10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý     No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨    Accelerated filer ¨    Non-accelerated filer ¨    Smaller reporting company ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.).

Yes ¨   No   ý

As of July 31, 2014, the latest practicable date, 2,830,939 shares of the registrant’s common stock, $.10 par value, were issued and outstanding.

Wayne Savings Bancshares, Inc.

Index

		Page
PART I - FINANCIAL INFORMATION
Item 1	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Income and Comprehensive Income	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4	Controls and Procedures	48
PART II - OTHER INFORMATION
Item 1	Legal Proceedings	49
Item 1A	Risk Factors	49
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3	Defaults Upon Senior Securities	49
Item 4	Mine Safety Disclosures	49
Item 5	Other Information	50
Item 6	Exhibits	50
SIGNATURES		51

Wayne Savings Bancshares, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	June 30, 2014			December 31, 2013
	(Unaudited)
Assets
Cash and due from banks	$	7,713		$	7,751
Interest-bearing deposits		4,378			5,630
Cash and cash equivalents		12,091			13,381
Available-for-sale securities		111,605			103,625
Held-to-maturity securities		6,581			6,623
Loans, net of allowance for loan losses of $2,549 and $2,819 at June 30, 2014 and December 31, 2013, respectively		260,056			261,130
Premises and equipment		6,838			6,692
Federal Home Loan Bank stock		4,226			5,025
Foreclosed assets held for sale, net		81			—
Accrued interest receivable		1,219			1,184
Bank-owned life insurance		9,142			9,006
Goodwill		1,719			1,719
Other intangible assets		—			38
Other assets		1,781			1,810
Prepaid federal income taxes		49			60
Total assets	$	415,388		$	410,293
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Demand	$	88,180		$	85,952
Savings and money market		129,328			121,140
Time		131,940			130,479
Total deposits		349,448			337,571
Other short-term borrowings		6,146			7,212
Federal Home Loan Bank advances		16,395			22,336
Interest payable and other liabilities		2,702			4,257
Deferred federal income taxes		705			365
Total liabilities		375,396			371,741
Commitments and Contingencies		—			—
Stockholders’ Equity
Preferred stock, 500,000 shares of $.10 par value authorized; no shares issued		—			—
Common stock, $.10 par value; authorized 9,000,000 shares; 3,978,731 shares issued		398			398
Additional paid-in capital		35,984			35,976
Retained earnings		19,639			18,743
Shares acquired by ESOP		(454	)		(492	)
Accumulated other comprehensive income		710			65
Treasury stock, at cost: Common: 1,147,792 and 1,135,292 shares at June 30, 2014 and December 31, 2013, respectively		(16,285	)		(16,138	)
Total stockholders’ equity		39,992			38,552
Total liabilities and stockholders’ equity	$	415,388		$	410,293

See accompanying notes to condensed consolidated financial statements. 2

Wayne Savings Bancshares, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

For the three and six months ended June 30, 2014 and 2013

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Interest and Dividend Income
Loans	$	2,879		$	2,846		$	5,769		$	5,734
Securities		783			632			1,563			1,288
Dividends on Federal Home Loan Bank stock and other		50			56			101			111
Total interest and dividend income		3,712			3,534			7,433			7,133
Interest Expense
Deposits		393			431			788			866
Other short-term borrowings		3			3			5			5
Federal Home Loan Bank advances		134			153			279			305
Total interest expense		530			587			1,072			1,176
Net Interest Income		3,182			2,947			6,361			5,957
Provision (Credit) for Loan Losses		79			10			87			(131	)
Net Interest Income After Provision (Credit) for Loan Losses		3,103			2,937			6,274			6,088
Noninterest Income
Gain on loan sales		84			26			109			73
Gain on sale of foreclosed assets held for sale		—			20			—			17
Gain on sale of premises and equipment		1			—			7			—
Earnings on bank-owned life insurance		73			74			144			147
Service fees, charges and other operating		323			278			592			548
Total noninterest income		481			398			852			785
Noninterest Expense
Salaries and employee benefits		1,525			1,528			3,018			3,032
Net occupancy and equipment expense		511			477			1,022			954
Federal deposit insurance premiums		68			65			131			140
Franchise taxes		65			100			129			200
Amortization of intangible assets		15			22			38			45
Other		466			471			963			1,022
Total noninterest expense		2,650			2,663			5,301			5,393
Income Before Federal Income Taxes		934			672			1,825			1,480
Provision for Federal Income Taxes		234			181			455			411
Net Income	$	700		$	491		$	1,370		$	1,069
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities		435			(1,728	)		977			(2,050	)
Tax (expense) benefit		(148	)		587			(332	)		696
Other comprehensive income (loss)		287			(1,141	)		645			(1,354	)
Total comprehensive income (loss)	$	987		$	(650	)	$	2,015		$	(285	)
Basic Earnings Per Share	$	0.25		$	0.17		$	0.49		$	0.37
Diluted Earnings Per Share	$	0.25		$	0.17		$	0.49		$	0.37
Dividends Per Share	$	0.09		$	0.08		$	0.17		$	0.15

See accompanying notes to condensed consolidated financial statements. 3

Wayne Savings Bancshares, Inc.

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2014 and 2013

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2014			2013
Operating Activities
Net income	$	1,370		$	1,069
Items not requiring (providing) cash
Depreciation and amortization		298			296
Provision (credit) for loan losses		87			(131	)
Amortization of premiums and discounts on securities		545			960
Amortization of mortgage servicing rights		22			17
Amortization of deferred loan origination fees		(53	)		(52	)
Amortization of intangible asset		38			45
Increase in value of bank-owned life insurance		(136	)		(140	)
Amortization expense of stock benefit plan		46			40
Gain on sale of foreclosed assets held for sale		—			(17	)
Gain on sale of premises and equipment		(7	)		—
Net gain on sale of loans		(109	)		(73	)
Proceeds from sale of loans in the secondary market		2,796			5,625
Origination of loans for sale in the secondary market		(2,687	)		(5,552	)
Deferred income taxes		8			166
Changes in
Accrued interest receivable		(35	)		1
Prepaid federal deposit insurance premiums		—			529
Other assets		18			(416	)
Interest payable and other liabilities		(617	)		354
Net cash provided by operating activities		1,584			2,721
Investing Activities
Purchases of available-for-sale securities		(17,984	)		(24,131	)
Purchase of  held-to-maturity securities		—			(2,988	)
Proceeds from maturities and paydowns of available-for-sale securities		10,446			22,013
Proceeds from maturities and paydowns of held-to-maturity securities		33			47
Proceeds from Federal Home Loan Bank stock redemption		799			—
Net change in loans		959			(1,671	)
Purchase of premises and equipment		(444	)		(129	)
Proceeds from the sale of premises and equipment		7			—
Proceeds from the sale of foreclosed assets		—			272
Net cash used in investing activities	$	(6,184	)	$	(6,587	)

See accompanying notes to condensed consolidated financial statements. 4

Wayne Savings Bancshares, Inc.

Condensed Consolidated Statements of Cash Flows (continued)

For the six months ended June 30, 2014 and 2013

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2014			2013
Financing Activities
Net change in deposits	$	11,877		$	4,363
Net change in other short-term borrowings		(1,066	)		1,296
Proceeds from Federal Home Loan Bank advances		2,719			3,060
Repayments of Federal Home Loan Bank advances		(8,660	)		(3,000	)
Advances by borrowers for taxes and insurance		(939	)		(575	)
Dividends on common stock		(474	)		(430	)
Treasury stock purchases		(147	)		(558	)
Net cash provided in financing activities		3,310			4,156
Change in Cash and Cash Equivalents		(1,290	)		290
Cash and Cash Equivalents, Beginning of period		13,381			12,055
Cash and Cash Equivalents, End of period	$	12,091		$	12,345
Supplemental Cash Flows Information
Interest paid on deposits and borrowings	$	1,078		$	1,175
Federal income taxes paid	$	400		$	150
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Transfers from loans to foreclosed assets held for sale	$	81		$	50
Recognition of mortgage servicing rights	$	40		$	56
Dividends payable	$	255		$	232

See accompanying notes to condensed consolidated financial statements. 5

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

Note 1: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of June 30, 2014 and for the three and six months ended June 30, 2014 and 2013, 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 condensed 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 December 31, 2013. Reference is made to the accounting policies of the Company described in the Notes to the Consolidated Financial Statements contained in its Annual Report on Form 10-K.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited financial statements have been included. The results of operations for the three and six months ended June 30, 2014, are not necessarily indicative of the results which may be expected for the full year. The condensed consolidated balance sheet of the Company as of December 31, 2013, has been derived from the consolidated balance sheet of the Company as of that date.

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.

6

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

Note 2: Principles of Consolidation

The accompanying condensed consolidated financial statements include Wayne Savings Bancshares, Inc. and the Company’s wholly-owned subsidiary, Wayne Savings Community Bank (“Wayne Savings” or the “Bank”).

Wayne Savings has eleven full-service offices in Wayne, Holmes, Ashland, Medina and Stark counties. All significant intercompany transactions and balances have been eliminated in the consolidation.

Note 3: Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
	(In thousands)
Available-for-sale securities
June 30, 2014:
U.S. government agencies	$	131	$	1	$	—	$	132
Mortgage-backed securities of government sponsored entities		87,397		1,363		310		88,450
Private-label collateralized mortgage obligations		583		15		2		596
State and political subdivisions		21,721		821		115		22,427
Totals	$	109,832	$	2,200	$	427	$	111,605

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
Available-for-sale securities	(In thousands)
December 31, 2013:
U.S. government agencies	$	137	$	—	$	—	$	137
Mortgage-backed securities of government sponsored entities		79,901		1,177		721		80,357
Private-label collateralized mortgage obligations		675		29		—		704
State and political subdivisions		22,116		547		236		22,427
Totals	$	102,829	$	1,753	$	957	$	103,625

7

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
	(In thousands)
Held-to-maturity Securities:
June 30, 2014:
U.S. government agencies	$	105	$	—	$	—	$	105
Mortgage-backed securities of government sponsored entities		1,360		7		—		1,367
State and political subdivisions		5,116		—		309		4,807
Totals	$	6,581	$	7	$	309	$	6,279

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
Held-to-maturity Securities:	(In thousands)
December 31, 2013:
U.S. government agencies	$	109	$	—	$	—	$	109
Mortgage-backed securities of government sponsored entities		1,390		11		21		1,380
State and political subdivisions		5,124		—		492		4,632
Totals	$	6,623	$	11	$	513	$	6,121

8

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

Amortized cost and fair value of available-for-sale securities and held-to-maturity securities at June 30, 2014 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
One to five years	$	6,166	$	6,481	$	—	$	—
Five to ten years		2,439		2,481		3,056		2,930
After ten years		13,247		13,597		2,165		1,982
		21,852		22,559		5,221		4,912
Mortgage-backed securities of government sponsored entities		87,397		88,450		1,360		1,367
Private-label collateralized mortgage obligations		583		596		—		—
Totals	$	109,832	$	111,605	$	6,581	$	6,279

The carrying value of securities pledged as collateral to secure public deposits and for other purposes was $60.4 million and $62.0 million at June 30, 2014 and December 31, 2013, respectively.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. The total fair value of these investments at June 30, 2014 and December 31, 2013, was $39.6 million and $51.5 million, which represented approximately 34% and 47%, respectively, of the Company’s total aggregate amortized cost of the available-for-sale and held-to-maturity investment portfolios. These decreases resulted primarily from changes in market interest rates.

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the decreases in fair value for these securities are temporary at June 30, 2014.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following table shows the gross unrealized losses and fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

9

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

	June 30, 2014
	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Mortgage-backed securities of government sponsored entities	$	15,179	$	59	$	16,715	$	251	$	31,894	$	310
Private-label collateralized mortgage obligations		124		2		—		—		124		2
State and political subdivisions		528		11		7,099		413		7,627		424
Total temporarily impaired securities	$	15,831	$	72	$	23,814	$	664	$	39,645	$	736

	December 31, 2013
	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Mortgage-backed securities of government sponsored entities	$	36,004	$	575	$	5,330	$	167	$	41,334	$	742
State and political subdivisions		8,639		555		1,519		173		10,158		728
Total temporarily impaired securities	$	44,643	$	1,130	$	6,849	$	340	$	51,492	$	1,470

Note 4: Credit Quality of Loans and the Allowance for Loan Losses

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, chargeoffs, the allowance for loan losses, any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

10

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well secured and in process of collection. Past due status is determined based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current for a period of six months and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical chargeoff experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by using the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogenous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

11

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

The risk characteristics of each portfolio segment are as follows:

Residential Real Estate Loans

For residential mortgage loans that are secured by one-to-four family residences and are generally owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in one-to-four family residences. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

All Other Mortgage Loans

All other mortgage loans consist of residential construction loans, nonresidential real estate loans, land loans and multi-family real estate loans.

Residential construction loan proceeds are disbursed in increments as construction progresses and as inspections warrant. Construction loans are typically structured as permanent one-to-four family loans originated by the Company with a 12-month construction phase. Accordingly, upon completion of the construction phase, there is no change in interest rate or term to maturity of the original construction loan, nor is a new permanent loan originated. These loans are generally owner occupied and the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded.

Nonresidential real estate loans are negotiated on a case-by-case basis. Loans secured by nonresidential real estate generally involve a greater degree of risk than one-to-four family residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income-producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by nonresidential real estate is typically dependent upon the successful operation of the related real estate project. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

The Company also originates a limited number of land loans secured by individual improved and unimproved lots for future residential construction. In addition, the Company originates loans to commercial customers with land held as the collateral.

Multi-family real estate loans generally involve a greater degree of credit risk than one-to-four family residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income-producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by multi-family real estate is typically dependent upon the successful operation of the related real estate property. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

12

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

Commercial Business Loans

Commercial business loans carry a higher degree of risk than one-to-four family residential loans. Such lending typically involves large loan balances concentrated in a single borrower or groups of related borrowers for rental or business properties. In addition, the payment experience on loans secured by income-producing properties is typically dependent on the success of the operation of the related project and thus is typically affected by adverse conditions in the real estate market and in the economy. The Company originates commercial loans generally in the $50,000 to $1,000,000 range with the majority of these loans being under $500,000. Commercial loans are generally underwritten based on the borrower’s ability to pay and assets such as buildings, land and equipment are taken as additional loan collateral. Each loan is evaluated for a level of risk and assigned a rating from “1” (the highest quality rating) to “7” (the lowest quality rating).

Consumer Loans

Consumer loans entail greater credit risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as automobiles, mobile homes, boats, and recreational vehicles. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In particular, amounts realizable on the sale of repossessed automobiles may be significantly reduced based upon the condition of the automobiles and the lack of demand for used automobiles.

The following presents by portfolio segment, the activity in the allowance for loan losses for the three and six months ended June 30, 2014 and 2013:

Three months ended June 30, 2014	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans		Total
	(In thousands)
Beginning balance	$	889		$	1,393		$	288		$	4	$	2,574
Provision charged to expense		63			(255	)		271			—		79
Losses charged off		(11	)		—			(112	)		—		(123	)
Recoveries		—			17			2			—		19
Ending balance	$	941		$	1,155		$	449		$	4	$	2,549

Three months ended June 30, 2013	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans			Total
	(In thousands)
Beginning balance	$	1,027		$	1,731		$	213		$	6		$	2,977
Provision charged to expense		216			(174	)		(29	)		(3	)		10
Losses charged off		(4	)		—			—			—			(4	)
Recoveries		—			—			1			3			4
Ending balance	$	1,239		$	1,557		$	185		$	6		$	2,987

13

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

Six months ended June 30, 2014	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans			Total
	(In thousands)
Beginning balance	$	1,017		$	1,526		$	271		$	5		$	2,819
Provision charged to expense		(72	)		(128	)		288			(1	)		87
Losses charged off		(11	)		(260	)		(112	)		—			(383	)
Recoveries		7			17			2			—			26
Ending balance	$	941		$	1,155		$	449		$	4		$	2,549

Six months ended June 30, 2013	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans			Total
	(In thousands)
Beginning balance	$	1,122		$	1,925		$	275		$	6		$	3,328
Provision (credit) charged to expense		155			(192	)		(92	)		(2	)		(131	)
Losses charged off		(38	)		(176	)		—			(2	)		(216	)
Recoveries		—			—			2			4			6
Ending balance	$	1,239		$	1,557		$	185		$	6		$	2,987

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on the portfolio segment and impairment method as of June 30, 2014 and December 31, 2013:

June 30, 2014	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans		Total
Allowance Balances:	(In thousands)
Ending balance:
Individually evaluated for impairment	$	96	$	209	$	241	$	—	$	546
Collectively evaluated for impairment		845		946		208		4		2,003
Total allowance for loan losses	$	941	$	1,155	$	449	$	4	$	2,549
Loan Balances:
Ending balance:
Individually evaluated for impairment	$	5,828	$	2,887	$	241	$	—	$	8,956
Collectively evaluated for impairment		160,422		81,467		14,116		1,932		257,937
Total balance	$	166,250	$	84,354	$	14,357	$	1,932	$	266,893

14

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

December 31, 2013	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans		Total
Allowance Balances:	(In thousands)
Ending balance:
Individually evaluated for impairment	$	226	$	618	$	65	$	—	$	909
Collectively evaluated for impairment		791		908		206		5		1,910
Total allowance for loan losses	$	1,017	$	1,526	$	271	$	5	$	2,819
Loan Balances:
Ending balance:
Individually evaluated for impairment	$	6,411	$	3,661	$	142	$	—	$	10,214
Collectively evaluated for impairment		160,317		82,434		14,773		1,110		258,634
Total balance	$	166,728	$	86,095	$	14,915	$	1,110	$	268,848

Total loans in the above tables do not include deferred loan origination fees of $681 and $682 or loans in process of $3.6 million and $4.2 million, respectively, for June 30, 2014 and December 31, 2013.

The following tables present the credit risk profile of the Bank’s loan portfolio based on rating category and payment activity as of June 30, 2014 and December 31, 2013:

June 30, 2014	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans
	(In thousands)
Rating *
Pass (Risk 1-4)	$	156,430	$	80,957	$	13,893	$	1,931
Special Mention (Risk 5)		2,867		1,017		223		—
Substandard (Risk 6)		6,953		2,380		241		1
Total	$	166,250	$	84,354	$	14,357	$	1,932

December 31, 2013	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans
	(In thousands)
Rating *
Pass (Risk 1-4)	$	158,518	$	81,362	$	14,328	$	1,108
Special Mention (Risk 5)		419		1,587		445		—
Substandard (Risk 6)		7,791		3,146		142		2
Total	$	166,728	$	86,095	$	14,915	$	1,110

15

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

* Ratings are generally assigned to consumer and residential mortgage loans on a “pass” or “fail” basis, where “fail” results in a substandard classification. Commercial loans, both secured by real estate or other assets or unsecured, are analyzed in accordance with an analytical matrix codified in the Bank’s loan policy that produces a risk rating as described below.

Risk 1 is unquestioned credit quality for any credit product. Loans are secured by cash and near cash collateral with immediate access to proceeds.

Risk 2 is very low risk with strong credit and repayment sources. Borrower is well capitalized in a stable industry, financial ratios exceed peers and financial trends are positive.

Risk 3 is very favorable risk with highly adequate credit strength and repayment sources. Borrower has good overall financial condition and adequate capitalization.

Risk 4 is acceptable, average risk with adequate credit strength and repayment sources. Collateral positions must be within Bank policies.

Risk 5 or “Special Mention,” also known as “watch,” has potential weakness that deserve Management’s close attention. This risk includes loans where the borrower has developed financial uncertainties or the borrower is resolving the financial uncertainties. Bank credits have been secured or negotiations will be ongoing to secure further collateral.

Risk 6 or “Substandard” loans are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged. This risk category contains loans that exhibit a weakening of the borrower’s credit strength with limited credit access and all nonperforming loans.

Risk 7 or “Doubtful” loans are significantly under protected by the current net worth and paying capacity of the borrower or of the collateral pledged. This risk category contains loans that are likely to experience a loss of some magnitude, but where the amount of the expected loss is not known with enough certainty to allow for an accurate calculation of a loss amount for charge off. This category is considered to be temporary until a chargeoff amount can be reasonably determined.

16

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

The following tables present the Bank’s loan portfolio aging analysis for June 30, 2014 and December 31, 2013:

June 30, 2014	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In thousands)
One-to-four family residential loans	$	254	$	557	$	1,507	$	2,318	$	163,932	$	166,250	$	936
All other mortgage loans		—		—		152		152		84,202		84,354		—
Commercial business loans		—		37		110		147		14,210		14,357		—
Consumer loans		—		—		1		1		1,931		1,932		1
Total	$	254	$	594	$	1,770	$	2,618	$	264,275	$	266,893	$	937

December 31, 2013	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In thousands)
One-to-four family residential loans	$	679	$	228	$	624	$	1,531	$	165,197	$	166,728	$	—
All other mortgage loans		150		64		811		1,025		85,070		86,095		—
Commercial Business loans		—		—		—		—		14,915		14,915		—
Consumer loans		79		—		—		79		1,031		1,110		—
Total	$	908	$	292	$	1,435	$	2,635	$	266,213	$	268,848	$	—

17

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

Nonaccrual loans were comprised of the following at:

Nonaccrual loans	June 30, 2014		December 31, 2013
	(In thousands)
One-to-four family residential loans	$	1,856	$	1,851
Nonresidential real estate loans		152		1,045
All other mortgage loans		—		—
Commercial business loans		183		2
Consumer loans		1		—
Total	$	2,192	$	2,898

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Bank will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Information with respect to the Company’s impaired loans at June 30, 2014 and December 31, 2013 in combination with activity for the three and six months ended June 30, 2014 and 2013 is presented below:

18

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

	As of June 30, 2014						Three months ended June 30, 2014				Six months ended June 30, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
	(In thousands)
Loans without a specific valuation allowance
One-to-four family residential loans	$	4,897	$	4,897	$	—	$	5,247	$	41	$	5,354	$	105
All other mortgage loans		2,360		2,360		—		2,194		43		2,146		63
Commercial business loans		—		—		—		38		—		51		—
Loans with a specific valuation allowance
One-to-four family residential loans		931		931		96		826		18		831		27
All other mortgage loans		527		527		209		936		4		1,160		18
Commercial business loans		241		241		241		151		2		122		3
Total:
One-to-four family residential loans	$	5,828	$	5,828	$	96	$	6,073	$	59	$	6,185	$	132
All other mortgage loans		2,887		2,887		209		3,130		47		3,306		81
Commercial business loans		241		241		241		189		2		173		3
	$	8,956	$	8,956	$	546	$	9,392	$	108	$	9,664	$	216

19

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

	As of December 31, 2013						Three months ended June 30, 2013				Six months ended June 30, 2013
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
	(In thousands)
Loans without a specific valuation allowance
One-to-four family residential loans	$	5,569	$	5,569	$	—	$	5,810	$	60	$	5,736	$	138
All other mortgage loans		2,051		2,051		—		2,351		20		2,494		49
Commercial business loans		77		77		—		83		—		84		1
Loans with a specific valuation allowance
One-to-four family residential loans		842		842		226		1,230		2		1,250		15
All other mortgage loans		1,610		2,076		618		2,681		27		2,806		36
Commercial business loans		65		65		65		82		1		88		2
Total:
One-to-four family residential loans	$	6,411	$	6,411	$	226	$	7,040	$	62	$	6,986	$	153
All other mortgage loans		3,661		4,127		618		5,032		47		5,300		85
Commercial business loans		142		142		65		165		1		172		3
	$	10,214	$	10,680	$	909	$	12,237	$	110	$	12,458	$	241

The interest income recognized in the above tables reflects interest income recognized and is not materially different from the cash basis method.

All the TDR classifications listed below occurred as concessions were granted to borrowers experiencing financial difficulties. Concessions to borrowers can include exceptions to loan policy including high loan-to-value ratios, no private mortgage insurance (“PMI”) and high debt-to-income ratios, as well as term and rate exceptions. The TDR classification that occurred in the 2014 quarter-to-date period included capitalizing delinquent real estate taxes and a portion of unpaid late charges, while the TDR’s in the 2014 year-to-date period also included an extension of the maturity date. In the June 30, 2013 quarter, and year-to-date periods, the concessions made to the borrowers included both a reduction in the stated interest rate below the market rate of similar debt and an extension of the maturity date. Each TDR has been individually evaluated for impairment with the appropriate specific valuation allowance included in the allowance for loan losses calculation.There were no TDR classifications which defaulted during the twelve month periods ended June 30, 2014 and 2013. The Company considers TDRs that become 90 days or more past due under modified terms as subsequently defaulted.

20

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

	Quarter-to-Date						Year-to-Date
Troubled Debt Restructurings	Number of loans		Pre- modification Unpaid Recorded   Balance		Post- modification Unpaid Recorded Balance		Number of loans		Pre- modification Unpaid Recorded Balance		Post- modification Unpaid Recorded Balance
	(dollars in thousands)
June 30, 2014
One-to-four family residential loans			$	—	$	—			$	—	$	—
All other mortgage loans		1		796		829		2		1,057		1,090
June 30, 2013
One-to-four family residential loans		1	$	303	$	303		2	$	416	$	416
All other mortgage loans				—		—		1		576		576

Note 5: Goodwill and Intangible Assets

The composition of goodwill and other intangible assets, all of which is core deposit intangible, at June 30, 2014 and December 31, 2013:

	June 30, 2014			December 31, 2013
	(In thousands)
Goodwill	$	1,719		$	1,719
Other intangible assets – gross		974			974
Other intangible assets – amortization		(974	)		(936	)
Total	$	1,719		$	1,757

The Company recorded amortization relative to intangible assets totaling $15,000 and $38,000 for the three and six month periods ended June 30, 2014, and $22,000 and $45,000 for the three and six months ended June 30, 2013 respectively. Such amortization is derived using the straight line method for the core deposit asset over ten years. The Company is required to annually test goodwill and other intangible assets for impairment. The Company’s testing of goodwill and other intangible assets at December 31, 2013 indicated there was no impairment in the carrying value of these assets.

Note 6: Earnings Per Share

Basic earnings per common share is 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. The computations are as follows:

21

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Weighted-average common shares outstanding (basic)		2,785,752		2,872,079		2,787,474		2,887,277
Dilutive effect of assumed exercise of stock options		—		—		—		—
Weighted-average common shares outstanding (diluted)		2,785,752		2,872,079		2,787,474		2,887,277

There were no options outstanding at June 30, 2014. Options to purchase 41,204 shares of common stock at an exercise price of $13.95 per share were outstanding at June 30, 2013, but none were included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares at June 30, 2013.

Note 7: Stock Option Plan

During fiscal year 2004, the Company adopted a Stock Option Plan that provided for the issuance of 142,857 incentive options and 61,224 non-incentive options with respect to authorized common stock. At December 31, 2013, all options under the 2004 Plan were expired, and none were outstanding at June 30, 2014. The Company recognized compensation expense related to stock option awards based on the fair value of the option award at the grant date. Compensation cost was recognized over the vesting period. There were no options granted during the three and six months ended June 30, 2013. There was no compensation expense recognized for the stock option plan during the three and six months ended June 30, 2013, as all options were fully vested prior to these periods. As of June 30, 2013 there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. The cost was recognized in fiscal year ended March 31, 2005 when the Company accelerated full vesting of all the stock options at that time.

22

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

Note 8: Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory–and possibly additional discretionary–actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

The Bank must give notice to, or under certain conditions specified by regulation, apply to, the Federal Reserve Bank of Cleveland prior to declaring a dividend to the Company. Under existing regulatory guidance, a dividend is generally permissible without regulatory approval if the institution is considered to be “well capitalized” and the dividend does not exceed current year-to-date net income plus the change in retained earnings for the previous two calendar years.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Tier I capital to average assets, of Tier 1 capital to risk-weighted assets, and of Total Risk-based capital to risk-weighted assets, all as defined in the regulations. Management believes, as of June 30, 2014, that the Bank met all capital adequacy requirements to which it is subject.

23

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

As of June 30, 2014, based on the computations for the call report the Bank is classified as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain capital ratios as set forth in the table below. There are no conditions or events since June 30, 2014 that management believes have changed the Bank’s capital classification.

The Bank’s actual capital amounts and ratios as of June 30, 2014 and December 31, 2013 are presented in the following table.

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of  June 30, 2014
Tier I Capital to average assets	$	36,016		8.7%	$	16,559		4.0%	$	20,699		5.0%
Tier I Capital to risk-weighted assets		36,016		14.3%		10,107		4.0%		15,160		6.0%
Total Risk-based capital to risk-weighted assets		38,565		15.3%		20,214		8.0%		25,267		10.0%
As of December 31, 2013
Tier I Capital to average assets	$	35,065		8.6%	$	16,372		4.0%	$	20,465		5.0%
Tier I Capital to risk-weighted assets		35,065		14.2%		9,866		4.0%		14,798		6.0%
Total Risk-based capital to risk-weighted assets		37,884		15.4%		19,731		8.0%		24,664		10.0%

24

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

Note 9: Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

	Gross Unrealized Gains on Available-for-sale Securities		Net Unrealized Loss for Unfunded Status of Split-dollar Life Insurance Plan Liability (tax-free)			Gross Unrealized Loss for Unfunded Status of Defined Benefit Plan			Tax Effect			Total Accumulated Other Comprehensive Income
	(In thousands)
June 30, 2014	$	1,773	$	(58	)	$	(609	)	$	(396	)	$	710
December 31, 2013	$	796	$	(58	)	$	(609	)	$	(64	)	$	65

There were no amounts reclassified out of accumulated other comprehensive (loss) income during the three

and six months ended June 30, 2014 or 2013.

Note 10: Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1	Quoted prices in active markets for identical assets or liabilities
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Recurring Measurements

Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the Company’s consolidated balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

25

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy.

The following table presents the fair value measurements of assets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2014 and December 31, 2013:

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
June 30, 2014
U.S. government agencies	$	132	$	—	$	132	$	—
Mortgage-backed securities of government sponsored entities		88,450		—		88,450		—
Private-label collateralized mortgage obligations		596		—		596		—
State and political subdivisions		22,427		—		22,427		—

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
December 31, 2013
U.S. government agencies	$	137	$	—	$	137	$	—
Mortgage-backed securities of government sponsored entities		80,357		—		80,357		—
Private-label collateralized mortgage obligations		704		—		704		—
State and political subdivisions		22,427		—		22,427		—

26

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

Nonrecurring Measurements

Certain assets may be required to be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

Collateral-dependent Impaired Loans, Net of ALLL

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the office of the Chief Financial Officer. Appraisals are reviewed for accuracy and consistency by the office of the Chief Financial Officer. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the office of the Chief Financial Officer by comparison to historical results.

Foreclosed Assets Held for Sale

Foreclosed assets held for sale are carried at the lower of fair value at acquisition date or current estimated fair value, less estimated cost to sell when the real estate is acquired. Estimated fair value of real estate is based on appraisals or evaluations. Foreclosed assets held for sale are classified within Level 3 of the fair value hierarchy.

Appraisals of real estate are obtained when the real estate is acquired and subsequently as deemed necessary by the Chief Financial Officer. Appraisals are reviewed internally for accuracy and consistency in accordance with regulatory requirements. Appraisers are selected from the list of approved appraisers maintained by management.

The following table presents the fair value measurements of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2013. There were no assets measured at fair value on a nonrecurring basis at June 30, 2014.

27

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
December 31, 2013
Collateral-dependent impaired loans	$	289	$	—	$	—	$	289

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements in thousands.

	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
December 31, 2013
Collateral-dependent impaired loans	$	289	Present value of cashflows	Discount Rate	6.22%

There were no changes in the inputs or methodologies used to determine fair value at June 30, 2014 as compared to December 31, 2013.

28

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

The following table presents estimated fair values of the Company’s financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
June 30, 2014
Financial assets
Cash and cash equivalents	$	12,091	$	12,091	$	—	$	—
Held-to-maturity securities		6,581		—		6,279		—
Loans, net of allowance for loan losses		260,056		—		—		267,626
Federal Home Loan Bank stock		4,226		—		4,226		—
Interest receivable		1,219		—		1,219		—
Financial liabilities
Deposits		349,448		32,131		294,902		—
Other short-term borrowings		6,146		—		6,146		—
Federal Home Loan Bank advances		16,395		—		16,666		—
Advances from borrowers for taxes and insurance		166		—		166		—
Interest payable		61		—		61		—

29

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Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
					(In thousands)
December 31, 2013
Financial assets
Cash and cash equivalents	$	13,381	$	13,381	$	—	$	—
Held-to-maturity securities		6,623		—		6,121
Loans, net of allowance for loan losses		261,130		—		—		266,530
Federal Home Loan Bank stock		5,025		—		5,025		—
Interest receivable		1,184		—		1,184		—
Financial liabilities
Deposits		337,571		30,145		275,357		—
Other short-term Borrowings		7,212		—		7,212		—
Federal Home Loan Bank Advances		22,336		—		22,801		—
Advances from borrowers for taxes and insurance		1,105		—		1,105		—
Interest payable		68		—		68		—

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Cash and Cash Equivalents, Interest Receivable and Federal Home Loan Bank Stock

The carrying amount approximates fair value.

Held-to-maturity securities

The fair value of held-to-maturity securities was estimated by using pricing models that contain market pricing and information, quoted prices of securities with similar characteristics or discounted cash flows that use credit-adjusted discount rates.

30

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

Loans

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations.

Deposits

Deposits include savings accounts, checking accounts and certain money market deposits. The carrying amount approximates fair value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Interest Payable, Other Short-Term Borrowings and Advances From Borrowers for Taxes and Insurance

The carrying amount approximates fair value.

Federal Home Loan Bank Advances

Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

Commitments to Originate Loans, Letters of Credit and Lines of Credit

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. Fair values of commitments were not material at June 30, 2014 and December 31, 2013.

Note 11: Recent Accounting Developments

FASB ASU 2013-04, Liabilities (Topic 405), Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date in Accounting Standards Update No. 2013-04, issued in February 2013 requires the Company to measure and report on obligations resulting from joint and several liability. This includes the amount the Company has agreed to pay on the basis of its arrangement among its co-obligors, and any additional amount the Company expects to pay on behalf of its co-obligors. The amendments in this update should be applied retrospectively, and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and early adoption is permitted. This standard did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2013-12, Definition of a Public Business Entity, in Accounting Standards Update No. 2013-12, issued in December 2013 improves the United States Generally Accepted Accounting Principles by providing a single definition of public business entity for use in future financial accounting and reporting guidance. This update states that an entity that is required by the Securities and Exchange Commission (SEC) to file or furnish reports to the SEC is considered a public business entity. There is no actual

31

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Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

effective date for the amendments in this update. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2014-01, Investments-Equity Method and Joint Ventures (Topic 323), Accounting for Investments in Qualified Affordable Housing Projects in Accounting Standards Update No. 2014-01, issued in January 2014 permits the Company to make an accounting policy election to account for its investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. The amendments in this update are effective prospectively for public business entities for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014, and early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

FASB ASU 2014-04, Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40), Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure, a consensus of the FASB Emerging Issues Task Force, in Accounting Standards Update No. 2014-04, issued in January 2014. The amendments in this update provides clarification on when an in-substance repossession or foreclosure occurs, including when a creditor should be considered to have received physical possession of the residential real estate property collateralizing a consumer mortgage loan, when to derecognize the loan and recognize the foreclosed property. The amendments in this update are effective for public business entities for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this update using either a modified retrospective transition method or a prospective transition method. This standard is not expected to have a material impact on the Company’s consolidated financial statements.

FASB ASU 2014-06, Technical Corrections and Improvements Related to Glossary Terms, in Accounting Standards Update No. 2014-06, was issued in March 2014. This update contains amendments that affect a wide variety of Topics in the Codification, and represent changes to clarify the Master Glossary of the Codification, consolidate multiple instances of the same term into a single definition, or make improvements to the Master Glossary. The amendments in this update do not have transition guidance and were effective upon issuance for both public and nonpublic entities. This standard did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, in Accounting Standards Update No. 2014-08, was issued in April 2014. The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. A discontinued operation may include a component of an entity or a group of components of an entity, or a business or nonprofit activity. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The amendments in this update are effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within annual periods beginning on or after December 15, 2015. All businesses or nonprofit activities that, on acquisition, are classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within annual periods beginning on or after December 15, 2015. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. This standard is not expected to have a material impact on the Company’s consolidated financial statements.

32

Index

Wayne Savings Bancshares, Inc.

Notes to Condensed Consolidated Financial Statements

FASB ASU 2014-11, Transfers and Servicing (Topic 860), Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures, was issued in June 2014. The amendments in this Update require disclosures for certain transactions comprising a transfer of a financial asset accounted for as a sale and an agreement with the same transferee entered into in contemplation of the initial transfer that results in the transferor retaining substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction. This Update also requires certain disclosures for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions that are accounted for as secured borrowings. The accounting changes in this Update are effective for public business entities for the first interim or annual period beginning after December 15, 2014. For public business entities, the disclosure for certain transactions accounted for as a sale is required to be presented for interim and annual periods beginning after December 15, 2014, and for disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. The disclosures are not required to be presented for comparative periods before the effective date. This standard is not expected to have a material impact on the Company’s consolidated financial statements.

33

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Strategic Initiatives

As part of an ongoing strategic planning process, which includes annual plan updates and regular progress reviews by the Board of Directors, the Company continues to be engaged in several initiatives to improve the returns to shareholders over a foreseeable time horizon.

These continuing initiatives include the execution of a comprehensive marketing and sales program to increase top line revenue of the Company through both loan and fee income generating activities, recognizing that marketing, product development, sales training and sales management expenses are likely to increase ahead of revenue.

Another ongoing initiative is the development of our customer contact staff, through sales and product training, to identify opportunities for revenue generation. The Bank’s Director of Customer Service and Sales, hired during the first quarter of 2014, continues to re-evaluate staff and operational processes related to all aspects of customer interaction. In cooperation with an existing Human Resources Steering Committee, position descriptions, activity goals and an expanded incentive program are all under review.

A further ongoing initiative, following an 18 month review process, is the upgrading of information technology solutions over an implementation schedule that covers the remainder of 2014 and through 2016, to improve internal operating efficiency and customer service while remaining attentive to potential effect on short and long term operating results to improve internal operating efficiency and customer service.

The final initiative includes the continuing development of a comprehensive Enterprise Risk Management (ERM) program to ensure that the earnings generated through existing and contemplated activities are commensurate with the risks assumed in those activities and consistent with legal requirements, regulatory requirements (particularly with respect to capital adequacy, liquidity and interest rate risk) and general economic conditions. The Board of Directors Risk Management Committee, formed during 2013 to oversee management’s ERM program, continues to meet on a quarterly basis to discuss that status of, and development of scorecard measures. The full board reviews the updated scorecard as part of a monthly risk management report to the board.

34

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Management believes that the progress under these initiatives is reflected in increased interest and non-interest revenue, decreased noninterest expense or a combination of increased revenue or decreased expense depending on the activity.

Critical Accounting Policies

Critical Accounting Policies – The Company’s critical accounting policies relate to the allowance for loan losses and goodwill. 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 loan losses. The allowance for loan losses is based on management’s current judgments about the credit quality of individual loans and segments of the loan portfolio. The allowance for loan losses is established through a provision, and considers all known internal and external factors that affect loan collectibility as of the reporting date. Such evaluation, which includes a review of all loans on which full collectibility 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, including those required by regulation 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. The Company recorded all assets and liabilities acquired in prior purchase acquisitions, including goodwill and other intangibles, at fair value as required. Goodwill is subject, at a minimum, to annual tests for impairment. Other intangible assets are amortized over their estimated useful lives using the straight-line method, and are subject to impairment if events or circumstances indicate a possible inability to realize the carrying amount. The initial goodwill and other intangibles recorded and subsequent impairment analysis requires management to make subjective judgments concerning estimates of how the acquired asset will perform in the future. Events and factors that may significantly affect the estimates include, among others, customer attrition, changes in revenue growth trends, specific industry conditions and changes in competition.

35

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Discussion of Financial Condition Changes from December 31, 2013 to June 30, 2014

At June 30, 2014, the Company had total assets of $415.4 million, an increase of $5.1 million from total assets at December 31, 2013. The increase in total assets includes a $7.9 million increase in total securities, partially offset by a $1.3 million decrease in cash, a $1.1 million decrease in net loan balances and a $799,000 decrease in Federal Home Loan Bank stock.

Total securities increased $7.9 million during the six months ended June 30, 2014. The increase in securities was primarily due to investing excess cash balances into amortizing securities that provide cashflows on an ongoing basis to fund anticipated increases in future loan balances. The increase included purchases totaling $18.0 million and a $977,000 increase in unrealized gains on available-for-sale securities, partially offset by principal repayments of $10.5 million and amortization of premiums of $545,000 during the six months ended June 30, 2014.

Net loans receivable decreased by $1.1 million at June 30, 2014 compared to December 31, 2013. The Bank originated $23.3 million of loans, received payments of $21.4 million, originated and sold $2.7 million of 30-year fixed-rate residential mortgage loans into the secondary market, and transferred $81,000 into foreclosed assets held for sale. The decrease in net loan balances is mainly due to principal reductions and loan sales in excess of new origination during the current year period.

Management continues to focus on risk selection and the returns generated in return for risks taken in making its lending and investment decisions. Key areas of risk reviewed for each potential loan origination and securities purchase include credit, interest rate and liquidity risk. Interest rate risk arises mainly from longer term fixed-rate loans. Credit risk arises mainly from loan structure and underwriting conditions. The effects of additional loan portfolio risks generated by competitive pressures in the Company’s market area are evaluated relative to the projected returns to ensure acceptable financial performance over a long-term horizon. As part of an overall strategy to manage liquidity and interest rate risk, management continues to execute a strategy of immediately selling certain newly originated 30-year fixed-rate residential mortgage loans into the secondary market to limit the interest rate risk exposure on the balance sheet and to utilize the secondary market as a backup source of liquidity. Similarly, in order to further limit the overall interest rate risk on the balance sheet, the Company focuses on the origination of shorter-term and adjustable-rate secured commercial loans and limits the retention of long-term fixed-rate residential mortgages. These strategies have the effect of generating lower loan yields in the short-term due to the loans being priced off the lower yield short end of the yield curve. The principal source of liquidity is the Bank’s investment securities portfolio. To the extent that loan demand is insufficient in any given period, investments in the securities portfolio are made to provide cash flows to fund loan demand in future periods (a source of liquidity), while also limiting the interest rate risk exposure of the Company. Investments generally contribute to higher risk-based capital ratios, compared to loans, as the investments the Company purchases are risk weighted less than the loan originations. As loan volume increases relative to investment volume, risk-based capital ratios will decline. As demonstrated by quarterly balance sheet presentations, as a result of general economic and competitive conditions, loan demand and originations are volatile on a sequential quarter basis, which in turn results in volatility in quarterly investment securities balances. The longer term trend and strategic direction is for an increase in higher yielding loan balances relative to lower yielding investment securities balances.

36

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

The following table sets forth certain information regarding the Company’s loan portfolio for the dates indicated.

	June 30, 2014				December 31, 2013
	Balance		Percent of total loans		Balance		Percent of total loans
	(Dollars in thousands)
Mortgage loans:
One-to-four family residential(1)	$	166,250		62.29%	$	166,728		62.02%
Residential construction loans		4,813		1.80%		4,951		1.84%
Multi-family residential		12,887		4.83%		14,011		5.21%
Nonresidential real estate/land(2)		66,654		24.98%		67,133		24.97%
Total mortgage loans		250,604		93.90%		252,823		94.04%
Other loans:
Consumer loans(3)		1,932		0.72%		1,110		0.41%
Commercial business loans		14,357		5.38%		14,915		5.55%
Total other loans		16,289		6.10%		16,025		5.96%
Total loans before net items		266,893		100.00%		268,848		100.00%
Less:
Loans in process		3,607				4,217
Deferred loan origination fees		681				682
Allowance for loan losses		2,549				2,819
Total loans receivable, net	$	260,056			$	261,130

⁽¹⁾ Includes equity loans collateralized by second mortgages in the aggregate amount of $14.2 million at June 30, 2014 and $14.3 million at December 31, 2013. Such loans have been underwritten on substantially the same basis as the Company’s first mortgage loans.

⁽²⁾ Includes land loans of $2.9 million at June 30, 2014 and $2.7 million for December 31, 2013.

⁽³⁾ Includes second mortgage loans of $484 at June 30, 2014 and $566 at December 31, 2013.

37

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Federal Home Loan Bank stock, totaled $4.2 million, a decrease of $799,000 compared to $5.0 million at December 31, 2013. The decrease was due to a stock repurchase program initiated by the FHLB whereby the FHLB repurchased excess shares held by member banks.

Foreclosed assets held for sale totaled $81,000 at June 30, 2014 while there were no foreclosed assets held for sale at December 31, 2013. Activity during the six month period includes the addition of one new foreclosed property and no related sales. Activity during the prior year six month period included the sale of three residential properties totaling $272,000, that were previously held as foreclosed assets, resulting in a gain of $17,000. Total nonperforming and impaired assets totaled $9.7 million, or 2.32% of total assets at June 30, 2014, compared to $11.1 million, or 2.70% of total assets December 31, 2013.

Goodwill of $1.7 million is carried on the Company’s balance sheet as a result of the acquisition of Stebbins Bancshares in June 2004. In accordance with FASB ASC 350, this goodwill is tested for impairment on at least an annual basis. Management evaluated the goodwill using an analysis of required measures of value, including the current stock price as an indicator of minority interest value, change of control multiples as a measure of controlling interest value and discounted cash flow analysis as a measure of going concern value and applied a weighting based on appraisal standards to arrive at a valuation conclusion that indicated no impairment at November 30, 2013. Management believes that there were no interim impairment indicators that would require another evaluation at June 30, 2014.

Deposits totaled $349.4 million at June 30, 2014, an increase of $11.9 million, from $337.6 million, at December 31, 2013. This increase includes a $2.2 million increase in demand deposits, an $8.2 million increase in savings and money market balances and a $1.5 million increase in time deposits. The rate of change in the composition of deposits from higher cost term deposits to lower cost liquid deposits slowed during the current year period as the difference between maturing and renewal rates on term deposits has narrowed and customers adjust to the extended period of low interest rates. The Company continues to monitor deposit activity closely to respond to changes in customer preference for types of deposits.

Other short-term borrowings, which consist solely of repurchase agreements with commercial customers of the Bank, decreased by $1.1 million and totaled $6.1 million at June 30, 2014. These customer repurchase agreements are offered by the Bank in order to retain commercial customer funds and to afford those commercial customers the opportunity to earn a return on a short-term secured transaction. Average balances are shown in the tables below and reflect no significant variation during the periods. The interest rate paid on these borrowings was 0.15% at both June 30, 2014 and December 31, 2013.

Advances from the Federal Home Loan Bank of Cincinnati (“FHLB”) totaled $16.4 million at June 30, 2014, and decreased $5.9 million from $22.3 million at December 31, 2013. This decrease includes the maturity of two fixed rate advances totaling $6.0 million, that were not replaced, partially offset by $59,000 related to amortized prepayment penalties. The Company uses advances from the FHLB for both short-term cash management purposes and to extend the term to maturity of liabilities for interest rate risk management purposes. The cost of longer term liabilities purchased from the FHLB is generally less expensive than obtaining a similar term to maturity through retail certificates of deposit. Repricing risk associated with advances is mitigated through the laddering of advance maturities over time. The weighted-average cost of FHLB advances was 2.64% at June 30, 2014 compared to 2.82% at December 31, 2013.

38

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Stockholders’ equity increased by $1.4 million during the period ended June 30, 2014, primarily due to net income of $1.4 million, and a $645,000 increase in unrealized gains on available-for-sale securities. These increases were partially offset by dividends of $474,000, and purchases of treasury stock totaling $147,000 during the current six month period.

The purchase of treasury shares during the current six month period was made as part of the Company’s share repurchase program that was initially announced during 2012 whereby the Company was authorized to repurchase up to 5.0%, or 150,206 shares of its common stock outstanding. On September 30, 2013 the Company announced the adoption of a new share repurchase program authorizing the repurchase of an additional 2.5% or 72,150, shares of its common stock outstanding. As a result of these two plans, net of shares previously repurchased, the Company may repurchase up to 49,182 shares of its common stock outstanding.

Comparison of Operating Results for the Three Months Ended June 30, 2014 and 2013

General

Net income for the three months ended June 30, 2014, totaled $700,000, reflecting an increase of $209,000, from $491,000 for the three month period ended June 30, 2013. The increase in net income was primarily due to an increase in both net interest income and noninterest income, and a decrease in noninterest expense, partially offset by an increase in the provision for loan losses and the provision for federal income taxes.

39

Index

Wayne Savings Bancshares, Inc.

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. 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 three months ended June 30,
	2014						2013
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
	(Dollars in thousands)
Interest-earning assets:
Loans receivable, net(1)	$	261,702	$	2,879		4.40%	$	244,961	$	2,846		4.65%
Investment securities(2)		115,448		783		2.71%		117,633		632		2.15%
Interest-earning deposits(3)		14,018		50		1.43%		14,442		56		1.55%
Total interest-earning assets		391,168		3,712		3.80%		377,036		3,534		3.75%
Noninterest-earning assets		23,491						24,524
Total assets	$	414,659					$	401,560
Interest-bearing liabilities:
Deposits	$	344,808	$	393		0.46%	$	328,183	$	431		0.53%
Other short-term borrowings		5,907		3		0.20%		6,355		3		0.19%
Borrowings		19,979		134		2.68%		21,322		153		2.87%
Total interest-bearing liabilities		370,694		530		0.57%		355,860		587		0.66%
Noninterest-bearing  liabilities		4,161						5,903
Total liabilities		374,855						361,763
Stockholders’ equity		39,804						39,797
Total liabilities and stockholders’ equity	$	414,659					$	401,560
Net interest income			$	3,182					$	2,947
Interest rate spread(4)						3.23%						3.09%
Net yield on interest-earning assets(5)						3.25%						3.13%
Ratio of average interest-earning assets to average  interest-bearing liabilities						105.52%						105.95%

⁽¹⁾ Includes nonaccrual loan balances.

⁽²⁾ Includes mortgage-backed securities both designated as available-for-sale and held-to-maturity.

⁽³⁾ Includes interest-earning 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.

40

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Interest Income

Interest income increased $178,000 or 5.0%, to $3.7 million for the three months ended June 30, 2014, compared to the same period in 2013. The increase was due to a $14.2 million increase in the average balance of interest-earning assets from $377.0 million in the 2013 period to $391.2 million for the 2014 period, and a 5 basis point increase in the weighted-average yield on interest-earning assets from 3.75% in the 2013 period to 3.80% for the 2014 period. The increase in yield was primarily due to an increase in higher yielding loan balances and a decrease in both the lower interest-yielding investment securities and interest-earning deposits

The increase in the average balance of earning assets for the 2014 period compared to the 2013 period includes a $16.7 million increase in average loan balances, partially offset by a $2.2 million decrease in average securities balances and a decline in the average interest-earning deposit balances of $424,000 as the Company continues to enhance its mix of earning assets by reinvesting cash flows from lower yielding securities and interest-earning deposits into higher yielding loans. While loan volume was up from the 2013 quarter to the 2014 quarter, the loan volume over sequential periods is volatile, with the volatility arising from local economic conditions and competitive activity. The increase in rate earned is primarily due to decreases in both securities prepayments and amortization of purchased premiums as the prepayment speeds in 2014 have declined from the 2013 levels. However, despite the rise in rates from historic lows, the continued overall low level of market interest rates continues to result in new loan originations at lower yields than the existing portfolio and the downward repricing of existing adjustable rate loans that continue to negatively affect the net interest margin.

Interest income on loans was $2.9 million for the three month period ended June 30, 2014, and increased $33,000 compared to the three month period ended June 30, 2013, primarily due to an increase of $16.7 million in the average balance of loans, substantially offset by a decrease in the weighted-average yield. The increase in the average balance of loans outstanding was partially offset by a 25 basis point decrease in the weighted-average loan portfolio yield from 4.65% for the three months ended June 30, 2013 to 4.40% for the three months ended June 30, 2014, as a result of lower origination yields and the amortization, prepayment and repricing of higher yielding loans due to the low level of market interest rates. Interest income on securities increased $151,000 during the three months ended June 30, 2014, compared to the same period in 2013. This increase was due to a 56 basis point increase in the weighted-average rate from 2.15% in the 2013 period to 2.71% for the 2014 period, partially offset by a $2.2 million decrease in the average balance. The increase in yield was primarily to the slowing of prepayments causing a decline in premium amortization for the quarter.

Dividends on Federal Home Loan Bank stock and other income decreased $6,000 for the three months ended June 30, 2014 compared to June 30, 2013. The decrease was due to a $424,000 decrease in the average balance, and a 12 basis point decrease in the weighted-average rate from 1.55% in the 2013 period to 1.43% in the 2014 period.

Interest Expense

Interest expense totaled $530,000 for the three month period ended June 30, 2014, a decrease of $57,000, or 9.7%, from $587,000 for the three month period ended June 30, 2013. The decrease was due to a 9 basis point decrease in the weighted-average cost of funds from 0.66% in the 2013 period to 0.57% in the current year period, partially offset by a $14.8 million, or 4.2%, increase in the average balance of total interest-bearing liabilities from $355.9 million in the 2013 period to $370.7 million in the 2014 period.

41

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Interest expense on deposits for the three month period ended June 30, 2014 totaled $393,000, a decrease of $38,000, or 8.8%, from $431,000 for the same period in the previous year. The decrease was due to a 7 basis point decrease in the weighted-average cost of deposits, from 0.53% in the 2013 period to 0.46% for the 2014 period, partially offset by a $16.6 million increase in the average balance from $328.2 million in the 2013 period to $344.8 million in the 2014 period. The decrease in interest expense continues to slow as rates paid on deposit products reach floors generally established by local market competitors and overall market conditions and as pricing pressure in certain deposit product segments by certain local competitors has increased.

Interest expense on other short-term borrowings totaled $3,000 for both three month periods ended June 30, 2014, and 2013. The weighted-average cost increased 1 basis point from 0.19% in the 2013 period to 0.20% in the 2014 period, which was fully offset by a $448,000 decrease in the average balance of short- term borrowings.

Interest expense on Federal Home Loan Bank advances totaled $134,000 for the three month period ended June 30, 2014, which decreased $19,000 from $153,000 in the 2013 period. The decrease was due to a 19 basis point decrease in the weighted-average cost from 2.87% in the 2013 period to 2.68% in the 2014 period, and a $1.3 million, or 6.3%, decrease in the average balance outstanding. The decrease in the weighted-cost was due to the maturity of higher rate advances, while the decrease in the average balance was due to not replacing the scheduled maturity of fixed-rate term advances.

Net Interest Income

Net interest income totaled $3.2 million for the three month period ended June 30, 2014, an increase of $235,000, or 8.0%, from the three month period ended June 30, 2013. The increase in net interest income was due to a 14 basis point increase in the net interest rate spread, from 3.09% at June 30, 2013 to 3.23% at June 30, 2014. The increase in the net interest spread was a result the yield on earning assets increasing 5 basis points, while the rate paid on interest-bearing liabilities decreased 9 basis points, compared to the same period last year. The yield on earning assets was positively impacted by a shift in the mix of earning assets from lower yielding securities into higher yielding loans, as well as a slowdown in securities prepayments and amortization of purchase premiums. The decrease in the cost of funds from the prior year period, was mainly due to a continuing preference by customers in the current low interest rate environment for lower cost and more liquid deposit accounts over longer term certificate accounts and management’s continuing strategy of limiting competition for higher cost term deposits by focusing on relationship balances.

Provision for Loan Losses

Management recorded a $79,000 provision for loan losses for the three month period ended June 30, 2014, compared to a provision of $10,000 for the three month period ended June 30, 2013. The increase is primarily due to current quarter chargeoffs not covered by specific reserves, partially offset with a continued improvement in our economic factors compared to the prior year quarter.

42

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Noninterest Income

Noninterest income totaled $481,000, for the three months ended June 30, 2014, an increase of $83,000, from $398,000 for the same period in 2013. The increase was primarily due to a $58,000 increase in gain on sale of residential mortgage loans and a $45,000 increase in service fees, charges and other operating income, partially offset by a $20,000 decrease in gain on sale of foreclosed assets held for sale. The increase in gain on sale of residential mortgage loans was primarily due to increased loan sales in the 2014 quarter compared to the 2013 quarter. The increase in service fees, charges and other operating income was primarily due to an increase in fees from annuity sales and fees from deposit service charges. The decrease in gain on sale of foreclosed assets held for sale was primarily due to the sale of a foreclosed property in the 2013 period, compared to no foreclosed property sales in the 2014 period.

Noninterest Expense

Noninterest expense totaled $2.7 million for the three months ended June 30, 2014, a decrease of $13,000, compared to the three months ended June 30, 2013. This decrease includes a $35,000 decrease in franchise taxes and a $7,000 decrease in amortization of intangible assets, partially offset by a $34,000 increase in occupancy and equipment expense. The decrease in franchise taxes was primarily due to the State of Ohio’s newly enacted Financial Institutions Tax during the three month period ended June 30, 2014, which resulted in lower taxes compared to the previous Ohio corporate franchise tax that was in place during the 2013 period. The decrease in amortization of intangible assets was due to a core deposit intangible amortized to zero in the current year quarter compared to a scheduled amortization amount in the prior year quarter. The increase in occupancy and equipment expense was primarily due to an increase in building repairs and maintenance and furniture and fixtures expense compared to the prior year quarter.

Federal Income Taxes

Federal income tax expense totaled $234,000 for the three month period ended June 30, 2014, an increase of $53,000 compared to $181,000 for three month period ended June 30, 2013. The increase was primarily due to a $262,000 increase in pretax income compared to the prior year period, and a decrease in the effective tax rate. The effective tax rate in the current year quarter was 25.05% compared to 26.93% for the prior year quarter. The effective rate is below the statutory rate of 34% due to certain income items that are not subject to tax.

Comparison of Operating Results for the Six Months Ended June 30, 2014 and 2013

General

Net income for the six months ended June 30, 2014, totaled $1.4 million, an increase of $301,000, from $1.1 million for the six month period ended June 30, 2013. The increase in net income was primarily due to an increase in both net interest income and noninterest income and a decrease in noninterest expense, partially offset by an increase in the provision (credit) for loan losses and the provision for federal income taxes.

43

Index

Wayne Savings Bancshares, Inc.

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. 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 six months ended June 30,
	2014						2013
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
	(Dollars in thousands)
Interest-earning assets:
Loans receivable, net(1)	$	261,645	$	5,769		4.41%	$	246,320	$	5,734		4.66%
Investment securities(2)		114,181		1,563		2.74%		116,336		1,288		2.21%
Interest-earning deposits(3)		12,928		101		1.56%		13,597		111		1.63%
Total interest-earning assets		388,754		7,433		3.82%		376,253		7,133		3.79%
Noninterest-earning assets		23,425						24,662
Total assets	$	412,179					$	400,915
Interest-bearing liabilities:
Deposits	$	341,123	$	788		0.46%	$	327,344	$	866		0.53%
Other short-term borrowings		6,249		5		0.16%		6,484		5		0.15%
Borrowings		21,171		279		2.64%		21,280		305		2.87%
Total interest-bearing liabilities		368,543		1,072		0.58%		355,108		1,176		0.66%
Noninterest-bearing  liabilities		4,296						5,923
Total liabilities		372,839						361,031
Stockholders’ equity		39,340						39,884
Total liabilities and stockholders’ equity	$	412,179					$	400,915
Net interest income			$	6,361					$	5,957
Interest rate spread(4)						3.24%						3.13%
Net yield on interest-earning assets(5)						3.27%						3.17%
Ratio of average interest-earning assets to average  interest-bearing liabilities						105.48%						105.95%

⁽¹⁾ Includes nonaccrual loan balances.

⁽²⁾ Includes mortgage-backed securities both designated as available-for-sale and held-to-maturity.

⁽³⁾ Includes interest-earning 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.

44

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Interest Income

Interest income increased $300,000 or 4.2%, to $7.4 million for the six months ended June 30, 2014, compared to the same period in 2013. The increase was due to a $12.5 million increase in the average balance of interest-earning assets from $376.3 million in the 2013 period to $388.8 million for the 2014 period, and a 3 basis point increase in the weighted-average yield on interest-earning assets from 3.79% in the 2013 period to 3.82% for the 2014 period. The increase in yield was primarily due to an increase in higher yielding loan balances and a decrease in both the lower interest-yielding investment securities and interest-earning deposits.

The increase in the average balance of earning assets for the 2014 period compared to the 2013 period includes a $15.3 million increase in average loan balances, partially offset by a $2.2 million decrease in average securities balances and a decline in the average interest-earning deposit balances of $669,000 as the Company continues to enhance its mix of earning assets by reinvesting cash flows from lower yielding securities and interest-earning deposits into higher yielding loans. The increase in rate earned is primarily due to decreases in both securities prepayments and amortization of purchase premiums as a result of an increase in market rates which slowed the volume of rate driven refinancing compared to the prior year quarter. However, despite the rise in rates from historic lows, the continued overall low level of market interest rates continues to result in new loan originations at lower yields than the existing portfolio and the downward repricing of existing adjustable rate loans that continue to negatively affect the net interest margin.

Interest income on loans was $5.8 million for six months ended June 30, 2014, an increase of $35,000 compared to the six months ended June 30, 2013, primarily due to an increase in the average balance of loans, substantially offset by a decrease in the weighted-average yield. The average balance of loans outstanding increased $15.3 million from $246.3 million in the 2013 period to $261.6 million in the 2014 period. The increase in the average balance of loans outstanding was substantially offset by a 25 basis point decrease in the weighted-average loan portfolio yield from 4.66% for the six months ended June 30, 2013 to 4.41% for the six months ended June 30, 2014, as a result of lower origination yields and the amortization, prepayment and repricing of higher yielding loans due to the low level of market interest rates.

Interest income on securities increased $275,000 during the six months ended June 30, 2014, compared to the same period in 2013. This increase was due to a 53 basis point increase in the weighted-average rate from 2.21% in the 2013 period to 2.74% for the 2014 period, partially offset by a $2.2 million decrease in the average balance. The increase in yield was primarily to the slowing of prepayments causing a decline in premium amortization for the quarter.

Dividends on Federal Home Loan Bank stock and other income totaled $101,000 for the six months ended June 30, 2014, and decreased $10,000 compared to the six months ended June 30, 2013. The decrease was due to a $669,000 decrease in the average balance, and a 7 basis point decrease in the weighted-average rate from 1.63% in the 2013 period to 1.56% in the 2014 period.

Interest Expense

Interest expense totaled $1.1 million for the six month period ended June 30, 2014, a decrease of $104,000, or 8.8%, from $1.2 million for the six month period ended June 30, 2013. The decrease was due to an 8 basis point decrease in the weighted-average cost of funds from 0.66% in the 2013 period to 0.58% in the current year period, partially offset by a $13.4 million, or 3.8%, increase in the average balance of total interest-bearing liabilities from $355.1 million in the 2013 period to $368.5 million in the 2014 period.

45

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Interest expense on deposits for the six month period ended June 30, 2014 totaled $788,000, a decrease of $78,000, or 9.0%, from $866,000 for the same period in the previous year. The decrease was due to a 7 basis point decrease in the weighted-average cost of deposits, from 0.53% in the 2013 period to 0.46% for the 2014 period, partially offset by a $13.8 million increase in the average balance from $327.3 million in the 2013 period to $341.1 million in the 2014 period. The decrease in interest expense continues to slow as rates paid on deposit products reach floors established by local market competitors and overall market conditions and as pricing pressure in the local market has begun rising.

Interest expense on other short-term borrowings totaled $5,000 for both six month periods ended June 30, 2014, and 2013. The weighted-average cost increased 1 basis point from 0.15% in the 2013 period to 0.16% in the 2014 period, which was offset by a $235,000 decrease in the average balance of other short-term borrowings.

Interest expense on Federal Home Loan Bank advances totaled $279,000 for the six month period ended June 30, 2014, which decreased $26,000 from $305,000 in the 2013 period. The decrease was due to a 23 basis point decrease in the weighted-average cost from 2.87% in the 2013 period to 2.64% in the 2014 period, and a $109,000 decrease in the average balance outstanding. The decrease in the weighted-average cost was due to the maturity of higher rate advances, while the decrease in the average balance was due to not replacing scheduled maturities of fixed-rate term advances.

Net Interest Income

Net interest income totaled $6.4 million for the six month period ended June 30, 2014, an increase of $404,000, or 6.8%, from the six month period ended June 30, 2013. The increase in net interest income was mainly due to an 11 basis point increase in the net interest rate spread, from 3.13% at June 30, 2013 to 3.24% at June 30, 2014. The increase in the net interest spread was a result of yields on earning assets increasing, while the cost of funds decreased. During the six months ended June 30, 2014, the yield on earning assets increased 3 basis points, while the rate paid on interest-bearing liabilities decreased 8 basis points, compared to the same period last year. The yield on earning assets was positively impacted by a shift in the mix of earning assets from lower yielding securities into higher yielding loans, as well as a slowdown in securities prepayments and amortization of purchase premiums. While loan volume was up from the 2013 six month period to the 2014 six month period, the loan volume over sequential periods is volatile, with the volatility arising from local economic conditions and competitive activity. The decrease in the cost of funds from the prior year period, was mainly due to a continuing preference by customers in the current low interest rate environment for lower cost and more liquid deposit accounts over longer term certificate accounts and management’s continuing strategy of limiting competition for higher cost term deposits by focusing on relationship balances.

Provision (credit) for Loan Losses

Management recorded an $87,000 provision for loan losses for the six month period ended June 30, 2014, compared to a provision reversal of $131,000 for the six month period ended June 30, 2013. The increase was mainly due to the restructuring of commercial real estate loans allowing the release of required reserves as additional collateral was given to the Bank on several classified relationships during the first quarter of 2013 and continued favorable movement in the economic factors considered as part of management’s analysis.

46

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Noninterest Income

Noninterest income totaled $852,000, for the six months ended June 30, 2014, an increase of $67,000, from $785,000 for the same period in 2013. The increase was primarily due to a $36,000 increase in gain on sale of residential mortgage loans, and an increase of $44,000 in service fees, charges and other operating income, partially offset by a $17,000 decrease in gain on sale of foreclosed assets held for sale. The increase in gain on sale of residential mortgage loans was primarily due to more favorable pricing on current year sales and an increase in mortgage servicing rights compared to the 2013 period. The increase in service fees, charges and other operating income was primarily due to an increase in fees from annuity sales and fees from deposit service charges implemented in 2014 that was not in place in the 2013 period. The decrease in gain on sale of foreclosed assets held for sale was due to the sale of three foreclosed properties in the 2013 period, compared to no foreclosed property sales in the 2014 period.

Noninterest Expense

Noninterest expense totaled $5.3 million for six months ended June 30, 2014, and decreased $92,000, compared to the six months ended June 30, 2013. This decrease includes a $71,000 decrease in franchise taxes and a $59,000 decrease in other operating expenses, partially offset by a $68,000 increase in occupancy and equipment expense. The decrease in franchise taxes was primarily due to the State of Ohio’s newly enacted Financial Institutions Tax during the 2014 period, which resulted in lower taxes compared to the previous Ohio corporate franchise tax that was in place during the 2013 period. The decrease in other operating expenses was primarily due a decrease in office supplies expense, marketing expense, legal expense and internet banking expense. The increase in occupancy and equipment expense was due to increases building maintenance and repairs, furniture and fixture expense, building insurance and data processing.

Federal Income Taxes

Federal income tax expense totaled $455,000 for the six month period ended June 30, 2014, an increase of $44,000 compared to $411,000 for six month period ended June 30, 2013. The increase was primarily due to a $345,000 increase in pretax income compared to the prior year period, and a decrease in the effective tax rate. The effective tax rate in the current year period was 24.93% compared to 27.77% for the prior year quarter. The effective rate is below the statutory rate of 34% due to certain income items that are not subject to tax.

47

Index

Wayne Savings Bancshares, Inc.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Forward-Looking Statements

This document contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and similar expressions. These forward-looking statements include: statements of goals, intentions and expectations, statements regarding prospects and business strategy, statements regarding asset quality and market risk, and estimates of future costs, benefits and results.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following: (1) general economic conditions, (2) competitive pressure among financial services companies, (3) changes in interest rates, (4) deposit flows, (5) loan demand, (6) changes in legislation or regulation, (7) changes in accounting principles, policies and guidelines, (8) litigation liabilities, including costs, expenses, settlements and judgments, and (9) other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. We have no obligation to update or revise any forward-looking statements to reflect any changed assumptions, any unanticipated events or any changes in the future.

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

Management believes there has been no material change in the Company’s market risk since the Company’s Form 10-K was filed with the Securities and Exchange Commission for the year ended December 31, 2013.

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.

48

Index

Wayne Savings Bancshares, Inc.

Part II

ITEM 1. Legal Proceedings

Not applicable.

ITEM 1A. Risk Factors

There have been no material changes in the risk factors set forth in Part I, Item 1A of the Company’s Annual Report on Form 10-K for year ended December 31, 2013.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) Not applicable.

(c) The following table sets forth certain information regarding repurchases by the Company for the quarter ended June 30, 2014.

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of the announced plan		Maximum number of shares which may still be purchased as part of the announced plan
April 1 - 30, 2014		—	$	—		165,674		56,682
May 1 - 31, 2014		7,500		12.10		173,174		49,182
June 1 - 30, 2014		—		—		173,174		49,182
Total		7,500	$	12.10		173,174		49,182

Notes to the Table:

On August 10, 2012, the Company announced the authorization by the Board of Directors of a new program for the repurchase of 150,206 shares, or 5.0%, of the Company’s outstanding shares of common stock. On September 30, 2013 the Company announced the adoption of a new share buy-back program authorizing the repurchase of an additional 2.5% or 72,150, shares of its common stock outstanding. As a result of these two plans, net of shares previously repurchased, the Company may repurchase up to 49,182 shares of its common stock outstanding.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

ITEM 4. Mine Safety Disclosures

Not applicable.

49

Index

Wayne Savings Bancshares, Inc.

Part II

ITEM 5. Other Information

Not applicable.

ITEM 6. Exhibits

Exhibit
Number	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
32	Written Statement of Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
101	Interactive financial data (XBRL)

50

Index

Wayne Savings Bancshares, Inc.

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:	August 8, 2014	By:	/s/Rod C. Steiger
			Rod C. Steiger
			President and Chief Executive Officer
Date:	August 8, 2014	By:	/s/Myron Swartzentruber
			Myron Swartzentruber
			Senior Vice President and
			Chief Financial Officer

51

EX-31.1

Exhibit 31.1

Pursuant to Rule 13a-14(a) and 15d-14(a)

OF THE SECURITIES AND EXCHANGE ACT OF 1934

Certification of the Chief Executive Officer

I, Rod C. Steiger, 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(c) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 officer 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 (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses 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.

August 8, 2014	/s/Rod C. Steiger
Date	Rod C. Steiger
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Pursuant to Rule 13a-14(a) and 15d-14(a)

OF THE SECURITIES AND EXCHANGE ACT OF 1934

Certification of the Chief financial Officer

I, Myron Swartzentruber, 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(c) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 officer 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 (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses 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.

August 8, 2014	/s/Myron Swartzentruber
Date	Myron Swartzentruber
	Senior Vice President and
	Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

I, Rod C. Steiger, President and Chief Executive Officer and Myron Swartzentruber, Senior Vice President and Chief Financial Officer, of Wayne Savings Bancshares, Inc. (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2014, (the “Report”) fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 8, 2014	/s/Rod C. Steiger
Date	Rod C. Steiger
	President and Chief Executive Officer
August 8, 2014	/s/Myron Swartzentruber
Date	Myron Swartzentruber
	Senior Vice President and
	Chief Financial Officer

XML

Earnings Per Share (Details Narrative) (USD $)	Jun. 30, 2013
Earnings Per Share Details Narrative
Options outstanding	41,204
Option exercise price	$ 13.95

XML

Fair Value Measurements (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Valuation Technique	Present value of cashflows
Unobservable Input	Discount Rate
Range (Weighted Average)	Discount Rate: 6.22%
Fair Value measured on a Non-Recurring Basis [Member] | Fair value [Member]
Collateral-dependent impaired loans	$ 289

XML

Credit Quality of Loans and the Allowance for Loan Losses (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Aging analysis of past due loans
30-59 Days Past Due	$ 254	$ 908
60-89 Days Past Due	594	292
Greater Than 90 Days Past Due	1,770	1,435
Total Past Due	2,618	2,635
Current	264,275	266,213
Total loans receivable	266,893	268,848
Total Loans >90 Days and Accruing	937
One-to-four family residential [Member]
Aging analysis of past due loans
30-59 Days Past Due	254	679
60-89 Days Past Due	557	228
Greater Than 90 Days Past Due	1,507	624
Total Past Due	2,318	1,531
Current	163,932	165,197
Total loans receivable	166,250	166,728
Total Loans >90 Days and Accruing	936
All other mortgage loans [Member]
Aging analysis of past due loans
30-59 Days Past Due		150
60-89 Days Past Due		64
Greater Than 90 Days Past Due	152	811
Total Past Due	152	1,025
Current	84,202	85,070
Total loans receivable	84,354	86,095
Commercial business loans [Member]
Aging analysis of past due loans
60-89 Days Past Due	37
Greater Than 90 Days Past Due	110
Total Past Due	147
Current	14,210	14,915
Total loans receivable	14,357	14,915
Consumer loans [Member]
Aging analysis of past due loans
30-59 Days Past Due		79
Greater Than 90 Days Past Due	1
Total Past Due	1	79
Current	1,931	1,031
Total loans receivable	1,932	1,110
Total Loans >90 Days and Accruing	$ 1

XML

Securities (Details Narrative) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Securities Details Narrative
Carrying value of securities pledged as collateral to secure public deposits	$ 60,400	$ 62,000
Fair value of investments, carried at less than historical costs	$ 39,600	$ 51,500
Percentage available for sale Securities in unrealized loss positions out of total available for sale securities	34.00%	47.00%

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Regulatory Matters (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Tier 1 Capital to average assets
Tier 1 Capital	$ 36,016	$ 35,065
Tier 1 Capital to average assets, ratio	8.70%	8.60%
Minimum amount of Tier 1 Capital for adequacy purposes	16,559	16,372
Minimum amount of Tier 1 Capital for adequacy purposes, ratio	4.00%	4.00%
Minimum Tier 1 Capital required to be well-capitalized	20,699	20,465
Minimum Tier 1 Capital required to be well-capitalized, ratio	5.00%	5.00%
Tier 1 Capital to risk-weighted assets
Tier 1 Capital	36,016	35,065
Tier 1 Capital to risk-weighted assets ratio	14.30%	14.20%
Minimum amount of Tier 1 Capital for adequacy purposes	10,107	9,866
Minimum amount of Tier 1 Capital for adequacy purposes, ratio	4.00%	4.00%
Minimum Tier 1 Capital required to be well-capitalized	15,160	14,798
Minimum Tier 1 Capital required to be well-capitalized, ratio	6.00%	6.00%
Total Risk-based Capital
Total Risk-based capital	38,565	37,884
Total Risk-based capital to risk-weighted assets, ratio	15.30%	15.40%
Minimum amount of capital for adequacy purposes	20,214	19,731
Minimum amount of capital for adequacy purposes, ratio	8.00%	8.00%
Minimum Capital required to be well-capitalized	$ 25,267	$ 24,664
Minimum Capital required to be well-capitalized, ratio	10.00%	10.00%

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Goodwill and Intangible Assets (Details Narrative) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Goodwill And Intangible Assets Details Narrative
Amortization of intangible assets	$ 15	$ 22	$ 38	$ 45

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Fair Value Measurements (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financial assets:
Held-to-maturity securities	$ 6,279	$ 6,121
Carrying Amount [Member]
Financial assets:
Cash and cash equivalents	12,091	13,381
Held-to-maturity securities	6,581	6,623
Loans, net of allowance for loan losses	260,056	261,130
Federal Home Loan Bank stock	4,226	5,025
Interest receivable	1,219	1,184
Financial liabilities:
Deposits	349,448	337,571
Other Short Term Borrowings	6,146	7,212
Federal Home Loan Bank Allowances	16,395	22,336
Advance Payments by Borrowers for Taxes and Insurance	166	1,105
Interest Payable	61	68
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets:
Cash and cash equivalents	12,091	13,381
Financial liabilities:
Deposits	32,131	30,145
Significant Other Observable Inputs (Level 2) [Member]
Financial assets:
Held-to-maturity securities	6,279	6,121
Federal Home Loan Bank stock	4,226	5,025
Interest receivable	1,219	1,184
Financial liabilities:
Deposits	294,902	275,357
Other Short Term Borrowings	6,146	7,212
Federal Home Loan Bank Allowances	16,666	22,801
Advance Payments by Borrowers for Taxes and Insurance	166	1,105
Interest Payable	61	68
Significant Unobservable Inputs (Level 3) [Member]
Financial assets:
Loans, net of allowance for loan losses	$ 267,626	$ 266,530

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Credit Quality of Loans and the Allowance for Loan Losses

6 Months Ended

Jun. 30, 2014

Credit Quality Of Loans And Allowance For Loan Losses

Credit Quality of Loans and the Allowance for Loan Losses

Note 4: Credit Quality of Loans and the Allowance for Loan Losses

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, chargeoffs, the allowance for loan losses, any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan. 

The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well secured and in process of collection. Past due status is determined based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current for a period of six months and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical chargeoff experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by using the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogenous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

The risk characteristics of each portfolio segment are as follows:

Residential Real Estate Loans

For residential mortgage loans that are secured by one-to-four family residences and are generally owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in one-to-four family residences. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

All Other Mortgage Loans

All other mortgage loans consist of residential construction loans, nonresidential real estate loans, land loans and multi-family real estate loans.

Residential construction loan proceeds are disbursed in increments as construction progresses and as inspections warrant. Construction loans are typically structured as permanent one-to-four family loans originated by the Company with a 12-month construction phase. Accordingly, upon completion of the construction phase, there is no change in interest rate or term to maturity of the original construction loan, nor is a new permanent loan originated. These loans are generally owner occupied and the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded.

Nonresidential real estate loans are negotiated on a case-by-case basis. Loans secured by nonresidential real estate generally involve a greater degree of risk than one-to-four family residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income-producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by nonresidential real estate is typically dependent upon the successful operation of the related real estate project. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

The Company also originates a limited number of land loans secured by individual improved and unimproved lots for future residential construction. In addition, the Company originates loans to commercial customers with land held as the collateral.

Multi-family real estate loans generally involve a greater degree of credit risk than one-to-four family residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income-producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by multi-family real estate is typically dependent upon the successful operation of the related real estate property. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

Commercial Business Loans

Commercial business loans carry a higher degree of risk than one-to-four family residential loans. Such lending typically involves large loan balances concentrated in a single borrower or groups of related borrowers for rental or business properties. In addition, the payment experience on loans secured by income-producing properties is typically dependent on the success of the operation of the related project and thus is typically affected by adverse conditions in the real estate market and in the economy. The Company originates commercial loans generally in the $50,000 to $1,000,000 range with the majority of these loans being under $500,000. Commercial loans are generally underwritten based on the borrower’s ability to pay and assets such as buildings, land and equipment are taken as additional loan collateral. Each loan is evaluated for a level of risk and assigned a rating from “1” (the highest quality rating) to “7” (the lowest quality rating).

Consumer Loans

Consumer loans entail greater credit risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as automobiles, mobile homes, boats, and recreational vehicles. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In particular, amounts realizable on the sale of repossessed automobiles may be significantly reduced based upon the condition of the automobiles and the lack of demand for used automobiles.

The following presents by portfolio segment, the activity in the allowance for loan losses for the three and six months ended June 30, 2014 and 2013:

Three months ended June 30, 2014	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans		Total
	(In thousands)
Beginning balance	$	889		$	1,393		$	288		$	4	$	2,574
Provision charged to expense		63			(255	)		271			—		79
Losses charged off		(11	)		—			(112	)		—		(123	)
Recoveries		—			17			2			—		19
Ending balance	$	941		$	1,155		$	449		$	4	$	2,549

Three months ended June 30, 2013	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans			Total
	(In thousands)
Beginning balance	$	1,027		$	1,731		$	213		$	6		$	2,977
Provision charged to expense		216			(174	)		(29	)		(3	)		10
Losses charged off		(4	)		—			—			—			(4	)
Recoveries		—			—			1			3			4
Ending balance	$	1,239		$	1,557		$	185		$	6		$	2,987

Six months ended June 30, 2014	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans			Total
	(In thousands)
Beginning balance	$	1,017		$	1,526		$	271		$	5		$	2,819
Provision charged to expense		(72	)		(128	)		288			(1	)		87
Losses charged off		(11	)		(260	)		(112	)		—			(383	)
Recoveries		7			17			2			—			26
Ending balance	$	941		$	1,155		$	449		$	4		$	2,549

Six months ended June 30, 2013	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans			Total
	(In thousands)
Beginning balance	$	1,122		$	1,925		$	275		$	6		$	3,328
Provision (credit) charged to expense		155			(192	)		(92	)		(2	)		(131	)
Losses charged off		(38	)		(176	)		—			(2	)		(216	)
Recoveries		—			—			2			4			6
Ending balance	$	1,239		$	1,557		$	185		$	6		$	2,987

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on the portfolio segment and impairment method as of June 30, 2014 and December 31, 2013:

June 30, 2014	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans		Total
Allowance Balances:	(In thousands)
Ending balance:
Individually evaluated for impairment	$	96	$	209	$	241	$	—	$	546
Collectively evaluated for impairment		845		946		208		4		2,003
Total allowance for loan losses	$	941	$	1,155	$	449	$	4	$	2,549
Loan Balances:
Ending balance:
Individually evaluated for impairment	$	5,828	$	2,887	$	241	$	—	$	8,956
Collectively evaluated for impairment		160,422		81,467		14,116		1,932		257,937
Total balance	$	166,250	$	84,354	$	14,357	$	1,932	$	266,893

December 31, 2013	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans		Total
Allowance Balances:	(In thousands)
Ending balance:
Individually evaluated for impairment	$	226	$	618	$	65	$	—	$	909
Collectively evaluated for impairment		791		908		206		5		1,910
Total allowance for loan losses	$	1,017	$	1,526	$	271	$	5	$	2,819
Loan Balances:
Ending balance:
Individually evaluated for impairment	$	6,411	$	3,661	$	142	$	—	$	10,214
Collectively evaluated for impairment		160,317		82,434		14,773		1,110		258,634
Total balance	$	166,728	$	86,095	$	14,915	$	1,110	$	268,848

Total loans in the above tables do not include deferred loan origination fees of $681 and $682 or loans in process of $3.6 million and $4.2 million, respectively, for June 30, 2014 and December 31, 2013.

The following tables present the credit risk profile of the Bank’s loan portfolio based on rating category and payment activity as of June 30, 2014 and December 31, 2013:

June 30, 2014	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans
	(In thousands)
Rating *
Pass (Risk 1-4)	$	156,430	$	80,957	$	13,893	$	1,931
Special Mention (Risk 5)		2,867		1,017		223		—
Substandard (Risk 6)		6,953		2,380		241		1
Total	$	166,250	$	84,354	$	14,357	$	1,932

December 31, 2013	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans
	(In thousands)
Rating *
Pass (Risk 1-4)	$	158,518	$	81,362	$	14,328	$	1,108
Special Mention (Risk 5)		419		1,587		445		—
Substandard (Risk 6)		7,791		3,146		142		2
Total	$	166,728	$	86,095	$	14,915	$	1,110

* Ratings are generally assigned to consumer and residential mortgage loans on a “pass” or “fail” basis, where “fail” results in a substandard classification. Commercial loans, both secured by real estate or other assets or unsecured, are analyzed in accordance with an analytical matrix codified in the Bank’s loan policy that produces a risk rating as described below.

Risk 1 is unquestioned credit quality for any credit product. Loans are secured by cash and near cash collateral with immediate access to proceeds.

Risk 2 is very low risk with strong credit and repayment sources. Borrower is well capitalized in a stable industry, financial ratios exceed peers and financial trends are positive.

Risk 3 is very favorable risk with highly adequate credit strength and repayment sources. Borrower has good overall financial condition and adequate capitalization.

Risk 4 is acceptable, average risk with adequate credit strength and repayment sources. Collateral positions must be within Bank policies.

Risk 5 or “Special Mention,” also known as “watch,” has potential weakness that deserve Management’s close attention. This risk includes loans where the borrower has developed financial uncertainties or the borrower is resolving the financial uncertainties. Bank credits have been secured or negotiations will be ongoing to secure further collateral.

Risk 6 or “Substandard” loans are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged. This risk category contains loans that exhibit a weakening of the borrower’s credit strength with limited credit access and all nonperforming loans.

Risk 7 or “Doubtful” loans are significantly under protected by the current net worth and paying capacity of the borrower or of the collateral pledged. This risk category contains loans that are likely to experience a loss of some magnitude, but where the amount of the expected loss is not known with enough certainty to allow for an accurate calculation of a loss amount for charge off. This category is considered to be temporary until a chargeoff amount can be reasonably determined.

The following tables present the Bank’s loan portfolio aging analysis for June 30, 2014 and December 31, 2013:

June 30, 2014	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In thousands)
One-to-four family residential loans	$	254	$	557	$	1,507	$	2,318	$	163,932	$	166,250	$	936
All other mortgage loans		—		—		152		152		84,202		84,354		—
Commercial business loans		—		37		110		147		14,210		14,357		—
Consumer loans		—		—		1		1		1,931		1,932		1
Total	$	254	$	594	$	1,770	$	2,618	$	264,275	$	266,893	$	937

December 31, 2013	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In thousands)
One-to-four family residential loans	$	679	$	228	$	624	$	1,531	$	165,197	$	166,728	$	—
All other mortgage loans		150		64		811		1,025		85,070		86,095		—
Commercial Business loans		—		—		—		—		14,915		14,915		—
Consumer loans		79		—		—		79		1,031		1,110		—
Total	$	908	$	292	$	1,435	$	2,635	$	266,213	$	268,848	$	—

Nonaccrual loans were comprised of the following at:

Nonaccrual loans	June 30, 2014		December 31, 2013
	(In thousands)
One-to-four family residential loans	$	1,856	$	1,851
Nonresidential real estate loans		152		1,045
All other mortgage loans		—		—
Commercial business loans		183		2
Consumer loans		1		—
Total	$	2,192	$	2,898

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Bank will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Information with respect to the Company’s impaired loans at June 30, 2014 and December 31, 2013 in combination with activity for the three and six months ended June 30, 2014 and 2013 is presented below:

	As of June 30, 2014						Three months ended June 30, 2014				Six months ended June 30, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
	(In thousands)
Loans without a specific valuation allowance
One-to-four family residential loans	$	4,897	$	4,897	$	—	$	5,247	$	41	$	5,354	$	105
All other mortgage loans		2,360		2,360		—		2,194		43		2,146		63
Commercial business loans		—		—		—		38		—		51		—
Loans with a specific valuation allowance
One-to-four family residential loans		931		931		96		826		18		831		27
All other mortgage loans		527		527		209		936		4		1,160		18
Commercial business loans		241		241		241		151		2		122		3
Total:
One-to-four family residential loans	$	5,828	$	5,828	$	96	$	6,073	$	59	$	6,185	$	132
All other mortgage loans		2,887		2,887		209		3,130		47		3,306		81
Commercial business loans		241		241		241		189		2		173		3
	$	8,956	$	8,956	$	546	$	9,392	$	108	$	9,664	$	216

	As of December 31, 2013						Three months ended June 30, 2013				Six months ended June 30, 2013
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
	(In thousands)
Loans without a specific valuation allowance
One-to-four family residential loans	$	5,569	$	5,569	$	—	$	5,810	$	60	$	5,736	$	138
All other mortgage loans		2,051		2,051		—		2,351		20		2,494		49
Commercial business loans		77		77		—		83		—		84		1
Loans with a specific valuation allowance
One-to-four family residential loans		842		842		226		1,230		2		1,250		15
All other mortgage loans		1,610		2,076		618		2,681		27		2,806		36
Commercial business loans		65		65		65		82		1		88		2
Total:
One-to-four family residential loans	$	6,411	$	6,411	$	226	$	7,040	$	62	$	6,986	$	153
All other mortgage loans		3,661		4,127		618		5,032		47		5,300		85
Commercial business loans		142		142		65		165		1		172		3
	$	10,214	$	10,680	$	909	$	12,237	$	110	$	12,458	$	241

The interest income recognized in the above tables reflects interest income recognized and is not materially different from the cash basis method.

All the TDR classifications listed below occurred as concessions were granted to borrowers experiencing financial difficulties. Concessions to borrowers can include exceptions to loan policy including high loan-to-value ratios, no private mortgage insurance (“PMI”) and high debt-to-income ratios, as well as term and rate exceptions. The TDR classification that occurred in the 2014 quarter-to-date period included capitalizing delinquent real estate taxes and a portion of unpaid late charges, while the TDR’s in the 2014 year-to-date period also included an extension of the maturity date. In the June 30, 2013 quarter, and year-to-date periods, the concessions made to the borrowers included both a reduction in the stated interest rate below the market rate of similar debt and an extension of the maturity date. Each TDR has been individually evaluated for impairment with the appropriate specific valuation allowance included in the allowance for loan losses calculation.There were no TDR classifications which defaulted during the twelve month periods ended June 30, 2014 and 2013. The Company considers TDRs that become 90 days or more past due under modified terms as subsequently defaulted.

	Quarter-to-Date						Year-to-Date
Troubled Debt Restructurings	Number of loans		Pre- modification Unpaid Recorded   Balance		Post- modification Unpaid Recorded Balance		Number of loans		Pre- modification Unpaid Recorded Balance		Post- modification Unpaid Recorded Balance
	(dollars in thousands)
June 30, 2014
One-to-four family residential loans			$	—	$	—			$	—	$	—
All other mortgage loans		1		796		829		2		1,057		1,090
June 30, 2013
One-to-four family residential loans		1	$	303	$	303		2	$	416	$	416
All other mortgage loans				—		—		1		576		576

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Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Accumulated Other Comprehensive Income Details
Gross unrealized gain on securities available-for-sale	$ 1,773	$ 796
Gross unrealized loss for unfunded status of split-dollar life insurance plan liability (tax free)	(58)	(58)
Gross unrealized loss for unfunded status of defined benefit plan liability	(609)	(609)
Tax effect	(396)	(64)
Net-of-tax amount	$ 710	$ 65

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Credit Quality of Loans and the Allowance for Loan Losses (Details Narrative) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Credit Quality Of Loans And Allowance For Loan Losses Details Narrative
Deferred loan origination fees	$ 681	$ 682
Loans in process	$ 3,600	$ 4,200

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Securities (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Securities with unrealized loss position
Less than 12 Months, Fair Value	$ 15,831	$ 44,643
Less than 12 Months, Unrealized Losses	72	1,130
More than 12 Months, Fair Value	23,814	6,849
More than 12 Months, Unrealized Losses	664	340
Total, Fair Value	39,645	51,492
Total, Unrealized Losses	736	1,470
Mortgage-backed securities of government sponsored entities [Member]
Securities with unrealized loss position
Less than 12 Months, Fair Value	15,179	36,004
Less than 12 Months, Unrealized Losses	59	575
More than 12 Months, Fair Value	16,715	5,330
More than 12 Months, Unrealized Losses	251	167
Total, Fair Value	31,894	41,334
Total, Unrealized Losses	310	742
Private-label collateralized mortgage obligations [Member]
Securities with unrealized loss position
Less than 12 Months, Fair Value	124
Less than 12 Months, Unrealized Losses	2
Total, Fair Value	124
Total, Unrealized Losses	2
State and political subdivisions [Member]
Securities with unrealized loss position
Less than 12 Months, Fair Value	528	8,639
Less than 12 Months, Unrealized Losses	11	555
More than 12 Months, Fair Value	7,099	1,519
More than 12 Months, Unrealized Losses	413	173
Total, Fair Value	7,627	10,158
Total, Unrealized Losses	$ 424	$ 728

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Recurring Fair Value Measurements
Available-for-sale securities	$ 111,605	$ 103,625
U.S. government agencies [Member]
Recurring Fair Value Measurements
Available-for-sale securities	132	137
Mortgage-backed securities of government sponsored entities [Member]
Recurring Fair Value Measurements
Available-for-sale securities	88,450	80,357
Private-label collateralized mortgage obligations [Member]
Recurring Fair Value Measurements
Available-for-sale securities	596	704
State and political subdivisions [Member]
Recurring Fair Value Measurements
Available-for-sale securities	22,427	22,427
Fair Value measured on a Recurring Basis [Member] | Fair value [Member] | U.S. government agencies [Member]
Recurring Fair Value Measurements
Available-for-sale securities	132	137
Fair Value measured on a Recurring Basis [Member] | Fair value [Member] | Mortgage-backed securities of government sponsored entities [Member]
Recurring Fair Value Measurements
Available-for-sale securities	88,450	80,357
Fair Value measured on a Recurring Basis [Member] | Fair value [Member] | Private-label collateralized mortgage obligations [Member]
Recurring Fair Value Measurements
Available-for-sale securities	596	704
Fair Value measured on a Recurring Basis [Member] | Fair value [Member] | State and political subdivisions [Member]
Recurring Fair Value Measurements
Available-for-sale securities	22,427	22,427
Fair Value measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. government agencies [Member]
Recurring Fair Value Measurements
Available-for-sale securities	132	137
Fair Value measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Mortgage-backed securities of government sponsored entities [Member]
Recurring Fair Value Measurements
Available-for-sale securities	88,450	80,357
Fair Value measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Private-label collateralized mortgage obligations [Member]
Recurring Fair Value Measurements
Available-for-sale securities	596	704
Fair Value measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | State and political subdivisions [Member]
Recurring Fair Value Measurements
Available-for-sale securities	$ 22,427	$ 22,427

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Credit Quality of Loans and the Allowance for Loan Losses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Activity in the allowance for loan losses by portfolio segment
Beginning balance	$ 2,574	$ 2,977	$ 2,819	$ 3,328
Provision charged to expense	79	10	87	(131)
Losses charged off	(123)	(4)	(383)	(216)
Recoveries	19	4	26	6
Ending balance	2,549	2,987	2,549	2,987
One-to-four family residential [Member]
Activity in the allowance for loan losses by portfolio segment
Beginning balance	889	1,027	1,017	1,122
Provision charged to expense	63	216	(72)	155
Losses charged off	(11)	(4)	(11)	(38)
Recoveries			7
Ending balance	941	1,239	941	1,239
All other mortgage loans [Member]
Activity in the allowance for loan losses by portfolio segment
Beginning balance	1,393	1,731	1,526	1,925
Provision charged to expense	(255)	(174)	(128)	(192)
Losses charged off			(260)	(176)
Recoveries	17		17
Ending balance	1,155	1,557	1,155	1,557
Commercial business loans [Member]
Activity in the allowance for loan losses by portfolio segment
Beginning balance	288	213	271	275
Provision charged to expense	271	(29)	288	(92)
Losses charged off	(112)		(112)
Recoveries	2	1	2	2
Ending balance	449	185	449	185
Consumer loans [Member]
Activity in the allowance for loan losses by portfolio segment
Beginning balance	4	6	5	6
Provision charged to expense		(3)	(1)	(2)
Losses charged off				(2)
Recoveries		3		4
Ending balance	$ 4	$ 6	$ 4	$ 6

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Credit Quality of Loans and the Allowance for Loan Losses (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Ending balances: Allowance for loan losses
Individually evaluated for impairment	$ 546	$ 909
Collectively evaluated for impairment	2,003	1,910
Ending balances: Loans
Individually evaluated for impairment	8,956	10,214
Collectively evaluated for impairment	257,937	258,634
Loans Receivable, gross	266,893	268,848
One-to-four family residential [Member]
Ending balances: Allowance for loan losses
Individually evaluated for impairment	96	226
Collectively evaluated for impairment	845	791
Ending balances: Loans
Individually evaluated for impairment	5,828	6,411
Collectively evaluated for impairment	160,422	160,317
Loans Receivable, gross	166,250	166,728
All other mortgage loans [Member]
Ending balances: Allowance for loan losses
Individually evaluated for impairment	209	618
Collectively evaluated for impairment	946	908
Ending balances: Loans
Individually evaluated for impairment	2,887	3,661
Collectively evaluated for impairment	81,467	82,434
Loans Receivable, gross	84,354	86,095
Commercial business loans [Member]
Ending balances: Allowance for loan losses
Individually evaluated for impairment	241	65
Collectively evaluated for impairment	208	206
Ending balances: Loans
Individually evaluated for impairment	241	142
Collectively evaluated for impairment	14,116	14,773
Loans Receivable, gross	14,357	14,915
Consumer loans [Member]
Ending balances: Allowance for loan losses
Collectively evaluated for impairment	4	5
Ending balances: Loans
Collectively evaluated for impairment	1,932	1,110
Loans Receivable, gross	$ 1,932	$ 1,110

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Securities

6 Months Ended

Jun. 30, 2014

SecuritiesAbstract

Securities

Note 3: Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
	(In thousands)
Available-for-sale securities
June 30, 2014:
U.S. government agencies	$	131	$	1	$	—	$	132
Mortgage-backed securities of government sponsored entities		87,397		1,363		310		88,450
Private-label collateralized mortgage obligations		583		15		2		596
State and political subdivisions		21,721		821		115		22,427
Totals	$	109,832	$	2,200	$	427	$	111,605

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
Available-for-sale securities	(In thousands)
December 31, 2013:
U.S. government agencies	$	137	$	—	$	—	$	137
Mortgage-backed securities of government sponsored entities		79,901		1,177		721		80,357
Private-label collateralized mortgage obligations		675		29		—		704
State and political subdivisions		22,116		547		236		22,427
Totals	$	102,829	$	1,753	$	957	$	103,625

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
	(In thousands)
Held-to-maturity Securities:
June 30, 2014:
U.S. government agencies	$	105	$	—	$	—	$	105
Mortgage-backed securities of government sponsored entities		1,360		7		—		1,367
State and political subdivisions		5,116		—		309		4,807
Totals	$	6,581	$	7	$	309	$	6,279

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
Held-to-maturity Securities:	(In thousands)
December 31, 2013:
U.S. government agencies	$	109	$	—	$	—	$	109
Mortgage-backed securities of government sponsored entities		1,390		11		21		1,380
State and political subdivisions		5,124		—		492		4,632
Totals	$	6,623	$	11	$	513	$	6,121

Amortized cost and fair value of available-for-sale securities and held-to-maturity securities at June 30, 2014 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
One to five years	$	6,166	$	6,481	$	—	$	—
Five to ten years		2,439		2,481		3,056		2,930
After ten years		13,247		13,597		2,165		1,982
		21,852		22,559		5,221		4,912
Mortgage-backed securities of government sponsored entities		87,397		88,450		1,360		1,367
Private-label collateralized mortgage obligations		583		596		—		—
Totals	$	109,832	$	111,605	$	6,581	$	6,279

The carrying value of securities pledged as collateral to secure public deposits and for other purposes was $60.4 million and $62.0 million at June 30, 2014 and December 31, 2013, respectively.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. The total fair value of these investments at June 30, 2014 and December 31, 2013, was $39.6 million and $51.5 million, which represented approximately 34% and 47%, respectively, of the Company’s total aggregate amortized cost of the available-for-sale and held-to-maturity investment portfolios. These decreases resulted primarily from changes in market interest rates.

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the decreases in fair value for these securities are temporary at June 30, 2014.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following table shows the gross unrealized losses and fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

	June 30, 2014
	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Mortgage-backed securities of government sponsored entities	$	15,179	$	59	$	16,715	$	251	$	31,894	$	310
Private-label collateralized mortgage obligations		124		2		—		—		124		2
State and political subdivisions		528		11		7,099		413		7,627		424
Total temporarily impaired securities	$	15,831	$	72	$	23,814	$	664	$	39,645	$	736

	December 31, 2013
	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Mortgage-backed securities of government sponsored entities	$	36,004	$	575	$	5,330	$	167	$	41,334	$	742
State and political subdivisions		8,639		555		1,519		173		10,158		728
Total temporarily impaired securities	$	44,643	$	1,130	$	6,849	$	340	$	51,492	$	1,470

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Credit Quality of Loans and the Allowance for Loan Losses (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014		Dec. 31, 2013
Loans Receivable, gross	$ 266,893		$ 268,848
One-to-four family residential [Member]
Loans Receivable, gross	166,250		166,728
One-to-four family residential [Member] | Pass (Risk 1-4) [Member]
Loans Receivable, gross	156,430	[1]	158,518	[1]
One-to-four family residential [Member] | Special Mention (Risk 5) [Member]
Loans Receivable, gross	2,867	[1]	419	[1]
One-to-four family residential [Member] | Substandard (Risk 6) [Member]
Loans Receivable, gross	6,953	[1]	7,791	[1]
All other mortgage loans [Member]
Loans Receivable, gross	84,354		86,095
All other mortgage loans [Member] | Pass (Risk 1-4) [Member]
Loans Receivable, gross	80,957	[1]	81,362	[1]
All other mortgage loans [Member] | Special Mention (Risk 5) [Member]
Loans Receivable, gross	1,017	[1]	1,587	[1]
All other mortgage loans [Member] | Substandard (Risk 6) [Member]
Loans Receivable, gross	2,380	[1]	3,146	[1]
Commercial business loans [Member]
Loans Receivable, gross	14,357		14,915
Commercial business loans [Member] | Pass (Risk 1-4) [Member]
Loans Receivable, gross	13,893	[1]	14,328	[1]
Commercial business loans [Member] | Special Mention (Risk 5) [Member]
Loans Receivable, gross	223	[1]	445	[1]
Commercial business loans [Member] | Substandard (Risk 6) [Member]
Loans Receivable, gross	241	[1]	142	[1]
Consumer loans [Member]
Loans Receivable, gross	1,932		1,110
Consumer loans [Member] | Pass (Risk 1-4) [Member]
Loans Receivable, gross	1,931	[1]	1,108	[1]
Consumer loans [Member] | Substandard (Risk 6) [Member]
Loans Receivable, gross	$ 1	[1]	$ 2	[1]

[1] Ratings are generally assigned to consumer and residential mortgage loans on a "pass" or "fail" basis, where "fail" results in a substandard classification, Commercial loans, both secured by real estate or other assets or unsecured, are analyzed in accordance with an analytical matrix codified in the Bank's loan policy that produces a risk rating as described below.

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Earnings Per Share (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share Details
Weighted-average common shares outstanding (basic)	2,785,752	2,872,079	2,787,474	2,887,277
Weighted-average common shares outstanding (diluted)	2,785,752	2,872,079	2,787,474	2,887,277

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
ASSETS
Cash and due from banks	$ 7,713	$ 7,751
Interest-bearing deposits	4,378	5,630
Cash and cash equivalents	12,091	13,381
Available-for-sale securities	111,605	103,625
Held-to-maturity securities	6,581	6,623
Loans, net of allowance for loan losses of $2,549 and $2,819 at June 30, 2014 and December 31, 2013, respectively	260,056	261,130
Premises and equipment	6,838	6,692
Federal Home Loan Bank stock	4,226	5,025
Foreclosed assets held for sale, net	81
Accrued interest receivable	1,219	1,184
Bank-owned life insurance	9,142	9,006
Goodwill	1,719	1,719
Other intangible assets		38
Other assets	1,781	1,810
Prepaid federal income taxes	49	60
Total assets	415,388	410,293
Deposits
Demand	88,180	85,952
Savings and money market	129,328	121,140
Time	131,940	130,479
Total deposits	349,448	337,571
Other short-term borrowings	6,146	7,212
Federal Home Loan Bank advances	16,395	22,336
Interest payable and other liabilities	2,702	4,257
Deferred federal income taxes	705	365
Total liabilities	375,396	371,741
Commitments and Contingencies
Stockholders' Equity
Preferred stock, 500,000 shares of $.10 par value authorized; no shares issued
Common stock, $.10 par value; authorized 9,000,000 shares; 3,978,731 shares issued	398	398
Additional paid-in capital	35,984	35,976
Retained earnings	19,639	18,743
Shares acquired by ESOP	(454)	(492)
Accumulated other comprehensive income	710	65
Treasury stock, at cost: Common: 1,147,792 and 1,135,292 shares at June 30, 2014 and December 31, 2013, respectively	(16,285)	(16,138)
Total stockholders' equity	39,992	38,552
Total liabilities and stockholders' equity	$ 415,388	$ 410,293

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Fair Value Measurements (Details 1) (Fair Value measured on a Non-Recurring Basis [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Fair value [Member]
Collateral-dependent impaired loans	$ 289
Significant Unobservable Inputs (Level 3) [Member]
Collateral-dependent impaired loans	$ 289

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Basis of Presentation

6 Months Ended

Jun. 30, 2014

Basis Of Presentation

Basis of Presentation

Note 1: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of June 30, 2014 and for the three and six months ended June 30, 2014 and 2013, 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 condensed 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 December 31, 2013. Reference is made to the accounting policies of the Company described in the Notes to the Consolidated Financial Statements contained in its Annual Report on Form 10-K.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited financial statements have been included. The results of operations for the three and six months ended June 30, 2014, are not necessarily indicative of the results which may be expected for the full year. The condensed consolidated balance sheet of the Company as of December 31, 2013, has been derived from the consolidated balance sheet of the Company as of that date.

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.

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Credit Quality of Loans and the Allowance for Loan Losses (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Loans with a specific valuation allowance
Specific Allowance	$ 546		$ 546		$ 909
Total Loans
Recorded Balance	8,956		8,956		10,214
Unpaid Principal Balance	8,956		8,956		10,680
Average Investment in Impaired Loans	9,392	12,237	9,664	12,458
Interest Income Recognized	108	110	216	241
One-to-four family residential [Member]
Loans without a specific valuation allowance
Recorded Balance	4,897		4,897		5,569
Unpaid Principal Balance	4,897		4,897		5,569
Average Investment in Impaired Loans	5,247	5,810	5,354	5,736
Interest Income Recognized	41	60	105	138
Loans with a specific valuation allowance
Recorded Balance	931		931		842
Unpaid Principal Balance	931		931		842
Specific Allowance	96		96		226
Average Investment in Impaired Loans	826	1,230	831	1,250
Interest Income Recognized	18	2	27	15
Total Loans
Recorded Balance	5,828		5,828		6,411
Unpaid Principal Balance	5,828		5,828		6,411
Average Investment in Impaired Loans	6,073	7,040	6,185	6,986
Interest Income Recognized	59	62	132	153
All other mortgage loans [Member]
Loans without a specific valuation allowance
Recorded Balance	2,360		2,360		2,051
Unpaid Principal Balance	2,360		2,360		2,051
Average Investment in Impaired Loans	2,194	2,351	2,146	2,494
Interest Income Recognized	43	20	63	49
Loans with a specific valuation allowance
Recorded Balance	527		527		1,610
Unpaid Principal Balance	527		527		2,076
Specific Allowance	209		209		618
Average Investment in Impaired Loans	936	2,681	1,160	2,806
Interest Income Recognized	4	27	18	36
Total Loans
Recorded Balance	2,887		2,887		3,661
Unpaid Principal Balance	2,887		2,887		4,127
Average Investment in Impaired Loans	3,130	5,032	3,306	5,300
Interest Income Recognized	47	47	81	85
Commercial business loans [Member]
Loans without a specific valuation allowance
Recorded Balance					77
Unpaid Principal Balance					77
Average Investment in Impaired Loans	38	83	51	84
Interest Income Recognized				1
Loans with a specific valuation allowance
Recorded Balance	241		241		65
Unpaid Principal Balance	241		241		65
Specific Allowance	241		241		65
Average Investment in Impaired Loans	151	82	122	88
Interest Income Recognized	2	1	3	2
Total Loans
Recorded Balance	241		241		142
Unpaid Principal Balance	241		241		142
Average Investment in Impaired Loans	189	165	173	172
Interest Income Recognized	$ 2	$ 1	$ 3	$ 3

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Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2014

Regulatory Matters Tables

Schedule of regulatory capital requirements

The Bank’s actual capital amounts and ratios as of June 30, 2014 and December 31, 2013 are presented in the following table.

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of  June 30, 2014
Tier I Capital to average assets	$	36,016		8.7%	$	16,559		4.0%	$	20,699		5.0%
Tier I Capital to risk-weighted assets		36,016		14.3%		10,107		4.0%		15,160		6.0%
Total Risk-based capital to risk-weighted assets		38,565		15.3%		20,214		8.0%		25,267		10.0%
As of December 31, 2013
Tier I Capital to average assets	$	35,065		8.6%	$	16,372		4.0%	$	20,465		5.0%
Tier I Capital to risk-weighted assets		35,065		14.2%		9,866		4.0%		14,798		6.0%
Total Risk-based capital to risk-weighted assets		37,884		15.4%		19,731		8.0%		24,664		10.0%

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Credit Quality of Loans and the Allowance for Loan Losses (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2013 One-to-four family residential [Member] N	Jun. 30, 2013 One-to-four family residential [Member] N	Jun. 30, 2014 All other mortgage loans [Member] N	Jun. 30, 2014 All other mortgage loans [Member] N	Jun. 30, 2013 All other mortgage loans [Member] N
Number of Loans	1	2	1	2	1
Pre-modification Unpaid Principal Balance	$ 303	$ 416	$ 796	$ 1,057	$ 576
Post- modification Unpaid Principal Balance	$ 303	$ 416	$ 829	$ 1,090	$ 576

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Measurements Tables

Schedule of fair value measured on a recurring basis

The following table presents the fair value measurements of assets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2014 and December 31, 2013:

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
June 30, 2014
U.S. government agencies	$	132	$	—	$	132	$	—
Mortgage-backed securities of government sponsored entities		88,450		—		88,450		—
Private-label collateralized mortgage obligations		596		—		596		—
State and political subdivisions		22,427		—		22,427		—

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
December 31, 2013
U.S. government agencies	$	137	$	—	$	137	$	—
Mortgage-backed securities of government sponsored entities		80,357		—		80,357		—
Private-label collateralized mortgage obligations		704		—		704		—
State and political subdivisions		22,427		—		22,427		—

Schedule of fair value measured on a nonrecurring basis

he following table presents the fair value measurements of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2013. There were no assets measured at fair value on a nonrecurring basis at June 30, 2014.

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
December 31, 2013
Collateral-dependent impaired loans	$	289	$	—	$	—	$	289

Schedule of Level 3 fair value measurements

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements in thousands.

	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
December 31, 2013
Collateral-dependent impaired loans	$	289	Present value of cashflows	Discount Rate	6.22%

Schedule of fair value of financial instruments

The following table presents estimated fair values of the Company’s financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
June 30, 2014
Financial assets
Cash and cash equivalents	$	12,091	$	12,091	$	—	$	—
Held-to-maturity securities		6,581		—		6,279		—
Loans, net of allowance for loan losses		260,056		—		—		267,626
Federal Home Loan Bank stock		4,226		—		4,226		—
Interest receivable		1,219		—		1,219		—
Financial liabilities
Deposits		349,448		32,131		294,902		—
Other short-term borrowings		6,146		—		6,146		—
Federal Home Loan Bank advances		16,395		—		16,666		—
Advances from borrowers for taxes and insurance		166		—		166		—
Interest payable		61		—		61		—

			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
					(In thousands)
December 31, 2013
Financial assets
Cash and cash equivalents	$	13,381	$	13,381	$	—	$	—
Held-to-maturity securities		6,623		—		6,121
Loans, net of allowance for loan losses		261,130		—		—		266,530
Federal Home Loan Bank stock		5,025		—		5,025		—
Interest receivable		1,184		—		1,184		—
Financial liabilities
Deposits		337,571		30,145		275,357		—
Other short-term Borrowings		7,212		—		7,212		—
Federal Home Loan Bank Advances		22,336		—		22,801		—
Advances from borrowers for taxes and insurance		1,105		—		1,105		—
Interest payable		68		—		68		—

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Principles of Consolidation

6 Months Ended

Jun. 30, 2014

Principles Of Consolidation

Principles of Consolidation

Note 2: Principles of Consolidation

The accompanying condensed consolidated financial statements include Wayne Savings Bancshares, Inc. and the Company’s wholly-owned subsidiary, Wayne Savings Community Bank (“Wayne Savings” or the “Bank”).

Wayne Savings has eleven full-service offices in Wayne, Holmes, Ashland, Medina and Stark counties. All significant intercompany transactions and balances have been eliminated in the consolidation.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]
Allowance for loan losses	$ 2,549	$ 2,819
Preferred stock, par value	$ 0.10	$ 0.10
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.10	$ 0.10
Common stock, shares authorized	9,000,000	9,000,000
Common stock, shares issued	3,978,731	3,978,731
Treasury stock, shares	1,147,792	1,135,292

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2014

Basis Of Presentation Policies

Use of Estimates

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.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document And Entity Information
Entity Registrant Name	WAYNE SAVINGS BANCSHARES INC /DE/
Entity Central Index Key	0001036030
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		2,830,939
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2014

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Securities (Tables)

6 Months Ended

Jun. 30, 2014

Securities Tables

Schedule of available for sale and held to maturity securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
	(In thousands)
Available-for-sale securities
June 30, 2014:
U.S. government agencies	$	131	$	1	$	—	$	132
Mortgage-backed securities of government sponsored entities		87,397		1,363		310		88,450
Private-label collateralized mortgage obligations		583		15		2		596
State and political subdivisions		21,721		821		115		22,427
Totals	$	109,832	$	2,200	$	427	$	111,605

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
Available-for-sale securities	(In thousands)
December 31, 2013:
U.S. government agencies	$	137	$	—	$	—	$	137
Mortgage-backed securities of government sponsored entities		79,901		1,177		721		80,357
Private-label collateralized mortgage obligations		675		29		—		704
State and political subdivisions		22,116		547		236		22,427
Totals	$	102,829	$	1,753	$	957	$	103,625

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
	(In thousands)
Held-to-maturity Securities:
June 30, 2014:
U.S. government agencies	$	105	$	—	$	—	$	105
Mortgage-backed securities of government sponsored entities		1,360		7		—		1,367
State and political subdivisions		5,116		—		309		4,807
Totals	$	6,581	$	7	$	309	$	6,279

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
Held-to-maturity Securities:	(In thousands)
December 31, 2013:
U.S. government agencies	$	109	$	—	$	—	$	109
Mortgage-backed securities of government sponsored entities		1,390		11		21		1,380
State and political subdivisions		5,124		—		492		4,632
Totals	$	6,623	$	11	$	513	$	6,121

Schedule of contractual maturity of securities

Amortized cost and fair value of available-for-sale securities and held-to-maturity securities at June 30, 2014 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
One to five years	$	6,166	$	6,481	$	—	$	—
Five to ten years		2,439		2,481		3,056		2,930
After ten years		13,247		13,597		2,165		1,982
		21,852		22,559		5,221		4,912
Mortgage-backed securities of government sponsored entities		87,397		88,450		1,360		1,367
Private-label collateralized mortgage obligations		583		596		—		—
Totals	$	109,832	$	111,605	$	6,581	$	6,279

Schedule of securities in a gross unrealized loss position

The following table shows the gross unrealized losses and fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position. 

	June 30, 2014
	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Mortgage-backed securities of government sponsored entities	$	15,179	$	59	$	16,715	$	251	$	31,894	$	310
Private-label collateralized mortgage obligations		124		2		—		—		124		2
State and political subdivisions		528		11		7,099		413		7,627		424
Total temporarily impaired securities	$	15,831	$	72	$	23,814	$	664	$	39,645	$	736

	December 31, 2013
	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Mortgage-backed securities of government sponsored entities	$	36,004	$	575	$	5,330	$	167	$	41,334	$	742
State and political subdivisions		8,639		555		1,519		173		10,158		728
Total temporarily impaired securities	$	44,643	$	1,130	$	6,849	$	340	$	51,492	$	1,470

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Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Interest and Dividend Income
Loans	$ 2,879	$ 2,846	$ 5,769	$ 5,734
Securities	783	632	1,563	1,288
Dividends on Federal Home Loan Bank stock and other	50	56	101	111
Total interest and dividend income	3,712	3,534	7,433	7,133
Interest Expense
Deposits	393	431	788	866
Other short term borrowings	3	3	5	5
Federal Home Loan Bank advances	134	153	279	305
Total interest expense	530	587	1,072	1,176
Net Interest Income	3,182	2,947	6,361	5,957
Provision (Credit) for Loan Losses	79	10	87	(131)
Net Interest Income After Provision (Credit) for Loan Losses	3,103	2,937	6,274	6,088
Noninterest Income
Gain on loan sales	84	26	109	73
Gain on sale of foreclosed assets held for sale		20		17
Gain on sale of premises and equipment	1		7
Earnings on bank-owned life insurance	73	74	144	147
Service fees, charges and other operating	323	278	592	548
Total noninterest income	481	398	852	785
Noninterest Expense
Salaries and employee benefits	1,525	1,528	3,018	3,032
Net occupancy and equipment expense	511	477	1,022	954
Federal deposit insurance premiums	68	65	131	140
Franchise taxes	65	100	129	200
Amortization of intangible assets	15	22	38	45
Other	466	471	963	1,022
Total noninterest expense	2,650	2,663	5,301	5,393
Income Before Federal Income Taxes	934	672	1,825	1,480
Provision for Federal Income Taxes	234	181	455	411
Net Income	700	491	1,370	1,069
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities	435	(1,728)	977	(2,050)
Tax (expense) benefit	(148)	587	(332)	696
Other comprehensive income (loss)	287	(1,141)	645	(1,354)
Total comprehensive income (loss)	$ 987	$ (650)	$ 2,015	$ (285)
Basic Earnings Per Share (in dollars per share)	$ 0.25	$ 0.17	$ 0.49	$ 0.37
Diluted Earnings Per Share (in dollars per share)	$ 0.25	$ 0.17	$ 0.49	$ 0.37
Dividends per share (in dollars per share)	$ 0.09	$ 0.08	$ 0.17	$ 0.15

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Stock Option Plan

6 Months Ended

Jun. 30, 2014

Stock Option Plan

Stock Option Plan

Note 7: Stock Option Plan

During fiscal year 2004, the Company adopted a Stock Option Plan that provided for the issuance of 142,857 incentive options and 61,224 non-incentive options with respect to authorized common stock. At December 31, 2013, all options under the 2004 Plan were expired, and none were outstanding at June 30, 2014. The Company recognized compensation expense related to stock option awards based on the fair value of the option award at the grant date. Compensation cost was recognized over the vesting period. There were no options granted during the three and six months ended June 30, 2013. There was no compensation expense recognized for the stock option plan during the three and six months ended June 30, 2013, as all options were fully vested prior to these periods. As of June 30, 2013 there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. The cost was recognized in fiscal year ended March 31, 2005 when the Company accelerated full vesting of all the stock options at that time.

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Earnings Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Share

Note 6: Earnings Per Share

Basic earnings per common share is 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. The computations are as follows: 

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Weighted-average common shares outstanding (basic)		2,785,752		2,872,079		2,787,474		2,887,277
Dilutive effect of assumed exercise of stock options		—		—		—		—
Weighted-average common shares outstanding (diluted)		2,785,752		2,872,079		2,787,474		2,887,277

There were no options outstanding at June 30, 2014. Options to purchase 41,204 shares of common stock at an exercise price of $13.95 per share were outstanding at June 30, 2013, but none were included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares at June 30, 2013.

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Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income Tables

Schedule of Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

	Gross Unrealized Gains on Available-for-sale Securities		Net Unrealized Loss for Unfunded Status of Split-dollar Life Insurance Plan Liability (tax-free)			Gross Unrealized Loss for Unfunded Status of Defined Benefit Plan			Tax Effect			Total Accumulated Other Comprehensive Income
	(In thousands)
June 30, 2014	$	1,773	$	(58	)	$	(609	)	$	(396	)	$	710
December 31, 2013	$	796	$	(58	)	$	(609	)	$	(64	)	$	65

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Credit Quality of Loans and the Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2014

Credit Quality Of Loans And Allowance For Loan Losses Tables

Schedule of allowance for loan losses

The following presents by portfolio segment, the activity in the allowance for loan losses for the three and six months ended June 30, 2014 and 2013:

Three months ended June 30, 2014	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans		Total
	(In thousands)
Beginning balance	$	889		$	1,393		$	288		$	4	$	2,574
Provision charged to expense		63			(255	)		271			—		79
Losses charged off		(11	)		—			(112	)		—		(123	)
Recoveries		—			17			2			—		19
Ending balance	$	941		$	1,155		$	449		$	4	$	2,549

Three months ended June 30, 2013	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans			Total
	(In thousands)
Beginning balance	$	1,027		$	1,731		$	213		$	6		$	2,977
Provision charged to expense		216			(174	)		(29	)		(3	)		10
Losses charged off		(4	)		—			—			—			(4	)
Recoveries		—			—			1			3			4
Ending balance	$	1,239		$	1,557		$	185		$	6		$	2,987

Six months ended June 30, 2014	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans			Total
	(In thousands)
Beginning balance	$	1,017		$	1,526		$	271		$	5		$	2,819
Provision charged to expense		(72	)		(128	)		288			(1	)		87
Losses charged off		(11	)		(260	)		(112	)		—			(383	)
Recoveries		7			17			2			—			26
Ending balance	$	941		$	1,155		$	449		$	4		$	2,549

Six months ended June 30, 2013	One-to-four family residential			All other mortgage loans			Commercial business loans			Consumer loans			Total
	(In thousands)
Beginning balance	$	1,122		$	1,925		$	275		$	6		$	3,328
Provision (credit) charged to expense		155			(192	)		(92	)		(2	)		(131	)
Losses charged off		(38	)		(176	)		—			(2	)		(216	)
Recoveries		—			—			2			4			6
Ending balance	$	1,239		$	1,557		$	185		$	6		$	2,987

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on the portfolio segment and impairment method as of June 30, 2014 and December 31, 2013:

June 30, 2014	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans		Total
Allowance Balances:	(In thousands)
Ending balance:
Individually evaluated for impairment	$	96	$	209	$	241	$	—	$	546
Collectively evaluated for impairment		845		946		208		4		2,003
Total allowance for loan losses	$	941	$	1,155	$	449	$	4	$	2,549
Loan Balances:
Ending balance:
Individually evaluated for impairment	$	5,828	$	2,887	$	241	$	—	$	8,956
Collectively evaluated for impairment		160,422		81,467		14,116		1,932		257,937
Total balance	$	166,250	$	84,354	$	14,357	$	1,932	$	266,893

December 31, 2013	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans		Total
Allowance Balances:	(In thousands)
Ending balance:
Individually evaluated for impairment	$	226	$	618	$	65	$	—	$	909
Collectively evaluated for impairment		791		908		206		5		1,910
Total allowance for loan losses	$	1,017	$	1,526	$	271	$	5	$	2,819
Loan Balances:
Ending balance:
Individually evaluated for impairment	$	6,411	$	3,661	$	142	$	—	$	10,214
Collectively evaluated for impairment		160,317		82,434		14,773		1,110		258,634
Total balance	$	166,728	$	86,095	$	14,915	$	1,110	$	268,848

Schedule of loans receivable by credit risk profile

The following tables present the credit risk profile of the Bank’s loan portfolio based on rating category and payment activity as of June 30, 2014 and December 31, 2013:

June 30, 2014	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans
	(In thousands)
Rating *
Pass (Risk 1-4)	$	156,430	$	80,957	$	13,893	$	1,931
Special Mention (Risk 5)		2,867		1,017		223		—
Substandard (Risk 6)		6,953		2,380		241		1
Total	$	166,250	$	84,354	$	14,357	$	1,932

December 31, 2013	One-to-four family residential		All other mortgage loans		Commercial business loans		Consumer loans
	(In thousands)
Rating *
Pass (Risk 1-4)	$	158,518	$	81,362	$	14,328	$	1,108
Special Mention (Risk 5)		419		1,587		445		—
Substandard (Risk 6)		7,791		3,146		142		2
Total	$	166,728	$	86,095	$	14,915	$	1,110

* Ratings are generally assigned to consumer and residential mortgage loans on a “pass” or “fail” basis, where “fail” results in a substandard classification. Commercial loans, both secured by real estate or other assets or unsecured, are analyzed in accordance with an analytical matrix codified in the Bank’s loan policy that produces a risk rating as described below.

Aging analysis of loans receivable

The following tables present the Bank’s loan portfolio aging analysis for June 30, 2014 and December 31, 2013:

June 30, 2014	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In thousands)
One-to-four family residential loans	$	254	$	557	$	1,507	$	2,318	$	163,932	$	166,250	$	936
All other mortgage loans		—		—		152		152		84,202		84,354		—
Commercial business loans		—		37		110		147		14,210		14,357		—
Consumer loans		—		—		1		1		1,931		1,932		1
Total	$	254	$	594	$	1,770	$	2,618	$	264,275	$	266,893	$	937

December 31, 2013	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In thousands)
One-to-four family residential loans	$	679	$	228	$	624	$	1,531	$	165,197	$	166,728	$	—
All other mortgage loans		150		64		811		1,025		85,070		86,095		—
Commercial Business loans		—		—		—		—		14,915		14,915		—
Consumer loans		79		—		—		79		1,031		1,110		—
Total	$	908	$	292	$	1,435	$	2,635	$	266,213	$	268,848	$	—

Schedule of non-accrual loans

Nonaccrual loans were comprised of the following at:

Nonaccrual loans	June 30, 2014		December 31, 2013
	(In thousands)
One-to-four family residential loans	$	1,856	$	1,851
Nonresidential real estate loans		152		1,045
All other mortgage loans		—		—
Commercial business loans		183		2
Consumer loans		1		—
Total	$	2,192	$	2,898

Schedule of impaired loans

Information with respect to the Company’s impaired loans at June 30, 2014 and December 31, 2013 in combination with activity for the three and six months ended June 30, 2014 and 2013 is presented below:

	As of June 30, 2014						Three months ended June 30, 2014				Six months ended June 30, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
	(In thousands)
Loans without a specific valuation allowance
One-to-four family residential loans	$	4,897	$	4,897	$	—	$	5,247	$	41	$	5,354	$	105
All other mortgage loans		2,360		2,360		—		2,194		43		2,146		63
Commercial business loans		—		—		—		38		—		51		—
Loans with a specific valuation allowance
One-to-four family residential loans		931		931		96		826		18		831		27
All other mortgage loans		527		527		209		936		4		1,160		18
Commercial business loans		241		241		241		151		2		122		3
Total:
One-to-four family residential loans	$	5,828	$	5,828	$	96	$	6,073	$	59	$	6,185	$	132
All other mortgage loans		2,887		2,887		209		3,130		47		3,306		81
Commercial business loans		241		241		241		189		2		173		3
	$	8,956	$	8,956	$	546	$	9,392	$	108	$	9,664	$	216

	As of December 31, 2013						Three months ended June 30, 2013				Six months ended June 30, 2013
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
	(In thousands)
Loans without a specific valuation allowance
One-to-four family residential loans	$	5,569	$	5,569	$	—	$	5,810	$	60	$	5,736	$	138
All other mortgage loans		2,051		2,051		—		2,351		20		2,494		49
Commercial business loans		77		77		—		83		—		84		1
Loans with a specific valuation allowance
One-to-four family residential loans		842		842		226		1,230		2		1,250		15
All other mortgage loans		1,610		2,076		618		2,681		27		2,806		36
Commercial business loans		65		65		65		82		1		88		2
Total:
One-to-four family residential loans	$	6,411	$	6,411	$	226	$	7,040	$	62	$	6,986	$	153
All other mortgage loans		3,661		4,127		618		5,032		47		5,300		85
Commercial business loans		142		142		65		165		1		172		3
	$	10,214	$	10,680	$	909	$	12,237	$	110	$	12,458	$	241

Schedule of troubled debt restructurings

All the TDR classifications listed below occurred as concessions were granted to borrowers experiencing financial difficulties.

	Quarter-to-Date						Year-to-Date
Troubled Debt Restructurings	Number of loans		Pre- modification Unpaid Recorded   Balance		Post- modification Unpaid Recorded Balance		Number of loans		Pre- modification Unpaid Recorded Balance		Post- modification Unpaid Recorded Balance
	(dollars in thousands)
June 30, 2014
One-to-four family residential loans			$	—	$	—			$	—	$	—
All other mortgage loans		1		796		829		2		1,057		1,090
June 30, 2013
One-to-four family residential loans		1	$	303	$	303		2	$	416	$	416
All other mortgage loans				—		—		1		576		576

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Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Measurements

Fair Value Measurements

Note 10: Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1	Quoted prices in active markets for identical assets or liabilities
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Recurring Measurements

Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the Company’s consolidated balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy.

The following table presents the fair value measurements of assets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2014 and December 31, 2013:

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
June 30, 2014
U.S. government agencies	$	132	$	—	$	132	$	—
Mortgage-backed securities of government sponsored entities		88,450		—		88,450		—
Private-label collateralized mortgage obligations		596		—		596		—
State and political subdivisions		22,427		—		22,427		—

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
December 31, 2013
U.S. government agencies	$	137	$	—	$	137	$	—
Mortgage-backed securities of government sponsored entities		80,357		—		80,357		—
Private-label collateralized mortgage obligations		704		—		704		—
State and political subdivisions		22,427		—		22,427		—

Nonrecurring Measurements

Certain assets may be required to be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

Collateral-dependent Impaired Loans, Net of ALLL

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the office of the Chief Financial Officer. Appraisals are reviewed for accuracy and consistency by the office of the Chief Financial Officer. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the office of the Chief Financial Officer by comparison to historical results.

Foreclosed Assets Held for Sale

Foreclosed assets held for sale are carried at the lower of fair value at acquisition date or current estimated fair value, less estimated cost to sell when the real estate is acquired. Estimated fair value of real estate is based on appraisals or evaluations. Foreclosed assets held for sale are classified within Level 3 of the fair value hierarchy.

Appraisals of real estate are obtained when the real estate is acquired and subsequently as deemed necessary by the Chief Financial Officer. Appraisals are reviewed internally for accuracy and consistency in accordance with regulatory requirements. Appraisers are selected from the list of approved appraisers maintained by management.

The following table presents the fair value measurements of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2013. There were no assets measured at fair value on a nonrecurring basis at June 30, 2014.

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
December 31, 2013
Collateral-dependent impaired loans	$	289	$	—	$	—	$	289

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements in thousands.

	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
December 31, 2013
Collateral-dependent impaired loans	$	289	Present value of cashflows	Discount Rate	6.22%

There were no changes in the inputs or methodologies used to determine fair value at June 30, 2014 as compared to December 31, 2013.

The following table presents estimated fair values of the Company’s financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
June 30, 2014
Financial assets
Cash and cash equivalents	$	12,091	$	12,091	$	—	$	—
Held-to-maturity securities		6,581		—		6,279		—
Loans, net of allowance for loan losses		260,056		—		—		267,626
Federal Home Loan Bank stock		4,226		—		4,226		—
Interest receivable		1,219		—		1,219		—
Financial liabilities
Deposits		349,448		32,131		294,902		—
Other short-term borrowings		6,146		—		6,146		—
Federal Home Loan Bank advances		16,395		—		16,666		—
Advances from borrowers for taxes and insurance		166		—		166		—
Interest payable		61		—		61		—

			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
					(In thousands)
December 31, 2013
Financial assets
Cash and cash equivalents	$	13,381	$	13,381	$	—	$	—
Held-to-maturity securities		6,623		—		6,121
Loans, net of allowance for loan losses		261,130		—		—		266,530
Federal Home Loan Bank stock		5,025		—		5,025		—
Interest receivable		1,184		—		1,184		—
Financial liabilities
Deposits		337,571		30,145		275,357		—
Other short-term Borrowings		7,212		—		7,212		—
Federal Home Loan Bank Advances		22,336		—		22,801		—
Advances from borrowers for taxes and insurance		1,105		—		1,105		—
Interest payable		68		—		68		—

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Cash and Cash Equivalents, Interest Receivable and Federal Home Loan Bank Stock

The carrying amount approximates fair value.

Held-to-maturity securities

The fair value of held-to-maturity securities was estimated by using pricing models that contain market pricing and information, quoted prices of securities with similar characteristics or discounted cash flows that use credit-adjusted discount rates.

Loans

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations.

Deposits

Deposits include savings accounts, checking accounts and certain money market deposits. The carrying amount approximates fair value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Interest Payable, Other Short-Term Borrowings and Advances From Borrowers for Taxes and Insurance

The carrying amount approximates fair value.

Federal Home Loan Bank Advances

Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

Commitments to Originate Loans, Letters of Credit and Lines of Credit

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. Fair values of commitments were not material at June 30, 2014 and December 31, 2013.

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Regulatory Matters

6 Months Ended

Jun. 30, 2014

Regulatory Matters

Regulatory Matters

Note 8: Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory–and possibly additional discretionary–actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

The Bank must give notice to, or under certain conditions specified by regulation, apply to, the Federal Reserve Bank of Cleveland prior to declaring a dividend to the Company. Under existing regulatory guidance, a dividend is generally permissible without regulatory approval if the institution is considered to be “well capitalized” and the dividend does not exceed current year-to-date net income plus the change in retained earnings for the previous two calendar years.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Tier I capital to average assets, of Tier 1 capital to risk-weighted assets, and of Total Risk-based capital to risk-weighted assets, all as defined in the regulations. Management believes, as of June 30, 2014, that the Bank met all capital adequacy requirements to which it is subject. 

As of June 30, 2014, based on the computations for the call report the Bank is classified as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain capital ratios as set forth in the table below. There are no conditions or events since June 30, 2014 that management believes have changed the Bank’s capital classification.

The Bank’s actual capital amounts and ratios as of June 30, 2014 and December 31, 2013 are presented in the following table.

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of  June 30, 2014
Tier I Capital to average assets	$	36,016		8.7%	$	16,559		4.0%	$	20,699		5.0%
Tier I Capital to risk-weighted assets		36,016		14.3%		10,107		4.0%		15,160		6.0%
Total Risk-based capital to risk-weighted assets		38,565		15.3%		20,214		8.0%		25,267		10.0%
As of December 31, 2013
Tier I Capital to average assets	$	35,065		8.6%	$	16,372		4.0%	$	20,465		5.0%
Tier I Capital to risk-weighted assets		35,065		14.2%		9,866		4.0%		14,798		6.0%
Total Risk-based capital to risk-weighted assets		37,884		15.4%		19,731		8.0%		24,664		10.0%

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Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

Note 9: Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

	Gross Unrealized Gains on Available-for-sale Securities		Net Unrealized Loss for Unfunded Status of Split-dollar Life Insurance Plan Liability (tax-free)			Gross Unrealized Loss for Unfunded Status of Defined Benefit Plan			Tax Effect			Total Accumulated Other Comprehensive Income
	(In thousands)
June 30, 2014	$	1,773	$	(58	)	$	(609	)	$	(396	)	$	710
December 31, 2013	$	796	$	(58	)	$	(609	)	$	(64	)	$	65

There were no amounts reclassified out of accumulated other comprehensive (loss) income during the three

and six months ended June 30, 2014 or 2013.

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Recent Accounting Developments

6 Months Ended

Jun. 30, 2014

Recent Accounting Developments

Recent accounting developments

Note 11: Recent Accounting Developments

FASB ASU 2013-04, Liabilities (Topic 405), Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date in Accounting Standards Update No. 2013-04, issued in February 2013 requires the Company to measure and report on obligations resulting from joint and several liability. This includes the amount the Company has agreed to pay on the basis of its arrangement among its co-obligors, and any additional amount the Company expects to pay on behalf of its co-obligors. The amendments in this update, should be applied retrospectively, and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and early adoption is permitted. This standard did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2013-12, Definition of a Public Business Entity, in Accounting Standards Update No. 2013-12, issued in December 2013 improves the United States Generally Accepted Accounting Principles by providing a single definition of public business entity for use in future financial accounting and reporting guidance. This update states that an entity that is required by the Securities and Exchange Commission (SEC) to file or furnish reports to the SEC is considered a public business entity. There is no actual effective date for the amendments in this update. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2014-01, Investments-Equity Method and Joint Ventures (Topic 323), Accounting for Investments in Qualified Affordable Housing Projects in Accounting Standards Update No. 2014-01, issued in January 2014 permits the Company to make an accounting policy election to account for its investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. The amendments in this update are effective prospectively for public business entities for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014, and early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

FASB ASU 2014-04, Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40), Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure, a consensus of the FASB Emerging Issues Task Force, in Accounting Standards Update No. 2014-04, issued in January 2014. The amendments in this update provides clarification on when an in-substance repossession or foreclosure occurs, including when a creditor should be considered to have received physical possession of the residential real estate property collateralizing a consumer mortgage loan, when to derecognize the loan and recognize the foreclosed property. The amendments in this update are effective for public business entities for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this update using either a modified retrospective transition method or a prospective transition method. This standard is not expected to have a material impact on the Company’s consolidated financial statements.

FASB ASU 2014-06, Technical Corrections and Improvements Related to Glossary Terms, in Accounting Standards Update No. 2014-06, was issued in March 2014. This update contains amendments that affect a wide variety of Topics in the Codification, and represent changes to clarify the Master Glossary of the Codification, consolidate multiple instances of the same term into a single definition, or make improvements to the Master Glossary. The amendments in this update do not have transition guidance and were effective upon issuance for both public and nonpublic entities. This standard did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, in Accounting Standards Update No. 2014-08, was issued in April 2014. The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. A discontinued operation may include a component of an entity or a group of components of an entity, or a business or nonprofit activity. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The amendments in this update are effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within annual periods beginning on or after December 15, 2015. All businesses or nonprofit activities that, on acquisition, are classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within annual periods beginning on or after December 15, 2015. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. This standard is not expected to have a material impact on the Company’s consolidated financial statements.

FASB ASU 2014-11, Transfers and Servicing (Topic 860), Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures, was issued in June 2014. The amendments in this Update require disclosures for certain transactions comprising a transfer of a financial asset accounted for as a sale and an agreement with the same transferee entered into in contemplation of the initial transfer that results in the transferor retaining substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction. This Update also requires certain disclosures for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions that are accounted for as secured borrowings. The accounting changes in this Update are effective for public business entities for the first interim or annual period beginning after December 15, 2014. For public business entities, the disclosure for certain transactions accounted for as a sale is required to be presented for interim and annual periods beginning after December 15, 2014, and for disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. The disclosures are not required to be presented for comparative periods before the effective date. This standard is not expected to have a material impact on the Company’s consolidated financial statements.

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Credit Quality of Loans and the Allowance for Loan Losses (Details 4) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Non-accrual loans	$ 2,192	$ 2,898
One-to-four family residential [Member]
Non-accrual loans	1,856	1,851
Nonresidential real estate loans[Member]
Non-accrual loans	152	1,045
Commercial business loans [Member]
Non-accrual loans	183	2
Consumer loans [Member]
Non-accrual loans	$ 1

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share Tables

Schedule of calculation of earnings per share

Basic earnings per common share is 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. The computations are as follows:

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Weighted-average common shares outstanding (basic)		2,785,752		2,872,079		2,787,474		2,887,277
Dilutive effect of assumed exercise of stock options		—		—		—		—
Weighted-average common shares outstanding (diluted)		2,785,752		2,872,079		2,787,474		2,887,277

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Securities (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Available for sale
Amortized Cost	$ 109,832	$ 102,829
Gross Unrealized Gains	2,200	1,753
Gross Unrealized Losses	427	957
Approximate Fair Value	111,605	103,625
Held to maturity
Amortized Cost	6,581	6,623
Gross Unrealized Gains	7	11
Gross Unrealized Losses	309	513
Approximate Fair Value	6,279	6,121
U.S. government agencies [Member]
Available for sale
Amortized Cost	131	137
Gross Unrealized Gains	1
Approximate Fair Value	132	137
Held to maturity
Amortized Cost	105	109
Approximate Fair Value	105	109
Mortgage-backed securities of government sponsored entities [Member]
Available for sale
Amortized Cost	87,397	79,901
Gross Unrealized Gains	1,363	1,177
Gross Unrealized Losses	310	721
Approximate Fair Value	88,450	80,357
Held to maturity
Amortized Cost	1,360	1,390
Gross Unrealized Gains	7	11
Gross Unrealized Losses		21
Approximate Fair Value	1,367	1,380
Private-label collateralized mortgage obligations [Member]
Available for sale
Amortized Cost	583	675
Gross Unrealized Gains	15	29
Gross Unrealized Losses	2
Approximate Fair Value	596	704
State and political subdivisions [Member]
Available for sale
Amortized Cost	21,721	22,116
Gross Unrealized Gains	821	547
Gross Unrealized Losses	115	236
Approximate Fair Value	22,427	22,427
Held to maturity
Amortized Cost	5,116	5,124
Gross Unrealized Losses	309	492
Approximate Fair Value	$ 4,807	$ 4,632

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Stock Option Plan (Details Narrative)	Dec. 31, 2004
Stock Option Plan - Incentive [Member]
Maximum Options Authorized	142,857
Stock Option Plan - NonIncentive [Member]
Maximum Options Authorized	61,224

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Operating Activities
Net income	$ 1,370	$ 1,069
Items not requiring (providing) cash
Depreciation and amortization	298	296
Provision (credit) for loan losses	87	(131)
Amortization of premiums and discounts on securities	545	960
Amortization of mortgage servicing rights	22	17
Amortization of deferred loan origination fees	(53)	(52)
Amortization of intangible assets	38	45
Increase in value of bank owned life insurance	(136)	(140)
Amortization expense of stock benefit plan	46	40
Gain on sale of foreclosed assets held for sale		(17)
Gain on sale of premises and equipment	(7)
Net gain on sale of loans	(109)	(73)
Proceeds from sale of loans in secondary market	2,796	5,625
Origination of loans for sale in the secondary market	(2,687)	(5,552)
Deferred income taxes	8	166
Changes in
Accrued interest receivable	(35)	1
Prepaid federal deposit insurance premiums		529
Other assets	18	(416)
Interest payable and other liabilities	(617)	354
Net cash provided by operating activities	1,584	2,721
Investing Activities
Purchases of available-for-sale securities	(17,984)	(24,131)
Purchase of held-to-maturity securities		(2,988)
Proceeds from maturities and paydowns of available-for-sale securities	10,446	22,013
Proceeds from maturities and paydowns of held-to-maturity securities	33	47
Proceeds from Federal Home Loan Bank stock redemption	799
Net change in loans	959	(1,671)
Purchase of premises and equipment	(444)	(129)
Proceeds from the sale of premises and equipment	7
Proceeds from the sale of foreclosed assets		272
Net cash used in investing activities	(6,184)	(6,587)
Financing Activities
Net change in deposits	11,877	4,363
Net change in other short-term borrowings	(1,066)	1,296
Proceeds from Federal Home Loan Bank advances	2,719	3,060
Repayments of Federal Home Loan Bank advances	(8,660)	(3,000)
Advances by borrowers for taxes and insurance	(939)	(575)
Dividends on common stock	(474)	(430)
Treasury stock purchases	(147)	(558)
Net cash provided in financing activities	3,310	4,156
Change in Cash and Cash Equivalents	(1,290)	290
Cash and Cash Equivalents, Beginning of period	13,381	12,055
Cash and Cash Equivalents, End of period	12,091	12,345
Supplemental Cash Flows Information
Interest paid on deposits and borrowings	1,078	1,175
Federal income taxes paid	400	150
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Transfers from loans to foreclosed assets held for sale	81	50
Recognition of mortgage servicing rights	40	56
Dividends payable	$ 255	$ 232

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2014

Goodwill And Intangible Assets

Goodwill and Intangible Assets

Note 5: Goodwill and Intangible Assets

The composition of goodwill and other intangible assets, all of which is core deposit intangible, at June 30, 2014 and December 31, 2013:

	June 30, 2014			December 31, 2013
	(In thousands)
Goodwill	$	1,719		$	1,719
Other intangible assets – gross		974			974
Other intangible assets – amortization		(974	)		(936	)
Total	$	1,719		$	1,757

The Company recorded amortization relative to intangible assets totaling $15,000 and $38,000 for the three and six month periods ended June 30, 2014, and $22,000 and $45,000 for the three and six months ended June 30, 2013 respectively. Such amortization is derived using the straight line method for the core deposit asset over ten years. The Company is required to annually test goodwill and other intangible assets for impairment. The Company’s testing of goodwill and other intangible assets at December 31, 2013 indicated there was no impairment in the carrying value of these assets.

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Securities (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Available-for-sale- Debt maturities, Amortized Cost
One to five years	$ 6,166
Five to ten years	2,439
After ten Years	13,247
Subtotal	21,852
Totals	109,832
Available for Sale Securities, Fair Values
One to five years	6,481
Five to ten years	2,481
After ten Years	13,597
Subtotal	22,559
Totals	111,605
Held to Maturity securities, Amortized Cost
Five to ten years	3,056
After ten Years	2,165
Subtotal	5,221
Totals	6,581	6,623
Held to Maturity securities, Fair Values
Five to ten years	2,930
After ten Years	1,982
Subtotal	4,912
Total	6,279	6,121
Mortgage-backed securities of government sponsored entities [Member]
Available-for-sale- Debt maturities, Amortized Cost
Maturities without single maturity date	87,397
Available for Sale Securities, Fair Values
Maturities without single maturity date	88,450
Held to Maturity securities, Amortized Cost
Maturities without single maturity date	1,360
Totals	1,360	1,390
Held to Maturity securities, Fair Values
Maturities without single maturity date	1,367
Total	1,367	1,380
Private-label collateralized mortgage obligations [Member]
Available-for-sale- Debt maturities, Amortized Cost
Maturities without single maturity date	583
Available for Sale Securities, Fair Values
Maturities without single maturity date	$ 596

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Goodwill and Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Goodwill And Intangible Assets Details
Goodwill	$ 1,719	$ 1,719
Other intangible assets - gross	974	974
Other intangible assets - amortization	(974)	(936)
Total	$ 1,719	$ 1,757

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill and intangibles

The composition of goodwill and other intangible assets, all of which is core deposit intangible, at June 30, 2014 and December 31, 2013:

	June 30, 2014			December 31, 2013
	(In thousands)
Goodwill	$	1,719		$	1,719
Other intangible assets – gross		974			974
Other intangible assets – amortization		(974	)		(936	)
Total	$	1,719		$	1,757