The Momentum of Vision 2011 ANNUAL REPORT

The Momentum of Vision 2011 ANNUAL REPORT

Redefining Relationship Banking

Letter from the CEO // MARCH 16, 2012 Dear Shareholders, We are very pleased with the financial results of 2011. We exceeded plan in both asset growth and net income. Assets increased over $50,000,000 to end the year at $364,028,000, which was ahead of plan and Bancorp net income of $2,957,000 exceeded plan by over twelve percent. With the economy growing only modestly, the balance sheet growth we did achieve came at the expense of our competitors. We feel this is further evidence of a solid business plan based on local-decision making and a knowledgeable staff committed to excellent service. Overall, I would say 2011 was a year of solid progress for your Bank. Although the Bank experienced our first loan charge-off during the year of a $52,000 home equity line, our asset quality remains very good, with zero non-performing loans and no delinquencies over thirty days. Given our asset growth and a forty-eight percent increase in net income, the stock valuation went from $34.00 to $37.50 over the year. We see success accelerating Looking back. Looking forward. We started with a vision based on a simple set of ideas. Create a banking experience unique in the market and the industry. Offer a true banking relationship that redefines personal service. Provide a concentration of financial experience and talent. Base decisions on our knowledge of the individual, not standard operating procedures. Go beyond the status quo to solve problems and find ways to help clients follow their vision for financial success. And it s working. We see a very exciting and challenging 2012. Our strategic plan is to grow the balance sheet $65,000,000 in an economic environment forecast to increase only modestly. We expect to achieve this by completing the McCord Road building expansion that will allow us to add the sales and support staff necessary to provide the Waterford standard of redefined personal service. Our headcount at the end of 2011 was forty-one; our plan in 2012 is to add up to seventeen more people. We currently have eight individuals in the Mortgage Group in rented space in Saxon Square. Once the building expansion is completed, the Mortgage Group will move into the Main Office and we then will look to add additional originators. The seventeen additions mentioned above also provide staffing for the proposed Perrysburg location expected to open in the fourth quarter. Furthermore, we also plan to add staff in the Commercial Lending and Treasury Management Departments in order to further grow the balance sheet. Our shareholders are at the core of our success. We thank you for your support and ask that you keep us top of mind for your banking needs and any referrals you may have. We guarantee a banking experience unique in the Toledo marketplace. Sincerely, Michael R. Miller Chairman & CEO

Treasury Management A can-do perspective One example of the way our relationship-driven business vision has continued to attract new clients can be found in the addition of a highly successful local business to our Treasury Management portfolio. The business transition was extremely complex because of the multitude of accounts and services involved and yet it was accomplished with such personal attention and seamless efficiency that several of the company s senior management team subsequently established private banking relationships with us as well. We see the glass half full Julie Bartnik // SVP, Treasury Management Aaron Bieszczad // VP, Treasury Management Angie Robinson // Treasury Management specialist Treasury Management operations can be complex, multi-faceted and often unique to each client s business. We ask questions and we listen carefully. And that makes us better able to help business clients maximize liquidity, minimize operational and financial risk, and realize their unique business goals and vision. Because we are focused on building long-term client relationships, we recognize and respond to each client s banking patterns. And that makes us better able to design solutions around their needs, and provide faster responses to their requests. Because our clients are busy people, we create user-friendly cash management tools and technologies while offering single contact ease and convenience. We are a proactive partner, using all our resources to help each client realize the optimum return on his or her trust in us. Waterford Bancorp, INC. // A history of growth (in millions) Total Assets Total Loans Total Deposits August 2007 $ 27.5 $ 2.0.0 $ 2.0.0 December 2007 61.9 26.0 36.7 December 2008 150.0 102.0 126.5 December 2009 212.2 159.9 170.4 December 2010 313.7 206.0 271.6 December 2011 364.0 252.5 323.6 total Assets Total loans services Automated Clearing House (ACH) Transactions // Sweep Accounts // Positive Pay // Wire Transfer Services // Wholesale Lockbox Transactions // Zero Balance Accounts (ZBA) // Merchant Services // Account Reconciliation Services // Remote Deposit Capture Services Aug. 2007 Dec. 2007 2008 2009 2010 2011 Total deposits

We see the big picture Private Banking We know our private banking clients by name. We understand their individual financial goals. That s why we re able to bring both a big picture context and absolute attention to detail to the service we provide. Our 360-degree solutions can be accessed with single contact convenience and banking tools designed around client preferences. From account openings and transitioning accounts to electronic banking and timely communications, we create a truly private banking experience. That means maintaining regular contact with the customer, providing seamless access to a team of experienced financial experts, doing whatever it takes to earn a client s confidence and helping that client succeed even working behind the scenes to coordinate transactions with other financial institutions. Christopher Macino // VP, Private Banking Ann Baksh // Private Banking, personal services Lori Walkowski // Private Banking, personal services 20/20 Customer Focus Developing relationships benefits everyone. As an example, a single client opened a personal checking account and discovered a caliber of service that eventually led to two generations of his extended family moving their entire personal and commercial banking business to Waterford. Just one example of the way strong client relationships work to everyone s benefit the client s and the Bank s. services Classic Checking // Elite Checking // Premier Money Market Accounts // Classic Savings // Certificates of Deposit // CDARS

Commercial and Industrial Lending We see challenges as opportunities Our financial experts are empowered to make decisions. They have an in-depth understanding of a broad array of industries and their financial structuring and cash flow needs. Because our decision-making is not separated from our customers by geography or bureaucracy, we can react quickly and base decisions on individual situations, not broad, rigid guidelines. Whether we re financing a major plant expansion, or inventories and accounts receivable, our innovative, can-do relationship banking is a catalyst for the success of both the individual and the local economy. todd hoyt // SVP, commercial lending craig Jones // SVP, Commercial Lending A. Glenn Paton // VP, Commercial Lending Susan Gilmore // AVP, Commercial Lending services Commercial Lines Of Credit // Commercial Term Loans // Overdraft Protection // VISA Business Credit Cards A proactive point of view We re solution focused. For example. When a regional design firm found that its existing loan structure was impeding its growth and its banker was unwilling to modify the arrangement we went to work. By developing a unique collateral/guarantee structure more appropriate to a large partnership ownership arrangement, Waterford was able to establish a loan facility that met the needs of this expanding, geographically diverse operation. In much the same way, we provided a sophisticated financing package for a national service business that was frustrated by the rigidity of its former bank. The speed with which Waterford was able to convert that client s national cash management operations was testimony to the Bank s ability to efficiently provide all the products and services of a much larger bank.

Commercial Real Estate Lending We see a dynamic economy WE SEE POTENTIAL EVERYWHERE The robust growth of our commercial real estate portfolio can be directly attributed to our willingness to find solutions based on our collective expertise and our clients circumstances. Our willingness to consult with clients to find effective solutions is at the core of our banking model. We are dedicated to providing our clients with the best loan structures consistent with sound underwriting guidelines. An eye for opportunity We bring energy and ideas to the table, helping our clients remove short-term obstacles and seize long-term opportunities. For example, when a long-established builder in the Toledo area needed a new bank to restructure its debt, Waterford was able to step in with a creative financing structure to enable the company to move forward. And when a church needed interim financing on short notice, we were able to help with its expansion efforts. Against a backdrop of a challenged economy, we ve grown by providing the resourcefulness, innovation, proximity, and attention to detail and follow-up that other lenders are unable or unwilling to match. Andrew Maher // VP, Commercial real Estate Lending Stephen McLaughlin // Credit Officer services Commercial Real Estate Mortgages // Construction Loans

Consumer and Mortgage Lending WE SEE BEYOND BUSINESS AS USUAL After its first full year of operation, Waterford Bank s Mortgage Group is the fourth largest residential mortgage originator in Lucas County in terms of dollars. And we placed more than $51 million of first mortgages in 2011 alone. It s a remarkable accomplishment, and a direct result of our absolute commitment to the residential mortgage sector. That commitment is defined by our having the region s top talent, a comprehensive range of mortgage products, and an efficient process made possible by our unparalleled level of support and hands-on attention to detail. Aided by our online mortgage application process, we provide a single point of contact, innovative loan products and personal service designed around individual preferences and needs. Our broad range of mortgage investors provides attractive rates for customers. And because we re based locally, we re able to help customers navigate the process on a personal level. sharon brown // VP, consumer lending Robert B. Griffey, Jr. // VP, Mortgage Lending Jeff Crowell // Mortgage Loan Officer Michele Bono Stuckey // Mortgage Loan Officer Vincent Lyons // Mortgage Loan Officer Alan Tinney // AVP, Mortgage lending services Fixed Rate Mortgages (with terms from 10 to 30 years) // Adjustable Rate Mortgages // Construction Loans // FHA Loans // VA Loans // Online Free Pre-qualification // Consumer Loans // Local Approval Process FOCUSED ON CUSTOMIZED SOLUTIONS Our residential mortgage solutions are as diverse and unique as our customers. And our service reflects that. For example, one residential mortgage client, denied by another lender, needed to close quickly on the purchase of a condo. Because our mortgage originator knew how to structure the transaction while the competitor did not the client closed in time. Another client s loan with a competitor was continually stalled by endless demands for information. When approached, we were able to identify the problem and close the mortgage in less than 30 days. And finally, three of the area s top five realtors are so pleased with their Waterford mortgage experiences that they now refer all of their clients to the Bank for their home financing needs.

WE SEE THE MOMENTUM BUILDING We re literally building on our commitment to service. The expansion of our facility on North McCord Road from 10,100 square feet to almost 29,000 is proof of Waterford s determination to be the bank of choice for financial services in the communities we serve. The additional space on McCord will allow the Bank to house a growing number of staff members to better serve clients in the days ahead. In addition, the Bank is reviewing its options to open branches in other parts of Northwest Ohio. And that translates into greater customer convenience and increased access to the innovative, can-do relationship banking model that s been the catalyst for our success, and the success of the community and clients we serve. Expansion Current Building

Waterford Bancorp, Inc. Financial Highlights 2011(in thousands, except share data) Results of Operations 12/31/11 12/31/10 Percentage Change Interest Income $ 14,056 $ 12,540 12.1% Interest Expense 2,490 2,602-4.3% Net Interest Income 11,566 9,938 16.4% Provision for Loan Losses 609 619-1.6% Non-interest Income 1,964 975 101.4% Non-interest Expense 8,517 7,271 17.1% Net Income Before Taxes 4,404 3,023 45.7% Federal Income Tax Expense 1,447 1,018 42.1% Net Income 2,957 2,005 47.5% Board of Directors: (Back Row) Marc E. Stockwell Salvatore F. Gianino Mark E. Ridenour Patrick R. Hylant Stephen H. Swigart (Front Row) Michael W. White Michael R. Miller Lawrence C. Boyer Share Data Number of Shares Outstanding 1,441,352 1,439,844 0.1% Earnings per Share $ 2.05 $ 1.39 47.3% Book Value per Share 27.32 24.53 11.3% Market Value per Share* 37.50 34.00 10.3% Period End Totals Total Loans $ 252,477 $ 206,016 22.6% People You Can Bank On Allowance for Loan Losses 3,207 2,650 21.0% Total Deposits 323,623 271,562 19.2% Stockholders Equity 39,375 35,325 11.5% Total Assets 364,028 313,700 16.0% Asset Quality Ratios Non-Performing Assets to Loans 0.00% 0.00% Net Charge Offs to Average Loans 0.02% 0.00% Allowance for Loan Losses to Total Loans 1.27% 1.29% Capital Ratios ** Ann Baksh Private Banking, Personal Services Julie A. Bartnik SVP, Treasury Management Deborah G. Beyer SVP & CFO Susan Beyer Information Technology Specialist Aaron J. Bieszczad VP, Treasury Management Tom Bohland Loan Operations Officer Michele Bono Stuckey Mortgage Loan Officer Lawrence C. Boyer EVP & Senior Lending Officer Amy Hayden-Wilson Operations Specialist Mary Hicks Operations Specialist Todd A. Hoyt SVP, Commercial Lending Craig Jones SVP, Commercial Lending Sarah Krempa Accounting Specialist Jerry Laroe Operations Officer Vincent Lyons Mortgage Loan Officer Lin MacDonald Mortgage Loan Processor Michelle Miller Operations Specialist Vivianne Newton Accounting Officer A. Glenn Paton VP, Commercial Lending Angie Robinson Treasury Management Specialist Cathy A. Simpson Executive Assistant Steve Stearns Mortgage Operations Officer Alan Tinney AVP, Mortgage Lending Dawn Vandenbroek Credit Officer Total Capital to Risk Weighted Assets 15.0% 16.5% Sharon Brown VP, Consumer Lending Christopher Macino VP, Private Banking Lori Walkowski Private Banking, Personal Services Tier 1 Capital to Risk Weighted Assets 13.8% 15.3% Tier 1 Capital to Average Assets 10.3% 10.8% 2011 2010 Rinold W. Burkhart SVP & CIO Jeff Crowell Mortgage Loan Officer Teri Geisel Commercial Lending Services Officer Andrew Maher VP, Commercial Real Estate Lending Pamela S. Martie Operations Specialist Cathy Martin AVP, Information Technology Shelly Wheeler AVP, Compliance, Audit, BSA/OFAC Officer Brian White Credit Officer Michael W. White President & COO * Market Value is determined by Austin Associates, LLC, an independent consulting firm experienced in appraisals of commercial banks and bank holding companies. Susan Gilmore AVP, Commercial Lending Robert B. Griffey, Jr. VP, Mortgage Lending Stephen McLaughlin Credit Officer Michael R. Miller Chairman & CEO Barb Wilbert Mortgage Loan Processor ** As measured by commonly used ratios, Waterford Bank, N.A. is well capitalized under regulatory guidelines.

Waterford Bancorp, Inc. Waterford Bank, N.A. 3900 N. McCord Rd. Toledo, OH 43617 phone: 419-720-3900 toll-free: 866-707-2871 fax: 419-720-3943 www.waterfordbankna.com Waterford Bank, N.A., a wholly-owned subsidiary of Waterford Bancorp, Inc., is Member FDIC. Equal Housing Lender.