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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, 2003
[ ] 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.
-------------------
(Exact name of registrant as specified in its charter)
OHIO 34-1516142
---- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
112 West Liberty Street,
PO Box 757, Wooster, Ohio 44691
- ---------------------------------------
(Address of principal executive offices) (Zip code)
(330) 264-1222
--------------
(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]
Indicate by check mark whether the registrant is an accelerated filer (as
defined by 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, 2003:
Common Stock $1.00 stated value $168,965,660
The number of shares outstanding of the issuer's classes of common stock as of
February 29, 2004:
Common Stock $1.00 stated value 6,305,591
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
2003 and portions of the Registrant's Proxy Statement for the Annual
Shareholders Meeting to be held May 13, 2004 are incorporated by reference into
Parts I, II and III.
TABLE OF CONTENTS
WAYNE BANCORP, INC.
FORM 10-K
PAGE
----
PART I
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...................................... 17
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
ITEM 9A. Controls and Procedures.................................................................. 17
PART III
ITEM 10. Directors and Executive Officers of the Registrant....................................... 18
ITEM 11. Executive compensation................................................................... 18
ITEM 12. Security ownership of certain beneficial owners and management........................... 18
ITEM 13. Certain relationships and related transactions........................................... 18
ITEM 14. Principal accounting fees and services................................................... 18
PART IV
ITEM 15. Exhibits, financial statement schedules and reports on Form 8-K.......................... 18
EXHIBIT INDEX ......................................................................................... 19
SIGNATURES ......................................................................................... 20
2
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
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 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 for future periods 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.
GENERAL DEVELOPMENT OF BUSINESS:
Wayne Bancorp, Inc. is a multi-bank holding company. On May 31, 2003, Wayne
Bancorp, Inc. completed a merger with Banc Services Corp. (BSC). The
shareholders of BSC received 1.391 shares of Company stock plus $14.40 in cash
for each share of BSC stock owned. The merger was accounted for under the
purchase method of accounting. As a result of the merger, BSC's banking
subsidiary, The Savings Bank and Trust Company was merged into Chippewa Valley
Bank, and renamed Savings Bank & Trust, while Access Financial Corp., a consumer
finance company survived the merger. The Company's bank subsidiaries, Wayne
County National Bank (WCNB) and Savings Bank & Trust (SBT), conduct general
commercial and retail banking business. The Company's non-bank affiliates
MidOhio Data, Incorporated (MID) performs proof operations and data processing
for the bank affiliates, while Chippewa Valley Title Agency, Inc. (CVT) a
wholly-owned subsidiary of WCNB, performs services related to title insurance
for the bank subsidiaries, and Access Financial Corp. (AFC) is a consumer
finance company. 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, 2003.
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
3
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.
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 2003, 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 67%, 68% and 72% of consolidated revenues in
2003, 2002 and 2001, respectively. Revenues from interest and dividends on
investment securities, federal funds sold and mortgage-backed securities
accounted for 18%, 20% and 17% of consolidated revenues in 2003, 2002 and 2001,
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.
4
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 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 "SOX." The stated goals of the SOX 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 SOX is the most far-reaching U.S. securities legislation enacted in some
time. The SOX 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 SOX's new requirements, the final scope of these requirements
remains to be determined.
The SOX 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 SOX 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 SOX 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
5
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.
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, 2003 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
6
the plan. As of December 31, 2003, 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.
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.
7
Employees
As of December 31, 2003, the Company had 300 full time employees and 43 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.
Availability of Financial Information
The Company files unaudited quarterly financial reports on form 10-Q, annual
reports on form 10-K, current reports on form 8-K and amendments to these
reports filed or furnished pursuant to 13(a) or 15(d) of the Securities Exchange
Act of 1934 with the Securities and Exchange Commission (SEC). Copies of these
reports are available free of charge at the SEC website, www.sec.gov or by
writing to: John A. Lende, Secretary and Treasurer, Wayne Bancorp, Inc., PO Box
757, Wooster, Ohio 44691.
Financial reports and other materials filed by the Company with the SEC may also
be read and copied at the SEC's Public Reference Room at 450 Fifth Street NW,
Washington, D.C. 20549. Information on the operation if the Public Reference
Room may be obtained by the SEC by calling 1-800-SEC-0330.
Statistical Information
The following tables and certain tables appearing in Item 7, Managements
Discussion & Analysis, (MDA) which incorporates the annual report, present
additional statistical information about the Company and its operations and
financial condition. They should be read in conjunction with the consolidated
financial statements and related notes and the discussion included in Item 7,
MDA and Item 7A, Quantitative and Qualitative Disclosures about Market Risk.
8
The following table sets forth, for the years ended December 31, 2003, 2002 and
2001, the distribution of assets, liabilities and shareholders' equity,
including interest amounts and average rates earned and paid on major categories
of interest earning assets and interest bearing liabilities:
Year ended December 31,
------------------------------------------------------------------------------------------
2003 2002 2001
----------------------------- ----------------------------- ----------------------------
Average Average Average
Daily Yield/ Daily Yield/ Daily Yield/
(in thousands of dollars) Balance Interest rate balance Interest rate balance Interest rate
---------- --------- ------ ---------- --------- ------ ---------- -------- ------
ASSETS
Interest-earning assets:
Loans (including fees)(1) $ 448,249 $ 30,499 6.80% $ 391,692 $ 28,058 7.16% $ 398,071 $ 33,127 8.32%
Securities: (2)
Taxable 164,764 5,961 3.62 127,027 6,185 4.87 100,299 5,814 5.80
Tax-exempt (3) 60,350 3,438 5.70 46,635 2,973 6.38 38,097 2,791 7.33
Federal funds sold 9,145 114 1.25 7,561 129 1.71 7,778 312 4.01
---------- --------- ------ ---------- --------- ------ ---------- -------- ------
Total interest-earning assets $ 682,508 $ 40,012 5.86% $ 572,915 $ 37,345 6.52% $ 544,245 $ 42,044 7.73%
Non-earning assets 59,774 32,767 31,722
---------- ---------- ----------
Total assets $ 742,282 $ 605,682 $ 575,967
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW and money market accounts $ 134,757 $ 1,053 .78% $ 135,428 $ 1,716 1.27% $ 140,340 $ 3,793 2.70%
Savings 153,640 1,655 1.08 95,672 1,589 1.66 80,061 1,983 2.48
Time deposits 231,025 6,590 2.85 201,117 8,126 4.04 183,838 9,444 5.14
Short term and other borrowed funds 37,493 527 1.41 34,207 715 2.09 37,735 1,451 3.85
Subordinated debentures 4,231 163 3.85
---------- --------- ------ ---------- --------- ------ ---------- -------- ----
Total interest-bearing liabilities $ 561,146 $ 9,988 1.78% $ 466,424 $ 12,146 2.60% $ 441,974 $ 16,671 3.77%
Noninterest-bearing liabilities 95,774 74,724 72,709
---------- ---------- ----------
Total liabilities 656,920 541,148 514,683
Shareholders' equity 85,362 64,534 61,284
---------- ---------- ----------
Total liabilities & shareholders'
equity $ 742,282 $ 605,682 $ 575,967
========== ========== ==========
Net interest income $ 30,024 $ 25,199 $ 25,373
========= ========= ========
Net interest spread 4.08% 3.92% 3.96%
====== ====== ======
Net interest margin 4.40% 4.40% 4.66%
====== ====== ======
(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 35% tax rate for 2003, and 34% for 2002 and 2001.
9
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.
2003 vs. 2002 2002 vs. 2001
------------- -------------
Increase(Decrease)(1) Increase(Decrease)(1)
(in thousands of dollars) Volume Rate Net Volume Rate Net
-------- --------- -------- -------- -------- ---------
Interest Income:
Loans $ 3,902 $ (1,461) $ 2,441 $ (523) $ (4,546) $ (5,069)
Securities:
Taxable 1,584 1,808) (224) 1,394 (1,023) 371
Non-taxable (2) 769 (356) 413 574 (392) 182
Federal funds sold 24 (39) (15) (8) (175) (183)
-------- --------- -------- -------- -------- ----------
Total Interest Income 6,279 (3,664) 2,615 1,437 (6,136) (4,699)
Interest Expense:
Now and money market accounts (8) (655) (663) (128) (1,949) (2,077)
Savings 746 (680) 66 339 (733) (394)
Time deposits 1,091 (2,627) (1,536) 830 (2,148) (1,318)
Short term and other borrowed funds 63 (251) (188) (125) (611) (736
Subordinated debentures 163 0 163 0 0 0
-------- --------- -------- -------- -------- ---------
Total Interest Expense 2,055 (4,213) (2,158) 916 (5,441) (4,525)
-------- --------- -------- -------- -------- ---------
Net Interest Income $ 4,224 $ 549 $ 4,773 $ 521 $ (695) $ (174)
======== ========= ======== ======== ======== =========
(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 35% tax rate for 2003, and 34% for 2002 and
2001.
10
SECURITIES
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) 2003 2002 2001
----------- ----------- -----------
By type:
U.S. Treasury and other U.S.
Government Agency Obligations $ 123,381 $ 69,086 $ 62,874
Mortgage-backed securities 45,562 24,170 12,207
States and political subdivisions 84,376 63,505 56,031
Other 19,039 28,147 33,986
----------- ----------- -----------
Total $ 272,358 $ 184,908 $ 165,098
=========== =========== ===========
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, 2003 (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 $ 14,245 4.78% $ 96,975 2.55%
Mortgage-backed securities 1 6.50 11,553 4.23
States and political subdivisions 11,613 4.11 38,198 3.37
Other 8,439 6.66 5,399 3.41
---------- ----- ---------- ----
$ 34,298 5.02% $ 152,125 2.91%
========== ===== ========== ====
Five to Ten Years Over Ten Years
Carrying Carrying
Value Yield Value Yield
---------- ----- ---------- -----
U.S. Treasury and other U.S.
Government Agency Obligations $ 12,161 2.43% $ 0 0.00%
Mortgage-backed securities 29,701 3.88 4,307 3.33
States and political subdivisions 29,829 3.23 4,736 4.02
Other 0 0.00 5,201 4.06
---------- ----- ---------- ----
$ 71,691 3.36% $ 14,244 3.83%
========== ===== ========== ====
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, 2003.
11
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) 2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- ----------
Real estate - mortgage $ 103,479 $ 93,083 $ 117,654 $ 143,032 $ 160,021
Real estate - construction 3,908 1,055 2,612 6,352 4,575
Installment & credit card 62,349 34,301 44,544 52,819 48,411
Commercial & industrial 279,198 241,069 222,131 171,389 141,929
Lease financing 422 787 1,175 1,869 2,549
Other Loans 444 115 201 227 107
----------- ----------- ----------- ----------- ----------
Gross loans 449,800 370,410 388,317 375,688 357,592
Less: Net deferred loan fees (482) (547) (672) (622) (792)
Unearned income on leases (27) (69) (161) (226) (297)
----------- ----------- ----------- ----------- ----------
Total loans $ 449,291 $ 369,794 $ 387,484 $ 374,840 $ 356,503
=========== =========== =========== =========== ==========
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 2003
is included on page 39 of the 2003 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, 2003 are as follows (in thousands of dollars):
Maturity (1)
Within 1 to 5 After 5
1 Year Years Years Total
----------- ----------- ----------- -----------
Commercial and industrial $ 69,519 $ 78,582 $ 106,099 $ 254,110
Commercial real estate 1,846 8,125 15,117 25,088
Real estate - construction 3,908 0 0 3,908
----------- ----------- ----------- -----------
Total $ 75,273 $ 86,707 $ 121,126 $ 283,106
=========== =========== =========== ===========
Fixed rate loans $ 19,252 $ 44,507 $ 5,170 $ 68,929
Variable rate loans 56,021 42,200 115,956 214,177
----------- ----------- ----------- -----------
Total $ 75,273 $ 86,707 $ 121,126 $ 283,106
=========== =========== =========== ===========
(1) Based on scheduled principal repayments
The following table summarizes past due and non-accrual loans:
(in thousands of dollars) 2003 2002 2001 2000 1999
-------- -------- -------- ------ ------
Accruing loans past due 90
days or more $ 1,063 $ 334 $ 217 $ 226 $ 182
Non-accrual loans 1,233 1,042 800 0 0
-------- -------- -------- ------ ------
$ 2,296 $ 1,376 $ 1,017 $ 226 $ 182
======== ======== ======== ====== ======
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.
12
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, 2003, Management has identified, and classified, $5.3 million
of loans as impaired. These loans consist primarily of commercial loans of which
$5.2 million is classified as substandard while $191 thousand is classified as
doubtful. Management continues to monitor these loans closely and has allocated
$821 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.
At December 31, 2003 there were $6.1 million of loans that were graded
substandard that did not have a specific reserve and were not included in the
tables above.
There were no foreign loans outstanding at December 31, 2003, 2002 or 2001.
As of December 31, 2003, 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, 2003, 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.
13
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) 2003 2002 2001 2000 1999
---------- ---------- ---------- --------- ----------
Allowance for loan losses
at the beginning of the year $ 6,039 $ 5,821 $ 5,343 $ 5,197 $ 4,916
Allowance acquired through acquisition 2,529
Loans charged off:
Real estate 89 6 0 0 0
Installment & credit card 1,121 424 372 179 259
Commercial & industrial 1,130 35 49 55 2
---------- ---------- ---------- --------- ----------
Total Loans Charged Off 2,340 465 421 234 261
Recoveries on loans charged off:
Real estate 2 2 0 0 0
Installment & credit card 298 218 190 131 144
Lease financing 0 0 0 0 5
Commercial & industrial 130 13 8 33 213
---------- ---------- ---------- --------- ----------
Total recoveries 430 233 198 164 362
---------- ---------- ---------- --------- ----------
Net loans charged off (recoveries) 1,910 232 223 70 (101)
Provision for loan losses 514 450 701 216 180
---------- ---------- ---------- --------- ----------
Allowance for loan losses at the end of the year $ 7,172 $ 6,039 $ 5,821 $ 5,343 $ 5,197
========== ========== ========== ========= ==========
Ratio of net charge-offs (recoveries) to average
loans 0.43% 0.06% 0.06% 0.02% (0.03)%
Allowance for loan losses to gross loans 1.60% 1.63% 1.50% 1.43% 1.46%
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) 2003 2002 2001 2000 1999
---------- ---------- ---------- --------- ----------
Real estate $ 418 $ 82 $ 38 $ 382 $ 356
Installment & credit card 982 241 199 367 181
Commercial & industrial 5,772 4,456 3,323 2,338 2,220
Other loans 0 5 10 24 9
Unallocated 0 1,255 2,251 2,232 2,431
---------- ---------- ---------- --------- ----------
$ 7,172 $ 6,039 $ 5,821 $ 5,343 $ 5,197
========== ========== ========== ========= ==========
During 2003, Management refined the processes used to allocate the allowance for
loan losses. These refinements resulted in the reallocation of the portion of
the reserve deemed unallocated to specific loan portfolios.
14
Percent of loans in each category to gross loans.
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Real estate - mortgage 23% 25% 30% 38% 45%
Real estate - construction 1% 1% 1% 2% 1%
Installment & credit card 14% 9% 12% 14% 14%
Commercial & industrial 62% 65% 57% 46% 40%
Lease financing 0% 0% 0% 0% 0%
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, 2003 the ratio of the allowance for loan losses to total net
loans was 1.60%, and the ratio of loans 30 days or more past due and still
accruing as a percentage of total net loans was 1.25%. Based on these ratios,
Managements analysis of the allowance for loan losses, and 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) 2003 2002 2001
----------- ---------- -----------
Amount:
Non-interest bearing demand $ 89,739 $ 71,482 $ 69,229
NOW and money market accounts 134,757 135,428 140,340
Savings 153,640 95,672 80,061
Time deposits 231,025 201,117 183,838
----------- ---------- -----------
$ 609,161 $ 503,699 $ 473,468
=========== ========== ===========
2003 2002 2001
----- ----- -----
Average rate for the year:
Interest bearing demand .78% 1.27% 2.70%
Savings 1.08% 1.66% 2.48%
Time deposits 2.85% 4.04% 5.14%
The maturity distribution of certificates of deposit of $100,000 or more at
December 31, 2003, are as follows (in thousands of dollars):
Three months or less $ 15,360
Over three months through six months 11,829
Over six months through twelve months 5,386
Over twelve months 23,491
-----------
Total $ 56,066
===========
15
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,
2003 2002 2001
------ ------ ------
Return on average assets 1.26% 1.45% 1.50%
Return on average equity 10.99% 13.60% 14.10%
Dividend payout ratio 41.32% 37.21% 35.29%
Average equity to average asset ratio 11.50% 10.65% 10.64%
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) 2003 2002 2001
--------- ---------- ----------
Amount outstanding at year end $ 39,451 $ 29,573 $ 33,635
Weighted average interest rate .60% .88% 1.53%
Maximum outstanding at any month-end 41,865 29,573 33,635
Average outstanding during the year 34,853 27,095 29,959
Weighted average rate during the year .66% 1.20 3.37%
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, 2003 the Company had $33.0 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. There were no principal balances on these borrowings
at December 31, 2003, while there were $1.3 million at December 31, 2002 with a
weighted-average interest rate of 6.61%. 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 SBT is located at
1052 High Street, Wadsworth, Ohio and the executive office of AFC is located at
31 Massillon Marketplace Dr., Massillon, Ohio. At December 31, 2003, the Company
owned 23 of its 29 facilities and leased the remaining six, all of which are
located in the State of Ohio. The Company operates 18 facilities in Wayne
County, of which two are unoccupied, four in Medina County, five 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 2003. 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.
16
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the year ended December 31, 2003, 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" in
the 2003 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" in the 2003 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" in the
2003 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"
in the 2003 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" in the 2003 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 in the 2003 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.
ITEM 9A - CONTROLS AND PROCEDURES
The Chief Executive Officer and the Chief Financial Officer of the Company have
carried out an evaluation of the effectiveness of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act)) as of December
31, 2003. Based on that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that, as of December 31, 2003 the Company's
disclosure controls and procedures are effective for the purposes set forth in
the definition thereof in Exchange Act Rule 13a-15(e). There were no significant
changes (including corrective actions with regard to significant deficiencies
and material weaknesses) in the Company's internal controls, during the quarter
ended December 31, 2003, or in other factors that could significantly affect
internal controls subsequent to the date of their most recent evaluation.
17
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made in the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held May 13, 2004 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.
On January 21, 2004, the Company's Board of Directors adopted a written code of
ethics for its senior financial officers, which includes the Company's Chief
Executive Officer, Chief Financial Officer and Controller. The code of ethics as
adopted and approved has been attached herein as exhibit 14.
The Board of Directors of the Company has determined that the Registrant has an
audit committee financial expert. The audit committee financial expert is Ms.
Gwenn E. Bull, CPA, she servers as the audit committee chairperson, and is also
independent.
ITEM 11 - EXECUTIVE COMPENSATION
Reference is made in the section pertaining to Executive Compensation and Other
Information in the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held May 13, 2004 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 in the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held May 13, 2004 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 in the section entitled Section 16(a) Beneficial Ownership
Reporting Compliance in the Registrant's Proxy Statement, which is incorporated
herein by reference.
ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES
Reference is made in the section pertaining to the Audit Committee Report in the
Registrant's Proxy Statement, which is incorporated herein by reference
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 in
the Company's 2003 Annual Report to Shareholders which financial statements are
incorporated herein by reference and attached hereto:
Report of Crowe Chizek and Company LLC, Independent Auditors Consolidated
Balance Sheets, December 31, 2003 and 2002, Consolidated Statements of Income
and Comprehensive Income, Years Ended December 31, 2003, 2002, and 2001,
Consolidated Statements of Cash Flows, Years Ended December 31, 2003, 2002, and
2001, Consolidated Statements of Shareholders' Equity, Years Ended December 31,
2003, 2002, and 2001 and the Notes to Consolidated Financial Statements.
18
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, 2003.
14 Registrants Code of Ethics for Senior Financial Officers
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
31.1 Rule 13a - 14(a)/15d - 14(a) Certification of Chief Executive Officer
31.2 Rule 13a - 14(a)/15d - 14(a) Certification of Chief Financial Officer
32.1 Section 1350 Certifications
32.2 Section 1350 Certifications
(b) Current report on Form 8-K, item 12, operations and financial
condition, (announcing the financial results for the third quarter
ended September 30, 2003), filed October 17, 2003.
19
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 17, 2004 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 17, 2004
- ----------------------------
James O. Basford Director
/s/ David P. Boyle March 17, 2004
- ----------------------------
David P. Boyle, CPA Principal Executive Officer/
Director, Chairman, President and Chief
Executive Officer of the Company
/s/ Gwenn E. Bull, CPA March 17, 2004
- ----------------------------
Gwenn E. Bull Director, Audit Chair
/s/ David L. Christopher March 17, 2004
- ----------------------------
David L. Christopher Director
/s/ Dennis B. Donahue March 17, 2004
- ----------------------------
Dennis B. Donahue Director
/s/ B. Diane Gordon March 17, 2004
- ----------------------------
B. Diane Gordon Director
/s/ John C. Johnston III March 17, 2004
- ----------------------------
John C. Johnston, III Director
/s/ John A. Lende March 17, 2004
- ----------------------------
John A. Lende Principal Financial Officer/
Secretary and Treasurer
of the Company
/s/ Victor Schantz March 17, 2004
- ----------------------------
Victor Schantz Director
/s/ Stephen L. Shapiro March 17, 2004
- ----------------------------
Stephen L. Shapiro Director
/s/ Jeffrey E. Smith March 17, 2004
- ----------------------------
Jeffrey E. Smith Director
/s/ Philip S. Swope March 17, 2004
- ----------------------------
Philip S. Swope Director, Vice Chairman of the Board
20
SIGNATURES CONTINUED
/s/ David E. Taylor March 17, 2004
- ----------------------------
David E. Taylor Director
/s/ Richard Wagner March 17, 2004
- ----------------------------
Richard Wagner Director
/s/ Bala Venkataraman March 17, 2004
- ----------------------------
Bala Venkataraman Director
21