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

WOOSTER, Ohio, Oct. 12, 2018 (GLOBE NEWSWIRE) — 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.

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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