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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual report pursuant to section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1995 Commission file #0-14612
WAYNE BANCORP, INC.
(Exact name of registrant as specified in its charter)
OHIO 34-1516142
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
112 West Liberty Street
PO Box 757
Wooster, Ohio 44691 44691
(Address of principal executive offic(Zip Code)
Registrant's telephone number, including area code: (216) 264-1222
Securities registered pursuant to section 12(b) of the ANone
Securities registered pursuant to section 12(g) of the 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 fur such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past nine months YES__X___ NO______
The aggregate market value of voting stock held by nonaffiliates of the
registrant based on the most recent trade prices of such stock on March 1, 1996:
Common Stock $1.00 stated value $84,344,625
The number of shares outstanding of the issuer's classes of common stock as of
March 1, 1996:
Common Stock $1.00 stated value 1,874,325
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
1995 and portions of the Registrant's Proxy Statement for the Annual
Shareholders Meeting to be held March 28, 1996 are incorporated by reference
into Parts I, II and III.
TABLE OF CONTENTS
WAYNE BANCORP, INC.
FORM 10-K
PART I PAGE
Item 1 Business................................................ 3
Item 2 Properties.............................................. 13
Item 3 Legal Proceedings....................................... 13
Item 4 Submission of matters to a vote of security holders..... 14
PART II
Item 5 Market for the Registrant's common stock and related
Shareholder matters............................ 14
Item 6 Selected Financial Data................................. 14
Item 7 Management discussion and analysis of financial condition
and results of operations...................... 14
Item 8 Financial statements and supplementary data............. 14
Item 9 Changes in and disagreements with accountants on
accounting and financial disclosures........... 14
PART III
Item 10 Directors and Executive Officers of the Registrant...... 14
Item 11 Executive Compensation.................................. 15
Item 12 Security ownership of certain beneficial owners and
management..................................... 15
Item 13 Certain relationships and related transactions.......... 15
PART IV
Item 14 Exhibits, financial statement schedules and reports on
Form 8-K....................................... 15
Exhibit Index........................................... 16
Signatures.............................................. 17
PART I
ITEM I. BUSINESS
General Development of Business:
Wayne Bancorp, Inc. and its subsidiary, the Wayne County National Bank,
(collectively the "Company"), conduct general commercial banking business.
Wayne Bancorp, Inc. is a one-bank holding company organized in April, 1986.
The Wayne County National Bank ("The Bank") is a full-service bank offering a
wide range of commercial and personal banking services primarily to customers in
Wayne, Holmes and Stark Counties of Ohio. These services include a broad range
of loan, deposit and trust products and various 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, Visa and Master Card lines of credit and lease financings.
Deposit products include interest and non-interest bearing checking accounts,
various savings accounts, certificates of deposit, and IRAs. The Trust
Department provides services in the areas of employee benefits, and personal
trusts. Miscellaneous services include safe deposit boxes, night depository,
United States savings bonds, traveler's checks, money orders and
cashier checks, bank-by-mail service, money transfers, wire services, utility
bill payments and collections, notary public services, discount brokerage
services and alternative investments. In addition, the Bank has correspondent
relationships with major banks in Cleveland, Cincinnati and Detroit pursuant
to which the Bank received various financial services. The Bank accounts for
substantially all (99%) of Wayne Bancorp.'s consolidated assets at
December 31, 1995.
The Bank's primary lending area consists of Wayne County, Ohio, and its
contiguous counties. Loans outside the primary lending area are considered
for creditworthy applicants. Lending decisions are make in accordance with
written loan policies designed to maintain loan quality.
Retail lending products are comprised of credit card loans, overdraft lines,
personal lines of credit and installment loans. Credit cards are unsecured
credit accounts, on which the credit limits are determined by analysis of two
criteria, the borrowers debt service and gross income. 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 twenty 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 three 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 lender in
the underwriting process.
The Bank offers a variety of mortgage loans programs, including a variety of
fixed and adjustable rate mortgages ranging from 120 to 260 months. The
underwriting guidelines include those for consumer loans and those necessary
to meet secondary market guidelines. The Bank may sell loans to the secondary
market when it deems it profitable and desirable to do so.Residential real
estate decisions focus on loan to value limits, debt to income ratio, housing
to income ratio, credit history, and in some cases whether private mortgage
insurance is obtained.
Business credit products include commercial loans and 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. 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
comakers 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 Bank has provided both direct and indirect
leasing on a limited basis. The direct leases are for specific equipment and
may be open-end or closed-end. Indirect leases are established by the same
methods as an indirect consumer auto finance. Each vehicle has its own
amortization.
In addition to the underwriting guidelines followed for specific loan types, the
Bank has underwriting guidelines common to all loan types. With regard to
collateral, the Bank 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 set forth in the loan policy. Appraisal policies follow and comply
with provisions outlined under Title XI of FIRREA. All appraisals are done by
outside independent appraisers The Bank, as a general rule, gets an appraisal
on all real estate transactions even when not required by Title XI. Approval
procedures include loan authorities approved by the Board of Directors for
ndividual 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 Loan Committee if
it exceeds individual approval limits. The Board of Directors approves
aggregate loan commitments in excess of $500 thousand up to the Bank's legal
lending limit. Loans to Directors and Executive Officers are approved by
the Board of Directors.
The Loan Quality 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 71%, 69%, and 66% of consolidated revenues in
1995, 1994 and 1993, respectively. Revenues from interest and dividends on
investment securities, federal funds sold and mortgage-backed securities
accounted for 19%, 20% and 22% of consolidated revenues in 1995, 1994, and
1993, respectively.
The business of the Registrant 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 Registrant or its subsidiaries.
Regulation and Supervision
Wayne Bancorp, Inc., is a corporation organized under the laws of the State of
Ohio. The Company is required to file certain reports and periodic information
with the United States Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended.
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 Company 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.
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.
The Company is a legal entity separate and distinct from its subsidiary Bank.
It is anticipated that a significant portion of the Company's revenues,
including funds available for payment of dividends (if any) and for operating
expenses, will be provided by dividends paid by its Bank subsidiary. There
are statutory limitations on the amount of dividends which may be paid to
the Company by its Bank subsidiary.
The Company's national banking subsidiary is subject to primary regulation,
supervision and examination by the Comptroller of the Currency. The Bank is a
member of the Federal Reserve System and, as such, is subject to the applicable
provisions of the Federal Reserve Act and regulations issued thereunder.
Further, the subsidiary Bank is also subject to the applicable provisions of
Ohio law insofar as they do not conflict with federal banking laws.
The Bank's deposits are insured by the Federal Deposit Insurance Corporation.
Related to that, the Bank is subject to provisions of the Federal Deposit
Insurance Corporation Improvement Act of 1991. This Act is designed to
protect the deposit insurance fund, to improve regulation and supervision of
insured depository institutions and to improve the reporting information related
to financial institutions.
Management is not aware of any; current recommendations by regulatory
authorities which, if they were to be implemented, would have a material
effect on the Company.
Regulatory Capital Requirements
The Company is required by the various regulatory authorities to maintain
certain capital levels. The required capital levels and the Company's capital
position at December 31, 1995 are:
Minimum Regulatory Requirements Company's Current Ratios
Leverage Ratio 4.0% to 5.0% 10.1%
Risk Based Capital 8.0% 18.2%
The Federal Deposit Insurance Corporation sets premiums for deposit insurance
based on the Company's capital levels. In the event the Company's levels fall
below the minimum requirement, the premiums for deposit insurance could rise.
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 Bank.
Its policies influence the amount of bank loans and deposits and interest rates
charged and paid thereon, and thus have an effect on the earnings of
the subsidiary and the Company.
Competition
The banking and financial services industry in the Company's market is highly
competitive. The Company's market area encompasses Wayne, Holmes and Stark
Counties in Ohio. The Bank competes for loans and deposits with other
commercial banks, savings and loans, finance companies 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.
Employees
As of December 31, 1995, the Company had 147 full time employees and 29 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.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
WAYNE BANCORP, INC.
December 31, 1995
Average
Daily Yield/
Balance Interest Rate
(In thousands of dollars)
ASSETS ----------------------------
Interest Earning Assets:
Loans (including fees) (1) $205,518 $18,956 9.22%
Investment Securities
Taxable 61,125 3,675 6.01%
Tax-Exempt (2) 23,064 1,909 8.28%
Federal Funds Sold 4,064 239 5.88%
-------------------
TOTAL EARNING ASSETS 293,771 24,779 8.43%
Non-earning Assets:
Cash and due from banks 11,509
Premises and Equipment (net) 6,118
Other Assets 5,239
Less Allowance for Loan Losses (3,589)
---------
TOTAL ASSETS $313,048
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
Transaction Accounts 57,802 2,019 3.49%
Savings 49,155 1,396 2.84%
Time Deposits 120,549 5,861 4.86%
Short Term Borrowings 12,717 640 5.03%
-------------------
TOTAL INTEREST BEARING LIABILITIES 240,223 9,916 4.13%
Non-Interest Bearing Liabilities
Demand Deposits 35,083
Other Liabilities 2,021
---------
TOTAL LIABILITIES 277,327
Shareholders' Equity 35,721
---------
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY $313,048
=========
NET INTEREST INCOME $14,863
==========
NET YIELD ON INTEREST EARNING ASSETS 5.06%
=========
(1) Nonaccrual loans are included in the average loan balance.
(2) Interest income on tax exempt securities includes a taxable equivalent
adjustment using a 34% tax rate.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
WAYNE BANCORP, INC.
December 31, 1994
Average
Daily Yield/
Balance Interest Rate
(In thousands of dollars)
ASSETS ----------------------------
Interest Earning Assets:
Loans (including fees) (1) $189,897 $16,465 8.67%
Investment Securities
Taxable 63,799 3,193 5.00%
Tax-Exempt (2) 26,508 2,015 7.60%
Federal Funds Sold 2,643 110 4.16%
-------------------
TOTAL EARNING ASSETS 282,847 21,783 7.70%
Non-earning Assets:
Cash and due from banks 11,583
Premises and Equipment (net) 5,817
Other Assets 5,768
Less Allowance for Loan Losses (3,292)
---------
TOTAL ASSETS $302,723
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
Transaction Accounts 53,444 1,506 2.82%
Savings 63,359 1,825 2.88%
Time Deposits 100,995 4,210 4.17%
Short Term Borrowings 10,387 390 3.75%
-------------------
TOTAL INTEREST BEARING LIABILITIES 228,185 7,931 3.48%
Non-Interest Bearing Liabilities
Demand Deposits 40,820
Other Liabilities 1,403
---------
TOTAL LIABILITIES 270,408
Shareholders' Equity 32,315
---------
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY $302,723
=========
NET INTEREST INCOME $13,852
==========
NET YIELD ON INTEREST EARNING ASSETS 4.90%
=========
(1) Nonaccrual loans are included in the average loan balance.
(2) Interest income on tax exempt securities includes a taxable equivalent
adjustment using a 34% tax rate.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
WAYNE BANCORP, INC.
December 31, 1993
Average
Daily Yield/
Balance Interest Rate
(In thousands of dollars)
ASSETS ----------------------------
Interest Earning Assets:
Loans (including fees) (1) $173,344 $15,163 8.75%
Investment Securities
Taxable 67,190 3,723 5.54%
Tax-Exempt (2) 24,867 1,865 7.50%
Federal Funds Sold 3,530 116 3.29%
-------------------
TOTAL EARNING ASSETS 268,931 20,867 7.76%
Non-earning Assets:
Cash and due from banks 11,095
Premises and Equipment (net) 5,502
Other Assets 5,719
Less Allowance for Loan Losses (2,852)
---------
TOTAL ASSETS $288,395
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
Transaction Accounts 43,369 1,114 2.57%
Savings 65,658 2,070 3.15%
Time Deposits 106,473 4,869 4.57%
Short Term Borrowings 6,865 234 3.41%
-------------------
TOTAL INTEREST BEARING LIABILITIES 222,365 8,287 3.73%
Non-Interest Bearing Liabilities
Demand Deposits 35,011
Other Liabilities 1,472
---------
TOTAL LIABILITIES 258,848
Shareholders' Equity 29,547
---------
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY $288,395
=========
NET INTEREST INCOME $12,580
==========
NET YIELD ON INTEREST EARNING ASSETS 4.68%
=========
(1) Nonaccrual loans are included in the average loan balance.
(2) Interest income on tax exempt securities includes a taxable equivalent
adjustment using a 34% tax rate.
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.
1995 vs 1994 1994 vs 1993
-------------------------------------------------------
Increase (Decrease) (1) Increase (Decrease) (1)
Volume Rate Net Volume Rate Net
-------------------------------------------------------
(In thousands of dollars)
Interest Income:
Loans $1,417 $1,074 $2,491 $1,448 ($146) $1,302
Taxable Investments (134) 616 482 (188) (342) (530)
Non-taxable
Investments (262) 156 (106) 123 27 150
Federal Funds Sold 60 69 129 (29) 23 (6)
-------------------------------------------------------
Total Interest Income 1,081 1,915 2,996 1,354 (438) 916
Interest Expense:
Transaction Accounts 123 390 513 259 133 392
Savings (409) (20) (429) (72) (173) (245)
Time Deposits 846 805 1,651 (250) (409) (659)
Short-term Borrowings 87 163 250 120 36 156
-------------------------------------------------------
Total Interest Expense 647 1,338 1,985 57 (413) (356)
-------------------------------------------------------
Net Interest Income $435 $577 $1,011 $1,297 ($25) $1,272
=======================================================
(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 volume variance and rate variances 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 34% tax rate for each year.
INVESTMENT PORTFOLIO
WAYNE BANCORP, INC.
The following table represents the carrying value of investment securities at
the dates indicated:
(in thousands of dollars)
1995 1994 1993
----------------------------
U.S. Treasury and Other U.S. Government
Agency Obligations $43,121 $48,512 $47,857
Mortgage-backed Securities 13,955 11,915 13,891
States and Political Subdivisions 21,126 24,510 24,531
Other 16,123 8,214 7,110
----------------------------
$94,325 $93,151 $93,389
============================
The following table sets forth the maturity distribution and yields on
investment securities available for-sale at December 31, 1995
(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 $19,762 6.63% $23,359 6.09%
Mortage-backed Securities 782 6.59% 9,491 6.22%
States and Political Subdivisions 4,268 5.73% 9,276 6.05%
Other 7,721 6.85% 6,114 7.97%
-------------------------------------
$32,533 6.56% $48,240 6.35%
=====================================
Five to Ten Years Over Ten Years
Carrying Carrying
Value Yield Value Yield
-------------------------------------
U.S. Treasury and Other U.S. Government
Agency Obligations
Mortgage-backed Securities 2,125 6.95% 1,557 8.01%
States and Political Subdivisions 7,121 5.68% 461 5.62%
Other 2,288 7.57%
-------------------------------------
$9,246 5.97% $4,306 7.52%
=====================================
Note: Yield represents the weighted average yield to maturity. Yield on
states and political subdivisions are not calculated on a tax
equivalent basis. Mortgage-backed obligations are distributed based
on contractual maturity.
Excluding those holdings of the investment portfolio in U.S. Treasury securities
and other agencies and corporations of the U.S. Government, there were no
investment securities of any one issuer which exceeded 10% of consolidated
shareholders' equity at December 31, 1995.
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. Loans by major category at
the end of the last five years were as follows: (In thousands of dollars)
1995 1994 1993 1992 1991
----------------------------------------------
Real Estate $76,694 $78,930 $71,230 $66,539 $62,086
Installment & Credit Card 42,426 39,914 34,408 34,391 40,048
Commercial & Collateral 81,740 75,983 74,011 72,081 56,072
Lease Financings 3,435 2,741 2,535 3,281 3,822
Other Loans 26 12 16 15 86
----------------------------------------------
$204,321 $197,580 $182,200 $176,307 $162,114
==============================================
The maturity distribution of the loan portfolio is a key factor in the
evaluation of risk characteris 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 1995
is included on page 31 of the 1995 Annual Report to Shareholders, and is
incorporated herein by reference.
The maturity distribution and interest rate sensitivity of commercial and
collateral loans at December 31, 1995 are as follows (In thousands of dollars):
Within 1 to 5 After 5
1 Year Years Years Total
-------------------------------------
Commercial and Collateral $34,856 $40,849 $6,035 $81,740
Real Estate Construction
Loans due after 1 year:
At predetermined interest rates $17,508
At floating interest rates $29,376
The following table summarizes past due, non-accrual and restructured loans:
(In thousands of dollars) 1995 1994 1993 1992 1991
----------------------------------------------
Accruing loans past due 90 days
or more as to principle or $204 $149 $45 $713 $508
Non-accrual loans 15 22 46 375 359
Restructured loans 0 0 0 0 0
----------------------------------------------
$219 $171 $91 $1,088 $867
==============================================
The effect of non-performing loans was as follows: December 31, 1995
------------------
Interest income due on non-performing loans in accordance
with the original terms of the loan $1
Less: Interest income on non-performing loans reflected in incom 0
---------
Net reduction in interest income $1
=========
The policy for placing loans on non-accrual status is to stop the accrual on
interest when it is like that collection of all of the principle or interest
is deemed doubtful, or when loans are past due as principle or interest ninety
days or more. In certain cases, interest accruals are continued on loans
ninety days past due if they are deemed to be adequately secured and in the
process of collection.
The Company adopted SFAS No. 114 and SFAS No. 118 effective January 1, 1995.
At December 31, 1995, the Company had no loans classified as impaired, and
therefore, the adoption of SFAS No. 114 and SFAS No. 118 had no effect on the
comparability of non-performing assets at December 31, 1995 to prior periods.
As of December 31, 1995, there were no potential problem loans for which
management has doubt as to the borrower's ability to comply with the present
repayment terms, which are not disclosed as past due ninety days or more,
non-accrual or restructured. These loans and their potential loss
exposure has been considered in the analysis of the adequacy of the reserve
for loan losses, prepared by management and included on page 13 of this filing.
There were no foreign loans outstanding at December 31, 1995, 1994 or 1993.
As of December 31, 1995, 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 31,1 995, 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.
SUMMARY OF LOAN LOSS EXPERIENCE
WAYNE BANCORP, INC.
In the normal course of business, the Company assumes risk of 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 and anticipated economic
conditions and credit-worthiness of its borrowers. The allowance for loan
losses is increased by provisions charged to operations and recovery of loans
previously charged off. The allowance is reduced by loans charged off as they
become uncollectible by the Bank's management. The following table contains
information relative to the loan loss experience for five years ending
December 31:
(In thousands of dollars) 1995 1994 1993 1992 1991
----------------------------------------------
Allowance for loan losses
at the beginning of the year $3,448 $3,040 $2,629 $2,059 $1,712
Loans charged off:
Real Estate 0 0 15 53 10
Installment & Credit Card 218 154 213 294 607
Lease Financings 1 0 5 1 22
Commercial & Collateral 11 29 173 20 319
----------------------------------------------
Total Loans Charged Off 230 183 406 368 958
Recoveries on loans charged off:
Real Estate 0 0 0 0 0
Installment & Credit Card 115 136 132 126 110
Lease Financings 139 7 3 5 2
Commercial & Collateral 113 102 82 57 93
----------------------------------------------
Total Recoveries 367 245 217 188 205
Net Loans Charged Off (137) (62) 189 180 753
Provision for Loan Losses 120 346 600 750 900
Changes incident to acquisition 200
----------------------------------------------
Allowance for Loan Losses
at the End of the Year $3,705 $3,448 $3,040 $2,629 $2,059
==============================================
Ratio of net charge-offs during the
year to average outstanding loans
during the year -0.07% -0.03% 0.10% 0.10% 0.50%
In all years presented, there were no material amount of loans excluded from the
amounts disclosed as non-accrual, past due 90 days or more restructured, or
potential problem loans, which may have been classified by the regulatory
examiners as loss, doubtful or substandard.
The following table shows an allocation of the allowance for loan losses for the
current period and each of the last two year ends.
Actual Net Charge-offs
--------------------
12-31-95 12-31-94 12-31-93 12-31-95 12-31-94
----------------------------------------------
Real Estate $201 $212 $207 $0 $0
Installment & Lease 65 103 338 (71) 4
Commercial & Collateral 319 412 719 (101) (74)
Credit Card Receivables 14 17 69 35 8
Other Loans 0 0 0
Unallocated 3,106 2,704 1,707
----------------------------------------------
$3,705 $3,448 $3,040 ($137) ($62)
==============================================
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 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.
The Company's management has an internal strategic goal that sets the allowance
for loan losses in a range of 1.25% to 1.50% of total net loans and leases.
At December 31, 1995 that ratio was 1.75% of total net loans and leases. Based
on the ratio of allowance to total net loans and leases and the December 31,
1995 ratio of loans past due 30 days or more to total net loans and leases
was .61%, the above allocation is considered reasonable by the Company's
management.
The amounts included in the specific allocations are obtained by using the
principle balance of any loans classified on the problem loan list as loss or
doubtful, plus 10% of the total principle balances of loans considered
substandard and 5% of those which are considered watch credits.
At December 31, 1995, the Company had not allocated any portion of the allowance
for loan losses for impaired loan balances. The adoption of SFAS No. 114 and
SFAS No. 118 had no impact on the comparability of the December 31, 1995
allowance for loan losses allocation to prior periods.
DEPOSITS
WAYNE BANCORP, INC.
The following table presents the average daily balance and the average rate paid
on each of the Bank's deposit categories for the period indicated.
(In thousands of dollars)
Year End December 31,
1995 1994 1993
Amount: ----------------------------
Non-interest bearing demand $35,083 $40,820 $35,011
Interest bearing demand 57,802 53,444 43,369
Savings 49,155 63,359 65,658
Time deposits 121,271 100,995 106,473
----------------------------
$263,311 $258,618 $250,511
============================
Average rate for the year:
Interest bearing demand 3.49% 2.82% 2.57%
Savings 2.84% 2.88% 3.15%
Time deposits 4.83% 4.17% 4.57%
The maturity distribution of certificates of deposit of $100,000 or more at
December 31, 1995 are as follows:
(In thousands of dollars)
Three months or less $7,837
Over three months through six months 2,744
Over six months through twelve months 2,785
Over twelve months 4,465
---------
$17,831
=========
RETURN ON EQUITY AND ASSETS
WAYNE BANCORP, INC.
The following table sets for operating and capital ratios of the Company
calculated on average daily balances:
Year End December 31,
1995 1994 1993
----------------------------
Return on Average Assets 1.43% 1.33% 1.27%
Return on Average Equity 12.56% 12.44% 12.43%
Dividend Payout Ratio 30.03% 28.77% 28.40%
Equity to Asset Ratio 11.46% 10.66% 10.26%
The following table represents information on federal funds purchased and
securities sold under agreements to repurchase:
(In thousands of dollars)
Year End December 31,
1995 1994 1993
----------------------------
Amount outstanding at year end $15,662 $13,861 $8,879
Weighted average interest rate 4.78% 5.02% 2.65%
Maximum outstanding at any month end 17,084 16,057 9,402
Average outstanding during the year 12,717 10,387 6,865
Weighted average rate during the year 5.03% 3.75% 3.41%
The Company enters into sales of securities under agreements to repurchase for
periods up to 29 days, which are treated as financings and reflected in the
consolidated balance sheet as a liability. The Company has borrowing lines of
credit extended by correspondent banks. At December 31, 1995 the Company has
$29 million of available credit, of which, none is used.
ITEM 2. PROPERTIES
The principal offices of the Company and the Wayne County National Bank are
located at 112 West Liberty Street, Wooster, Ohio. At December 31, 1995 the
Company owned nine of its branch facilities and leased two facilities. Nine
offices are located in Wayne County, Ohio and one located in each Holmes and
Stark Counties in Ohio.
ITEM 3. LEGAL PROCEEDINGS
There is no pending litigation of a material nature in which the Company is
involved an no such legal proceedings were terminated during the fourth quarter
of 1995. Furthermore, there are no material proceedings in which any director,
officer or affiliate of the Registrant, or any associate of such director of
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the year ended December 31, 1995, there were no
matters submitted to a vote of security holders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Reference is made to the section titled "Dividend and Market Price Data" on Page
4 of the 1995 Annual Report to Shareholders for the information about 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 13, "Restriction of Subsidiary Dividends" on
page 23 of the 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" on page 3
of the 1995 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"
on pages 25 through 32 of the 1995 Annual Report to Shareholders which is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, Management's Responsibility for the
Financial Statements Letter, and Report of Independent Auditors are included
on pages 11 through 24 of the 1995 Annual Report to Shareholders, which is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
Reference is made to the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held March 28, 1996 for information regarding changes in and
disagreements with accountants on accounting and financial disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held March 28, 1996 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
incorporate herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held March 28, 1996 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 to the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held March 28, 1996 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 to the Registrant's Proxy Statement which is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedules
The following financial statements and reports of Independent Auditors appears
on pages 12 thru 24 of the Company's 1995 Annual Report to Shareholders which
financial statements are incorporated herein by reference and attached hereto:
Report of Crowe Chizek and Company, LLP Independent Auditors
Consolidated Balance Sheets, December 31, 1995 and 1994
Consolidated Statements of Income, Years Ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows, Years Ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Shareholders' Equity, Years Ended
December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
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 herein incorporated 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 herein incorporated by reference.
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 herein incorporated 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 herein incorporated 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.
13 Annual Report to Shareholders for the year ended December 31, 1995
22 Subsidiaries of the Registrant
27 Financial Data Schedule
28 Notice of Annual Shareholders' Meeting
(b) Reports on Form 8-K
There were no Form 8-K's filed during the last quarter of the period covered by
this report.
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.
Date: March 1, 1996 By:_____________________________
Secretary/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
David L. Christopher March 28, 1996
____________________________ ____________________
David L. Christopher Director, Chairman of Board,
President and CEO
James O. Basford March 28, 1996
____________________________ ____________________
James O. Basford Director
Joseph R. Benden March 28, 1996
____________________________ ____________________
Joseph R. Benden Director
David P. Boyle March 28, 1996
____________________________ ____________________
David P. Boyle, CPA Senior Vice President and
Chief Financial Officer
Gwenn E. Bull March 28, 1996
____________________________ ____________________
Gwenn E. Bull Director
Dennis B. Donahue March 28, 1996
____________________________ ____________________
Dennis B. Donahue Director
Harold Freedlander March 28, 1996
____________________________ ____________________
Harold Freedlander Director
Frank M. Hays March 28, 1996
____________________________ ____________________
Frank M. Hays Director
Dietrich Kaesgen March 28, 1996
____________________________ ____________________
Dietrich Kaesgen Director
Joseph E. Seringer, Jr. March 28, 1996
____________________________ ____________________
Joseph E. Seringer, Jr. Director
Jeffrey E. Smith March 28, 1996
____________________________ ____________________
Jeffrey E. Smith Director
David E. Taylor March 28, 1996
____________________________ ____________________
David E. Taylor Director
Bala Venkataraman March 28, 1996
____________________________ ____________________
Bala Venkataraman Director
EXHIBIT (22)
SUBSIDIARIES OF THE REGISTRANT
NAME STATE OF INCORPORATION
Wayne County National Bank Ohio
Wayne National Corporation Ohio
FIVE YEAR FINANCIAL SUMMARY 1
(In thousands of dollars, For the Years Ended December 31,
except per share data) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
Statement of Income Summary:
Total Operating Income............ $26,883 $23,695 $22,871 $24,255 $25,149
Total Operating Expense........... 20,566 18,115 17,979 19,970 21,318
Total Interest Income............. 24,130 21,096 20,232 21,745 22,767
Total Interest Expense............ 9,916 7,931 8,287 10,184 12,155
Net Interest Income............... 14,214 13,165 11,945 11,561 10,612
Provision for Loan Losses......... 120 346 600 750 900
Income Before Income Tax Expense
and Accounting Change.......... 6,317 5,580 4,892 4,285 3,830
Income Tax Expense................ 1,832 1,560 1,480 1,171 1,082
Income Before Accounting Change... 4,485 4,020 3,412 3,114 2,748
Cumulative Effect of Accounting
Change....................... 260
Net Income........................ 4,485 4,020 3,672 3,114 2,748
Per Share Data: 2
Net Income........................ $2.40 $2.15 $1.98 $1.68 $1.48
Cash Dividends.................... 0.72 0.61 0.56 0.50 0.50
Book Value........................ 20.27 17.98 16.59 15.03 13.87
Balance Sheet Data:
Total Loans and Leases............$212,860 $197,580 $182,200 $176,307 $162,114
Allowance for Loan Losses......... 3,705 3,448 3,040 2,629 2,059
Investment Securities............. 94,325 93,151 93,389 84,778 92,590
Total Deposits.................... 274,747 266,545 258,759 254,773 243,509
Shareholders' Equity.............. 37,937 33,640 30,750 27,855 25,699
Total Assets...................... 330,927 315,685 299,735 291,282 278,642
Other Data:
Employees......................... 176 171 175 178 180
Shareholders...................... 1,182 1,163 1,158 1,153 1,160
Cash Dividends.................... $1,347 $1,157 $1,043 $959 $923
Cash Dividends as a Percent
of Net Income........... 30.03% 28.77% 28.40% 30.78% 33.59%
Financial Ratios:
Return on Average Assets.......... 1.43% 1.33% 1.27% 1.12% 1.06%
Return on Beginning Equity........ 13.33% 13.07% 13.18% 12.12% 11.51%
Equity to Assets.................. 11.46% 10.66% 10.26% 9.56% 9.22%
Loans to Deposits................. 77.47% 74.13% 70.41% 69.20% 66.57%
Loans to Total Assets............. 64.32% 62.59% 60.79% 60.53% 58.18%
Allowance for Loan Losses to
Total Net Loans......... 1.75% 1.75% 1.67% 1.51% 1.29%
1. This summary should be read in conjunction with the related consolidated
financial statements and notes to the financial statements.
2. Per share data has been adjusted for stock dividends and splits. See
Footnote #2 to the Financial Statements.
SHAREHOLDER INFORMATION
Executive Offices Transfer Agent Market Makers
112 West Liberty Street Wayne County National Bank Everen Securities
P.O. Box 757 112 West Liberty Street - Wooster, OH
Wooster, Ohio 44691 P.O. Box 757 The Ohio Company
(330)264-1222 Wooster, Ohio 44691 - Wooster, OH
McDonald & Co.
- Canton, OH
Sweeney Cartwright
- Columbus, OH
All common shares of Wayne Bancorp, Inc. are voting shares and are traded in the
local over-the-count market, primarily with the brokers in the Company's local
service area. At December 31, 1995 there are 1,874,284 shares outstanding and
1,182 shareholders of record. The range of market prices are compiled
from data provided by the brokers based on the trading activity.
DIVIDEND AND MARKET PRICE DATA
Cash
Dividends
Quarter Ended High Low Paid
- --------------------------------------------------------------------------
1995 March 31............................ $37.00 $35.00 $0.17
June 30............................. 38.50 36.50 0.17
September 30........................ 38.50 36.50 0.19
December 31......................... 43.25 38.50 0.19
1994 March 31............................ $33.25 $30.40 $0.14
June 30............................. 35.15 32.30 0.14
September 30........................ 35.15 33.25 0.165
December 31......................... 36.00 34.00 0.165
FORM 10-K
A copy of the Company's 1995 Annual Report on Form 10-K filed with the
Securities and Exchange Commission is available to shareholders without charge.
To obtain a copy, direct your request to David P. Boyle, CPA, Vice President
and Chief Financial Officer, P.O. Box 757, Wooster, OH 44691.
January 25, 1996
The management of Wayne Bancorp, Inc. has prepared and is responsible for
the financial statements and for the integrity and consistency of other related
information contained in the Annual Report. In the opinion of management,
the financial statements, which necessarily include amounts that are based on
management estimates and judgments, have been prepared in conformity with
generally accepted accounting principles appropriate to the circumstances.
The Company designed and maintains a system of internal accounting
controls that is designed to provide reasonable assurance that assets are
safeguarded, that transactions are executed in accordance with Company
authorizations and policies, and that transactions are properly recorded so
as to permit preparation of financial statements that will fairly present the
financial position and results of operations in conformity with generally
accepted accounting principles. Internal accounting controls are augmented by
written policies covering standards of personal and business conduct and an
organizational structure providing for division of responsibility and authority.
The effectiveness of and compliance with established control systems is
monitored through a continuous program of internal audit and credit
examinations. In recognition of cost-benefit relationships and inherent
control limitations, some features of the control system are designed
to detect rather than prevent errors, irregularities and departures from
approved policies and practices. Management believes that the system of
controls has prevented or detected on a timely basis any occurrences that
could be material to the financial statements and that timely corrective
actions have been initiated when appropriate.
The Company engaged Crowe, Chizek and Company LLP, independent certified
public accountants, to render an opinion on the financial statements. The
accountants have advised management that they were provided with access to
all information and records deemed necessary to render their opinion.
The Board of Directors exercises its responsibility for the financial
statements and related information through the Audit Committee, which is
comprised entirely of outside directors. The Audit Committee meets on a
regular basis with mangement, the Internal Auditor of the Company, and Crowe,
Chizek and Company LLP to assess the scope of the annual audit plan, to review
the status and results of audits, to review the Annual Report and Form 10-K,
including major changes in accounting policy and reporting practices, and to
approve non-audit related services rendered by the independent auditors.
Crowe, Chizek and Company LLP also meets with the Audit Committee, without
management being present, to afford them the opportunity to express their
opinion on the adequacy of management's compliance with the established
policies and procedures and the quality ofthe financial reporting.
David L. Christopher David P. Boyle, CPA
Chairman of the Board, President Vice President and
and Chief Executive Officer Chief Financial Officer
Wayne Bancorp, Inc. Wayne County National Bank
Report of Crowe, Chizek and Company LLP
Independent Auditors
Board of Directors and Shareholders
Wayne Bancorp, Inc.
Wooster, Ohio
We have audited the accompanying consolidated balance sheets of Wayne
Bancorp, Inc. as of December 31, 1995 and 1994 and the related consolidated
statements of income, cash flows and changes in shareholders' equity for the
three years ended December 31, 1995, 1994 and 1993. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Wayne
Bancorp, Inc. as of December 31, 1995 and 1994, and the results of operations
and cash flows for the three years ended December 31, 1995, 1994 and 1993 in
conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the
Company changed its method of accounting for impaired loans in 1995, for
certain investment securities in 1994 and for income taxes in 1993 to conform
to new accounting guidance.
Crowe Chizek and Company LLP
Columbus, Ohio
January 25, 1996
CONSOLIDATED BALANCE SHEETS
December 31,
(In thousands of dollars except per share data) 1995 1994
- --------------------------------------------------------------------------
ASSETS
Cash and due from banks (Note 12)....................... $16,015 $17,091
Federal funds sold...................................... 1,000
------------------
Total cash and cash equivalents............... 17,015 17,091
Investment securities available-for-sale................ 94,325 28,085
Investment securities held-to-maturity
(Fair Value $64,095) (Note 3).................. 65,066
Loans held for sale..................................... 8,539
Loans and leases (Note 4)............................... 204,321 197,580
Less:
Unearned income............................... 749 653
Allowance for loan losses (Note 5)............ 3,705 3,448
------------------
Net loans and leases.......................... 199,867 193,479
Premises and equipment (Note 6)......................... 6,126 6,317
Accrued income receivable and other assets (Note 2)..... 5,055 5,646
------------------
TOTAL ASSETS............................................$330,927 $315,684
==================
LIABILITIES
Deposits
Interest bearing (Note 7)..........................$232,512 $219,559
Noninterest bearing................................ 42,235 46,986
------------------
Total deposits.......................................... 274,747 266,545
Federal funds purchased................................. 5,000
Securities sold under agreements to repurchase (Note 3). 15,662 8,861
Other liabilities....................................... 2,581 1,638
------------------
Total liabilities....................................... 292,990 282,044
SHAREHOLDERS' EQUITY(Note 9)
Common stock, Stated value $1.00........................ 1,874 1,871
Shares authorized - 5,400,000 in 1995 and 2,400,000 in 1994
Shares issued - 1,874,284 in 1995 and 1,871,467 in 1994
Shares outstanding - 1,870,681 in 1995 and 1,870,971 in 1994
Paid in capital......................................... 7,999 7,897
Retained earnings (Note 13)............................. 27,368 24,230
Treasury stock at cost.................................. (134) (15)
Unrealized gain (loss) on securities
available-for-sale, net of tax (Note 3).............. 830 (343)
------------------
Total shareholders' equity.............................. 37,937 33,640
------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..............$330,927 $315,684
==================
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,
(In thousands of dollars except per share data) 1995 1994 1993
- --------------------------------------------------------------------------------
INTEREST INCOME:
Interest and fees on loans............................. $18,956 $16,465 $15,163
Interest on investment securities
Taxable............................................. 3,675 3,193 3,723
Nontaxable.......................................... 1,260 1,329 1,231
Other interest income.................................. 239 109 115
------------------------
Total interest income.................................. 24,130 21,096 20,232
INTEREST EXPENSE:
Interest on deposits (Note 7).......................... 9,276 7,541 8,053
Interest on repurchase agreements and
other borrowed funds................................ 640 390 234
------------------------
Total interest expense................................. 9,916 7,931 8,287
------------------------
NET INTEREST INCOME 14,214 13,165 11,945
Provision for loan losses (Note 5)..................... 120 346 600
NET INTEREST INCOME AFTER PROVISION ------------------------
FOR LOAN LOSSES................................... 14,094 12,819 11,345
OTHER INCOME:
Service charges and fees............................... 1,260 1,261 1,211
Income from fiduciary activities....................... 942 833 809
Securities gains (losses), net......................... (12) 2
Other noninterest income............................... 563 503 619
------------------------
Total other income..................................... 2,753 2,599 2,639
OTHER EXPENSES:
Salaries and employee benefits (Note 9)................ 5,167 4,399 3,990
Occupancy and equipment................................ 1,089 1,011 856
Other operating expenses (Note 10)..................... 4,274 4,428 4,246
------------------------
Total other expenses................................... 10,530 9,838 9,092
INCOME BEFORE INCOME TAX EXPENSE
AND ACCOUNTING CHANGE............................... 6,317 5,580 4,892
INCOME TAX EXPENSE (Note 11)........................ 1,832 1,560 1,480
------------------------
INCOME BEFORE ACCOUNTING CHANGE........................ 4,485 4,020 3,412
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES (Note 2).................. 260
------------------------
NET INCOME............................................. $4,485 $4,020 $3,672
========================
PER SHARE DATA: (Note 2)
INCOME BEFORE ACCOUNTING CHANGE........................ $2.40 $2.15 $1.84
CUMULATIVE EFFECT OF ACCOUNTING CHANGE................. .14
------------------------
NET INCOME............................................. $2.40 $2.15 $1.98
========================
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
(In thousands of dollars except for per share data) 1995 1994 1993
- --------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net Income........................................... $4,485 $4,020 $3,672
Adjustments to reconcile net cash provided
by operating activities:
Provision for loan losses.................. 120 346 600
Depreciation and amortizati................ 759 728 702
Federal Home Loan Bank stock dividends..... (23)
Amortization of investment security premiums
and accretion of discounts, net.......... 462 976 1,135
Deferred income taxes...................... 21 (223) (587)
Increase (Decrease) in interest receceivable. (154) (146) (417)
(Increase) Decrease in interest payayable.. 508 (335) (119)
Other, net................................. 318 822 (256)
------------------------
Net cash provided by operating activities............ 6,496 6,188 4,730
INVESTING ACTIVITIES
Purchase of investment securities
available-for-sale................................. (27,928) (13,939)
Proceeds from maturities of securities
available-for-sale................................. 6,691 1,000
Proceeds from sales of securities
available-for-sale................................. 999 6,075
Purchase of investment securities
held-to-maturity................................... (8,521) (29,342) (56,956)
Proceeds from maturities of securities
held-to-maturity................................... 28,910 34,948 47,210
Net increase in loans and leases..................... (15,047) (15,718) (15,742)
Proceeds from sales of loans......................... 8,701
Purchase of premises and equipment................... (318) (1,287) (281)
Partnership equity distribution...................... 105 32
---------------------------
Net cash used by investing activities................ (15,214) (18,158) (17,036)
FINANCING ACTIVITIES
Net increase in deposits............................. 8,202 7,786 3,988
Net increase (decrease) in short term borrowings..... 1,801 4,981 2,862
Cash dividends....................................... (1,133) (966) (962)
Fractional stock dividends paid in cash....................... (18)
Issuance of common stock...................................... 197 200
Treasury stock purchased, net........................ (228) (15)
---------------------------
Net cash provided by financing activities............ 8,642 11,980 6,073
Increase (decrease) in cash and cash equivalents..... (76) 10 (6,233)
Cash and cash equivalents at beginning of year....... 17,091 17,081 23,314
---------------------------
Cash and cash equivalents at end of year............. $17,015 $17,091 $17,081
===========================
Significant non-cash transactions:
Transfer of held-to-maturity securities
to available-for sale.............................. $45,652
Transfer of loans from portfolio to held for sale.... $8,539
Transfer of loans held for sale to loan portfolio.... $7,696
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Three Years Ended December 31, 1995
Unrealized
gain(loss) on
(In thousands of dollars except per share data) securities
Common Paid-In Retained Treasury Available-
Stock Capital Earnings Stock for-sale Total
- --------------------------------------------------------------------------------
Balance, January 1, 1993. $881 $4,028 $22,946 $27,855
Net income............... 3,672 3,672
Cash dividends
($.56 per share........ (1,043) (1,043)
Dividends reinvested..... 3 78 81
Common stock issued...... 4 196 200
Two-for-one stock split
(Note 2)............... 884 (884)
Purchase treasury stock.. ($15) (15)
-----------------------------------------------------
Balance December 31, 1993. 1,772 4,302 24,691 (15) 0 30,750
Unrealized gain on
securities available-
for-sale on adoption
of FAS No. 115 on
January 1, 1994,
net of tax.............. $140 140
Net income................ 4,020 4,020
Cash dividends
($.61 per share)........ (1,139) (1,139)
Dividends reinvested...... 5 168 173
Common stock issued....... 6 191 197
5% common stock dividend
at fair market value
(Note 2)................ 88 3,236 (3,324)
Fractional shares of stock
dividend paid in cash
(Note 2)................ (18) (18)
Change in unrealized
gain/loss on securities
available-for-sale
net of tax............. (483) (483)
----------------------------------------------------
Balance December 31, 1994. 1,871 7,897 24,230 (15) (343) 33,640
Net income................ 4,485 4,485
Cash dividends
($.72 per share)........ (1,347) (1,347)
Purchase treasury stock... (246) (246)
Dividends reinvested...... 3 99 109 211
Sale of treasury stock.... 3 18 21
Change in unrealized
gain/loss on securities
available-for-sale
net of tax.............. 1,173 1,173
----------------------------------------------------
Balance December 31, 1995. $1,874 $7,999 $27,368 $358 $830 $37,937
====================================================
See notes to consolidated financial statements
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
(In thousands of dollars except per share data)
1. NATURE OF OPERATIONS
Wayne Bancorp, Inc. and its subsidiary, the Wayne County National Bank conduct
general commercial banking business. Wayne Bancorp is a one-bank holding company
organized in April, 1986.
The Company operates in the single industry of commercial banking. While the
Company offers a wide range of services, they are all deemed to be part of
commercial banking.
The Wayne County National Bank has eleven banking locations in Wayne, Holmes
and Stark Counties in Ohio. A wide variety of services are provided to
businesses, individuals, and institutional and governmental customers. These
services include commercial and personal checking accounts, savings and time
deposits, business and personal loans, real estate loans, credit cards, leases
safe deposit facilities and electronic banking.
The Bank operates a Trust Department which offers complete trust administrative
services, and agency, trust and investment services to individuals,
corporations, partnerships, institutions and municipalities. In addition,
the Trust Department has discount brokerage service which offers stock trading
services to customers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Wayne Bancorp,
Inc. (the Company), subsidiary Wayne County National Bank (the Bank), and the
Bank's wholly owned subsidiary, Wayne National Corporation. All significant
intercompany transactions have been eliminated.
Investment Securities
Effective January 1, 1994, the Company changed its method of accounting for
debt and equity securities to adopt Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Accordingly, securities are classified into held-to-maturity and
available-for-sale categories. The held-to-maturity securities are those which
management has the positive intent the Company has the ability to hold to
maturity, and are reported at cost, adjusted for amortization of premiums and
accretion of discounts. Available-for-sale securities are those which the
Company may decide to sell if needed for liquidity, asset-liability management,
or other reasons. Available-for-Sale securities are reported at fair value,
with unrealized gains and losses included as a separate component of equity,
net of tax. The effect of adopting this new accounting guidance was to increase
the Company's equity at January 1, 1994 by approximately $140 thousand. Prior
to the adoption of SFAS No. 115, the Company recorded its investment securities
at amortized cost. Realized gains or losses are determined based on the
amortized cost of the specific security sold.
Interest and Fees on Loans and Leases
Interest income on commercial, consumer and mortgage loans is primarily
calculated by using the simple interest method based on the principal amounts
outstanding. Lease income is recognized under a method which provides for a
level return on the net investment outstanding. Loan origination fees and
certain direct origination costs are deferred and amortized over the contractual
life of the related loan using the level yield method. The net amount of fees
and costs deferred is reported in the consolidated balance sheets as a part of
loans and leases.
The accrual of interest on loans is suspended when, in Management's opinion,
the collection of a a portion of the loan principal has become doubtful. When
a loan is placed on non-accrual status, accrued and unpaid interest at risk is
charged against income. Payments received on non-accrual loans are applied
against principal until recovery of the remaining balance is reasonably assured.
The carrying value of loans classified as impaired is periodically adjusted to
reflect cash payments, revised estimates of future cash flows and increases in
the present value of expected cash flows due to passage of time. Cash payments
representing interest income are reported as such and other cash payments are
reported as reductions in carrying values. Increases or decreases in carrying
values due to changes in estimates of future payments or the passage of time
are reported as reductions or increases in the provision for loan losses.
Allowance for Loan Losses
The allowance for loan losses is a valuation established through a provision
for loan losses charged to expense. The allowance is the amount which, in the
opinion of management, is necessary to provide for potential losses in the loan
portfolio. Management's determination of the adequacy of the allowance
is based on evaluations of the collectibility of loans outstanding, taking
into consideration prior loss experience, loan quality, current economic
conditions and other pertinent factors. Loans which are deemed uncollectible
are charged off and deducted from the allowance and recoveries on loans
previously charged off are added to the allowance.
On January 1, 1995 the Company adopted SFAS 114, as amended by SFAS 118. Under
this standard, loans considered to be impaired, as identified according to
internal loan review standards, are reduced to the present value of expected
future cash flows or to the fair value of collateral by allocating a portion
of the allowance for loan losses to such loans. If these allocations cause the
allowance for loan losses to require an increase, such an increase will be
reported as a provision for loan losses charged to operations. The effect of
adopting this standard did not materially effect the allowance for loan losses
at January 1, 1995 or at December 31, 1995.
Management analyzes loans on an individual basis and classifies a loan as
impaired when an analysis of the borrower's operating results and financial
condition indicates that underlying cash flows are adequate to meet its debt
service requirements. Often this is associated with a delay or shortfall in
payments of 30 days or more. Smaller balance homogeneous loans are evaluated
for impairment in total. Such loans include residential first mortgage loans
secured by one to four family residences, residential construction loans,
consumer automobile, home equity and credit card loans with balances less than
$300 thousand. In addition, loans held for sale and leases are excluded from
consideration as impaired. Loans are generally moved to non-accrual status when
90 days or more past due. These loans are often also considered impaired.
Impaired loans, or portions thereof, are charged off when deemed uncollectible.
The nature of the disclosures for impaired loans is considered generally
comparable to prior nonaccrual loans and non-performing and past due asset
disclosures. The adoption of SFAS No. 114 had no impact on the comparability
of the December 31, 1995 allowance for loan losses to prior periods.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on a straight-line method over the estimated useful
life of the asset. Maintenance and repairs are charged to expense as incurred
and major improvements are capitalized.
Other Real Estate
Other real estate is recorded at the lower of cost or fair value, less
estimated costs to sell. Any reduction from the carrying value of the related
loan to fair value at the time the property is acquired is accounted for as a
loan charge-off. Any subsequent reductions in the fair value are reflected in a
valuation allowance through a charge to other real estate expense. Expenses
incurred to carry other real estate are charged to operations as incurred.
There was no other real estate held at December 31, 1995 and 1994.
Investment in Affiliate
The Bank's 20% partnership interest in NB5 Financial Services is reported
using the equity method of accounting. NB5 Financial Services is an Ohio
general partnership engaged in equipment leasing activities. Due to changes
in the demand for leases, the partners have determined that NB5 will not
continue generating new leases. As existing leases are paid, equity
distributions will be made to the partners. In 1995 there were no capital
distributions versus $105 thousand in 1994.
Intangibles
Intangible assets arising from the Bank's acquisition of four branches of
the former First Savings & Loan Company of Massillon, F.A., in July of 1991
are included in Other Assets in the accompanying Consolidated Balance Sheet
and are summarized as follows:
Goodwill................... $919
Core Deposit Intangible.... 279
Goodwill is being amortized using a method and life which corresponds to
the accretion of the loan discount. Core deposit intangible is being amortized
by deposit component, on a level yield basis over a ten year period.
Amortization of these intangibles totaled $250 thousand, $290 thousand, and $323
thousand for 1995, 1994 and 1993 respectively.
Income Taxes
Beginning in 1993, the Company adopted SFAS No. 109, "Accounting for Income
Taxes." The Company records income tax expense based on the amount of taxes
due on its tax return plus the change in deferred taxes computed based on the
expected future tax consequences of temporary differences between the carrying
amounts and tax basis of assets and liabilities, using enacted tax rates.
Previously, the Company computed deferred taxes for the tax effects of timing
differences between financial reporting and tax return income. The effect of
adoption of SFAS No. 109 as of January 1,1993 is shown as the cumulative effect
of an accounting change in the 1993 Consolidated Statement of Income.
Dividend Reinvestment Plan
In 1993, the Company established a dividend reinvestment plan whereby the
Company's shareholders are eligible to acquire new common shares of stock at
100% of the current estimated fair market value in lieu of receiving cash
dividends. Shareholders can have all or part of their normal cash dividends
reinvested in the Company's stock. During 1995, 5,454 shares of stock were
allocated under the plan in lieu of cash dividends of $214 thousand. Of the
shares allocated, 2,754 new shares were issued by the Company and 2,700 shares
were obtained from a reduction in the Treasury stock.
Consolidated Statement of Cash Flows
Cash and cash equivalents include cash, noninterest bearing deposits with
banks and federal fund sold. As permitted, the Company reports cash flows from
certain transactions on a net basis. For the years ended December 31, 1995, 1994
and 1993, income taxes paid totaled $1.83 million, $1.75 million, and $1.73
million and interest paid totaled $9.40 million, $8.32 million, and $8.41
million respectively.
Per Share Amounts
Net income per share computations are based on the weighted average number
of shares of common stock outstanding during the year. In November of 1994,
the Company declared a 5% stock dividend. These dividends were recorded by the
transfer of the market value of the new shares from Retained Earnings to Common
Stock and Paid in Capital. Fractional shares resulting from the stock dividend
were paid in cash. In June of 1993, the Board of Directors voted to split the
stock on a 2 for 1 basis. The split was effective June 15, 1993 and payable
to shareholders on July 1, 1993. All per share data has been retroactively
adjusted for the stock split and stock dividends.
Weighted average shares outstanding for December 31, 1995, 1994, and 1993
were 1,872,188, 1,866,146 and 1,855,289, respectively.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during
the reporting period. Actual results could differ from those estimates.
Areas involving the use of management's estimates and assumptions include
the allowance for loan losses, the realization of deferred tax assets, fair
value of certain securities, the determination and carrying value of impaired
loans, the determination of other-than-temporary reductions in the fair
value of securities, depreciation of premises and equipment, the carrying value
and amortization of intangibles and the fair value of financial instruments.
Estimates that are more susceptible to change in the near term include the
allowance for loan losses and the fair value of certain securities.
Concentration of Credit Risk
The Wayne County National Bank grants residential, consumer and commercial
loans and also leases assets to customers located in Wayne, Holmes and Stark
Counties. The makeup of the loan portfolio at December 31, 1995 was as follows:
Commercial................. 40%
Real Estate Loans.......... 35%
Consumer Loans............. 18%
Home Equity Loans.......... 3%
Direct Financing Leases.... 2%
Credit Cards............... 2%
Reclassifications
Certain reclassifications have been made to amounts previously reported to
conform with the current financial statement presentation.
3. INVESTMENT SECURITIES
The summary of amortized cost and fair values of investment securities are
as follows at December 31, 1995:
Gross Gross
Securities Amortized Unrealize Unrealized Fair
Available-for-Sale Cost Gains Losses Value
- ---------------------------- -------- -------- --------- ---------
U.S. Treasury $21,848 $339 ($10) $22,177
Federal Agency
Obligations 20,738 229 (23) 20,944
Federal Agency Pools 13,816 181 (42) 13,955
Obligations of States and
Political Subdivisions 20,612 536 (22) 21,126
Other Securities 16,056 91 (24) 16,123
-------- -------- --------- --------
$93,070 $1,376 ($121) $94,325
======== ======== ========= ========
The summary of amortized cost and fair values of investment securities are
as follows at December 31, 1994:
Gross Gross
Securities Amortized Unrealize Unrealized Fair
Available-for-Sale Cost Gains Losses Value
- ---------------------------- -------- -------- --------- --------
U.S. Treasury $13,953 ($386) $13,567
Federal Agency
Obligations 10,276 (106) 10,170
Federal Agency Pools 3,509 $14 (41) 3,482
Mortgage Backed
Obligations 192 (1) 191
Other Securities 675 675
-------- -------- --------- --------
$28,605 $14 ($534) $28,085
======== ======== ========= ========
Securities
Held-to-Maturity
- ------------------------------
U.S. Treasury $5,058 $2 ($97) $4,963
Federal Agency
Obligations 19,716 4 (385) 19,335
Federal Agency Pools 8,067 34 (364) 7,737
Mortgage Backed
Obligations 176 (1) 175
Obligations of States and
Political Subdivisions 24,510 266 (339) 24,437
Other Securities 7,539 (91) 7,448
-------- -------- --------- ----------
$65,066 $306 ($1,277) $64,095
========= ======== ========= ==========
During the years ended December 31, 1995, and 1994 proceeds from sales of
securities available-for-sale were $1 million with gross realized gains of $22
thousand in 1994 and losses of $1 thousand and $20 thousand in 1995 and 1994
respectively included in earnings. Proceeds from sales of held-to-maturity
securities who's maturity date was within 90 days of the sale date amounted to
$8.1 million in 1995, with gross realized gains of $1 thousand and losses of
$12 thousand included in earnings. There were no sales of held-to-maturity
securities in 1994. Proceeds from these transactions are reflected as
maturities in the consolidated statement of cash flows. There were no security
sales in 1993.
On December 1, 1995, the Company transferred securities with an amortized
cost of $45.65 million previously classified as held-to-maturity to available-
for-sale. The unrealized gain on the securities transferred totaled $653
thousand. This was done in accordance with a Financial Accounting Standards
Board ruling allowing a one time reclassification of securities. On December 1,
1995, the Company's equity increased approximately $431 thousand as a result
of this transfer.
The amortized cost and estimated market value of the securities at
December 31, 1995 by contractual maturity, are shown below. Expected maturities
may differ from the contractual maturities because borrowers may have the right
to call or prepay the obligations with or without call or prepayment penalties.
Securities Available-for-Sale
Amortized Fair
Cost Value
-------- ---------
Due in one year or less $32,274 $32,358
Due after one year
through five years 38,214 39,074
Due after five years
through ten years 7,121 7,292
Due after ten years 461 461
-------- --------
78,070 79,185
Federal Agency Pools
and Mortgage Backed
Securities 13,967 14,107
Equity Securities 1,033 1,033
-------- --------
$93,070 $94,325
======== ========
Investment securities were pledged to secure public and trust deposits,
securities sold under agreements to repurchase, and other purposes required
or permitted by law. Such pledged securities at December 31, 1995 and 1994
had a carrying value of $39.1 million and $30.5 million, respectively.
4. LOANS AND LEASES
The composition of the loan portfolio at December 31 is as follows:
1995 1994
-------- -------
Commercial $81,740 $75,984
Real Estate 70,760 73,387
Consumer Installment 36,954 34,218
Direct Lease Financing 3,435 2,741
Credit Card 5,472 5,695
Home Equity 5,934 5,543
Other Loans 26 12
-------- -------
$204,321 $197,580
======== =======
As of and for the year ended December 31, 1995 there were no impaired loans.
Loans on non-accrual status at December 31, 1994 were $22 thousand. If interest
had been accrued on non-accrual loans, interest income would have increased by
approximately $5 thousand in 1994 and $3 thousand in 1993. Additionally, loans
past due more than 90 days and still accruing income were approximately $149
thousand at December 31, 1994.
The Bank leases various types of equipment and automobiles to its customers,
which are classified as direct lease financing leases. All leases have terms
ranging from two to five years. The composition of the net investment in direct
financing leases included in loans at December 31 is as follows:
1995 1994
Minimum Lease Payments
Receivable $3,423 $2,727
Residual Value of Leased
Property (Unguaranteed) 12 14
-------- --------
3,435 2,741
Less: Unearned Income 547 397
-------- --------
Net Investment In Direct
Financing Lease $2,888 $2,344
======== ========
The following schedule summarizes by year the minimum lease payments
receivable on direct leases at December 31, 1995.
Years Ended December 31
1996 .................. $1,399
1997 .................. 968
1998 .................. 633
1999 .................. 307
2000 .................. 116
--------
$3,423
========
The Bank has granted loans to the officers and directors of the Company and
its subsidiaries and related business interests. The aggregate dollar amount of
these loans was $954 thousand and $596 thousand at December 31, 1995 and 1994,
respectively. During 1995, $559 thousand of new loans and advancements were
made and the repayments on loans to these parties totaled $201 thousand.
In 1996, the Company is required to adopt the provisions of SFAS No. 122,
"Accounting for Mortgage Servicing Rights." This statement requires lenders
who sell originated loans and retain the servicing rights to recognize as
separate assets the rights to service the mortgage loans for others. It also
requires that capitalized mortgage servicing rights be assessed for impairment
based on the fair value of those rights. Management does not anticipate that
this pronouncement will have a material impact on the Company's financial
condition or results of operations upon adoption.
5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the three years ending
December 31 are as follows:
1995 1994 1993
-------- -------- --------
Balance at Beginning
of Year $3,448 $3,040 $2,629
Loans Charged Off (230) (183) (406)
Loan Recoveries 367 245 217
Provision for Loan
Losses 120 346 600
-------- -------- --------
Balance at End of Year $3,705 $3,448 $3,040
======== ======== ========
6. PREMISES AND EQUIPMENT
A summary of the premises and equipment balances at December 31 is as follows:
1995 1994
-----------------
Land $1,213 $1,213
Premises and Leasehold
Improvements 6,489 6,347
Furniture and Equipment 2,911 2,735
-------- --------
10,613 10,295
Less Accumulated
Depreciation (4,487) (3,978)
-------- --------
$6,126 $6,317
======== ========
Depreciation expense was $509 thousand, $438 thousand, and $378 thousand
in 1995, 1994, and 1993.
7. DEPOSITS
Time certificates of deposit with a balance of $100 thousand or more, were
$17.8 million and $12.4 million at December 31, 1995 and 1994 respectively.
Interest expense on these deposits was $959 thousand, $440 thousand and $534
thousand for 1995, 1994, and 1993, respectively.
8. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate
that value.
Cash and Short Term Investments
For these short-term instruments, the carrying amount is a reasonable
estimate of the fair value
Investment Securities
Fair values are based on a quoted market price, if available. If a quoted
market price is not fair value is estimated using quoted market prices for
similar instruments.
Loans and Leases
For certain homogeneous categories of loans, such as some residential
mortgages, credit card receivables, and other consumer loans, fair value is
estimated using quoted market prices for securities backed by similar loans,
adjusted for differences in loan characteristics. The fair value of other types
loans is estimated by discounting future cash flows using current rates at which
similar loans would be made to borrowers with similar credit ratings and for
the same remaining maturities. For variable rate loans, the carrying amount
approximates fair value.
Deposits
Fair values for deposit liabilities with defined maturities are based on
the discounted value of future cash flows expected to be paid, using the current
rate offered for similar deposits with the same remaining maturities. For
deposit liabilities with no defined maturities, the fair value is the amount
payable upon demand. For time deposits with variable rates, the carrying value
approximates market value.
Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments is estimated using the fees currently charged
to enter similar agreements taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For fixed
rate loan commitments, fair value also considers the difference between current
levels of interest rates and the committed rates. The fair value of letters
of credit is based on fees currently charged for similar agreements or on the
estimated cost to terminate them or otherwise settle the obligation with the
counterparties at the reporting date. The estimated fair values of the Bank's
financial instruments are as follows:
1995
Carrying Fair
Value Value
-------------- --------------
Financial Assets:
Cash and Short-term
Investments $17,015 $17,015
Investment Securities 94,325 94,325
Loans Held for Sale 8,539 8,560
Loans and Leases 203,572 206,176
Less: Allowance for
Loan Losses (3,705) (3,705)
Financial Liabilities:
Deposits (274,747) (275,253)
Securities Sold Under
Agreement to Repurchase (15,662) (15,662)
Off Balance Sheet Financial Instruments:
Commitments to
Extend Credit 25,278 25,278
Letters of Credit 1,774 1,786
1994
Carrying Fair
Value Value
-------------- --------------
Financial Assets:
Cash and Short-term
Investments $17,091 $17,091
Investment Securities 93,151 92,180
Loans and Leases 196,927 195,229
Less: Allowance for
Loan Losses (3,448) (3,448)
Financial Liabilities:
Deposits (266,545) (265,275)
Federal Funds (5,000) (5,000)
Securities Sold Under
Agreement to Repurchase (8,861) (8,861)
Off Balance Sheet Financial Instruments:
Commitments to
Extend Credit 25,300 25,300
Letters of Credit 2,075 2,087
9. EMPLOYEE BENEFIT PLANS
The Bank sponsors a noncontributory Profit Sharing Retirement Plan (PSRP)
and an Employee Stock Ownership Plan (ESOP) in which all salaried employees
with one year or more of service participate. Annual contributions are made by
the Bank to both plans in an amount which is the lesser of 8.5% of the Bank's
current profits or 6.375% of the aggregate compensation paid in such year to
all eligible participants. Actual contributions paid to the plans for the
three years ending December 31 were:
1995 1994 1993
-------- --------- --------
PSRP.............. $255 $244 $238
ESOP.............. 189 181 178
-------- --------- --------
$444 $425 $416
======== ========= ========
The Company's stock is not listed on a national exchange and as such the
Company could be required to repurchase shares of the Company's stock held by
the ESOP upon the retirement or termination of participants in the plan. At
December 31, 1995, the fair value of shares subject to the repurchase obligation
totaled $2.4 million.
10. OTHER OPERATING EXPENSES
Other operating expenses include the following major categories of expense:
1995 1994 1993
-------- -------- --------
Data Processing $1,116 $1,089 $1,071
FDIC Insurance 354 570 554
Franchise Taxes 484 437 370
Intangible
Amortization 250 290 323
Other Operating 2,070 2,042 1,928
-------- -------- --------
$4,274 $4,428 $4,246
======== ======== ========
11. INCOME TAXES
Income tax expense and related balance sheet accounts are as follows:
1995 1994 1993
-------- --------- --------
Federal Current (Benefit) $1,811 $1,783 $1,806
Federal Deferred (Benefit) 21 (223) (326)
-------- --------- --------
$1,832 $1,560 $1,480
======== ======== ========
The sources of gross deferred tax assets and gross deferred tax liabilities at
December 31, are as follows:
1995 1994 1993
-------- ------ -------
Items giving rise to deferred tax assets:
Allowance for loan losses in excess of
tax reserves $886 $798 $613
Deferred loan fees 165 202 162
Unrealized loss on securities available-for-sale 177
Other 102 61 22
Items giving rise to deferred tax liabilities:
Depreciation (199) (227) (210)
Leases (436) (347) (361)
Unrealized gain on securities available-for-sale (427)
Other (84) (32) (58)
Valuation allowance for deferred tax assets
----------------------------
Net deferred tax assets $7 $632 $168
============================
The reasons for the differences between income tax expense and the amount
computed by applying the statutory federal income tax rate of 34% for the three
years presented are as follows:
1995 1994 1993
----- ----- -----
Tax at Federal
Statutory Rate $2,141 $1,897 $1,663
Effect of Tax-Exempt
Income (371) (400) (419)
Effect of Non-deductible
Goodwill Amort 61 61 57
Other 1 2 179
-------- -------- --------
$1,832 $1,560 $1,480
======== ======== ========
12. COMMITMENTS AND CONTINGENCIES
As of December 31, 1995, the Bank had outstanding standby letters of credit
of $1.8 million. Also at that date, the Bank had commitments outstanding to
extend credit and unfunded lines of credit for customers totaling approximately
$25.3 million. These commitments generally require the customer to maintain
certain credit standards. Management does not anticipate any material losses
as a result of these commitments.
At December 31, 1995, the Bank was required to maintain $4.6 million either
in cash or in balances with the Federal Reserve Bank. These balances do not
earn interest.
In November, 1988, the Bank entered into a service agreement with Electronic
Data Systems Corporation to provide proof and data processing services. The
contract covers a period of ten years with remaining minimum yearly service
fees as summarized by the following schedule:
Years Ended December 31
1996.............. $834
1997.............. 834
1998.............. 765
--------
$2,433
========
13. RESTRICTIONS ON SUBSIDIARY DIVIDENDS
Dividends are paid by the Company from its assets which are mainly provided
by the dividends from the Bank. However, certain restrictions exist in regard
to the ability of the Bank to transfer funds to the Company in the form of
dividends. The approval of the Comptroller of the Currency is required to pay
dividends in excess of the Bank's earnings retained in the current year plus
retained profits from the preceding two years. The amount of retained earnings
available for dividends without approval from the Comptroller of the Currency
is approximately $8.62 million at December 31, 1995.
14. WAYNE BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
BALANCE SHEET December 31,
ASSETS 1995 1994
------- -------
Cash $58 $1
Short Term Investments 544 584
Investment in Bank Subsidiary 37,079 32,783
Premises 287 296
-------- -------
TOTAL ASSETS $37,968 $33,664
======== ========
LIABILITIES $31 $24
SHAREHOLDERS' EQUITY 37,937 33,640
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $37,968 $33,664
======== ========
STATEMENT OF INCOME
Years Ended December 31,
1995 1994 1993
-------- -------- --------
Dividends from Subsidiary $1,348 $1,157 $1,043
Other Income 37 14 18
-------- --------- -------
1,385 1,171 1,061
Other Expenses 16 29 12
-------- --------- -------
Income Before Income Taxes and
Equity in Undistributed Net
Income of Bank Subsidiary 1,369 1,142 1,049
Federal Income Tax Expense (Benefit) 7 (4) 2
-------- --------- -------
1,362 1,146 1,047
Equity in Undistributed Net Income of
Bank Subsidiary 3,123 2,874 2,625
-------- --------- -------
Net Income $4,485 $4,020 $3,672
======== ======== =======
STATEMENT OF CASH FLOWS
Years Ended December 31,
1995 1994 1993
-------- ------- -------
OPERATING ACTIVITIES
Net Income $4,485 $4,020 $3,672
Adjustments