FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20552
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
------------------------------
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 No. 0-23433
WAYNE SAVINGS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
United States 31-1557791
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
151 North Market Street
Wooster, Ohio 44691
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (330) 264-5767
Check whether the issuer: (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
As of February 9, the latest practicable date, 2,599,877 shares of the
registrant's common stock, $1.00 par value, were issued and outstanding.
Page 1 of 16 pages
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Wayne Savings Bancshares, Inc.
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II - OTHER INFORMATION 15
SIGNATURES 16
2
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<TABLE>
Wayne Savings Bancshares, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
December 31, March 31,
<S> <C> <C>
ASSETS 1999 1999
Cash and due from banks $ 6,727 $ 1,540
Federal funds sold 2,225 4,295
Interest-bearing deposits in other financial institutions 8,867 10,410
------- -------
Cash and cash equivalents 17,819 16,245
Certificates of deposit in other financial institutions 4,000 6,000
Investment securities held to maturity - at amortized cost, approximate
market value of $19,687 and $11,752 as of December 31, 1999
and March 31, 1999 20,209 11,830
Mortgage-backed securities available for sale - at market 10,120 6,411
Mortgage-backed securities held to maturity - at cost, approximate
market value of $380 and $811 as of December 31, 1999
and March 31, 1999 390 819
Loans receivable - net 236,150 214,094
Loans held for sale - at lower of cost or market - 1,585
Real estate acquired through foreclosure 26 41
Office premises and equipment - at depreciated cost 8,203 7,748
Federal Home Loan Bank stock - at cost 3,107 2,919
Accrued interest receivable on loans 1,228 1,134
Accrued interest receivable on mortgage-backed securities 53 28
Accrued interest receivable on investments and interest-bearing deposits 284 184
Prepaid expenses and other assets 1,138 1,933
Prepaid federal income taxes 170 303
------- -------
Total assets $302,897 $271,274
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $267,250 $235,327
Advances from the Federal Home Loan Bank 8,000 9,000
Advances by borrowers for taxes and insurance 1,467 821
Accrued interest payable 1 179
Accounts payable on mortgage loans serviced for others 131 108
Other liabilities 625 497
Deferred federal income taxes 349 386
------- -------
Total liabilities 277,823 246,318
Stockholders' equity
Common stock (20,000,000 shares of $1.00 par value authorized;
2,632,229 and 2,505,082 shares issued at December 31, 1999
and March 31, 1999) 2,632 2,505
Additional paid-in capital 14,393 12,480
Retained earnings - substantially restricted 8,751 10,437
Less 32,352 and 22,583 shares, respectively, of treasury stock - at cost (631) (468)
Accumulated comprehensive income, unrealized gains (losses) on securities
available for sale, net of related tax effects (71) 2
------- -------
Total stockholders' equity 25,074 24,956
------- -------
Total liabilities and stockholders' equity $302,897 $271,274
======= =======
</TABLE>
3
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Wayne Savings Bancshares, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
(In thousands, except share data)
Nine months Three months
ended ended
December 31, December 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Interest income
Loans $13,346 $12,825 $4,558 $4,310
Mortgage-backed securities 442 296 166 116
Investment securities 681 615 287 172
Interest-bearing deposits and other 899 792 271 256
------ ------ ------ ------
Total interest income 15,368 14,528 5,282 4,854
Interest expense
Deposits 8,479 7,873 2,960 2,623
Borrowings 371 535 117 146
------ ------ ----- ------
Total interest expense 8,850 8,408 3,077 2,769
------ ------ ------ ------
Net interest income 6,518 6,120 2,205 2,085
Provision for losses on loans 82 47 38 16
------ ------ ------ ------
Net interest income after provision for losses on loans 6,436 6,073 2,167 2,069
Other income
Gain on sale of loans 32 255 11 67
Gain on sale of assets - 1 - -
Service fees, charges and other operating 535 519 200 158
------ ------ ------ ------
Total other income 567 775 211 225
General, administrative and other expense
Employee compensation and benefits 2,872 2,425 977 775
Occupancy and equipment 1,068 818 337 270
Federal deposit insurance premiums 155 153 54 52
Franchise taxes 266 264 88 90
Other operating 1,203 1,143 461 440
------ ------ ------ ------
Total general, administrative and other expense 5,564 4,803 1,917 1,627
------ ------ ------ ------
Earnings before income taxes 1,439 2,045 461 667
Federal income taxes
Current 489 705 180 247
Deferred - (9) (24) (20)
------ ------ ------ ------
Total federal income taxes 489 696 156 227
------ ------ ------ ------
NET EARNINGS $ 950 $ 1,349 $ 305 $ 440
====== ====== ====== ======
EARNINGS PER SHARE $0.37 $0.52 $0.12 $0.17
==== ==== ==== ====
Basic
Diluted $0.36 $0.51 $0.12 $0.17
==== ==== ==== ====
</TABLE>
4
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Wayne Savings Bancshares, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<CAPTION>
(In thousands, except share data)
Nine months Three months
ended ended
December 31, December 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net earnings $950 $1,349 $305 $440
Other comprehensive income (loss) net of tax:
Unrealized holding gains (losses) on securities, net of tax
of $38, $20, $13 and $9 during the respective periods (73) 39 (25) 17
---- ----- --- ---
Comprehensive income $877 $1,388 $280 $457
=== ===== === ===
Accumulated comprehensive income (loss) $(71) $ 56 $(71) $ 56
=== ===== === ===
</TABLE>
5
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Wayne Savings Bancshares, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the nine months ended December 31,
(In thousands)
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 950 $ 1,349
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of discounts and premiums on loans,
investments and mortgage-backed securities - net 14 (17)
Amortization of deferred loan origination fees (414) (420)
Depreciation and amortization 535 376
Loans originated for sale in the secondary market (2,688) (12,622)
Proceeds from sale of loans 4,262 11,937
(Gain) loss on sale of loans 11 (139)
Provision for losses on loans 82 47
Federal Home Loan Bank stock dividends (160) (149)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans (94) 58
Accrued interest receivable on mortgage-backed securities (25) (18)
Accrued interest receivable on investments and interest-bearing deposits (100) 10
Prepaid expenses and other assets 795 (882)
Accrued interest payable (178) (162)
Accounts payable on mortgage loans serviced for others 23 78
Other liabilities 128 121
Federal income taxes
Current (133) (36)
Deferred - (9)
------- -------
Net cash provided by (used in) operating activities 3,008 (478)
Cash flows provided by (used in) investing activities:
Purchase of investment securities (11,500) (7,562)
Proceeds from maturity of investment securities 2,074 9,117
Purchase of mortgage-backed securities (6,985) (6,280)
Principal repayments on mortgage-backed securities 3,506 2,148
Loan principal repayments 32,224 42,514
Loan disbursements (52,349) (45,156)
Purchase of office premises and equipment - net (1,235) (1,246)
Proceeds from sale of real estate acquired through foreclosure 5 121
Additions to real estate acquired through foreclosure - (60)
Decrease in certificates of deposit in other financial institutions 2,000 4,000
------- -------
Net cash used in investing activities (32,260) (2,404)
------- -------
Net cash used in operating and investing activities (29,252) (2,882)
------- -------
(balance carried forward)
</TABLE>
6
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Wayne Savings Bancshares, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<CAPTION>
For the nine months ended December 31,
(In thousands)
1999 1998
<S> <C> <C>
Net cash used in operating and investing activities
(balance brought forward) $(29,252) $ (2,882)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 31,923 11,131
Proceeds from Federal Home Loan Bank advances - 15,000
Repayment of Federal Home Loan Bank advances (1,000) (19,000)
Advances by borrowers for taxes and insurance 646 653
Proceeds from exercise of stock options 12 87
Dividends paid on common stock (592) (551)
Purchase of treasury shares (163) (346)
------- -------
Net cash provided by financing activities 30,826 6,974
------- -------
Net increase in cash and cash equivalents 1,574 4,092
Cash and cash equivalents at beginning of period 16,245 13,169
------- -------
Cash and cash equivalents at end of period $ 17,819 $ 17,261
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 396 $ 728
======= ======
Interest on deposits and borrowings $ 9,028 $ 8,570
======= ======
Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as
available for sale, net of related tax effects $ (73) $ 39
======= ======
Recognition of mortgage servicing rights in accordance
with SFAS No. 125 $ 43 $ 116
======= ======
</TABLE>
7
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Wayne Savings Bancshares, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended December 31, 1999
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB and,
therefore, do not include information or footnotes necessary for a
complete presentation of financial position, results of operations and
cash flows in conformity with generally accepted accounting principles.
Accordingly, these financial statements should be read in conjunction
with the financial statements and notes thereto of Wayne Savings
Bancshares, Inc. included in the Annual Report on Form 10-KSB for the
year ended March 31, 1999.
The accompanying consolidated financial statements include Wayne
Savings Bancshares, Inc. (the "Company") and its wholly-owned
subsidiary, Wayne Savings Community Bank ("Wayne Savings" or the
"Bank") and its federal savings bank subsidiary in North Canton, Ohio
named Village Savings Bank, F.S.B. ("Village"), together referred to as
"the Banks".
During the quarter ended June 30, 1999, Wayne Savings opened the new
Madison South office at the southern perimeter of Wooster, as planned.
Additionally, Wayne Savings also opened its Northside office on July
12, 1999. The new office is in leased office space formerly occupied by
a local commercial bank. These two openings increase the number of
Wayne Savings full-service offices from six to eight, with four offices
located in Wooster.
In the opinion of management, all adjustments (consisting only of
normal recurring accruals) which are necessary for a fair presentation
of the financial statements have been included. The results of
operations for the three and nine month periods ended December 31, 1999
are not necessarily indicative of the results which may be expected for
the entire fiscal year.
2. Principles of Consolidation
All significant intercompany transactions and balances have been
eliminated in the consolidation.
3. Earnings Per Share
Basic earnings per common share is computed based upon the weighted
average number of common shares outstanding during the period, less
shares in the ESOP that are unallocated and not committed to be
released. Diluted earnings per common share include the dilutive effect
of additional potential common shares issuable under the Company's
stock option plan. Earnings per share have been restated for all stock
dividends through the date of issuance of the financial statements. The
computations were as follows:
8
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<TABLE>
Wayne Savings Bancshares, Inc.
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three and nine months ended December 31, 1999
3. Earnings Per Share (continued)
For the nine months ended December 31, 1999 1998
<S> <C> <C>
Weighted average common shares
outstanding (basic) 2,602,783 2,609,758
Dilutive effect of assumed exercise
of stock options 18,781 26,739
--------- ---------
Weighted average common shares
outstanding (diluted) 2,621,564 2,636,497
========= =========
For the three months ended December 31, 1999 1998
Weighted average common shares
outstanding (basic) 2,600,929 2,610,613
Dilutive effect of assumed exercise
of stock options 18,683 25,119
--------- ---------
Weighted average common shares
outstanding (diluted) 2,619,612 2,635,732
========= =========
</TABLE>
4. Effects of Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
requires entities to recognize all derivatives in their financial
statements as either assets or liabilities measured at fair value. SFAS
No. 133 also specified new methods of accounting for hedging
transactions, prescribes the items and transactions that may be hedged,
and specifies detailed criteria to be met to qualify for hedge
accounting.
The definition of a derivative financial instrument is complex, but in
general, it is an instrument with one or more underlyings, such as an
interest rate or foreign exchange rate that is applied to a notional
amount, such as an amount of currency, to determine the settlement
amount(s). It generally requires no significant initial investment and
can be settled net or by delivery of an asset that is readily
convertible to cash. SFAS No. 133 applies to derivatives embedded in
other contracts, unless the underlyings of the embedded derivative is
clearly and closely related to the host contract.
SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years
beginning after June 15, 2000. On adoption, entities are permitted to
transfer held-to-maturity debt securities to the available-for-sale or
trading category without calling into question their intent to hold
other debt securities to maturity in the future. SFAS No. 133 is not
expected to have a material impact on the Company's financial
statements.
9
<PAGE>
Wayne Savings Bancshares, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Discussion of Financial Condition Changes from March 31, 1999 to December 31,
1999
At December 31, 1999, the Company had total assets of $302.9 million, an
increase of $31.6 million, or 11.7%, over March 31, 1999. The increase in assets
was funded primarily by a $31.9 million increase in deposits.
Cash and due from banks, federal funds sold, interest-bearing deposits,
certificates of deposit and investment securities totaled approximately $42.0
million at December 31, 1999, an increase of approximately $8.0 million, or
23.3%, over March 31, 1999 levels. During the nine-month period ended December
31, 1999, investment securities purchases totaled $11.5 million, while
maturities amounted to $2.1 million. Regulatory liquidity approximated 18.7% at
December 31, 1999, compared to 11.0% at March 31, 1999.
Mortgage-backed securities totaled $10.5 million at December 31, 1999, a $3.3
million, or 45.4%, increase over March 31, 1999 levels. Purchases of
mortgage-backed securities totaling $7.0 million were partially offset by
principal repayments of $3.5 million during the 1999 nine-month period.
Loans receivable totaled $236.2 million at December 31, 1999, an increase of
approximately $20.5 million, or 9.5%, over the March 31, 1999 total. This
increase resulted from loan disbursements of $55.0 million, which were partially
offset by principal repayments of $32.2 million and sales of $4.3 million. The
increase in loans receivable was comprised primarily of loans secured by
one-to-four family residential real estate. The allowance for loan losses
totaled $756,000 at December 31, 1999, as compared to $678,000 at March 31,
1999. Nonperforming loans totaled $187,000 at December 31, 1999 and $280,000 at
March 31, 1999. The allowance for loan losses totaled 404.3% and 242.1% of
nonperforming loans at December 31, 1999 and March 31, 1999, respectively.
Although management believes that the Company's allowance for loan losses at
December 31, 1999, is adequate based upon the available facts and circumstances,
there can be no assurance that additions to such allowance will not be necessary
in future periods, which would adversely affect the Company's results of
operations.
Deposits increased by approximately $31.9 million, or 13.6%, from the March 31,
1999 level to $267.3 million at December 31, 1999. The increase in deposits was
primarily attributable to growth achieved at the new office locations, coupled
with management's continuing efforts to achieve deposit growth through marketing
and business strategies.
The Banks are subject to capital standards, which generally require the
maintenance of regulatory capital sufficient to meet each of three tests, the
tangible capital requirement, the core capital requirement and the risk-based
capital requirement. At December 31, 1999, both Wayne Savings' and Village's
regulatory capital exceeded all minimum capital requirements.
10
<PAGE>
Wayne Savings Bancshares, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of Operating Results for the Nine Month Periods Ended December 31,
1999 and 1998
General
Net earnings totaled $950,000 for the nine months ended December 31, 1999, as
compared to net earnings of $1.3 million for the same period in 1998, a decrease
of $399,000, or 29.6%. The decrease in net earnings resulted primarily from an
increase of $761,000 in general, administrative and other expense, a decrease in
other income of $208,000 and an increase in the provision for losses on loans of
$35,000, which were partially offset by an increase of $398,000 in net interest
income and a decrease of $207,000 in the provision for federal income taxes.
Net Interest Income
Interest on loans and mortgage-backed securities totaled $13.8 million for the
nine months ended December 31, 1999, an increase of $667,000, or 5.1%, over the
same period in 1998. The increase can be primarily attributed to an $18.7
million, or 8.7%, increase in the average balance of loans and mortgage-backed
securities outstanding, which was partially offset by a decrease in the yield
year to year.
Interest on investments and interest-bearing deposits increased by $173,000, or
12.3%, during the nine months ended December 31, 1999, as compared to the same
period in 1998, as a result of a slight increase in the average balance from
year to year, coupled with an increase in the average yield.
Interest expense on deposits and borrowings totaled $8.9 million for the nine
months ended December 31, 1999, an increase of $442,000, or 5.3%, over the same
period in 1998. The increase can be primarily attributed to a $22.7 million, or
9.6%, increase in the average balance of interest-bearing liabilities, which was
partially offset by a decrease in the cost of funds year to year.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $398,000, or 6.5%, during the nine months ended
December 31, 1999, as compared to the same period in 1998.
Provision for Losses on Loans
A provision for losses on loans is charged to earnings to bring the total
allowance for loan losses to a level considered appropriate by management based
on historical experience, the volume and type of lending conducted by the
Company, the status of past due principal and interest payments, general
economic conditions, particularly as such conditions relate to the Company's
market area, and other factors related to the collectibility of the Company's
loan portfolio. As a result of such analysis, management recorded an $82,000
provision for losses on loans during the nine months ended December 31, 1999, an
increase of $35,000, or 74.5%, over the comparable 1998 period, primarily due to
growth in the loan portfolio. The provision for losses on loans is recorded
based upon management's assessment of the risk inherent in the loan portfolio.
There can be no assurance that the loan loss allowance of the Company will be
adequate to cover losses on nonperforming assets in the future.
11
<PAGE>
Wayne Savings Bancshares, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Nine Month Periods Ended December 31,
1999 and 1998 (continued)
Other Income
Other income totaled $567,000 for the nine months ended December 31, 1999, a
decrease of $208,000, or 26.8%, from the comparable 1998 period. This decrease
was due primarily to a $223,000, or 87.5%, decrease in gain on sale of loans,
which resulted from a decline in sales volume of approximately $7.5 million, or
63.9%, year to year.
General, Administrative and Other Expense
General, administrative and other expense totaled $5.6 million for the nine
months ended December 31, 1999, an increase of $761,000, or 15.8%, compared to
the 1998 period, due primarily to a $447,000, or 18.4%, increase in employee
compensation and benefits, a $250,000, or 30.1%, increase in occupancy and
equipment and a $49,000, or 4.3%, increase in other operating expenses. The
increases were due primarily to the costs associated with the addition of
Village and the new branches as previously discussed.
Federal Income Taxes
The provision for federal income taxes amounted to $489,000 for the nine months
ended December 31, 1999, a decrease of $207,000, or 29.7%, as compared to the
same period in 1998. The decrease resulted primarily from a $606,000, or 29.6%,
decrease in pretax earnings year to year. The effective tax rate for each of the
nine month periods ended December 31, 1999 and 1998 was 34.0%.
Comparison of Operating Results for the Three Month Periods Ended December 31,
1999 and 1998
General
Net earnings totaled $305,000 for the three months ended December 31, 1999, as
compared to net earnings of $440,000 for the same period in 1998, a decrease of
$135,000, or 30.7%. The decrease in net earnings resulted primarily from an
increase of $290,000 in general, administrative and other expense, a decrease in
other income of $14,000 and a $22,000 increase in the provision for losses on
loans, which were partially offset by an increase of $120,000 in net interest
income and a $71,000 decrease in the provision for federal income taxes.
Net Interest Income
Interest on loans and mortgage-backed securities increased by $298,000, or 6.7%,
for the three months ended December 31, 1999 over the same period in 1998. The
increase can be primarily attributed to an increase in the average balance of
loans and mortgage-backed securities outstanding.
Interest on investments and interest-bearing deposits increased $130,000, or
30.4%, during the current three-month period, as compared to the same period in
1998, as a result of an increase in the average balance of interest-earning
assets outstanding year to year.
12
<PAGE>
Wayne Savings Bancshares, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three Month Periods Ended December 31,
1999 and 1998 (continued)
Net Interest Income (continued)
Interest expense on deposits and borrowings increased by $308,000, or 11.1%, for
the three month period ended December 31, 1999, over the comparable period in
1998. The increase can be primarily attributed to an increase in the average
balance of interest-bearing liabilities outstanding year to year.
Provision for Losses on Loans
A provision for losses on loans is charged to earnings to bring the total
allowance for loan losses to a level considered appropriate by management.
Management recorded a $38,000 provision for losses on loans during the three
months ended December 31, 1999, an increase of $22,000, or 137.5%, over the same
period in 1998. The current period provision for losses on loans was based
primarily upon growth in the loan portfolio. There can be no assurance that the
loan loss allowance of the Company will be adequate to cover losses on
non-performing assets in the future.
Other Income
Other income totaled $211,000 for the three months ended December 31, 1999, a
decrease of $14,000 or 6.2%, from the comparable 1998 period. This decrease was
due primarily to the $56,000, or 83.6%, decrease in gain on sale of loans,
offset by a $42,000, or 26.6%, increase in service fees, charges and other
operating income.
General, Administrative and Other Expense
General, administrative and other expense increased by $290,000, or 17.8%,
during the current three month period over the comparable 1998 period. The
increases were due primarily to the costs associated with the addition of
Village and the new branches as previously discussed. Employee compensation and
benefits increased by $202,000, or 26.1%, during the three months ended December
31, 1999 as compared to the same period in 1998. Occupancy and equipment
increased by $67,000, or 24.8%, over the same period. These increases were due
primarily to costs associated with Village and new office locations.
Federal Income Taxes
The provision for federal income taxes amounted to $156,000 for the three months
ended December 31, 1999 as compared to $227,000 for the same period in 1998. The
effective tax rates for the three months ended December 31, 1999 and 1998 were
33.8% and 34.0%, respectively.
13
<PAGE>
Wayne Savings Bancshares, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Year 2000 Compliance Matters
The Year 2000 ("Y2K") issue related to certain computer programs which used a
two-digit format, as opposed to four digits, to indicate the year. Such computer
systems may have been unable to interpret dates beyond the year 1999, which
could have caused a system failure or other computer errors, leading to
disruption in operations. The potential impact was that date sensitive
calculations would be based on erroneous data, or could cause a system failure.
The Y2K issue may have affected all forms of financial accounting, including
interest computation, due dates, pensions/personnel benefits, investments, and
record keeping.
During the three year period leading up to January 1, 2000, the Company
developed and implemented a program to ensure Y2K information systems
compliance. The Company does not perform in-house programming. All systems have
been purchased from third-party vendors. Therefore, the primary thrust of the
Company's Y2K effort involved ongoing discussions and monitoring of vendors'
progress, including receipt of confirmation from its vendors that Y2K compliant
versions of their systems were in place.
The Company had expended a total of approximately $50,000 for hard costs related
to renovation and testing, approximately $30,000 of which was expensed during
fiscal 2000.
The Company experienced no technology-related problems upon arrival of January
1, 2000, nor was there any disruption of services to its customers. The Company
could incur losses if loan payments are delayed due to Year 2000 problems
affecting any major borrowers in the Company's primary market area. Because the
Company's loan portfolio is highly diversified with regard to individual
borrowers and types of businesses and the primary market area is not
significantly dependent upon one employer or industry, the Company does not
expect, and to date has not realized, any significant or prolonged difficulties
that will affect net earnings or cash flow.
14
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Wayne Savings Bancshares, Inc.
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities and Use of Proceeds
Not applicable
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable
ITEM 5. Other Information
The Board of Directors of Wayne Savings Bancshares, Inc. has
authorized to continue the repurchase of up to approximately 131,000
shares, or 5% of the Company's outstanding stock, over the 12 month
period ending July, 2000. Any repurchased shares will be held as
treasury stock and will be available for general corporate purposes.
ITEM 6. Exhibits and Reports on Form 8-K
Form 8-K: None
Exhibit 27: Financial data schedule for the nine month period
ended December 31, 1999
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.
Date: February 11, 2000 By: /s/Charles F. Finn
Charles F. Finn
Chairman and President
Date: February 11, 2000 By: /s/Todd J. Tappel
Todd J. Tappel
Chief Financial Officer
16
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