UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
__X___ QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 014612
For the Quarter Ended June 30, 2000
WAYNE BANCORP, INC
(Exact name of registrant as specified in its charter)
OHIO 34-1516142
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
112 West Liberty Street
P.O. Box 757
Wooster, Ohio 44691 44691
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (330) 264-1222
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 require-
ments for the past 90 days:
Yes__X__ No_____
Number of shares of Common Stock, Stated Value $1.00 per Share, shares
outstanding at July 31, 2000, the latest practicable date: 4,600,060
INDEX
WAYNE BANCORP, INC.
FORM 10-Q
For the Quarter Ended June 30, 2000
PART I. FINANCIAL INFORMATION PAGE NO.
Item I. Financial Statements (unaudited)
Consolidated Balance Sheets................. 1
Consolidated Statements of Income
and Comprehensive Income........... 2
Consolidated Statements of Cash Flows....... 3
Notes to Consolidated Financial Statements.. 4, 5, 6, 7
Item II. Management's discussion and analysis of financial
condition and results of operations.......... 7, 8, 9
Item III. Quantitative and Qualitative Disclosures about
Market Risk................................. 9, 10
PART II. OTHER INFORMATION............................... 11
SIGNATURES................................................. 12
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Unaudited) June 30, December 31,
(In thousands of dollars) 2000 1999
--------------------------
ASSETS
Cash and Due From Banks........................ $24,905 $23,660
Federal Funds Sold............................. 0 3,720
--------------------------
Total Cash and Cash Equivalents........ 24,905 27,380
Securities Available-for-Sale.................. 142,847 150,018
Loans.......................................... 383,841 356,503
Allowance for Loan Losses..... (5,298) (5,197)
------------------------
Net Loans................... 378,543 351,306
Premises and Equipment......................... 9,897 9,260
Accrued interest receivable and other assets... 9,600 7,924
-------------------------
TOTAL ASSETS................................... $565,792 $545,888
==========================
LIABILITIES
Deposits
Interest Bearing.......................... $391,837 $395,087
Non-Interest Bearing...................... 68,322 66,728
------------------------
Total Deposits.................. 460,159 461,815
Short-term borrowings.......................... 34,446 25,683
Federal Home Loan Bank Advances................ 12,419 1,288
ESOP Loan...................................... 200 400
Other Borrowings............................... 132 0
Other Liabilities.............................. 3,033 3,456
------------------------
Total Liabilities........... 510,389 492,642
SHAREHOLDERS' EQUITY
Common Stock, Stated Value $1.................. 4,917 4,917
Shares authorized - 12,000,000
Shares issued - 4,917,218
Shares outstanding - 4,600,060 in 2000 and
4,610,283 in 1999
Paid In Capital................................ 13,200 13,256
Retained Earnings.............................. 49,383 47,049
Unearned ESOP shares........................... (100) (200)
Treasury Stock, at cost........................ (10,994) (10,887)
Accumulated other comprehensive income......... (1,003) (889)
------------------------
Total Shareholders' Equity....... 55,403 53,246
------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..... $565,792 $545,888
========================
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited) Three Months Ended Six Months Ended
(In thousands of dollars, June 30, June 30,
except per share data) 2000 1999 2000 1999
------------------------------------------
INTEREST INCOME:
Interest and Fees on Loans...... $8,116 $7,053 $15,667 $13,931
Interest and Dividends on
Securities:
Taxable.................... 1,621 1,821 3,344 3,796
Non-taxable................ 488 432 924 841
Other Interest Income........... 45 68 66 111
------------------------------------------
Total Interest Income......... 10,270 9,374 20,001 18,679
INTEREST EXPENSE:
Interest on Deposits............ 4,167 3,547 8,168 7,039
Interest on Repurchase
Agreements.................... 354 294 659 633
Interest on Other Borrowed Funds 146 52 182 91
Interest on ESOP Loan........... 4 8 10 18
------------------------------------------
Total Interest Expense......... 4,671 3,901 9,019 7,781
NET INTEREST INCOME.............. 5,599 5,473 10,982 10,898
Provision for Loan Losses........ 54 54 108 108
------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES..... 5,545 5,419 10,874 10,790
OTHER INCOME:
Service Charges on Deposits...... 443 439 857 848
Income from Fiduciary Activities. 345 345 690 690
Other Non-Interest Income........ 182 194 351 386
Gain on Security Sales........... 0 49 1 49
------------------------------------------
Total Other Income............. 970 1,027 1,899 1,973
OTHER EXPENSES:
Salaries and Employee Benefits... 2,077 1,894 4,140 3,638
Occupancy and Equipment.......... 495 460 1,039 936
Other Non-Interest Expenses...... 1,085 1,262 2,182 2,473
------------------------------------------
Total Other Expenses........... 3,657 3,616 7,361 7,047
INCOME BEFORE INCOME TAX EXPENSE. 2,858 2,830 5,412 5,716
INCOME TAX EXPENSE............... 854 829 1,608 1,685
------------------------------------------
NET INCOME....................... 2,004 2,001 3,804 4,031
==========================================
Other Comprehensive Income, net
of tax Unrealized gains (losses)
on available-for-sale securities
arising during the period...... 222 (1,059) (113) (1,626)
Reclassification adjustment for
amounts realized on securities
included in net income. ....... 0 (32) (1) (32)
-----------------------------------------
COMPREHENSIVE INCOME............. $2,226 $910 $3,690 $2,373
==========================================
NET INCOME PER COMMON
SHARE - BASIC $0.44 $0.43 $0.83 $0.86
NET INCOME PER COMMON
SHARE - DILUTED $0.44 $0.43 $0.83 $0.86
DIVIDENDS PER SHARE $0.16 $0.15 $0.32 $0.30
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
(Unaudited) June 30,
(In thousands of dollars) 2000 1999
------------------------
OPERATING ACTIVITIES
Net Income............................. $3,804 $4,031
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses.......... 108 108
Depreciation and amortization...... 725 656
Amortization of security premiums
and discounts..................... 222 370
Compensation expense on ESOP shares 44 82
Change in interest receivable...... (964) 332
Change in interest payable......... 179 (62)
Other, (net)....................... (1,423) (707)
------------------------
Net cash provided by operating
activities........................... 2,695 4,810
INVESTING ACTIVITIES
Purchase of securities
available-for-sale................... (9,145) (16,919)
Proceeds from matured securities
available-for-sale................... 15,918 27,453
Proceeds from sales of securities
available-for-sale................... 3 8,751
Net increase in loans and leases....... (27,345) (16,757)
Purchase of premises and equipment, net (1,194) (587)
------------------------
Net cash (used) provided by investing
activities........................... (21,763) 1,941
FINANCING ACTIVITIES
Net increase (decrease) in deposits.... (1,656) 4,414
Net increase (decrease) in short term
borrowings........................... 10,169 (9,476)
Proceeds from Federal Home Loan Bank
advances.............................. 10,000 7,000
Repayment of Federal Home Loan Bank
advances.............................. (37) (7,035)
Repayment of ESOP loan................. (200) (200)
Proceeds from other borrowed funds..... 455 1,400
Repayment of other borrowed funds...... (560) (1,100)
Cash dividends paid.................... (1,471) (1,416)
Net (increase) decrease in treasury
stock................................ (107) (8,273)
------------------------
Net cash provided (used) by financing
activities............................ 16,593 (14,686)
Increase (decrease) in cash and cash
equivalents........................... (2,475) (7,935)
Cash and cash equivalents at beginning
of period............................. 27,380 27,810
------------------------
Cash and cash equivalents at end of
period................................ $24,905 $19,875
========================
Supplemental Disclosures of Cash Flow
Information:
Cash basis payments for federal
income taxes......................... $1,795 $1,510
Cash basis payments for interest
expense.............................. $8,840 $7,843
See notes to consolidated financial statements.
WAYNE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation:
The accompanying unaudited consolidated financial statements have been pre
pared in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting standards for complete financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included and such adjustments are of a normal
recurring nature.
The consolidated financial statements include the accounts of Wayne Bancorp,
Inc. (the Company), and its wholly-owned subsidiaries Wayne County National
Bank (Wayne), Chippewa Valley Bank (Chippewa), and MidOhio Data, Inc. (MID).
The financial statements of Wayne include the accounts of its wholly-owned
subsidiary, Wayne National Corporation. All significant intercompany trans-
actions have been eliminated.
Beginning January 1, 2001, a new accounting standard will require all
derivatives to be recorded at fair values. Unless designated as hedges,
changes in these fair values will be recorded in the income statement. Fair
value changes involving hedges will generally be recorded by offsetting gains
and losses on the hedge item, even if the fair value of the hedged item is
not otherwise recorded. This is not expected to have a material effect, but
will depend on derivative holdings when this standard applies.
To prepare financial statements in conformity with generally accepted account-
ing principles, management makes estimates and assumptions based on available
information. These estimates and assumptions affect the amounts reported in
the financial statements and the disclosures provided, and future results
could differ. The allowance for loan losses, fair values of financial
instruments and status of contingencies are particularly subject to change.
Income tax expense is the total of the current-year income tax due or
refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are expected future tax amounts for the temporary
differences between carrying amounts and tax basis of assets and liabilities,
computed using enacted tax rates. A valuation allowance, if needed, reduces
deferred tax assets to the amount expected to be realized.
Basic earnings per common share is net income divided by the weighted average
number of common shares outstanding during the period. Employee Stock Option
Plan ("ESOP") shares are considered outstanding for this calculation unless
unearned. Diluted earnings per common share includes the additional poten-
tial common shares issuable under stock options. The weighted average number
of common shares outstanding for basic and diluted earnings per common share
computations were 4,595,338 and 4,663,685 for the six months ended June 30,
2000 and 1999, and for the three months ended June 30, 2000 and 1999 the
weighted average shares outstanding were 4,596,035 and 4,681,003 respec-
tively. Stock options did not have a dilutive effect on the weighted
average shares outstanding for the three and six month periods ending June
30, 2000, due to the exercise price for the stock options exceeding the
average stock price of the Company during these periods.
Some items in prior financial statements have been reclassified to conform
to the current presentation.
2. Securities:
During the six months ended June 30, 2000 proceeds from the sale of
securities were $3 thousand, with gross gains of $1 thousand included in
earnings. During the period ended June 30, 1999, proceeds from the sale of
securities was $8.8 million, with gross realized gains of $52 thousand and
gross realized losses of $3 thousand included in earnings.
The amortized cost and fair values of securities available-for-sale
were as follows:
June 30, 2000
Gross Gross
Amortized Unrealized Unrealized Fair
(In thousands of dollars) Cost Gains Losses Value
-----------------------------------------------
U.S. Treasury............... $29,597 $0 ($253) $29,344
Federal Agency Obligations.. 33,823 19 (480) 33,362
Federal Agency Pool......... 10,314 13 (173) 10,154
Obligations of states and
political subdivisions.... 39,497 132 (399) 39,230
Corporate Obligations....... 28,334 15 (315) 28,034
Other securities............ 2,802 32 (111) 2,723
-----------------------------------------------
$144,367 $211 ($1,731) $142,847
===============================================
December 31, 1999
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------
U.S. Treasury............... $33,160 $17 ($261) $32,916
Federal Agency Obligations.. 35,371 2 (453) 34,920
Federal Agency Pool......... 13,083 20 (141) 12,962
Obligations of state and
political subdivisions.... 37,931 183 (420) 37,694
Corporate Obligations....... 29,094 6 (305) 28,795
Other securities............ 2,726 63 (58) 2,731
-----------------------------------------------
$151,365 $291 ($1,638) $150,018
===============================================
3. Loans:
Loans considered impaired within the scope of SFAS No. 114 were not significant
at June 30, 2000 and December 31, 1999, and during the three and six months
ended June 30, 2000 and 1999.
Loans are comprised of the following:
June 30, December 31,
(In thousands of dollars) 2000 1999
--------------------------
Commercial and Agricultural ........... $167,619 $146,504
Real Estate loans...................... 149,863 147,068
Installment loans...................... 51,563 48,411
Home Equity loans...................... 12,763 12,234
Lease Financing........................ 1,934 2,179
Other loans............................ 99 107
------------------------
Total............... $383,841 $356,503
========================
ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
The following discusses the financial condition as of June 30, 2000, as
compared to December 31, 1999 and the results of operations for the three and
six months ended June 30, 2000 and the same periods in 1999. This discussion
should be read in conjunction with the interim financial statements and foot-
notes included herein.
Forward-Looking Statements
When used in this document, the words or phrases "will likely result,"
"are expected to," "will continue," "is anticipated," "estimated," "projected"
or similar expressions are intended to identify "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements are subject to certain risks and uncertainties, including
changes in economic conditions in the Company's market area, changes in
policies by regulatory agencies, fluctuations in interest rates, demand for
loans in the Company's market area and competition that could cause actual
results to differ materially from the historical earnings and those
presently anticipated or projected. Factors listed above could affect the
Company's financial performance and could cause the Company's actual
results to differ materially from any statments expressed with respect to
future periods.
The Company does not undertake, and specifically disclaims any obligation,
to publicly revise any forward-looking statements to reflect events or
circumstances aftet the date of such statements or to reflect the occurrence
of anticiapted or unanticipated events.
Liquidity
The main objectives of asset/liability management are to provide adequate
liquidity and to minimize interest rate risk. Liquidity is the ability to
meet cash flow needs, which in the banking industry, refers to the Company's
ability to fund customer borrowing needs as well as deposit withdrawals. The
Company's primary source of liquidity is from overnight Federal Funds Sold
and Securities available-for-sale. In addition, other assets such as cash
and due from banks and maturing loans also provide additional sources of
liquidity. At June 30, 2000, the amount of cash and due from banks and
securities and loans with scheduled maturities and or repricing within the
next three months was $140 million. The Company continues to keep a balance
between short and long-term investments and securities that will provide
adequate liquidity and maximize earnings. Based on the Company's capital
position, profitability and reputation, the available liquidity sources are
considered adequate to meet the current and projected needs of the Company.
Capital
The Company's capital adequacy is a primary concern in our industry, and is
measured by several key ratios. A long standing measure of capital adequacy
is the percentage of shareholders' equity to total assets. At June 30, 2000,
the Company's equity-to-asset ratio adjusted by the impact of FAS#115 was
10.0% compared to 9.9% at December 31, 1999. Regulators of the banking
industry focus primarily on two other measurements of capital - the risk-
based capital ratio and the leverage ratio. The risk-based capital ratio
consists of a numerator of allowable capital components and a denominator of
an accumulation of risk-weighted assets. With a significant portion of the
Company's investment securities portfolio in government related low risk
categories and a fair amount of the loan portfolio in one-to-four family
mortgage loans with a 50% risk assessment, the risk-based capital ratio is
16.1% at June 30, 2000, and 16.5% at December 31, 1999.
The regulators require a minimum leverage capital ratio of 3%. They will
expect most banks to maintain leverage ratios in the 4-5% range. The
leverage ratio is calculated as equity capital less certain intangible
assets divided by total assets less the same intangible assets. At June 30,
2000, and December 31, 1999, the ratios were 10.0% and 9.7% respectively.
The Company's deposit insurance premiums which are paid to the Federal
Deposit Insurance Corporation are based, in part, on these capital ratios.
The FDIC considers a bank "adequately capitalized" if the capital ratios
are: Total equity 8%, Tier 1 risk-based 4% and a leverage ratio of 4%. The
FDIC considers a bank "well capitalized" with comparable capital ratios of 10%,
6% and 5%. The Company and bank subsidiaries are considered "well
capitalized" and therefore are subject to the lowest deposit insurance
premiums available.
Management is not aware of any matters subsequent to June 30, 2000 that
would cause the Company's capital category to change.
Financial Condition
The total assets of the Company increased by $19.9 million or 3.6% from
from December 31, 1999 to June 30, 2000. This increase is due to growth in
the loan portfolio of $27.3 million, that was funded by growth in short term
borrowings and Federal Home Loan Bank advances of $19.9 million and reduc-
tions in cash and investments of $9.6 million.
The lending area has experienced growth of $27.3 million through the first
six months of 2000. This growth is primarily concentrated in the commercial
and installment loan areas with increases of $21.1 million and $3.2 million
respectively. Despite the increase in the prime lending rate from the prior
year, the Company has experienced strong loan growth and steady demand
in the commercial loan area. Installment loans have also increased from year
end primarily due to the Company raising rates on these types of loans at a
slower pace than has been experienced in the prime rate.
Management expects interest rates to rise in the short term, and then remain
flat over the next twelve to fifteen months, based on economic indicators and
general economic conditions. Rate increases, which signal signs of an infla-
tionary economy, impact rates charged on various loan types, primarily
commercial and residential real estate loans. Although the Company did not
sell any loans during the first six months of 2000 or during the twelve month
period in 1999, management may consider the sale of loans into the secondary
market as market conditions warrant to align the portfolio and provide
liquidity for future loan demand. There were no loans held for sale at
June 30, 2000 or December 31, 1999.
Total securities available-for-sale and fed funds sold decreased by $10.9
million through the second quarter of 2000. This decrease is primarily due
to the the strong loan demand that the Company has been experiencing, where
cash flows from investment maturities have been used to fund higher yielding
loans.
Total deposits decreased by $1.7 million for the period ended June 30, 2000.
This decline in deposits is due to customers increased awareness of deposit
rates, and an increase in investment alternatives. As consumers have become
more rate conscious over the past few years deposit retention is becoming
more difficult, especially as mutual funds and the stock market are becoming
more acceptable as investment vehicles. In order to grow and retain deposits
to meet loan demand and grow assets, the Company has focused on growing its
core deposits. To do this management analyzes rates paid on deposits within
its market area on a weekly basis to ensure the Company's rates on similar
products are competitive.
Other borrowings increased $19.9 million for the six months ended June 30, 2000.
This increase is primarily in overnight federal funds borrowings as well as
additional funds advanced from the Federal Home Loan Bank. The Company used
these alternative funding sources to fund its loan growth, as well as offset
the decline in core deposits.
Results of Operations
Net income was $3,804,000 for the first six months of 2000 compared to
$4,031,000 for the same period in 1999. Earnings per common share for the
six months ended June 30, 2000 and 1999 were $.83 and $.86 per share
respectively. Dividends were $.32 per share for the first six months of
2000 and $.30 per share for the first six months in 1999.
For the three months ended June 30, 2000, net income was $2,004,000, or
$.44 per share, with dividends paid of $.16 per share. This compares to net
income of $2,001,000, or $.43 per share, with dividends paid of $.15 per
share for the three months ended June 30, 1999.
Total interest income for the first six months increased $1.3 million or 7.1%
compared to the prior year. This increase is primarily related to the strong
loan growth that has been achieved since last year as well as the overall
rise in the interest rate environment.
Total earning assets were $526.7 million and $493.8 million at June 30, 2000
and June 30, 1999. The increase in earning assets is due to growth in the loan
portfolio of $42.9 million, offset by a reduction of $10.0 million in
securities and federal funds sold. The weighted average interest earned on
these assets has increased from 7.47% at June 30, 1999 to 7.75% at June 30,
2000.
Total interest bearing liabilities at June 30, 2000 and June 30, 1999 were
$439.0 and $405.6 million respectively. The weighted interest rate paid for
these liabilities has increased from 3.83% at June 30, 1999 to 4.26% at June
30, 2000.
The net effect of the changes in interest earning assets and interest bearing
liabilities, combined with the repricing that has occurred since June 30, 1999,
caused an increase in net interest income of $84,000, or .8%, for the
six months ended June 30, 2000.
The provision for loan losses was $108,000 for the six month period ending
June 30, 2000 and 1999, while the ratio of the allowance for loan losses to
total loans was 1.38% and 1.47% respectively. This decline in the ratio is
due to a 12.6% increase in loan balances, without an increase in non-perform-
ing loans. Given the make-up of the loan portfolio, which considers past due
loans, charge-off and recovery history as well as general economic condi-
tions, management considers the allowance for loan losses to be adequate and
sufficient to cover probable incurred credit losses.
Total other expenses increased by $314,000 for the six months ended June 30,
2000 compared to the same period in 1999. Salaries and employee benefits
increased by $502,000, or 13.8%, from $3,638,000 at June 30, 1999 to
$4,140,000 at June 30, 2000. This increase is due, in part, to the annual
salary adjustments that are made each year in order to maintain compensation
at a level that will attract and retain employees, as well as the addition
of new employees to staff the data processing company, which provides
services to WCNB. Occupancy and equipment expense increased $103 thousand,
or 11.0%, from $936,000 at June 30, 1999 to $1,039,000 at June 30, 2000.
This increase is primarily related to the addition of new facilities. These
facilities, which include a mortgage loan center, a full service branch as
well as the relocation of an existing branch and the creation of a new data
processing company have increased expenses in this area primarily due to
increases in rent, depreciation, maintenance and utilities. Other non-
interest expenses have decreased $291,000, or 11.8%, from $2,473,000 at
June 30, 1999 to $2,182,000 at June 30, 2000. This decline is due to the
Company's efforts to control and contain costs where possible. Several
reductions were noted in this area, including directors fees, franchise taxes,
computer expense and credit card processing costs. These decreases were
offset by increases in FDIC insurance, donations and phone expense.
ITEM III - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Asset and Liability Management and Market Risk
The Company's primary market risk exposure is interest rate risk and, to a
lesser extent, liquidity risk. The Company does not maintain a trading
account for any class of financial instruments and the Company is not
affected by foreign currency exchange rate risk or commodity price risk.
Because the Company does not hold any equity securities other than stock in
the FHLB of Cincinnati and an insignificant investment in other equity
securities, the Company is not subject to equity price risk.
Interest rate risk is the risk that the Company's financial condition will
be adversely affected due to movements in interest rates. The Company,
like other financial institutions, is subject to interest rate risk to the
extent that its interest-earning assets reprice differently than its
interest-bearing liabilities. The income of financial institutions is
primarily derived from the excess of interest earned on interest-earning
assets over the interest paid on interest-bearing liabilities. One of the
Company's principal financial objectives is to achieve long-term profita-
bility while reducing its exposure to fluctuations in interest rates.
Accordingly, the Company places great importance on monitoring and
controlling interest rate risk.
There are several methods employed by the Company to monitor and control
interest rate risk. One such method is using a "GAP" analysis. The GAP is
defined as the repricing variance between rate sensitive assets and rate
sensitive liabilities within certain periods. The repricing can occur due to
changes in rates on variable rate products as well as maturities of
interest-earning assets and interest-bearing liabilities. A high ratio of
interest sensitive liabilities, generally referred to as a negative GAP,
tends to benefit net interest income during periods of falling interest
rates as the average rate paid on interest-bearing liabilities declines
faster than the average rate earned on interest-earning assets. The opposite
holds true during periods of rising interest rates. The Company attempts to
minimize the interest rate risk through management of the gap in order to
achieve consistent shareholder return. The Company's Asset and Liability
Management Policy is to maintain a fairly neutral GAP position of +10% to -15%
in both the short- and long-term periods. At June 30, 2000, the Company had
a negative GAP position of -12.9% of total assets for a one year period.
Another strategy used by the Company is to originate variable rate loans
tied to market indices. Such loans reprice on an annual, quarterly, monthly
or daily basis as the underlying market index changes. Currently, approxi-
mately 29% of the Company's loan portfolio is written as variable rate.
The Company also invests excess funds in liquid federal funds that mature
and reprice on a daily basis. The Company also maintains all of its securi-
ties in the available-for-sale portfolio to take advantage of interest rate
fluctuations and to maintain liquidity for loan funding and deposit
withdrawals.
The Company's 1999 annual report provides a table which details information
about the Company's financial instruments that are sensitive to changes in
interest rates as of December 31, 1999. The table is based on information
and assumptions set forth in the notes. The Company believes the assumptions
utilized are reasonable. For loans, securities and liabilities with
contractual maturities, the table represents principal cash flows and the
weighted-average interest rate. For variable rate loans, the contractual
maturity and weighted-average interest rate was used with an explanatory
footnote as to repricing periods. For liabilities without contractual
maturities such as demand and savings deposit accounts, a decay rate was
utilized to match their most likely withdrawal behavior. Management
believes that no events have occurred since December 31, 1999 that would
significantly change the ratio of rate sensitive assets to rate sensitive
liabilities for the given time horizons.
WAYNE BANCORP, INC.
PART II - OTHER INFORMATION
_____________________________________________________________
ITEM 1 - Legal Proceedings:
NONE
ITEM 2 - Changes in securities:
NONE
ITEM 3 - Defaults upon senior securities:
NONE
ITEM 4 - Submission of matters to a vote of securities holders:
(a) Annual Shareholders' Meeting
Date: April 20, 2000
Description: Election of Directors
B. Diane Gordon FOR: 3,228,906 WITHHELD: 77,720
Stephen L. Shapiro FOR: 3,234,874 WITHHELD: 71,752
Bala Venkataraman FOR: 3,237,257 WITHHELD: 69,369
Description: Ratify the engagement of Crowe, Chizek & Company LLP
as the independent auditor.
FOR: 3,238,024 AGAINST: 53,384 ABSTAIN: 15,218
(d) None
ITEM 5 - Other information:
NONE
ITEM 6 - Exhibits and reports on Form 8-K:
NONE
______________________SIGNATURES______________________________
Pursuant to the requirements of the Securities and 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 Aug 11, 2000 ____________________________
David L. Christopher,
Chairman
Date Aug 10, 2000 ____________________________
David P. Boyle, CPA
President/Treasurer
