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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from .................... to .............
Commission File No. 014612
WAYNE BANCORP, INC.
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(Exact name of registrant as specified in its charter)
OHIO 34-1516142
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
112 West Liberty Street, PO Box 757, Wooster, Ohio 44691
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(Address of principal executive offices) (Zip code)
(330) 264-1222
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(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $1.00 Stated Value Per Share
(Title of class)
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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]
Include by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant based on the most recent trade prices of such stock on June 30, 2002:
Common Stock $1.00 stated value $100,722,497
The number of shares outstanding of the issuer's classes of common stock as of
January 31, 2003:
Common Stock $1.00 stated value 4,774,565
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
2002 and portions of the Registrant's Proxy Statement for the Annual
Shareholders Meeting to be held May 29, 2003 are incorporated by reference into
Parts I, II and III.
TABLE OF CONTENTS
WAYNE BANCORP, INC.
FORM 10-K
PART I PAGE
- ------ ----
ITEM 1. Description of business ................................................................. 3
ITEM 2. Description of property ................................................................. 16
ITEM 3. Legal proceedings ....................................................................... 16
ITEM 4. Submission of matters to a vote of security holders ..................................... 16
PART II
ITEM 5. Market for the Registrant's common stock and related Shareholder matters ................ 17
ITEM 6. Selected financial data ................................................................. 17
ITEM 7. Management discussion and analysis of financial condition and results of operations ..... 17
ITEM 7A. Quantitative and qualitative disclosures about market risk .............................. 17
ITEM 8. Financial statements and supplementary data ............................................. 17
ITEM 9. Changes in and disagreements with accountants on accounting and financial disclosures ... 17
PART III
ITEM 10. Directors and Executive Officers of the Registrant ...................................... 17
ITEM 11. Executive compensation .................................................................. 17
ITEM 12. Security ownership of certain beneficial owners and management .......................... 18
ITEM 13. Certain relationships and related transactions .......................................... 18
ITEM 14. Controls and Procedures.................................................................. 18
PART IV
ITEM 15. Exhibits, financial statement schedules and reports on Form 8-K ......................... 19
EXHIBIT INDEX .......................................................................................... 19
SIGNATURES ............................................................................................. 20
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2
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS:
Wayne Bancorp, Inc. is a multi-bank holding company. Its bank subsidiaries,
Wayne County National Bank (WCNB) and Chippewa Valley Bank (CVB), conduct
general commercial and retail banking business. The Company's non-bank
affiliates MidOhio Data, Incorporated (MID) performs proof operations for WCNB
and data processing for CVB, while Chippewa Valley Title Agency, Inc. (CVT) a
wholly-owned subsidiary of WCNB, performs services related to title insurance
for the bank subsidiaries. These entities are collectively referred to as the
Company. Wayne Bancorp, Inc. was organized in April, 1986 and is reported on the
NASDAQ Small Cap Market under the symbol "WNNB".
The Company offers a wide range of commercial and personal banking services
primarily to its customers in Wayne, Holmes, Medina and Stark counties in Ohio.
These services include a broad range of loan, deposit and trust products, retail
investments and other miscellaneous services. Loan products include commercial
and commercial real estate loans, a variety of mortgage and construction loan
products, installment loans, home equity lines of credit, lines for overdraft
protection and lease financing. Deposit products include interest and
non-interest bearing checking accounts, various savings accounts, certificates
of deposit and IRA's. The Investment and Trust Services group provides services
in the areas of employee benefits and personal trusts. In addition, the Company
provides retail investment services, including mutual funds and annuities as
well as discount brokerage services. Miscellaneous services include online and
telephone banking, safety deposit boxes, night depository, United States Savings
Bonds, traveler's checks, money orders, utility bill payments collections and
notary public services. In addition, the Company has correspondent relationships
with major banks in Cleveland, Cincinnati and Chicago pursuant to which the
Company receives various financial services. The subsidiaries account for
substantially all of the Company's consolidated assets at December 31, 2002.
The Company's primary lending area comprises the Ohio counties of Wayne, Holmes,
Medina and Stark. Loans outside this area are considered for creditworthy
applicants. Lending decisions are made in accordance with written loan policies
designed to maintain loan quality.
Retail lending products are comprised of overdraft lines, personal lines of
credit and installment loans. Overdraft lines of credit are lines attached to
checking accounts to cover overdrafts and/or allow customers to write themselves
a loan. Credit limits are based on a percentage of gross income and average
deposits. Personal lines of credit include lines secured by junior mortgages
(home equity) and private banking lines which are generally secured by junior
mortgages but may be unsecured or secured by other collateral. The lines have a
20 year draw period and may then be renewed or amortized over ten years. Credit
limits are determined by comparing three criteria, appraised value, debt service
and gross income. Installment loans include both direct and indirect loans. The
term can range from 3 to 180 months, depending upon the collateral which
includes new and used automobiles, boats and recreational vehicles as well as
junior mortgages and unsecured personal loans. Retail lending underwriting
guidelines include evaluating the entire credit using the "Five C's of Credit,"
character, capacity, capital, condition and collateral. Credit scoring, analysis
of credit bureau ratings and debt to income ratios are the major tools used by
the lenders in the underwriting process.
The Company offers a wide range of mortgage loan programs, including a variety
of fixed and adjustable rate mortgages ranging from 120 to 360 months. The
underwriting guidelines include those similar to consumer loans and those
necessary to meet secondary market guidelines. Residential real estate decisions
focus on loan to value limits, debt to income and mortgage to income ratios,
credit history, and in some cases, whether private mortgage insurance is
obtained.
Business credit products include commercial loans, commercial real estate loans
and leases. Commercial loans include lines and letters of credit, fixed and
adjustable rate term loans, demand and time notes. Commercial real estate loans
include fixed and adjustable mortgages. Loans are generally to owner occupied
businesses. The portfolio also includes loans to churches, rental property,
shopping plazas and residential development loans. Loans to businesses often
entail greater risk because the primary source of repayment is typically
dependent upon adequate cash flow of the underlying business. Cash flow of a
business can be subject to adverse conditions in the economy or a specific
industry. Should cash flow fail, the lender looks to the assets of the business
and/or the ability of the co-makers to support the debt. Commercial lenders
consider the "Five C's of Credit," character, capacity, capital, condition and
collateral in making commercial credit decisions.
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(Continued)
3
The Company provides both direct and indirect leasing on a limited basis. The
direct leases are for specific equipment and may be open- or closed-end leases.
Indirect leases are established by the same methods as an indirect consumer auto
loan. Each vehicle is amortized individually over a five year period based on
Internal Revenue Code guidelines.
In addition to the underwriting guidelines followed for specific loan types, the
Company has underwriting guidelines common to all loan types. With regard to
collateral, the Company follows supervisory limits set forth in Regulation H for
transactions secured by real estate. Loans in excess of these guidelines are
reported to the Board of Directors on a monthly basis. Loans not secured by real
estate are analyzed on a loan by loan basis, based on collateral type guidelines
as set forth in the loan policy. Appraisal policies follow and comply with
provisions outlined under Title XI of the Financial Institutions Reform Recovery
and Enforcement Act, (FIRREA), whereby all appraisals are done by outside
independent appraisers. The Company, as a general rule, obtains an appraisal on
all real estate transactions even when not required by Title XI. Approval
procedures include authorities approved by the Board of Directors for individual
lenders and loan committees. Retail and residential loans are centrally
underwritten by their respective departments. Business credits can be approved
by the individual commercial lender or taken to the Loan Committee if it exceeds
individual approval limits. During 2002, the Board of Directors approved
aggregate loan commitments in excess of $750 thousand up to the respective banks
legal lending limit. Loans to Director's and Officers are approved by the Board
of Directors.
The Officers Loan Review Committee meets on a monthly basis. The Committee
reviews Bank lending trends, the Past Due report, the Watch List and various
other reports in order to monitor and maintain credit quality. The Committee
also reviews on a relationship basis, customers on the Bank's Watch List and
credits with aggregate commitments in excess of $300 thousand.
Revenues from loans accounted for 68%, 72% and 72% of consolidated revenues in
2002, 2001 and 2000, respectively. Revenues from interest and dividends on
investment securities, federal funds sold and mortgage-backed securities
accounted for 20%, 17% and 18% of consolidated revenues in 2002, 2001 and 2000,
respectively.
The business of the Company is not seasonal to any material degree, nor is it
dependent upon a single or small group of customers whose loss would result in a
material adverse effect on the Company or its subsidiaries.
REGULATION AND SUPERVISION:
General
Wayne Bancorp, Inc. is a corporation organized under the laws of the State of
Ohio. This business in which the Company and its subsidiaries are engaged is
subject to extensive supervision, regulation and examination by various bank
regulatory authorities. The supervision, regulation and examination to which the
Company and its subsidiaries are subject are intended primarily for the
protection of depositors and the deposit insurance funds that insure the
deposits of banks, rather than for the protection of security holders.
Several of the more significant regulatory provisions applicable to banks and
bank holding companies to which the Company and its subsidiaries are subject are
discussed below, along with certain regulatory matters concerning the Company
and its subsidiaries. Any change in applicable law or regulation may have a
material effect on the business and prospects of the Company and its
subsidiaries.
Holding Company Activities
As a bank holding company incorporated and doing business within the State of
Ohio, the Company is subject to regulation and supervision under the Bank
Holding Act of 1956, as amended (the "Act"). The Company is required to file
with the Federal Reserve Board on a quarterly basis information pursuant to the
Act. The Federal Reserve Board may conduct examinations or inspections of the
Company and its subsidiaries.
The Company is required to obtain prior approval from the Federal Reserve Board
for the acquisition of more than five percent of the voting shares or
substantially all of the assets of any bank or bank holding company. In
addition, the Company is prohibited by the Act, except in certain situations
from acquiring direct or indirect ownership or control of more than five percent
of the voting shares of any company which is not a bank or bank holding company
and from engaging directly or indirectly in activities other than those of
banking, managing or controlling banks or furnishing services to its
subsidiaries. The Company may, however, subject to the prior approval of the
Federal Reserve Board, engage in, or acquire shares of companies engaged in
activities which are deemed by the Federal Reserve Board by order or by
regulation to be so closely related to banking or managing and controlling a
bank as to be a proper activity.
On November 12, 2000, the Gramm-Leach-Bliley Act (the "GLB Act") was enacted
into law. The GLB Act made sweeping changes in the financial services in which
various types of financial institutions may engage. The Glass-Steagall Act,
which had generally prevented banks from affiliation with securities and
insurance firms was repealed. Pursuant to the GLB Act, a
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4
bank holding company may elect to become a "financial holding company," provided
that all of the depository institution subsidiaries of the bank holding company
are "well capitalized" and "well managed" under applicable regulatory standards.
Under the GLB Act, a bank holding company that has elected to become a financial
holding company may affiliate with securities firms and insurance companies and
engage in other activities that are financial in nature. Activities that are
"financial in nature" include securities underwriting, dealing and
market-making, sponsoring mutual funds and investment companies, insurance
underwriting and agency, merchant banking, and activities that the Federal
Reserve Board has determined to be closely related to banking. No Federal
Reserve Board approval is required for the Company to acquire a company, other
than a bank holding company, bank or savings association, engaged in activities
that are financial in nature or incidental to activities that are financial in
nature, as determined by the Federal Reserve Board. Prior Federal Reserve Board
approval is required before the Company may acquire the beneficial ownership or
control of more than 5% of the voting shares, or substantially all of the
assets, of a bank holding company, bank or savings association. If any
subsidiary bank of the company ceases to be "well capitalized" or "well managed"
under applicable regulatory standards, the Federal Reserve Board may, among
other actions, order the Company to divest the subsidiary bank. Alternatively,
the Company may elect to conform its activities to those permissible for a bank
holding company that is not also a financial holding company. If any subsidiary
bank of the Company receives a rating under the Community Reinvestment Act of
1977 of less than satisfactory, the Company will be prohibited from engaging in
new activities or acquiring companies other than bank holding companies, banks
or savings associations. In order to convert to a Financial Holding Company
there are certain requirements that must be met. At this time the Company is not
eligible to make an election to become a Financial Holding Company; however, in
the future an election is anticipated once these requirements are satisfied.
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002,
or the "SOA." The stated goals of the SOA are to increase corporate
responsibility, to provide for enhanced penalties for accounting and auditing
improprieties at publicly traded companies and to protect investors by improving
the accuracy and reliability of corporate disclosures pursuant to the securities
laws.
The SOA is the most far-reaching U.S. securities legislation enacted in some
time. The SOA generally applies to all companies, both U.S. and non-U.S., that
file or are required to file periodic reports with the Securities and Exchange
Commission (the "SEC") under the Securities Exchange Act of 1934, or the
Exchange Act. Given the extensive SEC role in implementing rules relating to
many of the SOA's new requirements, the final scope of these requirements
remains to be determined.
The SOA includes very specific additional disclosure requirements and new
corporate governance rules, requires the SEC and securities exchanges to adopt
extensive additional disclosure, corporate governance and other related rules
and mandates further studies of certain issues by the SEC and the Comptroller
General. The SOA represents significant federal involvement in matters
traditionally left to state regulatory systems, such as the regulation of the
accounting profession, and to state corporate law, such as the relationship
between a board of directors and management and between a board of directors and
its committees.
The SOA also requires the Company to disclose to shareholders whether SEC
filings are available at the Company's web site. The Company's website is
www.wcnb.com. Currently our SEC filings are not available at our web site as we
do not have the requisite hyperlink installed for such. However SEC filings may
be viewed at the SEC's web site at www.sec.gov/. In addition, the Company's SEC
filings can be obtained free of charge by contacting the Secretary and Treasurer
of the Company.
Affiliate Transactions
Various governmental requirements, including Sections 23A and 23B of the Federal
Reserve Act, and the regulations promulgated thereunder, limit borrowings by the
Company and its non-bank subsidiaries from its affiliate insured depository
institutions, and also limit various other transactions between the Company and
its non-bank subsidiaries on the one hand, and its affiliate insured depository
institutions on the other. Sections 23A of the Federal Reserve Act also requires
that an insured depository institution's loans to its non-bank affiliates be
secured and Section 23B of the Federal Reserve Act requires that an insured
depository institution's transactions with its non-bank affiliates be on
arms-length terms.
Interstate Banking and Branching
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
("Riegle-Neal"), subject to certain concentration limits and other requirements,
bank holding companies such as the Company are permitted to acquire banks and
bank holding companies located in any state. Any bank that is a subsidiary of a
bank holding company is permitted to receive deposits, renew time deposits,
close loans, service loans and receive loan payments as an agent for any other
bank subsidiary of that bank holding company. Banks are permitted to acquire
branch offices outside their home states by merging with out-of-state banks,
purchasing branches in other states and establishing de novo branch offices in
other states. The ability of banks to acquire branch offices is contingent,
however, on the host state having adopted legislation "opting in" to those
provisions of Riegle-Neal. In action, the ability of a bank to merge with a bank
located in another state is contingent on the host state not having adopted
legislation "opting out" of that provision of Riegle-Neal. The Company may from
time to time use Riegle-Neal to acquire banks in additional states and to
consolidate its bank subsidiaries, although the Company does not contemplate any
such action at this time.
Control Acquisitions
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company, unless the Federal Reserve Board
has been notified and has not objected to the transaction. Under the rebuttable
presumption established by the Federal Reserve Board, the acquisition of 10% or
more of a class of voting stock of a bank holding company with a class of
securities registered under Section 12 of the Exchange Act, such as the Company,
would, under the circumstances set forth in the presumption, constitute
acquisition of control of the bank holding company. In addition, a company is
required to obtain the approval of the Federal Reserve Board under the Bank
Holding Company Act before acquiring 25% (5% in the case of an acquirer that is
a bank holding company) or more of any class of outstanding voting stock of a
bank holding company, or otherwise obtaining control or a "controlling
influence" over that bank holding company.
On December 9, 2002, Wayne Bancorp, Inc. signed a definitive agreement to merge
with Banc Services, Corp., located in Orrville, Ohio. Upon closing of this
transaction, The Savings Bank & Trust Company, a wholly-owned subsidiary of Banc
Services Corp., will become a wholly-owned subsidiary of the Company, through a
merger with and into Chippewa Valley Bank which following the merger will be
named Savings Bank & Trust. Under the terms of the agreement, subject to certain
conditions being met, Banc Services Corp. shareholders will receive 1.391
shares, as adjusted for the 5% stock dividend, of stock in Wayne Bancorp, Inc.
for each share of Banc Services Corp. owned plus $14.40 in cash. The transaction
is subject to shareholder and regulatory approval and is expected to close in
the third quarter of 2003.
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5
Liability for Banking Subsidiaries
Under the current Federal Reserve Board policy, a bank holding company is
expected to act as a source of financial and managerial strength to each of its
subsidiary banks and to maintain resources adequate to support each subsidiary
bank. This support may be required at times when the bank holding company may
not have the resources to provide it. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a U.S. federal bank
regulatory agency to maintain the capital of a subsidiary bank would be assumed
by the bankruptcy trustee and entitled to priority of payment. Any depository
institution insured by the FDIC can be held liable for any loss incurred, or
reasonably expected to be incurred, by the FDIC in connection with (1) the
"default" of a commonly controlled FDIC-insured depository institution; or (2)
any assistance provided by the FDIC to both a commonly controlled FDIC-insured
depository institution "in danger of default." All of the Company's subsidiary
banks are FDIC-insured depository institutions. If a default occurred with
respect to a bank, any capital loans to the bank from its parent holding company
would be subordinate in right of payment to payment of the bank's depositors and
certain of its other obligations.
Regulatory Capital Requirements
The Company is required by the various regulatory authorities to maintain
certain capital levels. Bank holding companies are required to maintain minimum
levels of capital in accordance with Federal Reserve capital adequacy
guidelines. If capital falls below minimum guideline levels, a bank holding
company, among other things, may be denied approval to acquire or establish
additional banks or non-bank businesses. The required capital levels and the
Company's capital position at December 31, 2002 are summarized in the table
included in Note 16 to the financial statements.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
and the regulations promulgated under FDICIA, among other things, established
five capital categories for insured depository institutions-well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized and requires U.S. federal bank regulatory agencies
to implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements based on these
categories. Unless a bank is well capitalized, it is subject to restrictions on
its ability to offer brokered deposits and on certain other aspects of its
operations. An undercapitalized bank must develop a capital restoration plan and
its parent bank holding company must guarantee the bank's compliance with the
plan up to the lesser of 5% of the bank's assets at the time it became
under-capitalized and the amount needed to comply with the plan. As of December
31, 2002, each of the Company's banking subsidiaries was well capitalized based
on the prompt corrective action guidelines.
Dividend Restrictions
The ability of the Company to obtain funds for the payment of dividends and for
other cash requirements will be largely dependent on the amount of dividends
which may be declared by its banking subsidiaries. Various U.S. federal and
state statutory provisions limit the amount of dividends the Company's banking
subsidiaries can pay to the Company without regulatory approval. Dividend
payments by national banks are limited to the lesser of (1) the level of
undivided profits; (2) the amount in excess of which the bank ceases to be at
least adequately capitalized; and (3) absent regulatory approval, an amount not
in excess of net income for the current year combined with retained net income
for the preceding two years. Ohio chartered, member banks may not declare a
dividend without the approval of both the Ohio Division of Financial
Institutions and the Federal Reserve if the total of dividends declared by such
bank in a calendar year exceeds the total of its net income for that year,
combined with its retained net income from the preceding two years.
In addition, U.S. federal bank regulatory authorities have authority to prohibit
the Company's banking subsidiaries from engaging in an unsafe or unsound
practice in conducting their business. The payment of dividends, depending upon
the financial condition of the bank in question, could be deemed to constitute
an unsafe or unsound practice. The ability of the Company's banking subsidiaries
to pay dividends in the future is currently, and could be further, influenced by
bank regulatory policies and capital guidelines.
Deposit Insurance Assessments
The deposits of the Company's banking subsidiaries are insured up to regulatory
limits by the FDIC, and, accordingly, are subject to deposit insurance
assessments to maintain the Bank Insurance Fund (the "BIF") and/or the Savings
Association Insurance Fund (the "SAIF") administered by the FDIC.
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6
Depositor Preference Statute
In the "liquidation or other resolution" of an institution by any receiver, U.S.
federal legislation provides that deposits and certain claims for administrative
expenses and employee compensation against the insured depository institution
would be afforded a priority over general unsecured claims against that
institution, including federal funds and letters of credit.
Government Monetary Policy
The earnings of the Company are affected primarily by general economic
conditions, and to a lesser extent by the fiscal and monetary policies of the
federal government and its agencies, particularly the Federal Reserve. Its
policies influence, to some degree, the volume of bank loans and deposits, and
interest rates charged and paid thereon, and thus have an effect on the earnings
of the Company's subsidiary banks.
Additional Regulation
The Bank is also subject to federal regulation as to such matters as required
reserves, limitation as to the nature and amount of its loans and investments,
regulatory approval of any merger or consolidation, issuance or retirement of
their own securities, limitations upon the payment of dividends and other
aspects of banking operations. In addition, the activities and operations of the
Bank are subject to a number of additional detailed, complex and sometimes
overlapping laws and regulations. These include state usury and consumer credit
laws, state laws relating to fiduciaries, the Federal Truth-in-Lending Act and
Regulation Z, the Federal Equal Credit Opportunity Act and Regulation B, the
Fair Credit Reporting Act, the Truth in Savings Act, the Community Reinvestment
Act, anti-redlining legislation and antitrust laws.
Future Legislation
Changes to the laws and regulations in the states and countries where the
Company and its subsidiaries do business can affect the operating environment of
bank holding companies and their subsidiaries in substantial and unpredictable
ways. The Company cannot accurately predict whether those changes in laws and
regulations will occur, and, if those changes occur, the ultimate effect they
would have upon the financial condition or results of operations of the Company
or any of its subsidiaries.
Competition
The banking and financial services industry in the Company's market is highly
competitive. The Company's market area encompasses Wayne, Holmes, Medina and
Stark Counties in Ohio. The bank subsidiaries compete for loans and deposits
with other commercial banks, savings and loans, finance companies, mortgage
brokers and credit unions. The primary competitive factor is interest rates
charged on loans and paid for deposits as well as fees charged for various other
products and service.
Employees
As of December 31, 2002, the Company had 220 full time employees and 40 part
time employees. The Company is not a party to any collective bargaining
agreement and management considers its relationship with their employees to be
good.
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7
Year ended December 31,
-----------------------
2002 2001 2000
-------------------------- ---------------------------- ----------------------------
(in thousands of dollars) Average Average Average
Daily Yield/ Daily Yield/ Daily Yield/
Balance Interest rate balance Interest rate balance Interest rate
------- -------- ---- ------- -------- ---- ------- -------- ----
ASSETS
Interest-earning assets:
Loans (including fees)(1) .......... $391,692 $28,058 7.16% $398,071 $33,127 8.32% $377,942 $33,069 8.75%
Securities: (2)
Taxable .......................... 127,027 6,185 4.87 100,299 5,814 5.80 104,620 6,368 6.09
Tax-exempt (3) ................... 46,635 2,973 6.38 38,097 2,791 7.33 34,776 2,680 7.71
Federal funds sold ................. 7,561 129 1.71 7,778 312 4.01 4,395 297 6.76
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-earning assets .... $572,915 $37,345 6.52% $544,245 $42,044 7.73% $521,733 $42,414 8.13%
Non-earning assets .................... 32,767 31,822 32,476
-------- -------- --------
Total assets ..................... $605,682 $575,967 $554,209
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW and money market accounts ...... $135,428 1,716 1.27% $140,340 3,793 2.70% $130,049 4,893 3.76%
Savings ............................ 95,672 1,589 1.66 80,061 1,983 2.48 79,708 2,161 2.71
Time deposits ...................... 201,117 8,126 4.04 183,838 9,444 5.14 184,911 10,081 5.45
Short term and other borrowed funds 34,207 715 2.09% 37,735 1,451 3.85 33,339 1,875 5.62
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-bearing
liabilities ................. $466,424 12,146 2.60% $441,974 16,671 3.77% $428,007 19,010 4.44%
Noninterest-bearing liabilities ....... 74,724 72,709 70,365
-------- -------- --------
Total liabilities ............. 541,148 514,683 498,372
Shareholders' equity .................. 64,534 61,284 55,837
-------- -------- --------
Total liabilities &
shareholders' equity ....... $605,682 $575,967 $554,209
======== ======== ========
Net interest income ................... $25,199 $25,373 $23,404
======= ======= =======
Net interest spread ................ 3.92% 3.96% 3.69%
==== ==== ====
Net interest margin ................ 4.40% 4.66% 4.49%
==== ==== ====
(1) Nonaccrual loans are included in the average loan balance.
(2) Average balance includes unrealized gains and losses while yield is based
on amortized cost.
(3) Interest income on tax exempt securities includes a taxable equivalent
adjustment using a 34% tax rate.
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8
SUMMARY OF NET INTEREST INCOME CHANGES
WAYNE BANCORP, INC.
The following table sets forth for the periods indicated a summary of the
changes in interest income and interest expense resulting from changes in volume
and changes in interest rates for the major components of interest earning
assets and interest bearing liabilities.
2002 vs. 2001 2001 vs. 2000
------------- -------------
Increase(Decrease)(1) Increase(Decrease)(1)
Volume Rate Net Volume Rate Net
(in thousands of dollars)
Interest Income:
Loans $ (523) $(4,546) $(5,069) $ 1,716 $(1,658) $ 58
Securities:
Taxable 1,394 (1,023) 371 (257) (297) (554)
Non-taxable (2) 574 (392) 182 248 (137) 111
Federal funds sold (8) (175) (183) 168 (153) 15
------- ------- ------- ------- ------- -------
Total Interest Income 1,437 (6,136) (4,699) 1,875 (2,245) (370)
Interest Expense:
Now and money market accounts (128) (1,949) (2,077) 363 (1,463) (1,100)
Savings 339 (733) (394) 10 (188) (178)
Time deposits 830 (2,148) (1,318) (58) (579) (637)
Short term and other borrowed funds (125) (611) (736) 224 (648) (424)
------- ------- ------- ------- ------- -------
Total Interest Expense 916 (5,441) (4,525) 539 (2,878) (2,339)
------- ------- ------- ------- ------- -------
Net Interest Income $ 521 $ (695) $ (174) $ 1,336 $ 633 $ 1,969
======= ======= ======= ======= ======= =======
(1) For purposes of the above table, changes in interest due to volume and
rate were determined as follows:
Volume variance - Change in volume multiplied by the prior year's rate.
Rate Variance - Change in rate multiplied by the prior year's balance.
Rate/Volume Variance - Change in volume multiplied by change in rate.
The rate/volume variance was allocated to the volume variance and rate variance
in proportion to the relationship of the absolute dollar amount of change in
each.
(2) Interest income on tax-exempt securities includes the effects of taxable
equivalent adjustments using a 34% tax rate for each year.
- --------------------------------------------------------------------------------
9
INVESTMENT PORTFOLIO
WAYNE BANCORP, INC.
The following table sets forth the year-end carrying value of securities
available-for-sale for the last three years:
(in thousands of dollars) 2002 2001 2000
---- ---- ----
By type:
U.S. Treasury and other U.S.
Government Agency Obligations $ 69,086 $ 62,874 $ 51,964
Mortgage-backed securities 24,170 12,207 9,387
States and political subdivisions 63,505 56,031 39,732
Other 28,147 33,986 37,266
-------- -------- --------
Total $184,908 $165,098 $138,349
======== ======== ========
There were no securities held-to-maturity during the last three years.
The following table sets forth the maturity distribution and yields on
securities available for-sale at December 31, 2002 (in thousands of dollars):
One Year or Less One to Five Years
Carrying Carrying
Value Yield Value Yield
----- ----- ----- -----
U.S. Treasury and other U.S.
Government Agency Obligations $ 25,114 4.46% $ 43,972 3.90%
Mortgage-backed securities 67 7.19 10,067 5.34
States and political subdivisions 17,658 3.72 38,532 4.17
Other 13,869 5.22 10,880 6.25
-------- ---- -------- ----
$ 56,708 4.42% $103,451 4.39%
======== ==== ======== ====
Five to Ten Years Over Ten Years
Carrying Carrying
Value Yield Value Yield
----- ----- ----- -----
U.S. Treasury and other U.S.
Government Agency Obligations $ 0 0.00% $ 0 0.00%
Mortgage-backed securities 13,771 5.35 265 5.23
States and political subdivisions 6,033 4.62 1,282 5.48
Other 0 0.00 3,398 3.96
------- ---- ------ ----
$19,804 5.13% $4,945 4.42%
======= ==== ====== ====
Note: Yield represents the weighted average yield to maturity. Yield on states
and political subdivisions is not calculated on a tax equivalent basis.
Mortgage-backed obligations are distributed based on contractual maturity.
Excluding those holdings of the securities portfolio in U.S. Treasury securities
and other agencies and corporations of the U.S. Government, there were no
securities of any one issuer, which exceeded 10% of consolidated shareholders'
equity at December 31, 2002.
- --------------------------------------------------------------------------------
10
LOAN PORTFOLIO
WAYNE BANCORP, INC.
The Company's commercial loans are extended primarily to local businesses. The
Company also extends credit to customers through installment loans, vehicle and
equipment leases and revolving credit arrangements. The remaining portfolio
consists primarily of residential mortgage loans (1-4 family dwellings) and
mortgage loans on commercial property. The following table sets forth the
composition of the loan portfolio for the last five years.
(in thousands of dollars) 2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Real estate - mortgage $ 93,083 $ 117,654 $ 143,032 $ 160,021 $ 144,150
Real estate - construction 1,055 2,612 6,352 4,575 3,642
Installment & credit card 34,301 44,544 52,819 48,411 48,684
Commercial & industrial 241,069 222,131 171,389 141,929 125,862
Lease financing 787 1,175 1,869 2,549 3,299
Other Loans 115 201 227 107 104
--------- --------- --------- --------- ---------
Gross loans 370,410 388,317 375,688 357,592 325,741
Less: Net deferred loan fees (547) (672) (622) (792) (1,078)
Unearned income on leases (69) (161) (226) (297) (464)
--------- --------- --------- --------- ---------
Total loans $ 369,794 $ 387,484 $ 374,840 $ 356,503 $ 324,199
========= ========= ========= ========= =========
The maturity distribution of the loan portfolio is a key factor in evaluating
the interest rate risk characteristics of the loan portfolio and the future
profitability of the portfolio. The maturity distribution and interest rate
sensitivity of the loan portfolio and other balance sheet items at year end 2002
is included on page 28 of the 2002 Annual Report to Shareholders, and is
incorporated herein by reference.
The maturity distribution and interest rate sensitivity of commercial and
industrial loans at December 31, 2002 are as follows (in thousands of dollars):
Maturity (1)
Within 1 to 5 After 5
1 Year Years Years Total
------ ----- ----- -----
Commercial and industrial $ 82,488 $ 75,777 $ 64,071 $222,336
Commercial real estate 5,485 2,908 10,340 18,733
Real estate - construction 1,055 0 0 1,055
-------- -------- -------- --------
Total $ 89,028 $ 78,685 $ 74,411 $242,124
Fixed rate loans $ 18,495 $ 52,471 $ 800 $ 71,766
Variable rate loans 70,533 26,214 73,611 170,358
-------- -------- -------- --------
Total $ 89,028 $ 78,685 $ 74,411 $242,124
(1) Based on scheduled principal repayments
The following table summarizes past due, non-accrual and restructured loans:
(in thousands of dollars) 2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Accruing loans past due 90
days or more $ 334 $ 217 $226 $182 $288
Non-accrual loans 1,042 800 0 0 0
Restructured loans 0 0 0 0 271
------ ------ ---- ---- ----
$1,376 $1,017 $226 $182 $559
====== ====== ==== ==== ====
The policy for placing loans on non-accrual status is to stop the accrual of
interest when it is likely that the collection of interest is deemed doubtful,
or when loans are past due as to principal or interest 90 days or more. In
certain cases, interest accruals are continued on loans 90 days past due if they
are deemed to be adequately secured and in the process of collection.
- --------------------------------------------------------------------------------
11
Impaired loans are comprised of commercial and commercial real estate loans, and
are carried at the present value of expected future cash flows, discounted at
the loan's effective interest rate or at a fair value of collateral, if the loan
is collateral dependent. A portion of the allowance for loan losses is allocated
to impaired loans, when such impaired loans are identified.
Smaller balance homogeneous loans are evaluated for impairment in total. Such
loans include residential first mortgage and construction loans secured by 1-4
family properties, consumer and home equity loans. Such loans are included in
non-accrual and past due disclosures above, and those 1 - 4 family mortgage
loans on non-accrual are also included in impaired loan totals. Commercial loans
and mortgage loans secured by other properties are evaluated individually for
impairment. In addition, loans held-for-sale, if any, and leases are excluded
from consideration of impairment. When analysis of borrower operating results
and financial condition indicates that the borrower's underlying cash flows are
not adequate to meet its debt service requirements, the loan is evaluated for
impairment. Impaired loans, or portions thereof, are charged-off when deemed
uncollectible.
As of December 31, 2002, Management has identified, and classified, $1.5 million
of loans as impaired. These loans include commercial loans with balances of $726
thousand and 1-4 family mortgage loans of $316 thousand, both classified as
non-accrual, while there is one commercial loan with a balance of $460 thousand
classified as doubtful. Management continues to monitor these loans closely and
has allocated $510 thousand of the allowance for loan losses to these loans.
When reviewing the adequacy of the allowance for loan losses on page 13 of this
report, these balances are included in commercial and industrial loans and real
estate loans accordingly.
In all years presented, there were no material amount of loans excluded from the
amounts disclosed as non-accrual, past due 90 days or more, or restructured,
where management has substantial concern regarding the borrowers ability to
repay their loan, based on current information.
There were no foreign loans outstanding at December 31, 2002, 2001 or 2000.
As of December 31, 2002, there were no concentrations of credit greater than 10%
of total loans which are not otherwise disclosed as a category of loans pursuant
to Guide 3, Item III. A.
As of December 31, 2002, there are no other interest bearing assets that would
require disclosure under Guide 3, Item III. C. 1. or C. 2., if such assets were
loans.
- --------------------------------------------------------------------------------
12
SUMMARY OF LOAN LOSS EXPERIENCE
WAYNE BANCORP, INC.
In the normal course of business, the Company assumes risk by extending credit.
The Company manages this risk through its lending policy, loan review procedures
and personal contact with the borrower.
In determining the adequacy of the allowance for loan losses, management
evaluates past loan loss experience, present economic conditions and the
credit-worthiness of its borrowers. The allowance for loan losses is increased
by provisions charged to operations and recoveries of loans previously charged
off. The allowance is reduced by loans charged-off when they are deemed
uncollectible by the bank's Management. The following table contains information
relative to the allowance for loan losses for the last five years ending
December 31:
(in thousands of dollars) 2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Allowance for loan losses
at the beginning of the year $ 5,821 $ 5,343 $ 5,197 $ 4,916 $ 4,923
Loans charged off:
Real estate 6 0 0 0 23
Installment & credit card 424 372 179 259 260
Lease financing 0 0 0 0 4
Commercial & industrial 35 49 55 2 196
------- ------- ------- ------- -------
Total Loans Charged Off 465 421 234 261 483
Recoveries on loans charged off:
Real estate 2 0 0 0 1
Installment & credit card 218 190 131 144 205
Lease financing 0 0 0 5 3
Commercial & industrial 13 8 33 213 27
------- ------- ------- ------- -------
Total recoveries 233 198 164 362 236
------- ------- ------- ------- -------
Net loans charged off 232 223 70 (101) 247
Provision for loan losses 450 701 216 180 240
------- ------- ------- ------- -------
Allowance for loan losses at the end of the year $ 6,039 $ 5,821 $ 5,343 $ 5,197 $ 4,916
======= ======= ======= ======= =======
Ratio of net charge-offs (recoveries) to average
loans 0.06% 0.06% 0.02% (0.03)% 0.08%
Allowance for loan losses to gross loans 1.63% 1.50% 1.43% 1.46% 1.51%
The following table shows a year-end breakdown of the allowance for loan losses
allocated by loan category. While management's periodic analysis of the adequacy
of the allowance for loan losses may allocate portions of the allowance for
specific identified problem loans, the entire allowance is available for any
loan charge-offs that occur.
(in thousands of dollars) 2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Real estate $ 82 $ 38 $ 382 $ 356 $ 253
Installment & credit card 241 199 367 181 111
Commercial & industrial 4,456 3,323 2,338 2,220 1,796
Other loans 5 10 24 9 13
Unallocated 1,255 2,251 2,232 2,431 2,743
------ ------ ------ ------ ------
$6,039 $5,821 $5,343 $5,197 $4,916
====== ====== ====== ====== ======
- --------------------------------------------------------------------------------
13
Percent of loans in each category to gross loans.
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Real estate - mortgage 25% 30% 38% 45% 44%
Real estate - construction 1% 1% 2% 1% 1%
Installment & credit card 9% 12% 14% 14% 15%
Commercial & industrial 65% 57% 46% 40% 39%
Lease financing 0% 0% 0% 0% 1%
Other loans 0% 0% 0% 0% 0%
--- --- --- --- ---
100% 100% 100% 100% 100%
=== === === === ===
Management's allocation of the allowance for loan losses is based on several
factors. First, consideration is given to the current portfolio. Management has
an internal loan review function that is designed to identify problem and
impaired loans and the losses that may be expected if the borrower is unable to
continue servicing the debt. Management will use the amount of loss that is
expected on those loans. The second step is to review the prior charge-off
history of each category of loan. In this step, management will review the prior
three year average charge-offs and compare that to the expected loss identified
in the first step and will adjust the allocation accordingly. The third step is
to review any loans that have been classified by the regulatory examiners and
allocate the specific loss portion that is determined by the examiners.
At December 31, 2002 the ratio of the allowance for loan losses to total net
loans was 1.63%, and the ratio of loans 30 days or more past due and still
accruing as a percentage of total net loans was .86%. Based on these ratios, as
well as other factors, management believes the current allowance for loan losses
is adequate to absorb probable incurred credit losses.
DEPOSITS
WAYNE BANCORP, INC.
The following tables present the average deposit amounts and the rates paid on
those deposits for the last three years:
Year End December 31,
(in thousands of dollars) 2002 2001 2000
---- ---- ----
Amount:
Non-interest bearing demand $ 71,482 $ 69,229 $ 66,994
NOW and money market accounts 135,428 140,340 130,049
Savings 95,672 80,061 79,708
Time deposits 201,117 183,838 184,911
-------- -------- --------
$503,699 $473,468 $461,662
======== ======== ========
2002 2001 2000
---- ---- ----
Average rate for the year:
Non-interest bearing demand 0% 0% 0%
Interest bearing demand 1.27% 2.70% 3.76%
Savings 1.66% 2.48% 2.71%
Time deposits 4.04% 5.14% 5.45%
The maturity distribution of certificates of deposit of $100,000 or more at
December 31, 2002, are as follows (in thousands of dollars):
Three months or less $ 6,644
Over three months through six months 9,212
Over six months through twelve months 8,025
Over twelve months 19,632
-------
Total $43,513
=======
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14
RETURN ON EQUITY AND ASSETS
WAYNE BANCORP, INC.
The following table sets forth operating and capital ratios of the Company
calculated on average daily balances:
Year End December 31,
2002 2001 2000
---- ---- ----
Return on average assets 1.45% 1.50% 1.47%
Return on average equity 13.60% 14.10% 14.55%
Dividend payout ratio 37.21% 35.29% 36.21%
Average equity to average asset ratio 10.65% 10.64% 10.08%
SHORT-TERM BORROWINGS
WAYNE BANCORP, INC.
The following table represents information on federal funds purchased and
securities sold under agreements to repurchase for the last three years:
Year End December 31,
(in thousands of dollars) 2002 2001 2000
---- ---- ----
Amount outstanding at year end $29,573 $33,635 $30,540
Weighted average interest rate .88% 1.53% 5.42%
Maximum outstanding at any month-end 29,573 33,635 34,446
Average outstanding during the year 27,095 29,959 28,306
Weighted average rate during the year 1.20% 3.37% 5.30%
The Company enters into sales of securities under agreements to repurchase for
periods up to 29 days, which are treated as financing and reflected in the
consolidated balance sheet as a liability. The Company has borrowing lines of
credit, "federal funds purchased," extended by correspondent banks. At December
31, 2002 the Company had $27.0 million of available credit, of which none was
used.
The Company also obtains funding from the Federal Home Loan Bank (FHLB) of
Cincinnati. The FHLB borrowings consist of fixed rate notes, and are secured by
a blanket pledge of the Company's 1-4 family residential real estate loan
portfolio and FHLB stock. Principal balances on these borrowings were $1.3
million and $6.8 million at December 31, 2002 and 2001, and the weighted-average
interest rate on these borrowings was 6.61% and 5.01% respectively.
ITEM 2 - PROPERTIES
The executive offices of the Company, WCNB and MID are located at 112 West
Liberty Street, Wooster, Ohio, while the executive office of CVB is located at
20 South Main Street, Rittman, Ohio. However, CVB has applied for, and received
regulatory approval to relocate its headquarters to 1052 High Street, Wadsworth,
Ohio. This relocation will be effective April 1, 2003. At December 31, 2002, the
Company owned 18 of its 22 facilities and leased the remaining four, all of
which are located in the State of Ohio. The Company operates 15 offices in Wayne
County, three in Medina County, two in Stark County and two in Holmes, County.
Management believes the properties described above are in good operating
condition for the purpose for which it is used. The properties are unencumbered
by any mortgage security interest, and are in Management's opinion, adequately
insured.
ITEM 3 - LEGAL PROCEEDINGS
There is no pending litigation of a material nature in which the Company is
involved and no such legal proceedings were terminated during 2002. Furthermore,
there are no material proceedings in which any director, officer or affiliate of
the Company, or any associate of such director or officer, is a party, or has a
material interest, adverse to the Company. As a part of its ordinary course of
business, the Company may be a party to lawsuits (such as garnishment
proceedings) involving claims to the ownership of funds in particular accounts
and involving the collection of past due accounts. All such litigation is
incidental to the Company's business.
- --------------------------------------------------------------------------------
15
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the year ended December 31, 2002, there were no
matters submitted to a vote of security holders.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
Reference is made to the section entitled "Dividend and Market Price Data" on
Page 1 of the 2002 Annual Report to Shareholders for information pertaining to
the principal market for the Registrant's Common Stock, market prices, number of
shareholders and dividends, which is incorporated herein by reference. Reference
is made to Note 16, "Regulatory Matters" on page 21 of the 2002 Annual Report to
Shareholders for information concerning dividend restrictions, which is
incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
Reference is made to the table entitled "Five Year Financial Summary" on page 2
of the 2002 Annual Report to Shareholders, which is incorporated herein by
reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reference is made to the section entitled "Management Discussion and Analysis"
on pages 26 through 35 of the 2002 Annual Report to Shareholders which is
incorporated herein by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to the section entitled "Quantitative and Qualitative
Disclosures About Market Risk" on page 33 of the 2002 Annual Report to
Shareholders which is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and the Report of Independent Auditors are
included on pages 4 through 25 of the 2002 Annual Report to Shareholders, which
is incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
No changes in or disagreements with the independent accountants regarding
accounting and financial disclosures have occurred.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made on page 62 of the Registrant's Joint Proxy
Statement/Prospectus for the Annual Meeting of Shareholders to be held May 29,
2003 for information as to the directors and nominees for directorships of the
Registrant, including other directorships held by such director, or persons
nominated to become a director, of the Registrant and executive officers of the
Registrant which information is incorporated herein by reference.
- --------------------------------------------------------------------------------
16
ITEM 11 - EXECUTIVE COMPENSATION
Reference is made on page 94 of the Registrant's Joint Proxy
Statement/Prospectus for the Annual Meeting of Shareholders to be held May 29,
2003 for information regarding compensation paid in excess of $100,000 to
executive officers of the Registrant and to the Registrant's Proxy Statement
with respect to Salaried Employees Profit Sharing Plan, which is incorporated
herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made on page 100 of the Registrant's Joint Proxy
Statement/Prospectus for the Annual Meeting of Shareholders to be held May 29,
2003 for information regarding beneficial ownership of the Company's stock which
information is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made on page 102 of the Registrant's Joint Proxy
Statement/Prospectus, which is incorporated herein by reference.
ITEM 14 - CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing date of this report, an evaluation
was carried out under the supervision and with the participation of Wayne
Bancorp, Inc.'s management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934). Based on their evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that the Company's disclosure
controls and procedures are, to the best of their knowledge, effective to ensure
that information required to be disclosed by Wayne Bancorp, Inc. in reports it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms. Subsequent to the date of their evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that there were no
significant changes in Wayne Bancorp Inc.'s internal controls or in other
factors that could significantly affect its internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
- --------------------------------------------------------------------------------
17
PART IV
ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedules
The following financial statements and reports of Independent Auditors appear on
pages 4 through 25 of the Company's 2002 Annual Report to Shareholders which
financial statements are incorporated herein by reference and attached hereto:
Report of Crowe, Chizek and Company LLP, Independent Auditors Consolidated
Balance Sheets, December 31, 2002 and 2001, Consolidated Statements of Income
and Comprehensive Income, Years Ended December 31, 2002, 2001, and 2000,
Consolidated Statements of Cash Flows, Years Ended December 31, 2002, 2001, and
2000, Consolidated Statements of Shareholders' Equity, Years Ended December 31,
2002, 2001, and 2000 and the Notes to Consolidated Financial Statements.
Schedules to the consolidated financial statements required by Article 9 of
Regulation S-X are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
(3) Listing of Exhibits
Exhibit Number
3(a) Amended Articles of Incorporation of Wayne Bancorp, Inc., were filed
with the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and are incorporated herein by reference.
3(b) Wayne Bancorp, Inc., Amended Code of Regulations (Bylaws) were filed
with the Company's Annual Report on Form 10-K for the year ended
December 31, 1992 and is incorporated herein by reference.
4 The rights of security holders are contained in the Company's Articles
of Incorporation and Code of Regulations. Please see exhibits 3(a) and
3(b).
9(a) Trust Division Policy - voting own Bank stock was filed with the
Company's Annual Report on Form 10-K for the year ended December 31,
1987 and is incorporated herein by reference.
9(b) Trust Division Policy - proxy voting policy was filed with the
Company's Annual Report on Form 10-K for the year ended December 31,
1987 and is incorporated herein by reference.
10 Wayne County National Bank Salaried Employee Profit Sharing Trust was
filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1986 and is incorporated herein by reference.
10(a) Salaried Employee Profit Sharing Plan Amended effective January 1, 1987
was filed with the Company's Annual Report on Form 10-K for the year
ended December 31, 1987 and is incorporated herein by reference.
10(b) Employee Stock Ownership Plan effective on January 1, 1987 was filed
with the Company's Annual Report on Form 10-K for the year ended
December 31, 1987 and is incorporated herein by reference.
10(c) Change in Control Agreements were filed with the Company's Form 10-Q
dated September 30, 1998 and are incorporated herein by reference.
10(d) The 1999 Incentive Stock Option Plan as recommended by the Board of
Directors is filed with the Company's, 1998, Notice of Annual
Shareholders' Meeting and is incorporated herein by reference.
13 Annual Report to Shareholders for the year ended December 31, 2002.
21 Subsidiaries of the Registrant
99 Joint Proxy Statement/Prospectus
99.1 Certification of periodic financial reports
99.2 Certification of periodic financial reports
(b) Current report on Form 8-K, item 5, other events, (execution of
affiliation agreement whereby Banc Services Corp. will be merged
with and into Wayne Bancorp, Inc.), filed, December 11, 2002.
- --------------------------------------------------------------------------------
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WAYNE BANCORP, INC.
March 19, 2003 By: /s/ John A. Lende
- ---------------------------- --------------------------
Date Secretary and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
on Form 10-K has been signed below by the following persons on behalf of the
Registrant in the Capacities and on dates as indicated.
Signature Capacity with Registrant Date
--------- ------------------------ ----
/s/ James O. Basford March 19, 2003
- -----------------------------
James O. Basford Director
/s/ David P. Boyle March 19, 2003
- -----------------------------
David P. Boyle, CPA Director, President and Chief
Executive Officer of the Company
/s/ Gwenn E. Bull, CPA March 19, 2003
- -----------------------------
Gwenn E. Bull Director, Audit Chair
/s/ David L. Christopher March 19, 2003
- -----------------------------
David L. Christopher Director, Chairman of the Board,
/s/ Dennis B. Donahue March 19, 2003
- -----------------------------
Dennis B. Donahue Director
/s/ B. Diane Gordon March 19, 2003
- -----------------------------
B. Diane Gordon Director
/s/ John C. Johnston III March 19, 2003
- -----------------------------
John C. Johnston, III Director
/s/ Stephen L. Shapiro March 19, 2003
- -----------------------------
Stephen L. Shapiro Director
/s/ Jeffrey E. Smith March 19, 2003
- -----------------------------
Jeffrey E. Smith Director
/s/ Philip S. Swope March 19, 2003
- -----------------------------
Philip S. Swope Director, Vice Chairman of the Board
/s/ David E. Taylor March 19, 2003
- -----------------------------
David E. Taylor Director
/s/ Bala Venkataraman March 19, 2003
- -----------------------------
Bala Venkataraman Director
- --------------------------------------------------------------------------------
19
I, David P. Boyle, certify that:
1) I have reviewed this annual report on Form 10-K of Wayne Bancorp, Inc.;
2) Based on my knowledge, this annual 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 annual report;
3) Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual
report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures 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 annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6) The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
/s/ David P. Boyle
- ------------------
David P. Boyle
President and Chief Executive Officer
March 19, 2003
21
I, John A. Lende, certify that:
1) I have reviewed this annual report on Form 10-K of Wayne Bancorp, Inc.;
2) Based on my knowledge, this annual 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 annual report;
3) Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual
report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a. designed such disclosure controls and procedures 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 annual
report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6) The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
/s/ John A. Lende
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John A. Lende
Secretary and Treasurer
March 19, 2003
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