<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: September 30, 1997
------------------
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
----------
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) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 November 7, 1997, 404,388 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>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,512,683 $ 1,385,896
Interest-bearing deposits 156,288 255,152
Federal funds sold 3,440,000 8,280,000
Investment securities:
Held-to-maturity 5,243,544 3,622,528
Available-for-sale 797,208 5,102,326
Loans, less allowances for loan losses of
$234,048 and $213,969, respectively 28,735,905 23,168,235
Premises and equipment, net 931,386 997,013
Deferred income taxes 28,896 30,796
Other assets 500,996 392,804
------------ ------------
Total assets $ 41,346,906 $ 43,234,750
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits $ 5,873,827 $ 12,970,694
Interest-bearing deposits 29,538,561 25,045,809
------------ ------------
Total deposits 35,412,388 38,016,503
Accrued interest expense 225,014 181,051
Accrued income taxes 0 325,895
Other liabilities 52,503 83,534
------------ ------------
Total liabilities 35,689,905 38,606,983
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value; authorized 10,000,000
shares; 404,388 and 377,786 shares issued and
outstanding, respectively 404,388 377,786
Surplus 3,593,520 3,354,102
Retained earnings 1,627,006 897,163
Unrealized gain (loss) net - AFS investments 32,087 (1,284)
------------ ------------
Total stockholders' equity 5,657,001 4,627,767
------------ ------------
Total liabilities and stockholders' equity $ 41,346,906 $ 43,234,750
============ ============
</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 Nine Months Ended
September 30, September 30,
------------------------- --------------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $ 803,083 $ 654,862 $ 2,222,402 $ 1,772,779
Interest-bearing deposits 1,945 150 6,074 2,135
Federal funds sold 42,774 9,448 123,853 73,613
Investment securities:
Taxable 14,402 82,859 101,623 281,093
Nontaxable 68,505 30,755 180,523 87,516
Dividends 2,870 3,614 14,554 10,296
----------- ----------- ----------- -----------
Total interest income 933,579 781,688 2,649,029 2,227,432
----------- ----------- ----------- -----------
Interest expense:
Deposits 337,672 263,692 944,394 777,084
Federal funds purchased 0 821 118 869
----------- ----------- ----------- -----------
Total interest expense 337,672 264,513 944,512 777,953
----------- ----------- ----------- -----------
Net interest income 595,907 517,175 1,704,517 1,449,479
Provision for loan losses 36,000 27,000 108,000 54,000
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 559,907 490,175 1,596,517 1,395,479
----------- ----------- ----------- -----------
Other income:
Service charges on deposits 120,490 100,244 345,182 289,464
Other operating income 46,865 38,333 118,385 115,131
Securities gains (losses), net 0 3,197 (27,332) 15,131
----------- ----------- ----------- -----------
Total other income 167,355 141,774 436,235 419,726
----------- ----------- ----------- -----------
Other expenses:
Salaries and employee benefits 154,397 149,815 454,037 441,174
Net occupancy and equipment expense 49,736 47,586 149,238 143,119
Other operating expenses 126,065 108,375 411,412 343,788
----------- ----------- ----------- -----------
Total other expenses 330,198 305,776 1,014,687 928,081
----------- ----------- ----------- -----------
Profit before income taxes 397,064 326,173 1,018,065 887,124
Income tax expense 115,246 100,227 288,221 273,836
----------- ----------- ----------- -----------
Net Profit $ 281,818 $ 225,946 $ 729,844 $ 613,288
=========== =========== =========== ===========
Earnings per common share $ 0.71 $ 0.60 $ 1.85 $ 1.62
=========== =========== =========== ===========
Weighted average shares outstanding 397,900 377,786 394,763 377,786
=========== =========== =========== ===========
Earnings per common share fully diluted $ 0.60 $ 0.47 $ 1.58 $ 1.27
=========== =========== =========== ===========
Weighted average fully diluted shares outstanding 474,257 483,091 470,070 483,091
=========== =========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 4
WAYNE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit $ 729,844 $ 613,288
Adjustments to reconcile net profit to net cash provided by
operating activities:
Depreciation, amortization, and accretion, net 71,575 84,960
Provision for loan losses 108,000 54,000
Securities (gains) losses, net 27,332 (15,131)
Net decrease (increase) in available for sale securities (50,560) 86,485
Net decrease in deferred taxes 1,900 23,395
Net decrease (increase) in other assets (108,192) 22,536
Net increase (decrease) in accrued interest payable 43,963 (36,722)
Net increase (decrease) in accrued income taxes (325,895) 168,757
Net increase (decrease) in other liabilities (31,031) 10,038
Net increase (decrease) in unrealized gain (loss) AFS
investments 33,370 (57,080)
------------ ------------
Net cash provided by operating activities 500,306 954,526
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities held-to-maturity (1,754,154) (393,502)
Purchase of investment securities available-for-sale (371,617) (2,626,654)
Proceeds from maturities of interest-bearing time deposits 98,864 0
Proceeds from maturities of securities held-to-maturity 135,000 130,000
Proceeds from maturities of securities available-for-sale 1,500,000 1,750,000
Proceeds from sales of securities available-for-sale 3,200,776 1,289,522
Net increase in loans (5,675,670) (6,286,735)
Purchase of fixed assets (8,623) (89,895)
------------ ------------
Net cash used by investing activities (2,875,424) (6,227,264)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (2,604,115) (2,855,812)
Proceeds from issuance of common stock 266,020 0
------------ ------------
Net cash used by financing activities (2,338,095) (2,855,812)
------------ ------------
Net decrease in cash and cash equivalents (4,713,213) (8,128,550)
Cash and cash equivalents at beginning of period 9,665,896 11,918,713
------------ ------------
Cash and cash equivalents at end of period $ 4,952,683 $ 3,790,163
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH PAID FOR:
Interest $ 900,431 $ 813,806
Income taxes $ 633,409 $ 52,281
</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 nine months ended September 30, 1997, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, please refer to the consolidated
financial statements and footnotes thereto for the Company's fiscal year ended
December 31, 1996, included in the Company's Form 10-KSB for the year ended
December 31, 1996.
4
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Wayne Bancorp, Inc. (the "Company") was organized under the Georgia
Business Corporation Code on September 5, 1989, to become a one-bank holding
company by acquiring all the capital stock of Wayne National Bank (the "Bank")
upon its formation. The Bank commenced business on September 26, 1990, and the
only activity of the Company since then has been the ownership and operation of
the Bank. The Bank is engaged in a general commercial and retail banking
business from its main office in Jesup, Georgia.
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
unaudited consolidated financial statements and related notes and other
statistical information included elsewhere herein.
Results of Operations
The Company experienced a net profit during the quarter ended September
30, 1997, of $281,818, compared to $225,946 during the same period of 1996. This
brings net profit for the nine months ended September 30, 1997, to $729,844,
compared to $613,288 for the nine months ended September 30, 1996. The
improvement in earnings for the third quarter is attributed to higher net
interest income which is up 15.2% from the third quarter of 1996. The
improvement in net interest income can be attributed to a 17.8% increase in
earning assets to $38.6 million on September 30, 1997, from $32.8 million on
September 30, 1996. The segment of earning assets showing the most significant
increase was loans which grew $6.3 million, or 27.5%, during the twelve months
ending September 30, 1997. The Company's net interest margin declined slightly
to 6.4% for the quarter ended September 30, 1997, compared to 6.5% for the same
period of 1996.
Noninterest income for the quarter ended September 30, 1997, was
$167,355, up 18.0% from $141,774 for the same quarter of 1996. For the nine
month period ended September 30, 1997, noninterest income increased $16,509, or
3.9%, to $436,235, from $419,726 for the same period of 1996. The increase was
primarily the result of improved service charges on deposits which were up 19.2%
to $345,182 for the nine months ended September 30, 1997, compared to $289,464
for the same period of 1996. This increase is attributable primarily to the
increase in the number of demand deposit accounts.
Noninterest expense for the quarter ended September 30, 1997, was
$330,198, an increase of $24,422, or 8.0%, from $305,776 for the same period of
1996. Salaries and benefits were up $4,582, or 3.1%, to $154,397 for the quarter
ended September 30, 1997, from $149,815 for the same period of 1996, primarily
as a result of salary increases and an increase in the number of Bank employees.
Other operating expenses were up $17,690, or 16.3%, to $126,065 for the quarter
ended September 30, 1997, from $108,375 for the same period of 1996. This
increase is primarily a result of increases in advertising and other
miscellaneous expenses. For the nine month period ended September 30, 1997,
noninterest expense increased $86,606, or 9.3%, to $1,014,687, from $928,081 for
the same period of 1996. This increase in noninterest expense is primarily the
result of an increase in salaries and benefits of $12,863, or 2.9%, to $454,037
for the nine months ended September 30, 1997, from $441,174 for the same period
of 1996. The increase in salaries and benefits is a result of salary increases
and an increase in the number of Bank employees. Other operating expenses were
up $67,624, or 19.7%, to $411,412 for the nine months ended September 30, 1997,
from $343,788 for the same nine month period of 1996. This increase is primarily
a result of increases in advertising, travel, education, office supplies,
postage and audit expenses.
5
<PAGE> 7
Loan losses, net of recoveries, during the quarter ended September 30,
1997, were $37,480, compared to $37,435 for the same period one year ago. Loan
losses, net of recoveries, amounted to $87,480 for the nine months ended
September 30, 1997, compared to $47,615 for the nine months ended September 30,
1996. Continuing a trend which began in 1996, the majority of loan losses
experienced in 1997 has been the result of consumer bankruptcies on secured
loans. Because these loans are secured, management believes significant
recoveries will be realized as these consumers begin paying within their
approved plan to the bankruptcy court; however, the timing and amount of
recoveries cannot be determined. Past due loans, although higher than normal for
the Bank at 1.05% of total loans as of September 30, 1997, continue to be well
below the national average of our peer group of 2.44%.
As a result of the increase in loan charge-offs, $20,079 was added to
the loan loss reserve in excess of recoveries during the nine months ended
September 30, 1997, bringing the reserve to .81% of loans at September 30, 1997,
compared to .89% of loans at December 31, 1996. Based on its review, management
believes the allowance for loan losses is adequate as of September 30, 1997.
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 September 30, 1997, were 2.76% and 20.43%, respectively,
compared to 2.63% and 20.96%, respectively, for the same quarter of 1996. Return
on average assets and average equity, on an annualized basis, for the nine
months ended September 30, 1997, were 2.49% and 18.98%, respectively, compared
to 2.45% and 19.86%, respectively, for the same period of 1996. Earnings per
share, on a fully diluted basis, for the nine and three month periods ended
September 30, 1997, amounted to $1.58 and $.60, respectively, compared to $1.27
and $.47, respectively, for the same periods of 1996.
The Company's assets ended the third quarter of 1997 at $41,346,906,
down 4.4% from $43,234,750 at December 31, 1996. This decrease can be attributed
to the reduction in seasonal local government tax deposits of approximately $5.4
million at December 31, 1996, which deposits were subsequently withdrawn by
mid-January 1997, and is reflected in the decrease in federal funds sold, offset
by increases in loans. Total deposits ended the quarter at $35.4 million, down
6.9% from $38.0 million at December 31, 1996, which decrease is also related to
the reduction in seasonal local government tax deposits, offset by normal growth
in the Bank's deposits. At September 30, 1997, the Company's loan to deposit
ratio was 81.1%, compared to 60.9% at December 31, 1996.
Management expects earnings to level off during the final quarter of
1997 to be comparable to that experienced during the third quarter of 1997,
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 $2.6 million reduction in deposits during the nine month period
ended September 30, 1997, is primarily reflected in federal funds sold which
decreased $4.8 million, offset by the $5.6 million increase in loans. The
reduction in federal funds sold is primarily attributed to the seasonal local
government tax deposits of approximately $5.4 million at December 31, 1996,
which deposits were withdrawn by mid-January 1997. During the first nine months
of 1997, management has expanded the held-to-maturity portion of the investment
portfolio by approximately $1.6 million through the purchase of municipal bonds.
The available-for-sale portion of the portfolio has declined approximately $4.3
6
<PAGE> 8
million through the sale of the U.S. Treasury securities and maturities which
were not reinvested in securities. During the first nine months of 1997, loans
have increased by approximately $5.6 million, an amount well ahead of
projections. The Company's liquid assets at September 30, 1997, represented
14.3% of total assets, compared to 34.7% at December 31, 1996.
During the first quarter of 1997, two former directors of the Company
exercised warrants for the Company's common stock, par value $1.00 per share
(the "Common Stock"), resulting in the issuance of 19,046 shares of the Common
Stock. The exercise price was $10.00 per share, resulting in an injection of
$190,460 into the Company's capital during the first quarter of 1997. During the
third quarter of 1997, two officers of the Bank exercised options for the
Company's Common Stock, resulting in the issuance of 7,556 shares of the Common
Stock. The exercise price was $10.00 per share, resulting in an injection of
$75,560 into the Company's capital during the third quarter of 1997. At
September 30, 1997, the Company's risk based capital ratio was 19.3% and its
leverage ratio was 14.0%, compared to 19.6% and 12.3%, respectively, at December
31, 1996. Both the Company and 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.
On February 5, 1997, two former directors of the Company exercised
warrants for the Common Stock, resulting in the issuance of 19,046 shares of the
Common Stock. The warrants had an exercise price of $10 per share and thus the
Company received $190,460. Near the end of September 1997, two officers of the
Bank exercised options for the Common Stock, resulting in the issuance of 7,556
shares of the Common Stock. The options had an exercise price of $10 per share
and thus the Company received $75,560. The Common Stock issued pursuant to the
exercise of the warrants and the options represent unregistered securities,
which issuance was considered to be exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) as a transaction by an issuer
not involving any public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during
the quarter ended September 30, 1997.
7
<PAGE> 9
ITEM 5. OTHER INFORMATION.
None.
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 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 September 30, 1997.
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: November 7, 1997 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> <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 Financial Data Schedule (for SEC use only).
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,512,683
<INT-BEARING-DEPOSITS> 156,288
<FED-FUNDS-SOLD> 3,440,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 797,208
<INVESTMENTS-CARRYING> 5,243,544
<INVESTMENTS-MARKET> 5,374,386
<LOANS> 28,735,905
<ALLOWANCE> 234,048
<TOTAL-ASSETS> 41,346,906
<DEPOSITS> 35,412,388
<SHORT-TERM> 0
<LIABILITIES-OTHER> 277,517
<LONG-TERM> 0
0
0
<COMMON> 404,388
<OTHER-SE> 5,252,613
<TOTAL-LIABILITIES-AND-EQUITY> 41,346,906
<INTEREST-LOAN> 2,222,402
<INTEREST-INVEST> 302,774
<INTEREST-OTHER> 123,853
<INTEREST-TOTAL> 2,649,029
<INTEREST-DEPOSIT> 944,394
<INTEREST-EXPENSE> 944,512
<INTEREST-INCOME-NET> 1,704,517
<LOAN-LOSSES> 108,000
<SECURITIES-GAINS> (27,332)
<EXPENSE-OTHER> 1,014,687
<INCOME-PRETAX> 1,018,065
<INCOME-PRE-EXTRAORDINARY> 1,018,065
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 729,844
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.58
<YIELD-ACTUAL> 6.27
<LOANS-NON> 27,805
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 485,841
<ALLOWANCE-OPEN> 213,969
<CHARGE-OFFS> 114,247
<RECOVERIES> 26,326
<ALLOWANCE-CLOSE> 234,048
<ALLOWANCE-DOMESTIC> 234,048
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
