STURGEON BAY, Wis., July 22 /EMWNews/ -- 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.