Wayne Savings Bancshares, Inc. Announces Record Earnings for the Quarter ended September 30, 2018

WOOSTER, Ohio, Oct. 12, 2018 — Wayne Savings Bancshares, Inc. (OTCQX: WAYN), (the “Company”), the holding company parent of Wayne Savings Community Bank, reported net income (unaudited) of $1.4 million, or $0.53 per common share, for the quarter ended September 30, 2018.  This represents an increase of $563,000, or 65.8%, compared to $855,000, or $0.31 per common share, for the quarter ended September 30, 2017. The increase in net income was due to an increase in net interest income, an increase in other income and a decrease in noninterest expenses.   The return on average equity and return on average assets for the third quarter of 2018 were 13.12% and 1.22%, respectively, compared to 8.06% and 0.77%, respectively, for the same period in 2017.

President and CEO James R. VanSickle commented, “We are pleased to announce a fifth consecutive quarter of record earnings for our shareholders.  Our 13.12% annualized return on average equity, 1.22% annualized return on average assets and an efficiency ratio of 60.03% are just a few among many highlights for the quarter ending September 30, 2018.  Our outstanding team continues to work diligently at delivering great results for both our shareholders and customers. We truly appreciate the support of our customers, staff and shareholders as we continue to execute our plan to become a top-performing community bank.”  

2018 Quarterly Business Highlights

  • Net interest income was $4.0 million for the quarter ended September 30, 2018, an increase of $287,000, or 7.8%, compared to the quarter ended September 30, 2017.  The quarterly average loan balances increased $24.8 million, or 7.3%, to $365.5 million from the September 30, 2017 period.  Our net interest margin increased from 3.44% for the quarter ended September 30, 2017 to 3.56% at September 30, 2018.  This increase was the result of an increase in our yield on average interest-earning assets of 24 basis points, partially offset by an increase of 12 basis points in the average cost of interest-bearing liabilities.  
  • Provision for loan losses was $90,000 in the third quarter of 2018, mainly due to increased growth in the loan portfolio.   
  • Noninterest expense totaled $2.7 million for the three-month period ended September 30, 2018, a decrease of $177,000, or 6.1%, compared to the three months ended September 30, 2017 primarily due to reduced net occupancy and equipment expense, legal expense, professional fees and auditing and accounting expense related to deregistration from the Securities and Exchange Commission.  The Company’s efficiency ratio improved from 69.22% for the three-month period ended September 2017 to 60.03% for the same period in 2018.   

The Company, reported net income (unaudited) of $3.6 million, or $1.34 per common share, for the nine months ended September 30, 2018, an increase of $1.4 million or 64.0%, compared to $2.2 million, or $0.79 per common share, for the same period ended September 30, 2017. The increase in net income was due to an increase in net interest income, a decrease in noninterest expenses and a decrease in federal income tax expense partially offset by an increase in provision for loan losses.  The return on average equity and return on average assets for the year-to-date period ended September 30, 2018 were 11.27% and 1.05%, respectively, compared to 6.96% and 0.65%, respectively, for the same period in 2017.

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Net income for the nine months ended September 30, 2018 was also negatively impacted by a proxy contest for the election of directors at the 2018 annual shareholders meeting. The proxy contest expenses, which were included in noninterest expense, totaled $164,000 for the nine months ended September 30, 2018 and $420,000 for the same period in 2017.  The return on average equity and return on assets adjusted for the proxy expenses for the nine months of 2018 would have been 11.58% and 1.08%, respectively, compared to 7.84% and 0.74%, respectively for the same period in 2017. 

2018 Year-to-Date Business Highlights

  • Net interest income was $11.6 million for the nine-month period ended September 30, 2018, an increase of $853,000, or 8.0%, compared to the same period in 2017 as the nine-month average net loan balances increased $20.3 million from the September 30, 2017 period.  Net interest margin increased 18 basis points to 3.54% for the nine months ended September 30, 2018.  This increase was the result of a 22 basis points increase in the yield on interest-earning assets offset with an increase in the average cost of interest-bearing liabilities of 4 basis points.
  • Net loan balances increased from $345.9 million at December 31, 2017 to $369.2 million, an increase of 6.7%, despite selling $10.9 million in mortgage loans through September 30, 2018 compared to $8.3 million during the 2017 year-to-date period.
  • Provision for loan losses was $428,000 for the nine-month period ending September 30, 2018 as a result of growth in the loan portfolio and increased specific reserve requirements for classified credits in 2018. 
  • Noninterest expense totaled $8.5 million for the nine-month period ended September 30, 2018, a decrease of $645,000, or 7.0%, compared to the September 30, 2017 nine-month period.  This decrease was primarily due to reduced salaries and employee benefits and legal expenses related to the proxy contest of $176,000 as the Company utilized our prior experience.  The Company’s efficiency ratio improved from 73.99% for the nine-month period ended September 2017 to 64.21% for the same period in 2018. 
  • On December 22, 2017, H.R.1, formerly known as the Tax Cuts and Jobs Act (the “Tax Reform Act”), was enacted into law.  Beginning in 2018, the Tax Reform Act reduces the federal tax rate for corporations from 35% to 21% and changes or limits certain deductions.  Income before federal income taxes for the nine months ended September 30, 2018 increased to $4.3 million from $3.0 million for the same prior year period. Despite the increased income before federal income taxes, the provision for federal income taxes for the nine months ended September 2018 declined to $743,000 compared to the prior year period of $832,000 as a result of the federal tax rate reduction.  The effect of this change lowered the Company’s effective tax rate from 28% for the nine months ended September 30, 2017 compared to 17% for the same period in 2018. 

September 30, 2018 Financial Condition:

At September 30, 2018, the Company had total assets of $471.5 million, an increase of $31.7 million, from total assets at December 31, 2017. The increase in total assets was primarily due to an $23.3 million increase in net loans compared to December 31, 2017.  Loan balances generated from commercial relationships increased $21.8 million, or a 11.6% increase over the December 2017 balances, most of which was secured by real estate property. 

The allowance for loan losses was $2.9 million at December 31, 2017 and increased to $3.3 million at September 30, 2018 due to portfolio growth and related increased specific reserve requirements for classified credits in 2018.  The allowance for loan losses and the related provision for loan losses is based on management’s judgment and evaluation of the loan portfolio.  Management believes the current allowance for loan losses is adequate, however changing economic and other conditions may require future adjustments to the allowance for loan losses.

Total nonperforming loans remained at $1.9 million for both December 31, 2017 and September 30, 2018.  

Total liabilities increased from $398.2 at December 31, 2017 to $428.2 million at September 30, 2018 mainly due to increased Federal Home Loan Bank advances and deposit growth.  The deposit growth was primarily due to newly offered Platinum checking balances introduced to the market in the fourth quarter of 2017which totaled $38.1 million at September 30, 2018.  These new high-interest checking products were partially offset with declines in saving, money market and certificate of deposit balances as existing customers also chose the high-interest Platinum product. The Company is continuing to enhance its deposit products in an effort to serve its customers and increase deposit balances.

Established in 1899, Wayne Savings Community Bank, the wholly owned subsidiary of Wayne Savings Bancshares, Inc., has eleven full-service banking locations in the communities of Wooster, Ashland, Millersburg, Rittman, Lodi, North Canton, and Creston, Ohio. Additional information about Wayne Savings Community Bank is available at www.waynesavings.com.

Forward-Looking-Statements This release contains forward-looking statements that are not historical facts and that are intended to be forward-looking statements as that term is defined by the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may include, but are not limited to, statements about the Companys plans, objectives, expectations and intentions and other statements contained in this release that are not historical facts and pertain to the Companys future operating results.  When used in this release, the words expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions are generally intended to identify forward-looking statements.  Actual results may differ materially from the results discussed in these forward-looking statements, because such statements are inherently subject to significant assumptions, risks and uncertainties, many of which are difficult to predict and are generally beyond the Companys control.  These include but are not limited to: the possibility of adverse economic developments that may, among other things, increase default and delinquency risks in the Companys loan portfolios; shifts in interest rates; shifts in the rate of inflation; shifts in the demand for the Companys loan and other products; unforeseen increases in costs and expenses; lower-than-expected revenue or cost savings in connection with acquisitions; changes in accounting policies; changes in the monetary and fiscal policies of the federal government; and changes in laws, regulations and the competitive environment.  Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact Information: Myron Swartzentruber Senior Vice President Chief Financial Officer (330) 264-5767

 
WAYNE SAVINGS BANCSHARES, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share data – unaudited)
    
 September 30, 2018 December 31, 2017
ASSETS   
    
Cash and cash equivalents$  14,583  $  6,041 
Securities, net (1)   61,460     63,011 
Loans held for sale   427     – 
Loans receivable, net   369,241     345,900 
Federal Home Loan Bank stock   4,226     4,226 
Premises & equipment   5,586     6,051 
Foreclosed assets held for sale, net   17     45 
Bank-owned life insurance   10,300     10,097 
Other assets   5,613     4,426 
  TOTAL  ASSETS$  471,453  $  439,797 
    
LIABILITIES AND STOCKHOLDERS’ EQUITY   
    
Deposit accounts $  373,660  $  372,465 
Other short-term borrowings   7,702     7,409 
Federal Home Loan Bank advances   42,750     13,500 
Accrued interest payable and other liabilities   4,094     4,838 
  TOTAL LIABILITIES   428,206     398,212 
    
    
Common stock (3,978,731 shares of $.10 par value issued)   398     398 
Additional paid-in capital   36,137     36,093 
Retained earnings   27,008     24,414 
Shares acquired by ESOP   (158)    (206)
Treasury Stock, at cost – 1,272,887 shares at both September 30, 2018 and December 31, 2017.   (18,361)    (18,361)
Accumulated other comprehensive income   (1,777)    (753)
  TOTAL STOCKHOLDERS’ EQUITY   43,247     41,585 
    
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$  471,453  $  439,797 
(1)  Includes held-to-maturity classifications.
Note: The December 31, 2017 Condensed Consolidated Balance Sheet has been derived from the audited Consolidated Balance Sheet as of that date.
    

 

   
WAYNE SAVINGS BANCSHARES, INC.  
Condensed Consolidated Statements of Income  
(Dollars in Thousands, except per share data – unaudited)  
            
 Three Months Ended   Nine Months Ended  
 September 30, Percentage  September 30, Percentage 
  2018  2017 change  2018  2017 change
            
Interest and dividend income$  4,590 $  4,154 10.5% $  13,246 $  12,226 8.3%
Interest expense   640    491 30.3%    1,665    1,498 11.1%
  Net interest income   3,950    3,663 7.8%    11,581    10,728 8.0%
  Provision for loan losses   90    99 (9.1)%    428    209 104.8%
  Net interest income after provision for loan losses   3,860    3,564 8.3%    11,153    10,519 6.0%
Non-interest income   611    548 11.5%    1,713    1,681 1.9%
Non-interest expense           
  Salaries and employee benefits   1,509    1,531 (1.4)%    4,578    4,781 (4.2)%
  Net occupancy and equipment expense   564    601 (6.2)%    1,693    1,654 2.4%
  Franchise taxes   93    90 3.3%    285    275 3.6%
  Advertising and marketing   42    68 (38.2)%    259    200 29.5%
  Legal   50    98 (49.0)%    139    445 (68.8)%
  Professional fees   49    90 (45.6)%    128    243 (47.3)%
  Auditing and accounting   70    106 (34.0)%    201    322 (37.6)%
  Stockholder expense   42    25 68.0%    235    287 (18.1)%
  Other   319    306 4.2%    1,018    974 4.5%
Total non-interest expense   2,738    2,915 (6.1)%    8,536    9,181 (7.0)%
Income before federal income taxes    1,733    1,197 44.8%    4,330    3,019 43.4%
Provision for federal income taxes    315    342 (7.9)%    743    832 (10.7)%
  Net income$  1,418 $  855 65.8% $  3,587 $  2,187 64.0%
            
Earnings per share           
  Basic and diluted$  0.53 $  0.31   $  1.34 $  0.79  
            

 
WAYNE SAVINGS BANCSHARES, INC.
Selected Condensed Consolidated Financial Data
(Dollars in Thousands, except per share data – unaudited)
        
 September June March December
  2018   2018   2018   2017 
        
Interest and dividend income$  4,590  $  4,436  $  4,220  $  4,202 
Interest expense   640     541     484     482 
  Net interest income   3,950     3,895     3,736     3,720 
  Provision for loan losses   90     218     120     92 
  Net interest income after       
  provision for loan losses   3,860     3,677     3,616     3,628 
Non-interest income   611     609     493     470 
Non-interest expense   2,738     2,846     2,952     2,782 
Income before federal income taxes    1,733     1,440     1,157     1,316 
Provision for federal income taxes    315     236     192     394 
  Net income$  1,418  $  1,204  $  965  $  922 
        
Earnings per share – basic and diluted$  0.53  $  0.45  $  0.36  $  0.34 
Dividends per share$  0.15  $  0.11  $  0.11  $  0.10 
Return on average assets 1.22%  1.05%  0.86%  0.81%
Return on average equity 13.12%  11.40%  9.23%  8.66%
Shares outstanding   2,705,844     2,705,844     2,705,844     2,705,844 
Book value per share$  15.98  $  15.70  $  15.39  $  15.37 
        
        
 September June March December
  2017   2017   2017   2016 
        
Interest and dividend income$  4,154  $  4,095  $  3,977  $  3,931 
Interest expense   491     499     508     525 
  Net interest income   3,663     3,596     3,469     3,406 
  Provision for loan losses   99     83     27     213 
  Net interest income after       
  provision for loan losses   3,564     3,513     3,442     3,193 
Non-interest income   548     640     487     466 
Non-interest expense   2,915     3,101     3,159     3,276 
Income before federal income taxes    1,197     1,052     770     383 
Provision for federal income taxes    342     291     199     68 
  Net income$  855  $  761  $  571  $  315 
        
Earnings per share – basic and diluted$  0.31  $  0.27  $  0.21  $  0.12 
Dividends per share$  0.09  $  0.09  $  0.09  $  0.09 
Return on average assets 0.77%  0.68%  0.51%  0.28%
Return on average equity 8.06%  7.26%  5.53%  3.03%
Shares outstanding   2,781,839     2,781,839     2,781,839     2,781,839 
Book value per share$  15.31  $  15.11  $  14.88  $  14.75 
        

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