-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A6+dL71shHpsFgceESuPUIdXflJ144yIXQxYxcfmcu8fM3qbTKdzK7QQGiu3mGtm +4mYEMnQW6WMYsf7T0W7uQ== 0000914317-04-000675.txt : 20040212 0000914317-04-000675.hdr.sgml : 20040212 20040212121351 ACCESSION NUMBER: 0000914317-04-000675 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WAYNE SAVINGS BANCSHARES INC /DE/ CENTRAL INDEX KEY: 0001036030 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 311557791 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23433 FILM NUMBER: 04589257 BUSINESS ADDRESS: STREET 1: 151 N MARKET ST CITY: WOOSTER STATE: OH ZIP: 44691-4809 BUSINESS PHONE: 3302645767 MAIL ADDRESS: STREET 1: 151 N MARKET ST CITY: WOOSTER STATE: OH ZIP: 44691-4809 FORMER COMPANY: FORMER CONFORMED NAME: WAYNE SAVINGS BANKSHARES INC DATE OF NAME CHANGE: 19970319 10-Q 1 form10q-57326_wayne.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20552 (Mark One) |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2003 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _______________ Commission File No. 0-23433 WAYNE SAVINGS BANCSHARES, INC. (Exact name of registrant as specified in its charter) Delaware 31-1557791 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 151 North Market Street Wooster, Ohio 44691 (Address of principal (Zip Code) executive office) Registrant's telephone number, including area code: (330) 264-5767 Check whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12 B-2 of the Exchange Act) Yes |_| No |X| As of February 6, 2004, the latest practicable date, 3,907,318 shares of the registrant's common stock, $.10 par value, were issued and outstanding. 1 Wayne Savings Bancshares, Inc. INDEX Page PART I - FINANCIAL INFORMATION Item 1 Consolidated Statements of Financial Condition 3 Consolidated Statements of Earnings 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3 Quantitative and Qualitative Disclosures About Market Risk 20 Item 4 Controls and Procedures 20 PART II - OTHER INFORMATION Item 1 Legal Proceedings 21 Item 2 Changes in Securities and Use of Proceeds 21 Item 3 Defaults Upon Senior Securities 21 Item 4 Submission of Matters to a Vote of Security Holders 21 Item 5 Other Information 21 Item 6 Exhibits and Reports on Form 8-K 21 SIGNATURES 22 2 Wayne Savings Bancshares, Inc. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands, except share data)
December 31, March 31, ASSETS 2003 2003 Cash and due from banks $ 3,328 $ 2,967 Federal funds sold 2,850 8,000 Interest-bearing deposits in other financial institutions 7,064 6,529 --------- --------- Cash and cash equivalents 13,242 17,496 Investment securities available for sale - at market 24,777 17,036 Investment securities - at amortized cost, approximate market value of $14,875 and $19,211 as of December 31, 2003 and March 31, 2003, respectively 14,089 18,805 Mortgage-backed securities available for sale - at market 84,072 66,151 Mortgage-backed securities - at cost, approximate market value of $5,008 and $9,927 as of December 31, 2003 and March 31, 2003, respectively 4,927 9,851 Loans receivable - net 208,745 228,373 Office premises and equipment - net 8,748 8,818 Real estate acquired through foreclosure 167 -- Federal Home Loan Bank stock - at cost 4,164 4,041 Cash surrender value of life insurance 6,252 5,121 Accrued interest receivable on loans 831 948 Accrued interest receivable on mortgage-backed securities 405 380 Accrued interest receivable on investments and interest-bearing deposits 409 313 Prepaid expenses and other assets 1,136 1,532 Prepaid federal income taxes -- 126 --------- --------- Total assets $ 371,964 $ 378,991 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits $ 294,363 $ 300,931 Advances from the Federal Home Loan Bank 30,000 30,000 Advances by borrowers for taxes and insurance 1,151 712 Accrued interest payable 102 235 Accounts payable on mortgage loans serviced for others 68 130 Other liabilities 1,145 1,638 Accrued federal income taxes 42 -- Deferred federal income taxes 741 682 --------- --------- Total liabilities 327,612 334,328 Commitments -- -- Stockholders' equity Common stock (8,000,000 shares of $ .10 par value authorized; 3,907,318 and 3,888,795 shares issued and outstanding at December 31, 2003 and March 31, 2003, respectively) 391 389 Additional paid-in capital 34,365 34,208 Retained earnings - substantially restricted 12,373 11,830 Less required contributions for shares acquired by Employee Stock Ownership Plan (1,495) (1,612) Shares acquired by Management Recognition Plan (1,142) -- Accumulated other comprehensive loss (140) (152) --------- --------- Total stockholders' equity 44,352 44,663 --------- --------- Total liabilities and stockholders' equity $ 371,964 $ 378,991 ========= =========
See accompanying notes to consolidated financial statements. 3 Wayne Savings Bancshares, Inc. CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except share data)
Nine months Three months ended ended December 31, December 31, 2003 2002 2003 2002 Interest income Loans $ 10,515 $ 12,866 $ 3,277 $ 4,117 Mortgage-backed securities 1,767 875 648 470 Investment securities 1,113 835 376 346 Interest-bearing deposits and other 191 406 61 123 -------- -------- -------- -------- Total interest income 13,586 14,982 4,362 5,056 Interest expense Deposits 4,526 6,673 1,423 2,006 Borrowings 938 430 313 299 -------- -------- -------- -------- Total interest expense 5,464 7,103 1,736 2,305 -------- -------- -------- -------- Net interest income 8,122 7,879 2,626 2,751 Provision for losses on loans 63 75 -- 37 -------- -------- -------- -------- Net interest income after provision for losses on loans 8,059 7,804 2,626 2,714 Other income Gain on sale of loans 91 42 30 26 Increase in cash surrender value of life insurance 211 54 77 54 Loss on disposal of real estate acquired through foreclosure -- (11) -- -- Service fees, charges and other operating 1,177 1,077 383 388 -------- -------- -------- -------- Total other income 1,479 1,162 490 468 General, administrative and other expense Employee compensation and benefits 3,972 3,475 1,372 1,189 Occupancy and equipment 1,098 1,116 357 371 Federal deposit insurance premiums 36 41 12 14 Franchise taxes 230 231 76 77 Other operating 1,462 1,281 498 456 -------- -------- -------- -------- Total general, administrative and other expense 6,798 6,144 2,315 2,107 -------- -------- -------- -------- Earnings before income taxes 2,740 2,822 801 1,075 Federal incomes taxes Current 783 969 350 481 Deferred 53 (47) (109) (145) -------- -------- -------- -------- Total federal income taxes 836 922 241 336 -------- -------- -------- -------- NET EARNINGS $ 1,904 $ 1,900 $ 560 $ 739 ======== ======== ======== ======== EARNINGS PER SHARE Basic $ 0.51 $ 0.50 $ 0.15 $ 0.19 ======== ======== ======== ======== Diluted $ 0.51 $ 0.50 $ 0.15 $ 0.19 ======== ======== ======== ========
See accompanying notes to consolidated financial statements. -4- Wayne Savings Bancshares, Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands)
Nine months Three months ended ended December 31, December 31, 2003 2002 2003 2002 Net earnings $ 1,904 $1,900 $ 560 $739 Other comprehensive income, net of tax: Unrealized holding gains on securities, net of taxes of $6, $133, $134 and $100, during the respective periods 12 259 260 194 ------- ------ ----- ---- Comprehensive income $ 1,916 $2,159 $ 820 $933 ======= ====== ===== ==== Accumulated comprehensive income (loss) $ (140) $ 281 $(140) $281 ======= ====== ===== ====
See accompanying notes to consolidated financial statements. -5- Wayne Savings Bancshares, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended December 31, (In thousands)
2003 2002 Cash flows from operating activities: Net earnings for the period $ 1,904 $ 1,900 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Amortization of discounts and premiums on loans, investments and mortgage-backed securities - net 1,359 253 Amortization of deferred loan origination fees (441) (318) Depreciation and amortization 392 422 Gain on sale of loans (49) (27) Proceeds from sale of loans in the secondary market 4,665 3,169 Loans originated for sale in the secondary market (4,627) (1,715) Provision for losses on loans 63 75 Loss on disposal of real estate acquired through foreclosure -- 11 Federal Home Loan Bank stock dividends (123) (137) Increase (decrease) in cash due to changes in: Accrued interest receivable on loans 117 173 Accrued interest receivable on mortgage-backed securities (25) (165) Accrued interest receivable on investments and interest-bearing deposits (96) (198) Prepaid expenses and other assets 396 (674) Accrued interest payable (133) (120) Accounts payable on mortgage loans serviced for others (62) 46 Other liabilities (493) 83 Federal income taxes Current 42 122 Deferred 53 (47) -------- -------- Net cash provided by operating activities 2,942 2,853 Cash flows provided by (used in) investing activities: Purchase of investment securities designated as held to maturity -- (14,049) Purchase of investment securities designated as available for sale (21,129) (5,086) Proceeds from maturity of investment securities designated as held to maturity 4,690 12,927 Proceeds from maturity of investment securities designated as available for sale 13,523 1,673 Purchase of mortgage-backed securities designated as held to maturity -- (3,557) Purchase of mortgage-backed securities designated as available for sale (44,446) (47,108) Principal repayments on mortgage-backed securities designated as held to maturity 4,756 5,691 Principal repayments on mortgage-backed securities designated as available for sale 25,360 2,774 Loan principal repayments 73,680 57,709 Loan disbursements (53,646) (45,213) Purchase of office premises and equipment - net (322) (156) Purchase of bank-owned life insurance (920) (5,000) Increase in cash surrender value of life insurance (211) (54) Proceeds from sale of real estate acquired through foreclosure -- 8 Purchase of Federal Home Loan Bank stock -- (97) -------- -------- Net cash provided by (used in) investing activities 1,335 (39,538) -------- -------- Net cash provided by (used in) operating and investing activities (balance carried forward) 4,277 (36,685) -------- --------
-6- Wayne Savings Bancshares, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the nine months ended December 31, (In thousands)
2003 2002 Net cash provided by (used in) operating and investing activities (balance brought forward) $ 4,277 $(36,685) Cash flows provided by (used in) financing activities: Net increase (decrease) in deposit accounts (6,568) 19,299 Proceeds from Federal Home Loan Bank advances -- 25,000 Advances by borrowers for taxes and insurance 439 544 Dividends paid on common stock (1,341) (623) Proceeds from exercise of stock options 61 16 Prepaid tax benefits related to employee stock plans 20 -- Shares acquired by Management Recognition Plan (1,142) -- -------- -------- Net cash provided by (used in) financing activities (8,531) 44,236 -------- -------- Net increase (decrease) in cash and cash equivalents (4,254) 7,551 Cash and cash equivalents at beginning of period 17,496 27,883 -------- -------- Cash and cash equivalents at end of period $ 13,242 $ 35,434 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for: Federal income taxes $ 635 $ 713 ======== ======== Interest on deposits and borrowings $ 5,597 $ 7,223 ======== ======== Supplemental disclosure of noncash investing activities: Issuance of mortgage loan upon sale of impaired loan $ -- $ 450 ======== ======== Unrealized gains on securities designated as available for sale, net of related tax effects $ 12 $ 259 ======== ======== Recognition of mortgage servicing rights in accordance with SFAS No. 140 $ 42 $ 15 ======== ========
See accompanying notes to consolidated financial statements. -7- Wayne Savings Bancshares, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the nine and three month periods ended December 31, 2003 and 2002 1. Basis of Presentation The accompanying unaudited consolidated financial statements for the nine and three months ended December 31, 2003 and 2002 were prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of Wayne Savings Bancshares, Inc. (the "Company") included in the Annual Report on Form 10-K for the year ended March 31, 2003. In the opinion of management, all adjustments (consisting only of normal recurring accruals) which are necessary for a fair presentation of the unaudited financial statements have been included. The results of operations for the three- and nine-month periods ended December 31, 2003 are not necessarily indicative of the results which may be expected for the entire fiscal year. Critical Accounting Policy - The Company's critical accounting policy relates to the allowance for losses on loans. The Company has established a systematic method of periodically reviewing the credit quality of the loan portfolio in order to establish a sufficient allowance for losses on loans. The allowance for losses on loans is based on management's current judgments about the credit quality of individual loans and segments of the loan portfolio. The allowance for losses on loans is established through a provision, and considers all known internal and external factors that affect loan collectability as of the reporting date. Such evaluation, which included a review of all loans on which full collectability may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience, management's knowledge of inherent risks in the portfolio that are probable and reasonably estimable and other factors that warrant recognition in providing an appropriate loan loss allowance. Management has discussed the development and selection of this critical accounting policy with the audit committee of the Board of Directors. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Principles of Consolidation The accompanying consolidated financial statements include Wayne Savings Bancshares, Inc. and the Company's wholly-owned subsidiary, Wayne Savings Community Bank ("Wayne Savings" or the "Bank"). On September 30, 2003, Village Savings Bank, F.S.B. ("Village Bank") was merged with and into Wayne Savings Community Bank to be operated as a branch. Prior to this date, Village Bank was a wholly-owned subsidiary of Wayne Savings Community Bank. Wayne Savings has ten banking locations in Wayne, Holmes, Ashland, Medina and Stark counties. All significant intercompany transactions and balances have been eliminated in the consolidation. -8- Wayne Savings Bancshares, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the nine and three month periods ended December 31, 2003 and 2002 3. Earnings Per Share Basic earnings per common share are computed based upon the weighted-average number of common shares outstanding during the period, less shares in the Company's Employee Stock Ownership Plan ("ESOP") that are unallocated and not committed to be released. Diluted earnings per common share include the dilutive effect of all additional potential common shares issuable under the Company's stock option plan. Basic and diluted earnings per share for the three and nine months ended December 31, 2002 has been restated to give effect to 1.5109 share exchange ratio in the Company's January 2003 secondary stock offering. The computations are as follows:
For the nine months ended For the three months ended December 31, December 31, 2003 2002 2003 2002 Weighted-average common shares outstanding (basic) 3,747,681 3,887,582 3,757,170 3,889,087 Dilutive effect of assumed exercise of stock options 3,916 6,033 20,154 5,912 --------- --------- --------- --------- Weighted-average common shares outstanding (diluted) 3,751,597 3,893,615 3,777,324 3,894,999 ========= ========= ========= =========
At December 31, 2003 and 2002 all outstanding options were included in the diluted earnings per share calculation. 4. Stock Option Plan The Company has a 1993 incentive Stock Option Plan that provided for the issuance of 196,390 adjusted shares of authorized shares of common stock with 10,123 options outstanding at December 31, 2003. In fiscal 2004, the Company adopted a new Stock Option Plan that provided for the issuance of 142,857 incentive options and 61,224 non-incentive options of authorized common stock. As of December 31, 2003, all options under the 2004 Plan have been granted and expire in fiscal 2014. The Company accounts for its stock option plans in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," which provides a fair value-based method for valuing stock-based compensation that entities may use, which measures compensation cost at the grant date based on the fair value of the award. Compensation is then recognized over the service period, which is usually the vesting period. Alternatively, SFAS No. 123 permits entities to continue to account for stock options and similar equity instruments under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Entities that continue to account for stock options using APB Opinion No. 25 are required to make pro forma disclosures of net earnings and earnings per share, as if the fair value-based method of accounting defined in SFAS No. 123 had been applied. Management has determined that the Company will continue to account for stock based compensation in accordance with APB Opinion No. 25. There were 204,081 options granted during the nine months ended December 31, 2003 and 10,123 options granted for the nine month period ended December 31, 2002. -9- Wayne Savings Bancshares, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the nine and three month periods ended December 31, 2003 and 2002 4. Stock Option Plan (continued) At December 31, 2003, 10,123 of the stock options granted were subject to exercise at the discretion of the grantees and expire in fiscal 2013 while the remaining 204,081 options vest at a rate of 20% annually and will expire in fiscal 2014. A summary of the status of the Company's stock option plans as of and for the years ended March 31, 2003 and 2002, and the nine months ended December 31, 2003 is presented below:
Nine months ended Year ended December 31, March 31, 2003 2003 2002 Weighted- Weighted- Weighted- average average average exercise exercise exercise Shares price Shares price Shares price Outstanding at beginning of period 28,666 $ 6.26 23,378 $ 3.31 26,400 $ 3.31 Granted 204,081 13.95 10,123 11.67 -- -- Exercised (18,543) 3.31 (4,835) 3.31 (3,022) 3.31 Forfeited -- -- -- -- -- -- --------- ------ -------- ------ ------- ------ Outstanding at end of period 214,204 $13.84 28,666 $ 6.26 23,378 $ 3.31 ========= ====== ======== ====== ======= ====== Options exercisable at period-end $ 10,123 $11.67 28,666 $ 6.26 23,378 $ 3.31 ========= ====== ======== ====== ======= ====== Fair value of options granted $ 3.93 $ 3.17 $ -- ====== ====== ======
The following information applies to options outstanding at December 31, 2003: Number outstanding...................................................................... 214,204 Range of exercise prices................................................................ $11.67 - $13.95 Weighted-average exercise price......................................................... $13.84 Weighted-average remaining contractual life............................................. 9.5 years
The fair value of options granted has been based on the Black Scholes pricing model using a dividend yield of 3.3%, expected volatility of 28.8%, a risk-free interest rate of 4.38% and an expected life of ten years. 5. Effects of Recent Accounting Pronouncements In October 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 147, "Accounting for Certain Financial Institutions: An Amendment of FASB Statement No. 72 and 144 and FASB Interpretation No. 9," which removes acquisitions of financial institutions from the scope of SFAS No. 72, "Accounting for Certain Acquisitions of Banking and Thrift Institutions," except for transactions between mutual enterprises. Accordingly, the excess of the fair value of liabilities assumed over the fair value of tangible and intangible assets acquired in a business combination should be recognized and accounted for as goodwill in accordance with SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 147 also requires that the acquisition of a less-than-whole financial institution, such as a branch, be accounted for as a business combination if the transferred assets and activities constitute a business. Otherwise, the acquisition should be accounted for as the acquisition of net assets. -10- Wayne Savings Bancshares, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the nine and three month periods ended December 31, 2003 and 2002 5. Effects of Recent Accounting Pronouncements (continued) SFAS No. 147 also amends the scope of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," to include long-term customer relationship assets of financial institutions (including mutual enterprises) such as depositor and borrower-relationship intangible assets and credit cardholder intangible assets. The provisions of SFAS No. 147 related to unidentifiable intangible assets and the acquisition of a less-than-whole financial institution are effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions related to impairment of long-term customer relationship assets are effective October 1, 2002. Transition provisions for previously recognized unidentifiable intangible assets are effective on October 1, 2002, with earlier application permitted. SFAS No. 147 was adopted on April 1, 2003, without material effect on the Company's financial condition or results of operations. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for fiscal years beginning after December 15, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. SFAS No. 148 was adopted on April 1, 2003, without material effects on the Company's financial position or results of operation. In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires a guarantor entity, at the inception of a guarantee covered by the measurement provisions of the interpretation, to record a liability for the fair value of the obligation undertaken in issuing the guarantee. The Company has financial letters of credit which require the Company to make payment if the customer's financial condition deteriorates, as defined in the agreements. FIN 45 requires Wayne to record a liability generally equal to fees received for these letters of credit when guaranteeing obligations. FIN 45 applies prospectively to guarantees Wayne issues or modifies subsequent to December 31, 2002. Wayne had $97,000 in letters of credit outstanding at December 31, 2003. In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest Entities." FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns, or both. FIN 46 also requires disclosures about variable interest entities that a company is not required to consolidate, but in which it has a significant variable interest. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to existing entities in the first fiscal year or interim period beginning after September 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The Company adopted the disclosure requirements of FIN 46 effective January 31, 2003, without material effect on its financial statements. -11- Wayne Savings Bancshares, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the nine and three month periods ended December 31, 2003 and 2002 6. Forward-looking Statements This quarterly report on Form 10-Q contains forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans", "expects" and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the Company's actual results to differ materially from those contemplated by such forward-looking statements. These important factors include, without limitation, the Bank's continued ability to originate quality loans, fluctuation of interest rates, real estate market conditions in the Bank's lending areas, general and local economic conditions, the continued ability of the Bank to attract and retain deposits, new accounting pronouncements and changing regulatory requirements. -12- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Average Balance Sheet The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated and the average yields earned and rates paid. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented.
For the nine months ended December 31, ----------------------------------------------------------------------- 2003 2002 --------------------------------- -------------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- (Dollars in thousands) Interest-earning assets: Loans receivable, net(1) $216,611 $ 10,515 6.47% $244,848 $ 12,866 7.01% Mortgage-backed securities(2) 85,686 1,767 2.75 29,978 875 3.89 Investment securities 31,311 1,113 4.74 22,274 835 5.00 Interest-bearing deposits(3) 16,727 191 1.52 28,700 406 1.89 -------- -------- -------- -------- Total interest- earning assets 350,335 13,586 5.17 325,800 14,982 6.13 Non-interest-earning assets 22,115 20,504 -------- -------- Total assets $372,450 $346,304 ======== ======== Interest-bearing liabilities: Deposits $297,531 4,526 2.03 $300,517 6,673 2.96 Borrowings 30,000 938 4.17 12,939 430 4.43 -------- -------- -------- -------- Total interest- bearing liabilities 327,531 5,464 2.22 313,456 7,103 3.02 -------- ------ -------- ------ Non-interest bearing liabilities 372 6,020 -------- -------- Total liabilities 327,903 319,476 Stockholders' equity 44,547 26,828 -------- -------- Total liabilities and stockholders' equity $372,450 $346,304 ======== ======== Net interest income $ 8,122 $ 7,879 ======== ======== Interest rate spread(4) 2.95% 3.11% ====== ====== Net yield on interest- earning assets(5) 3.09% 3.22% ====== ====== Ratio of average interest- earning assets to average interest-bearing liabilities 106.96% 103.94% ====== ======
- ---------- (1) Includes non-accrual loan balances. (2) Includes mortgage-backed securities designated as available for sale. (3) Includes federal funds sold and interest-bearing deposits in other financial institutions. (4) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities (5) Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets. -13- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Average Balance Sheet (continued)
For the three months ended December 31, ----------------------------------------------------------------------- 2003 2002 --------------------------------- --------------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- (Dollars in thousands) Interest-earning assets: Loans receivable, net(1) $210,174 $ 3,277 6.24% $239,545 $ 4,117 6.87% Mortgage-backed securities(2) 88,758 648 2.92 48,810 470 3.85 Investment securities 33,966 376 4.43 24,765 346 5.59 Interest-bearing deposits(3) 16,695 61 1.46 30,054 123 1.64 -------- -------- -------- -------- Total interest- earning assets 349,593 4,362 4.99 343,174 5,056 5.89 Non-interest-earning assets 22,234 24,283 -------- -------- Total assets $371,827 $367,457 ======== ======== Interest-bearing liabilities: Deposits $295,793 1,423 1.92 $303,700 2,006 2.64 Borrowings 30,000 313 4.17 28,817 299 4.15 -------- -------- -------- -------- Total interest- bearing liabilities 325,793 1,736 2.13 332,517 2,305 2.77 -------- ---- -------- ---- Non-interest bearing liabilities 1,768 7,662 -------- -------- Total liabilities 327,561 340,179 Stockholders' equity 44,266 27,278 -------- -------- Total liabilities and stockholders' equity $371,827 $367,457 ======== ======== Net interest income $ 2,626 $ 2,751 ======== ======== Interest rate spread(4) 2.86% 3.12% ====== ====== Net yield on interest- earning assets(5) 3.00% 3.21% ====== ====== Ratio of average interest- earning assets to average interest-bearing liabilities 107.30% 103.20% ====== ======
- ---------- (1) Includes non-accrual loan balances. (2) Includes mortgage-backed securities designated as available for sale. (3) Includes federal funds sold and interest-bearing deposits in other financial institutions. (4) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities (5) Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets. -14- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Discussion of Financial Condition Changes from March 31, 2003 to December 31, 2003 At December 31, 2003, we had total assets of $372.0 million, a decrease of $7.0 million, or 1.9%, from March 31, 2003 levels. Liquid assets consisting of cash, interest-bearing deposits and investment securities decreased by $1.2 million, or 2.3%, to $52.1 million at December 31, 2003. Mortgage-backed securities increased by $13.0 million, or 17.1%, to $89.0 million as management redeployed excess liquid assets into higher-yielding assets consisting of short term adjustable-rate mortgage-backed securities and collateralized mortgage obligations with low extension risks. Management's intention is to maintain a short term investment duration until rates rise from near historic low levels. The increase in mortgage-backed securities was funded by loan repayments and sales exceeding loan originations which contributed to the reduction of loan portfolio by $19.6 million, or 8.6%, to $208.7 million. During the nine month period ended December 31, 2003, loan prepayments exceeded those from the same period in 2002 as customers sought to refinance their loans in the declining interest rate environment. Nonperforming and impaired loans of $1.8 million consisted of $1.2 million of residential mortgage loans, coupled with a $548,000 commercial business and real estate loan relationship which became delinquent and was designated as impaired during fiscal year 2002. The Company entered into a workout agreement in July 2003 with the borrower which called for the sale and disposal of the underlying collateral. The first sale under the workout agreement closed in August and Wayne Savings received payment of $1.1 million. The second sale occurred in October and Wayne Savings received net proceeds of $157,000. The final sale occurred during December 2003 in which Wayne Savings, upon finalization will receive $866,000 representing the recovery of all the principal and interest to which we are entitled. Deposits at December 31, 2003, totaled $294.4 million, a decrease of $6.6 million from $300.9 million at March 31, 2003. Management attributes the decline in deposits mainly to customers seeking to find alternative investment opportunities due to the low rate environment. The Bank's deposit pricing is very competitive in all market areas. Stockholders' equity decreased by $311,000 during the nine months ended December 31, 2003, due to dividends paid totaling $1.3 million and the purchase of common stock of $1.1 million for the management recognition plan offset by a $1.9 million in net earnings for the nine months ended December 31, 2003, an increase of $117,000 due to amortization of the ESOP loan and an after-tax increase of $12,000 in other comprehensive gain. Comparison of Operating Results for the Nine Month Periods Ended December 31, 2003 and 2002 General Net earnings totaled $1.9 million for the nine months ended December 31, 2003, an increase of $4,000 or .2%, over the nine months ended December 31, 2002. The growth in net earnings was primarily attributable to an increase in net interest income of $243,000, or 3.1%, an increase in other income of $317,000, or 27.3%, and an $86,000, or 9.3%, decrease in federal income tax expense, which were partially offset by a $654,000, or 10.6%, increase in general, administrative and other expense. Interest Income Interest income for the nine months ended December 31, 2003, decreased $1.4 million, or 9.3%, to $13.6 million. This decrease was a result of a 96 basis point reduction in the yield on interest earning assets to 5.17%, partially offset by an increase in the weighted average balance of interest-earning assets totaling $24.5 million, or 7.5%, to $350.3 million for the period ended December 31, 2003. -15- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Comparison of Operating Results for the Nine Month Periods Ended December 31, 2003 and 2002 (continued) Interest Income (continued) Interest income on loans declined $2.4 million, or 18.3%, for the nine months ended December 31, 2003, due primarily to a decrease in the weighted average balance of loans outstanding of $28.2 million, or 11.5%, compared to the 2002 period, coupled with a 54 basis-point decrease in the weighted average yield on loans to 6.47% for the 2003 period. Interest income on mortgage-backed securities increased $892,000 during the nine months ended December 31, 2003, due primarily to a $55.7 million, or 185.8%, increase in the weighted average balance outstanding from the comparable 2002 period, which was partially offset by a decrease in the average yield of 114 basis points to 2.75%. Interest income on investments increased by $278,000, or 33.3%, reflecting an increase in the weighted average balance of $9.0 million, or 40.6%, partially offset by a decrease in the weighted average rate of 26 basis-points to 4.74% from 5.00% during the comparable 2002 period. Interest income on interest-bearing deposits and other decreased by $215,000, or 53.0%, reflecting a decrease in the weighted average balance of $12.0 million, or 41.7%, coupled with a decrease in the weighted average rate of 37 basis points to 1.52% from 1.89% during the comparable 2002 period. Interest Expense Interest expense for the nine months ended December 31, 2003 totaled $5.5 million, a decrease of $1.6 million, or 23.1%, from interest expense of $7.1 million for the nine months ended December 31, 2002. The decrease resulted from a 80 basis point decrease in the average cost of funds to 2.22% for the 2003 period, offset by an increase in the average balance of deposits and borrowings outstanding of $14.1 million, or 4.5%, to $327.5 million for the period ended December 31, 2003. Interest expense on deposits totaled $4.5 million for the nine months ended December 31, 2003, a decrease of $2.1 million, or 32.2%, from the nine months ended December 31, 2002, as a result of a 93 basis point decrease in the average cost of deposits to 2.03% for the 2003 period coupled with a decrease in the average balance outstanding of $3.0 million, or 1.0%, to $297.5 million for the 2003 period. Interest expense on borrowings totaled $938,000 for the nine months ended December 31, 2003, an increase of $508,000 from the 2002 period, primarily due to an increase in the average balance of borrowings of $17.1 million to an average balance of $30.0 million for the nine months ended December 31, 2003 from $12.9 million for the nine months ended December 31, 2002, offset by a decrease in the average cost of borrowings to 4.17% from an average cost of 4.43% for the 2002 period. The Company borrowed the additional funds in the nine month period ended December 31, 2002, to purchase corporate and mortgage-backed securities which should enhance future earnings and cash flows. Net Interest Income Net interest income totaled $8.1 million for the nine months ended December 31, 2003, an increase of $243,000, or 3.1%, from the nine month period ended December 31, 2002. The average interest rate spread decreased to 2.95% for the nine months ended December 31, 2003 from 3.11% for the nine months ended December 31, 2002. The net interest margin decreased to 3.09% for the nine months ended December 31, 2003 from 3.22% for the nine months ended December 31, 2002. -16- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Comparison of Operating Results for the Nine Month Periods Ended December 31, 2003 and 2002 (continued) Provision for Losses on Loans The Company recorded provisions for losses on loans totaling $63,000 and $75,000 for the nine month periods ended December 31, 2003 and 2002, respectively. To the best of management's knowledge, all known and inherent losses that are probable and which can be reasonably estimated have been recorded as of December 31, 2003 and 2002. Other Income Other income, consisting primarily of an increase in cash surrender value of life insurance, gains on sale of loans, service fees, and charges on deposit accounts, increased by $317,000 or 27.3%, to $1.5 million for the nine months ended December 31, 2003, from $1.2 million for the nine months ended December 31, 2002. The increase resulted primarily from an increase of $157,000 in cash surrender value of life insurance which was purchased in October 2002. Additionally, service fees, charges and other operating income increased by $100,000, or 9.3%, to $1.2 million for the nine months ended December 31, 2003, was due primarily to increased income related to credit card merchants. Gain on sale of loans increased $49,000, or 116.7%, in 2003 as compared to the nine months ended December 31, 2002, mainly due to management's decision to sell the majority of the lower rate thirty year residential mortgage loans to the secondary market. General, Administrative, and Other Expense General, administrative and other expense increased by $654,000, or 10.6%, to $6.8 million for the nine months ended December 31, 2003 compared to the nine months ended December 31, 2002. The increase resulted primarily from a $497,000, or 14.3%, increase in employee compensation and benefits and a $181,000, or 14.1%, increase in other operating expense. The increase in employee compensation and benefits was primarily attributable to normal merit increases, an increase in employee benefit plan costs and additional staff needed for operating a fully converted, publicly traded stock company. Similarly, the increase in other operating expense was primarily attributable to increased costs related to routine and ongoing compliance matters required of a public company as well as higher merchant expenses related to credit card activity. Federal Income Taxes The provision for federal income taxes was $836,000 for the nine months ended December 31, 2003, a decrease of $86,000, or 9.3%, compared to the same period in 2002. The decrease resulted primarily from a $82,000, or 2.9%, decrease in pretax earnings, coupled with $211,000 of tax-exempt income related to the cash surrender value of life insurance, as compared to $54,000 of tax-exempt income from the cash surrender value of life insurance in the 2002 period. The effective tax rate for the nine months ended December 31, 2003, was 30.5% as compared to 32.7% for the same period in 2002. The decrease in the effective tax rate period to period is mainly due to the beneficial effects of the aforementioned tax-exempt income. -17- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Comparison of Operating Results for the Three Month Periods Ended December 31, 2003 and 2002 General Net earnings totaled $560,000 for the three months ended December 31, 2003, a decrease of $179,000, or 24.2%, from the $739,000 of net earnings for the three months ended December 31, 2002. The reduction in net earnings was primarily attributable to an decrease in net interest income of $125,000, or 4.5%, and an increase in general, administrative and other expense of $208,000, or 9.9%, which were partially offset by a $95,000, or 28.3%, decrease in federal income tax expense, coupled with a decrease of $37,000 in provision for loan losses and an increase of $22,000, or 4.7%, in other income. Interest Income Interest income decreased $694,000, or 13.7%, for the three months ended December 31, 2003, to $4.4 million. This decline was mainly due to a 90 basis point reduction in the average yield on interest earning assets to 4.99% from 5.89% for the period ended December 31, 2002. The yield reduction was partially offset with an increase in the weighted-average balance of interest-earning assets totaling $6.4 million, or 1.9%, to a balance of $349.6 million for the three months ended December 31, 2003. Interest income on loans declined $840,000, or 20.4%, for the three months ended December 31, 2003, due primarily to a decrease in the weighted average outstanding balance of loans period to period of $29.4 million, or 12.3%, coupled with a 63 basis-point decrease in the weighted average yield on loans to 6.24% for the 2003 period. Interest income on mortgage-backed securities increased $178,000 during the three months ended December 31, 2003, due primarily to a $40.0 million increase in the weighted average balance outstanding from the comparable 2002 period. This significant increase in the average outstanding balance was the result of management's strategy to invest in higher yielding short term mortgage-backed securities as a defensive measure during the current historic low interest rate environment. The increase in the weighted-average balance was partially offset by a decrease in the average yield of 93 basis points to 2.92% for the three months ended December 31, 2003. The yield on mortgage-backed securities was adversely affected by the record levels of repayments during the period. Interest income on investments increased by $30,000, or 8.7%, reflecting an increase in the weighted average balance of $9.2 million, or 37.2%, to $34.0 million from $24.8 million during the comparable 2002 period, partially offset with a decrease in the average yield of 116 basis points to 4.43%. Interest income on interest-bearing deposits declined $62,000, or 50.4%, for the three months ended December 31, 2003, due primarily to a decrease in the weighted average balance of $13.4 million, or 44.4%, compared to the 2002 period of $30.1 million, coupled with a decrease in the average yield of 18 basis points to an average yield of 1.46% from an average yield of 1.64% for the quarter ended December 31, 2002. Interest Expense Interest expense for the three months ended December 31, 2003 totaled $1.7 million, a decrease of $569,000, or 24.7%, from interest expense of $2.3 million for the three months ended December 31, 2002. The decrease resulted from a 64 basis point decrease in the average cost of funds to 2.13% for the 2003 period, coupled with a decrease in the average balance of deposits and borrowings outstanding of $6.7 million, or 2.0%, to $325.8 million for the period ended December 31, 2003. Interest expense on deposits totaled $1.4 million for the three months ended December 31, 2003, a decrease of $583,000, or 29.1%, from the three months ended December 31, 2002, as a result of a 72 basis point decrease in the average cost of deposits to 1.92% for the 2003 period coupled with a decrease in the average balance outstanding of $7.9 million, or 2.6%, to $295.8 million for the 2003 period. -18- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Comparison of Operating Results for the Three Month Periods Ended December 31, 2003 and 2002 (continued) Interest Expense (continued) Interest expense on borrowings totaled $313,000 for the three months ended December 31, 2003, an increase of $14,000 from the 2002 period, primarily due to an increase in the average balance of borrowings of $1.2 million to an average outstanding balance of $30.0 million for the three months ended December 31, 2003, coupled with an increase in the average cost of borrowings to 4.17% from the average cost of 4.15% for the 2002 period. Net Interest Income Net interest income totaled $2.6 million for the three months ended December 31, 2003, a decrease of $125,000, or 4.5%, from the three month period ended December 31, 2002. The average interest rate spread decreased to 2.86% for the three months ended December 31, 2003 from 3.12% for the three months ended December 31, 2002. The net interest margin decreased to 3.00% for the three months ended December 31, 2003 from 3.21% for the three months ended December 31, 2002. Provision for Losses on Loans The Company recorded no provision for losses on loans for the three month period ended December 31, 2003 as compared to $37,000 in 2002. To the best of management's knowledge, all known and inherent losses that are probable and which can be reasonably estimated have been recorded as of December 31, 2003 and 2002. Other Income Other income, consisting primarily of an increase in cash surrender value of life insurance, gains on sale of loans, service fees, and charges on deposit accounts, increased by $22,000, or 4.7%, to $490,000 for the three months ended December 31, 2003, from $468,000 for the three months ended December 31, 2002. The increase resulted primarily from $23,000 in the increase in cash surrender value of life insurance due to the purchase of life insurance in October 2002. General, Administrative, and Other Expense General, administrative and other expense increased by $208,000, or 9.9%, to $2.3 million for the three months ended December 31, 2003 compared to the three months ended December 31, 2002. The increase resulted primarily from a $183,000, or 15.4%, increase in employee compensation and benefits and a $42,000, or 9.2%, increase in other operating expense. The increase in employee compensation and benefits was primarily attributable to normal merit increases, an increase in employee benefit plan costs and additional staff needed for operating a fully converted, publicly traded stock company. Similarly, the increase in other operating expense was primarily attributable to increased merchant expenses related to credit card activity, coupled with increased costs related to routine compliance matters required of a public company. Federal Income Taxes The provision for federal income taxes was $241,000 for the three months ended December 31, 2003, a decrease of $95,000, or 28.3%, compared to the same period in 2002, primarily due to the $274,000 decrease in earnings before federal income taxes and the aforementioned increase of the cash surrender value of life insurance. The effective tax rate for the three months ended December 31, 2003, was 30.1% as compared to 31.3% for the same period in 2002. -19- ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no material change in the Company's market risk since the Company's Form 10-K filed with the Securities and Exchange Commission for the year ended March 31, 2003. ITEM 4 CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. Under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective in timely alerting them to the material information relating to the Company (or our consolidated subsidiaries) required to be included in the Company's periodic SEC filings. (b) Changes in internal controls. There has been no change made in the Company's internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. -20- Wayne Savings Bancshares, Inc. PART II ITEM 1. Legal Proceedings Not applicable ITEM 2. Changes in Securities and Use of Proceeds Not applicable ITEM 3. Defaults Upon Senior Securities Not applicable ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 5. Other Information Not applicable ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits: EX-31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 EX-31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 EX-32.1 Written Statement of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 EX-32.2 Written Statement of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 (b) Reports on Form 8-K: The Company filed a Form 8-K on October 1, 2003, disclosing the merger of Wayne Savings Community Bank and Village Savings Bank, F.S.B. The Company filed a Form 8-K on October 29, 2003, disclosing its earnings release for the six months and three months ended September 30, 2003. The Company filed a Form 8-K on November 5, 2003, disclosing the signing of the merger agreement to acquire Stebbins Bancshares, Inc. and its national bank subsidiary, Stebbins National Bank of Creston, Ohio. -21- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 12, 2004 By: ---------------------------- -------------------------------- Charles F. Finn Chairman and President Date: February 12, 2004 By: ---------------------------- -------------------------------- Michael C. Anderson Chief Financial Officer -22- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 12, 2004 By: /s/ Charles C. Finn ----------------------- ------------------------------- Charles C. Finn Chairman and President Date: February 12, 2004 By: /s/ Michael C. Anderson ----------------------- ------------------------------- Michael C. Anderson Chief Financial Officer -22- EX-31.1 3 ex31-1.txt Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Charles F. Finn, President and Chief Executive Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Wayne Savings Bancshares, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements and other financial information included in this quarterly report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) disclosed in this quarterly report any changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a) all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. February 12, 2004 /s/ Charles F. Finn - ------------------- ------------------------------------- Date Charles F. Finn President and Chief Executive Officer A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act of 2002 bas been provided to Wayne Savings Bancshares, Inc. and will be retained by Wayne Savings Bancshares, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-31.2 4 ex31-2.txt Exhibit 31.2 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Michael C. Anderson, Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Wayne Savings Bancshares, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements and other financial information included in this quarterly report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) disclosed in this quarterly report any changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a) all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. February 12, 2004 /s/ Michael C. Anderson - -------------------- ---------------------------- Date Michael C. Anderson Chief Financial Officer A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act of 2002 bas been provided to Wayne Savings Bancshares, Inc. and will be retained by Wayne Savings Bancshares, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-32.1 5 ex32-1.txt EXHIBIT 32.1 STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350 The undersigned, Charles F. Finn, is the President and Chief Executive Officer of Wayne Savings Bancshares, Inc. (the "Company"). This statement is being furnished in connection with the filing by the Company of the Company's Annual Report on Form 10-Q for the quarter ended December 31, 2003 (the "Report"). By execution of this statement, I certify that: A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended. February 12, 2004 /s/ Charles F. Finn - -------------------- --------------------------------- Dated Charles F. Finn EX-32.2 6 ex32-2.txt EXHIBIT 32.2 STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350 The undersigned, Michael C. Anderson, is the Chief Financial Officer of Wayne Savings Bancshares, Inc. (the "Company"). This statement is being furnished in connection with the filing by the Company of the Company's Annual Report on Form 10-Q for the quarter ended December 31, 2003 (the "Report"). By execution of this statement, I certify that: A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended. February 12, 2004 /s/ Michael C. Anderson - ------------------------- ---------------------------- Dated Michael C. Anderson -----END PRIVACY-ENHANCED MESSAGE-----