<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(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
--------- -------
Commission file number: 33-31093-A
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WAYNE BANCORP, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-1858246
----------------- -----------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
818 South First Street, Jesup, Georgia 31545
---------------------------------------------
(Address of principal executive offices)
(912) 427-2265
---------------------------
(Issuer's telephone number)
Not Applicable
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
On August 9, 1996, 377,786 shares of the issuer's common stock, par
value $1.00 per share, were issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
---- ----
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
WAYNE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ---------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,660,771 $ 1,865,429
Interest-bearing deposits 65,057 113,284
Federal funds sold 0 9,940,000
Investment securities:
Held-to-maturity 2,435,526 2,171,226
Available-for-sale 6,076,451 5,810,537
Loans, less allowances for loan losses of
$213,488 and $196,669, respectively 21,554,169 16,279,664
Premises and equipment, net 1,013,336 1,005,692
Deferred income taxes 39,837 61,242
Other assets 426,966 403,694
----------- -----------
Total assets $33,272,113 $37,650,768
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits $ 5,941,007 $10,271,578
Interest-bearing deposits 22,504,223 23,214,792
----------- -----------
Total deposits 28,445,230 33,486,370
Federal funds purchased 310,000 0
Accrued interest expense 147,483 201,268
Accrued income taxes 153,253 74,523
Other liabilities 54,510 53,367
----------- -----------
Total liabilities 29,110,476 33,815,528
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value; authorized 10,000,000
shares; 377,786 issued and outstanding 377,786 377,786
Surplus 3,354,102 3,354,102
Retained earnings 456,356 69,015
Unrealized gain (loss) net - AFS investments (26,607) 34,337
----------- -----------
Total stockholders' equity 4,161,637 3,835,240
----------- -----------
Total liabilities and stockholders' equity $33,272,113 $37,650,768
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
1
<PAGE> 3
WAYNE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------------
1996 1995 1996 1995
-------- ------ ----- ------
<S> <C> <C> <C> <C>
Interest Income:
Loans, including fees $ 591,530 $ 430,398 $1,117,917 $ 809,955
Interest-bearing deposits in banks 661 3,930 1,985 9,162
Federal funds sold 14,527 36,431 64,165 70,752
Investment securities:
Taxable 100,860 108,838 198,234 229,991
Nontaxable 30,285 14,856 56,761 15,258
Dividends 3,640 1,976 6,682 3,775
--------- --------- ---------- ---------
Total interest income 741,503 596,429 1,445,744 1,138,893
--------- --------- ---------- ---------
Interest expense:
Deposits 247,625 255,792 513,392 481,531
Federal funds purchased 48 0 48 0
--------- --------- ---------- ---------
Total interest expense 247,673 255,792 513,440 481,531
--------- --------- ---------- ---------
Net interest income 493,830 340,637 932,304 657,362
Provision for loan losses 18,000 0 27,000 0
--------- --------- ---------- ---------
Net interest income after
provision for loan losses 475,830 340,637 905,304 657,362
--------- --------- ---------- ---------
Other income:
Service charges on deposits 96,351 85,278 189,220 166,896
Other operating income 32,178 35,724 76,798 66,263
Securities gains (losses) net (746) 1,405 11,934 1,405
--------- --------- ---------- ---------
Total other income 127,783 122,407 277,952 234,564
--------- --------- ---------- ---------
Other expenses:
Salaries and employee benefits 143,902 123,726 291,359 257,729
Net occupancy and equipment expense 49,434 50,800 95,533 101,255
Other operating expense 118,301 139,542 235,413 264,110
--------- --------- ---------- ---------
Total other expense 311,637 314,068 622,305 623,094
--------- --------- ---------- ---------
Profit before income taxes 291,976 148,976 560,951 268,832
Income tax expense 90,425 46,159 173,609 86,697
--------- --------- ---------- ---------
Net Profit $ 201,551 $ 102,817 $ 387,342 $ 182,135
========= ========= ========== =========
Earnings per common share $ 0.53 $ 0.28 $ 1.03 $ 0.49
========= ========= ========== =========
Weighted average shares outstanding 377,786 372,804 377,786 371,524
========= ========= ========== =========
Earnings per common share fully diluted $ 0.43 $ 0.22 $ 0.83 $ 0.39
========= ========= ========== =========
Weighted average fully diluted shares outstanding 468,723 467,350 466,677 467,013
========= ========= ========== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 4
WAYNE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit $387,342 $ 182,135
Adjustments to reconcile net profit to net cash provided by
operating activities:
Depreciation, amortization, and accretion, net 57,456 64,806
Provision for loan losses 27,000 0
(Gain) loss on sale of securities (11,934) (1,405)
Net decrease (increase) in available for sale securities 92,338 (156,998)
Net decrease (increase) in deferred taxes 21,405 121,846
Net decrease (increase) in other assets (23,272) (17,729)
Net increase (decrease) in accrued interest payable (53,785) 27,096
Net increase (decrease) in accrued income taxes 78,730 0
Net increase (decrease) in other liabilities 1,143 (30,253)
Net increase (decrease) in unrealized gain (loss) AFS
investments (60,944) 103,619
----------- ----------
Net cash provided (used) by operating activities 515,479 293,117
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities held-to-maturity (393,502) (1,617,662)
Purchase of investment securities available-for-sale (2,533,537) (2,433,849)
Proceeds from maturities of interest-bearing deposits 0 300,000
Proceeds from maturities of securities held-to-maturity 130,000 2,465,000
Proceeds from maturities of securities available-for-sale 1,000,000 0
Proceeds from sales of securities available-for-sale 1,179,964 2,906,919
Net (increase) decrease in loans (5,301,505) (1,694,738)
Purchase of fixed assets (58,644) (12,294)
----------- ----------
Net cash provided (used) by investing activities (5,977,224) (86,624)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (5,041,140) (5,063,001)
Net increase (decrease) in federal funds purchased 310,000 0
Proceeds from issuance of common stock 0 62,299
----------- ----------
Net cash provided (used) by financing activities (4,731,140) (5,000,702)
----------- ----------
Net increase (decrease) in cash and cash equivalents (10,192,885) (4,794,209)
Cash and cash equivalents at beginning of period 11,918,713 8,925,843
----------- ----------
Cash and cash equivalents at end of period $ 1,725,828 $4,131,634
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH PAID FOR:
Interest $ 567,225 $ 454,435
Income taxes $ 42,081 $ 0
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 5
WAYNE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation
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-QSB and Item
310 (b) of Regulation S-B of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
However, in the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30, 1996, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, please refer to the consolidated
financial statements and footnotes thereto for the Company's fiscal year ended
December 31, 1995, included in the Company's Form 10-KSB for the year ended
December 31, 1995.
4
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
The Company experienced a net profit during the quarter ended June 30,
1996, of $201,551, compared to $102,817 during the same period of 1995. This
brings net profit for the six months ended June 30, 1996, to $387,342, compared
to $182,135 for the six months ended June 30, 1995. The improvement in
earnings for the second quarter is attributed primarily to higher net interest
income which is up 45.0%. The improvement in net interest income can be
attributed to a 16.1% increase in earning assets to $30.3 million on June 30,
1996, from $26.1 million on June 30, 1995. The segment of earning assets
showing the most significant increase was loans which grew $6.5 million, or
43.0%, during the twelve months ending June 30, 1996. The increase in loans
contributed to raising the Company's net interest margin to 6.4% for the
quarter ended June 30, 1996, compared to 5.1% for the same period of 1995.
Noninterest income for the quarter ended June 30, 1996, was $127,783,
up 4.4% from $122,407 for the same quarter of 1995. This increase is
attributed to improved service charges on deposits which were up 13.0% to
$96,351 for the quarter ended June 30, 1996, compared to $85,278, for the same
quarter in 1995.
Noninterest expense for the quarter ended June 30, 1996, was $311,637,
down .8% from $314,068 for the same period of 1995. Salaries and benefits were
up $20,176, or 16.3%, primarily as a result of salary increases and an increase
in the number of Bank employees. Other operating expenses were down $21,241,
or 15.2%, primarily due to a $14,353 decline in the premium rate paid by the
Bank to the Federal Deposit Insurance Corporation (the "FDIC") for deposit
insurance. In-mid 1995, the FDIC reduced the deposit insurance rates on most
banks to the statutory minimum assessment of $1,000 semiannually as a result of
the Bank Insurance Fund reaching its legally mandated reserve ratio. The FDIC
can raise the deposit insurance rates at anytime. Any increase in the deposit
insurance rates for the Bank will increase the Bank's cost of funds and there
can be no assurance that such cost can be passed on to the Bank's customers.
Loan losses, net of recoveries, during the quarter ended June 30,
1996, were $6,975, compared to a net recovery of $204 for the same period one
year ago. Loan losses, net of recoveries, amounted to $10,181 for the six
months ended June 30, 1996, compared to $137,614 for the six-month period ended
June 30, 1995. The majority of the loss in 1995 came from one loan, the loss
on which amounted to $133,368, which represented the unguaranteed portion of a
$784,000 loan, 83% guaranteed by the Small Business Administration. As a
result of the growth experienced in loans during the last half of 1995,
management decided to begin monthly loan loss provisions in January of this
year after two and one-half years of no provisions. The provision was $3,000
per month in the first quarter of 1996 and was increased to $6,000 per month in
the second quarter of 1996 as loan growth continued at a rapid pace. As a
result of the monthly loan loss provisions, $27,000 was added to the loan loss
reserve, in excess of recoveries, during the six months ended June 30, 1996,
bringing the reserve to .98% of loans at June 30, 1996, compared to 1.19% of
loans at December 31, 1995. Based on its review, management believes the
allowance for loan losses is adequate as of June 30, 1996. However, there can
be no assurance that charge-offs in future periods will not exceed the
allowance for loan losses or that additional increases in the loan loss
allowance will not be required.
Return on average assets and average equity, on an annualized basis,
for the quarter ended June 30, 1996, were 2.43% and 19.87%, respectively,
compared to 1.42% and 12.13%, respectively, for the
5
<PAGE> 7
same quarter of 1995. Return on average assets and average equity, on an
annualized basis, for the six months ended June 30, 1996 were 2.37% and 19.43%,
respectively, compared to 1.28% and 11.20%, respectively, for the same period
of 1995. Earnings per share, on a fully diluted basis, for the six and three
months periods ended June 30, 1996, amounted to $.83 and $.43, respectively,
compared to $.39 and $.22, respectively, for the same periods of 1995.
The Company's assets ended the second quarter of 1996 at $33,272,113,
down 11.6% from $37,650,768 at December 31, 1995. This decrease can be
attributed to the reduction in seasonal local government tax deposits of
approximately $5.5 million at December 31, 1995, which deposits were
subsequently withdrawn by mid-January 1996. Total deposits ended the quarter
at $28,445,230, down 15.1% from $33,486,370 at December 31, 1995. At June 30,
1996, the Company's loan to deposit ratio was 76.5%, compared to 49.2% at
December 31, 1995.
The Company has adopted Statement of Financial Accounting Standards
115 ("SFAS 115") issued by the Financial Accounting Standards Board which
provides for the classification of investment securities into the following
three categories: trading, available-for-sale and held-to-maturity. Debt
securities that an enterprise has the intent and ability to hold until maturity
are classified as held-to-maturity and reported at amortized cost. Trading
securities and available-for-sale securities are reported at market value with
unrealized gains and losses on trading securities reported in income and
unrealized gains and losses on available-for-sale securities reported as a net
amount in a separate component of shareholder's equity until realized. At June
30, 1996, the Company held $6.1 million in securities classified
available-for-sale and $2.4 million in securities classified held-to-maturity
and reflected an unrealized loss after tax of $26,607 as a separate component
in shareholder's equity. There can be no assurance that as interest rates
change in the future the amount of unrealized loss will not increase, but if
these securities are held until they mature and are repaid in accordance with
their terms, these losses will not be realized.
Management expects earnings during the second half of 1996 to be
comparable to that experienced during the first six months, contingent upon no
deterioration within the loan portfolio which would require excessive
provisions to the loan loss reserve. Although such expectations are based on
management's best judgment, actual results will depend upon a number of factors
that cannot be predicted with certainty and fulfillment of management's
expectations cannot be assured.
Liquidity and Sources of Capital
The $5.0 million reduction in deposits during the first half of 1996
is primarily reflected in Fed Funds sold which is down $10.0 million, offset by
the $5.3 million increase in loans. The reduction in Federal Funds sold is
primarily attributed to the seasonal local government tax deposits of
approximately $5.5 million at December 31, 1995, which deposits were withdrawn
by mid-January 1996. The decrease experienced in Fed Funds sold in excess of
the reduction related to the withdrawal of the seasonal local government tax
deposits is primarily reflected in the $5.3 million increase in loans. During
the first half of 1996, management expanded the held-to-maturity portion of the
investment portfolio by approximately $265,000 through the purchase of tax
exempt municipal bonds. The available-for-sale portion of the portfolio also
grew approximately $265,000 through the purchase of U.S. Treasury securities
and stocks. During the first half of the year, loans increased by
approximately $5.3 million, an amount well ahead of projections. The Company's
liquid assets at June 30, 1996, represented 23.4% of total assets, compared to
47.1% at December 31, 1995.
At June 30, 1996, the Company's risk based capital ratio was 20.4% and
its leverage ratio was 14.6%, compared to 20.9% and 11.8%, respectively, at
December 31, 1995. Both the Company and
6
<PAGE> 8
the Bank are, at this time, in compliance with the Federal Reserve Board's and
the OCC's capital requirements. Management expects asset growth to continue at
a deliberate and controllable pace during the coming months and capital should
continue to be adequate. However, no assurances can be given in this regard,
as rapid growth, deterioration in loan quality and poor earnings, or a
combination of these factors, could change the Company's capital position in a
relatively short period of time.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company
or the Bank is a party or of which any of their property is the subject.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Shareholders on April 9, 1996,
at which meeting all four of management's nominees for the Board of Directors
were reelected to serve as Class I Directors for three year terms. The
individuals reelected were: Tommie C. Fuller, Sr., receiving 235,349 votes for
and 2,127 votes against or withheld, with no votes abstaining; Douglas R.
Harper, receiving 235,385 votes for and 2,091 votes against or withheld, with
no votes abstaining; J. Lex Kenerly, III, M.D., receiving 234,975 votes for and
2,501 votes against or withheld, with no votes abstaining; and W. Donald
Whitaker, receiving 235,375 votes for and 2,101 votes against or withheld, with
no votes abstaining. Class II and Class III Directors continuing in office
are: Patricia B. Armstrong, Leonard D. Brannen, C. Revis Clary, J. Ashley
Dukes, James L. Lott, Jerry D. McDaniel, Ferrell L. O'Quinn, and Bernon W.
Sapp.
ITEM 5. OTHER INFORMATION.
None.
7
<PAGE> 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
3(a) Articles of Incorporation and Articles of Amendment
of Company (incorporated by reference to Exhibit 3(a)
of Registration Statement on Form S-18, File No.
33-31093-A).
3(b) Bylaws of Company (incorporated by reference to
Exhibit 3(b) of Registration Statement on Form S-18,
File No. 33-31093-A).
10(a) Form of Stock Warrant Agreement (incorporated by
reference to Exhibit 10(c) of Registration Statement
on Form S-18, File No. 33-31093-A).
10(b) 1990 Stock Option Plan (incorporated by reference to
Exhibit 10(d) of the Annual Report on Form 10-K filed
by the Company for the fiscal year ended December 31,
1990).
10(c) Form of Employment Agreement for Executive Officers
(incorporated by reference to Exhibit 10(f) of the
Annual Report on Form 10-KSB filed by the Company for
the fiscal year ended December 31, 1992).
27(a) Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Company during
the quarter ended June 30, 1996.
8
<PAGE> 10
SIGNATURES
In accordance with 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 13, 1996 By: /s/ Douglas R. Harper
------------------- ----------------------------------------
Douglas R. Harper
President, Chief Executive Officer &
Principal Financial Officer
9
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
- - ------ ----------- -----------
<S> <C>
3(a) Articles of Incorporation and Articles of Amendment of Company (incorporated by
reference to Exhibit 3(a) of Registration Statement on Form S-18, File No. 33-31093-
A).
3(b) Bylaws of Company (incorporated by reference to Exhibit 3(b) of Registration Statement
on Form S-18, File No. 33-31093-A).
10(a) Form of Stock Warrant Agreement (incorporated by reference to Exhibit 10(c) of
Registration Statement on Form S-18, File No. 33-31093-A).
10(b) 1990 Stock Option Plan (incorporated by reference to Exhibit 10(d) of the Annual
Report on Form 10-K filed by the Company for the fiscal year ended December 31, 1990).
10(c) Form of Employment Agreement for Executive Officers (incorporated by reference to
Exhibit 10(f) of the Annual Report on Form 10-KSB filed by the Company for the fiscal
year ended December 31, 1992).
27(a) Financial Data Schedule (for SEC use only).
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,660,771
<INT-BEARING-DEPOSITS> 65,057
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,076,451
<INVESTMENTS-CARRYING> 2,435,526
<INVESTMENTS-MARKET> 2,454,292
<LOANS> 21,767,657
<ALLOWANCE> 213,488
<TOTAL-ASSETS> 33,272,113
<DEPOSITS> 28,445,230
<SHORT-TERM> 310,000
<LIABILITIES-OTHER> 355,246
<LONG-TERM> 0
0
0
<COMMON> 377,786
<OTHER-SE> 3,783,851
<TOTAL-LIABILITIES-AND-EQUITY> 33,272,113
<INTEREST-LOAN> 1,117,917
<INTEREST-INVEST> 263,662
<INTEREST-OTHER> 64,165
<INTEREST-TOTAL> 1,445,744
<INTEREST-DEPOSIT> 513,392
<INTEREST-EXPENSE> 513,440
<INTEREST-INCOME-NET> 932,304
<LOAN-LOSSES> 27,000
<SECURITIES-GAINS> 11,934
<EXPENSE-OTHER> 622,305
<INCOME-PRETAX> 560,951
<INCOME-PRE-EXTRAORDINARY> 387,342
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 387,342
<EPS-PRIMARY> 1.03
<EPS-DILUTED> .83
<YIELD-ACTUAL> 6.17
<LOANS-NON> 0
<LOANS-PAST> 1,991
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 225,039
<ALLOWANCE-OPEN> 196,669
<CHARGE-OFFS> 18,014
<RECOVERIES> 7,833
<ALLOWANCE-CLOSE> 213,488
<ALLOWANCE-DOMESTIC> 27,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
