Exhibit 10.1

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

STATE OF WISCONSIN

DEPARTMENT OF FINANCIAL INSTITUTIONS

MADISON, WISCONSIN

Written Agreement by and among

BAYLAKE CORP.

Sturgeon Bay, Wisconsin

BAYLAKE BANK

Sturgeon Bay, Wisconsin

FEDERAL RESERVE BANK OF CHICAGO

Chicago, Illinois

and

STATE OF WISCONSIN

DEPARTMENT OF

FINANCIAL INSTITUTIONS

Madison, Wisconsin

Docket Nos.

10-149-WA/RB-HC
10-149-WA/RB-SM

WHEREAS, in recognition of their common goal to maintain the financial soundness
of Baylake Corp., Sturgeon Bay, Wisconsin (“Baylake”), a registered bank holding
company, and its subsidiary bank, Baylake Bank, Sturgeon Bay, Wisconsin (the
“Bank”), a state-chartered bank that is a member of the Federal Reserve System,
Baylake, the Bank, the Federal Reserve Bank of Chicago (the “Reserve Bank”), and
the State of Wisconsin Department of Financial Institutions (the “DFI”) have
mutually agreed to enter into this Written Agreement (the “Agreement”); and

WHEREAS, on December 21, 2010, the boards of directors of Baylake and
the Bank, at duly constituted meetings, adopted resolutions authorizing and
directing

Robert J. Cera to enter into this Agreement on behalf of Baylake and the Bank,
and consenting to compliance with each and every applicable provision of this
Agreement by Baylake, the Bank, and their institution-affiliated parties, as
defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as
amended (the “FDI Act”)(12 U.S.C. §§ 1813(u) and 1818(b)(3)).

NOW, THEREFORE, Baylake, the Bank, the Reserve Bank, and the DFI agree as
follows:

Source of Strength

1.

The board of directors of Baylake shall take appropriate steps to fully utilize
Baylake’s financial and managerial resources, pursuant to section 225.4(a) of
Regulation Y of the Board of Governors of the Federal Reserve System (the “Board
of Governors”) (12 C.F.R.  § 225.4(a)), to ensure that the Bank complies with
this Agreement and any other supervisory action taken by the Reserve Bank or the
DFI.

Concentrations of Credit

2.

Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and
the DFI an acceptable written plan to further reduce the Bank’s commercial real
estate (“CRE”) concentrations. The plan shall, at a minimum, include a schedule
for reducing and the means by which the Bank will reduce the level of CRE
concentrations, and timeframes for achieving the reduced levels.

Asset Improvement

3.

The Bank shall not, directly or indirectly, extend, renew, or restructure any
credit to or for the benefit of any borrower, including any related interest of
the borrower, whose loans or other extensions of credit are criticized in the
report of examination of the Bank conducted by the Reserve Bank and the DFI that
commenced on September 8, 2009 (the “Report of

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Examination”) or in any subsequent report of examination, without the prior
approval of a majority of the full board of directors or a designated committee
thereof.  The board of directors or its committee shall document in writing the
reasons for the extension of credit,  renewal, or restructuring, specifically
certifying that: (i) the Bank’s risk management policies and practices for loan
workout activity are acceptable; (ii) the extension of credit is necessary to
improve and protect the Bank’s interest in the ultimate collection of the credit
already granted and maximize its potential for collection; (iii) the extension
of credit reflects prudent underwriting based on reasonable repayment terms and
is adequately secured; and all necessary loan documentation has been properly
and accurately prepared and filed; (iv) the Bank has performed a comprehensive
credit analysis indicating that the borrower has the willingness and ability to
repay the debt as supported by an adequate workout plan, as necessary; and (v)
the board of directors or its designated committee reasonably believes that the
extension of credit will not impair the Bank’s interest in obtaining repayment
of the already outstanding credit and that the extension of credit or renewal
will be repaid according to its terms.  The written certification shall be made
a part of the minutes of the meetings of the board of directors or its
committee, as appropriate, and a copy of the signed certification, together with
the credit analysis and related information that was used in the determination,
shall be retained by the Bank in the borrower’s credit file for subsequent
supervisory review.  For purposes of this Agreement, the term “related interest”
is defined as set forth in section 215.2(n) of Regulation O of the Board of
Governors (12 C.F.R. § 215.2(n)).

4.

(a)

Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and
the DFI an acceptable written plan designed to improve the Bank’s position
through repayment, amortization, liquidation, additional collateral, or other
means on each loan, relationship, or other asset in excess of $500,000,
including other real estate owned (“OREO”),

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that are past due as to principal or interest more than 90 days as of the date
of this Agreement, are on the Bank’s problem loan list, or were adversely
classified in the Report of Examination.

(b)

Within 30 days of the date that any additional loan, relationship, or other
asset in excess of $500,000, including OREO, becomes past due as to principal or
interest for more than 90 days, is on the Bank’s problem loan list, or is
adversely classified in any subsequent report of examination of the Bank, the
Bank shall submit to the Reserve Bank an acceptable written plan to improve the
Bank’s position on such loan, relationship, or asset.

(c)

Within 45 days after the end of each calendar quarter thereafter, the Bank shall
submit a written progress report to the Reserve Bank and the DFI to update each
asset improvement plan, which shall include, at a minimum, the carrying value of
the loan or other asset and changes in the nature and value of supporting
collateral, along with a copy of the Bank’s current problem loan list, a list of
all loan renewals and extensions without full collection of interest in the last
quarter, and past due/non-accrual report.

Allowance for Loan and Lease Losses

5.

(a)

Within 10 days of this Agreement, the Bank shall eliminate from its books, by
charge-off or collection, all assets or portions of assets classified “loss” in
the Report of Examination that have not been previously collected in full or
charged off.  Thereafter the Bank shall, within 30 days from the receipt of any
federal or state report of examination, charge off all assets classified “loss”
unless otherwise approved in writing by the Reserve Bank and the DFI.

(b)

Within 60 days of this Agreement, the Bank shall review and revise its ALLL
methodology consistent with relevant supervisory guidance, including the
Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated
July 2, 2001 (SR 01-17

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(Sup)) and December 13, 2006 (SR 06-17), and the findings and recommendations
regarding the ALLL set forth in the Report of Examination, and submit a
description of the revised methodology to the Reserve Bank and the DFI.  The
revised ALLL methodology shall be designed to maintain an adequate ALLL and
shall address, consider, and include, at a minimum, the reliability of the
Bank’s loan grading system, the volume of criticized loans, concentrations of
credit, the current level of past due and nonperforming loans, past loan loss
experience, evaluation of probable losses in the Bank’s loan portfolio,
including adversely classified loans, and the impact of market conditions on
loan and collateral valuations and collectability.

(c)

Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and
the DFI an acceptable written program for the maintenance of an adequate ALLL.
 The program shall include policies and procedures to ensure adherence to the
revised ALLL methodology and provide for periodic reviews and updates to the
ALLL methodology, as appropriate.  The program shall also provide for a review
of the ALLL by the board of directors on at least a quarterly calendar basis.
 Any deficiency found in the ALLL shall be remedied in the quarter it is
discovered, prior to the filing of the Consolidated Reports of Condition and
Income, by additional provisions.  The board of directors shall maintain written
documentation of its review, including the factors considered and conclusions
reached by the Bank in determining the adequacy of the ALLL.  During the term of
this Agreement, the Bank shall submit to the Reserve Bank and the DFI, within 30
days after the end of each calendar quarter, a written report regarding the
board of directors’ quarterly review of the ALLL and a description of any
changes to the methodology used in determining the amount of ALLL for that
quarter.

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Capital Plan

6.

Within 60 days of this Agreement, Baylake and the Bank shall submit to the
Reserve Bank and the DFI an acceptable joint written plan to maintain sufficient
capital at Baylake on a consolidated basis and the Bank as a separate legal
entity on a stand-alone basis.  The plan shall, at a minimum, address, consider,
and include:

(a)

Baylake’s current and future capital requirements, including compliance with the
Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and
Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of
Governors  (12 C.F.R. Part 225, App. A and D);

(b)

the Bank’s current and future capital requirements, including compliance with
the Capital Adequacy Guidelines for State Member Banks:  Risk-Based Measure and
Tier 1 Leverage Measure, Appendices A and B of Regulation H of the Board of
Governors (12 C.F.R. Part 208, App. A and B);

(c)

the adequacy of the Bank’s capital, taking into account the volume of classified
assets, concentrations of credit, the adequacy of the ALLL, current and
projected asset growth, projected retained earnings, and anticipated and
contingency funding needs;

(d)

the source and timing of additional funds to fulfill Baylake’s and the Bank’s
future capital requirements; and

(e)

the requirements of section 225.4(a) of Regulation Y of the Board of Governors
that Baylake serve as a source of strength to the Bank.

7.

Baylake and the Bank shall notify the Reserve Bank and the DFI, in writing, no
more than 30 days after the end of any calendar quarter in which any of
Baylake’s consolidated capital ratios, or the Bank’s capital ratios (total
risk-based, Tier 1, or leverage), fall below the

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approved capital plan’s minimum ratios.  Together with the notification, Baylake
and the Bank shall submit an acceptable written plan that details the steps
Baylake or the Bank, as appropriate, will take to increase Baylake’s or the
Bank’s capital ratios to or above the approved capital plan’s minimums.

Earnings Plan and Budget

8.

(a)

Within 90 days of this Agreement, the Bank shall submit to the Reserve Bank and
the DFI a written business plan for 2011 to improve the Bank’s earnings and
overall condition.  The plan, at a minimum, shall provide for or describe:

(i)

a comprehensive budget for 2011, including income statement and balance sheet
projections; and

(ii)

a description of the operating assumptions that form the basis for, and
adequately support, major projected income, expense, and balance sheet
components.

(b)

During the term of this Agreement, a business plan and budget for each calendar
year subsequent to 2011 shall be submitted to the Reserve Bank and the DFI at
least 30 days prior to the beginning of that calendar year.

Dividends and Distributions

9.

(a)

Baylake  and the Bank shall not declare or pay any dividends without the prior
written approval of the Reserve Bank, the Director of the Division of Banking
Supervision and Regulation of the Board of Governors (“Director”), and, as to
the Bank, the DFI.

(b)

Baylake shall not take any other form of payment representing a reduction in
capital from the Bank without the prior written approval of the Reserve Bank.

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(c)

Baylake and its nonbank subsidiary shall not make any distributions of interest,
principal, or other sums on subordinated debentures or trust preferred
securities without the prior written approval of the Reserve Bank and the
Director.

(d)

All requests for prior approval shall be received at least 30 days prior to the
proposed dividend declaration date, proposed distribution on subordinated
debentures, and required notice of deferral on trust preferred securities.  All
requests shall contain, at a minimum, current and projected information, as
appropriate, on the parent’s capital, earnings, and cash flow; the Bank’s
capital, asset quality, earnings and loan loss reserve needs; and identification
of the sources of funds for the proposed payment or distribution.  For requests
to declare or pay dividends, Baylake and the Bank, as appropriate, must also
demonstrate that the requested declaration or payment of dividends is consistent
with the Board of Governors’ Policy Statement on the Payment of Cash Dividends
by State Member Banks and Bank Holding Companies, dated November 14, 1985
(Federal Reserve Regulatory Service, 4-877 at
page 4-323).

Debt and Stock Redemption

10.

(a)

Baylake and its nonbank subsidiary shall not, directly or indirectly, incur,
increase, or guarantee any debt without the prior written approval of the
Reserve Bank.  All requests for prior written approval shall contain, but not be
limited to, a statement regarding the purpose of the debt, the terms of the
debt, and the planned source(s) for debt repayment, and an analysis of the cash
flow resources available to meet such debt repayment.

(b)

Baylake shall not, directly or indirectly, purchase or redeem any shares of its
stock without the prior written approval of the Reserve Bank.

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Cash Flow

11.

Within 60 days of this Agreement, Baylake shall submit to the Reserve Bank a
written statement of its planned sources and uses of cash for debt service,
operating expenses, and other purposes (“Cash Flow Projection”) for 2011.
 Baylake shall submit to the Reserve Bank a Cash Flow Projection for each
calendar year subsequent to 2011 at least one month prior to the beginning of
that calendar year.

Compliance with Laws and Regulations

12.

In appointing any new director or senior executive officer, or changing the
responsibilities of any senior executive officer so that the officer would
assume a different senior executive officer position, Baylake and the Bank shall
comply with the notice provisions of Section 32 of the FDI Act (12 U.S.C. §
1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§
225.71 et seq.).

13.

Baylake and the Bank shall comply with the restrictions on indemnification and
severance payments of Section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and
Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R.
Part 359).

Compliance with the Agreement

14.

Within 30 days after the end of each calendar quarter following the date of this
Agreement, Baylake’s and the Bank’s boards of directors shall submit to the
Reserve Bank and the DFI written progress reports detailing the form and manner
of all actions taken to secure compliance with this Agreement and the results
thereof.

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Approval and Implementation of Plans and Program

15.

(a)

The Bank and, as applicable, Baylake shall submit written plans and a program
that are acceptable to the Reserve Bank and the DFI within the applicable time
periods set forth in paragraphs 2, 4(a), 4(b), 5(c), 6, and 7 of this Agreement.

(b)

Within 10 days of approval by the Reserve Bank and the DFI, the Bank and, as
applicable, Baylake shall adopt the approved plans and program.  Upon adoption,
the Bank and, as applicable, Baylake shall promptly implement the approved plans
and program and thereafter fully comply with them.

(c)

During the term of this Agreement, the approved plans and program shall not be
amended or rescinded without the prior written approval of the Reserve Bank and
the DFI.

Communications

16.

All communications regarding this Agreement shall be sent to:

(a)

Mr. David A. Ward

Assistant Vice President

Federal Reserve Bank of Chicago

230 South LaSalle Street

Chicago, Illinois  60604

(b)

Mr. Michael J. Mach

Administrator

Division of Banking

Wisconsin Department of Financial Institutions

P.O. Box 7876

Madison, Wisconsin  53507-7876

(c)

Mr. Robert J. Cera

Chief Executive Officer

Baylake Corp.

Baylake Bank

217 North 4th Avenue

Sturgeon Bay, Wisconsin 54235

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Miscellaneous

17.

Notwithstanding any provision of this Agreement, the Reserve Bank and the DFI
may, in their sole discretion, grant written extensions of time to Baylake and
the Bank to comply with any provision of this Agreement.

18.

The provisions of this Agreement shall be binding upon Baylake, the Bank, and
their institution-affiliated parties, in their capacities as such, and their
successors and assigns.

19.

Each provision of this Agreement shall remain effective and enforceable until
stayed, modified, terminated, or suspended in writing by the Reserve Bank and
the DFI.

20.

The provisions of this Agreement shall not bar, estop, or otherwise prevent the
Board of Governors, the Reserve Bank, the DFI, or any other federal or state
agency from taking any other action affecting Baylake, the Bank, or any of their
current or former
institution-affiliated parties and their successors and assigns.

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21.

Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is
enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C.
§ 1818).

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the 23rd day of December, 2010.

BAYLAKE CORP.

FEDERAL RESERVE BANK
OF CHICAGO

 

 

 

 

By:  /s/ Robert J. Cera                        

By:  /s/ Mark H. Kawa                        

Robert J. Cera

Mark H. Kawa

 

Vice President

 

 

 

 

BAYLAKE BANK

STATE OF WISCONSIN

 

DEPARTMENT OF FINANCIAL
INSTITUTIONS

 

 

 

 

By:  /s/ Robert J. Cera                         

By:  /s/ Michael J. Mach                     

Robert J. Cera

Michael J. Mach

 

Administrator

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