Wayne Savings Bancshares, Inc. Announces Earnings for the nine months ending September 30, 2023

WOOSTER, Ohio, Oct. 27, 2023 (GLOBE NEWSWIRE) -- Wayne Savings Bancshares, Inc. (OTCQX: WAYN), (the “Company”), the holding company parent of Wayne Savings Community Bank, reported net income (unaudited) of $5.8 million, or $2.64 per common share, for the year to date period ended September 30, 2023, a decrease of $799,000, or 12.1%, compared to $6.6 million, or $2.89 per common share, for the same period ended September 30, 2022. Net income excluding the merger-related expenses (non-GAAP) for the nine months ended September 30, 2023, was $6.4 million, or $2.91 per share. The decrease in net income was due to an increase in non-interest expenses, including the merger-related expenses of $624,000. The return on average equity and return on average assets for the nine months ended September 30, 2023, was 16.06% and 1.02%, respectively, compared to 18.34% and 1.33%, respectively, for the same period in 2022. Excluding merger-related expenses, return on average equity and return on average assets for the nine months ended September 30, 2023, was 17.71% and 1.12%, respectively.

The Company reported net income (unaudited) of $1.8 million, or $0.81 per common share, for the quarter ended September 30, 2023, a decrease of $736,000, or 29.3%, compared to $2.5 million, or $1.14 per common share, for the quarter ended September 30, 2022. The decrease in net income was due primarily to an increase in interest expense and non-interest expenses, including merger-related expenses of $187,000. Net income excluding merger-related expenses (non-GAAP) for the quarter ended September 30, 2023, was $1.9 million, or $0.88 per share. The return on average equity and return on average assets for the third quarter of 2023 was 14.41% and 0.91%, respectively, compared to 22.85% and 1.48%, for the same period in 2022. Excluding merger-related expenses, return on average equity and return on average assets for the three months ended September 30, 2023, was 15.70% and 0.99%, respectively.

President and CEO James R. VanSickle commented, “We are pleased to report our strong results for the third quarter and nine months ended September 30, 2023, despite the challenging economic and interest rate environments. Our commercial and residential lending teams continue to execute under the leadership of Executive Chairman, Mark R. Witmer, with our gross loans reaching an all-time high of $669 million. Thanks to the efforts of our remarkable team of community bankers, we continue to move closer to finalizing our pending merger with Main Street Financial Services Corp. and we look forward to a bright future with our new partners.”

2023 Select Business Highlights

• Wayne Savings Bancshares, Inc. and Main Street Financial Services Corp. announced a merger of equals transaction on February 23, 2023. The combined company will have a pro-forma assets exceeding $1.3 billion and 19 branches from Wooster, Ohio to Wheeling, West Virginia. The transaction is awaiting the approval of both corporations’ shareholders and all customary regulatory approvals. The transaction is expected to close during the first quarter of 2024.
  
  
• Wayne Savings Bancshares, Inc., the holding company parent of Wayne Savings Community Bank, announced on January 30, 2023, that it was named to the 2023 OTCQX Best 50. In January 2023, OTCQX ranked Wayne Savings Bancshares, Inc. 28th on its 2023 OTCQX Best 50. Companies in the 2023 OTCQX Best 50 were ranked based on their performance during the 2022 calendar year.
  
  
• Net loan balances increased to $661.4 million at September 30, 2023, compared to $554.8 million at September 30, 2022, or 19.2% growth, comprised mainly of $63.0 million of commercial loans secured by real estate and $38.4 million of one-to-four residential mortgage loans.
  
  
• Wayne Savings Bancshares, Inc. declared a cash dividend $0.23 per share for the quarter ending September 30, 2023, on September 28, 2023. The quarterly cash dividend will be paid on November 1, 2023, to the stockholders of record as of October 18, 2023.
  
  
• Wayne Savings continues to look for opportunities to create a larger footprint to expand our customer base. Wayne Savings opened a new office in Dalton during the first quarter of 2023 and a new office in Carrollton, Ohio during the third quarter of 2023.
  

Third Quarter 2023 Financial Results

Net interest income was $5.4 million for the quarter ended September 30, 2023, down 13.1% from $6.2 million in the same quarter of 2022. The net interest margin of 2.88% in the third quarter of 2023 decreased 95 basis points from 3.83% in the third quarter of 2022. These results were impacted by higher loan yields, which were 5.18% for the 2023 quarter compared to 4.69% for the same quarter of 2022. The cost of funds for the quarter ended September 30, 2023, was 2.02%, up 160 basis points from the same 2022 quarter. The cost of funds increase is largely due to utilizing higher-cost wholesale funding, such as FHLB advances and brokered certificates of deposit, to support the Bank’s loan growth.

Provision for credit losses was $138,000 in the third quarter of 2023 under the newly adopted Accounting Standards Update (ASU) 2016-13 Current Expected Credit Losses (CECL) method the Bank adopted on January 1, 2023. In 2022, the provision for loan losses for the third quarter was $410,000 using the incurred loss method.

Noninterest expense totaled $3.7 million for the three-month period ended September 30, 2023, an increase of $383,000, or 11.4%, compared to the three months ended September 30, 2022, primarily due to merger related expenses, increased salaries and employee benefits as the Company added additional sales and sales support staff to facilitate loan and deposit growth and increased occupancy and equipment expense as the Company continues to expand into new market areas. The Company’s efficiency ratio was 61.2% for the three-month period ended September 30, 2023, compared to 48.8% for the same period in 2022. Excluding merger related expenses for the merger (non-GAAP), noninterest expense increased $196,000 from the third quarter of 2022 to the third quarter of 2023 and the Company’s efficiency ratio was 58.2%.

2023 Year-to-Date Business Results

Net interest income of $17.0 million for the nine months ended September 30, 2023, was up 2.8% from $16.5 million in the same period of 2022. These results were mainly due to $106.6 million of loan growth and higher loan yields, which were 5.03% in the nine months ended September 30, 2023, compared to 4.45% in the same period of 2022. The cost of funds for the period ended September 30, 2023, was 1.62%, up 123 basis points from the same period of 2022 due to the increased usage of wholesale funding in a rising interest rate environment used to support the Bank’s loan growth. The net interest margin of 3.10% for the period ended September 30, 2023, decreased 39 basis points from 3.49% in the same period of 2022.

Provision for credit losses was $526,000 for the nine-month period ending September 30, 2023, under the newly adopted ASU 2016-13 Current Expected Credit Losses (CECL) method the Bank adopted on January 1, 2023. The adoption of CECL required a $113,000 adjustment to equity, net of taxes. In 2022, the Provision for loan losses for the same period was $841,000 using the incurred loss method.

Noninterest expense totaled $11.1 million for the year-to-date period ended September 30, 2023, an increase of $1.4 million, or 14.9%, compared to the September 30, 2022 nine-month period. The increase was primarily due to the merger expenses for the merger and an increase in salaries and employee benefits expense. The Company’s efficiency ratio was 58.4% for the nine-month period ended September 30, 2023, compared to 51.8% for the same period in 2022. Excluding the merger expenses (non-GAAP), the Company’s noninterest expense increased $810,000 from the third quarter of 2022 to the third quarter of 2023 and the Company’s efficiency ratio was 55.1% for the nine-month period ended September 30, 2023.

September 30, 2023 Financial Condition

At September 30, 2023, the Company had total assets of $798.2 million, an increase of $68.5 million, from December 31, 2022. The growth in total assets includes a $66.4 million increase in net loans as compared to December 31, 2022.

Net loan balances increased from $594.9 million at December 31, 2022, to $661.4 million at September 30, 2023, an increase of $66.4 million, or 11.2% of annualized growth consisting mainly of commercial real estate loans and mortgage loans.

The allowance for credit losses was $7.3 million at September 30, 2023, compared to $6.7 million at December 31, 2022. The allowance for credit losses and the related provision for credit losses is based on management’s judgment and evaluation of the loan portfolio. Management believes the current allowance for credit losses is adequate, however, changing economic and other conditions may require future adjustments to the allowance for credit losses.

Total nonperforming loans declined to $307,000 from $805,000 at December 31, 2022 as the Company recognized a payoff during the quarter. Past due loan balances of 30 days and more decreased from $4.3 million at December 31, 2022, to $1.4 million at September 30, 2023, mainly due to decreased non-residential real estate loan and commercial loan delinquencies.

Total liabilities increased $65.6 million due primarily to an increase in deposits accounts of $48.1 million. Deposit accounts increased primarily due to growth in brokered certificates of deposit $67.3 million and growth in our relationship special certificates of deposits.

Total stockholders’ equity increased by $2.9 million during the first three quarters of 2023. The Company earned $5.8 million of net income for the nine months ended September 30, 2023, down from 2022 by 12.1% mainly due to merger expenses. The Company paid $1.5 million in dividends during the period. Accumulated other comprehensive loss increased by $1.4 million mainly due to an increase in gross unrealized losses on securities available for sale as market interest rates rose.

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

Non-GAAP Disclosure
This press release includes disclosures of the Company’s return on average equity, return on average assets, net income, and efficiency ratios which are excluding costs related to merger activities which are financial measures not prepared in accordance with generally accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flow that excludes or includes amounts that are required to be disclosed by GAAP. The Company believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and the Company’s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP.

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.

Contact Information:
Myron Swartzentruber
Senior Vice President Chief Financial Officer
[phone]

WAYNE SAVINGS BANCSHARES, INC.
Selected Condensed Consolidated Financial Data
(Dollars in thousands, except share data - unaudited)
		September				June				March				December
		2023				2023				2023				2022
Interest and dividend income		$	9,078			$	8,571			$	7,901			$	7,518
Interest expense			3,673				2,867				2,050				1,248
Net interest income			5,405				5,704				5,851				6,270
Provision for credit losses*			138				170				218				381
Net interest income after
provision for credit losses*			5,267				5,534				5,633				5,889
Non-interest income			691				706				603				631
Non-interest expense			3,733				3,949				3,394				3,508
Income before federal income taxes			2,225				2,291				2,842				3,012
Provision for federal income taxes			452				547				563				603
Net income		$	1,773			$	1,744			$	2,279			$	2,409
Earnings per share - basic		$	0.81			$	0.79			$	1.04			$	1.09
Earnings per share - diluted		$	0.80			$	0.79			$	1.03			$	1.09
Dividends per share		$	0.23			$	0.23			$	0.23			$	0.23
Return on average assets			0.91	%			0.92	%			1.23	%			1.36	%
Return on average equity			14.41	%			14.36	%			19.58	%			22.87	%
Shares outstanding			2,199,707				2,199,407				2,196,457				2,192,738
Book value per share		$	21.64			$	22.06			$	21.82			$	20.40
		September				June				March				December
		2022				2022				2022				2021
Interest and dividend income		$	6,892			$	5,889			$	5,517			$	5,502
Interest expense			670				564				564				592
Net interest income			6,222				5,325				4,953				4,910
Provision for loan losses			410				257				174				128
Net interest income after
provision for loan losses			5,812				5,068				4,779				4,782
Non-interest income			636				599				865				598
Non-interest expense			3,350				3,191				3,101				3,156
Income before federal income taxes			3,098				2,476				2,543				2,224
Provision for federal income taxes			589				457				476				428
Net income		$	2,509			$	2,019			$	2,067			$	1,796
Earnings per share - basic		$	1.14			$	0.88			$	0.87			$	0.76
Earnings per share - diluted		$	1.13			$	0.87			$	0.86			$	0.75
Dividends per share		$	0.23			$	0.23			$	0.23			$	0.21
Return on average assets			1.48	%			1.23	%			1.28	%			1.12	%
Return on average equity			22.85	%			17.37	%			15.44	%			13.48	%
Shares outstanding			2,191,338				2,185,688				2,369,886				2,365,268
Book value per share		$	18.94			$	19.33			$	21.12			$	22.67
*Adopted ASU 2016-13 during the first quarter 2023: therefore, prior periods provision amount reflects the incurred loss method.

WAYNE SAVINGS BANCSHARES, INC.
Non-GAAP reconciliation
(Dollars in thousands, except per share data - unaudited)
		For the three months				For the Nine months
		September 30, 2023				September 30, 2023
Net Income as reported - GAAP		$	1,773			$	5,796
Effect of merger related expenses (net of tax benefit)			160				597
Net Income non-GAAP		$	1,933			$	6,393
Earnings per share - GAAP		$	0.81			$	2.64
Effect of merger related expenses			0.07				0.27
Earnings per share non-GAAP		$	0.88			$	2.91
Return on average assets - GAAP			0.91	%			1.02	%
Effect of merger related expenses			0.08	%			0.10	%
Return on average assets non-GAAP			0.99	%			1.12	%
Return on average equity - GAAP			14.41	%			16.06	%
Effect of merger related expenses			1.29	%			1.65	%
Return on average equity non-GAAP			15.70	%			17.71	%
Efficiency Ratio - GAAP			61.24	%			58.42	%
Effect of merger related expenses			-3.07	%			-3.29	%
Efficiency Ratio non-GAAP			58.17	%			55.13	%

WAYNE SAVINGS BANCSHARES, INC.
Condensed Consolidated Statements of Income
(Dollars in thousands, except share data - unaudited)
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2023				2022				2023				2022
Interest income	$	9,078			$	6,892			$	25,550			$	18,298
Interest expense		3,673				670				8,590				1,798
Net interest income		5,405				6,222				16,960				16,500
Provision for credit losses *		138				410				526				841
Net interest income after provision for credit losses*		5,267				5,812				16,434				15,659
Non-interest income		691				636				2,000				2,100
Non-interest expense
Salaries and employee benefits		2,049				1,933				5,949				5,625
Net occupancy and equipment expense		629				500				1,806				1,489
Federal deposit insurance premiums		117				92				374				187
Franchise taxes		98				115				299				346
Advertising and marketing		49				98				179				196
Legal		11				26				30				58
Professional fees		54				95				165				250
ATM network		121				100				320				291
Auditing and accounting		60				64				180				184
Merger related expenses		187				-				624				-
Other		358				327				1,150				1,016
Total non-interest expense		3,733				3,350				11,076				9,642
Income before federal income taxes		2,225				3,098				7,358				8,117
Provision for federal income taxes		452				589				1,562				1,522
Net income	$	1,773			$	2,509			$	5,796			$	6,595
Earnings per share
Basic	$	0.81			$	1.14			$	2.64			$	2.89
Diluted	$	0.80			$	1.13			$	2.62			$	2.86
*Adopted ASU 2016-13 during the first quarter 2023: therefore, prior periods provision amount reflects the incurred loss method.

WAYNE SAVINGS BANCSHARES, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share data - unaudited)
	September 30, 2023				December 31, 2022
ASSETS
Cash and cash equivalents	$	16,785			$	13,799
Securities, net (1)	83,966				91,769
Loans held for sale	102				-
Loans receivable, net	661,378				594,931
Federal Home Loan Bank stock	6,247				3,322
Premises & equipment, net	4,981				5,183
Bank-owned life insurance	11,636				11,434
Other assets	13,146				9,335
TOTAL ASSETS	$	798,241			$	729,773
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposit accounts	$	653,936			$	605,834
Other short-term borrowings	9,756				14,776
Federal Home Loan Bank advances	80,000				58,500
Accrued interest payable and other liabilities	6,958				5,933
TOTAL LIABILITIES	750,650				685,043
Common stock (3,978,731 shares of $.10 par value issued)	398				398
Additional paid-in capital	36,604				36,584
Retained earnings	53,812				49,645
Treasury Stock, at cost - 1,779,024 shares and 1,785,993 shares
at September 30, 2023 and December 31, 2022, respectively.	(30,349		)		(30,459		)
Accumulated other comprehensive loss	(12,874		)		(11,438		)
TOTAL STOCKHOLDERS' EQUITY	47,591				44,730
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	798,241			$	729,773
(1) Includes available-for-sale and held-to-maturity classifications.
Note: The December 31, 2022 Condensed Consolidated Balance Sheet has been derived from the audited Consolidated Balance Sheet as of that date.