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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to_______________________
Commission File Number: 0-22399
WAYPOINT FINANCIAL CORP.
------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1872581
------------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
235 North Second Street, P.O. Box 1711, Harrisburg, Pennsylvania 17105
- ----------------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
717-236-4041
------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by checkmark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes [X] No [_]
Indicate the number of shares outstanding of each of the Bank's classes
of common stock, as of the latest practicable date. 32,110,290 of stock, par
------------------------
value of $.01 per share, outstanding at June 30, 2003.
- ------------------------------------------------------
CONTENTS
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Financial Condition................................................................... 4
Consolidated Statements of Income................................................................................ 5
Consolidated Statements of Shareholders' Equity.................................................................. 6
Consolidated Statements of Cash Flows............................................................................ 7-8
Notes to Consolidated Financial Statements....................................................................... 9-15
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
I. Forward-Looking Statements.............................................................................. 16
II. Critical Accounting Policies............................................................................ 16-17
III. Market Risk and Interest Rate Sensitivity Management.................................................... 17
IV. Liquidity............................................................................................... 18
V. Capital Resources....................................................................................... 18-19
VI. Results of Operations
Comparison for the Three-Month Periods Ended June 30, 2003 and June 30, 2002
Net Income............................................................................................ 19
Net Interest Income................................................................................... 19-22
Noninterest Income.................................................................................... 23
Noninterest Expense................................................................................... 24
Provision for Income Taxes............................................................................ 24
Comparison for the Six-Month Periods Ended June 30, 2003 and June 30, 2002
Net Income............................................................................................ 25
Net Interest Income................................................................................... 25
Noninterest Income.................................................................................... 25
Noninterest Expense................................................................................... 26
Provision for Income Taxes............................................................................ 26
VII. Financial Condition
Marketable Securities................................................................................. 26
Loans Receivable, Net................................................................................. 26
Loan Commitments...................................................................................... 26
Loan Quality.......................................................................................... 27
Non-Performing Assets................................................................................. 27
Allowance for Loan Losses............................................................................. 28
Allocation of the Allowance for Loan Losses........................................................... 28
Deposits.............................................................................................. 28
Other Borrowings...................................................................................... 29
Item 3. Quantitative and Qualitative Disclosures about Market Risk.............................................. 29
Item 4. Controls and Procedures................................................................................. 29
Part II. Other Information............................................................................................ 30-31
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures............................................................................................................ 32
Exhibits - Certifications............................................................................................ 33-36
2
Part I. Financial Information.
Part 1, Item 1 Financial Statements.
(Balance of this page is intentionally left blank)
3
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
June 30, December 31,
2003 2002
------------------ ----------------
(In thousands, except share data)
(Unaudited)
Assets
Cash and cash equivalents $ 118,638 $ 96,088
Marketable securities available-for-sale 2,878,814 2,792,112
Loans receivable, net 2,379,562 2,310,106
Loans held for sale, net 38,333 30,328
Loan servicing rights 2,188 3,167
Investment in real estate and other joint ventures 18,455 14,811
Premises and equipment, net of accumulated
depreciation of $42,526 and $41,062 48,249 48,826
Accrued interest receivable 25,037 26,585
Goodwill 14,785 10,302
Other intangible assets 2,998 1,676
Other assets 112,304 91,012
------------------ ----------------
Total assets $ 5,639,363 $ 5,425,013
================== ================
Liabilities and Stockholders' Equity
Deposits $ 2,581,661 $ 2,453,390
Other borrowings 2,459,577 2,414,480
Escrow 4,968 3,348
Accrued interest payable 10,255 10,295
Postretirement benefit obligation 2,307 2,310
Deferred tax liability 2,577 6,106
Income taxes payable 2,680 -
Other liabilities 108,953 49,311
------------------ ----------------
Total liabilities 5,172,978 4,939,240
------------------ ----------------
Company-obligated mandatorily redeemable preferred securities
of subsidiary trust holding junior subordinated debentures of
Waypoint ("Trust Preferred Securities") 43,839 29,102
Preferred stock, 10,000,000 shares authorized but unissued
Common stock, $ .01 par value, authorized 100,000,000 shares,
40,687,433 shares issued and 32,110,290 outstanding
at June 30, 2003, 40,502,372 shares issued
and 34,702,206 shares outstanding at December 31, 2002 407 404
Paid in capital 318,921 315,636
Retained earnings 265,148 249,177
Accumulated other comprehensive income 8,330 11,710
Employee stock ownership plan (14,460) (14,460)
Recognition and retention plans (6,723) (6,977)
Treasury stock, 8,577,143 shares at June 30, 2003
and 5,800,166 shares at December 31, 2002 (149,077) (98,819)
------------------ ----------------
Total stockholders' equity 422,546 456,671
------------------ ----------------
Total liabilities and stockholders' equity $ 5,639,363 $ 5,425,013
================== ================
See accompanying notes to consolidated financial statements.
4
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Income
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- -------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- --------------
(In thousands, except share data)
(Unaudited)
Interest Income:
Loans $ 37,198 $ 41,767 $ 74,592 $ 84,991
Marketable securities and interest-earning cash 27,352 28,087 55,767 56,646
-------------- -------------- -------------- --------------
Total interest income 64,550 69,854 130,359 141,637
-------------- -------------- -------------- --------------
Interest Expense:
Deposits and escrow 13,465 18,260 27,949 37,228
Borrowed funds 20,669 21,531 41,522 42,702
-------------- -------------- -------------- --------------
Total interest expense 34,134 39,791 69,471 79,930
-------------- -------------- -------------- --------------
Net interest income 30,416 30,063 60,888 61,707
Provision for loan losses 2,064 3,585 4,485 5,670
-------------- -------------- -------------- --------------
Net interest income after provision for loan
losses 28,352 26,478 56,403 56,037
-------------- -------------- -------------- --------------
Noninterest Income:
Banking service and account fees 3,924 3,156 7,313 5,986
Financial services fees 2,348 1,649 4,393 3,636
Residential mortgage banking 1,297 1,143 2,600 1,845
Bank-owned life insurance 1,142 1,178 2,288 2,381
Gain on securities and derivatives, net 3,717 3,952 5,590 4,276
Other (1,601) 1,667 (1,928) 1,835
-------------- -------------- -------------- --------------
Total noninterest income 10,827 12,745 20,256 19,959
-------------- -------------- -------------- --------------
Noninterest Expense:
Salaries and benefits 11,597 10,999 22,914 22,047
Equipment expense 1,849 1,789 3,620 3,559
Occupancy expense 1,829 1,574 3,751 3,136
Marketing 1,215 1,183 2,306 2,181
Amortization of intangible assets 192 490 312 980
Outside services 1,312 1,177 2,579 2,257
Communications and supplies 1,296 1,102 2,622 2,324
Other 3,276 2,973 6,229 5,522
-------------- -------------- -------------- --------------
Total noninterest expense 22,566 21,287 44,333 42,006
-------------- -------------- -------------- --------------
Income before income taxes 16,613 17,936 32,326 33,990
Income tax expense 5,068 5,171 9,399 9,729
-------------- -------------- -------------- --------------
Net Income $ 11,545 $ 12,765 $ 22,927 $ 24,261
============== ============== ============== ==============
Basic earnings per share $ 0.37 $ 0.35 $ 0.72 $ 0.66
============== ============== ============== ==============
Diluted earnings per share $ 0.36 $ 0.34 $ 0.70 $ 0.65
============== ============== ============== ==============
See accompanying notes to consolidated financial statements.
5
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
EMPLOYEE RECOGNITION
ACCUMULATED STOCK AND
COMMON PAID IN RETAINED COMPREHENSIVE OWNERSHIP RETENTION TREASURY COMPREHENSIVE
STOCK CAPITAL EARNINGS INCOME (LOSS) PLAN PLAN (RRP) STOCK TOTAL INCOME (LOSS)
--------- -------- --------- ------------ --------- --------- --------- --------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
Balance at December 31, 2001 $ 402 $ 312,009 $215,600 $ (280) $(15,640) $ (9,954) $ (15,922) $486,215
Net income 24,261 24,261 $24,261
Dividends paid at $.20 per
share (7,506) (7,506)
Exercised stock options
(140,899 shares) 2 944 946
Unrealized gains on
securities, net of
income tax of $4,425 8,218 8,218 8,218
----------
Comprehensive income $ 32,479
==========
Earned portion of RRP (135) (135)
Treasury stock purchased
(1,942,833 shares) (31,791) (31,791)
Dividend reinvestment plan, net (173) (173)
--------- -------- --------- ------------ --------- --------- ---------- ----------
Balance at June 30, 2002 $ 404 $312,780 $232,355 $ 7,938 $(15,640) $(10,089) $ (47,713) $480,035
========= ======== ========= ============ ========= ========= ========== =========
Balance at December 31, 2002 $ 404 $315,636 $249,177 $ 11,710 $(14,460) $ (6,977) $ (98,819) $456,671
Net income 22,927 22,927 $22,927
Dividends paid at $.22 per
share (6,956) (6,956)
Exercised stock options
(185,061 shares) 3 2,795 2,798
Unrealized losses on
securities, net of
income tax of $(2,567) (3,380) (3,380) (3,380)
---------
Comprehensive income $ 19,547
=========
Earned portion of RRP 254 254
Tax benefit on exercised
options 675 675
Treasury stock purchased
(2,776,977 shares) (50,258) (50,258)
Dividend reinvestment plan, net (185) (185)
--------- -------- ---------- ------------ ---------- ---------- ---------- ----------
Balance at June 30, 2003 $ 407 $318,921 $265,148 $ 8,330 $(14,460) $ (6,723) $(149,077) $ 422,546
========= ======== ========== ============ ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
6
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended
June 30,
---------------------------------------
2003 2002
----------------- -------------------
(In thousands)
(Unaudited)
Cash flows from operating activities:
Net income $ 22,927 $ 24,261
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 4,485 5,670
Net depreciation, amortization and accretion 3,982 3,102
Loans originated for sale (250,299) (167,452)
Proceeds from sales of loans originated for sale 245,708 195,990
Origination of loan servicing rights (525) (853)
Net gain on loans and securities (10,101) (5,923)
Gain on the sale of foreclosed real estate (146) (394)
Loss (gain) from joint ventures 2,747 (1,137)
Decrease in accrued interest receivable 1,548 1,779
Decrease in accrued interest payable (40) (452)
Amortization of intangibles 312 980
Earned ESOP expense 1,111 884
Earned RRP expense 1,242 1,744
Loss on the sale of premises and equipment - 72
Provision for deferred income tax (3,529) 5,217
Increase in income taxes payable 2,752 1,357
Other, net 2,066 5,730
----------------- -------------------
Net cash provided by operating activities 24,240 70,575
----------------- -------------------
Cash flows from investing activities:
Proceeds from maturities and principal reductions
of marketable securities 1,747,085 600,278
Proceeds from sales of marketable securities available for sale 323,073 473,791
Purchase of marketable securities (2,070,689) (1,118,016)
Loan (originations) net of principal payments on loans (102,058) 91,585
Investments in real estate held for investment and other joint
ventures (6,255) (1,418)
Proceeds on real estate and premises and equipment 1,054 1,971
Purchases of premises and equipment, net (2,494) (3,058)
Acquisition of business (6,000) -
----------------- -------------------
Net cash (used in) provided by investing activities (116,284) 45,133
7
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(continued)
For the Six Months Ended
June 30,
---------------------------------------
2003 2002
----------------- -------------------
(In thousands)
(Unaudited)
Cash flows from financing activities:
Proceeds from deposits 117,781 5,507
Proceeds from other borrowings 340,000 399,000
Payments and maturities of other borrowings (353,392) (730,000)
Net increase in other short term borrowings 48,467 210,789
Net increase in escrow 1,620 1,717
Net proceeds from issuance of Trust Preferred Securities 14,719 -
Dividend reinvestment plan (185) (173)
Cash dividends (6,956) (7,506)
Payments to acquire treasury stock (50,258) (31,791)
Proceeds from the exercise of stock options 2,798 946
----------------- -------------------
Net cash provided by (used in) financing activities 114,594 (151,511)
----------------- -------------------
Net increase (decrease) in cash and cash equivalents 22,550 (35,803)
Cash and cash equivalents at beginning of period 96,088 116,583
----------------- -------------------
Cash and cash equivalents at end of period $ 118,638 $ 80,780
================= ===================
Supplemental disclosures:
Cash paid during the period for:
Interest on deposits, advances and other borrowings
(includes interest credited to deposit accounts) $ 69,511 $ 80,382
Income taxes 7,246 8,365
Cash received during the period for:
Income taxes $ 255 $ -
Non-cash investing activities:
Transfers from loans to foreclosed real estate $ 826 $ 1,039
See accompanying notes to financial statements.
8
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(All dollar amounts presented in the tables are in thousands,
except per share data)
(Unaudited)
(1) Summary of Significant Accounting Policies
The Consolidated Financial Statements include the accounts of Waypoint Financial
Corp. ("Waypoint Financial", "the Company", or "the Registrant") and its
wholly-owned subsidiaries Waypoint Bank, Waypoint Financial Investment
Corporation, New Service Corporation, Waypoint Service Corporation, Waypoint
Brokerage Services, Inc., Waypoint Insurance Group, Inc., and Lenders Support
Group, Inc. Waypoint Bank is the sole owner of the following subsidiaries:
Waypoint Investment Corporation, H.S. Service Corporation, First Harrisburg
Service Corporation, and C.B.L. Service Corporation. All significant
intercompany transactions and balances are eliminated in consolidation.
The accompanying interim financial statements have been prepared in accordance
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments, consisting of normal recurring
accruals necessary for a fair presentation of the results of interim periods,
have been made. Operating results for the six-month period ended June 30, 2003
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2003 or any other interim period.
The accounting policies followed in the presentation of interim financial
results are consistent with those followed on an annual basis. These policies
are presented on pages 50 through 80 of the 2002 Annual Report on Form 10-K.
(2) Recently Issued Accounting Guidance
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities," an interpretation of ARB No. 51. This
Interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
immediately to interests in variable interest entities created after January 31,
2003. For public enterprises such as Waypoint Financial, with an interest in a
variable interest entity created before February 1, 2003, the Interpretation is
applied to the enterprise no later than the end of the first annual or interim
reporting period beginning after June 15, 2003. The Interpretation requires
certain disclosures in financial statements issued after January 31, 2003 if it
is reasonably possible that an enterprise will consolidate or disclose
information about variable interest entities when the Interpretation becomes
effective. The application of this Interpretation is not expected to result in
consolidation of any variable interest entities.
In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" (SFAS 149). SFAS 149 amends SFAS
133, "Accounting for Derivative Instruments and Hedging Activities" for certain
decisions made by the FASB Derivatives Implementation Group. In particular, SFAS
149 (1) clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative, (2) clarifies when a
derivative contains a financing component, (3) amends the definition of an
underlying to conform it to language used in FASB Interpretation No. 45, and (4)
amends certain other existing pronouncements. This Statement is effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. In addition, most provisions of
SFAS 149 are to be applied prospectively. Waypoint Financial is currently
assessing the impact SFAS 149 may have on its consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" (SFAS No. 150).
SFAS 150 establishes standards for the classification and measurement of
financial instruments with characteristics of both liabilities and equity. This
standard is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise shall be effective beginning in the third quarter of
2003. Waypoint Financial's adoption of SFAS 150 will result in a
reclasssification of the Trust Preferred Securities to liabilities in the
consolidated statements of financial condition. Payments on the Trust Preferred
Securities will continue to be classified as interest expense in the
consolidated statements of income.
9
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(All dollar amounts presented in the tables are in thousands,
except per share data)
(Unaudited)
(3) Stock-Based Compensation
In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" (SFAS 148). SFAS 148 amends SFAS 123,
"Accounting for Stock-Based Compensation" (SFAS 123) to provide alternative
methods of transition for an entity that voluntarily changes to the fair
value-based method of accounting for stock-based employee compensation. It also
amends the disclosure provisions of SFAS 123 to require prominent disclosure
about the effects on reported net income of an entity's accounting policy
decisions with respect to stock-based employee compensation. Waypoint Financial
has not elected to change to the fair-value method of accounting for stock-based
compensation but has complied with the disclosure requirements herein.
Waypoint Financial accounts for the Option Plans under Accounting Principles
Board Opinion No. 25, and, accordingly, compensation expense generally has not
been recognized in the accompanying financial statements. Had compensation
expense for these plans been recorded in the financial statements of Waypoint
Financial consistent with the fair value provisions of Statement 123, net income
and net income per share would have been reduced to the following pro-forma
amounts (in thousands, except per-share data):
For the three month periods For the six month periods
ended June 30, ended June 30,
---------------------------------- ----------------------------------
2003 2002 2003 2002
--------------- --------------- --------------- ---------------
Net Income
As reported $11,545 $12,765 $22,927 $24,261
Deduct: Total stock-based
employee compensation
expense determined under
fair value based method
for all awards,(1) net of
related tax effects (264) (589) (588) (1,177)
------- ------- ------- -------
Pro forma $11,281 $12,176 $22,339 $23,084
Basic earnings per share
As reported $0.37 $0.35 $0.72 $0.66
Pro forma $0.36 $0.34 $0.71 $0.63
Diluted earnings per share
As reported $0.36 $0.34 $0.70 $0.65
Pro forma $0.35 $0.33 $0.69 $0.62
- -------------------
(1) All awards refers to awards granted, modified, or settled in fiscal
periods beginning December 15, 1994 - that is, awards for which the fair
value was required to be measured under Statement 123.
10
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(All dollar amounts presented in the tables are in thousands,
except per share data)
(Unaudited)
(4) Earnings Per Share
The following table shows the calculation of basic and diluted earnings per
share.
Per Share
Income Shares Amount
----------------------------------------------
For the three months ended June 30, 2003:
Basic earnings per share:
Income available to common shareholders $ 11,545 31,133,635 $ 0.37
Dilutive effect of employee and director
stock options 925,950 (0.01)
----------------------------------------------
Diluted earnings per share:
Income available to common shareholders
plus assumed conversions $ 11,545 32,059,585 $ 0.36
==============================================
For the three months ended June 30, 2002:
Basic earnings per share:
Income available to common shareholders $ 12,765 36,113,692 $ 0.35
Dilutive effect of employee and director
stock options 1,120,276 (0.01)
----------------------------------------------
Diluted earnings per share:
Income available to common shareholders
plus assumed conversions $ 12,765 37,233,968 $ 0.34
==============================================
Per Share
Income Shares Amount
----------------------------------------------
For the six months ended June 30, 2003:
Basic earnings per share:
Income available to common shareholders $ 22,927 31,660,168 $ 0.72
Dilutive effect of employee and director
stock options 924,689 (0.02)
----------------------------------------------
Diluted earnings per share:
Income available to common shareholders
plus assumed conversions $ 22,927 32,584,857 $ 0.70
==============================================
For the six months ended June 30, 2002:
Basic earnings per share:
Income available to common shareholders $ 24,261 36,503,406 $ 0.66
Dilutive effect of employee and director
stock options 979,371 (0.01)
----------------------------------------------
Diluted earnings per share:
Income available to common shareholders
plus assumed conversions $ 24,261 37,482,777 $ 0.65
==============================================
Excluded from the computation of diluted earnings per share were anti-dilutive
options of 57,502 shares and 77,534 shares for the three months ended June 30,
2003 and June 30, 2002, respectively, and 136,570 shares and 242,621 shares for
the six months ended June 30, 2003 and June 30, 2002, respectively, because the
exercise prices were greater than the average market price of the common shares
during the respective period.
11
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(All dollar amounts presented in the tables are in thousands,
except per share data)
(Unaudited)
(5) Marketable Securities
The amortized cost, gross unrealized holding gains, gross unrealized holding
losses and fair value for available-for-sale securities by major security type
were as follows:
As of June 30, 2003
---------------------------------------------------------------
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Cost Gains Losses Value
--------------------------------------------------------------
U.S. Government and agencies $ 322,541 $ 6,488 $ (104) $ 328,925
Corporate bonds 66,357 - (6,452) 59,905
Municipal securities 89,206 5,179 (96) 94,289
FHLB stock 112,595 - - 112,595
Equity securities 152,486 3,543 (68) 155,961
Asset-backed securities 31,629 56 (9) 31,676
Mortgage-backed securities:
Agency PC's & CMO's 668,003 4,395 (1,176) 671,222
Private issue CMO's 1,420,921 3,723 (403) 1,424,241
-------------- -------------- -------------- --------------
Total mortgage-backed securities 2,088,924 8,118 (1,579) 2,095,463
-------------- -------------- -------------- --------------
Total securities available for sale $ 2,863,738 $ 23,384 $ (8,308) $ 2,878,814
============== ============== ============== ==============
As of December 31, 2002
---------------------------------------------------------------
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Cost Gains Losses Value
--------------------------------------------------------------
U.S. Government and agencies $ 337,316 $ 7,469 $ (16) $ 344,769
Corporate bonds 78,089 78 (10,951) 67,216
Municipal securities 94,235 4,475 - 98,710
FHLB stock 109,807 - - 109,807
Equity securities 125,173 6,260 (507) 130,926
Asset-backed securities 43,677 1,167 - 44,844
Mortgage-backed securities:
Commercial 23,599 803 - 24,402
Agency PC's & CMO's 1,054,131 7,948 (1,229) 1,060,850
Private issue CMO's 905,110 5,976 (498) 910,588
-------------- -------------- ------------ -------------
Total mortgage-backed securities 1,982,840 14,727 (1,727) 1,995,840
-------------- -------------- ------------ -------------
Total securities available for sale $ 2,771,137 $ 34,176 $ (13,201) $ 2,792,112
============== ============== ============ =============
12
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(All dollar amounts presented in the tables are in thousands,
except per share data)
(Unaudited)
(6) Loans Receivable, Net
The following table presents the composition of loans receivable, net, as of the
dates indicated:
June 30, December 31,
2003 2002
----------------- -----------------
Residential mortgage loans (principally conventional):
Secured by 1-4 family residences $ 473,191 $ 697,505
Construction (net of undistributed
portion of $30,729 and $27,535) 24,604 23,636
----------------- -----------------
497,795 721,141
Less:
Unearned discount 68 95
Net deferred loan origination fees 2,947 3,616
----------------- -----------------
Total residential mortgage loans 494,780 717,430
----------------- -----------------
Commercial loans:
Commercial real estate 574,962 533,088
Commercial business 355,535 307,655
Construction and site development
(net of undistributed portion of
$64,365 and $15,974) 84,589 53,774
----------------- -----------------
1,015,086 894,517
Less:
Net deferred loan origination fees 2,107 1,308
----------------- -----------------
Total commercial loans 1,012,979 893,209
----------------- -----------------
Consumer and other loans:
Manufactured housing 99,041 106,098
Home equity and second mortgage 526,774 360,102
Indirect automobile 153,237 138,530
Other 98,313 98,887
----------------- -----------------
877,365 703,617
Plus:
Net deferred loan origination fees (1,363) (2,489)
Dealer reserve 24,619 25,845
----------------- -----------------
Total consumer and other loans 900,621 726,973
----------------- -----------------
Less: Allowance for loan losses 28,818 27,506
----------------- -----------------
Loans receivable, net $ 2,379,562 $ 2,310,106
================= =================
Loans having a carrying value of $583,399,000 were pledged as collateral for
FHLB advances at June 30, 2003.
Waypoint Financial conducts certain residential mortgage banking activities
including the origination of mortgage loans for securitization or sale to
investors and the servicing of mortgage loans for investors.
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The unpaid principal balances of
these loans totaled $381,369,000 at June 30, 2003 and $476,990,000 at December
31, 2002.
13
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(All dollar amounts presented in the tables are in thousands,
except per share data)
(Unaudited)
Waypoint Financial's investment in loan servicing rights is included in the
accompanying consolidated statement of financial condition. Waypoint Financial
did not purchase or sell any mortgage servicing rights during the six-month
periods ended June 30, 2003 and 2002.
Waypoint Financial sold mortgage loans totaling $242,294,000 and $194,343,000
during the six-month periods ended June 30, 2003 and June 30, 2002,
respectively. Waypoint Financial did not exchange loans for mortgage-backed
securities during the six-month periods ended June 30, 2003 and 2002.
Investor custodial balances maintained in connection with the foregoing mortgage
servicing rights totaled $9,363,000 at June 30, 2003 and $10,831,000 at December
31, 2002.
(7) Deposits
The following table presents the composition of deposits, as of the dates
indicated:
June 30, December 31,
2003 2002
------------------ ------------------
Savings $ 259,949 $ 250,780
Time 1,425,105 1,452,973
Transaction 529,052 379,211
Money market 367,555 370,426
------------------ ------------------
Total deposits $ 2,581,661 $ 2,453,390
================== ==================
(8) Other Borrowings
The following table presents the composition of Waypoint Financial's other
borrowings as of the dates indicated:
June 30, December 31,
2003 2002
----------------- -----------------
FHLB advances $ 2,108,384 $ 2,041,558
Repurchase agreements 346,193 372,897
Other 5,000 25
----------------- -----------------
Total other borrowings $ 2,459,577 $ 2,414,480
================= =================
(9) Other Liabilities
Other liabilities includes securities in process of $84,430,000 as of June 30,
2003 and no corresponding amount as of December 31, 2002. Securities in process
represent securities acquired in the ordinary course of business that have not
settled as of the dates presented.
14
WAYPOINT FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(All dollar amounts presented in the tables are in thousands,
except per share data)
(Unaudited)
(10) Acquisition
On April 1, 2003, Waypoint Financial announced the acquisition of privately-held
e3 Consulting, Inc. based in Mechanicsburg, Pennsylvania. This company develops
custom-tailored executive and employee benefit programs and qualified retirement
plans for businesses throughout the Mid-Atlantic region. Following the
acquisition, this company is doing business as Waypoint Benefits Consulting. The
price for this purchase acquisition totaled $6,000,000 paid on April 1, 2003
plus contingent consideration to be paid annually through the five-year period
ended March 31, 2008 if certain financial performance targets are achieved. Any
additional contingent consideration paid will be classified as goodwill in the
consolidated statements of financial condition.
This acquisition is not expected to have a material impact on Waypoint
Financial's results of operations. Accordingly, disclosures regarding pro-forma
results of operations have been omitted.
(11) Reclassifications
Certain amounts in the 2002 condensed financial statements and notes have been
reclassified to conform to the 2003 presentation.
(12) Stock Dividend
Waypoint Financial declared a 5% stock dividend on July 17, 2003, which will be
paid August 15, 2003 to shareholders of record on August 1, 2003. The
distribution date of the 5% stock dividend will occur subsequent to the issuance
of financial statements for the second quarter 2003. Accordingly, the per share
amounts reported herein do not reflect the effect of the stock dividend.
(13) Subsequent Events
On July 24, 2003, Waypoint Financial announced its agreement to acquire two
branches in Chambersburg, Pennsylvania. Terms of the agreement have not been
disclosed pending regulatory approval. On July 29, 2003, Waypoint Financial also
announced plans to open several additional branches in its Pennsylvania markets
during the remainder of 2003. These transactions, if consummated, are not
expected to have a material impact on Waypoint Financial's financial condition
or results of operations.
15
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following is management's discussion and analysis of the significant changes
in the results of operations, capital resources and liquidity presented in its
accompanying interim consolidated financial statements for Waypoint Financial
Corp. and Subsidiaries. This discussion should be read in conjunction with the
2002 Annual Report on Form 10-K. Current performance does not guarantee and may
not be indicative of similar performance in the future.
I. Forward-Looking Statements
In addition to historical information, this report contains forward-looking
statements. The forward-looking statements contained in the following sections
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those projected in the forward-looking statements.
Important factors that might cause such a difference include, but are not
limited to, interest rate trends, the general economic climate in Waypoint
Financial's market area and the country as a whole, Waypoint Financial's ability
to control costs and expenses, competitive products and pricing, loan
delinquency rates and changes in federal and state regulation. Readers should
not place undue reliance on these forward-looking statements, as they reflect
management's analysis only as of the date of this report. Waypoint Financial has
no obligation to update or revise these forward-looking statements to reflect
events or circumstances that occur after the date of this report. Readers should
carefully review the risk factors described in other documents that Waypoint
Financial files periodically with the Securities and Exchange Commission.
II. Critical Accounting Policies
This section describes Waypoint Financial's critical accounting policies which
involve accounting estimates that: a) require assumptions about highly uncertain
matters, and b) could vary sufficiently to cause a material effect on Waypoint
Financial's financial condition or results of operations.
Allowance for Loan Losses. In originating loans, Waypoint Financial recognizes
that losses will be experienced on loans and that the risk of loss will vary
with, among other things, the type of loan being made, the creditworthiness of
the borrower over the term of the loan, general economic conditions and, in the
case of a secured loan, the quality of the security for the loan. Waypoint
Financial maintains an allowance for loan losses to absorb losses inherent in
the loan portfolio. The allowance for loan losses represents management's
estimate of probable losses based on information available as of the date of the
financial statements. The allowance for loan losses is based on management's
evaluation of the collectibility of the loan portfolio, including past loan loss
experience, known and inherent losses, information about specific borrower
situations and estimated collateral values, and economic conditions.
The loan portfolio and other credit exposures are regularly reviewed by
management in its determination of the allowance for loan losses. The
methodology for assessing the appropriateness of the allowance includes a review
of historical losses, peer group comparisons, industry data and economic
conditions. In addition, the regulatory agencies, as an integral part of their
examination process, periodically review Waypoint Financial's allowance for loan
losses and may require Waypoint Financial to make additional provisions for
estimated losses based upon judgments different from those of management.
In establishing the allowance for loan losses, loss factors are applied to
various pools of outstanding loans. Waypoint Financial segregates the loan
portfolio according to risk characteristics (i.e., mortgage loans, home equity
and consumer). Loss factors are derived using Waypoint Financial's historical
loss experience and may be adjusted for significant factors that, in
management's judgment, affect the collectibility of the portfolio as of the
evaluation date. Commercial loans are evaluated individually to determine the
required allowance for loan losses and to evaluate for potential impairment of
such loans under SFAS 114.
Although management believes that it uses the best information available to
establish the allowance for loan losses, future adjustments to the allowance for
loan losses may be necessary and results of operations could be adversely
affected if circumstances differ substantially from the assumptions used in
making the determinations. Furthermore, while Waypoint Financial believes it has
established its existing allowance for loan losses in conformity with generally
accepted accounting principles, there can be no assurance that regulators, in
reviewing Waypoint Financial's loan
16
portfolio, will not request Waypoint Financial to increase its allowance for
loan losses. In addition, because future events affecting borrowers and
collateral cannot be predicted with certainty, there can be no assurance that
the existing allowance for loan losses is adequate or that increases will not be
necessary should the quality of any loans deteriorate as a result of the factors
discussed above. Any material increase in the allowance for loan losses may
adversely affect Waypoint Financial's financial condition and results of
operations.
The allowance review methodology is based on information known at the time of
the review. Changes in factors underlying the assessment could have a material
impact on the amount of the allowance that is necessary and the amount of
provision to be charged against earnings. Such changes could impact future
results.
Goodwill. Waypoint Financial has goodwill that is subject to annual impairment
evaluation under SFAS 142. Waypoint Financial applies the market approach under
SFAS 142 for impairment measurement which is highly sensitive to underlying
assumptions. Changes in assumptions and results due to economic conditions,
industry factors and reporting unit performance and cash flow projections could
result in different assessments of the fair values of reporting units and could
result in impairment charges in the future.
III. Market Risk and Interest Rate Sensitivity Management
Waypoint Financial monitors its interest rate risk position by utilizing
simulation analysis. Net interest income fluctuations and the net portfolio
value ratio are determined in various interest rate scenarios and monitored
against acceptable limitations established by management and approved by the
Board of Directors. Such rate scenarios include "ramped" rate changes adjusting
rates in +/- 100 basis point (bp) increments resulting in projected changes to
net interest income over the next 12 months and immediate rate shocks resulting
in projected net portfolio value ratios as indicated in the following table:
As of June 30, 2003 As of December 31, 2002
---------------------------------- -----------------------------------
Change in Percent change Net Percent change Net
Interest rates in net interest portfolio in net interest portfolio
(In basis points) income (1) ratio (2) income (1) ratio (2)
-------------------------- ---------------- ---------------- ----------------- ----------------
+300 7.29% 4.78% 6.95% 5.29%
+200 5.86 5.60 5.22 5.91
+100 2.88 5.84 3.62 6.20
0 - 5.58 - 6.30
(100) (4.89) 4.93 (3.45) 5.27
(200) (9.07) 3.89 (6.74) 3.72
- -----------------
(1) The percentage change in this column represents an increase (decrease)
in net interest income for 12 months in a stable interest rate
environment versus net interest income for 12 months in the various
rate scenarios.
(2) The net portfolio value ratio in this column represents net portfolio
value of Waypoint Financial in various rate scenarios, divided by the
present value of expected net cash flows from existing assets in those
same scenarios. Net portfolio value is defined as the present value of
expected net cash flows from existing assets, minus the present value
of expected net cash flows from existing liabilities, plus or minus the
present value of expected net cash flows from existing
off-balance-sheet contracts.
Simulation results are influenced by a number of estimates and assumptions with
regard to embedded options, prepayment behaviors, pricing strategies and
cashflows. As of these dates, the net portfolio ratio fell within the "minimal
risk" category established under OTS guidelines for interest rate risk
measurement.
17
IV. Liquidity
Waypoint Financial meets its liquidity needs by either reducing its assets or
increasing its liabilities. Sources of asset liquidity include short-term
investments, securities available for sale, maturing and repaying loans, and
monthly cash flows from mortgage-backed securities. The loan portfolio provides
an additional source of liquidity due to Waypoint Financial's participation in
the secondary mortgage market and resulting ability to sell loans as necessary.
Waypoint Financial also meets its liquidity needs by attracting deposits and
utilizing borrowing arrangements with the FHLB of Pittsburgh and the Federal
Reserve Bank of Philadelphia for short and long- term loans as well as other
short-term borrowings. Waypoint Financial also occasionally uses brokered
deposits to supplement other sources of funds to the extent such deposits are
determined to have more favorable interest cost and risk characteristics at the
time of purchase relative to other sources of funding.
During the six months ended June 30, 2003, securities available for sale
increased $86.7 million and loans receivable, net increased by $69.5 million.
Within securities available for sale, $84.4 million of securities were acquired
on a trade date basis but did not settle as of June 30, 2003, and therefore such
amounts were offset by securities in process, which is included in other
liabilities. Funding for Waypoint Financial's asset growth was provided by
growth in deposits totaling $128.3 million and borrowings totaling $45.1
million. Waypoint Financial also acquired treasury stock totaling $50.3 million,
which was funded in part by $14.7 million of proceeds from the issuance of
additional trust preferred securities. At June 30, 2003, Waypoint Financial had
$2,108.4 million in FHLB loans outstanding, an increase of $66.8 million during
the six months then ended.
Waypoint Bank is required by OTS regulations to maintain sufficient liquidity to
ensure its safe and sound operation. Waypoint Bank had sufficient liquidity
during the six-month periods ended June 30, 2003 and June 30, 2002. The sources
of liquidity previously discussed are deemed by management to be sufficient to
fund outstanding loan commitments and meet other obligations.
V. Capital Resources
Stockholders' equity at June 30, 2003, totaled $422.5 million compared to $456.7
million at December 31, 2002, a decrease of $34.2 million. Stockholders' equity
was increased by net income of $22.9 million and by stock plan activity totaling
$3.7 million. Offsetting these increases were treasury stock purchases of $50.3
million, cash dividends of $6.9 million, a decrease in Waypoint Financial's
unrealized gains on available for sale securities of $3.4 million, net of tax,
and $.2 million in dividend reinvestment activity.
Under OTS regulations a savings association must satisfy three minimum capital
requirements: Total capital, Tier 1 capital to risk weighted assets and Tier 1
capital to average assets. Savings associations must meet all of the standards
in order to comply with the capital requirements. At June 30, 2003, and December
31, 2002, Waypoint Bank met all three minimum capital requirements to be well
capitalized.
RISK-BASED CAPITAL RATIOS AND LEVERAGE RATIOS
WAYPOINT BANK Minimum Requirement Minimum Requirement to
Actual for Capital Adequacy be "Well Capitalized
--------------------- ---------------------- ----------------------
As of June 30, 2003 Amount Ratio Amount Ratio Amount Ratio
------------------- ------ ----- ------- ----- ------- -----
(in thousands) (in thousands) (in thousands)
Total Capital
(to Risk Weighted Assets) $438,049 12.6% $277,098 8.0% $346,372 10.0%
Tier 1 Capital
(to Risk Weighted Assets) 407,668 11.8 138,549 4.0 207,823 6.0
Tier 1 Capital
(to Average Assets) 407,668 7.5 216,039 4.0 270,049 5.0
18
As of December 31, 2002
Total Capital
(to Risk Weighted Assets) $441,066 13.7% $257,395 8.0% $321,744 10.0%
Tier 1 Capital
(to Risk Weighted Assets) 410,953 12.8 128,697 4.0 193,046 6.0
Tier 1 Capital
(to Average Assets) 410,953 7.8 210,333 4.0 262,916 5.0
A reconciliation of Waypoint Bank's regulatory capital to capital using
accounting principles generally accepted in the United States (GAAP) as of June
30, 2003 follows:
TIER 1
TANGIBLE (CORE) RISK-BASED
CAPITAL CAPITAL CAPITAL
-------- --------- ----------
GAAP capital at Waypoint Financial $422,546 $422,546 $422,546
Capital attributed to affiliates 4,246 4,246 4,246
-------- -------- --------
GAAP capital at Waypoint Bank 426,792 426,792 426,792
Capital adjustments:
Unrealized gains, net of taxes, on securities available for sale (9,054) (9,054) (9,054)
Allowance for loan losses - - 28,818
Certain intangible assets (10,034) 10,034) (10,034)
Disallowed servicing assets (36) (36) (36)
Allowable unrealized gains, net of taxes, on equity securities available
for sale - - 1,563
-------- -------- --------
Regulatory capital at Waypoint Bank $407,668 $407,668 $438,049
======== ======== ========
VI. Results of Operations
COMPARISON FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2003 AND JUNE 30, 2002
NET INCOME
Net income for the three months ended June 30, 2003 was $11.5 million or $.36
per share as compared to $12.8 million or $.34 per share for the three months
ended June 30, 2002. The increase in net income per share of $.02 resulted
primarily from treasury stock repurchases during 2002 and the first six months
of 2003, which substantially reduced the amount of equivalent shares
outstanding. The calculation of earnings per share is presented in Note 4 of the
accompanying Notes to Consolidated Financial Statements. The following
paragraphs include a discussion of the components of net income.
NET INTEREST INCOME
Waypoint Financial's principle source of revenue is net interest income, which
represents the difference between interest income generated by earning assets
such as loans and marketable securities and interest expense on interest-bearing
liabilities such as deposits and borrowings. Net interest income can be
significantly impacted by movements in market interest rates.
Net interest income before provision for loan losses totaled $30.4 million for
the three months ended June 30, 2003, as compared to $30.1 million for the
quarter ended June 30, 2002. Waypoint's net interest income trend reflects the
challenge facing commercial banks from the continued decline in market interest
rates to the lowest levels in almost five decades. Provision expense for loan
losses decreased to $2.1 million for the current quarter relative to $3.6
million recorded for the quarter ended June 30, 2002. The provision for loan
losses for the quarter ended June 30, 2002 increased due to increased
charge-offs during that period. Waypoint Financial's provision expense and
allowance for loan losses are discussed in further detail in the Asset Quality
section of this report.
Table 1 presents, on a tax-equivalent basis, Waypoint Financial's average asset
and liability balances, interest rates, interest income and interest expense for
each of the three-month and six-month periods ended June 30, 2003 and June 30,
2002. Table 2 presents a rate-volume analysis of changes in net interest income
on a tax-equivalent basis for the three and six-month periods ended June 30,
2003 and June 30, 2002.
19
TABLE 1A - AVERAGE BALANCE SHEETS, RATES AND INTEREST INCOME AND EXPENSE SUMMARY
(THREE-MONTH PERIODS)
For the three months ended,
---------------------------------------------------------------------
June 30, 2003 June 30, 2002
Rate ---------------------------------------------------------------------
as of Average Average
June 30, Average Yield/ Average Yield/
2003 Balance Interest(2) Cost Balance Interest (2) Cost
----------- ---------------------------------------------------------------------
(All dollar amounts are in thousands)
Assets:
Interest-earning assets:
Loans, net (1) (5) 5.94% $ 2,420,366 $ 37,383 6.17% $ 2,409,525 $ 41,959 6.97%
Marketable securities - taxable 3.96 2,631,129 26,099 4.17 2,407,139 26,779 4.45
Marketable securities - tax-free 7.18 89,634 1,695 7.57 99,927 2,055 8.23
Other interest-earning assets 1.05 66,404 151 1.05 64,014 279 1.74
----------- ---------------------------------------------------------------------
Total interest-earning assets 4.98 5,207,533 65,328 5.06 4,980,605 71,072 5.71
----------- ---------------------- ----------------------
Noninterest-earning assets 233,851 187,288
------------- ------------
Total assets $ 5,441,384 $ 5,167,893
============= ============
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Savings deposits 0.44 $ 262,658 314 0.48 $ 242,488 757 1.25
Time deposits 3.27 1,392,343 11,686 3.37 1,525,972 15,704 4.12
Transaction and money market deposits 0.75 836,419 1,456 0.70 788,109 1,790 0.91
Escrow 0.87 4,400 9 0.86 5,911 9 0.61
Borrowed funds 3.55 2,469,623 20,669 3.32 2,106,091 21,531 4.09
----------- ---------------------------------------------------------------------
Total interest-bearing liabilities 2.81 4,965,443 34,134 2.74 4,668,571 39,791 3.41
----------- ---------------------- ----------------------
Noninterest-bearing liabilities 49,976 53,493
------------- ------------
Total liabilities 5,015,419 4,722,064
Stockholders' equity 425,965 445,829
------------- ------------
Total liabilities and
stockholders' equity $ 5,441,384 $ 5,167,893
============= ============
Net interest income, tax-equivalent 31,194 31,281
Interest rate spread, tax-equivalent (3) 2.17% 2.32% 2.30%
=========== ========== =========
Net interest-earning assets $ 242,090 $ 312,034
============= ============
Net interest margin, tax-equivalent (4) 2.44% 2.51%
========== =========
Ratio of interest-earning assets
to interest-bearing liabilities 1.05 x 1.07 x
============= ============
Adjustment to reconcile tax-equivalent
net interest income to net interest
income (778) (1,218)
------------ -------------
Net interest income before
provision for loan losses $ 30,416 $ 30,063
============ =============
(1) Includes net income (expense) recognized on deferred loan fees and costs of
$726,000 for the three months ended June 30, 2003, and $(52,000) for the
three months ended June 30, 2002.
(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.
20
TABLE 1B - AVERAGE BALANCE SHEETS, RATES AND INTEREST INCOME AND EXPENSE SUMMARY
(SIX-MONTH PERIODS)
For the six months ended,
-----------------------------------------------------------------------------
June 30, 2003 June 30, 2002
-----------------------------------------------------------------------------
Average Average
Average (2) Yield/ Average (2) Yield/
Balance Interest Cost Balance Interest Cost
-----------------------------------------------------------------------------
(All dollar amounts are in thousands)
ASSETS:
Interest, earning assets:
Loans, net (1)(5) $2,391,181 $ 74,944 6.28% $2,446,961 $ 85,378 6.98%
Marketable securities - taxable 2,628,424 53,181 4.25 2,405,029 54,164 4.50
Marketable securities - tax-free 91,386 3,495 7.65 97,172 4,015 8.26
Other interest-earning assets 65,286 314 1.12 60,089 540 1.80
-----------------------------------------------------------------------------
Total interest-earning assets 5,176,277 131,934 5.15 5,009,251 144,097 5.75
----------------------- ------------------------
Noninterest-earning assets 220,886 186,992
--------------- ---------------
Total assets $ 5,397,163 $5,196,243
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Savings deposits $ 260,043 628 0.49 $ 233,404 1,452 1.24
Time deposits 1,395,538 24,706 3.57 1,514,185 31,923 4.22
Transaction and money market deposits 801,614 2,597 0.65 799,924 3,837 0.96
Escrow 4,135 18 0.88 5,861 16 0.55
Borrowed funds 2,453,724 41,522 3.37 2,142,578 42,702 3.99
-----------------------------------------------------------------------------
Total interest-bearing liabilities 4,915,054 69,471 2.83 4,695,952 79,930 3.40
----------------------- ------------------------
Noninterest-bearing liabilities 49,314 49,005
--------------- ---------------
Total liabilities 4,964,368 4,744,957
Stockholders' equity 432,795 451,286
--------------- ---------------
Total liabilities and
stockholders' equity $ 5,397,163 $ 5,196,243
=============== ===============
Net interest income, tax-equivalent 62,463 64,167
Interest rate spread, tax-equivalent (3) 2.32% 2.35%
========= ==========
Net interest-earning assets $ 261,223 $ 313,299
=============== ==============
Net interest margin, tax-equivalent (4) 2.45% 2.56%
========= ==========
Ratio of interest-earning assets
to interest-bearing liabilities 1.05 x 1.07 x
=============== ===============
Adjustment to reconcile tax-equivalent net
interest income to net interest income (1,575) (2,460)
-------------- --------------
Net interest income before provision for
loan losses $ 60,888 $ 61,707
============== ==============
(1) Includes net income (expense) recognized on deferred loan fees and costs of
$1,359,000 for the six months ended June 30, 2003, and $(315,000) for the
six months ended June 30, 2002.
(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.
21
TABLE 2 RATE/VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME
Three Months Ended June 30, 2003 Six Months Ended June 30, 2003
Compared to Compared to
Three Months Ended June 30, 2002 Six Months Ended June 30, 2002
Increase (Decrease) Increase (Decrease)
----------------------------------------- -----------------------------------------
Volume Rate Net Volume Rate Net
------------- ------------- ------------ ------------ ------------- -------------
(Dollar amounts in thousands)
Interest-earning assets:
Loans, net $ 552 $ (5,128) $ (4,576) $ (1,910) $(8,524) $(10,434)
Marketable securities - taxable 5,036 (5,716) (680) 4,738 (5,721) (983)
Marketable securities - tax-free (202) (158) (360) (232) (288) (520)
Other interest-earning assets 29 (157) (128) 44 (270) (226)
------------- ------------- ------------ ------------ ------------- -------------
Total interest-earning assets 5,415 (11,159) (5,744) 2,640 (14,803) (12,163)
------------- ------------- ------------ ------------ ------------- -------------
Interest-bearing liabilities:
Savings deposits 169 (612) (443) 149 (973) (824)
Time deposits (1,293) (2,725) (4,018) (2,361) (4,856) (7,217)
Transaction and money market
deposits 277 (611) (334) 8 (1,248) (1,240)
Escrow (5) 5 - (6) 8 2
Borrowed funds 7,188 (8,050) (862) 5,792 (6,972) (1,180)
------------- ------------- ------------ ------------ ------------- -------------
Total interest-bearing liabilities 6,336 (11,993) (5,657) 3,582 (14,041) (10,459)
Change in tax-equivalent
net interest income $ (921) $ 834 $ (87) $ (942) $ (762) $ (1,704)
============= ============= ============ ============ ============= =============
As presented in Table 1a, the net interest margin ratio on a tax-equivalent
basis was 2.44% for the quarter ended June 30, 2003 as compared to 2.51% for the
quarter ended June 30, 2002. During the current quarter relative to the
comparable prior quarter, Waypoint was able to maintain the spread between its
average interest yield and its average interest cost. However, the net interest
margin decreased 7 basis points as growth in interest-bearing liabilities
exceeded growth in interest-earning assets by $69.9 million, due in part to
decreased stockholders' equity resulting from planned capital management
activities.
22
NONINTEREST INCOME
The table below presents a comparison of noninterest income for the three-month
and six-month periods ended June 30, 2003 and 2002.
TABLE 3 CHANGES IN NONINTEREST INCOME
Three months ended June 30
-------------------------------------------------------
2003 2002 Change %
----------- ------------ ------------ -----------
(Dollar amounts in thousands)
Banking services and account fees $ 3,924 $ 3,156 $ 768 24.3%
Financial services fees 2,348 1,649 699 42.4
Residential mortgage banking 1,297 1,143 154 13.5
Bank-owned life insurance 1,142 1,178 (36) (3.1)
Gain on securities and derivatives, net 3,717 3,952 (235) (5.9)
Other (1,601) 1,667 (3,268) (196.0)
----------- ------------ ------------ ------------
Total $ 10,827 $ 12,745 $ (1,918) (15.0)%
=========== ============ ============ ============
Six months ended June 30
-------------------------------------------------------
2003 2002 Change %
----------- ------------ ------------ -----------
(Dollar amounts in thousands)
Banking services and account fees $ 7,313 $ 5,986 $ 1,327 22.2%
Financial services fees 4,393 3,636 757 20.8
Residential mortgage banking 2,600 1,845 755 40.9
Bank-owned life insurance 2,288 2,381 (93) (3.9)
Gain on securities and derivatives, net 5,590 4,276 1,314 30.7
Other (1,928) 1,835 (3,763) (205.1)
----------- ------------ ------------ ------------
Total $ 20,256 $ 19,959 $ 297 1.5%
=========== ============ ============ ============
Noninterest income was $10.8 million for the quarter ended June 30, 2003, as
compared to $12.7 million for the quarter ended June 30, 2002. Notable changes
in the quarter ended June 30, 2003 versus the quarter ended June 30, 2002
included:
- Banking services and account fees totaled $3.9 million, up $.8 million
on increased monthly service charges and ATM/debit card fees,
increased commercial deposit fees, and increased overdraft and NSF
fees.
- Financial services fees totaled $2.3 million, up $.7 million. Within
this category, insurance fees were $1.7 million, up $1.0 million. This
increase in insurance fees included $.6 million from Waypoint Benefits
Consulting, acquired on April 1, 2003, and $.4 million in combined
increases from title insurance and property and casualty insurance
sales. These increases were partially offset by a decrease of $.3
million in retail brokerage fees on decreased sales of alternative
investment products and decreased commissioned transaction volume.
- Residential mortgage banking income totaled $1.3 million, up $.2
million. Within this category, net gains on the sale of loans totaled
$1.5 million, up $.8 million on continued high refinancing activity
during the current quarter. Increases in loan selling gains were
partially offset by a $.6 million reduction in income from loan
servicing. The rapid refinancing of mortgage loans serviced for others
resulted in decreased servicing revenue and increased net expense from
the amortization and valuation of capitalized loan servicing rights.
- Gains on securities and derivatives were $3.7 million in the current
quarter, down $.2 million. During the current quarter, a $1.1 million
loss was recognized on the fair value of an interest rate cap that was
acquired during the current quarter to manage interest rate risk
associated with valuation of marketable securities.
- Other totaled a net loss of $1.6 million, down $3.3 million from a net
gain of $1.7 million in the comparable prior quarter. This net change
resulted primarily from Waypoint's equity investment in a small
business investment corporation (SBIC) partnership, upon which
Waypoint recognized a loss of $1.5 million in the current quarter as
compared to a gain of $1.5 million in the comparable prior quarter.
23
NONINTEREST EXPENSE
The following table presents a comparison of noninterest expense for the
three-month and six-month periods ended June 30, 2003 and 2002.
TABLE 4 CHANGES IN NONINTEREST EXPENSE
Three months ended June 30
-----------------------------------------------------
2003 2002 Change %
----------- ----------- ----------- -----------
(Dollar amounts in thousands)
Salaries and benefits $ 11,597 $ 10,999 $ 598 5.4%
Equipment expense 1,849 1,789 60 3.4
Occupancy expense 1,829 1,574 255 16.2
Marketing 1,215 1,183 32 2.7
Amortization of intangible assets 192 490 (298) (60.8)
Outside services 1,312 1,177 135 11.5
Communications and supplies 1,296 1,102 194 17.6
Other 3,276 2,973 303 10.2
----------- ----------- ----------- -----------
Total $ 22,566 $ 21,287 $ 1,279 6.0%
=========== =========== =========== ===========
Six months ended June 30
-----------------------------------------------------
2003 2002 Change %
----------- ----------- ----------- -----------
(Dollar amounts in thousands)
Salaries and benefits $ 22,914 $ 22,047 $ 867 3.9%
Equipment expense 3,620 3,559 61 1.7
Occupancy expense 3,751 3,136 615 19.6
Marketing 2,306 2,181 125 5.7
Amortization of intangible assets 312 980 (668) (68.2)
Outside services 2,579 2,257 322 14.3
Communications and supplies 2,622 2,324 298 12.8
Other 6,229 5,522 707 12.8
----------- ----------- ----------- -----------
Total $ 44,333 $ 42,006 $ 2,327 5.5%
=========== =========== =========== ===========
Noninterest expense was $22.6 million for the quarter ended June 30, 2003, up
$1.3 million or 6.1% from $21.3 million for the quarter ended June 30, 2002.
Notable changes in the quarter ended June 30, 2003 relative to the quarter ended
June 30, 2002 included:
- Salaries and benefits expense totaled $11.6 million, up $.5 million.
Increases for annual merit raises, staffing increases in the financial
services group and increased benefits expense for health insurance and
employer matching contributions for Waypoint's defined contribution
retirement plan ("401K plan") were partially offset by increased
capitalized costs on higher consumer loan origination volume.
- Occupancy and equipment expenses increased a combined $.3 million
primarily due to banking and financial services business expansion.
- Amortization of other intangible assets was down $.3 million as
identified intangible assets associated with certain Maryland branches
became fully amortized in September, 2002.
- Other noninterest expense totaled $3.3 million, up $.3 million from
the comparable prior quarter primarily on increased loan expenses
from increases in commercial and consumer loan portfolios and related
origination volume.
PROVISION FOR INCOME TAXES
Income tax expense for the current quarter totaled $5.1 million, or an effective
tax rate of 30.5% on income before taxes of $16.6 million. This compares to
income taxes of $5.2 million and an effective tax rate of 28.8% for the
comparable prior quarter. The increase in the effective tax rate resulted
primarily from decreased income on tax-preferenced securities.
24
COMPARISON FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2003 AND JUNE 30, 2002
NET INCOME
Net income for the six months ended June 30, 2003 was $22.9 million or $.70 per
share as compared to $24.3 million or $.65 per share for the six months ended
June 30, 2002. The increase in net income per share of $.05 resulted primarily
from treasury stock repurchases during 2002 and the first six months of 2003,
which substantially reduced the amount of equivalent shares outstanding. The
calculation of earnings per share is presented in Note 4 of the accompanying
Notes to Consolidated Financial Statements. The following paragraphs include a
discussion of the components of net income.
NET INTEREST INCOME
Net interest income before provision for loan losses totaled $60.9 million for
the six months ended June 30, 2003, which represents a decrease of $.8 million
or 1.3% from $61.7 million for the six months ended June 30, 2002. Waypoint's
net interest income trend reflects the challenge facing commercial banks from
the continued decline in market interest rates to the lowest levels in almost
five decades. Provision expense for loan losses decreased to $4.5 million for
the current six months relative to $5.7 million recorded for the six months
ended June 30, 2002. The provision for loan losses for the six months ended June
30, 2002 increased due to increased charge-offs during that period, specifically
during the last three months. Waypoint Financial's provision expense and
allowance for loan losses are discussed in further detail in the Asset Quality
section of this report.
As presented in Table 1b, the net interest margin ratio on a tax-equivalent
basis was 2.45% for the six-month period ended June 30, 2003 as compared to
2.56% for the six-month period ended June 30, 2002. Waypoint Financial was able
to limit its decrease in interest rate spread to 3 basis points despite the
continuation of historically low interest rates. However, the net interest
margin decreased 11 basis points as growth in interest-bearing liabilities
exceeded growth in interest-earning assets by $52.1 million, due in part to
decreased stockholders' equity resulting from capital management activities.
NONINTEREST INCOME
Noninterest income was $20.3 million for the six months ended June 30, 2003, up
$.3 million or 1.5% from $20.0 million for the comparable prior period. Notable
changes in the six months ended June 30, 2003 versus the six months ended June
30, 2002 included:
- Banking services and account fees totaled $7.3 million, up $1.3
million on increased monthly service charges, commercial deposit fees
and increased overdraft and NSF fees.
- Financial services fees totaled $4.4 million, up $.8 million. Within
this category, insurance fees were $2.7 million, up $1.2 million.
Insurance fees increased $.6 million due to the April 1, 2003
acquisition of Waypoint Benefits Consulting and $.5 million on
increased title insurance fees. These increases were partially offset
by a decrease of $.6 million in retail brokerage fees on decreased
sales of alternative investment products and decreased commissioned
transaction volume.
- Residential mortgage banking income totaled $2.6 million, up $.8
million. Within this category, net gains on the sale of loans totaled
$3.4 million, up $1.8 million on historically high refinancing
activity during the period. Increases in loan selling gains were
partially offset by a $1.0 million increase in net loss on loan
servicing. The rapid refinancing of mortgage loans serviced for others
resulted in decreased servicing revenue and increased expense from the
amortization of capitalized loan servicing rights.
- Gains on securities and derivatives were $5.6 million in the period,
up $1.3 million. During the current period, Waypoint Financial
recognized a $1.1 million loss on the fair value of an interest rate
cap that was acquired to manage interest rate risk associated with the
valuation of marketable securities.
- Other noninterest income totaled a net loss of $1.9 million, down
from a gain of $1.8 million in the comparable prior period. This net
change of $3.7 million resulted primarily from Waypoint Financial's
equity investment in an SBIC partnership, which resulted in a $1.5
million loss in the current period versus a $1.5 million gain in the
comparable prior period. Also, losses from low income housing
partnerships increased $1.2 million, although these partnership losses
were substantially offset by tax credits and deductions totaling $.9
million that were applied to reduce corporate income tax expense
during the period.
25
NONINTEREST EXPENSE
Noninterest expense was $44.3 million for the six months ended June 30, 2003, up
$2.3 million or 5.5% from $42.0 million for the comparable prior period. Notable
changes in the six months ended June 30, 2003 relative to the six months ended
June 30, 2002 included:
- Salaries and benefits expense totaled $22.9 million, up $.9 million.
Increases for annual merit raises, staffing increases in the banking
and financial services business lines, and increased benefits expense
for health insurance and employer matching contributions for
Waypoint's defined contribution retirement plan ("401K plan") were
partially offset by increased capitalized costs on higher loan
origination volume.
- Occupancy and equipment expense increased a combined $.7 million on
banking and financial services expansion and increased maintenance
expenses associated with the harsh 2003 winter conditions.
- Amortization of other intangible assets was down $.7 million as
identified intangible assets associated with certain Maryland branches
became fully amortized in September, 2002.
- Other noninterest expense totaled $6.2 million, up $.7 million from
the comparable prior period. Loan expenses were up $.6 million on
increased loan portfolio and increased loan origination volume.
PROVISION FOR INCOME TAXES
Income tax expense for the six months ended June 30, 2003 totaled $9.4 million,
or an effective tax rate of 29.1% on income before taxes of $32.3 million. This
compares to income taxes of $9.7 million and an effective tax rate of 28.6% for
the comparable prior period. The increase in the effective tax rate resulted
primarily from decreased income on tax-preferenced securities.
VII. Financial Condition
MARKETABLE SECURITIES
Marketable securities, excluding the Federal Home Loan Bank cash account,
totaled $2.879 billion at June 30, 2003 and $2.792 billion at December 31, 2002.
This increase of $132.7 million during the six months ended June 30, 2003
resulted primarily from advance purchases of securities totaling $84.4 million
that were made to partly offset anticipated prepayments on mortgage backed
securities and a related tightening of supply for acceptable investment
instruments. This temporary increase in marketable securities is expected to be
reduced by prepayments during the third quarter of 2003. Note (5) of the Notes
to Consolidated Financial Statements presents the composition of the marketable
securities portfolio as of June 30, 2003 and December 31, 2002.
LOANS RECEIVABLE, NET
Waypoint Financial continued to increase the weighting of commercial and
consumer loans in the loan portfolio during the six months ended June 30, 2003.
Commercial loans increased $120.6 million or 13.5% and consumer and other loans
increased $173.7 million or 24.7%. Waypoint Financial attributes the substantial
growth in the consumer loan portfolio primarily to a special program for home
equity loans that was implemented to mitigate the effects of rapid mortgage
prepayments. This program also contributed to growth in low cost savings and
transaction deposits. Offsetting these increases, residential mortgage loans
decreased $223.3 million or 31.0% as Waypoint Financial continued to sell
substantially all residential mortgage originations and prepayments continued at
a historically high level on mortgage loans held in portfolio. The composition
of loans receivable, net is included in Note (6) of the accompanying Notes to
Consolidated Financial Statements.
LOAN COMMITMENTS
Waypoint Financial issues loan commitments to prospective borrowers conditioned
on the occurrence of certain events. Commitments are made in writing on
specified terms and conditions and are generally honored for up to 60 days from
approval. Waypoint Financial had loan commitments and unadvanced loans and lines
of credit totaling $725.1 million at June 30, 2003 and $638.5 million at
December 31, 2002. Discussion regarding the composition and funding of loan
commitments is presented in Note (15) of the consolidated financial statements
in the 2002 Annual Report on Form 10-K.
26
LOAN QUALITY
Despite continuing uncertainty with respect to the national economy during the
six months ended June 30, 2003, Waypoint Financial continued to maintain
excellent credit quality in its loan portfolio. Management attributes this
performance to strong underwriting standards and credit and collections
management, as well as a diversified economy in its local market area. Waypoint
Financial follows a comprehensive loan policy that details credit underwriting,
credit management and loan loss provisioning techniques.
NON-PERFORMING ASSETS
The following table sets forth information regarding non-accrual loans, loans
delinquent 90 days or more and still accruing, and other non-performing assets
as of the dates indicated:
As of As of
June 30, 2003 December 31, 2002
-----------------------------------------------
(Amounts in thousands)
Non-accrual residential mortgage loans $ 600 $ 792
Non-accrual commercial loans 9,117 9,331
Non-accrual consumer and other loans 97 126
-------------------- ---------------------
Total non-accrual loans 9,814 10,249
Loans 90 days or more delinquent and still accruing 9,246 9,743
-------------------- ---------------------
Total non-performing loans 19,060 19,992
Total foreclosed other assets 416 505
Total foreclosed real estate 540 492
-------------------- ---------------------
Total non-performing assets $ 20,016 $ 20,989
==================== =====================
Total non-performing loans to total loans 0.80% 0.86%
==================== =====================
Allowance for loan losses to non-performing loans 151.20% 137.59%
==================== =====================
Total non-performing assets to total assets 0.35% 0.39%
==================== =====================
27
ALLOWANCE FOR LOAN LOSSES
The following table summarizes the activity in Waypoint Financial's allowance
for loan losses for the periods indicated:
For the For the
three months ended six months ended
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
------------------------------------- -------------------------------------
(Amounts in thousands)
Balance at beginning of period $ 27,898 $ 23,674 $ 27,506 $ 23,069
Provision for loan losses 2,064 3,585 4,485 5,670
Charge-offs:
Residential mortgage loans (99) (195) (319) (563)
Commercial loans (136) (1,114) (1,113) (1,509)
Consumer and other loans (1,227) (1,059) (2,502) (2,187)
----------------- ------------------ ------------------ -----------------
Total charge-offs (1,462) (2,368) (3,934) (4,259)
----------------- ------------------ ------------------ -----------------
Recoveries:
Residential mortgage loans 68 45 81 48
Commercial loans 29 110 292 265
Consumer and other loans 221 155 388 408
----------------- ------------------ ------------------ -----------------
Total recoveries 318 310 761 721
----------------- ------------------ ----------------- -----------------
Net charge-offs (1,144) (2,058) (3,173) (3,538)
----------------- ------------------ ------------------ -----------------
Balance at the end of period $ 28,818 $ 25,201 $ 28,818 $ 25,201
================= ================== ================== =================
Annualized net charge-offs
to average loans outstanding 0.19% 0.34% 0.27% 0.29%
================= ================== ================== =================
Allowance for loan losses as
a percentage of total loans 1.20% 1.06% 1.20% 1.06%
================= ================== ================== =================
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table sets forth the composition of the allowance for loan losses
as of the dates indicated:
As of June 30, 2003 As of December 31, 2002
-----------------------------------------------------------------------
(Dollar amounts in thousands)
% of Total % of Total
Amount Reserves Amount Reserves
--------------- --------------- -------------- ----------------
Residential mortgage loans $ 862 2.99% $ 1,201 4.37%
Commercial loans 18,908 65.61 19,235 69.93
Consumer and other loans 6,126 21.26 4,424 16.08
General 2,922 10.14 2,646 9.62
--------------- --------------- -------------- ----------------
Total $ 28,818 100.00% $ 27,506 100.00%
=============== =============== ============== ================
DEPOSITS
During the six months ended June 30, 2003, deposits increased $128.3 million
from $2.453 billion at December 31, 2002. Within the deposit portfolio, Waypoint
Financial experienced substantial growth in its lower-cost savings and
transaction deposits, which increased a combined $159.0 million or 25.2%. This
growth in savings and transaction deposit balances resulted from Waypoint
Financial's increased marketing and sales emphasis on these deposit product
lines. Time deposits decreased $27.9 million and money market accounts decreased
$2.9 million as Waypoint Financial continued to actively manage its cost of
funds. The composition of the deposit portfolio is included in Note (7) of the
accompanying Notes to Consolidated Financial Statements.
28
OTHER BORROWINGS
Other borrowings increased to $2.460 billion as of June 30, 2003, up $45.1
million from $2.414 billion as of December 31, 2002. This increase came
primarily in FHLB advances, which increased $66.8 million to $2.108 billion as
of June 30, 2003. Note (8) of the accompanying Notes to Consolidated Financial
Statements presents the composition of borrowings as of June 30, 2003 and
December 31, 2002.
Item 3 Quantitative and Qualitative Disclosures about Market Risk
Reference Item 2, Section III.
Item 4 Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Waypoint Financial's Chief Executive Officer and Chief Financial Officer
have concluded that Waypoint Financial's disclosure controls and procedures
(as defined in Rule 13a-14(C) under the Securities Exchange Act of 1934, as
amended), based on their evaluation of these controls and procedures as of
a date within (90) days prior to the filing date of this Form 10-Q, are
effective.
(b) Changes in Internal Controls
There have been no significant changes in Waypoint Financial's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation thereof, including any corrective
actions with regard to significant deficiencies and material weaknesses.
29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31.1 Certification of the Company's Chief Executive Officer
pursuant to Rule 13a-15 or 15d-15 of the Securities
Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Company's Chief Financial Officer
pursuant to Rule 13a-15 or 15d-15 of the Securities
Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Company's Chief Executive Officer
pursuant to 18 U. S. C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification of the Company's Chief Financial Officer
pursuant to 18 U. S. C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K
1. Incorporated by reference, the Company's Report on Form
8-K dated April 1, 2003, reported the completion of its
acquisition of e3 Consulting, Inc., a provider of
executive and employee benefit programs and qualified
retirement plans.
2. Incorporated by reference, the Company's Report on Form
8-K dated April 17, 2003, reported first quarter
financial results and the declaration of a regular
quarterly cash dividend.
3. Incorporated by reference, the Company's Report on Form
8-K dated May 12, 2003 reported a change in independent
public accountants for certain Company employee benefit
plans.
4. Incorporated by reference, the Company's Report on Form
8-K dated May 21, 2003 reported the promotion of David
E. Zuern to the position of Chief Executive Officer and
President of the Company, succeeding Charles C.
Pearson, Jr., who remains as Chairman of the Board of
the Company. Also, James H. Moss, Chief Financial
Officer, and Andrew S. Samuel, Banking Division
President, were named Senior Executive Vice Presidents
of the Company.
30
5. Incorporated by reference, the Company's Report on Form
8-K dated July 17, 2003 reported second quarter
financial results, the declaration of a 5% stock
dividend, and the declaration of an increased regular
quarterly cash dividend.
6. Incorporated by reference, the Company's Report on Form
8-K dated July 29, 2003 reported the agreement to
acquire two bank branches in Chambersburg, Pennsylvania
and reported certain other expansion activities planned
for the remainder of 2003.
31
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WAYPOINT FINANCIAL CORP.
(Registrant)
By /s/ David E. Zuern
------------------
David E. Zuern,
President and
Chief Executive Officer
By /s/ James H. Moss
-----------------
James H. Moss,
Senior Executive Vice President
and Chief Financial Officer
Dated: August 14, 2003
32