<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: March 31, 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 May 1, 1997, 396,832 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>
March 31, December 31,
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
Cash and due from banks $ 1,364,430 $ 1,385,896
Interest-bearing deposits 276,059 255,152
Federal funds sold 5,700,000 8,280,000
Investment securities:
Held-to-maturity 4,153,445 3,622,528
Available-for-sale 1,593,475 5,102,326
Loans, less allowances for loan losses of
$207,255 and $213,969, respectively 25,074,962 23,168,235
Premises and equipment, net 978,149 997,013
Deferred income taxes 22,344 30,796
Other assets 395,594 392,804
----------- -----------
Total assets $39,558,458 $43,234,750
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits $7,276,807 $12,970,694
Interest-bearing deposits 26,915,346 25,045,809
----------- -----------
Total deposits 34,192,153 38,016,503
Accrued interest expense 181,677 181,051
Accrued income taxes 90,080 325,895
Other liabilities 46,883 83,534
----------- -----------
Total liabilities 34,510,793 38,606,983
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value; authorized 10,000,000
shares; 396,832 and 377,786 shares issued and 396,832 377,786
outstanding, respectively
Surplus 3,525,516 3,354,102
Retained earnings 1,110,190 897,163
Unrealized gain (loss) net - AFS investments 15,127 (1,284)
----------- -----------
Total stockholders' equity 5,047,665 4,627,767
----------- -----------
Total liabilities and stockholders' equity $39,558,458 $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
March 31,
------------------------
1997 1996
-------- --------
<S> <C> <C>
Interest Income:
Loans, including fees $680,680 $526,387
Interest-bearing deposits 1,821 1,324
Federal funds sold 23,268 49,638
Investment securities:
Taxable 67,536 97,374
Nontaxable 53,385 26,476
Dividends 6,635 3,042
-------- --------
Total interest income 833,325 704,241
-------- --------
Interest expense:
Deposits 289,836 265,767
Federal funds purchased 118 0
-------- --------
Total interest expense 289,954 265,767
-------- --------
Net interest income 543,371 438,474
Provision for loan losses 36,000 9,000
-------- --------
Net interest income after
provision for loan losses 507,371 429,474
-------- --------
Other income:
Service charges on deposits 106,685 92,869
Other operating income 41,996 44,620
Securities gains (losses) net (30,297) 12,680
-------- --------
Total other income 118,384 150,169
-------- --------
Other expenses:
Salaries and employee benefits 151,047 147,457
Net occupancy and equipment expense 48,783 46,099
Other operating expenses 130,050 117,112
-------- --------
Total other expenses 329,880 310,668
-------- --------
Profit before income taxes 295,875 268,975
Income tax expense 82,848 83,184
-------- --------
Net Profit $213,027 $185,791
======== ========
Earnings per common share $0.55 $0.49
======== ========
Weighted average shares outstanding 389,425 377,786
======== ========
Earnings per common share fully diluted $0.49 $0.40
======== ========
Weighted average fully diluted shares outstanding 473,356 468,217
======== ========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
2
<PAGE> 4
WAYNE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit $ 213,027 $ 185,791
Adjustments to reconcile net profit to net cash provided by
operating activities:
Depreciation, amortization, and accretion, net 26,466 28,210
Provision for loan losses 36,000 9,000
(Gain) loss on sale of securities 30,297 (12,680)
Net decrease (increase) in available-for-sale securities (24,865) 68,144
Net decrease (increase) in deferred taxes 8,452 29,629
Net decrease (increase) in other assets (2,790) (38,940)
Net increase (decrease) in accrued interest payable 626 (42,791)
Net increase (decrease) in accrued income taxes (235,815) 8,705
Net increase (decrease) in other liabilities (36,651) (7,787)
Net increase (decrease) unrealized gain (loss)
AFS investments 16,411 (44,975)
---------- ----------
Net cash provided by operating activities 31,158 182,306
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of interest-bearing deposits (20,907) (24,994)
Purchase of investment securities held-to-maturity (665,260) (294,095)
Purchase of investment securities available-for-sale (50,867) (2,429,455)
Proceeds from maturities of securities held-to-maturity 135,000 130,000
Proceeds from maturities of securities available-for-sale 500,000 500,000
Proceeds from sales of securities available-for-sale 3,052,954 151,529
Net (increase) decrease in loans (1,942,727) (2,074,419)
Purchase of fixed assets (6,927) (57,477)
---------- ----------
Net cash provided (used) by investing activities 1,001,266 (4,098,911)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (3,824,350) (5,254,226)
Proceeds from issuance of common stock 190,460 0
---------- ----------
Net cash provided (used) by financing activities (3,633,890) (5,254,226)
---------- ----------
Net increase (decrease) in cash and cash equivalents (2,601,466) (9,170,831)
Cash and cash equivalents at beginning of period 9,665,896 11,805,429
---------- ----------
Cash and cash equivalents at end of period $7,064,430 $2,634,598
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH PAID FOR:
Interest $ 289,210 $ 308,558
Income taxes $ 322,666 $ 21,681
</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 three months ended March 31, 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
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 March
31, 1997, of $213,027, compared to a net profit of $185,791 during the same
period of 1996. This 14.7% increase in earnings can be attributed primarily to
a 23.9% increase in net interest income to $543,371 for the quarter ended March
31, 1997, compared to $438,474 during the same period of 1996. This
improvement in net interest income came primarily as a result of a 17.7%
increase in average earning assets to $35.1 million at March 31, 1997, compared
to $29.8 million at March 31, 1996. By far, the largest increase in any
particular segment of earning assets occurred in loans which grew $6.7 million,
or 36.7%, to $25.1 million at March 31, 1997, compared to $18.3 million at
March 31, 1996. This increase in loans contributed to the increase in the
Company's net interest margin for the quarter ended March 31, 1997, to 6.49% on
a fully taxable equivalent basis, compared to 6.01% for the same quarter of
1996.
Noninterest income for the quarter ended March 31, 1997, was $118,384,
down 21.2% from $150,169 for the same quarter of 1996. This decrease can be
attributed to a $30,297 loss from the sale of securities, comprised of a
$40,003 loss by the Bank, partially offset by $9,706 gain by the Company,
compared to a $12,680 gain in the same period of 1996. The Bank's loss came as
a result of management's efforts to restructure the investment portfolio
following the Federal Reserve Bank's decision to increase interest rates in
late March. Management's action had a positive effect on the Bank's interest
sensitivity position and greatly improved it's ability to deal with rising
interest rates. The major segment of noninterest income, service charges on
deposits, increased 14.9% to $106,685 for the quarter ended March 31, 1997,
compared to $92,869 for the same period of 1996.
Noninterest expense for the quarter ended March 31, 1997, was
$329,880, up 6.2% from $310,668 for the same quarter of 1996. Salaries and
benefits were up $3,590, or 2.4%, primarily as a result of salary increases.
Occupancy expenses were up $2,684, or 5.8%, primarily due to an increase in
building and equipment maintenance. Other operating expenses were up $12,938,
or 11.0%, primarily due to increases in office supplies, postage and audit
expenses.
Loan losses, net of recoveries, amounted to $42,714 during the quarter
ended March 31, 1997, compared to $3,206 during the same quarter of 1996. A
majority of the losses experienced during the first quarter of 1997 resulted
from several consumer bankruptcies of relatively small amounts. Many of these
loans were secured, therefore, the Bank should ultimately recover most of these
losses. However, the amount of these recoveries and the length of time it will
take is undeterminable at this time. The Bank added $36,000 in excess of
recoveries to the loan loss reserve during the first quarter of 1997, compared
to $9,000 during the same period of 1996, bringing the reserve to .82% of loans
at March 31, 1997, compared to 1.09% of loans at March 31, 1996. Based on its
review, management believes the allowance for loan loss is adequate as of March
31, 1997. However, there can be no assurance that
5
<PAGE> 7
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 March 31, 1997, were 2.29% and 17.40%, respectively,
compared to 2.30% and 18.94%, respectively, for the same quarter of 1996.
Earnings per share on a fully diluted basis for the same comparable periods
amounted to $.49 and $.40, respectively.
The Company's assets ended the first quarter of 1997 at $39,558,458,
down 8.5% 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. Total deposits ended the quarter
at $34,192,153, down 10.1% from $38,016,503 at December 31, 1996. At March 31,
1997, the Company's loan to deposit ratio was 73.3%, compared to 60.9% at
December 31, 1996.
Management expects earnings during the remaining quarters of 1997 to
be comparable to that experienced during the first quarter, net of securities
gains and losses, 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 $3.8 million reduction in deposits during the quarter ended March
31, 1997, is primarily reflected in federal funds sold which decreased $2.6
million and investment securities which decreased $3.0 million, offset by the
$1.9 million increase in loans. The reduction in deposits 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 quarter of 1997, management expanded the
held-to-maturity portion of the investment portfolio by $530,000 through the
purchase of tax exempt municipal bonds. The available-for-sale portion of the
portfolio declined $3.5 million during the first quarter of 1997 from the sale
of U.S. Treasury securities, and maturities which were not reinvested in
securities. Also, during the first quarter of 1997, loans increased by
approximately $1.9 million, an amount slightly ahead of projections. The
Company's liquid assets at March 31, 1997, represented 22.6% 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. On March 31, 1997, the Company's risk
based capital ratio was 19.6% and its leverage ratio was 13.9%, 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
Office of the Comptroller of the Currency's capital requirements. Management
expects asset growth to continue at a deliberate and controllable pace during
the coming months and believes 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.
6
<PAGE> 8
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. The Common Stock issued pursuant to the
exercise of the warrants 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 first quarter of 1997.
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).
7
<PAGE> 9
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 March 31, 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: May 6, 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(a) Financial Data Schedule (for SEC use only).
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,364,430
<INT-BEARING-DEPOSITS> 276,059
<FED-FUNDS-SOLD> 5,700,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,593,475
<INVESTMENTS-CARRYING> 4,153,445
<INVESTMENTS-MARKET> 4,169,300
<LOANS> 25,282,217
<ALLOWANCE> 207,255
<TOTAL-ASSETS> 39,558,458
<DEPOSITS> 34,192,153
<SHORT-TERM> 0
<LIABILITIES-OTHER> 318,640
<LONG-TERM> 0
0
0
<COMMON> 396,832
<OTHER-SE> 4,650,833
<TOTAL-LIABILITIES-AND-EQUITY> 39,558,458
<INTEREST-LOAN> 680,680
<INTEREST-INVEST> 127,556
<INTEREST-OTHER> 25,089
<INTEREST-TOTAL> 833,325
<INTEREST-DEPOSIT> 289,836
<INTEREST-EXPENSE> 289,954
<INTEREST-INCOME-NET> 543,371
<LOAN-LOSSES> 36,000
<SECURITIES-GAINS> (30,297)
<EXPENSE-OTHER> 329,880
<INCOME-PRETAX> 295,875
<INCOME-PRE-EXTRAORDINARY> 295,875
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 213,027
<EPS-PRIMARY> .55
<EPS-DILUTED> .49
<YIELD-ACTUAL> 6.49
<LOANS-NON> 26,861
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 389,937
<ALLOWANCE-OPEN> 213,969
<CHARGE-OFFS> 50,277
<RECOVERIES> 7,563
<ALLOWANCE-CLOSE> 207,255
<ALLOWANCE-DOMESTIC> 207,255
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
