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FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from __________ to ____________.
Commission File Number 014612
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WAYNE BANCORP, INC
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(Exact name of registrant as specified in its charter)
Ohio 34-1516142
---- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
112 West Liberty Street, P.O. Box 757, Wooster, Ohio 44691
----------------------------------------------------------
(Address of principal executive offices)
(330) 264-1222
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
As of October 31, 2003, the latest practicable date, 6,012,388 shares of the
issuer's common shares, $1.00 stated value, were issued and outstanding.
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1.
WAYNE BANCORP, INC
INDEX
FORM 10-Q
For the Quarter Ended September 30, 2003
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets............................................................. 3
Consolidated Statements of Income
and Comprehensive Income.............................................................. 4
Condensed Consolidated Statements of Cash Flows ........................................ 5
Notes to Consolidated Financial Statements ............................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................... 15
Item 3. Quantitative and Qualitative Disclosures about
Market Risk........................................................................... 20
Item 4. Controls and procedures..................................................... 21
PART II - OTHER INFORMATION........................................................................... 22
SIGNATURES ........................................................................................... 23
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2.
WAYNE BANCORP, INC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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Item 1. Financial Statements
September 30, December 31,
2003 2002
---- ----
(In thousands)
ASSETS
Cash and due from banks $ 29,869 $ 24,508
Federal funds sold 11,783 7,130
----------- -----------
Total cash and cash equivalents 41,652 31,638
Securities available-for-sale 254,512 184,908
Loans held-for-sale 26,615 24,761
Loans 456,549 369,794
Allowance for loans (7,467) (6,039)
------------ ------------
Net loans 449,082 363,755
Premises and equipment 15,870 11,288
Goodwill 24,695 748
Other identifiable intangible assets 5,867 771
Accrued interest receivable and other assets 8,193 5,718
----------- -----------
Total assets $ 826,486 $ 623,587
=========== ===========
LIABILITIES
Deposits
Interest bearing $ 575,540 $ 442,532
Non-interest bearing 99,991 79,001
----------- -----------
Total deposits 675,531 521,533
Short-term borrowings 38,137 29,573
Federal Home Loan Bank advances and other borrowed funds 1,486 1,397
ESOP Loan 1,537 1,671
Obligated mandatory redeemable capital securities of subsidiary trust 7,217
Other liabilities 4,848 2,989
----------- -----------
Total liabilities 728,756 557,163
SHAREHOLDERS' EQUITY
Common stock, $1.00 stated value 6,246 4,917
Shares authorized - 12,000,000 in 2003 and 2002
Shares issued - 6,245,964 in 2003
4,916,911 in 2002
Paid-in capital 43,407 13,174
Retained earnings 54,284 49,897
Unearned ESOP shares, - 67,482 shares in 2003
and 71,150 in shares in 2002 (1,222) (1,390)
Treasury stock, at cost - 234,622 shares in 2003
and 135,346 shares in 2002 (7,027) (3,738)
Accumulated other comprehensive income 2,042 3,564
----------- -----------
Total shareholders' equity 97,730 66,424
----------- -----------
Total liabilities and shareholders' equity $ 826,486 $ 623,587
=========== ===========
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See accompanying notes to consolidated financial statements
3.
WAYNE BANCORP, INC
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
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Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
---- ---- ---- ----
(In thousands, except per share data)
INTEREST INCOME
Interest and fees on loans $ 8,649 $ 6,958 $ 22,509 $ 21,143
Taxable securities 1,484 1,516 4,320 4,729
Non-taxable securities 597 501 1,601 1,474
Other interest income 30 24 90 96
----------- ----------- ----------- -----------
Total interest income 10,761 8,999 28,521 27,442
----------- ----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 2,357 2,844 7,097 8,810
Interest on federal funds purchased and
repurchase agreements 64 81 175 260
Interest on Federal Home Loan Bank
advances and other borrowed funds 162 87 275 315
----------- ----------- ----------- -----------
Total interest expense 2,583 3,012 7,547 9,385
----------- ----------- ----------- -----------
NET INTEREST INCOME 8,178 5,987 20,974 18,057
Provision for loan losses 131 150 242 450
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 8,047 5,837 20,732 17,607
Other income
Service charges and fees on deposit accounts 765 572 1,885 1,598
Income from fiduciary activities 537 360 1,387 1,080
Net gain(loss) on sale of loans (125) 32 255 144
Net gain on sale of securities 146 0 146 62
Other non-interest income 370 216 866 695
----------- ----------- ----------- -----------
Total other income 1,693 1,180 4,539 3,579
----------- ----------- ----------- -----------
Other expenses
Salaries and employee benefits 3,008 2,276 8,059 6,860
Occupancy and equipment 749 511 1,972 1,521
Amortization of intangibles 157 21 216 61
Other operating expenses 1,955 1,259 4,907 3,747
----------- ----------- ----------- -----------
Total other expenses 5,869 4,067 15,154 12,189
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 3,870 2,950 10,117 8,997
Income tax expense 1,187 835 2,975 2,569
----------- ----------- ----------- -----------
NET INCOME 2,683 2,115 7,142 6,428
Other Comprehensive Income (1,861) 871 (1,522) 1,302
------------ ----------- ------------ -----------
Comprehensive Income $ 822 $ 2,986 $ 5,260 $ 7,730
=========== =========== =========== ===========
Earnings per common share - basic $ 0.43 $ 0.42 $ 1.28 $ 1.28
=========== =========== =========== ===========
Earnings per common share - diluted $ 0.43 $ 0.42 $ 1.28 $ 1.27
=========== =========== =========== ===========
Dividends per share $ 0.17 $ 0.16 $ 0.51 $ 0.49
=========== =========== =========== ===========
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See accompanying notes to consolidated financial statements
4.
WAYNE BANCORP, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine Months Ended
September 30,
2003 2002
---- ----
(In thousands)
Net cash from operating activities $ 3,517 $ 3,437
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available-for-sale
Purchases (68,768) (59,038)
Proceeds from maturities and repayments 56,068 45,356
Proceeds from sales 7,299 7,336
Net change in loans 33,662 9,579
Net cash received in merger 4,243
Purchase of premises and equipment (2,373) (1,812)
Proceeds from sales of premises 107 67
---------- ----------
Net cash from investing activities 30,238 1,488
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits (14,414) 5,416
Net change in short-term borrowings (3,238) (7,865)
Repayment of Federal Home Loan Bank advances (1,300) (3,480)
Proceeds from ESOP loan and other borrowed funds 1,401
Repayment of ESOP loan and other borrowed funds (146) (140)
Cash dividends paid (2,450) (2,157)
Treasury stock purchased (3,594) (1,811)
----------- ----------
Net cash from financing activities (23,741) (10,037)
----------- -----------
Net change in cash and cash equivalents 10,014 (5,112)
Cash and cash equivalents at beginning of period 31,638 32,713
---------- ----------
Cash and cash equivalents at end of period $ 41,652 $ 27,601
========== ==========
Supplemental disclosures of cash flow information
Cash basis payments for federal income tax purposes $ 2,670 $ 2,585
Cash basis payments for interest expense 7,356 9,655
Supplemental non-cash disclosure
Merger with BSC through issuance of common stock $ 45,883 $
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See acompanying notes to consolidated financial statements
5.
WAYNE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements are prepared without audit and reflect all
adjustments which, in the opinion of Management, are necessary to present fairly
the financial position of Wayne Bancorp, Inc. (the "Company") at September 30,
2003, and its results of operations and cash flows for the periods presented.
All such adjustments are normal and recurring in nature.
The accompanying consolidated financial statements have been prepared in
accordance with the instructions of Form 10-Q and therefore, do not purport to
contain all the necessary financial disclosures required by accounting
principles generally accepted in the United States of America that might
otherwise be necessary in the circumstances, and should be read in conjunction
with the financial statements, and notes thereto, of the Company for the year
ended December 31, 2002, included in its 2002 annual report. Refer to the
accounting policies of the Company described in the notes to the financial
statements contained in the Company's 2002 annual report. The Company has
consistently followed these policies in preparing this Form 10-Q. The selection
and application of these accounting policies involve judgments, estimates and
uncertainties that are susceptible to change.
The consolidated financial statements include the accounts of the Company, and
its wholly-owned subsidiaries Wayne County National Bank (Wayne), Savings Bank &
Trust (SBT), Access Financial Corp. (AFC) and MidOhio Data, Inc. (MID). The
financial statements of Wayne include the accounts of its wholly-owned
subsidiary, Chippewa Valley Title Agency, Inc. All significant intercompany
accounts and transactions have been eliminated in the consolidation
To prepare financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates
and assumptions based on available information. These estimates and assumptions
affect the amounts reported in the financial statements and the disclosures
provided, and future results could differ. The allowance for loan losses, fair
values of financial instruments and status of contingencies are particularly
subject to change.
Presented below are discussions of those accounting policies that management
believes are the most important (Critical Accounting Policies) to the portrayal
and understanding of the Company's financial condition and results of
operations. These Critical Accounting Policies require management's most
difficult, subjective and complex judgments about matters that are inherently
uncertain. In the event that different assumptions or conditions were to
prevail, and depending upon the severity of such changes, the possibility of
materially different financial condition or results of operations is a
reasonable likelihood.
Loans and leases are the Company's largest income earning asset category. Loans
are recorded at the amount advanced to the borrower plus certain costs incurred
by the Company to originate the loan, less certain origination fees that are
collected from the borrower. The carrying amount of loans is reduced as
principal payments are made. Payments made by the borrower are allocated between
interest income and principal payment based upon the outstanding principal
amount, the contractual rate of interest and other contractual terms. The
carrying amount is further adjusted to reflect amortization of the origination
costs net of origination fees. These items are amortized over the expected life
of the loan.
The accrual of interest income is generally discontinued (Non-Accrual Status)
when management believes that collection of principal and/or interest is
doubtful or when payment becomes 90 to 120 days past due, except for loans that
are well secured and are in a short-term, well-defined process of collection.
Payments received from the borrower after a loan is placed on Non-Accrual Status
are applied to reduce the principal balance of the loan until such time that
collectibility of remaining principal and interest is no longer doubtful.
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6.
WAYNE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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Management periodically reviews the loan and lease portfolio in order to
establish an estimated allowance for loan and lease losses (Allowance) that are
probable as of the respective reporting date. Additions to the Allowance are
charged against earnings for the period as a provision for loan and lease losses
(Provision). Actual loan and lease losses are charged against (reduce) the
Allowance when management believes that the collection of principal will not
occur. Unpaid interest for the current year for loans that are placed on
Non-Accrual Status is reversed against the interest income previously
recognized. Subsequent recoveries of amounts previously charged to the
Allowance, if any, are credited to (increase) the Allowance.
The Allowance is regularly reviewed by management to determine whether or not
the amount is considered adequate to absorb probable losses. If not, an
additional Provision is made to increase the Allowance. This evaluation includes
specific loss estimates on certain individually reviewed loans, statistical loss
estimates for loan groups or pools that are based on historical loss experience
and general loss estimates that are based upon the size, quality, and
concentration characteristics of the various loan portfolios, adverse situations
that may affect a borrower's ability to repay, and current economic and industry
conditions, among other things. The Allowance is also subject to periodic
examination by regulators whose review includes a determination as to its
adequacy to absorb potential losses.
Those judgments and assumptions that are most critical to the application of
this accounting policy are the initial and on-going credit-worthiness of the
borrower, the amount and timing of future cash flows of the borrower that are
available for repayment of the loan, the sufficiency of underlying collateral,
the enforceability of third-party guarantees, the frequency and subjectivity of
loan reviews and risk gradings, emerging or changing trends that might not be
fully captured in the historical loss experience, and charges against the
Allowance for actual losses that are greater than previously estimated. These
judgments and assumptions are dependent upon or can be influenced by a variety
of factors including the breadth and depth of experience of lending officers,
credit administration and the corporate loan review staff that periodically
review the status of the loan, changing economic and industry conditions,
changes in the financial condition of the borrower and changes in the value and
availability of the underlying collateral and guarantees.
While the Company strives to reflect all known risk factors in its evaluations,
judgment errors may occur. If different assumptions or conditions were to
prevail, the amount and timing of interest income and loan and lease losses
could be materially different. These factors are most pronounced during economic
downturns. Since, as described above, so many factors can affect the amount and
timing of losses on loans and leases it is difficult to predict, with any degree
of certainty, the affect on income if different conditions or assumptions were
to prevail. Nonetheless, if any combination of the above judgments or
assumptions were to adversely affect the adequacy of the Allowance by ten
percent, an additional Provision of approximately $747 thousand would be
necessary.
The Company recognizes as separate assets the rights to service mortgage loans
for others. Mortgage servicing rights, that are retained when mortgage loans are
sold, are recorded as income at the time the loans are sold. Because it is
retained as an asset, the amount allocated to mortgage servicing rights will
have a favorable impact on the amount of gain or loss that is recognized on the
sale of the loans.
The mortgage servicing rights asset is amortized over the projected period of
and in proportion to the estimated amount of net servicing income. Amortization
of the servicing rights asset will reduce the amount of income that is recorded
in the respective period from the servicing of the mortgage loans. Each
reporting period, the Company re-evaluates the fair value of its remaining
mortgage servicing rights assets. The amount that the carrying amount of
mortgage servicing rights exceeds the new estimate of fair value is charged
against earnings for the period.
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7.
WAYNE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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The periodic re-evaluation of fair value is based upon current estimates of the
remaining net servicing cash flows that incorporate numerous assumptions
including the cost of servicing the loans, prepayment rates and default rates.
This re-evaluation is done by stratifying servicing rights assets into pools
based upon the original sale date of the loans, analyzing prepayment speed and
historical amortization.
Judgments and assumptions that are most critical to the application of this
accounting policy are the prepayment speeds that will determine the amount and
period of servicing revenue that is expected to be earned, estimated costs to
service the loans and estimated interest earned on amounts collected for real
estate tax and property insurance premiums that are held in escrow until payment
is due. These assumptions are based upon actual performance of the underlying
loans and the general market consensus regarding changes in mortgage and other
interest rates. For example, declining mortgage interest rates typically result
in accelerated mortgage prepayments, which tend to shorten the life and reduce
the value of the servicing rights asset.
If different assumptions and conditions were to prevail, materially different
amortization and valuation allowances than those that were recorded may be
required. Since, as described above, so many factors can affect the value of
mortgage servicing rights it is difficult to predict, with any degree of
certainty, the affect on income if different conditions or assumptions were to
prevail. Nonetheless, if any combination of the above judgments or assumptions
were to adversely affect their value by an additional ten percent, an additional
impairment charge of approximately $118 thousand would be necessary.
Income tax expense is based on the effective tax rate expected to be applicable
for the entire year. Income tax expense is the sum of current-year income tax
due or refundable and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are expected future tax amounts for the
temporary differences between carrying amounts and tax basis of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized.
Basic earnings per common share is net income divided by the weighted average
number of common shares outstanding during the period. Employee Stock Option
Plan ("ESOP") shares are considered outstanding for this calculation unless
unearned. Diluted earnings per common share includes the additional potential
common shares issuable under stock options. Earnings and dividends per share are
restated for all stock splits and dividends through the issue of the financial
statements.
Newly Issued But Not Yet Effective Accounting Standards
FASB recently issued two new accounting standards, Statement 149, Amendment to
Statement 133 on Derivative Instruments and Hedging Activities, and Statement
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equities, both of which generally become effective in the
quarter beginning July 1, 2003. The new standards will not materially affect the
Company's operating results or financial condition.
In January 2003, FASB issued Interpretation No. 46. This Interpretation provides
guidance for the consolidation of variable interest entities (VIEs) and requires
such entities to be consolidated by their primary beneficiaries if the entities
do not effectively disperse risk among parties involved. The consolidation
requirements apply for the first period beginning after September 15, 2003 for
VIEs existing
before February 1, 2003. The adoption of this interpretation is not expected to
have a significant impact on the Company's financial condition or results of
operations. However, there are uncertainties associated with regulatory capital
treatment of Trust Preferred Securities. The Federal Reserve indicated they will
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8.
WAYNE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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review the regulatory treatment of such securities but will currently continue
to allow including the securities in Tier 1 capital and if warranted will
provide further guidance. If Trust Preferred Securities were to be disallowed
for Tier 1 treatment, the regulatory capital amount may be materially impacted.
Employee compensation expense under stock options is reported using the
intrinsic value method. No stock-based compensation cost is reflected in net
income, as all options granted had an exercise price equal to or greater than
the market price of the underlying common stock at date of grant. The following
table illustrates the effect on net income and earnings per share if expense was
measured using the fair value recognition provisions of FASB Statement No. 123,
Accounting for Stock-Based Compensation.
Three months ended Nine months ended
September, 30 September 30,
(dollars in thousands except per share data) 2003 2002 2003 2002
- -------------------------------------------------------------------------------------------------------
Net income as reported $ 2,683 $ 2,115 $ 7,142 $ 6,428
Deduct: Stock based compensation expense
determined under fair value based method (21) (56) (64) (169)
----------- ---------- -------- ----------
Pro forma net income $ 2,662 $ 2,059 7,078 6,259
Basic earnings per common share as reported 0.43 0.42 1.28 1.28
Pro forma basis earnings per common share 0.43 0.41 1.27 1.24
Diluted earnings per common share as reported 0.43 0.42 1.28 1.27
Proforma diluted earnings per common share 0.42 0.41 1.26 1.24
The proforma effects above are computed using option pricing models, and
weighted-average assumptions. The assumptions used for stock options granted
during 2002 is as follows:
Risk Free Expected
Fair Value Interest Expected Expected Stock Price
Date of Grant of Options Rate Life Dividends Volatility
- ------------- ---------- ---- ---- --------- ----------
April 11, 2002 5.93 3.84 7.5 years 2.96 26.20
December 6, 2002 5.93 3.84 7.5 years 2.96 26.20
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9.
WAYNE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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NOTE 2 - SECURITIES
During the three and nine months ended September 30, 2003, proceeds from the
sale of securities were $7.3 million, with gross realized gains of $153 thousand
and gross realized losses of $7 thousand included in earnings. During the nine
months ended September 30, 2002 proceeds from the sale of securities were $7.3
million, with gross realized gains of $64 thousand and gross realized losses of
$2 thousand included in earnings. There were no sales of securities during the
three months ended September 30, 2002.
Securities available-for-sale were as follows:
Gross Gross
Fair Unrealized Unrealized
Value Gains Losses
----- ----- ------
(In thousands)
September 30, 2003
------------------
U.S. Treasury $ 5,100 $ 87 $
Federal Agency Obligations 99,615 952 (195)
Federal Agency Pools 38,378 328 (149)
Obligations of state and
political subdivisions 92,373 2,127 (619)
Corporate Obligations 14,779 393
Other securities 4,267 179 (9)
----------- ----------- ------------
Total $ 254,512 $ 4,066 $ (972)
=========== =========== ============
Gross Gross
Fair Unrealized Unrealized
Value Gains Losses
----- ----- ------
(In thousands)
December 31, 2002
-----------------
U.S. Treasury $ 7,243 $ 227 $
Federal Agency Obligations 61,843 1,515
Federal Agency Pools 24,170 783
Obligations of state and
political subdivisions 63,505 2,188
Corporate Obligations 24,749 720
Other securities 3,398 72 (101)
----------- ----------- -----------
Total $ 184,908 $ 5,505 $ (101)
========== =========== ===========
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10.
WAYNE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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NOTE 3 - LOANS
Loans are comprised of the following:
September 30, December 31,
2003 2002
---- ----
(In thousands)
Commercial $ 289,360 $ 242,124
Real estate 72,488 75,686
Consumer installment 63,721 34,301
Home equity 29,379 17,397
Direct lease financing 570 787
Credit card and other 1,625 115
------------ ------------
Gross loans 457,143 370,410
Less: Net deferred loan fees (559) (547)
Unearned income on leases (35) (69)
------------- ------------
Total loans $ 456,549 $ 369,794
============ ============
Impaired loans were as follows:
September 30, December 31,
2003 2002
---- ----
Period-end loans with no allocated allowance for loan losses $ 0 $ 0
PERIOD-END LOANS WITH ALLOCATED ALLOWANCE FOR LOAN LOSSES 1,190 1,502
---------- --------------
Total $ 1,190 $ 1,502
---------- --------------
Amount of the allowance for loan losses allocated $ 0 $ 510
---------- --------------
Non-performing loans were as follows:
Loans past due over 90 days and accruing interest $ 1,906 $ 334
Non-accrual loans 972 1,042
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11.
WAYNE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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NOTE 4 - EARNINGS PER COMMON SHARE
The factors used in the earnings per common share are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
---- ---- ---- ----
Basic
Net income $ 2,683,000 $ 2,115,000 $ 7,142,000 $ 6,428,000
Weighted average common
shares outstanding 6,313,286 5,093,387 5,631,609 5,119,194
Less: Average unallocated ESOP shares (69,995) (77,942) (72,527) (80,181)
------------ ----------- ------------ -----------
Average shares 6,243,291 5,015,445 5,559,082 5,039,013
=========== =========== =========== ===========
Basic earnings per common share $ 0.43 $ 0.42 $ 1.28 $ 1.28
=========== ========== =========== ===========
Diluted
Net income $ 2,683,000 $ 2,115,000 $ 7,142,000 $ 6,428,000
Weighted average shares outstanding
for basic earnings per common share 6,243,291 5,015,445 5,559,082 5,039,013
Add: Dilutive effects of assumed
exercise of stock options 40,628 13,001 37,168 12,050
----------- ----------- ----------- -----------
Average shares and dilutive
Potential common shares 6,283,919 5,028,446 5,596,250 5,051,063
=========== =========== =========== ===========
Diluted earnings per common share $ 0.43 $ 0.42 $ 1.28 $ 1.27
=========== ========== =========== ===========
Stock options for 35,192 shares of common stock were not considered in computing
diluted earnings per common share for three and nine months ended September 30,
2003 and stock options for 50,715 shares of common stock and 54,705 shares of
common stock were not considered in computing diluted earnings per common share
for the three and nine months ended September 30, 2002 because they were
antidilutive.
On November 3, 2003, the Company announced the declaration of a 5% stock
dividend. The stock dividend is payable to shareholders of record on December 5,
2003, and will be paid on December 26, 2003. All earnings and dividends per
share data have been adjusted accordingly, and reflects increases in common
shares outstanding, unallocated ESOP shares and stock options.
NOTE 5 - OBLIGATED MANDATORY REDEEMABLE SECURITIES
In connection with the acquisition of Banc Services Corp. (BSC) discussed in
Note 6, the Company assumed mandatory redeemable capital securities with a par
and fair value of $7.0 million at a floating rate of 5.50%. These securities
were issued through a special purpose entity as part of a pooled offering. The
Company may redeem them, in whole but not in part, any time prior to 2007 at a
price of 107.50% of face value. After 2007, the securities may be redeemed at
face. They count as Tier 1 capital for regulatory purposes.
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12.
WAYNE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
- --------------------------------------------------------------------------------
NOTE 6 -MERGER
On May 31, 2003, the Company completed the merger of Banc Services Corp., (BSC)
which was announced December 11, 2002. BSC merged with and into the Company and
BSC's subsidiaries, The Savings Bank and Trust Company and Access Financial
Corp. survived the merger.
The Company issued 1,329,053 shares of common stock valued at approximately
$32.1 million, plus cash of $13.8 million, while cash of $7 thousand was paid
for fractional shares. Total assets of BSC prior to the merger were $210.0
million, including $123.0 million in loans and $166.8 million in deposits. The
transaction was recorded as a purchase and, accordingly, the operating results
of BSC have been included in the Company's consolidated financial statements
since the date of the merger. The aggregate of the purchase price over the fair
value of the net assets, or goodwill, acquired of approximately $23.9 million
will be evaluated for impairment on an annual basis. The core deposit intangible
of approximately $4.9 million is expected to be amortized over a period of ten
years. As a result of the merger, management believes that the combination of
the companies is a complimentary strategic fit of the existing businesses and
enables Wayne Bancorp, Inc. to compete more effectively with other financial
institutions in the Company's existing markets. In addition the Company entered
into the merger for the following reasons:
- expands market area and increases assets
- expected to be accretive to per share earnings
- increases liquidity for the sale of common stock
- provides the foundation for further growth and selling opportunities
- provides opportunities to consolidate functions and increase efficiencies
The following table summarizes the fair value of the assets acquired and
liabilities assumed at the date of acquisition.
(dollars in thousands) May 31, 2003
------------
Cash and federal funds sold $ 18,495
Investment securities 68,431
Loans net 119,231
Goodwill 23,947
Core deposit intangible 4,881
Other assets 5,283
--------
Total assets acquired 240,268
--------
Deposits $168,412
Other borrowed funds 22,203
Other liabilities 3,770
--------
Total liabilities assumed 194,385
--------
Net assets acquired $ 45,883
========
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13.
WAYNE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
- -------------------------------------------------------------------------------
The following summarizes pro forma financial information for the three and nine
months ended September 30, 2003 and 2002, assuming the BSC Merger occurred as of
January 1, 2002. Merger related expenses are included in the 2003 results below.
Three months ended Nine months ended
September 30, September 30,
(dollars in thousands except per share data) 2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------
Net interest income $ 8,178 $ 7,111 $ 25,365 $ 24,578
Net income 2,683 2,432 7,585 8,759
Basic earnings per share $ .43 $ .40 $ 1.22 $ 1.43
Diluted earnings per share .43 .40 1.21 1.43
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14.
WAYNE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
- -------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis
INTRODUCTION
The following discusses the financial condition as of September 30, 2003, as
compared to December 31, 2002 and the results of operations for the three and
nine months ended September 30, 2003 and the same periods in 2002. This
discussion should be read in conjunction with the interim financial statements
and footnotes included herein.
FORWARD-LOOKING STATEMENTS
When used in this document, the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimated," "projected" or
similar expressions are intended to identify "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties, including changes in
economic conditions in the Company's market area, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in the
Company's market area and competition that could cause actual results to differ
materially from the historical earnings and those presently anticipated or
projected. Factors listed above could affect the Company's financial performance
and could cause the Company's actual results to differ materially from any
statements expressed with respect to future periods.
The Company does not undertake, and specifically disclaims any obligation, to
publicly revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
LIQUIDITY
The main objectives of asset/liability management are to provide adequate
liquidity and to minimize interest rate risk. Liquidity is the ability to meet
cash flow needs, which in the banking industry, refers to the Company's ability
to fund customer borrowing needs as well as deposit withdrawals. The Company's
primary source of liquidity is from overnight federal funds sold and securities
available-for-sale. In addition, other assets such as cash and due from banks
and maturing loans also provide additional sources of liquidity. At September
30, 2003, the amount of cash and due from banks and securities and loans with
scheduled maturities and or repricing within the next three months was
approximately $255 million. The Company continues to keep a balance between
short and long-term investment securities that will provide adequate liquidity
and maximize earnings. Based on the Company's capital position, profitability
and reputation, the available liquidity sources are considered adequate to meet
the current and projected needs of the Company.
CAPITAL
The Company's capital adequacy is a primary concern in our industry, and is
measured by several key ratios. A long-standing measure of capital adequacy is
the percentage of shareholders' equity to total assets. At September 30, 2003,
the Company's equity-to-asset ratio adjusted by the impact of accumulated other
comprehensive income was 11.6% compared to 10.1% at December 31, 2002.
Regulators of the banking industry focus primarily on two other measurements of
capital - the risk-based capital ratio and the leverage ratio. The risk-based
capital ratio consists of a numerator of allowable capital components and a
denominator of an accumulation of risk-weighted assets. With a significant
portion of the Company's investment securities portfolio in government related
low risk categories and a fair amount of the loan portfolio in one-to-four
family mortgage loans with a 50% risk assessment, the risk- based capital ratio
is 14.6% at September 30, 2003, and 16.5% at December 31, 2002. This compares to
a required minimum of 10% to be considered well capitalized.
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15.
WAYNE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
The regulators require a minimum leverage capital ratio of 5% to be considered
well capitalized. The leverage ratio is calculated as equity capital less
certain intangible assets divided by total assets less the same intangible
assets. At September 30, 2003, and December 31, 2002, the ratios were 9.1% and
10.2% respectively.
The Company's deposit insurance premiums which are paid to the Federal Deposit
Insurance Corporation (FDIC) are based, in part, on these capital ratios. The
FDIC considers a bank "adequately capitalized" if the capital ratios are: Total
risk-based equity 8%, Tier 1 risk-based 4% and a leverage ratio of 4%. The FDIC
considers a bank "well capitalized" with comparable capital ratios of 10%, 6%
and 5%. The Company and bank subsidiaries are considered "well capitalized" and
therefore are subject to the lowest deposit insurance premiums available.
Management is not aware of any matters subsequent to September 30, 2003 that
would cause the Company's capital category to change.
FINANCIAL CONDITION
The total assets of the Company increased by $202.9 million or 32.5% from
December 31, 2002 to September 30, 2003. Earning assets increased by $162.9
million, which includes an increase of $74.3 million in securities and federal
funds sold and an increase in loans of $88.6 million. This asset growth was
funded by an increase of $169.7 million increase in deposits and borrowed funds
as well a $31.3 million increase in shareholders equity. These increases are
primarily the result of the acquisition of Banc Services Corp, (BSC) on May 31,
2003. BSC had assets of $240.3 million at May 31, 2003, including net loans of
$119.2 million, investments and federal funds sold of $82.7 million, deposits of
$168.4 million and shareholders equity of $45.9 million.
Total loans at September 30, 2003 were $456.5 million, which is an increase of
$86.8 million from total loans of $369.8 million at December 31, 2002. This
increase is primarily related to the acquisition of BSC, which added $121.8
million of loans. This change includes an increase in commercial loans of $47.2
million, consumer installment loans of $29.4 million, home equity of $12.0
million, credit card and other of $1.3 million, while mortgage loans decreased
by $3.2 million. The Company's focus continues to be in the commercial loan
area, however due to the weak economic conditions loan demand has slowed in this
area, a trend that management expects to continue throughout the remainder of
the year. Although mortgage loan volume has been strong due to the low rates on
residential mortgage loans, the balance has declined due to the continued
refinance activity and loan sales that has occurred during the first nine months
of this year. The increase in consumer installment loans is due to the addition
of $32.4 million of loans from SBT and $6.3 million of loans from AFC, a
consumer finance company. This addition from SBT is due to their strong presence
in the in-direct automobile market, which has allowed SBT to grow their
portfolio despite the low rates and incentives being offered by the auto
manufacturers. Home equity loans continue to grow due to the strong housing
market, low interest rates, and borrowers taking advantage of the equity
available in their homes. Management anticipates that overall loan growth will
be hampered during the fourth quarter of the year as a result of prolonged weak
economic conditions, uncertainty in the financial markets and the slow pace of
the economic recovery.
As of September 30, 2003, the Company had $26.6 million of one-to-four family
residential mortgage loans classified as held-for-sale, compared to $24.8
million at December 31, 2002. Through September 30, 2003 the Company sold $37.3
million of mortgage loans into the secondary market. Loans classified as held
for sale, are those 15 and 30 year fixed rate mortgage loans, that were
originated within the preceding 12 months. Management considers the sale of
loans into the secondary market based on overall portfolio composition, interest
rate risk and liquidity.
Based on current economic conditions, and trends in the financial markets
management expects interest rates to remain stable during the second half of
2003, with expectations rates will rise in the next twelve to eighteen months.
Rate increases, which usually signal signs of a stronger economy and higher
inflation,
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16.
WAYNE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
- -------------------------------------------------------------------------------
impact rates offered on various loan and deposit products. Most susceptible are
the variable rate products that change based on various indices, such as the
prime rate of interest and treasury rates.
Total securities available-for-sale increased by $69.6 million through the third
quarter of 2003, while federal funds sold increased by $4.7 million. This
increase in securities is primarily due to investing the proceeds from the
mortgage loan sales into short-term securities, as well as the acquisition of
BSC. As these securities mature it is anticipated that the proceeds will be used
to fund future growth in the loan portfolio, or reinvested into similar
securities.
Total deposits have increased by $154.0 million for the period ended September
30, 2003, including deposits from BSC of $168.4. Total deposits, excluding the
merger, have declined by $12.7 million since December 31, 2002. This decline was
primarily in certificates of deposit, and were non-core deposits based on the
volatility of the funds. These deposits were from local municipalities who
withdrew their funds as a result of pricing. As these entities routinely move
deposits between financial institutions based on pricing and balance
limitations, management does not believe this decline will be an ongoing trend.
Despite the net decline in deposits the Company has experienced an increase in
savings accounts due to economic uncertainties and the weak financial markets.
The Company has also experienced a slight change in its deposit mix. Savings
accounts have increased, while certificates, money market, NOW and transaction
accounts have declined proportionately. Management believes that the increase in
savings accounts and the shift in the deposit mix is a result of the current
rate environment, as the incentive to invest long-term has diminished due to the
low rate differential between products, and investors' preference to stay liquid
to take advantage of rising interest rates in the future. Management is also
aware that this growth in savings accounts and the shift in the deposit mix may
cause margin and liquidity pressure in the future as expectations are that a
portion of these customers will withdrawal their funds and invest them in the
equity markets, and a portion will shift back into higher yielding certificates.
To monitor these trends management analyzes rates paid on deposits within its
market area on a weekly basis to ensure the Company's rates on similar products
are competitive in order to both grow and retain these deposits. Management
continues its long-term focus on growing its core deposit base to facilitate
asset growth and meet loan demand.
Short-term borrowings, which consists of securities sold under agreements to
repurchase and federal funds purchased, increased by $8.6 million for the nine
months ended September 30, 2003, of which substantially all the increase was
from the acquisition of BSC.
Federal Home Loan Bank (FHLB) advances and other borrowed funds remained
relatively unchanged from December 31, 2002, showing a slight increase of $89
thousand during the first nine months of 2003. This increase is primarily due to
line of credit advances from a correspondent bank, which the Company has used to
fund the current share buyback program, offset by the repayment of the FHLB
advance that existed at December 31, 2003. The Company considers FHLB advances
to be an alternative funding source to core deposit growth and primarily
structures these advances to fund loans with similar repayment characteristics.
RESULTS OF OPERATIONS
Net income was $7.1 million for the first nine months of 2003 compared to $6.4
million for the same period in 2002. Basic earnings per common share for the
nine months ended September 30, 2003 and 2002 was $1.28 per share, while diluted
earnings per share was $1.28 and $1.27 per share respectively. Dividends were
$.51 per share for the first nine months of 2003 and $.49 per share for the same
period in 2002.
For the three months ended September 30, 2003, net income was $2.7 million, or
$.43 per share, with dividends paid of $.17 per share. This compares to net
income of $2.1 million, or $.42 per share, with dividends paid of $.16 per share
for the three months ended September 30, 2002.
- -------------------------------------------------------------------------------
17.
WAYNE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Total interest income for the nine months ended September 30, 2003 was $28.5
million, which increased $1.1 million, or 3.9%, from the $27.4 million earned in
the comparable period last year. This increase in interest income is primarily
due to the merger with BSC, as the Company continues to experience downward
pressure on asset yields as a result of the prolonged low interest rate
environment. As the Federal Open Market Committee (FOMC) has reduced rates
thirteen times over the past three years, the "benchmark" federal funds rate
remains at historic lows. And as the prime rate of interest tends to move in
conjunction with the federal funds rate, the prime rate of interest of 4.00%
remains at its lowest level in over 40 years. The Company prices commercial and
industrial loans as well as home equity loans on the prime rate of interest,
therefore fluctuations in this index will cause an increase or decrease in total
interest income. Total interest income for the three months ended September 30,
2003 was $10.8 million, which increased $1.8 million, or 19.6%, compared to $9.0
million for the same three month period one year ago. This increase is due to
the interest income added by SBT and AFC, offset by the repricing that has
occurred since last year.
Total earning assets were $749.5 million and $567.8 million at September 30,
2003 and September 30, 2002. The increase in earning assets is due to an
increase of $92.8 million in securities and federal funds sold and an increase
of $88.8 million in loan balances. The weighted average interest rate earned on
these assets has decreased from 6.41% at September 30, 2002 to 5.96% at
September 30, 2003.
Total interest bearing liabilities at September 30, 2003 and 2002 were $623.9
and $463.2 million respectively. The weighted average interest rate paid for
these liabilities has decreased from 2.69% at September 30, 2002 to 1.85% at
September 30, 2003.
The net effect of the changes in interest earning assets and interest bearing
liabilities, combined with the repricing that has occurred since September 30,
2002, caused an increase in net interest income of $2.9 million, or 16.2%, for
the nine months ended September 30, 2003, and an increase in net interest income
of $2.2 million, or 36.6% for the three months ended September 30, 2003.
The provision for loan losses was $242 thousand for the nine month period ending
September 30, 2003 compared to $450 thousand for the same period in 2002, while
the ratio of the allowance for loan losses to total loans was 1.54% for both
periods. Total charge-offs for the nine months ended September 30, 2003 were
$1.6 million compared to $404 thousand in the same period last year. The
increase in the actual charge-offs was primarily due to the Company charging off
two commercial loans, for $953 thousand that were previously classified as
impaired. As SBT and AFC are strategically focused to conduct a larger volume of
consumer installment and in-direct dealer loans it is anticipated that the
Company's total charge-offs will be higher than has been reported in prior
periods. The decrease in the provision is largely due to a decline in pre-merger
loan balances coupled with no significant change in the amount of non-performing
loans. The provision for loan losses for the three months ended September 30,
2003 was $131 thousand, compared to $150 thousand, for the same three-month
period in 2002. Total charge-offs for the three months ended September 30, 2003
were $896 thousand compared to $53 thousand for the same period last year. The
decrease in the provision is substantially the same as that for the full nine
months. Given the make-up of the loan portfolio, and considering past due loans,
charge-off and recovery history as well as economic conditions, Management
considers the allowance for loan losses to be adequate and sufficient to cover
probable incurred credit losses.
Total other income increased by $960 thousand, or 26.8%, for the nine months
ended September 30, 2003 compared to the same period one year ago. Service
charges and fees on deposits increased by $287 thousand, or 18.0%, primarily due
to the increased fees from SBT. Trust revenues increased $307 thousand, or
28.4%, due TO increased fees generated from the Trust division. Net gains on
loans sales have increased by $111 thousand, or 70.1%, due to a more favorable
rate environment and a $5.2 million increase in loans sold. Net gains on the
sale of securities increased by $84 thousand, or 135.5%, from the prior period
due to the lower rate environment, which increased the value of the portfolio.
Other non-interest income has
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18.
WAYNE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
- -------------------------------------------------------------------------------
increased by $171 thousand, or 24.6%, due in part to the merger with BSC as well
as an increase in revenue from CVT.
Total other income increased by $513 thousand, or 43.5%, for the three months
ended September 30, 2003 compared to the same period one year ago. Service
charges on deposits increased by $193 thousand, Trust earnings increased by $177
thousand, net gains on the sale of loans decreased by $157 thousand, net gains
on the sale of securities increased by $146 thousand and other miscellaneous
income increased by $154 thousand. Although the Company has experienced an
increase in net gains on loan sales for the full year, loan sales during the
three months ended September 30, 2003 generated a net loss of $125 thousand. Due
to the volatility in the interest rate environment and the rapid rise of the
10-year treasury, which reached its yearly high during the third quarter the
value of the loans held for sale deteriorated and a portion was sold to prevent
further losses. As these loans are marked to market each quarter management
elected to sell these loans and reinvest the proceeds into similar assets rather
than risk further deterioration. The remaining changes were substantially the
same as those for the nine months ended September 30, 2003
Total other expenses increased by $3.0 million, or 24.3%, for the nine months
ended September 30, 2003 compared to the same period in 2002. Salaries and
employee benefits increased by $1.2 million, or 17.5%, from $6.9 million at
September 30, 2002 to $8.1 million at September 30, 2003. This increase is due,
in part, to the acquisition of BSC, annual salary adjustments that are made each
year in order to maintain compensation at a level that will attract and retain
employees, as well as an increase in expenses related to retirement benefits,
and health insurance costs. Occupancy and equipment expense increased $450
thousand, or 30.0%, from $1.5 million at September 30, 2002 to $2.0 million at
September 30, 2003. These increases were primarily attributed to increased
expenses related to building and equipment maintenance and repairs as well as
depreciation. Amortization of intangibles increased $155 thousand, or 254.1%,
from $61 thousand at September 30, 2002, to $216 thousand at September 30, 2003
as a result of the core deposit intangible that was recorded as a result of the
merger. Other non-interest expenses increased $1.2 million, or 30.9%, from $3.7
million at September 30, 2002 to $4.9 million at September 30, 2003. Increases
in this area were noted in substantially all expense items as a result of the
merger with BSC.
Total other expenses for the three months ended September 30, 2003, increased by
$1.8 million, or 44.3%, from $4.1 million at September 30, 2002 to $5.9 million
at September 30, 2003. Salaries and employee benefits increased by $732
thousand, occupancy and equipment expense increased $238 thousand, intangible
amortization increased by $136 thousand and other non-interest expenses
increased $136 thousand. The increase in these areas is substantially the same
as that for the full nine months ended September 30, 2003.
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19.
WAYNE BANCORP, INC.
QUANTITATIVE AND QUALITATIVE MEASURES ABOUT MARKET RISK
- -------------------------------------------------------------------------------
Item 3. Quantitative and qualitative disclosures about market risk.
ASSET AND LIABILITY MANAGEMENT AND MARKET RISK
The Company's primary market risk exposure is interest rate risk and, to a
lesser extent, liquidity risk. The Company does not maintain a trading account
for any class of financial instruments and the Company is not affected by
foreign currency exchange rate risk or commodity price risk. Because the Company
does not hold any equity securities other than stock in the FHLB of Cincinnati
and an insignificant investment in other equity securities, the Company is not
subject to equity price risk.
Interest rate risk is the risk that the Company's financial condition will be
adversely affected due to movements in interest rates. The Company, like other
financial institutions, is subject to interest rate risk to the extent that its
interest-earning assets reprice differently than its interest-bearing
liabilities. The income of financial institutions is primarily derived from the
excess of interest earned on interest-earning assets over the interest paid on
interest-bearing liabilities. One of the Company's principal financial
objectives is to achieve long-term profitability while reducing its exposure to
fluctuations in interest rates. Accordingly, the Company places great importance
on monitoring and controlling interest rate risk.
There are several methods employed by the Company to monitor and control
interest rate risk. One such method is using a "GAP" analysis. The GAP is
defined as the repricing variance between rate sensitive assets and rate
sensitive liabilities within certain periods. The repricing can occur due to
changes in rates on variable rate products as well as maturities of
interest-earning assets and interest-bearing liabilities. A high ratio of
interest sensitive liabilities, generally referred to as a negative GAP, tends
to benefit net interest income during periods of falling interest rates as the
average rate paid on interest-bearing liabilities declines faster than the
average rate earned on interest-earning assets. The opposite holds true during
periods of rising interest rates. The Company attempts to minimize the interest
rate risk through management of the GAP in order to achieve consistent
shareholder return. Based on loan demand and funding needs, Management attempts
to manage the GAP position by adjusting maturities and rates on deposit products
accordingly. Another strategy used by the Company is to originate variable rate
loans tied to market indices. Such loans reprice on an annual, quarterly,
monthly or daily basis as the underlying market index changes. Currently,
approximately 60% of the Company's loan portfolio is written as variable rate.
The Company also invests excess funds in liquid federal funds that mature and
reprice on a daily basis. The Company also maintains all of its securities in
the available-for-sale portfolio to take advantage of interest rate fluctuations
and to maintain liquidity for loan funding and deposit withdrawals.
THE COMPANY'S 2002 ANNUAL REPORT PROVIDES A TABLE WHICH DETAILS INFORMATION
ABOUT THE COMPANY'S FINANCIAL INSTRUMENTS THAT ARE SENSITIVE TO CHANGES IN
INTEREST RATES AS OF DECEMBER 31, 2002. THE TABLE IS BASED ON INFORMATION AND
ASSUMPTIONS SET FORTH IN THE NOTES. THE COMPANY BELIEVES THE ASSUMPTIONS
UTILIZED ARE REASONABLE. FOR LOANS, SECURITIES AND LIABILITIES WITH CONTRACTUAL
MATURITIES, THE TABLE REPRESENTS PRINCIPAL CASH FLOWS AND THE WEIGHTED-AVERAGE
INTEREST RATE. FOR VARIABLE RATE LOANS, THE CONTRACTUAL MATURITY AND
WEIGHTED-AVERAGE INTEREST RATE WAS USED WITH AN EXPLANATORY FOOTNOTE AS TO
REPRICING PERIODS. FOR LIABILITIES WITHOUT CONTRACTUAL MATURITIES SUCH AS DEMAND
AND SAVINGS DEPOSIT ACCOUNTS, A DECAY RATE WAS UTILIZED TO MATCH THEIR MOST
LIKELY WITHDRAWAL BEHAVIOR. MANAGEMENT BELIEVES THAT NO EVENTS HAVE OCCURRED
SINCE DECEMBER 31, 2002 THAT WOULD SIGNIFICANTLY CHANGE THE RATIO OF RATE
SENSITIVE ASSETS TO RATE SENSITIVE LIABILITIES FOR THE GIVEN TIME HORIZONS.
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20.
WAYNE BANCORP, INC.
CONTROLS AND PROCEDURES
- --------------------------------------------------------------------------------
Item 4. Controls and Procedures
As of the end of the period covered by this quarterly 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). 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 the Company's reports that 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 the Company's
internal controls or in other factors that could significantly affect its
internal controls.
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21.
WAYNE BANCORP, INC
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31.1
31.2
32.1
32.2
(b) Reports on Form 8-K
1. Current Report on Form 8-K dated April 17, 2003, announcing
first quarter financial results of Wayne Bancorp, Inc.
2. Current Report on Form 8-K dated May 31, 2003, announcing the
merger of Banc Services Corp. into Wayne Bancorp, Inc. effective
May 31, 2003.
3. Current Report on Form 8-K dated July 21, 2003, announcing
second quarter financial results of Wayne Bancorp, Inc.
4. Current Report on Form 8-K dated October 17, 2003, announcing
third quarter financial results of Wayne Bancorp, Inc.
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22.
WAYNE BANCORP, INC
SIGNATURES
- -------------------------------------------------------------------------------
Pursuant to the requirement of the Securities Exchange Act of 1934, the small
business issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 14, 2003 \s\ David P. Boyle
----------------- ------------------
David P. Boyle
President and Chief Executive Officer
Date: November 14, 2003 \s\ John A. Lende
----------------- -----------------
John A. Lende
Secretary and Treasurer
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23.