Baylake Corp. Reports Financial Results for the Quarter and Year Ended December 31, 2002.

Business Editors

STURGEON BAY, Wis.--(BUSINESS WIRE)--Feb. 4, 2003

Baylake Corp. (OTC BB: BYLK), a bank holding company with $904.7 million in assets, reported net income of $8.7 million or $1.17 basic earnings per share for the year ended December 31, 2002, as compared to $7.5 million or $1.01 basic earnings per share for the year ended December 31, 2001. The increase in net income was primarily due to increased net interest income and other non-interest income offset to a lesser amount by increased other non-interest expense and provision for loan loss expense. Diluted earnings per share were $1.15 for the year ended December 31, 2002 compared to $0.99 a year earlier. Return on assets (ROA) and return on equity (ROE) increased for the year ended December 31, 2002, to 1.00% and 13.98%, respectively, from 0.93% and 13.37%, respectively, from the year ended December 31, 2001.

Baylake Corp. reported net income of $2.4 million or $0.33 basic earnings per share for the three months ended December 31, 2002, as compared to $2.3 million or $0.31 basic earnings per share for the same period in the prior year. The increase in net income of 7.6% resulted primarily from increased non-interest income offset to a lesser degree by a decrease in net interest income, increased provision for loan loss expense and increased other non-interest expense.

Net interest income for the three months ended December 31, 2002 was $7.0 million compared to $7.5 million a year earlier. Net interest income declined as a result of a decrease in net interest margin of 44 basis points to 3.58% affected in part by a lower rate environment, thereby compressing net interest margin. In addition, average-earning assets decreased $5.5 million during the same time frame.

Non-interest income for the three months ended December 31, 2002 increased by $2.1 million to $3.8 million due to an increase of loan servicing fees amounting to $294,000, an increase of gains on sales of loans of $292,000, a death benefit recognized net of cash surrender value from a life insurance policy amounting to $754,000, and gross revenues from bank subsidiaries totaling $184,000 offset by a decrease in fees for other services to customers of $218,000.

For the three months ended December 31, 2002, non-interest expense increased $140,000 from the three months ended December 31, 2001 to $5.3 million. Personnel and benefit expenses increased approximately $229,000 due to additional staffing and normal salary increases. Occupancy and equipment expenses increased $206,000. Other operating expenses declined $350,000 for the quarter ended December 31, 2002 compared to a year earlier.

For the year ended December 31, 2002, net interest income increased $2.4 million to $29.4 million due primarily to average interest-earning assets increasing by $46.4 million. The increase in average interest-earning assets primarily reflected substantial growth in loan originations during the year. During the year 2002, net interest margin increased by 9 basis points to 3.87%, the result of lower cost of funding from deposits and other wholesale funding relative to rates earned on earning assets such as loans and investments.

For the year ended December 31, 2002, non-interest income increased by $4.4 million to $10.8 million. The increase was primarily attributable to an increase from gains on sales of loans totaling $552,000 gross revenues of $707,000 from bank subsidiaries; an increase in securities gains of $510,000 and increases in income from bank owned life insurance, including a death benefit recognized as mentioned earlier.

For the year ended December 31, 2002, non-interest expense increased $2.4 million over the preceding year. Personnel and benefit expense increased approximately $1.7 million due to additional staffing and normal salary increases. Occupancy and equipment expense increased $539,000 as a result of additional branch expenses during the year.

For the year ended December 31, 2002, income tax expense increased $484,000, primarily due to an increase in taxable income.

Total assets for Baylake Corp. increased 7.0% to $904.7 million at December 31, 2002 when compared to total assets of $845.8 million at December 31, 2001. Total loans increased 9.6% during the year of 2002 to $665.9 million at December 31, 2002, while deposits during the year increased 10.5% to $740.3 million at December 31, 2002. Total shareholders' equity increased 10.6% during the year of 2002 to $65.4 million at December 31, 2002 as compared with $59.1 million at December 31, 2001.

Baylake Corp. recorded provisions for loan losses totaling $5.7 million for the year ended December 31, 2002, an increase of $2.8 million when compared to the prior year. This included an increase of $1.2 million for the quarter ended December 31, 2002 due to concerns on one commercial credit totaling $4.7 million which has experienced cashflow problems. During the year, the allowance increased $3.4 million to $11.4 million. During the year ended December 31, 2002, Baylake Corp. had net charge-offs of approximately $2.3 million. The ratio of allowance for loan losses to total loans was 1.71% at December 31, 2002 compared to 1.32% at December 31, 2001. Non-performing loans totaled $22.1 million and $14.7 million at December 31, 2002 and December 31, 2001, respectively. The ratio of allowance for loan losses to non-performing loans was 51.6% and 54.5% at December 31, 2002 and December 31, 2001, respectively.

Foreclosed assets, net, at December 31, 2002 increased $1.2 million from December 31, 2001, primarily as a result of the acquisition from one borrower of a commercial property which since has been organized as a subsidiary of the bank. Baylake has continued to manage actively the operations.

Despite the increases in nonperforming loans during the 2002 year and in view of the level of balances in non-performing assets, Baylake Corp. believes the balance of the allowance for loan loss at December 31, 2002 is presently sufficient to absorb loan losses inherent in the portfolio, although future adjustments to the allowance may be necessary based on changes in economic conditions and the impact that these changes, if any, may have on the ability of borrowers to continue to service or repay outstanding credits and on the value of the underlying collateral securing these credits.

Capital resources for the twelve-month period ended December 31, 2002 improved by $927,000 from the nine-month period ended September 30, 2002. For the year ended December 31, 2002, capital resources have improved $6.3 million.

During the quarter ended December 31, 2002, Baylake Corp. acquired additional liquidity through the growth in core deposits. As a result, Baylake Corp. anticipates that it will have sufficient funds available to meet the commitments outstanding at December 31, 2002. At December 31, 2002, Baylake Corp. had available and outstanding, established lines of credit totaling $50.4 million with nonaffiliated banks.

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 26 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 may contain 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. 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 September 30, 2002 and Form 10-K for the year ended December 31, 2001, describe some factors, including certain credit, market, operational, liquidity and interest rate risks associated with the company's business and operations. Other factors include changes in business and economic conditions, 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, 2002 and at and for the three and twelve months ended
December 31, 2002 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.

                                         At                  At
                                      December 31,        December 31,
                                        2002                2001
                                  ----------------    ----------------
                                     (dollars in         (dollars in
                                      thousands)          thousands)

Selected Financial Condition Data (at end of period):

Total assets                             $ 904,656           $ 845,791
Investment securities(1)                   151,366             167,100
Federal funds sold                               0               4,452
Total loans                                665,887             607,715
Total deposits                             740,307             669,890
Borrowings(2)                               75,056              92,837
Notes payable and subordinated debt            106                 158
Trust preferred securities                  16,100              16,100
Total shareholders' equity                  65,401              59,130
Non-performing loans,
  net of discount(3)(4)                     22,113              14,673
Non-performing assets,
  net of discount(3)(4)                     25,003              16,346

                            As of and for the        As of and for the
                               Three Months             Twelve Months
                            Ended December 31,       Ended December 31,
                            ------------------       ------------------
                             2002        2001        2002         2001
                             ----        ----        ----         ----
                          (dollars in thousands, except per share data)

Selected Income Data:
Total interest income     $12,395     $14,229    $ 51,564      $59,023
Total interest expense      5,395       6,773      22,188       32,053
                            -----       -----      ------       ------
Net interest income         7,000       7,456      29,376       26,970
Provision for loan losses   3,000       1,805       5,700        2,880
                            -----       -----       -----        -----
Net interest income after
  provision for loan losses 4,000       5,651      23,676       24,090
Total non-interest income   3,768       1,659      10,754        6,308
Total non-interest expense  5,303       5,163      23,133       20,772
                            -----       -----      ------       ------
Income before income tax    2,465       2,147      11,297        9,626
Income tax provision           20       (125)       2,575        2,091
                               --       -----       -----        -----
Net income                $ 2,445     $ 2,272     $ 8,722      $ 7,535
                          =======     =======     =======      =======
Per Share Data:(5)
Net income per
  share (basic)           $  0.33     $  0.31     $  1.17      $  1.01
Net income per
  share (diluted)            0.32        0.30        1.15         0.99
Cash dividends per
  common share               0.13        0.12        0.49         0.45
Book value per share         8.74        7.91        8.74         7.91

Performance Ratios:(6)
Return on average
  total assets               1.08%       1.08%       1.00%        0.93%
Return on average total
  shareholders' equity      15.00%      15.46%      13.98%       13.37%
Net interest margin(7)       3.58        4.02        3.87         3.78
Net interest spread(7)       3.32        3.62        3.61         3.34
Non-interest income to
  average assets             1.67        0.79        1.24         0.78
Non-interest expense to
  average assets             2.35        2.53        2.66         2.57
Net overhead ratio(8)        0.68        1.74        1.42         1.79
Efficiency ratio            49.25       56.64       57.65        62.42
Average loan-to-average
  deposit ratio             89.47       92.00       91.78        95.76
Average interest-earning
  assets to average
  interest-bearing
  liabilities              110.03      111.55      109.50       110.33

Asset Quality Ratios:(3)(4)(6)
Non-performing loans to
  total loans                3.32%       2.42%       3.32%        2.42%
Allowance for loan losses to:
  Total loans                1.71        1.32        1.71         1.32
  Non-performing loans      51.60       54.47       51.60        54.47
Net charge-offs to
  average loans              0.55        1.01        0.36         0.32
Non-performing assets
  to total assets            2.76        1.93        2.76         1.93

Capital Ratios:(6)(9)
Shareholders' equity
  to assets                  7.23%       6.99%       7.23%        6.99%
Tier 1 risk-based capital    9.74       10.10        9.74        10.10
Total risk-based capital    10.99       11.29       10.99        11.29
Leverage ratio               8.24        8.22        8.24         8.22

Ratio of Earnings to Fixed Charges:(10)

Including deposit interest   1.46x       1.32x       1.51x        1.30x
Excluding deposit interest   3.39        2.44        3.33         2.27

Other Data at End of Period:
Number of bank subsidiaries     1           1           1            1
Number of banking facilities   26          25          26           25
Number of full-time
  equivalent employees        293         276         293          276

(1) Includes securities classified as held-to-maturity and 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, guaranteed

loans 90 days or more past due but still accruing interest and

restructured loans. Non-performing assets consist of

non-performing loans and other real estate owned. (4) The increase in non-performing assets during the three and twelve

months ended December 31, 2002 was due, in part, to an increase in

various foreclosed properties taken into other real estate for

purposes of liquidation and an increase in non-accrual loans, a

result of several commercial real estate loans experiencing

cashflow problems. (5) Earnings and dividends per share are based on the weighted average

number of shares outstanding for the period. (6) With the exception of end of period ratios, all ratios are based

on average monthly balances and are annualized where appropriate. (7) Net interest margin represents net interest income as a percentage

of average interest-earning assets, and 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. (8) Net overhead ratio represents the difference between noninterest

expense and noninterest income, divided by average assets. (9) The capital ratios are presented on a consolidated basis (10) For purposes of calculating the ratio of earnings to fixed

charges, earnings consist of income before taxes plus interest and

rent expense. Fixed charges consist of interest and rent expense.