Baylake Corp. Reports Financial Results for the Three and Nine Months Ended September 30, 2002.

Business Editors

STURGEON BAY, Wis.--(BUSINESS WIRE)--Oct. 23, 2002

-Baylake Corp. (OTC BB:BYLK), a bank holding company with $905.4 million in assets, reported net income of $6.3 million or $0.84 basic earnings per share for the nine months ended September 30, 2002, as compared to $5.3 million or $0.70 basic earnings per share for the nine months ended September 30, 2001. The increase in net income of 19.3% was primarily due to increased net interest income and other non-interest income offset to a lesser amount by increased other non-interest expense. Diluted earnings per share were $0.83 for the first nine months of 2002 compared to $0.69 a year earlier. Return on assets (ROA) and return on equity (ROE) increased for the nine months ended September 30, 2002, to 0.97% and 13.62%, respectively, from 0.88% and 12.63%, respectively, for the same period one year ago.

Baylake Corp. reported net income of $2.2 million or $0.30 basis earnings per share for the three months ended September 30, 2002, as compared to $1.9 million or $0.25 basic earnings per share for the same period in the prior year. The increase in net income of 16.4% resulted primarily from increased net interest income and non-interest income offset to a lesser degree by an increase in non-interest expense.

Net interest income for the three months ended September 30, 2002 was $7.8 million compared to $6.9 million for the same period a year earlier. Net interest income increased as a result of average earning assets increasing $33.6 million and by an increase in net interest margin by 30 basis points to 4.06%.

Non-interest income for the three months ended September 30, 2002 increased by $1.4 million to $3.0 million due to increased fees on various services to customers totaling $400,000, increased securities gains totaling $511,000, increased gains on sales of loans totaling $180,000 and increased other income of $398,000 offset to a lesser degree by decreased loan servicing fees of $84,000 and decreased trust fees amounting to $35,000.

For the three months ended September 30, 2002, non-interest expense increased $688,000 from the three months ended September 30, 2001 to $6.1 million. Personnel and benefit expenses increased approximately $531,000 due to additional staffing and normal salary increases. Other occupancy and equipment expenses increased $107,000. Expenses from the operation of other real estate owned decreased $134,000. Other operating expense increased $170,000. Income tax expense increased $24,000 to $809,000, the result of increased taxable income.

For the nine months ended September 30, 2002, net interest income increased $2.5 million to $22.4 million due primarily to average interest-earning assets increasing by $47.4 million and an increase in net interest margin of 21 basis points. The increase in average interest-earning assets primarily reflected substantial growth in loan originations during the year. Net interest margin increased by 21 basis points to 3.98% for the first nine months of 2002, 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.

Non-interest income increased by $2.6 million to $7.0 million for the nine months ended September 30, 2002. The increase was attributable to increased fees on various services to customers totaling $1.0 million, increased gains from sales of loans totaling $260,000, increased gains from securities sales totaling $511,000 and increased other income of $953,000 offset by decreased loan servicing fees totaling $172,000.

For the nine months ended September 30, 2002, non-interest expense increased $2.1 million over the preceding year. Personnel and benefit expenses increased approximately $1.4 million due to additional staffing and normal salary increases. Occupancy and equipment expenses increased $333,000 due to expansion in existing markets and costs related to the modernization of various facilities. Data processing expenses increased $42,000, a result of increased customer volume. Expenses on other real estate owned properties decreased $88,000, the result of reduced holding costs relative to these properties. Income tax expense increased $339,000, the result of increased taxable income.

Total assets for Baylake Corp. increased 7.0% to $905.4 million at September 30, 2002 when compared to total assets of $845.8 million at December 31, 2001. Total loans increased 7.4% during the first nine months of 2002 to $649.9 million at September 30, 2002, while deposits during the first nine months increased 9.8% to $735.7 million. Total shareholders' equity increased 9.0% during the first nine months of 2002 to $64.5 million at September 30, 2002 as compared with $59.1 million at December 31, 2001.

Baylake Corp. recorded provisions for loan losses totaling $2.7 million for the first nine months of 2002, an increase of $1.6 million, as compared to the prior year. The allowance increased $1.3 million to $9.3 million during the period. During the first nine months of 2002, Baylake Corp. had net charge-offs of approximately $1.4 million. The ratio of allowance for loan losses to total loans was 1.43% at September 30, 2002 compared to 1.32% at December 31, 2001. Non-performing loans totaled $22.6 million and $14.7 million at September 30, 2002 and December 31, 2001, respectively. The ratio of allowance for loan losses to non-performing loans was 41.3% and 54.5% at September 30, 2002 and December 31, 2001, respectively.

The increase in non-performing loans was due primarily to two commercial real estate credits which became non-performing during the period. Management of Baylake Corp. believes that these credits do not present a significant risk of loss to the company based on the value of the collateral securing the loans, the loan-to-value ratio and the specific reserve applied to such loans. Foreclosed assets, net, at September 30, 2002 increased $967,000 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 continues to manage actively the operations and is marketing the business to potential buyers.

Despite the charge-offs taken during the first nine months of 2002 and the increase in non-performing loans, Baylake Corp. believes the balance of the allowance for loan loss at September 30, 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 three-month period ended September 30, 2002 increased $1.8 million for the period compared to the three-month period ended June 30, 2002. For the nine months ended September 30, 2002, capital resources have improved $5.3 million. During the quarter ended September 30, 2002, Baylake Corp. acquired additional liquidity through the purchase of brokered deposits. As a result, Baylake Corp. believes that it will have sufficient funds available to meet the commitments outstanding at September 30, 2002. At September 30, 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 June 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.

Visit our Web site at http://www.baylake.com

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 September 30, 2002 and at and for the three and nine months ended September 30, 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            At
                              September 30, December 31, September 30,
                                  2002         2001          2001
                              ------------- ------------ ------------
                                       (dollars in thousands)

Selected Financial Condition Data
(at end of period):
Total assets                      $ 905,363    $ 845,791    $ 829,626
Investment securities(1)            166,233      167,100      167,859
Federal funds sold                        0        4,452       11,501
Total loans                         652,363      607,715      595,815
Total deposits                      735,704      669,890      652,705
Borrowings(2)                        80,779       92,837       93,842
Notes payable and
 subordinated debt                      106          158          158
Trust preferred securities           16,100       16,100       16,100
Total shareholders' equity           64,474       59,130       58,903
Non-performing loans,
 net of discount(3)(4)               22,553       14,673       16,325
Non-performing assets,
 net of discount(3)(4)               25,193       16,346       18,193


                              As of and for the    As of and for the
                                Three Months           Nine Months
                             Ended September 30,   Ended September 30,
                             -------------------  -------------------
                                2002      2001       2002      2001
                                ----      ----       ----      ----
                                      (dollars in thousands,
                                       except per share data)

Selected Income Data:
Total interest income         $ 13,287  $ 14,692   $ 39,169  $ 45,158
Total interest expense           5,524     7,812     16,793    25,280
                                 -----     -----     ------    ------
Net interest income              7,763     6,880     22,376    19,878
Provision for loan losses        1,654       425      2,700     1,075
                                 -----       ---      -----     -----
Net interest income after
 provision for loan losses       6,109     6,455     19,676    18,803
Total non-interest income        2,967     1,597      6,986     4,393
Total non-interest expense       6,053     5,365     17,830    15,717
                                 -----     -----     ------    ------
Income before income tax         3,023     2,687      8,832     7,479
Income tax provision               809       785      2,555     2,216
                                   ---       ---      -----     -----
Net income                     $ 2,214   $ 1,902    $ 6,277   $ 5,263
                               =======   =======    =======   =======

Per Share Data:(5)
Net income per share (basic)   $  0.30   $  0.25    $  0.84   $  0.70
Net income per share (diluted)    0.30      0.25       0.83      0.69
Cash dividends
 per common share                 0.12      0.11       0.36      0.33
Book value per share              8.62      7.88       8.62      7.88

Performance Ratios:(6)
Return on average
 total assets                     0.99%     0.92%      0.97%     0.88%
Return on average
 total shareholders' equity      13.80     13.17      13.62     12.63
Net interest margin(7)            4.06      3.76       3.98      3.77
Net interest spread(7)            3.83      3.25       3.71      3.31
Non-interest income
 to average assets                1.33      0.77       1.08      0.73
Non-interest expense
 to average assets                2.71      2.59       2.76      2.62
Net overhead ratio(8)             1.38      1.82       1.68      1.89
Efficiency ratio                 54.49     60.86      58.58     62.17
Average loan-to-average
 deposit ratio                   90.43     91.18      92.60     97.03
Average interest-earning
 assets to average
  interest-bearing liabilities  108.44    112.61     109.31    109.91


Asset Quality Ratios:(3)(4)(6)
Non-performing loans
 to total loans                   3.46%     2.74%      3.46%     2.74%
Allowance for loan losses to:
   Total loans                    1.43      1.30       1.43      1.30
   Non-performing loans          41.32     47.30      41.32     47.30
Net charge-offs
 to average loans                 0.65    - 0.03       0.29      0.08
Non-performing assets
 to total assets                  2.78      2.19       2.78      2.19


Capital Ratios:(6)(9)
Shareholders' equity
 to assets                        7.12%     7.10%      7.12%     7.10%
Tier 1 risk-based capital         9.84     10.20       9.84     10.20
Total risk-based capital         11.09     11.38      11.09     11.38
Leverage ratio                    8.15      8.14       8.15      8.14

Ratio of Earnings to Fixed Charges:(10)
Including deposit interest        1.55x     1.34x      1.53x     1.30x
Excluding deposit interest        3.63      2.70       3.31      2.23

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           289       276        289       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 nine
    months ended September 30, 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.