Waypoint Financial (NASDAQ:WYPT)
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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/