UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended March 31, 1998
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
--------------- -----------------
Commission file number 20691
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WAYNE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3424621
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1195 Hamburg Turnpike, Wayne, New Jersey 07474
----------------------------------------------
(Address of principal executive offices) (Zip Code)
(973) 305-5500
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all the 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. X Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 2,013,124 shares of the Registrant's common stock outstanding as of
May 12, 1998.
FORM 10-Q
Index
PART 1 -- FINANCIAL INFORMATION
Item 1. Financial Statements. Page(s)
Consolidated Statements of Financial Condition as of
March 31, 1998 and December 31, 1997........................ 3
Consolidated Statements of Income for the Three Months
ended March 31, 1998 and 1997............................... 4
Consolidated Statements of Cash Flows for the Three
Months ended March 31, 1998 and 1997........................ 5
Notes to Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 7-12
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings........................................... 13
Item 2. Changes in Securities....................................... 13
Item 3. Defaults Upon Senior Securities............................. 13
Item 4. Submission of Matters to a Vote of Security Holders......... 13
Item 5. Other Information........................................... 13
Item 6. Exhibits and Reports on Form 8-K............................ 14
Signature Page.............................................. 15
2
Item 1. Financial Statements.
WAYNE BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
(Unaudited)
March 31, December 31,
1998 1997
---------- ------------
Assets:
Cash and due from banks $ 1,466 $ 1,577
Interest-bearing deposits in other banks 3,943 1,868
Federal funds sold -- 3,400
---------- ---------
Total cash and cash equivalents 5,409 6,845
Securities available for sale 68,688 73,413
Securities held to maturity, (estimated market value $2,302
and $2,882 in 1998 and 1997, respectively) 2,318 2,913
Loans receivable, net 187,185 178,932
Premises and equipment, net 3,331 3,318
Real estate owned, net 223 80
Federal Home Loan Bank of New York stock, at cost 2,150 2,150
Interest and dividends receivable 1,659 1,897
Other assets 1,044 495
---------- ---------
Total assets $ 272,007 $ 270,043
========= =========
Liabilities and Stockholders'Equity:
Deposits $ 203,532 $198,479
Federal Home Loan Bank advances 32,000 32,000
Advance payments by borrowers for taxes and insurance 876 914
Other liabilities 1,067 4,706
---------- ---------
Total liabilities 237,475 236,099
---------- ---------
Stockholders' Equity:
Preferred stock, $0.01 par value, 2,000,000 shares authorized, none issued -- --
Conunon stock, $0.01 par value, 8,000,000 shares authorized, 2,231,383 shares
issued and 2,013,124 shares outstanding at March 31, 1998 and 2,231,383
issued and 2,013,823 outstanding at December 31, 1997 22 22
Paid-in capital 21,460 21,264
Retained earnings, substantially restricted 19,920 19,623
Treasury stock at cost, 218,259 shares at March 31, 1998 and 217,560
shares at December 31 , 1997 (4,433) (4,417)
Unallocated common stock held by the ESOP (1,560) (1,604)
Common stock held by the MRP (1,205) (1,262)
Accumulated other comprehensive income-
Net unrealized gain on securities available for sale 328 318
---------- ---------
Total stockholders' equity 34,532 33,944
---------- ---------
Total liabilities and stockholders' equity $ 272,007 $ 270,043
========= =========
See accompanying notes to consolidated financial statements.
3
WAYNE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months
Ended
March 31,
----------------------
1998 1997
-------- ---------
Interest income:
Loans $3,516 $2,894
Securities available for sale 1,223 1,426
Securities held to maturity 27 44
Short tenti and other investments 61 69
------ ------
Total interest income 4,827 4,433
------ ------
Interest expense:
Deposits 2,043 1,799
Federal Home Loan Bank advances 540 455
------ ------
Total interest expense 2,583 2,254
------ ------
Net interest income before provision for loan losses 2,244 2,179
Provision for loan losses 70 125
------ ------
Net interest income after provision for loan losses 2,174 2,054
------ ------
Other income:
Loan fees and service charges 77 60
Gain on sale of real estate owned - 50
Other 98 73
------ ------
Total other income 175 183
Other expenses:
Compensation and employee benefits 848 614
Occupancy 113 96
Equipment 55 40
Data processing services 80 70
Advertising 26 37
Federal insurance premiums 30 6
Real estate owned operations 15 3
Other 532 525
------ ------
Total other expenses 1,699 1,391
------ ------
Income before income tax expense 650 846
Income tax expense 255 342
------ ------
Net income $ 395 $ 504
====== ======
Basic earnings per share $ .22 $ 0.25
====== ======
Basic weighted average shares 1,804 1,995
====== ======
Diluted earnings per share $ 0.22 $ 0.27
====== =======
Diluted weighted average shares 1,824 1,882
====== =======
See accompanying notes to consolidated financial statements.
4
WAYNE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
-------------------------
1998 1997
----------- -------------
(Dollars in thousands)
Cash flows from operating activities:
Net income $ 395 $ 504
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses and real estate owned 75 125
Depreciation and amortization 58 45
Net (accretion) of discounts and amortization of premiums 30 26
Decrease (increase) in deferred loan fees 9 (84)
Decrease in interest and dividends receivable 238 300
(Increase) in other assets (430) (50)
(Decrease) increase in other liabilities (3,636) 506
Gain on sale of real estate owned - 50
--------- -------
Net cash (used in) provided by operating activities (3,261) 1,422
--------- -------
Cash flows from investing activities:
Calls of securities available for sale 2,500 -
Purchases of securities available for sale (300) (27)
Principal repayments on securities held to maturity 584 243
Principal repayments on securities available for sale 2,509 1,629
Net increase in loans receivable (7,974) (7,476)
Purchase of loans (488) -
Additions to premises and equipment (71) (101)
Purchase of Federal Home Loan Bank stock - (235)
--------- -------
Net cash used in investing activities (3,240) (5,967)
--------- -------
Cash flows from financing activities:
Net increase in deposits 5,053 1,955
(Decrease) increase in advance payments by borrowers for taxes and insurance (38) 72
Dividends paid (101) (107)
ESOP shares allocated 110 76
Amortization of MRP 57 -
Purchase of treasury stock (16) (1,248)
--------- -------
Net cash provided by financing activities 5,065 748
--------- -------
Net decrease in cash and cash equivalents (1,436) (3,797)
Cash and cash equivalents at beginning of period 6,845 6,943
--------- -------
Cash and cash equivalents at end of period $ 5,409 $ 3,146
========= =======
Supplemental information:
Cash paid during the period for:
Interest $ 2,043 $ 2,255
========= =======
Taxes $ 261 $ -
========= =======
Transfer of loans receivable to real estate owned $ 147 $ -
========= =======
See accompanying notes to consolidated financial statements.
5
Wayne Bancorp, Inc.
Notes to Consolidated Financial Statements
March 31, 1998
(Unaudited)
Note 1 - Basis of presentation
---------------------
The accompanying unaudited consolidated financial statements include the
accounts of Wayne Bancorp, Inc. ("Company") and its wholly-owned subsidiaries,
Wayne Savings Bank, F.S.B. ("Bank") and its subsidiaries as of March 31, 1998
and December 31, 1997 and for the three month periods ended March 31, 1998 and
1997, respectively, and the Company's newly formed subsidiary, Wayne Ventures,
Inc. as of March 31, 1998 and for the three month period ended March 31, 1998.
Material intercompany accounts and transactions have been eliminated in
consolidation. The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management all necessary adjustments,
consisting only of normal recurring accruals necessary for a fair presentation
have been included. The results of operations for the three-month period ended
March 31, 1998 are not necessarily indicative of the results that may be
expected for the entire calendar year or any other period. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements for the year ended December 31, 1997, and the notes
thereto.
Note 2 - Organization of the Holding Company and conversion to stock form of
ownership
----------------------------------------------------------------------
Wayne Bancorp, Inc. was organized for the purpose of acquiring all of the
capital stock of the Bank that was issued in the conversion from a federally
chartered mutual savings bank to a stock savings bank pursuant to a Plan of
Conversion (Conversion) via the issuance of common stock. On June 27, 1996, the
Company completed an initial public offering. The offering resulted in the sale
of 2,231,383 shares of common stock which, after giving effect to offering
expenses of $1.3 million and 178,511 shares issued to the Bank's tax qualified
Employee Stock Ownership Plan (ESOP), resulted in net proceeds of $21.0 million.
Pursuant to the Conversion, the Bank transferred all of its outstanding shares
to the Company. The Bank may not declare or pay cash dividends or repurchase any
of its shares of common stock if the effect of these would cause equity to be
reduced below applicable regulatory capital maintenance requirements or if such
declaration and payment would otherwise violate regulatory requirements.
Note 3 - Earnings per share
------------------
For purposes of calculating basic earnings per share, the weighted average
number of common shares, for the quarter ended March 31, 1998 and 1997 was
1,803,725 and 1,994,865, respectively. Diluted weighted average shares included
common stock equivalents of 20,309 and 112,710 at March 31, 1998 and 1997,
respectively. The diluted weighted average number of common shares, for the
quarter ended March 31, 1998 and 1997 was 1,824,034 and 1,882,164, respectively.
6
Note 4 - Comprehensive income
--------------------
During the first quarter of 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards for reporting and display
of comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. This Statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. This Statement requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. In accordance with the provisions of SFAS 130
for interim period reporting, the Company's total comprehensive income for the
three months ended March 31, 1998 and 1997 was $405,000 and $101,000. The
difference between the Company's net income and total comprehensive income for
these periods relates to the change in the net unrealized gains on securities
available for sale during the applicable period of time.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial condition
- -------------------
General
- -------
Wayne Bancorp, Inc. is the holding company for Wayne Savings Bank, F.S.B. a
federally chartered stock savings bank. The Bank converted from a mutual to a
stock savings bank on June 27, 1996 in conjunction with the issuance of the
Bank's capital stock to the Company. The Company also owns all of the capital
stock of Wayne Ventures, Inc.
Assets
- ------
Total assets increased $2.0 million or 0.7% to $272.0 million at March 31, 1998
from $270.0 million at December 31, 1997 due primarily to an $8.3 million
increase in loans receivable, net from $178.9 million at December 31, 1997 to
$187.2 million at March 31, 1998. Such increase was partially offset by a
decrease in cash and cash equivalents of $1.4 million or 21.0% to $5.4 million
at March 31, 1998 from $6.8 million at December 31, 1997. The Company also
experienced a decrease of $5.3 million in securities held to maturity and
securities available for sale, which was the result of principal repayments and
prepayments. Also contributing to this decrease was the call of a $2.5 million
available for sale security in the quarter ended March 31, 1998.
Loan originations during the quarter ended March 31, 1998 totalled $22.7 million
(comprised of $6.0 million of residential one-to four-family mortgage loans,
$5.6 million of home equity loans, $5.9 million of commercial real estate loans,
$1.1 million of multi-family loans, $1.5 million of investment in a joint
venture, $935,000 of construction loans, $1.6 million of commercial business
7
loans and $73,000 of consumer loans.) The Company's newly formed subsidiary,
Wayne Ventures, Inc., entered into a joint venture to construct and market 14
single family homes in the Township of Wayne, New Jersey. During the first
quarter of 1998, principal repayments and prepayments on loans totalled $14.9
million. During the same quarter of 1997, loan originations totalled $12.4
million and principal repayments and prepayments totalled $4.7 million.
Liabilities
- -----------
Deposits increased by $5.1 million between December 31, 1997 and March 31, 1998
due to interest credited of $2.1 million, and an excess of deposits over
withdrawals of $3.0 million.
Other liabilities decreased $3.6 million and is primarily the result of the
payment, in January 1998, for the purchase of a $4.0 million Federal Farm Credit
Banks note, at a rate of 6.1%, that was recorded in December 1997.
Non performing loans and allowance for loan losses
- --------------------------------------------------
Non performing loans at March 31, 1998 and March 31, 1997 were as follows:
1998 1997
------------------
(Dollars in thousands)
Loans delinquent 90 days or more and other non-
performing loans $2,213 $2,084
Loans delinquent 90 days or more and other non-
performing loans as a percentage of total loans
outstanding 1.17% 1.34%
Allowance for loan losses as a percent of
nonperforming loans 101.22% 91.84%
The following table sets forth the changes in the allowance for loan losses for
the three months ended March 31, 1998 and 1997:
1998 1997
------------------
(Dollars in thousands)
Balance at beginning of period $2,170 $1,789
8
Provision for losses 70 125
------ ------
Balance at end of period $2,240 $1,914
====== ======
Asset/liability management
- --------------------------
Management's strategy has been to operate as a community oriented financial
institution by offering a variety of financial services to meet the needs of the
communities it serves while maintaining capital in excess of regulatory
requirements and monitoring the sensitivity of the Company's assets and
liabilities to interest rate fluctuations. The Board of Directors has sought to
accomplish these goals by: (i) attracting and maintaining low-cost savings and
transaction accounts, as well as money market accounts, which management
believes provide the Company with a stable source of funds; (ii) focusing its
lending on the origination of one- to four-family, owner-occupied residential
mortgage loans, including home equity loans; (iii) supplementing its one- to
four-family residential lending activities with commercial business, commercial
real estate, multi-family, construction and consumer loans and most recently
entering into a single joint venture, in accordance with the Company's
underwriting guidelines; (iv) purchasing short-to-intermediate term investment
and mortgage-backed securities to complement the Company's lending activities;
(v) emphasizing shorter-term loans and investments and adjustable rate assets
when market conditions permit; and (vi) controlling growth.
As part of management's review of its assets and liabilities, the Company
considers the interest sensitivity of its assets and liabilities and targets
what it believes to be an acceptable level of risk based on the Company's
business focus, operating environment, capital and liquidity requirements, and
performance objectives. Management seeks to reduce the vulnerability of the
Company's operating results to changes in interest rates and to manage the ratio
of interest rate sensitive assets to interest rate sensitive liabilities within
specified maturities or repricing periods. The Company does not currently engage
in trading activities or use off-balance sheet derivative instruments to control
interest rate risk. Even though trading activities or use of off-balance sheet
derivative instruments may be permitted with the approval of the Board of
Directors, management does not intend to engage in such activities in the
immediate future.
In managing the Company's assets and liabilities, the Company has taken certain
actions to decrease the sensitivity of its assets and liabilities to
fluctuations in interest rates. A significant component of the Company's
operating strategy has been to maintain its interest rate spread by maintaining
a core deposit base. The Company has sought to maintain and attract new deposits
by pricing its deposits competitively, but generally not among the highest
interest rates in its market area, and relying on personalized customer service
and advertising. The Company maintains a core deposit base while employing this
strategy.
At March 31, 1998, total interest- bearing liabilities maturing or repricing
within one year exceeded total interest- earning assets maturing or repricing
within the same period by $30.6 million, representing a one-year negative
cumulative gap of 10.3%.
Liquidity and capital
- ---------------------
9
The Bank is required to maintain minimum levels of liquid assets as defined by
the Office of Thrift Supervision ("OTS") regulations. This requirement, which
may be varied by the OTS depending on economic conditions and deposit flows, is
based on a percentage of withdrawable deposits and short-term borrowings. The
minimum required liquidity ratio is currently 4.0%. The Bank's liquidity ratio
was 37.9% at March 31, 1998 compared with 40.2% at December 31, 1997.
The Company's primary sources of funds are deposits, principal and interest
payments on loans and securities and, to a lesser extent, borrowings and
proceeds from the sale of securities available for sale. While maturities and
scheduled amortization of loans and securities provide an indication of the
timing of the receipt of funds, other sources of funds such as loan prepayments
and deposit inflows are less predictable because they are greatly influenced by
general interest rates, economic conditions, competition and regulatory changes.
The Company's most liquid assets are cash and cash equivalents, which include
interest-bearing deposits and short-term highly liquid investments (such as
federal funds) with original maturities of less than three months that are
readily convertible to known amounts of cash. The level of these assets is
dependent on the Company's operating, financing and investing activities during
any given period. At March 31, 1998 and December 31, 1997, cash and cash
equivalents totaled $5.4 million and $6.8 million, respectively.
The Company and the Bank have other sources of liquidity that include investment
securities maturing within one year, and securities available for sale. Other
sources of funds include Federal Home Loan Bank of New York ("FHLB-NY")
advances, which at March 31, 1998, totalled $32.0 million. If needed, the Bank
may borrow an additional $49.6 million from the FHLB-NY.
At March 31, 1998, the Company had outstanding commitments to fund loan
originations of $8.5 million. There were no commitments to purchase securities
or mortgage-backed securities at March 31, 1998.
As of March 31, 1998, the Bank exceeded all regulatory capital requirements as
detailed in the following table:
Tangible Capital Core Capital Risk-Based Capital
---------------- ------------------- ------------------
Amount Percent Amount Percent(1) Amount Percent
------ ------- ------ ------- ------ -------
Capital for regulatory purposes $28,550 10.6% $28,550 10.6% $30,128 22.4%
Minimum regulatory requirement 4,040 1.5% 8,080 3.0% 10,748 8.0%
------ ---- ------ ---- ------ ----
Excess $24,510 9.1% $20,470 7.6%% $19,380 14.4%
======= === ======= === ======= ====
(1) Tangible and core capital is shown as a percentage of total adjusted
assets. Risk-based capital levels are shown as a percentage of
risk-weighted assets.
10
Comparison of Operating Results for the Three Months Ended March 31, 1998 and
1997
General The Company reported net income of $395,000 for the three months ended
March 31, 1998 compared with net income of $504,000 for the three months ended
March 31, 1997. The decrease in net income was primarily attributable to the
increase in compensation and employee benefits of $234,000 offset by a $112,000
increase in net interest income after provision for loan losses.
Interest income Interest income increased $394,000, or 8.9% to $4.8 million for
the three months ended March 31, 1998 from $4.4 million for the three months
ended March 31, 1997. The increase was primarily the result of higher
outstanding average balances on interest earning assets.
Interest income on loans receivable, net increased $622,000, or 21.5% to $3.5
million for the three months ended March 31, 1998, from $2.9 million for the
comparable three month period in 1997 primarily as a result of an increase in
average balance of loans of $33.7 million, partially offset by a slight decrease
in the average yield to 7.59% for the three months ended March 31, 1998 from
7.61% for the comparable three month period in 1997. The increase in the average
balance of loans between the periods was due to the increase in loan
originations of $22.7 million for the first quarter of 1998 versus $12.4 million
for the comparable 1997 quarter.
Interest income on securities available for sale decreased $203,000 during the
first quarter of 1998 as a result of a decrease in average outstanding balance
of $9.2 million in the available for sale portfolio. The average balance of the
available for sale portfolio for the three months ended March 31, 1998 was $71.6
million compared with $80.8 million for the comparable period in 1997. The
decline in the available for sale portfolio is the result of management's
decision to use cash flows from the investment portfolio to fund loan growth. In
addition, the yield on the available for sale portfolio decreased 23 basis
points to 6.83% for the quarter ended March 31, 1998 from 7.06% in the prior
period.
Interest expense Interest expense increased $329,000, or 14.6% to $2.6 million
for the three months ended March 31, 1998 from $2.3 million for the three months
ended March 31, 1997.
Interest on deposits increased $244,000, to $2.0 million for the three months
ended March 31, 1998 from $1.8 million for the comparable three months ended
March 31, 1997. The increase in interest expense on deposits was due to an
increase in the average balance of $21.2 million as well as an increase of 11
basis points in the cost of deposits to 4.13% for the three months ended March
31, 1998 from 4.02% for the three months ended March 31, 1997.
Net interest income Net interest income before provision for loan losses
increased $65,000 to $2.2 million for the three months ended March 31, 1998. The
increase reflects an increase in the average balances of loans receivable, net
of $33.7 million for the three months ended March 31, 1998 over the comparable
prior year period, offset by a $9.2 million decrease in the average balances of
securities available for sale for the three months ended March 31, 1998 over the
comparable period in 1997. Offsetting this net increase in assets was an
increase in the average balance of deposits of
11
$21.2 million and an increase in the average balance of advances of $5.4 million
for the three months ended March 31, 1998 compared with the same period in 1997.
Provision for loan losses The adequacy of the allowance for loan losses is based
on the Company's past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral and current economic conditions.
The Company provided $70,000 for loan losses for the three months ended March
31, 1998 compared with $125,000 for the comparable three month period in 1997,
which was due to management's continuing reassessment of losses inherent in the
loan portfolio. Management believes that the allowance for loan losses is
adequate. While management uses available information to recognize losses on
loans, future additions to the allowance may be necessary based on changes in
economic conditions in the Company's market area. In addition, various
regulatory agencies, as an integral part of their routine examination process,
periodically review the Company's allowance for loan losses. Such agencies may
require the Company to recognize additions to the allowance based on their
judgments about information available to them at the time of their examination.
Other income Total other income for the three months ended March 31, 1998 was
$175,000 compared with $183,000 for the comparable three month period in 1997.
The decrease is due to the $50,000 gain on sales of real estate owned recognized
during the quarter ended March 31, 1997 offset by increases in loan fees and
service charges and in other income for the three months ended March 31, 1998.
Other expenses Other expenses increased $308,000 or 22.1% for the three months
ended March 31, 1998 to $1.7 million from $1.4 million for the comparable
three-month period in 1997. The increase is primarily the result an increase of
$234,000 in compensation and employee benefits expense, and an increase in
Federal insurance premiums of $24,000.
The increase in compensation and employee benefits expense is the result of
opening a branch office in Fairfield, N. J., in the second quarter of 1997,
normal annual merit increases and costs related to loan production. Also
contributing to the increase was the final payment of $67,000 related to the
onetime non-recurring cost to purchase the rights under a contract entered into
in 1989 which established Wayne Savings Financial Services Group, Inc. The
increase in Federal insurance premiums is the result of the credit received in
the first quarter of 1997 that represents the overpayment, recorded in the third
quarter of 1996, to recapitalize the Savings Association Insurance Fund. The
high level of other expenses in both quarters is the result of the legal and
professional fees incurred in the proxy fight with a dissident stockholder
group.
Income tax expense Income tax expense was $255,000 which represents an effective
tax rate of 39.2% for the three months ended March 31, 1998 compared with income
tax expense of $342,000 which represents an effective tax rate of 40.4% for the
three months ended March 31, 1997.
12
Part II - Other Information
Item 1. Legal Proceedings
-----------------
From time to time, the Company is a party to routine legal proceedings in the
ordinary course of business, such as claims to enforce liens, condemnation
proceedings on properties in which the Company holds security interests, claims
involving the making of real property loans and other issues incident to the
business of the Company.There were no law suits pending or known to be
contemplated against the Company at March 31, 1998 that would have a material
effect on the operations of income of the Company or the Bank, taken as a whole.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On March 31, 1998 stockholders approved the election of three directors
for terms of three years each or until their successors are elected. Following
is the result of the voting:
For Withheld
Thomas D. Collins 835,487 32,254
Johanna O'Connell 1,607,570 31,654
Nicholas S. Gentile, Jr. 1,604,470 34,754
On March 24, 1998 stockholders approved the ratification of the
appointment of KPMG Peat Marwick LLP as independent auditors for the calendar
year ending December 31, 1998. Following is the result of the voting:
For 1,607,027
Against 11,000
Abstained 21,197
Item 5. Other Information
-----------------
Not applicable
13
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. Exhibits
3.1 Certificate of incorporation of Wayne Bancorp, Inc.*
3.2 Bylaws of Wayne Bancorp, Inc.*
4.0 Stock Certificate of Wayne Bancorp, Inc.*
10.1 Employment Agreement between Wayne Bancorp, Inc. and Johanna
O'Connell**
10.2 Employment Agreement between Wayne Savings Bank, F.S.B. and
Johanna O'Connell**
10.3 Form of Change in Control Agreement between Wayne Bancorp, Inc.
and Certain Executive Officers**
10.4 Employment Agreement between Wayne Savings Financial Services
Group, Inc. and Gary Len**
10.5 Employee Severance Compensation Plan
10.6 Employee Stock Ownership Plan
10.7 Incentive Stock Plan
27.0 Financial Data Schedule (in electronic filing only)
B. Reports on Form 8-K
On March 23, 1998, the Registrant filed a Current Report on Fomr8-K
regarding a press release dated March 20, 1998 in which the Registrant
announced that the Board of Directors has determined that it is in the
best interest of its stockholders to seek a sale or merger of the
Company and that it engaged Sandler O'Neil & Partners, L.P. to assist
the Registrant in seeking a partner (Items 5, 7).
- --------------------
* Incorporated herein by reference from the Exhibits to Form S-1
Registrations Statement and all amendments thereto, filed March 18, 1996,
Registration Number 333-2488 and declared effective May 13, 1996.
** Incorporated herein by reference to the Exhibits to the Registrant's Annual
Report on Form 10-K, (File No. 20691) filed on March 11, 1997.
*** Incorporated herein by reference to the Proxy Statement for the Special
Meeting of Stockholders filed on December 9, 1996.
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SIGNATURES
Pursuant to the requirements 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.
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Registrant
Date: May 12, 1998 By: /s/ Johanna O'Connell
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Johanna O'Connell,
President
Date: May 12, 1998 By: /s/ Timothy P. Tierney
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Timothy P. Tierney,
Vice President & Controller
15