<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(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, 1996
---------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 000-20691
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WAYNE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3009651
------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1195 Hamburg Turnpike, Wayne, New Jersey 07474
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(Address of principal executive offices) (Zip Code)
(201) 305-5500
-------------------------------
(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all the 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. X Yes No
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 2,231,383 shares of the Registrant's common stock outstanding as of
August 12, 1996.
<PAGE>
FORM 10-Q
INDEX
PART 1 -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements. Page(s)
-------
<S> <C> <C>
Consolidated Statements of Financial Condition as of
June 30, 1996 and December 31, 1995......................... 3
Consolidated Statements of Income for the Three Months
and Six Months ended June 30, 1996 and 1995.................. 4
Consolidated Statements of Cash Flows for the Six
Months ended June 30, 1996 and 1995.......................... 5
Notes to Consolidated Financial Statements................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 7-14
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings............................................ 15
Item 2. Changes in Securities........................................ 15
Item 3. Defaults Upon Senior Securities.............................. 15
Item 4. Submission of Matters to a Vote of Security Holders.......... 15
Item 5. Other Information............................................ 15
Item 6. Exhibits and Reports on Form 8-K............................. 15
Signature Page............................................... 16
</TABLE>
2
<PAGE>
Item 1. Financial Statements.
WAYNE BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash and due from banks $ 17,029 $ 26,262
Securities held to maturity, (estimated
market value $3,539
and $3,769 in 1996 and 1995, 3,620 3,841
respectively)
Securities available for sale 55,469 58,155
Loans receivable, net 127,735 111,988
Premises and equipment, net 3,216 3,271
Real estate owned, net 513 597
Federal Home Loan Bank of New York
stock, at cost 1,568 1,568
Interest and dividends receivable 1,035 987
Other assets 1,532 1,328
-------- --------
Total assets $211,717 $207,997
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits $171,437 $173,822
Federal Home Loan Bank advances 2,000 2,000
Advance payments by borrowers for taxes 807 769
and insurance
Other liabilities 794 14,107
-------- --------
Total liabilities 175,038 190,698
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Stockholders' Equity:
Preferred stock, $ 0.01 par value,
8,000,000 shares authorized, none
issued - -
Common stock, $ 0.01 par value,
8,000,000 shares authorized,
2,231,383 issued;
and outstanding at June 30, 1996 22 -
Paid-in capital 21,004 -
Retained earnings, substantially
restricted 18,039 17,394
Unrealized loss on securities
available for sale, net of tax (601) (95)
Unallocated common stock held by ESOP (1,785) -
-------- --------
Total stockholders' equity 36,679 17,299
-------- --------
Total liabilities and stockholders' equity $211,717 $207,997
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
WAYNE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------- ------------------
1996 1995 1996 1995
------- ------ ------- -------
Interest income:
<S> <C> <C> <C> <C>
Loans $2,348 $2,320 $4,577 $4,659
Securities held to maturity 56 759 107 1,496
Securities available for sale 943 53 1,847 105
Short term and other investments 110 153 335 194
------ ------ ------ ------
Total interest income 3,457 3,285 6,866 6,454
Interest expense:
Deposits 1,768 1,697 3,567 3,123
Federal Home Loan Bank advances 32 84 65 104
------ ------ ------ ------
Total interest expense 1,800 1,781 3,632 3,227
Net interest income before
provision for loan losses 1,657 1,504 3,234 3,227
Provision for loan losses 50 5 85 80
------ ------ ------ ------
Net interest income after
provision for loan losses 1,607 1,499 3,149 3,147
Other income:
Loan fees and service charges 8 10 23 17
Other 132 108 248 236
------ ------ ------ ------
Total other income 140 118 271 253
Other expenses:
Compensation and employee
benefits 525 538 1,054 1,165
Occupancy 93 98 192 189
Equipment 47 44 92 91
Data processing services 57 66 116 98
Advertising 69 103 91 155
Federal insurance premiums 99 91 196 183
Real estate owned expense, net 41 83 95 113
Other 328 202 585 468
------ ------ ------ ------
Total other expenses 1,259 1,225 2,421 2,462
------ ------ ------ ------
Income before income tax expense 488 392 999 938
Income tax expense 168 141 354 339
------ ------ ------ ------
Net income $ 320 $ 251 $ 645 $ 599
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
WAYNE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1996 1995
----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 645 $ 599
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for losses on loans and real estate owned 150 150
Depreciation and amortization 83 84
Net (accretion) of discounts and amortization of premiums 77 (9)
Decrease (increase) in deferred loan fees 30 (35)
Increase in interest and dividends receivable (48) (129)
Decrease (increase) in other assets 80 (419)
Increase (decrease) in other liabilities (13,313) 151
-------- -------
Net cash provided by (used in) operating activities (12,296) 392
-------- -------
Cash flows from investing activities:
Calls of securities available for sale 2,000 2 ,000
Purchases of securities held to maturity - (6,349)
Purchases of securities available for sale (4,500) -
Principal repayments on securities held to maturity 218 2,093
Principal repayments on securities available for sale 4,308 72
Net increase in loans receivable (15,829) (1,990)
Additions to premises and equipment (28) (27)
Purchase of Federal Home Loan Bank stock - (201)
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Net cash used in investing activities (13,831) (4,402)
-------- -------
Cash flows from financing activities:
Net (decrease) increase in deposits (2,835) 6,954
Federal Home Loan Bank advances acquired - 2,000
Increase in advance payments by borrowers for taxes and insurance 38 -
Proceeds from issuance of common stock, net of ESOP shares 19,241 -
Net cash provided by financing activities 16,894 9,035
-------- -------
Net increase (decrease) in cash and cash equivalents (9,233) 5,025
-------- -------
Cash and cash equivalents at beginning of period 26,262 2,498
-------- -------
Cash and cash equivalents at end of period $ 17,029 $ 7,523
======== =======
Supplemental information:
Cash paid during the year for:
Interest $ 3,566 $ 3,127
======== =======
Income taxes $400 $210
======== =======
Transfer of loans receivable to real estate owned $143 $240
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
WAYNE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
Note 1 - Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements include the
accounts of Wayne Bancorp, Inc. ("Company") and its wholly-owned subsidiary,
Wayne Savings Bank, F.S.B. ("Bank") and its subsidiaries, as of June 30, 1996
and December 31, 1995 and for the three and six month periods ended June
30, 1996 and 1995, respectively. The consolidated financial statements for
periods prior to June 30, 1996 include only the accounts of the Bank and its
subsidiaries. Material intercompany accounts and transactions have been
eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management all necessary adjustments,
consisting only of normal recurring accruals necessary for a fair presentation
have been included. The results of operations for the six month period ended
June 30, 1996 are not necessarily indicative of the results that may be expected
for the entire calendar year. These consolidated financial statements should be
read in conjunction with the consolidated financial statements for the year
ended December 31, 1995, and the notes thereto.
Note 2 - Organization of the Holding Company and conversion to stock form of
--------------------------------------------------------------------
ownership
---------
Wayne Bancorp, Inc. was organized for the purpose of acquiring all of the
capital stock of the Bank that was issued in the conversion from a federally
chartered mutual savings bank to a stock savings bank pursuant to a Plan of
Conversion (Conversion) via the issuance of common stock. On June 27, 1996, the
Company completed an initial public offering. The offering resulted in the sale
of 2,231,383 shares of common stock which, after giving effect to offering
expenses of $1.3 million and 178,511 shares issued to the Bank's tax qualified
Employee Stock Ownership Plan (ESOP), resulted in net proceeds of $21.0 million.
Pursuant to the Conversion, the Bank transferred all of its outstanding shares
to the Company. The Bank may not declare or pay cash dividends or repurchase
any of its shares of common stock if the effect of these would cause equity to
be reduced below applicable regulatory capital maintenance requirements or if
such declaration and payment would otherwise violate regulatory requirements.
Note 3 - Earnings per share
------------------
The initial public offering was completed June 27, 1996. Accordingly, net
income per share calculations for the three and six month periods ended June 30,
1996 are not meaningful and are therefore not presented.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition
- -------------------
General
- -------
Wayne Bancorp, Inc. is the holding company for Wayne Savings Bank, F.S.B. a
federally chartered stock savings bank. The Bank converted from a mutual to a
stock savings bank on June 27, 1996 in conjunction with the issuance of the
Bank's capital stock to the Company.
Assets
- ------
Total assets increased by $3.7 million or 1.8% to $211.7 million at June 30,
1996 from $208.0 million at December 31, 1995. Cash and due from banks
decreased $9.2 million or 35.2% to $17.0 million at June 30, 1996 from $26.3
million at December 31, 1995. At December 31, 1995, the Bank was still awaiting
delivery of approximately $13.5 million in mortgage-backed securities, which
resulted in cash and due from banks being inflated by that amount until the
securities were delivered and paid for in January 1996.
The decline of $2.9 million in securities held to maturity and securities
available for sale is primarily due to principal repayments and prepayments and
an increase in the unrealized loss, net of taxes on securities available for
sale of $506,000 from $95,000 at December 31, 1995 to $601,000 at June 30, 1996.
Net loans increased by $15.7 million or 14.1% to $127.7 million at June 30, 1996
from $112.0 million at December 31, 1995. Loan originations during the quarter
ended June 30, 1996 totalled $23.1 million (comprised of $19.7 million of
residential one-to four-family mortgage loans, $3.2 million of home equity
loans, and $222,000 of other loans.) During the second quarter of 1996,
principal repayments totalled $7.7 million. During the first quarter, loan
originations totalled $6.7 million and principal repayments totalled $6.1
million.
REO, net decreased by $84,000 or 14.1% to $513,000 at June 30, 1996 from
$597,000 at December 31, 1995.
Other assets increased by $204,000 to $1.5 million at June 30, 1996 from $1.3
million at December 31, 1995 which was primarily the result of the deferred tax
benefit related to the unrealized loss on securities available for sale which
increased to $337,000 as of June 30, 1996 from $53,000 as of December 31, 1995.
Liabilities
- -----------
Deposits decreased by $2.4 million between December 31, 1995 and June 30, 1996
due to interest credited of $3.6 million, offset by an excess of withdrawals
over deposits of $6.0 million. This decrease is predominately due to the
purchase of common stock in the initial public offering by Bank depositors on
June 27, 1996.
7
<PAGE>
Stockholders' equity
- --------------------
The Company's stockholders' equity increased $19.4 million to $36.7 million at
June 30, 1996 from $17.3 million at December 31, 1995. The increase is
primarily due to net proceeds of the initial public offering that was completed
on June 27, 1996 totalling $21.0 million, offset by unallocated shares of common
stock held by the Bank's employee stock ownership plan of $1.8 million. In
addition to the net proceeds, the increase in stockholders' equity was also due
to net income for the six months ended June 30, 1996 totalling $645,000 offset
by the increase in the net unrealized loss on securities, net of taxes, of
$506,000.
Non performing loans and allowance for loan losses
- --------------------------------------------------
Non performing loans at June 30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Loans delinquent 90 days or more and
other non-performing loans $2,672 $2,450
Loans delinquent 90 days or more and
other non-performing loans as a
percentage of total loans outstanding 2.06% 2.16%
</TABLE>
The following table sets forth the changes in the allowance for loan losses for
the six months ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance at beginning of period $1,589 $1,543
Provision for losses 85 80
Charge-offs 0 96
Recoveries 0 0
------ ------
Balance at end of period $1,674 $1,527
====== ======
</TABLE>
8
<PAGE>
Allowance for real estate owned
- -------------------------------
Activity in the allowance for REO for the six months ended June 30, 1996 and
1995 was as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance at beginning of period $ 183 $ 240
Provision charged to operations 65 70
Charge-offs 69 159
Recoveries 4 0
----- -----
Balance at end of period $ 183 $ 151
===== =====
</TABLE>
Asset/liability management
- --------------------------
Management's strategy has been to operate as community oriented financial
institution by offering a verity of financial services to meet the needs of the
communities it serves while maintaining capital in excess of regulatory
requirements and monitoring the sensitivity of the Bank's assets and liabilities
to interest rate fluctuations. The Board of Directors has sought to accomplish
these goals by; (I) attracting and maintaining low-cost savings and transaction
accounts, as well as money market accounts, which management believes provide
the Bank with a stable source of funds; (ii) focusing its lending on the
origination of one-to four-family, owner-occupied residential mortgage loans,
including home equity loans; (iii) supplementing its one- to four-family
residential lending activities with commercial real estate, multi-family,
construction and consumer loans in accordance with the Bank's underwriting
guidelines; (iv) purchasing short-to-intermediate term investment and mortgage-
backed securities to complement the Bank's lending activities; (v) emphasizing
shorter-term loans and investments and adjustable rate assets when market
conditions permit; and (vi) controlling growth.
As part of management's review of its assets and liabilities, the Bank considers
the interest sensitivity of its assets and liabilities and targets what it
believes to be an acceptable level of risk based on the Bank's business focus,
operating environment, capital and liquidity requirements, and performance
objectives. Management seeks to reduce the vulnerability of the Bank's
operation results to changes in interest rates and to manage the ration of
interest rate sensitive assets to interest rate sensitive liabilities within
specified maturities or reprising periods. The Bank does not currently engage
in trading activities or use off-off-balance sheet derivative instruments to
control interest rate risk. Even though trading activities or use of off-
balance sheet derivative instruments may be permitted with the approval of the
Board of Directors, management does not intend to engage in such activities in
the immediate future.
In managing the Bank's assets and liabilities, the Bank has taken certain
actions to decrease the sensitivity of its assets and liabilities to
fluctuations in interest rates. A significant component of the Bank's operating
strategy has been to maintain its interest rate spread by maintaining a core
deposit base. The Bank has sought to maintain and attract new deposits by
pricing its deposits competitively, but generally not among
9
<PAGE>
the highest interest rates in its market area, and relying on personalized
customer service and advertising. The Bank maintained a core deposit base while
employing this strategy.
At June 30, 1996, total interest-earning assets maturing or repricing within one
year exceeded total interest-bearing liabilities maturing or repricing within
the same period by $1.8 million, representing a one year cumulative gap of
0.85%.
Liquidity and capital
- ---------------------
The Bank is required to maintain minimum levels of liquid assets as defined by
the Office of Thrift Supervision ("OTS") regulations. This requirement, which
may be varied by the OTS depending on economic conditions and deposit flows, is
based on a percentage of withdrawable deposits and short-term borrowings. The
minimum required liquidity and short-term liquidity ratios are currently 5.0%
and 1.0% respectively.. The Bank's liquidity ratio and short-term liquidity
ratio was 8.1% and 9.9% for June 30, 1996 compared with 9.7% and 15.6% for
December 31, 1995, respectively.
The Company's primary sources of funds are deposits, principal and interest
payments on loans and securities and, to a lesser extent, borrowings and
proceeds from the sale of securities. While maturities and scheduled
amortization of loans and securities provide an indication of the timing of the
receipt of funds, other sources of funds such as loan prepayments and deposit
inflows are less predictable because they are greatly influenced by general
interest rates, economic conditions, competition and regulatory changes.
The Bank's most liquid assets are cash and cash equivalents, which include
interest-bearing deposits and short-term highly liquid investments (such as
federal funds) with original maturities of less than three months that are
readily convertible to known amounts of cash. The level of these assets is
dependent on the Bank's operating, financing and investing activities during any
given period. At June 30, 1996 and December 31, 1995, cash and cash equivalents
totaled $17.0 million and $26.3 million, respectively.
The Company and the Bank have other sources of liquidity that include investment
securities maturing within one year, and securities available for sale. Other
sources of funds include Federal Home Loan Bank of N.Y. ("FHLB-NY") advances,
which at June 30, 1996, totalled $2.0 million. If needed, the Bank may borrow
an additional $61.5 million from the FHLB-NY.
As of June 30, 1996, the Bank exceeded all regulatory capital requirements as
detailed in the following table:
<TABLE>
<CAPTION>
TANGIBLE CAPITAL CORE CAPITAL RISK-BASED CAPITAL
--------------------- -------------------- ---------------------
AMOUNT PERCENT/(1)/ AMOUNT PERCENT/(1)/ AMOUNT PERCENT/(1)/
------- ------------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Capital for regulatory purposes $26,721 12.6% $26,721 12.6% $27,088 30.8%
Minimum regulatory requirement 3,188 1.5% 6,377 3.0% 7,033 8.0%
------- ---- ------- ---- ------- ----
Excess $23,533 11.1% $20,344 9.6% $20,055 22.8%
======= ==== ======= ==== ======= ====
</TABLE>
(1) Tangible and core capital are shown as a percentage of total adjusted
assets. Risk-based capital levels are shown as a percentage of risk-
weighted assets.
10
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
1995
General The Company reported net income of $320,000 for the three months ended
- -------
June 30, 1996 compared with net income of $251,000 for the three months ended
June 30, 1995. The $69,000 increase was primarily attributable to an increase
of $172,000 of total interest income offset by a slight increase in total
interest expense of $19,000. Also offsetting this increase was an increase of
$45,000 in the provision for loan losses.
Interest income Interest income increased $172,000, or 5.2% to $3.5 million for
- ---------------
the three months ended June 30, 1996 from $3.3 million for the three months
ended June 30, 1995. The increase was primarily the result of higher
outstanding average balances partially offset by a decline in average yields on
earning assets.
Interest income on mortgage loans increased $28,000, or 1.2% to $2.3 million for
the three months ended June 30, 1996, from $2.3 million for the comparable three
month period in 1995 primarily as a result of an increase in average balances of
mortgage loans of $7.2 million partially offset by a decrease in the average
yield on mortgage loans of 38 basis points. The average yield on mortgage loans
decreased to 7.65% for the three months ended June 30, 1996 from 8.03% for the
comparable three month period in 1995. The increase in average balances of
mortgage loans between the periods was due to the increase in loan originations
during the second quarter of 1996 of $23.1 million versus $6.7 million in the
comparable 1995 quarter.
Interest income on securities held to maturity decreased $703,000, or 92.6% to
$56,000 for the three months ended June 30, 1996 from $759,000 for the
comparable three month period in 1995. This change was primarily the result of
the Bank taking advantage of the window period permitted by a special report
issued by the Financial Accounting Standards Board ("FASB") addressing Statement
of Financial Accounting Standards ("SFAS") No. 115 and reclassifying $51.4
million of mortgage-backed securities from held to maturity to available for
sale. During the second quarter of 1996 principal repayments and
prepayments on securities available for sale and held to maturity amounted to
$2.6 million. For the same period in 1995 the principal repayments and
prepayments on securities available for sale and held to maturity totalled
$970,000.
Interest on investment securities decreased $43,000 or 27.8% to $110,000 for the
three months ended June 30, 1996 from $153,000 for the comparable three month
period in 1995 primarily as a result of a slight increase in average balances of
$78,000 which was offset by a decrease in average yield of 180 basis points.
Interest expense Interest expense increased $19,000, or 1.1% to $1.8 million
- ----------------
for the three months ended June 30, 1996 from $1.8 million for the three months
ended June 30, 1995. Interest on deposits increased by $71,000, or 4.2% to $1.8
million for the three months ended June 30, 1996 from $1.7 million for the
comparable three month period in 1995. The increase in interest expense on
deposits was primarily due to an increase of $8.2 million in average deposits.
11
<PAGE>
Interest on FHLB-NY advances decreased $52,000, or 61.3% to $32,000 for the
three months ended June 30, 1996 from $84,000 for the comparable three month
period in 1995. The decline in interest expense on advances was due primarily
to a decrease in average balances of $1.3 million from December 31, 1995 to June
30, 1996.
Net interest income Net interest income before provision for loan losses
- -------------------
increased by $153,000 to $1.7 million for the three months ended June 30, 1996
from $1.5 million for the three months ended June 30, 1995. The increase
reflects an increase in the average balances of loans receivable, net of $7.2
million for the three months ended June 30, 1996 over the comparable prior year
period, as well as an increase in net interest income, primarily due to the
increase in the average balances of securities available for sale and held to
maturity of $6.4 million for the three month period.
Provision for loan losses The adequacy of the allowance for loan losses is
- -------------------------
based on the Bank's past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral and current economic conditions.
The Bank provided $50,000 for loan losses for the three months ended June 30,
1996 compared with $5,000 for the comparable three month period in 1995 which
was due to management's continuing reassessment of losses inherent in the loan
portfolio. Management believes that the allowance for losses is adequate.
While management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions in the Bank's market area. In addition, various regulatory agencies,
as an integral part of their routing examination process, periodically review
the Bank's allowance for loan losses. Such agencies may require the Bank to
recognize additions to the allowance based on their judgments about information
available to them at the time of their examination.
Other income Total other income for the three months ended June 30, 1996 was
- ------------
$140,000 compared with $118,000 for the comparable three month period in 1995.
The increase is primarily due to fee income on checking accounts.
Other expenses Other expenses increased $34,000 or 2.8% for the three months
- --------------
ended June 30, 1996 to $1.3 million from $1.2 million for the comparable three
month period in 1995. The increase is primarily due to a decrease of $13,000 in
compensation and employee benefits expense, a decrease of $34,000 in
advertising, a decrease of $42,000 in REO operations, net and an increase of
$125,000 in other expenses.
The decrease in compensation and employee benefits expense reflects the
expansion in loan originations and the resulting deferral of salary costs. The
decrease in advertising is primarily due to reduced advertising during the
period. The decrease in REO operations, net is the result of the decline in
expenses related to the properties held by the bank. Finally, the increase in
the other category was primarily due to costs associated with the loan
originations, increased professional fees in connection with the Bank's
change from a June 30 to December 31 year end and the increase in office
supplies, stationery, postage and telephone.
Income tax expense Income tax expense was $168,000 which represents an
- ------------------
effective tax rate of 34.5% for the three months ended June 30, 1996 compared
with income tax expense of $141,000 which represents an effective tax rate of
36.0% for the three months ended June 30, 1995.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
12
<PAGE>
General The Company reported net income of $645,000 for the six months ended
- -------
June 30, 1996 compared with net income of $599,000 for the six months ended June
30, 1995. The $46,000 increase was primarily attributable to a decrease in
other expenses for the six months ended June 30, 1996 compared with the same
period in the prior year. Other income for the six months ended June 30, 1996
increased $12,000 or 5.1% to $248,000 from $236,000 for the six months ended
June 30, 1995.
Interest income Interest income increased $412,000 or 6.4% to $6.9 million for
- ---------------
the six months ended June 30, 1996 from $6.5 million for the six months ended
June 30, 1995. The increase was primarily the result of an increase in interest
income on securities available for sale and held to maturity.
Interest income on mortgage loans decreased $82,000, or 1.8% to $4.6 million for
the six months ended June 30, 1996, from $4.7 million for the comparable six
month period in 1995 primarily as a result of a decrease in the average rate of
24 basis points offset by an increase in outstanding average balances of
mortgage loans of $1.5 million. The decrease in average balances of mortgage
loans between the periods was due to the increase in loan originations during
the later part of 1995.
Interest income on securities available for sale and held to maturity increased
$353,000, to $2.0 million for the six months ended June 30, 1996 from $1.6
million for the comparable six month period in 1995 primarily due to an increase
in average balances of $7.8 million partially offset by a decline in the average
yield of 39 basis points..
Interest income on short-term and other investments increased by $141,000 to
$335,000 for the six months ended June 30, 1996 from $194,000 for the comparable
six month period in 1995 primarily as a result of an increase in average
outstanding balances of $5.1 million. The increase in the average balance was
due primarily to the Bank's decision to remain liquid during the period prior to
its public offering.
Interest expense Interest expense increased $405,000, or 12.6% to $3.6 million
- ----------------
for the six months ended June 30, 1996 from $3.2 million for the six months
ended June 30, 1995. Interest on deposits increased by $444,000, or 14.2% to
$3.6 million for the six months ended June 30, 1996 from $3.1 million for the
comparable six month period in 1995. The increase in interest on deposits was
primarily due to the increase of 25 basis points in the average cost of
deposits and an increase of $11.7 million in average balances.
Interest on FHLB-NY advances decreased $39,000, or 37.5% to $65,000 for the six
months ended June 30, 1996 from $104,000 for the comparable six month period in
1995. FHLB-NY advances on an average basis decreased by $1.3 million between
the periods partially offset by an increase in the cost of the advances of 18
basis points.
Net interest income Net interest income before provision for loan losses
- -------------------
increased by $7,000 to $3.2 million for the six months ended June 30, 1996 from
$3.2 million for the six months ended June 30, 1995.
Provision for loan losses The adequacy of the allowance for loan losses is
- -------------------------
based on the Bank's past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral and current economic conditions.
The Bank provided $85,000 for loan losses for the six months ended June 30, 1996
compared with $80,000 for the comparable six month period in 1995 which was due
to management's continuing reassessment of losses
13
<PAGE>
inherent in the loan portfolio. Management believes that the allowance for
losses is adequate. While management uses available information to recognize
losses on loans, future additions to the allowance may be necessary based on
changes in economic conditions in the Bank's market area. In addition, various
regulatory agencies, as an integral part of their routing examination process,
periodically review the Bank's allowance for loan losses. Such agencies may
require the Bank to recognize additions to the allowance based on their
judgments about information available to them at the time of their examination
Other income Total other income for the six months ended June 30, 1996 was
- ------------
$271,000 compared with $253,000 for the comparable six month period in 1995.
The increase of $18,000 in the six months ended June 30, 1996 was primarily
attributable to the fees earned on the higher volume of checking accounts.
Other expenses Other expenses decreased $41,000 or 1.7% for the six months
- --------------
ended June 30, 1996 to $2.4 million from $2.5 million for the comparable six
month period in 1995. The decrease was primarily due to a decrease of $111,000
in compensation and employee benefits expense, a decrease of $64,000 in
advertising, which was partially offset by an increase of $117,000 in other
expenses. The decrease in compensation and employee benefits expense reflects
the expansion in loan originations and the resulting deferral of salary costs,
the decline in the accrual of bonus expense as a result of a reduction in the
number of employees participating in the program and a reduction in
hospitalization and medical plan expenses as a result of restructuring the
employee benefits program. The reduction in the six months ended June 30, 1996
is primarily due to the advertising for checking accounts in the six months
ended June 30, 1995. Finally, the increase in other expenses is primarily due to
nondeferrable costs associated with the increased loan production.
Income tax expense Income tax expense was $354,000 which represents an
- ------------------
effective tax rate of 35.4% for the six months ended June 30, 1996 compared with
income tax expense of $339,000 which represents an effective tax rate of 36.1%
for the six months ended June 30, 1995.
Legislative initiatives
- -----------------------
Legislative initiatives regarding the recapitalization of the Savings
Association Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation
("FDIC"), deposit insurance premiums, FICO bond interest payments, the merger of
SAIF and Bank Insurance Fund ("BIF"), financial industry regulatory structure,
and revision of thrift and bank charters are still pending before Congress.
Management cannot predict the ultimate impact any final legislation or
regulatory actions may have on the operations of the Company. Whiteout passage
of legislation addressing the FDIC insurance premium disparity, the Bank, like
other thrifts, will continue to pay deposit insurance premiums significantly
higher than banks. As long as such premium differential continues, it may have
adverse consequences on the Company's earnings and the Company may be placed at
a substantial competitive disadvantage to commercial banking organizations
insured by the BIF.
Legislation regarding bad debt recapture has been passed by Congress and sent to
the President for signature. The legislation requires recapture of reserves
accumulated after 1987. The recapture of post 1987 reserves must be paid over a
six year period starting in 1996. The payment of the tax can be deferred in each
of 1996 and 1997 if an institution originates at least the same average annual
principal amount of mortgage loans that it originated in the six years prior to
1996. Management does not believe that this legislation will have a material
impact on the operations of the Company.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. Exhibits
(3)(I) Certificate of incorporation*
(ii) Bylaws*
(4) Stock certificates*
(27) Financial Data Schedule (filed herewith)
B. Reports on From 8-K
None
- -----------------
* Incorporated herein by reference from the Exhibits to Form S-1
Registrations Statement and all amendments thereto, filed March 18, 1996,
Registration Number - 333-2488 and declared effective May 13, 1996.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of The Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WAYNE BANCORP, INC.
-------------------------------
Registrant
Date: August 19, 1996 By: /s/ William E. Vanderberg
-------------------------
William E. Vanderberg,
President & Chief Executive Officer
Date: August 19, 1996 By: /s/ Timothy P. Tierney
-----------------------
Timothy P. Tierney,
Vice President & Controller
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 17,029
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 55,469
<INVESTMENTS-CARRYING> 3,620
<INVESTMENTS-MARKET> 3,539
<LOANS> 127,735
<ALLOWANCE> 1,674
<TOTAL-ASSETS> 211,717
<DEPOSITS> 171,437
<SHORT-TERM> 2,000
<LIABILITIES-OTHER> 794
<LONG-TERM> 0
0
0
<COMMON> 22
<OTHER-SE> 36,657
<TOTAL-LIABILITIES-AND-EQUITY> 211,717
<INTEREST-LOAN> 4,577
<INTEREST-INVEST> 2,289
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 6,866
<INTEREST-DEPOSIT> 3,567
<INTEREST-EXPENSE> 3,632
<INTEREST-INCOME-NET> 3,234
<LOAN-LOSSES> 85
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,421
<INCOME-PRETAX> 999
<INCOME-PRE-EXTRAORDINARY> 999
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 645
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,589
<ALLOWANCE-OPEN> 1,589
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,674
<ALLOWANCE-DOMESTIC> 1,674
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
