WYPT Waypoint Financial Corp (MM)

Waypoint Financial Announces Third Quarter Results and Declares Regular Quarterly Cash Dividend HARRISBURG, Pa., Oct. 21 /PRNewswire-FirstCall/ -- Waypoint Financial Corp. (NASDAQ:WYPT) today announced net income of $.31 per share, or $10.3 million, for the quarter ended September 30, 2004 as compared to $.30 per share, or $9.9 million, for the quarter ended September 30, 2003 and $.30 per share, or $10.0 million, for the linked quarter ended June 30, 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 November 4, 2004. The dividend will be paid on November 15, 2004. Also, in anticipation of Waypoint's acquisition by Sovereign Bancorp ("Sovereign") expected to close in January 2005, Waypoint will suspend its Dividend Reinvestment Plan ("DRP") and accept no additional participants after the November dividend in order to facilitate an orderly cash/stock election and the planned transfer of responsibilities to Sovereign's stock transfer agent. Detailed information will be provided to DRP participants with their DRP statement. David E. Zuern, President and CEO, discussed Waypoint's business performance during the quarter ended September 30, 2004. He stated: "Waypoint continued to build franchise value during the quarter through growth in commercial and consumer loans, transaction deposits, and banking fee income. Waypoint also continued to maintain sound credit quality in our asset portfolios and prudently manage interest rate risk during a historically low rate environment." Zuern reported that Waypoint continued to show progress in changing the composition of the Bank's loan and deposit portfolios. Net loans increased $81.9 million during the quarter, with commercial and consumer loans up a combined $98.4 million or 4.5% from June 30, 2004. Waypoint's loan growth was funded primarily by deposits, which were up $74.4 million or 2.7% from June 30, 2004. Within the deposit portfolio, core deposits, which include savings, transaction and money market accounts, grew $33.8 million and time deposits increased $40.6 million. Zuern also praised Waypoint's commitment to maintaining credit quality. He reported that non-performing loans represented 0.59% of total loans as of September 30, 2004 as compared to 0.75% as of June 30, 2004 and 0.76% of total loans as of December 31, 2003. He noted that continued strong credit quality and improvements in the balance sheet mix helped Waypoint increase its net interest income after provision for loan losses to $26.4 million during the quarter ended September 30, 2004, up from $25.4 million for the quarter ended September 30, 2003 and up from $25.8 million for the linked quarter ended June 30, 2004. Zuern added that Waypoint's revenue from banking services and account fees totaled $5.4 million for the quarter ended September 30, 2004, up 25.6% from $4.3 million for the quarter ended September 30, 2003 and on par with $5.4 million for the linked quarter ended June 30, 2004. Zuern attributed the banking fee income growth to rising account volumes, improved service offerings, and pricing increases. Core fee income, which includes bank service and account fees, financial services fees, and mortgage banking income, totaled $8.7 million for the current quarter and the linked quarter ended June 30, 2004, though this level is down from $10.1 million recorded in the quarter ended September 30, 2003, which was enhanced by record-high mortgage banking revenue. Zuern credited Waypoint's continued loan, deposit and fee growth to the strength of the company's retail franchise. He also noted that Waypoint's newly opened office in the Frederick, Maryland market is exceeding all expectations and exemplifies the Bank's successful expansion into Maryland's Northern Tier. Zuern moved on to discuss expense control, noting that Waypoint reduced its total noninterest expenses to $22.6 million during the current quarter as compared to $23.1 million during the comparable prior quarter. The expense reductions were spread across several categories as the Bank continued to manage down costs in advance of the closing of Sovereign's acquisition of Waypoint. Zuern closed with comments regarding the pending acquisition of Waypoint by Sovereign. He stated, "As January 2005 moves closer, we are looking forward to joining our strong and growing franchise with Sovereign, a Pennsylvania-based company that combines the best features of a community bank with the resources of a large financial services provider. 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. Sovereign/Waypoint integration teams are working diligently to ensure a seamless transition 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 58 branches in Dauphin, York, Lancaster, Cumberland, Franklin, Lebanon, Adams, and Centre counties in Pennsylvania and 8 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 in 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 September, June, March, December, September, 2004 2004 2004 2003 2003 Basic income per share $0.32 $0.31 $0.17 $0.28 $0.31 Diluted income per share $0.31 $0.30 $0.16 $0.27 $0.30 Return on average equity (ROE) 10.12% 9.85% 5.13% 8.97% 9.83% Return on average assets 0.76% 0.74% 0.39% 0.67% 0.72% Net interest margin (tax equivalent) 2.22% 2.22% 2.27% 2.24% 2.28% Noninterest income divided by average assets 0.69% 0.80% 1.03% 0.80% 0.83% Noninterest expense divided by average assets 1.66% 1.66% 2.33% 1.89% 1.67% Efficiency ratio 61.22% 59.59% 75.36% 67.12% 59.31% Effective income tax rate 21.69% 30.34% 36.70% 21.49% 28.59% Diluted average equivalent shares 33,095,825 32,979,567 32,741,246 32,622,332 33,135,917 Book value per share $12.65 $11.86 $12.53 $12.10 $12.29 Stockholders' equity to total assets 7.90% 7.28% 7.78% 7.55% 7.62% Selected Financial Condition Data (Unaudited, amounts in thousands) As of the periods ended September, June, March, December, September, 2004 2004 2004 2003 2003 Total assets $5,351,987 $5,442,856 $5,371,728 $5,329,902 $5,429,818 Loans receivable, net 2,559,827 2,477,915 2,426,157 2,397,640 2,390,740 Loans held for sale, net 15,832 13,164 17,653 17,011 30,002 Marketable securities 2,459,825 2,612,849 2,606,875 2,587,752 2,667,038 Deposits 2,874,356 2,799,987 2,705,787 2,720,915 2,630,393 Borrowings 1,952,471 2,144,391 2,078,626 2,110,681 2,273,446 Stockholders' equity 423,055 396,130 417,860 402,233 413,710 Selected Operating Data (Unaudited, amounts in thousands) For the three month periods ended September, June, March, December, September, 2004 2004 2004 2003 2003 Interest income $61,798 $58,636 $59,010 $59,735 $60,877 Interest expense 34,273 31,926 31,692 32,879 33,489 Net interest income 27,525 26,710 27,318 26,856 27,388 Provision for loan losses 1,113 902 1,901 1,014 2,014 Net interest income after provision for loan losses 26,412 25,808 25,417 25,842 25,374 Noninterest income 9,420 10,878 13,727 10,681 11,495 Noninterest expense 22,616 22,399 30,931 25,193 23,063 Income before taxes 13,216 14,287 8,213 11,330 13,806 Income tax expense 2,867 4,335 3,014 2,435 3,946 Net income $10,349 $9,952 $5,199 $8,895 $9,860 Discussion of Operating Results Net income totaled $.31 per share, or $10.3 million, for the quarter ended September 30, 2004 as compared to $.30 per share, or $9.9 million, for the quarter ended September 30, 2003. This also compares to $.30 per share, or $10.0 million, for the linked quarter ended June 30, 2004. Net interest income after provision for loan losses totaled $26.4 million during the quarter ended September 30, 2004, up from $25.4 million for the quarter ended September 30, 2003, and up from $25.8 million for the linked quarter ended June 30, 2004. The increase in net interest income after provision for loan losses came primarily from improvements in balance sheet mix and continued strong credit quality in the loan portfolio. These favorable trends were partially offset by the cumulative effects of record high prepayments during 2003 and early in 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. These impacts resulted in the net interest margin ratio (tax- equivalent) remaining at 2.22% for the current quarter, on par with the linked quarter ended June 30, 2004, but below 2.28% for the quarter ended September 30, 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 $1.1 million for the current quarter versus $2.0 million for the quarter ended September 30, 2003 and $.9 million for the linked quarter ended June 30, 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 $9.4 million for the current quarter, as compared to $11.5 million for the comparable prior quarter ended September 30, 2003, with notable changes between these periods as follows: -- Banking services and account fees totaled $5.4 million for the current quarter, up $1.1 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 $3.1 million, up $.3 million primarily due to increased benefits consulting fees. -- Net residential mortgage banking revenue totaled $.2 million, down $2.8 million. Within this category, net gains on the sale of loans decreased $2.3 million and loan servicing activities including valuation adjustments resulted in a net revenue decrease of $.5 million. The loan sale results reflect both a sales volume decrease and a decrease in the average gain per dollar of loan principal sold. These experiences were consistent with trends currently being reported for the mortgage banking industry as a whole. -- Gains on securities and derivatives decreased $1.9 million primarily due to a recognized loss of $1.7 million during the current quarter on the valuation of an interest rate cap that does not receive hedge accounting treatment. The valuation of this instrument resulted in a gain of $.4 million during the comparable prior quarter. -- Other income resulted in a net gain of $.8 million during the current quarter versus a loss of $.6 million for the comparable prior quarter. This change resulted primarily from Waypoint's investment in certain low income housing tax credit ("LIHTC") partnerships, which contributed a net gain of $.5 million for the current period versus a net loss of $.5 million for the comparable prior period. During the current period, Waypoint recorded a $.7 million partial recovery of previous write-downs to the equity-method valuation of its largest LIHTC partnership pursuant to the successful renegotiation of its management services contract. Noninterest expense was $22.6 million for the quarter ended September 30, 2004 versus $23.1 million for the quarter ended September 30, 2003 and $22.4 million for the linked quarter ended June 30, 2004. Notable changes in the quarter ended September 30, 2004 relative to the quarter ended September 30, 2003 included: -- Salaries and benefits expense totaled $12.6 million, up $.1 million. Increases from expansion in the banking franchise and the effect of annual merit increases were substantially offset by attrition in non- essential operational positions in advance of the Sovereign integration of Waypoint. -- Legal and integration expenses associated with the Sovereign acquisition totaled $.2 million, with no corresponding expenses in the comparable prior quarter. -- Other expenses decreased $.6 million, which was spread over a number of other expense categories that are being managed downward in advance of the integration with Sovereign. Income tax expense for the current quarter totaled $2.9 million, resulting in an effective tax rate of 21.7% on income before taxes of $13.2 million. For the quarter ended September 30, 2003, income taxes were $3.9 million, resulting in an effective tax rate of 28.6% on income before taxes of $13.8 million. The decrease in the effective tax rate for the current quarter reflected a $.7 million tax benefit that resulted from changes in Waypoint's estimate of contingency reserves maintained to recognize uncertainty associated with various income tax positions. Income tax expense totaled $10.2 million for an effective rate of 28.6% for the nine-month period ended September 30, 2004 as compared to $13.2 million for an effective rate of 28.9% for the nine-month period ended September 30, 2003. Discussion of Financial Condition Waypoint's total assets were $5.352 billion at September 30, 2004, down $90.9 million during the current quarter as marketable securities decreased $153.0 million. Partially offsetting this decrease was an increase of $81.9 million in net loans. Within the loan portfolio, commercial and consumer loans were up a combined $98.4 million or 4.5%. This increase included the purchase of $49.8 million of Pennsylvania- and Maryland-originated home equity loans. Partially offsetting these increases, residential mortgage loans decreased $18.0 million due to the combined effect of repayments on loans held in portfolio and the sale of substantially all conventional residential mortgage production. Waypoint's loan composition is presented in Table 1 which appears later in this report. Waypoint's deposit portfolio totaled $2.874 billion at September 30, 2004 up $74.4 million or 2.7% during the current quarter. Core deposits, which include savings, transaction and money market accounts, grew $33.8 million as Waypoint continued to target its sales and marketing efforts toward this profitable product set. Time deposits, which represent a higher cost funding source than core deposits, were up $40.6 million 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 $423.1 million in stockholders' equity or 7.90% of total assets at September 30, 2004, as compared to $396.1 million or 7.28% of total assets at June 30, 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 $10.3 million from net income, an increase of $20.1 million in the market value of available-for-sale securities (net of taxes) and $1.1 million from paid in capital and tax benefits associated with stock compensation plans. Offsetting these increases were dividends paid to shareholders totaling $4.5 million. Discussion of Asset Quality Non-performing loans totaled $15.2 million or 0.59% of total loans as of September 30, 2004 as compared to $18.8 million or 0.75% of total loans as of June 30, 2004 and $18.2 million or 0.76% of total loans as of December 31, 2003. Waypoint's allowance for loan losses was $30.0 million or 1.16% of total loans as of September 30, 2004 as compared to $29.6 million or 1.18% of total loans as of June 30, 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 September 30, 2004 as compared to 0.10% for the quarter ended June 30, 2004 and 0.26% for the comparable prior quarter ended September 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. Additionally, this news release 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 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 business of Waypoint may not be combined successfully with Sovereign's businesses, or such combination may take longer to accomplish than expected; (2) expected cost savings from the merger cannot be fully realized or realized within the expected timeframes; (3) operating costs, customer loss and business disruption following the merger, 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 merger, 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 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 September 30, December 31, 2004 2003 (Unaudited) (All dollar amounts in thousands) Assets Cash and cash equivalents $86,937 $100,016 Marketable securities 2,365,765 2,489,770 FHLB Stock 94,060 97,982 Loans receivable, net 2,559,827 2,397,640 Loans held for sale, net 15,832 17,011 Loan servicing rights 2,322 2,528 Investment in real estate and other joint ventures 21,833 20,773 Premises and equipment, net of accumulated depreciation of $42,762 and $45,261 47,595 49,789 Accrued interest receivable 24,296 23,597 Goodwill 18,332 17,881 Intangible assets 2,605 2,881 Deferred tax asset, net 7,752 9,059 Bank-owned life insurance 95,616 92,522 Other assets 9,215 8,453 Total assets $5,351,987 $5,329,902 Liabilities and Shareholders' Equity Deposits $2,874,356 $2,720,915 Other borrowings 1,952,471 2,110,681 Escrow 819 2,568 Accrued interest payable 9,062 10,009 Postretirement benefit obligation 2,272 2,248 Income taxes payable 2,153 2,586 Trust preferred debentures 46,392 46,392 Other liabilities 41,407 32,270 Total liabilities 4,928,932 4,927,669 Preferred stock, 10,000,000 shares authorized but unissued Common stock, $.01 par value, authorized 100,000,000 shares, 43,042,917 shares issued and 33,455,945 outstanding at September 30, 2004, 43,031,041 shares issued and 33,247,630 shares outstanding at December 31, 2003 429 425 Paid in capital 357,449 353,530 Retained earnings 253,735 241,668 Accumulated other comprehensive income (4,351) (8,502) Employee stock ownership plan (13,391) (13,423) Recognition and retention plans (4,206) (4,206) Paid in capital from obligations under Rabbi Trust, 546,572 shares at at September 30, 2004 and 495,826 shares at December 31, 2003 9,326 8,457 Treasury stock shares held in Rabbi Trust at cost, 546,572 shares at September 30, 2004 and 563,162 shares at December 31, 2003 (9,326) (9,240) Treasury stock, 9,586,972 shares at September 30, 2004 and 9,716,075 shares at December 31, 2003 (166,610) (166,476) Total stockholders' equity 423,055 402,233 Total liabilities and stockholders' equity $5,351,987 $5,329,902 WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES Consolidated Statements of Income Three Months Ended Nine Months Ended September 30, September 30, 2004 2003 2004 2003 (In thousands, except per share data) (Unaudited) Interest Income: Loans $35,718 $36,447 $103,457 $111,039 Marketable securities and interest-earning cash 26,080 24,430 75,987 80,197 Total interest income 61,798 60,877 179,444 191,236 Interest Expense: Deposits and escrow 13,571 13,272 37,817 41,221 Borrowed funds 20,702 20,217 60,074 61,739 Total interest expense 34,273 33,489 97,891 102,960 Net interest income 27,525 27,388 81,553 88,276 Provision for loan losses 1,113 2,014 3,916 6,499 Net interest income after provision for loan losses 26,412 25,374 77,637 81,777 Noninterest Income: Banking service and account fees 5,393 4,307 15,191 11,620 Financial services fees 3,145 2,795 7,841 7,188 Residential mortgage banking 161 3,031 1,732 5,631 Bank-owned life insurance 1,031 1,081 3,094 3,369 Gain on securities and derivatives, net (1,061) 881 5,628 6,471 Other 751 (600) 539 (2,528) Total noninterest income 9,420 11,495 34,025 31,751 Noninterest Expense: Salaries and benefits 12,561 12,515 38,015 35,751 Equipment expense 1,704 1,813 5,261 5,433 Occupancy expense 1,902 1,756 5,793 5,507 Marketing 1,365 1,374 3,674 3,680 Amortization of intangible assets 190 207 579 518 Outside services 1,205 1,274 3,928 3,853 Communications and supplies 1,207 1,230 3,822 3,852 Borrowing prepayment - - 4,704 - Acquisition 176 - 3,335 - Other 2,306 2,894 6,835 9,123 Total noninterest expense 22,616 23,063 75,946 67,717 Income before income taxes 13,216 13,806 35,716 45,811 Income tax expense 2,867 3,946 10,216 13,219 Net Income $10,349 $9,860 $25,500 $32,592 Basic earnings per share $0.32 $0.31 $0.80 $0.99 Diluted earnings per share $0.31 $0.30 $0.77 $0.96 Table 1 - Loans Receivable, Net September 30, December 31, 2004 2003 Residential mortgage loans: One-to-four family $283,286 $347,679 Construction 21,061 25,500 Total residential mortgage loans 304,347 373,179 Commercial loans: Commercial real estate 767,450 651,139 Commercial business 361,128 343,129 Construction and site development 105,471 103,611 Total commercial loans 1,234,049 1,097,879 Consumer and other loans: Manufactured housing 84,715 93,323 Home equity and second mortgage 609,836 561,937 Indirect automobile 215,001 174,416 Other 121,627 106,968 Total consumer and other loans 1,031,179 936,644 Loans receivable, gross 2,569,575 2,407,702 Plus: Dealer reserves 22,756 23,584 Less: Unearned (premiums) discounts (1,887) 6 Net deferred loan origination fees 4,366 5,209 Allowance for loan losses 30,025 28,431 Loans receivable, net $2,559,827 $2,397,640 Table 2 - Deposits September, December 31, 2004 2003 Savings $228,318 $252,072 Time 1,436,639 1,408,970 Transaction 911,651 560,520 Money market 297,748 499,353 Total deposits $2,874,356 $2,720,915 Table 3a - Average Balance Sheet, quarter For the three months ended, September 30, 2004 Average Interest Average Balance (2) Yield/Cost Assets: (Dollar amounts in thousands) Interest-earning assets: Loans, net (1) (5) $2,580,943 $35,924 5.49% Marketable securities 2,503,764 26,492 4.24 Other interest-earning assets 41,261 104 1.25 Total interest-earning assets 5,125,968 62,520 4.84 Noninterest-earning assets 316,603 Total assets $5,442,571 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings deposits $234,364 140 0.24 Time deposits 1,422,781 10,012 2.79 Transaction and money market 1,197,329 3,415 1.15 Escrow 1,718 4 0.82 Borrowed funds 2,128,247 20,702 3.81 Total interest-bearing liabilities 4,984,439 34,273 2.71 Noninterest-bearing liabilities 49,008 Total liabilities 5,033,447 Stockholders' equity 409,124 Total liabilities and stockholders' Equity $5,442,571 Net interest income - tax-equivalent 28,247 Interest rate spread (3) 2.13% Net interest-earning assets $141,529 Net interest margin (4) 2.22% Ratio of interest-earning assets to interest-bearing liabilities 1.03 x Adjustment to reconcile tax-equivalent net interest income to net interest income (722) Net interest income $27,525 For the three months ended, September 30, 2003 Average Interest Average Balance (2) Yield/Cost Assets: (Dollar amounts in thousands) Interest-earning assets: Loans, net (1) (5) $2,454,060 $36,646 5.90% Marketable securities 2,669,174 25,270 3.59 Other interest-earning assets 81,321 174 0.90 Total interest-earning assets 5,204,555 62,090 4.90 Noninterest-earning assets 306,916 Total assets $5,511,471 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings deposits $256,108 267 0.41 Time deposits 1,403,613 11,007 3.11 Transaction and money market 937,199 1,992 0.85 Escrow 2,798 6 0.87 Borrowed funds 2,463,967 20,217 3.28 Total interest-bearing liabilities 5,063,685 33,489 2.60 Noninterest-bearing liabilities 46,552 Total liabilities 5,110,237 Stockholders' equity 401,234 Total liabilities and stockholders' Equity $5,511,471 Net interest income - tax-equivalent 28,601 Interest rate spread (3) 2.30% Net interest-earning assets $140,870 Net interest margin (4) 2.28% Ratio of interest-earning assets to interest-bearing liabilities 1.03 x Adjustment to reconcile tax-equivalent net interest income to net interest income (1,213) Net interest income $27,388 (1) Includes income recognized on deferred loan fees and costs of $171,000 for the three months ended September 30, 2004, and $620,000 for the three months ended September 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 nine months ended, September 30, 2004 Average Interest Average Balance (2) Yield/Cost Assets: (Dollar amounts in thousands) Interest-earning assets: Loans, net (1) (5) $2,502,365 $104,057 5.51% Marketable securities 2,489,133 77,248 4.16 Other interest-earning assets 50,782 341 1.01 Total interest-earning assets 5,042,280 181,646 4.79 Noninterest-earning assets 345,109 Total assets $5,387,389 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings deposits $242,203 398 0.22 Time deposits 1,389,167 29,265 2.81 Transaction and money market 1,124,611 8,140 0.97 Escrow 2,584 14 0.76 Borrowed funds 2,174,562 60,074 3.63 Total interest-bearing liabilities 4,933,127 97,891 2.62 Noninterest-bearing liabilities 47,934 Total liabilities 4,981,061 Stockholders' equity 406,328 Total liabilities and stockholders' Equity $5,387,389 Net interest income - tax-equivalent 83,755 Interest rate spread (3) 2.17% Net interest-earning assets $109,153 Net interest margin (4) 2.24% Ratio of interest-earning assets to interest-bearing liabilities 1.02 x Adjustment to reconcile tax-equivalent net interest income to net interest income (2,202) Net interest income $81,553 For the nine months ended, September 30, 2003 Average Interest Average Balance (2) Yield/Cost Assets: (Dollar amounts in thousands) Interest-earning assets: Loans, net (1) (5) $2,412,371 $111,584 6.15% Marketable securities 2,702,746 82,761 4.19 Other interest-earning assets 70,689 488 1.03 Total interest-earning assets 5,185,806 194,833 5.07 Noninterest-earning assets 249,873 Total assets $5,435,679 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings deposits $258,717 895 0.46 Time deposits 1,398,260 35,713 3.42 Transaction and money market 847,306 4,589 0.72 Escrow 3,684 24 0.88 Borrowed funds 2,457,176 61,739 3.35 Total interest-bearing liabilities 4,965,143 102,960 2.75 Noninterest-bearing liabilities 50,918 Total liabilities 5,016,061 Stockholders' equity 419,618 Total liabilities and stockholders' Equity $5,435,679 Net interest income - tax-equivalent 91,873 Interest rate spread (3) 2.32% Net interest-earning assets $220,663 Net interest margin (4) 2.40% Ratio of interest-earning assets to interest-bearing liabilities 1.04 x Adjustment to reconcile tax-equivalent net interest income to net interest income (3,597) Net interest income $88,276 (1) Includes income recognized on deferred loan fees and costs of $497,000 for the nine months ended September 30, 2004, and $1,845,000 for the nine months ended September 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 September 30, 2004 Compared to Three Months Ended September 30, 2003 Increase (Decrease) Volume Rate Net (Dollar amounts in thousands) Interest-earning assets: Loans, net $3,258 $(3,981) $(723) Marketable securities 486 737 1,223 Other interest-earning assets (38) (32) (70) Total interest-earning assets 3,706 (3,276) 430 Interest-bearing liabilities: Savings deposits (12) (115) (127) Time deposits 329 (1,324) (995) Transaction and money market deposits 642 781 1,423 Escrow (3) 1 (2) Borrowed funds 428 57 485 Total interest-bearing liabilities 1,384 (600) 784 Change in net interest income $2,322 $(2,676) $(354) Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003 Increase (Decrease) Volume Rate Net (Dollar amounts in thousands) Interest-earning assets: Loans, net $4,125 $(11,652) $(7,527) Marketable securities (5,055) (458) (5,513) Other interest-earning assets (138) (9) (147) Total interest-earning assets (1,068) (12,119) (13,187) Interest-bearing liabilities: Savings deposits (37) (460) (497) Time deposits (135) (6,313) (6,448) Transaction and money market deposits 2,553 998 3,551 Escrow (10) - (10) Borrowed funds (1,067) (598) (1,665) Total interest-bearing liabilities 1,304 (6,373) (5,069) Change in net interest income $(2,372) $(5,746) $(8,118) Table 5 - Analysis of Allowance for Loan Losses For the Three For the Nine Months Ended Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2004 2003 2004 2003 (All dollar amounts in thousands) Balance at beginning of the period $29,553 $28,818 $28,431 $27,506 Provision for loan losses 1,113 2,014 3,916 6,499 Charge-offs: Residential mortgage loans (101) (134) (290) (453) Commercial loans (67) (552) (164) (1,665) Consumer and other loans (984) (1,139) (2,882) (3,641) Total charge-offs (1,152) (1,825) (3,336) (5,759) Recoveries: Residential mortgage loans 23 40 58 121 Commercial loans 311 9 430 301 Consumer and other loans 177 235 526 623 Total recoveries 511 284 1,014 1,045 Net charge-offs (641) (1,541) (2,322) (4,714) Balance at end of period $30,025 $29,291 $30,025 $29,291 Annualized net charge-offs to average loans 0.10% 0.26% 0.19% 0.26% Allowance for loan losses as a % of total loans 1.16% 1.21% 1.16% 1.21% Table 6 - Non-performing Assets As of As of September 30, 2004 December 31, 2003 (Amounts in thousands) Non-accrual residential mortgage loans $271 $443 Non-accrual commercial loans 7,646 8,173 Non-accrual other loans 414 90 Total non-accrual loans 8,331 8,706 Loans 90 days or more delinquent and still accruing 6,903 9,498 Total non-performing loans 15,234 18,204 Total foreclosed other assets 558 313 Total foreclosed real estate 136 472 Total non-performing assets $15,928 $18,989 Total non-performing loans to total loans 0.59% 0.76% Allowance for loan losses to non-performing loans 197.09% 156.18% Total non-performing assets to total assets 0.30% 0.36% Table 7 - Allocation of the Allowance for Loan Losses As of Sept. 30, 2004 As of Dec. 31, 2003 (All dollar amounts are in thousands) % of Total % of Total Amount Reserves Amount Reserves Residential mortgage loans $708 2.36% $1,099 3.86% Commercial loans 24,149 80.43% 20,455 71.95% Consumer and other loans 5,168 17.21% 6,877 24.19% Total $30,025 100.00% $28,431 100.00% DATASOURCE: Waypoint Financial Corp. CONTACT: James H. Moss, Chief Financial Officer, Waypoint Financial Corp., +1-717-909-2247 Web site: http://www.waypointbank.com/

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