WYPT Waypoint Financial Corp (MM)

Waypoint Financial Announces Second Quarter Results and Declares Regular Quarterly Cash Dividend HARRISBURG, Pa., July 22 /PRNewswire-FirstCall/ -- Waypoint Financial Corp. (NASDAQ:WYPT) today announced net income of $.30 per share, or $10.0 million, for the quarter ended June 30, 2004 as compared to $.34 per share, or $11.4 million, for the quarter ended June 30, 2003. This also compares to $.16 per share, or $5.2 million, for the linked quarter ended March 31, 2004, which was affected by expenses associated with the pending acquisition of Waypoint by Sovereign Bancorp, Inc. ("Sovereign") announced on March 9, 2004. Waypoint also announced that the Board of Directors declared a regular quarterly cash dividend of $.14 per share to shareholders of record as of August 5, 2004. The dividend will be paid on August 13, 2004. David E. Zuern, President and CEO, discussed Waypoint's business performance during the quarter ended June 30, 2004. He stated: "Waypoint continued to build franchise value during the quarter, with particularly strong growth noted in commercial loans, transaction deposits, and banking fee income. 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 the Bank's loan and deposit portfolios. The commercial loan portfolio grew $65.5 million, or 5.7%, and the consumer loan portfolio grew $11.8 million during the quarter. Mortgage loans in portfolio decreased $25.4 million during the quarter as mortgage loan prepayments continued at a rapid pace, though at reduced levels relative to those experienced in 2003. Waypoint's core deposits, which include savings, transaction and money market accounts, grew $61.6 million during the quarter, up 4.6%. Time deposits were also up $32.6 million during the quarter. Strong growth in banking services and account fees helped drive Waypoint's total non-interest income to $10.9 million during the current quarter versus $10.8 million for the quarter ended June 30, 2003. Zuern said the growth in banking fee income came from rising account volumes, improved service offerings, and pricing increases. This performance lifted Waypoint's core fee income to $8.8 million this quarter, up from $7.6 million for the comparable quarter ended June 30, 2003 and up from $7.3 million for the linked quarter ended March 31, 2004. Core fee income includes bank service and account fees, financial services fees and mortgage banking income. Net gains on securities decreased to $1.3 million during the current quarter from $3.7 million in the comparable prior quarter as Waypoint placed less reliance on this supplemental revenue source. Zuern also noted that Waypoint continued to control costs, limiting total noninterest expenses to $22.4 million during the current quarter as compared to $22.8 million during the comparable prior quarter. This was particularly noteworthy in light of the excellent growth in core fee income. Zuern closed with comments regarding the pending acquisition of Waypoint by Sovereign. He stated, "We are excited about combining our strong and growing franchise with Sovereign, a Pennsylvania-based company with a very similar commitment to a performance culture. As part of the Sovereign family, we will offer an even broader array of products delivered with the same flexibility, responsiveness, and local decision making that our customers expect. Both organizations are already working together on integration tasks and sharing expertise to ensure that this transition will be smooth for our customers." 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 66 branches. Waypoint Bank operates 57 branches in Dauphin, York, Lancaster, Cumberland, Franklin, Lebanon, Adams, and Centre counties in Pennsylvania and 9 branches in Baltimore, Harford, Frederick and Washington counties in 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. On March 9, 2004, Waypoint and 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 no later than January of 2005. The following page 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 June, March, December, 2004 2004 2003 Basic income per share $0.31 $0.17 $0.28 Diluted income per share $0.30 $0.16 $0.27 Return on average equity (ROE) 9.85% 5.13% 8.97% Return on average assets 0.74% 0.39% 0.67% Net interest margin (tax equivalent) 2.22% 2.27% 2.24% Noninterest income divided by average assets 0.80% 1.03% 0.80% Noninterest expense divided by average assets 1.66% 2.33% 1.89% Efficiency ratio 59.59% 75.36% 67.12% Effective income tax rate 30.34% 36.70% 21.49% Diluted average equivalent shares 32,979,567 32,741,246 32,622,332 Book value per share $11.86 $12.53 $12.10 Stockholders' equity to total assets 7.28% 7.78% 7.55% As of or for the three months ended September, June, 2003 2003 Basic income per share $0.31 $0.35 Diluted income per share $0.30 $0.34 Return on average equity (ROE) 9.83% 10.82% Return on average assets 0.72% 0.84% Net interest margin (tax equivalent) 2.28% 2.44% Noninterest income divided by average assets 0.83% 0.80% Noninterest expense divided by average assets 1.67% 1.67% Efficiency ratio 59.31% 55.21% Effective income tax rate 28.59% 30.40% Diluted average equivalent shares 33,135,917 33,662,564 Book value per share $12.29 $12.41 Stockholders' equity to total assets 7.62% 7.42% Selected Financial Condition Data (Unaudited, amounts in thousands) As of the periods ended June, March, December, 2004 2004 2003 Total assets $5,442,856 $5,371,728 $5,329,902 Loans receivable, net 2,477,915 2,426,157 2,397,640 Loans held for sale, net 13,164 17,653 17,011 Marketable securities 2,612,849 2,606,875 2,587,752 Deposits 2,799,987 2,705,787 2,720,915 Borrowings 2,144,391 2,078,626 2,110,681 Stockholders' equity 396,130 417,860 402,233 As of the periods ended September, June, 2003 2003 Total assets $5,429,818 $5,639,363 Loans receivable, net 2,390,740 2,379,562 Loans held for sale, net 30,002 38,333 Marketable securities 2,667,038 2,878,814 Deposits 2,630,393 2,581,661 Borrowings 2,273,446 2,459,577 Stockholders' equity 413,710 418,561 Selected Operating Data (Unaudited, amounts in thousands) For the three month periods ended June, March, December, Sept., June, 2004 2004 2003 2003 2003 Interest income $58,636 $59,010 $59,735 $60,877 $64,550 Interest expense 31,926 31,692 32,879 33,489 34,134 Net interest income 26,710 27,318 26,856 27,388 30,416 Provision for loan losses 902 1,901 1,014 2,014 2,064 Net interest income after provision for loan losses 25,808 25,417 25,842 25,374 28,352 Noninterest income 10,878 13,727 10,681 11,495 10,827 Noninterest expense 22,399 30,931 25,193 23,063 22,772 Income before taxes 14,287 8,213 11,330 13,806 16,407 Income tax expense 4,335 3,014 2,435 3,946 4,987 Net income $9,952 $5,199 $8,895 $9,860 $11,420 Discussion of Operating Results Net income totaled $.30 per share for the quarter ended June 30, 2004, as compared to net income of $.34 per share for the quarter ended June 30, 2003 and $.16 per share for the quarter ended March 31, 2004. Net income for the current quarter was $10.0 million versus $11.4 million for the quarter ended June 30, 2003 and $5.2 million for the linked quarter ended March 31, 2004. The linked quarter was impacted by merger-related expenses totaling $3.0 million, or $.09 per share. Net interest income after provision for loan losses totaled $25.8 million for the current quarter as compared to $28.4 million recorded during the quarter ended June 30, 2003 and $25.4 million for the linked quarter ended March 31, 2004. 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 six months 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 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. These impacts, which were partially reduced by favorable mix improvements in the loan and deposit portfolios, resulted in the net interest margin ratio (tax-equivalent) decreasing to 2.22% for the current quarter. This compared to 2.44% for the quarter ended June 30, 2003 and 2.27% for the linked quarter ended March 31, 2004. 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 $.9 million for the current quarter versus $2.1 million for the quarter ended June 30, 2003 and $1.9 million for the linked quarter ended March 31, 2004. 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 $10.9 million for the current quarter, as compared to $10.8 million for the comparable prior quarter ended June 30, 2003, with notable changes between these periods as follows: -- Banking services and account fees totaled $5.4 million, up $1.5 million primarily due to increased overdraft fees, service charges, and commercial fees. These trends reflect increased account and transaction volumes, pricing increases, and increased service offerings. -- Financial services fees totaled $2.3 million for both periods. Waypoint Benefits Consulting, acquired on April 1, 2003, was reflected in both periods and contributed an increase of $.2 million. This increase was offset by a $.2 million decrease in title insurance income resulting from decreased refinancing activity in the mortgage banking market. -- Residential mortgage banking income totaled $1.1 million, down $.2 million from the prior period. Within this category, net gains on the sale of loans decreased $.9 million and loan servicing activities including valuation adjustments resulted in a net revenue increase of $.7 million. The loan sale results reflect both a sales volume decrease and a decrease in the average gain per dollar of loan principal sold. Sales volume was reduced as mortgage rates increased during the quarter and gains were reduced as lower market volume increased competitive pricing pressures. -- Gains on securities decreased $2.4 million in the current quarter, primarily due to decreased sales of marketable securities. This income category also includes gains and losses in the valuation of an interest rate cap that does not receive hedge accounting treatment. This valuation resulted in a gain of $1.1 million during the current quarter and a loss of $1.1 million during the comparable prior quarter. -- Other income resulted in a net loss of $.2 million during the current quarter, but this was an improvement of $1.4 million on a comparative basis. This change resulted primarily from Waypoint's investment in certain Small Business Investment Corporation (SBIC) partnerships, which contributed breakeven results for the current period versus a net loss of $1.5 million for the comparable prior period. Noninterest expense was $22.4 million for the quarter ended June 30, 2004 versus $22.8 million for the quarter ended June 30, 2003 and $30.9 million for the linked quarter ended March 31, 2004. The linked quarter included borrowing prepayment expenses of $4.7 million and merger-related expenses of $3.0 million. Notable changes in the quarter ended June 30, 2004 relative to the quarter ended June 30, 2003 included: -- Salaries and benefits expense totaled $12.2 million, up $.4 million. Increases from expansion in the retail banking franchise and increased investment in sales and marketing personnel were partially offset by attrition in non-essential operational positions in advance of the Sovereign integration of Waypoint. -- Marketing expenses increased $.2 million on increased product advertising. -- Expenses associated with the Sovereign acquisition totaled $.2 million, with no corresponding expenses in the comparable prior quarter. -- Other expenses decreased $1.2 million, which included a $.7 million decrease in loan servicing and other non-deferrable loan costs. The remaining decrease of $.5 million was spread over other expense categories, which are generally being managed downward in advance of the integration with Sovereign. Income tax expense for the current quarter totaled $4.3 million, resulting in an effective tax rate of 30.3% on income before taxes of $14.3 million. For the quarter ended June 30, 2003, income taxes were $5.0 million, resulting in an effective tax rate of 30.4% on income before taxes of $16.4 million. Discussion of Financial Condition Waypoint's total assets were $5.443 billion at June 30, 2004, up from $5.371 billion at March 31, 2004 and up from $5.330 billion at December 31, 2003. The increase from March 31, 2004 came primarily in the loan portfolio, which increased $51.8 million. Waypoint continued to experience strong growth in its commercial loan portfolio, which was up $65.5 million, or 5.7%, during the current quarter. Consumer and other loans also increased $11.8 million. Partially offsetting these increases, residential mortgage loans decreased $25.4 million during the current quarter as Waypoint sold substantially all of its conventional residential mortgage production and prepayments on loans held in portfolio continued at a rapid pace, though at reduced levels relative to those experienced in 2003. Waypoint's loan composition is presented in Table 1 which appears later in this report. Waypoint's deposit portfolio totaled $2.800 billion at June 30, 2004, up from $2.706 billion at March 31, 2004, and up from $2.721 billion at December 31, 2003. Most of Waypoint's deposit growth during the quarter resulted from a $61.6 million increase in core deposits, up 4.6%. Core deposits include savings, transaction and money market deposit accounts. Time deposits also increased during the quarter, up $32.6 million. Time deposits represent a higher cost funding source than core deposits, but the increase in balances was generated at rates that were lower than the cost of alternative wholesale funding. The composition of the deposit portfolio is presented in Table 2 which appears later in this report. Waypoint had $396.1 million in stockholders' equity or 7.28% of total assets at June 30, 2004, as compared to $417.9 million or 7.78% of total assets at March 31, 2004 and $402.2 million or 7.55% of total assets at December 31, 2003. Notable changes in stockholders' equity for the current quarter included increases of $10.0 million from net income and $.8 million from paid in capital and tax benefits associated with stock option exercises. Offsetting these increases were a decrease of $27.8 million in the market value of available-for-sale securities (net of taxes) and dividends paid to shareholders totaling $4.5 million. Discussion of Asset Quality Non-performing loans totaled $18.8 million or 0.75% of total loans as of June 30, 2004 as compared to $17.4 million or 0.71% of total loans as of March 31, 2004 and $18.2 million or 0.76% of total loans as of December 31, 2003. Waypoint's allowance for loan losses was $29.6 million or 1.18% of total loans as of June 30, 2004 as compared to $29.3 million or 1.19% of total loans as of March 31, 2004 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 0.10% on an annualized basis for the quarter ended June 30, 2004 as compared to 0.17% for the quarter ended March 31, 2004 and 0.19% for the comparable prior quarter ended June 30, 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 final 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 approval of the merger may not be obtained, or adverse regulatory conditions may be imposed in connection with government approval of the merger; (5) the stockholders 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 June 30, December 31, 2004 2003 (Unaudited) (All dollar amounts in thousands) Assets Cash and cash equivalents $98,305 $100,016 Marketable securities 2,509,427 2,489,770 FHLB Stock 103,422 97,982 Loans receivable, net 2,477,915 2,397,640 Loans held for sale, net 13,164 17,011 Loan servicing rights 2,703 2,528 Investment in real estate and other joint ventures 21,357 20,773 Premises and equipment, net of accumulated depreciation of $48,018 and $45,261 48,841 49,789 Accrued interest receivable 23,640 23,597 Goodwill 18,332 17,881 Intangible assets 2,801 2,881 Deferred tax asset, net 19,910 9,059 Bank-owned life insurance 94,585 92,522 Other assets 8,454 8,453 Total assets $5,442,856 $5,329,902 Liabilities and Shareholders' Equity Deposits $2,799,987 $2,720,915 Other borrowings 2,144,391 2,110,681 Escrow 3,524 2,568 Accrued interest payable 8,701 10,009 Postretirement benefit obligation 2,248 2,248 Income taxes payable 3,021 2,586 Trust preferred debentures 46,392 46,392 Other liabilities 38,462 32,270 Total liabilities 5,046,726 4,927,669 Preferred stock, 10,000,000 shares authorized but unissued Common stock, $.01 par value, authorized 100,000,000 shares, 42,991,487 shares issued and 33,402,460 outstanding at June 30, 2004, 43,031,041 shares issued and 33,247,630 shares outstanding at December 31, 2003 428 425 Paid in capital 356,534 353,530 Retained earnings 247,888 241,668 Accumulated other comprehensive income (24,453) (8,502) Employee stock ownership plan (13,451) (13,423) Recognition and retention plans (4,206) (4,206) Paid in capital from obligations under Rabbi Trust, 544,948 shares at June 30, 2004 and 495,826 shares at December 31, 2003 9,253 8,457 Treasury stock shares held in Rabbi Trust at cost, 544,948 shares at June 30, 2004 and 563,162 shares at December 31, 2003 (9,253) (9,240) Treasury stock, 9,589,027 shares at June 30, 2004 and 9,716,075 shares at December 31, 2003 (166,610) (166,476) Total stockholders' equity 396,130 402,233 Total liabilities and stockholders' equity $5,442,856 $5,329,902 WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES Consolidated Statements of Income Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 (In thousands, except per share data) (Unaudited) Interest Income: Loans $33,918 $37,198 $67,739 $74,592 Marketable securities and interest-earning cash 24,718 27,352 49,907 55,767 Total interest income 58,636 64,550 117,646 130,359 Interest Expense: Deposits and escrow 12,087 13,465 24,246 27,949 Borrowed funds 19,839 20,669 39,372 41,522 Total interest expense 31,926 34,134 63,618 69,471 Net interest income 26,710 30,416 54,028 60,888 Provision for loan losses 902 2,064 2,803 4,485 Net interest income after provision for loan losses 25,808 28,352 51,225 56,403 Noninterest Income: Banking service and account fees 5,444 3,924 9,798 7,313 Financial services fees 2,284 2,348 4,696 4,393 Residential mortgage banking 1,057 1,297 1,571 2,600 Bank-owned life insurance 1,027 1,142 2,063 2,288 Gain on securities and derivatives, net 1,283 3,717 6,689 5,590 Other (217) (1,601) (212) (1,928) Total noninterest income 10,878 10,827 24,605 20,256 Noninterest Expense: Salaries and benefits 12,250 11,803 25,454 23,235 Equipment expense 1,741 1,849 3,557 3,620 Occupancy expense 1,870 1,829 3,891 3,751 Marketing 1,379 1,215 2,309 2,306 Amortization of intangible assets 189 192 389 312 Outside services 1,303 1,312 2,723 2,579 Communications and supplies 1,335 1,296 2,615 2,622 Borrowing prepayment - - 4,704 - Acquisition 194 - 3,159 - Other 2,138 3,276 4,529 6,229 Total noninterest expense 22,399 22,772 53,330 44,654 Income before income taxes 14,287 16,407 22,500 32,005 Income tax expense 4,335 4,987 7,349 9,274 Net Income $9,952 $11,420 $15,151 $22,731 Basic earnings per share $0.31 $0.35 $0.48 $0.68 Diluted earnings per share $0.30 $0.34 $0.46 $0.66 Table 1 - Loans Receivable, Net June 30, December 31, 2004 2003 Residential mortgage loans: One-to-four family $305,586 $347,679 Construction 16,804 25,500 Total residential mortgage loans 322,390 373,179 Commercial loans: Commercial real estate 744,347 651,139 Commercial business 364,194 343,129 Construction and site development 106,361 103,611 Total commercial loans 1,214,902 1,097,879 Consumer and other loans: Manufactured housing 87,552 93,323 Home equity and second mortgage 552,116 561,937 Indirect automobile 195,420 174,416 Other 116,803 106,968 Total consumer and other loans 951,891 936,644 Loans receivable, gross 2,489,183 2,407,702 Plus: Dealer reserves 22,740 23,584 Less: Unearned premiums (1) 6 Net deferred loan origination fees 4,456 5,209 Allowance for loan losses 29,553 28,431 Loans receivable, net $2,477,915 $2,397,640 Table 2 - Deposits June 30, December 31, 2004 2003 Savings $239,384 $252,072 Time 1,396,074 1,408,970 Transaction 831,903 560,520 Money market 332,626 499,353 Total deposits $2,799,987 $2,720,915 Table 3a - Average Balance Sheet, quarter For the three months ended, June 30, 2004 Average Interest (2) Average Balance Yield/Cost Assets: (Dollar amounts in thousands) Interest-earning assets: Loans, net (1) (5) $2,480,290 $34,122 5.48% Marketable securities 2,443,617 25,097 4.13 Other interest-earning assets 71,898 160 0.98 Total interest-earning assets 4,995,805 59,379 4.75 Noninterest-earning assets 411,252 Total assets $5,407,057 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings deposits $244,070 131 0.21 Time deposits 1,354,165 9,247 2.89 Transaction and money market 1,124,042 2,703 0.97 Escrow 3,135 6 0.79 Borrowed funds 2,231,662 19,839 3.49 Total interest-bearing liabilities 4,957,074 31,926 2.56 Noninterest-bearing liabilities 45,902 Total liabilities 5,002,976 Stockholders' equity 404,081 Total liabilities and stockholders' equity $5,407,057 Net interest income - tax-equivalent 27,453 Interest rate spread (3) 2.19% Net interest-earning assets $38,731 Net interest margin (4) 2.22% Ratio of interest-earning assets to interest-bearing liabilities 1.01 x Adjustment to reconcile tax-equivalent net interest income to net interest income (722) Net interest income $26,731 For the three months ended, June 30, 2003 Average Interest (2) Average Balance Yield/Cost Assets: Interest-earning assets: Loans, net (1) (5) $2,420,366 $37,383 6.17% Marketable securities 2,720,763 27,794 4.17 Other interest-earning assets 66,404 151 1.05 Total interest-earning assets 5,207,533 65,328 5.06 Noninterest-earning assets 233,851 Total assets $5,441,384 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings deposits $262,658 314 0.48 Time deposits 1,392,343 11,686 3.37 Transaction and money market 836,419 1,456 0.70 Escrow 4,400 9 0.86 Borrowed funds 2,469,623 20,669 3.32 Total interest-bearing liabilities 4,965,443 34,134 2.74 Noninterest-bearing liabilities 53,867 Total liabilities 5,019,310 Stockholders' equity 422,074 Total liabilities and stockholders' equity $5,441,384 Net interest income - tax-equivalent 31,194 Interest rate spread (3) 2.32% Net interest-earning assets $242,090 Net interest margin (4) 2.44% Ratio of interest-earning assets to interest-bearing liabilities 1.05 x Adjustment to reconcile tax-equivalent net interest income to net interest income (778) Net interest income $30,416 (1) Includes income recognized on deferred loan fees and costs of $151,000 for the three months ended June 30, 2004, and $726,000 for the three months ended June 30, 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 3b - Average Balance Sheet, year to date For the six months ended, June 30, 2004 Average Interest (2) Average Balance Yield/Cost Assets: (Dollar amounts in thousands) Interest-earning assets: Loans, net (1) (5) $2,462,645 $68,133 5.51% Marketable securities 2,481,736 50,756 4.12 Other interest-earning assets 55,594 237 0.91 Total interest-earning assets 4,999,975 119,126 4.77 Noninterest-earning assets 359,518 Total assets $5,359,493 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings deposits $246,166 258 0.21 Time deposits 1,372,175 19,252 2.81 Transaction and money market 1,087,852 4,725 0.87 Escrow 3,022 11 0.75 Borrowed funds 2,197,973 39,372 3.52 Total interest-bearing liabilities 4,907,188 63,618 2.58 Noninterest-bearing liabilities 47,392 Total liabilities 4,954,580 Stockholders' equity 404,913 Total liabilities and stockholders' equity $5,359,493 Net interest income - tax-equivalent 55,508 Interest rate spread (3) 2.19% Net interest-earning assets $92,787 Net interest margin (4) 2.25% Ratio of interest-earning assets to interest-bearing liabilities 1.02 x Adjustment to reconcile tax-equivalent net interest income to net interest income (1,480) Net interest income $54,028 For the six months ended, June 30, 2003 Average Interest (2) Average Balance Yield/Cost Assets: (Dollar amounts in thousands) Interest-earning assets: Loans, net (1) (5) $2,391,181 $74,944 6.28% Marketable securities 2,719,810 56,676 4.25 Other interest-earning assets 65,286 314 1.12 Total interest-earning assets 5,176,277 131,934 5.15 Noninterest-earning assets 220,886 Total assets $5,397,163 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings deposits $260,043 628 0.49 Time deposits 1,395,538 24,706 3.57 Transaction and money market 801,614 2,597 0.65 Escrow 4,135 18 0.88 Borrowed funds 2,453,724 41,522 3.37 Total interest-bearing liabilities 4,915,054 69,471 2.83 Noninterest-bearing liabilities 49,341 Total liabilities 4,964,395 Stockholders' equity 432,768 Total liabilities and stockholders' equity $5,397,163 Net interest income - tax-equivalent 62,463 Interest rate spread (3) 2.32% Net interest-earning assets $261,223 Net interest margin (4) 2.45% Ratio of interest-earning assets to interest-bearing liabilities 1.05 x Adjustment to reconcile tax-equivalent net interest income to net interest income (1,575) Net interest income $60,888 (1) Includes income recognized on deferred loan fees and costs of $326,000 for the six months ended June 30, 2004, and $1,359,000 for the six months ended June 30, 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 June 30,2004 Compared to Three Months Ended June 30, 2003 Increase (Decrease) Volume Rate Net (Dollar amounts in thousands) Interest-earning assets: Loans, net $2,424 $(5,685) $(3,261) Marketable securities (3,049) 352 (2,697) Other interest-earning assets 18 (9) 9 Total interest-earning assets (607) (5,342) (5,949) Interest-bearing liabilities: Savings deposits (20) (163) (183) Time deposits (311) (2,128) (2,439) Transaction and money market deposits 599 648 1,247 Escrow (2) (1) (3) Borrowed funds (3,645) 2,815 (830) Total interest-bearing liabilities (3,379) 1,171 (2,208) Change in net interest income $2,772 $(6,513) $(3,741) Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003 Increase (Decrease) Volume Rate Net (Dollar amounts in thousands) Interest-earning assets: Loans, net $2,199 $(9,010) $(6,811) Marketable securities (4,887) (1,033) (5,920) Other interest-earning assets (44) (33) (77) Total interest-earning assets (2,732) (10,076) (12,808) Interest-bearing liabilities: Savings deposits (32) (338) (370) Time deposits (410) (5,044) (5,454) Transaction and money market deposits 1,092 1,036 2,128 Escrow (4) (3) (7) Borrowed funds (4,502) 2,352 (2,150) Total interest-bearing liabilities (3,856) (1,997) (5,853) Change in net interest income $1,124 $(8,079) $(6,955) Table 5 - Analysis of Allowance for Loan Losses For the Three For the Six Months Ended Months Ended June 30, June 30, June 30, June 30, 2004 2003 2004 2003 (All dollar amounts in thousands) Balance at beginning of the period $29,295 $27,898 $28,431 $27,506 Provision for loan losses 902 2,064 2,803 4,485 Charge-offs: Residential mortgage loans (131) (99) (189) (319) Commercial loans (1) (136) (97) (1,113) Consumer and other loans (802) (1,227) (1,898) (2,502) Total charge-offs (934) (1,462) (2,184) (3,934) Recoveries: Residential mortgage loans 35 68 35 81 Commercial loans 56 29 119 292 Consumer and other loans 199 221 349 388 Total recoveries 290 318 503 761 Net charge-offs (644) (1,144) (1,681) (3,173) Balance at end of period $29,553 $28,818 $29,553 $28,818 Annualized net charge-offs to average loans 0.10% 0.19% 0.14% 0.27% Allowance for loan losses as a % of total loans 1.18% 1.20% 1.18% 1.20% Table 6 - Non-performing Assets As of As of June 30, 2004 December 31, 2003 (Amounts in thousands) Non-accrual residential mortgage loans $228 $443 Non-accrual commercial loans 7,107 8,173 Non-accrual other loans 528 90 Total non-accrual loans 7,863 8,706 Loans 90 days or more delinquent and still accruing 10,938 9,498 Total non-performing loans 18,801 18,204 Total foreclosed other assets 340 313 Total foreclosed real estate 414 472 Total non-performing assets $19,555 $18,989 Total non-performing loans to total loans 0.75% 0.76% Allowance for loan losses to non-performing loans 157.19% 156.18% Total non-performing assets to total assets 0.36% 0.36% Table 7 - Allocation of the Allowance for Loan Losses As of June 30, As of December 31, 2004 2003 (All dollar amounts are in thousands) % of Total % of Total Amount Reserves Amount Reserves Residential mortgage loans $651 2.20% $1,099 3.86% Commercial loans 23,656 80.05% 20,455 71.95% Consumer and other loans 5,246 17.75% 6,877 24.19% Total $29,553 100.00% $28,431 100.00% DATASOURCE: Waypoint Financial Corp. CONTACT: James H. Moss, Chief Financial Officer of Waypoint Financial, +1-717-909-2247 Web site: http://www.waypointbank.com/

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