (32,661)
    Variable balance accounts (1 customer
     as of December 31, 2008 and 2007)        (5,312)     (6,231)
        Portion of variable balance
         accounts considered to be core        3,000       3,000
    Core deposits                           $147,396    $172,115

SOURCE Bay National Corporation