WYPT Waypoint Financial Corp (MM)

Waypoint Financial Announces First Quarter Results and Declares Regular Quarterly Cash Dividend HARRISBURG, Pa., April 22 /PRNewswire-FirstCall/ -- Waypoint Financial Corp. today announced net income of $.16 per share, or $5.2 million, for the quarter ended March 31, 2004 as compared to $.33 per share, or $11.3 million, for the quarter ended March 31, 2003 and $.27, or $8.9 million, for the linked quarter ended December 31, 2003. The current quarter was negatively impacted by acquisition-related expenses totaling $3.0 million, or $.09 per share. Waypoint also announced that the Board of Directors declared a regular quarterly cash dividend of $.14 per share to shareholders of record as of May 6, 2004. The dividend will be paid on May 14, 2004. On March 9, 2004, Waypoint and Sovereign Bancorp, Inc. ("Sovereign") announced that they had reached a definitive agreement for Sovereign to acquire Waypoint. Under the terms of the agreement, shareholders of Waypoint will be entitled to receive $28.00 in cash, 1.262 shares of Sovereign common stock, or a combination thereof per Waypoint share, subject to election and allocation procedures which are intended to ensure that, in the aggregate, 70% of Waypoint shares will be exchanged for Sovereign common stock and 30% will be exchanged for cash. The acquisition is expected to close in the fourth quarter of 2004. Regarding the agreement with Sovereign, David E. Zuern, President and CEO, said, "We are excited about joining Sovereign, a Pennsylvania-based company with a very similar commitment to a performance culture focused on customers, employees and community as well as shareholders. We expect to offer an even broader array of products delivered with the same flexibility, responsiveness, and local decision making that our customers expect." Zuern went on to discuss Waypoint's business performance during the quarter ended March 31, 2004. He stated: "Waypoint continued to build franchise value during the quarter through solid growth in commercial loans, transaction deposits, banking fees, and financial services fees. Also, Waypoint's key credit quality indicators showed continued improvement from levels which were already sound." Zuern reported that Waypoint continued to show progress in changing the composition of asset and liability portfolios. The commercial loan portfolio grew $51.5 million, or 4.7%, and the consumer loan portfolio grew $3.5 million during the quarter. Mortgage loans in portfolio decreased $25.3 million during the quarter as mortgage loan prepayments reaccelerated in response to lowering mortgage market rates. Waypoint's core deposits, which include savings, transaction and money market accounts, grew $30.4 million during the quarter, up 2.3%, and time deposits, a higher cost funding source, decreased $45.5 million for the quarter. Waypoint also decreased its higher-rate borrowings by $32.1 million to further improve its liability composition. As a result, Waypoint's net interest margin improved 3 basis points to 2.27%, despite the margin challenges facing financial institutions from continued historically-low interest rates. Zuern added that Waypoint's fee income from bank service and account fees, financial services fees and mortgage banking income aggregated to $7.3 million this quarter, up from $6.8 million for the comparable quarter ended March 31, 2003 and up from $7.0 million in the fourth quarter of 2003. Increases in banking services and account fees and financial services fees were partially offset by reductions in mortgage banking income. Waypoint's total non- interest income was $13.7 million during the current quarter versus $9.4 million for the comparable prior quarter, including net gains on securities totaling $5.4 million and $1.9 million, respectively. Security gains were up during the current quarter primarily due to net gains on securities sold in conjunction with the prepayment of fixed-rate borrowings. The resulting gains offset the related prepayment expense while maintaining an appropriate interest rate risk position. Zuern also noted that Waypoint's noninterest expense was negatively impacted by $3.0 million in expenses associated with the Sovereign acquisition and $4.7 million in prepayment expenses to extinguish certain higher-rate borrowings. Excluding these items, non-interest expenses compared favorably to the linked quarter ended December 31, 2003. Noninterest expense for the linked quarter included a one-time impairment charge of $1.1 million on real estate used in operations. Waypoint Financial Corp. is a $5.4 billion bank holding company whose primary operating subsidiary is Waypoint Bank, which is headquartered in Harrisburg, Pennsylvania with a network of 65 branches. Waypoint Bank operates 57 branches in Dauphin, York, Lancaster, Cumberland, Franklin, Lebanon, Adams, and Centre counties in Pennsylvania and 8 branches in Baltimore, Harford and Washington counties in northern Maryland. Waypoint offers a full range of financial services including banking for retail, commercial and small business customers, mortgages, trust and investment, brokerage, and insurance services to more than 125,000 household and business customers. The following contains a summary of selected financial data for the most recent five fiscal quarters. Selected Ratios and Other Data (Unaudited) As of or for the three months ended March, December, September, June, March, 2004 2003 2003 2003 2003 Basic income per share $0.17 $0.28 $0.31 $0.35 $0.33 Diluted income per share $0.16 $0.27 $0.30 $0.34 $0.33 Return on average equity (ROE) 5.13% 8.97% 9.83% 10.82% 10.35% Return on average assets 0.39% 0.67% 0.72% 0.84% 0.84% Net interest margin (tax equivalent) 2.27% 2.24% 2.28% 2.44% 2.47% Noninterest income divided by average assets 1.03% 0.80% 0.83% 0.80% 0.70% Noninterest expense divided by average assets 2.33% 1.89% 1.67% 1.67% 1.63% Efficiency ratio 75.36% 67.12% 59.31% 55.21% 54.84% Effective income tax rate 36.70% 21.49% 28.59% 30.40% 27.48% Diluted average equivalent shares 32,854,416 32,622,332 33,135,917 33,662,564 34,768,749 Book value per share $12.53 $12.10 $12.29 $12.41 $12.21 Stockholders' equity to total assets 7.78% 7.55% 7.62% 7.42% 7.47% Selected Financial Condition Data (Unaudited, amounts in thousands) As of the periods ended March, December, September, June, March, 2004 2003 2003 2003 2003 Total assets $5,371,728 $5,329,902 $5,429,818 $5,639,363 $5,602,738 Loans receivable, net 2,426,157 2,397,640 2,390,740 2,379,562 2,338,478 Loans held for sale, net 17,653 17,011 30,002 38,333 33,666 Marketable securities 2,606,875 2,587,752 2,667,038 2,878,814 2,913,329 Deposits 2,705,787 2,720,915 2,630,393 2,581,661 2,452,834 Borrowings 2,078,626 2,110,681 2,273,446 2,459,577 2,531,514 Stockholders' equity 417,860 402,233 413,710 418,561 418,622 Selected Operating Data (Unaudited, amounts in thousands) For the three month periods ended March, December, September, June, March, 2004 2003 2003 2003 2003 Interest income $59,010 $59,735 $60,877 $64,550 $65,809 Interest expense 31,692 32,879 33,489 34,134 35,337 Net interest income 27,318 26,856 27,388 30,416 30,472 Provision for loan losses 1,901 1,014 2,014 2,064 2,421 Net interest income after provision for loan losses 25,417 25,842 25,374 28,352 28,051 Noninterest income 13,727 10,681 11,495 10,827 9,429 Noninterest expense 30,931 25,193 23,063 22,772 21,882 Income before taxes 8,213 11,330 13,806 16,407 15,598 Income tax expense 3,014 2,435 3,946 4,987 4,286 Net income $5,199 $8,895 $9,860 $11,420 $11,312 Discussion of Operating Results Net income totaled $.16 per share for the quarter ended March 31, 2004, as compared to net income of $.33 per share for the quarter ended March 31, 2003 and $.27 per share for the quarter ended December 31, 2003. Net income for the current quarter was $5.2 million versus $11.3 million for the quarter ended March 31, 2003 and $8.9 million for the quarter ended December 31, 2003. The current quarter was negatively impacted by acquisition-related expenses totaling $3.0 million, or $.09 per share. Net interest income before provision for loan losses totaled $27.3 million for the current quarter as compared to $30.5 million recorded during the quarter ended March 31, 2003 and $26.9 million for the quarter ended December 31, 2003. The decrease in net interest income from the comparable prior period came primarily from the cumulative effects of record high prepayments during 2003 and in the first quarter of 2004 on mortgage loans and mortgage- backed securities. In the current environment, yields on new loan and security assets acquired into portfolio are at substantially lower rates relative to assets being replaced. This trend is exacerbated by aggressive pricing by key competitors in Waypoint's market for both loans and deposits, which results in spread compression. Also, FHLB dividends were down $.5 million during the current quarter relative to the comparable prior quarter due to reductions in the dividend rate paid by the FHLB of Pittsburgh. As a result of these various impacts, the net interest margin ratio (tax- equivalent) decreased to 2.27% for the current quarter as compared to 2.47% for the quarter ended March 31, 2003. Reflecting the effect of Waypoint's asset and liability mix improvements, net interest margin increased 3 basis points relative to the linked quarter ended December 31, 2003. See Table 3 which appears later in this release for a detailed schedule of Waypoint's average portfolio balances and interest rates. Also, see Table 4 for a rate/volume analysis of Waypoint's net interest income. Pursuant to management's evaluation of the adequacy of Waypoint's allowance for loan losses, the provision for loan losses totaled $1.9 million for the current quarter versus $2.4 million for the quarter ended March 31, 2003 and $1.0 million for the quarter ended December 31, 2003. Please see the Discussion of Asset Quality that appears later in this section and Tables 5, 6, and 7 following the financial statements for additional information regarding credit quality. Noninterest income was $13.7 million for the current quarter, as compared to $9.4 million for the quarter ended March 31, 2003 and $10.7 million for the quarter ended December 31, 2003. Notable changes in the current quarter versus the quarter ended March 31, 2003 included: -- Banking services and account fees totaled $4.4 million, up $1.0 million from the comparable prior quarter primarily due to increased overdraft fees, service charges, and ATM fees. These trends reflect both increased account and transaction volumes as well as improved fee collections. -- Financial services fees increased to $2.4 million, up $.4 million. Within this category, insurance fees were $1.6 million, up $.4 million. This increase in insurance fees included $.8 million from Waypoint Benefits Consulting, acquired on April 1, 2003, which was partially offset by a decrease of $.4 million in title insurance fees. -- Residential mortgage banking income totaled $.5 million, down $.8 million from the prior period. Within this category, net gains on the sale of loans decreased to $.7 million from $1.9 million and loan servicing activities including valuation adjustments resulted in a net loss of $.2 million, which compared to a loss of $.6 million in the prior period. The loan sale results reflect primarily a sales volume decrease in the current quarter relative to the quarter ended March 31, 2003, which was enhanced by carryover from year-end 2002. -- Gains on securities were up $3.5 million in the current quarter, primarily resulting from security sales associated with liability restructuring wherein $125.0 million of fixed-rate FHLB advances were prepaid. In addition, the net gain for the current quarter included a loss of $1.5 million on the valuation of an interest rate cap that does not receive hedge accounting treatment. -- Other income was breakeven in the aggregate, which included a $.3 million loss on low income housing tax credit investments, offset by other miscellaneous income. Noninterest expense was $30.9 million for the quarter ended March 31, 2004 and included borrowing prepayment expenses of $4.7 million and acquisition expenses of $3.0 million, up from $21.9 million for the quarter ended March 31, 2003. Noninterest expense was $25.2 million for the linked quarter ended December 31, 2003 and included a one-time impairment charge of $1.1 million on real estate used in operations. Notable changes in the quarter ended March 31, 2004 relative to the quarter ended March 31, 2003 included: -- Salaries and benefits expense totaled $13.2 million, up $1.8 million primarily due to expansion in the retail banking franchise, increased investment in sales and marketing personnel, the acquisition of Waypoint Benefits Consulting and annual merit raises. -- Other expenses were $2.4 million, down $.6 million primarily on decreased loan servicing and other non-deferrable loan costs. Offsetting the decrease in other expenses was an increase of $.2 million in external auditing and accounting fees. Income tax expense for the current quarter totaled $3.0 million, or an effective tax rate of 36.7% on income before taxes of $8.2 million. The effective tax rate for the current quarter reflected acquisition expenses that are nondeductible for tax purposes totaling $3.0 million. For the quarter ended March 31, 2003, income taxes were $4.3 million or an effective tax rate of 27.6% on income before taxes of $15.6 million. Discussion of Financial Condition Waypoint's total assets were $5.372 billion at March 31, 2004, down from $5.603 billion at March 31, 2003 and up from $5.330 billion at December 31, 2003. The decrease from March 31, 2003 came primarily in cash and securities, which decreased $339.8 million during the twelve months ended March 31, 2004. Cash and securities included $70.9 million of securities in process at March 31, 2004. Waypoint continued to experience strong growth in its commercial portfolio, which was up $51.5 million during the current quarter. Consumer and other loans also increased $3.5 million. Partially offsetting these increases, residential mortgage loans decreased $25.3 million during the current quarter as Waypoint sold substantially all of its conventional residential mortgage production and prepayments continued at a historically high level on mortgage loans held in portfolio. Waypoint's loan portfolio is presented in Table 1 which appears later in this report. Waypoint's deposit portfolio totaled $2.706 billion at March 31, 2004, up from $2.453 billion at March 31, 2003, but down from $2.721 billion at December 31, 2003. Within the deposit portfolio, Waypoint experienced substantial growth in its core deposits, which grew $30.4 million during the quarter, up 2.3%. This was offset by a decrease of $45.5 million in time deposits, a higher cost funding source. The composition of the deposit portfolio is presented in Table 2 which appears later in this report. Waypoint's portfolio of customer repurchase agreements totaled $52.7 million at March 31, 2004 as compared to $51.7 million at March 31, 2003 and $56.1 million at December 31, 2003. Waypoint offers this investment product to its commercial customers as part of a broad range of products and services targeted to this profitable market segment. Customer repurchase agreements represent a lower-cost source of funding for Waypoint and are included in borrowings on the Statement of Financial Condition. The average cost of these funds were 0.75% for each of the quarters ended March 31, 2004 and December 31, 2003 and 0.98% for the quarter ended March 31, 2003. Waypoint had $417.9 million in stockholders' equity, or 7.78% of total assets, at March 31, 2004, as compared to $418.6 million or 7.47% at March 31, 2003 and $402.2 million or 7.55% at December 31, 2003. Notable changes in stockholders' equity for the current quarter included increases of $5.2 million in net income, paid in capital and tax benefits from stock option exercises totaling $3.3 million and an increase of $11.9 million in the market value of available-for-sale securities (net of taxes). Offsetting these increases were dividends paid to shareholders totaling $4.5 million. Discussion of Asset Quality Non-performing loans totaled $17.4 million or 0.71% of total loans as of March 31, 2004 as compared to $17.8 million or .79% of total loans at March 31, 2003 and $18.2 million or 0.76% of total loans as of December 31, 2003. Waypoint's allowance for loan losses was $29.3 million or 1.19% of total loans as of March 31, 2004, as compared to $27.9 million or 1.18% of total loans at March 31, 2003 and $28.4 million or 1.17% of total loans as of December 31, 2003. Net loan charge-offs as a percentage of average loans outstanding totaled 0.17% on an annualized basis for the quarter ended March 31, 2004 as compared to 0.34% for the quarter ended March 31, 2003 and 0.31% for the quarter ended December 31, 2003. See Tables 5, 6 and 7 which appear later in this release for more information on asset quality. Note on Forward-Looking Statements Statements contained in this news release which are not historical facts are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Amounts herein could vary as a result of market and other factors. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Corporation with the Securities and Exchange Commission from time to time. Such forward-looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," and "potential." Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, expected or anticipated revenue, results of operations and business of the Corporation that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting the Corporation's operations, pricing, products and services. This filing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the financial condition, results of operations and business of Waypoint Financial Corp. pending consummation of the merger of Seacoast Financial Services Corporation with and into Sovereign Bancorp, Inc. and the merger of Waypoint with and into Sovereign that are subject to various factors which could cause actual results to differ materially from such projections or estimates. Such factors include, but are not limited to, the following: (1) the respective businesses of Seacoast and Waypoint may not be combined successfully with Sovereign's businesses, or such combinations may take longer to accomplish than expected; (2) expected cost savings from each of the mergers cannot be fully realized or realized within the expected timeframes; (3) operating costs, customer loss and business disruption following the mergers, including adverse effects on relationships with employees, may be greater than expected; (4) governmental approvals of each of the mergers may not be obtained, or adverse regulatory conditions may be imposed in connection with government approvals of the mergers, (5) the stockholders of Seacoast may fail to approve the merger of Seacoast with and into Sovereign and the shareholders of Waypoint may fail to approve the merger of Waypoint with and into Sovereign; (6) adverse governmental or regulatory policies may be enacted; (7) the interest rate environment may adversely impact the expected financial benefits of the mergers, and compress margins and adversely affect net interest income; (8) the risks associated with continued diversification of assets and adverse changes to credit quality; (9) competitive pressures from other financial service companies in Seacoast's, Waypoint's and Sovereign's markets may increase significantly; and (10) the risk of an economic slowdown that would adversely affect credit quality and loan originations. Other factors that may cause actual results to differ from forward-looking statements are described in Waypoint's filings with the Securities and Exchange Commission. Waypoint does not undertake or intend to update any forward-looking statements. Sovereign and Waypoint will be filing documents concerning the merger with the Securities and Exchange Commission, including a registration statement on Form S-4 containing a prospectus/proxy statement which will be distributed to shareholders of Waypoint. Investors are urged to read the registration statement and the proxy statement/prospectus regarding the proposed transaction when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. Investors will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings containing information about Sovereign and Waypoint, free of charge on the SEC's Internet site (http://www.sec.gov/). In addition, documents filed by Sovereign with the SEC, including filings that will be incorporated by reference in the prospectus/proxy statement, can be obtained, without charge, by directing a request to Sovereign Bancorp, Inc., Investor Relations, 1130 Berkshire Boulevard, Wyomissing, Pennsylvania 19610 (Tel: 610-988-0300). In addition, documents filed by Waypoint with the SEC, including filings that will be incorporated by reference in the prospectus/proxy statement, can be obtained, without charge, by directing a request to Waypoint Financial Corp., 235 North Second Street, Harrisburg, Pennsylvania 17101, Attn: Richard C. Ruben, Executive Vice President and Corporate Secretary (Tel: 717-236-4041). Directors and executive officers of Waypoint may be deemed to be participants in the solicitation of proxies from the shareholders of Waypoint in connection with the merger. Information about the directors and executive officers of Waypoint and their ownership of Waypoint common stock is set forth in Waypoint's proxy statement for its 2004 annual meeting of shareholders, as filed with the SEC on April 20, 2004. Additional information regarding the interests of those participants may be obtained by reading the prospectus/proxy statement regarding the proposed merger transaction when it becomes available. INVESTORS SHOULD READ THE PROSPECTUS/PROXY STATEMENT AND OTHER DOCUMENTS TO BE FILED WITH THE SEC CAREFULLY BEFORE MAKING A DECISION CONCERNING THE MERGER. WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES Consolidated Statements of Financial Condition March 31, December 31, 2004 2003 (Unaudited) (All dollar amounts in thousands) Assets Cash and cash equivalents $85,633 $100,016 Marketable securities 2,511,070 2,489,770 FHLB Stock 95,805 97,982 Loans receivable, net 2,426,157 2,397,640 Loans held for sale, net 17,653 17,011 Loan servicing rights 2,283 2,528 Investment in real estate and other joint ventures 20,417 20,773 Premises and equipment, net of accumulated depreciation of $46,648 and $45,261 49,566 49,789 Accrued interest receivable 23,376 23,597 Goodwill 18,332 17,881 Intangible assets 2,996 2,881 Deferred tax asset, net 2,313 9,059 Bank-owned life insurance 93,558 92,522 Other assets 22,569 8,453 Total assets $5,371,728 $5,329,902 Liabilities and Shareholders Equity Deposits $2,705,787 $2,720,915 Other borrowings 2,078,626 2,110,681 Escrow 2,976 2,568 Accrued interest payable 9,599 10,009 Postretirement benefit obligation 2,248 2,248 Income taxes payable 4,576 2,586 Trust preferred debentures 46,392 46,392 Other liabilities 103,664 32,270 Total liabilities 4,953,868 4,927,669 Preferred stock, 10,000,000 shares authorized but unissued Common stock, $ .01 par value, authorized 100,000,000 shares, 42,947,816 shares issued and 33,358,789 outstanding at March 31, 2004, 43,031,041 shares issued and 33,247,630 shares outstanding at December 31, 2003 428 425 Paid in capital 356,628 353,530 Retained earnings 242,411 241,668 Accumulated other comprehensive income 3,387 (8,502) Employee stock ownership plan (13,395) (13,423) Recognition and retention plans (4,206) (4,206) Paid in capital from obligations under Rabbi Trust, 495,826 shares at March 31, 2004 and 495,826 shares at December 31, 2003 8,457 8,457 Treasury stock shares held in Rabbi Trust at cost, 563,162 shares at March 31, 2004 and 563,162 shares at December 31, 2003 (9,240) (9,240) Treasury stock, 9,589,027 shares at March 31, 2004 and 9,716,075 shares at December 31, 2003 (166,610) (166,476) Total stockholders' equity 417,860 402,233 Total liabilities and stockholders' equity $5,371,728 $5,329,902 WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES Consolidated Statements of Income Three Months Ended March 31, 2004 2003 (Unaudited) (All dollar amounts in thousands, except per share data) Interest Income: Loans $33,821 $37,394 Marketable securities and interest- earning cash 25,189 28,415 Total interest income 59,010 65,809 Interest Expense: Deposits and escrow 12,159 14,484 Borrowed funds 19,533 20,853 Total interest expense 31,692 35,337 Net interest income 27,318 30,472 Provision for loan losses 1,901 2,421 Net interest income after provision for loan losses 25,417 28,051 Noninterest Income: Banking service and account fees 4,354 3,389 Financial services fees 2,412 2,045 Residential mortgage banking 514 1,303 Bank-owned life insurance 1,036 1,146 Gain on securities and derivatives, net 5,406 1,873 Other 5 (327) Total noninterest income 13,727 9,429 Noninterest Expense: Salaries and benefits 13,204 11,432 Equipment expense 1,816 1,771 Occupancy expense 2,021 1,922 Marketing 930 1,091 Amortization of intangible assets 200 120 Outside services 1,420 1,267 Communications and supplies 1,280 1,326 Borrowing prepayment 4,704 - Acquisition 2,965 - Other 2,391 2,953 Total noninterest expense 30,931 21,882 Income before income taxes 8,213 15,598 Income tax expense 3,014 4,286 Net Income $5,199 $11,312 Basic earnings per share $0.17 $0.33 Diluted earnings per share $0.16 $0.33 Table 1 - Loans Receivable, Net March 31, December 31, 2004 2003 Residential mortgage loans: One-to-four family $327,014 $347,679 Construction 20,826 25,500 Total residential mortgage loans 347,840 373,179 Commercial loans: Commercial real estate 687,823 651,139 Commercial business 356,530 343,129 Construction and site development 105,035 103,611 Total commercial loans 1,149,388 1,097,879 Consumer and other loans: Manufactured housing 90,344 93,323 Home equity and second mortgage 556,775 561,937 Indirect automobile 179,294 174,416 Other 113,691 106,968 Total consumer and other loans 940,104 936,644 Loans receivable, gross 2,437,332 2,407,702 Plus: Dealer reserves 22,973 23,584 Less: Unearned premiums 4 6 Net deferred loan origination fees 4,849 5,209 Allowance for loan losses 29,295 28,431 Loans receivable, net $2,426,157 $2,397,640 Table 2 - Deposits March 31, December 31, 2004 2003 Savings $246,999 $252,072 Time 1,363,492 1,408,970 Transaction 694,314 560,520 Money market 400,982 499,353 Total deposits $2,705,787 $2,720,915 Table 3 - Average Balance Sheet, quarter For the three months ended, March 31, 2004 Average Average Balance Interest(2) Yield/Cost Assets: (Dollar amounts in thousands) Interest-earning assets: Loans, net (1) (5) $2,444,999 $34,011 5.54% Marketable securities 2,519,856 25,659 4.12 Other interest-earning assets 39,290 96 0.89 Total interest-earning assets 5,004,145 59,766 4.78 Noninterest-earning assets 307,784 Total assets $5,311,929 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings deposits $248,261 127 0.21 Time deposits 1,390,185 10,005 2.89 Transaction and money market 1,051,663 2,022 0.77 Escrow 2,910 5 0.70 Borrowed funds 2,164,285 19,533 3.55 Total interest-bearing liabilities 4,857,304 31,692 2.59 Noninterest-bearing liabilities 48,882 Total liabilities 4,906,186 Stockholders' equity 405,743 Total liabilities and stockholders' equity $5,311,929 Net interest income - tax-equivalent 28,074 Interest rate spread (3) 2.19% Net interest-earning assets $146,841 Net interest margin (4) 2.27% Ratio of interest-earning assets to interest-bearing liabilities 1.03 x Adjustment to reconcile tax- equivalent net interest income to net interest income (756) Net interest income $27,318 For the three months ended, March 31, 2003 Average Average Balance Interest(2) Yield/Cost Assets: (Dollar amounts in thousands) Interest-earning assets: Loans, net (1)(5) $2,361,672 $37,394 6.39% Marketable securities 2,718,846 28,882 4.36 Other interest-earning assets 64,155 163 1.19 Total interest-earning assets 5,144,673 66,439 5.24 Noninterest-earning assets 207,778 Total assets $5,352,451 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings deposits $257,399 314 0.45 Time deposits 1,398,769 13,020 3.78 Transaction and money market 766,422 1,141 0.60 Escrow 3,866 9 0.89 Borrowed funds 2,437,649 20,853 3.41 Total interest-bearing liabilities 4,864,105 35,337 2.92 Noninterest-bearing liabilities 48,645 Total liabilities 4,912,750 Stockholders' equity 439,701 Total liabilities and stockholders' equity $5,352,451 Net interest income - tax-equivalent 31,102 Interest rate spread (3) 2.32% Net interest-earning assets $280,568 Net interest margin (4) 2.47% Ratio of interest-earning assets to interest-bearing liabilities 1.06 x Adjustment to reconcile tax- equivalent net interest income to net interest income (630) Net interest income $30,472 (1) Includes income recognized on deferred loan fees and costs of $175,000 for the three months ended March 31, 2004, and $633,000 for the three months ended March 31, 2003. (2) Interest income and yields are shown on a tax equivalent basis using an effective tax rate of 35%. (3) Represents the difference between the average yield on interest- earning assets and the average cost on interest-bearing liabilities. (4) Represents the annualized net interest income before the provision for loan losses divided by average interest-earning assets. (5) Includes loans on nonaccrual status and loans held for sale. Table 4 - Rate/Volume Analysis of Changes in Tax-equivalent Net Interest Income Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003 Increase (Decrease) Volume Rate Net (Dollar amounts in thousands) Interest-earning assets: Loans, net $1,366 $(4,749) $(3,383) Marketable securities (1,839) (1,384) (3,223) Other interest-earning assets (41) (26) (67) Total interest-earning assets (514) (6,159) (6,673) Interest-bearing liabilities: Savings deposits (12) (175) (187) Time deposits (77) (2,938) (3,015) Transaction and money market deposits 500 381 881 Escrow (2) (2) (4) Borrowed funds (2,198) 878 (1,320) Total interest-bearing liabilities (1,789) (1,856) (3,645) Change in net interest income $1,275 $(4,303) $(3,028) Table 5 - Analysis of Allowance for Loan Losses For the Three For the Three For the Twelve Months Ended Months Ended Months Ended March 31, March 31, December 31, 2004 2003 2003 (All dollar amounts in thousands) Balance at beginning of the period $28,431 $27,506 $27,506 Provision for loan losses 1,901 2,421 7,513 Charge-offs: Residential mortgage loans (58) (220) (595) Commercial loans (96) (977) (2,732) Consumer and other loans (1,095) (1,275) (4,596) Total charge-offs (1,249) (2,472) (7,923) Recoveries: Residential mortgage loans - 13 139 Commercial loans 63 263 389 Consumer and other loans 149 167 807 Total recoveries 212 443 1,335 Net charge-offs (1,037) (2,029) (6,588) Balance at end of period $29,295 $27,898 $28,431 Annualized net charge-offs to average loans 0.17% 0.34% 0.27% Allowance for loan losses as a % of total loans 1.19% 1.18% 1.17% Table 6 - Non-performing Assets As of As of March 31, 2004 December 31, 2003 (Amounts in thousands) Non-accrual residential mortgage loans $438 $443 Non-accrual commercial loans 8,276 8,173 Non-accrual other loans 402 90 Total non-accrual loans 9,116 8,706 Loans 90 days or more delinquent and still accruing 8,318 9,498 Total non-performing loans 17,434 18,204 Total foreclosed other assets 340 313 Total foreclosed real estate 414 472 Total non-performing assets $18,188 $18,989 Total non-performing loans to total loans 0.71% 0.76% Allowance for loan losses to non-performing loans 168.03% 156.18% Total non-performing assets to total assets 0.34% 0.36% Table 7 - Allocation of the Allowance for Loan Losses As of March 31, 2004 As of December 31, 2003 (All dollar amounts are in thousands) % of Total % of Total Amount Reserves Amount Reserves Residential mortgage loans $942 3.22% $1,099 3.86% Commercial loans 22,216 75.83% 20,455 71.95% Consumer and other loans 6,137 20.95% 6,877 24.19% Total $29,295 100.00% $28,431 100.00% DATASOURCE: Waypoint Financial Corp. CONTACT: James H. Moss, Chief Financial Officer, Waypoint Financial, +1-717-909-2247 Web site: http://www.waypointbank.com/

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