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

WOOSTER, Ohio, July 19, 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 $1.2 million or $0.45 per common share for the quarter ended June 30, 2018, an increase of $443,000 or 58.4%, compared to $761,000 or $0.27 per common share for the quarter ended June 30, 2017. The increase in net income was due to an increase in net interest income and a decrease in noninterest expenses partially offset by an increase in provision for loan losses.   The return on average equity and return on average assets for the second quarter of 2018 was 11.40% and 1.05%, respectively, compared to 7.26% and 0.68%, respectively, for the same period in 2017.

President and CEO James R. VanSickle commented, “We are pleased to announce a fourth consecutive quarter of record earnings for our shareholders.  2018 is shaping up to be a memorable year for Wayne Savings Bancshares, Inc.  Our outstanding team is committed to building a dynamic and independent financial services organization.  We truly appreciate the support of our customers, staff and shareholders as we execute our plan to become a top-performing community bank.”  

2018 Quarterly Business Highlights

• Net interest income was $3.9 million for the quarter ended June 30, 2018, an increase of $299,000, or 8.3%, compared to the quarter ended June 30, 2017.  The quarterly average loan balances increased $21.4 million, or 6.4%, to $357.6 million from the June 30, 2017 period.  The net interest margin increased from 3.38% for the quarter ended June 30, 2017 to 3.57% for the comparable period.   The net interest margin increase was the result of an increase of 22 basis points in the average yield on interest-earning assets partially offset with an increase of 3 basis points in the average cost of interest-bearing liabilities to 0.53%.
   
• Provision for loan losses was $218,000 in the second quarter of 2018 as a result of growth in the loan portfolio and related reserve requirement for a classified credit during the second quarter of 2018. 
   
• Noninterest expense totaled $2.8 million for the three-month period ended June 30, 2018, a decrease of $255,000, or 8.2%, compared to the three months ended June 30, 2017 primarily due to reduced stockholder and legal expenses related to the proxy contest as the Company implemented our 2017 experience and internal staff allowing us to reduce professional costs. 

The Company reported net income (unaudited) of $2.2 million or $0.81 per common share for the six months ended June 30, 2018, an increase of $837,000 or 62.8%, compared to $1.3 million or $0.48 per common share for the same period ended June 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, as both loan balances and specific reserves increased.  The return on average equity and return on average assets for the six months ended June 30, 2018 was 10.32% and 0.96%, respectively, compared to 6.40% and 0.60%, respectively, for the same period in 2017.

Net income for the six months ended June 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 six months ended June 30, 2018 and $412,000 for the same period in 2017.  The return on average equity and return on assets adjusted for the proxy expenses for the second quarter of 2018 would have been 11.10% and 1.03%, respectively, compared to 7.70% and 0.72%, respectively for the same period in 2017. 

2018 Year-to-Date Business Highlights

• Net interest income was $7.6 million for the six-month period ended June 30, 2018, an increase of $566,000, or 8.0%, compared to the same period in 2017 as the six-month average net loan balances increased $18.0 million from the June 30, 2017 period.  Net interest margin increased 21 basis points to 3.53% for the six months ended June 30, 2018.   The net interest margin increase was the result of an increase of 21 basis points in the average yield on interest-earning assets while the average cost of interest-bearing liabilities remained at 0.50%.
  
  
• Net loan balances increased from $345.9 million at December 31, 2017 to $364.1 million, an increase of 5.3%, despite selling $6.8 million in mortgage loans through June 30, 2018 compared to $5.7 million during the 2017 year to date period.
   
• Provision for loan losses was $338,000 for the six-month period ending June 30, 2018 as a result of growth in the loan portfolio and related specific reserve requirement for a classified credit in 2018. 
   
• Noninterest expense totaled $5.8 million for the six-month period ended June 30, 2018, a decrease of $462,000, or 7.4%, compared to the June 30, 2017 six-month period.  This decrease was primarily due to reduced stockholder and legal expenses related to the proxy contest of $248,000 as the Company utilized our prior experience and internal staff skillsets allowing us to reduce professional costs.  In addition to the reduced proxy costs, the Company reduced accounting and auditing expenses by $85,000 mainly due to deregistration from the Securities and Exchange Commission in October 2017 and reduced professional services of $74,000.  The Company’s efficiency ratio improved from 76.4% for the six-month period ended June 2017 to 66.4% 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 six months ended June 30, 2018 increased to $2.6 million from $1.8 million for the same prior year period. Despite the increased income before federal income taxes, the provision for federal income taxes for the six months ended June 2018 declined to $428,000 compared to the prior year period of $490,000 as a result of the federal tax rate reduction.  The effect of this change lowered the Company’s effective tax rate from 27% in the 2017 to 16% in the 2018 period. 

June 30, 2018 Financial Condition:

At June 30, 2018, the Company had total assets of $463.0 million, an increase of $23.2 million, from total assets at December 31, 2017. The increase in total assets was primarily due to an $18.2 million increase in net loans compared to December 31, 2017.  Loan balances generated from commercial relationships increased $17.4 million, or a 9.3% increase over the December 2017 balances, most of which was secured by real estate property. 

The allowance for loan losses increased from $2.9 million at December 31, 2017 to $3.3 million at June 30, 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 decreased from $1.9 million at December 31, 2017 to $1.4 million for the period ended June 30, 2018 due to reduced nonperforming mortgage loans and Commercial loans paydowns due to real estate sales and loans removed from nonperforming status due to improved payment performance.   

Total liabilities increased from $398.2 at December 31, 2017 to $420.5 million at June 30, 2018.  Federal Home Loan Bank Advances increased by $18.5 million with short-term advances and deposits growth $6.6 million.  The increase in deposits was primarily due to newly offered Platinum checking balances introduced to the market in the fourth quarter of 2017.  These high-interest checking products grew to a combined balance of $28.7 million at June 30, 2018.  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 Company’s plans, objectives, expectations and intentions and other statements contained in this release that are not historical facts and pertain to the Company’s 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 Company’s 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 Company’s loan portfolios; shifts in interest rates; shifts in the rate of inflation; shifts in the demand for the Company’s 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)
		June 30,				December 31,
		2018				2017
	ASSETS
	Cash and cash equivalents	$	8,543			$	6,041
	Securities, net (1)		64,557				63,011
	Loans held for sale		388				-
	Loans receivable, net		364,084				345,900
	Federal Home Loan Bank stock		4,226				4,226
	Premises & equipment		5,768				6,051
	Foreclosed assets held for sale, net		29				45
	Bank-owned life insurance		10,231				10,097
	Other assets		5,173				4,426
	TOTAL  ASSETS	$	462,999			$	439,797
	LIABILITIES AND STOCKHOLDERS' EQUITY
	Deposit accounts		379,071				372,465
	Other short-term borrowings		6,197				7,409
	Federal Home Loan Bank advances		32,000				13,500
	Accrued interest payable and other liabilities		3,243				4,838
	TOTAL LIABILITIES		420,511				398,212
	Common stock (3,978,731 shares of $.10 par value issued)		398				398
	Additional paid-in capital		36,121				36,093
	Retained earnings		25,992				24,414
	Shares acquired by ESOP		(174	)			(206	)
	Accumulated other comprehensive loss		(1,488	)			(753	)
	Treasury Stock at cost - 1,272,887 shares at both June 30, 2018
	and December 31, 2017		(18,361	)			(18,361	)
	TOTAL STOCKHOLDERS' EQUITY		42,488				41,585
	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	462,999			$	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									Six Months Ended
		June 30,						Percentage			June 30,						Percentage
		2018			2017			Change			2018			2017			Change
Interest and dividend income		$	4,436		$	4,095		8.3	%		$	8,656		$	8,072		7.2	%
Interest expense			541			499		8.3	%			1,025			1,007		1.8	%
Net interest income			3,895			3,596		8.3	%			7,631			7,065		8.0	%
Provision for loan losses			218			83		162.7	%			338			110		207.3	%
Net interest income after provision
for loan losses			3,677			3,513		4.7	%			7,293			6,955		4.9	%
Noninterest income			609			640		(4.8	)%			1,102			1,127		(2.2	)%
Non-Interest expense
Salaries and employee benefits			1,523			1,526		(0.2	)%			3,069			3,250		(5.6	)%
Net occupancy and equipment expense			565			527		7.2	%			1,129			1,053		7.2	%
Franchise taxes			96			94		2.1	%			192			185		3.8	%
Advertising and marketing			119			62		91.9	%			217			132		64.4	%
Legal			16			156		(89.7	)%			89			347		(74.4	)%
Professional fees			40			101		(60.4	)%			79			152		(48.0	)%
Audit and accounting			68			106		(35.8	)%			131			216		(39.4	)%
Stockholder expense			67			186		(64.0	)%			193			262		(26.3	)%
Other			352			343		2.6	%			699			663		5.4	%
Total noninterest expense			2,846			3,101		(8.2	)%			5,798			6,260		(7.4	)%
Income before federal income taxes			1,440			1,052		37.0	%			2,597			1,822		42.5	%
Provision for income taxes			236			291		(18.9	)%			428			490		(12.7	)%
Net income		$	1,204		$	761		58.4	%		$	2,169		$	1,332		62.8	%
Earnings per share - Basic and diluted		$	0.45		$	0.27					$	0.81		$	0.48

 

	WAYNE SAVINGS BANCSHARES, INC.
	Selected Condensed Consolidated Financial Data
	(Dollars in Thousands, except per share data - unaudited)
			June				March				December				September
			2018				2018				2017				2017
	Interest and dividend income		$	4,436			$	4,220			$	4,202			$	4,154
	Interest expense			541				484				482				491
	Net interest income			3,895				3,736				3,720				3,663
	Provision for loan losses			218				120				92				99
	Net interest income after
	provision for loan losses			3,677				3,616				3,628				3,564
	Noninterest income			609				493				470				548
	Noninterest expense			2,846				2,952				2,782				2,915
	Income before income taxes			1,440				1,157				1,316				1,197
	Provision for income taxes			236				192				394				342
	Net income		$	1,204			$	965			$	922			$	855
	Earnings per share - basic and diluted		$	0.45			$	0.36			$	0.34			$	0.31
	Dividends per share		$	0.11			$	0.11			$	0.10			$	0.09
	Return on average assets			1.05	%			0.86	%			0.81	%			0.77	%
	Return on average equity			11.40	%			9.23	%			8.66	%			8.06	%
	Shares outstanding			2,705,844				2,705,844				2,705,844				2,781,839
	Book value per share		$	15.70			$	15.39			$	15.37			$	15.31
			June				March				December				September
			2017				2017				2016				2016
	Interest and dividend income		$	4,095			$	3,977			$	3,931			$	3,953
	Interest expense			499				508				525				534
	Net interest income			3,596				3,469				3,406				3,419
	Provision for loan losses			83				27				213				208
	Net interest income after
	provision for loan losses			3,513				3,442				3,193				3,211
	Noninterest income			640				487				466				523
	Noninterest expense			3,101				3,159				3,276				3,024
	Income before income taxes			1,052				770				383				710
	Provision for income taxes			291				199				68				160
	Net income		$	761			$	571			$	315			$	550
	Earnings per share - basic and diluted		$	0.27			$	0.21			$	0.12			$	0.20
	Dividends per share		$	0.09			$	0.09			$	0.09			$	0.09
	Return on average assets			0.68	%			0.51	%			0.28	%			0.49	%
	Return on average equity			7.26	%			5.53	%			3.03	%			5.31	%
	Shares outstanding			2,781,839				2,781,839				2,781,839				2,781,839
	Book value per share		$	15.11			$	14.88			$	14.75			$	14.88