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Wayne Savings Bancshares, Inc. Announces Record Earnings for the Quarter and Twelve months ended December 31, 2017

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WOOSTER, Ohio, Feb. 02, 2018 (GLOBE NEWSWIRE) -- Wayne Savings Bancshares, Inc. (OTCQX:WAYN), the holding company parent of Wayne Savings Community Bank, reported net income (unaudited) of $922,000 or $0.34 per common share for the quarter ended December 31, 2017, compared to $315,000 or $0.12 per common share for the quarter ended December 31, 2016. The increase in net income was due to an increase in net interest income and a decrease in the provision for loan losses and noninterest expense, partially offset by an increase in the provision for federal income taxes. The return on average equity and return on average assets for the fourth quarter of 2017 was 8.66% and 0.81%, respectively, compared to 3.03% and 0.28%, respectively, for the same period in 2016.

"2017 has been a transformational year for Wayne Savings," stated James R. VanSickle, President and CEO.  "We are pleased to report record earnings for the quarter and year ended December 31, 2017.  We are excited about our opportunities and look forward to maintaining our momentum in 2018.  Wayne Savings is committed to becoming a high-performing community bank and creating long-term shareholder value through consistent profitable growth."

Net interest income increased $314,000 for the quarter ended December 31, 2017, compared to the quarter ended December 31, 2016. Interest income increased $271,000 during the fourth quarter of 2017 primarily due to a change in the composition of the average balance of interest-earning assets, and an increase in rates earned on those assets. The change in the average balance of interest-earning assets included a $25.9 million increase in average balance of higher yielding loans, while the average balance of lower yielding investments and interest-bearing deposits declined by $21.6 million compared to the prior year quarter. The rate earned on these assets increased from 3.70% in the prior year quarter to 3.87% in the current year quarter. Interest expense decreased $43,000 primarily due to a decrease in the rates paid on those liabilities from 0.52% for the quarter ended December 31, 2016 to 0.49% for the quarter ended December 31, 2017. The net interest rate spread increased from 3.18% for the quarter ended December 31, 2016 to 3.38% for the quarter ended December 31, 2017.

Provision for loan losses was $92,000 in the fourth quarter of 2017, a decrease of $121,000 from $213,000 during the 2016 period.  The change was primarily due to a decrease in required specific reserves for the fourth quarter of 2017 partially offset by growth in the loan portfolio. 

Noninterest expense totaled $2.8 million for the three-month period ended December 31, 2017, a decrease of $499,000 compared to the three months ended December 31, 2016. This change was primarily due to a decrease in salaries and employee benefits related to severance expenses from the fourth quarter of 2016, reduced pension expense due to fewer retirements in 2017 and reduced healthcare costs as a result of a change in our healthcare provider. 

On December 22, 2017, H.R.1, formerly known as the Tax Cuts and Jobs Act (the "Tax Reform Act"), was enacted into law.  Beginning in 2018, the Tax Reform Act reduces the federal tax rate for corporations from 35% to 21% and changes or limits certain deductions.   The effect of this change is expected to lower the Company's effective tax rate from 28% in 2017 to approximately 20% in 2018.  The Tax Reform Act also caused a one-time positive earnings adjustment of $13,000 to revalue the deferred tax items.

For the twelve months ended December 31, 2017, net income totaled $3.1 million, or $1.13 per common share, compared to net income of $2.2 million, or $0.82 per diluted share, for the twelve months ended December 31, 2016.  The increase in net income was primarily due to increases in both net interest income and noninterest income and a decline in provision for loan losses and other operating expenses. The return on average equity and return on average assets for the twelve months ended December 31, 2017 were 7.39% and 0.69%, respectively, compared to 5.46% and 0.51%, respectively, for the twelve months ended December 31, 2016. 

Net income for the twelve months ended December 31, 2017 was negatively impacted by a proxy contest for the election of directors at the 2017 annual shareholders meeting. The proxy contest resulted in increased noninterest expenses of $426,000.  Return on average equity would have been 8.05% and return on assets would have been 0.76% for the twelve months ended December 31, 2017, without these proxy contest expenses. 

Net interest income was $14.5 million, an increase of $1.0 million for the twelve months ended December 31, 2017, compared to the same period in 2016.  Interest income increased $877,000 during the 2017 period mainly due to a $4.2 million increase in the average balance of interest-earning assets, and an increase in the rates earned on those assets from 3.70% in 2016 to 3.87% in 2017.  Interest expense decreased $90,000 primarily due to a decline in the average rate paid. The average rate paid declined from 0.52% in 2016 period to 0.49% in 2017. The average balance of interest-bearing liabilities increased $3.1 million during the current year period, including a $10.8 million increase in the average balance of demand deposits and an increase of $7.3 million in money market and savings balances, while the average balance of certificates of deposit declined $13.5 million.  The net interest rate spread increased from 3.18% in 2016 to 3.38% in 2017, due to interest-earning assets repricing upward, while the cost of interest-bearing deposits declined.  

Provision for loan losses decreased $64,000 to $301,000 during the twelve months ended December 31, 2017 compared to a $365,000 during the same period in 2016.  The decrease is primarily due to a decline in required specific reserves as the Company received paydowns during the year on a classified credit partially offset by an increase in the loan portfolio.

Noninterest income increased $156,000 for the twelve months ended December 31, 2017 compared to the same period in 2016. The increase was primarily due to an increase in gain on sale of residential mortgage loans of $62,000 and an increase in other operating income of $94,000. The increase in gain on sale of residential mortgage loans was primarily due to an increase in loans sold, from $5.5 million in 2016, to $10.1 million in 2017.

Noninterest expense decreased $194,000 for the twelve months ended December 31, 2017 compared to the same period in 2016, due to a decrease of $930,000 in salaries and benefits partially offset by the aforementioned proxy costs related to the 2017 proxy contest.  Salaries and benefit costs declined due to decreased higher severance costs in 2016, staff reductions in 2017 and a decline in healthcare costs due to a change in the provider.  

At December 31, 2017, the Company had total assets of $439.8 million, a decrease of $15.0 million, from total assets at December 31, 2016. The decrease in total assets includes a $10.7 million decrease in cash and cash equivalents partially offset by an $13.6 million increase in net loans compared to December 31, 2016.

Total securities decreased $17.3 million to $63.0 million at December 31, 2017, compared to December 31, 2016. The decrease in securities was primarily due to investing the principal paydowns of mortgage-backed securities into higher yielding loans. Net loans totaled $345.9 million at December 31, 2017, an increase of $13.6 million, compared to $332.3 million at December 31, 2016, primarily due to new originations in excess of principal reductions and scheduled maturities.

The allowance for loan losses totaled $2.9 million, or 0.84% of gross loans, at December 31, 2017, compared to $3.0 million, or 0.91% of gross loans, at December 31, 2016. The decline in the allowance was mainly due to a charge-off on a classified credit with specific reserves.  Nonperforming assets, which consist of loans on nonaccrual status and real estate owned, totaled $2.0 million at December 31, 2017, or 0.55% of total loans, an increase of $402,000 from the December 31, 2016 balance of $1.6 million, or 0.46% of total loans.  This increase was mainly due to a single commercial credit which is classified as a substandard credit and returned to a non-accrual status during the third quarter of 2017.

Deposits totaled $372.5 million at December 31, 2017, a decrease of $11.2 million from $383.7 million at December 31, 2016. The Company continues to monitor deposit activity closely to respond to changes in customer preference for types of deposits and competitive pressure.

Other short-term borrowings, which consist solely of repurchase agreements with commercial customers of the Bank, totaled $7.4 million at December 31, 2017, compared to $7.2 million at December 31, 2016.  Advances from the Federal Home Loan Bank (FHLB) totaled $13.5 million at December 31, 2017, a decrease of $4.5 million from December 31, 2016.

Stockholders' equity was $41.6 million at December 31, 2017, an increase of $557,000, compared to the 2016 year-end. This increase was mainly due to net income of $3.1 million, partially offset by $1.0 million in shareholder dividends, and a $1.4 increase in treasury stock as the Company completed the 2016 stock repurchase plan.

Established in 1899, Wayne Savings Community Bank, the wholly owned subsidiary of Wayne Savings Bancshares, Inc., has eleven full-service banking locations in the communities of Wooster, Ashland, Millersburg, Rittman, Lodi, North Canton, and Creston, Ohio. Additional information about Wayne Savings Community Bank is available at www.waynesavings.com.

Forward-Looking-Statements
This release contains forward-looking statements that are not historical facts and that are intended to be
"forward-looking statements" as that term is defined by the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may include, but are not limited to, statements about the Company's plans, objectives, expectations and intentions and other statements contained in this release that are not historical facts and pertain to the Company's future operating results.  When used in this release, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally intended to identify forward-looking statements.  Actual results may differ materially from the results discussed in these forward-looking statements, because such statements are inherently subject to significant assumptions, risks and uncertainties, many of which are difficult to predict and are generally beyond the Company's control.  These include but are not limited to: the possibility of adverse economic developments that may, among other things, increase default and delinquency risks in the Company's loan portfolios; shifts in interest rates; shifts in the rate of inflation; shifts in the demand for the Company's loan and other products; unforeseen increases in costs and expenses; lower-than-expected revenue or cost savings in connection with acquisitions; changes in accounting policies; changes in the monetary and fiscal policies of the federal government; and changes in laws, regulations and the competitive environment.  Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.


WAYNE SAVINGS BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
  December 31, 2017   December 31, 2016
  (Unaudited)   (Audited)
ASSETS      
       
Cash and cash equivalents $   6,041     $   16,756  
Investment securities, net (1)     63,011         80,268  
Loans receivable, net     345,900         332,283  
Federal Home Loan Bank stock     4,226         4,226  
Premises & equipment     6,051         6,420  
Foreclosed assets held for sale, net     45         2  
Bank-owned life insurance     10,097         9,827  
Other assets     4,426         5,009  
  TOTAL  ASSETS $   439,797     $   454,791  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
Deposit accounts    372,465       383,733  
Other short-term borrowings   7,409       7,246  
Federal Home Loan Bank Advances   13,500       18,000  
Accrued interest payable and other liabilities   4,838       4,784  
  TOTAL LIABILITIES   398,212       413,763  
       
       
Common stock (3,978,731 shares of $.10 par value issued)   398       398  
Additional paid-in capital   36,093       36,041  
Retained earnings   24,414       22,317  
Shares acquired by ESOP   (206 )     (273 )
Treasury Stock, at cost - 1,272,887 shares at December 31, 2017 and 1,196,892 December 31, 2016.   (18,361 )     (16,936 )
Accumulated other comprehensive loss   (753 )     (519 )
  TOTAL STOCKHOLDERS' EQUITY   41,585       41,028  
       
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $   439,797     $   454,791  
(1)  Includes held-to-maturity classifications.      
Note: The December 31, 2016 Condensed Consolidated Balance Sheet has been derived from the audited Consolidated Balance Sheet as of that date.
       


WAYNE SAVINGS BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, except per share data - unaudited)
               
               
  Three Months Ended   Twelve Months Ended
  December 31,   December 31,
    2017     2016       2017       2016
               
Interest income $   4,202   $   3,931     $   16,428     $   15,551
Interest expense     482       525         1,980         2,070
  Net interest income     3,720       3,406         14,448         13,481
Provision for loan losses     92       213         301         365
  Net interest income after provision for loan losses     3,628       3,193         14,147         13,116
Noninterest income     471       472         2,152         1,996
Noninterest expense     2,783       3,282         11,964         12,158
Income before income taxes      1,316       383         4,335         2,954
Provision for income taxes      394       68         1,226         708
  Net income $   922   $   315     $   3,109     $   2,246
               
Earnings per share              
  Basic and Diluted $   0.34   $   0.12     $   1.13     $   0.82
               
Dividends per share $   0.10   $   0.09     $   0.37     $   0.36
               
               
               
CONSOLIDATED FINANCIAL HIGHLIGHTS
               
      For the Three Months    
      ended December 31,     
        2017       2016      
Quarterly Results              
Earnings Per Share:              
  Basic and diluted     $   0.34     $   0.12      
Return on Average Assets (Annualized)       0.81 %     0.28 %    
Return on Average Equity (Annualized)       8.66 %     3.03 %    
               
               
      For the Twelve Months    
      ended December 31,     
        2017       2016      
Year to Date Results              
Earnings Per Share:              
  Basic and diluted     $   1.13     $   0.82      
Return on Average Assets        0.69 %     0.51 %    
Return on Average Equity        7.39 %     5.46 %    
               
               
      December 31,    December 31,    
        2017       2016      
End of Period Data              
Total Assets     $   439,797     $   454,791      
Stockholders' Equity to Total Assets       9.46 %     9.02 %    
Shares Outstanding       2,705,844       2,781,839      
Book Value Per Share     $   15.37     $   14.75      
               
             

Contact Information:
Myron Swartzentruber
Senior Vice President Chief Financial Officer
(330) 264-5767                                                                                                                                   

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