Wayne Savings Bancshares, Inc. Announces Earnings for the six months ending June 30, 2023

WOOSTER, Ohio, July 25, 2023 (GLOBE NEWSWIRE) -- Wayne Savings Bancshares, Inc. (OTCQX: WAYN), (the “Company”), the holding company parent of Wayne Savings Community Bank, reported net income (unaudited) of $4.0 million, or $1.83 per common share, for the year to date period ended June 30, 2023, a decrease of $63,000, or 1.5%, compared to $4.1 million, or $1.75 per common share, for the same period ended June 30, 2022. Net income excluding the merger costs related to the Main Street merger (non-GAAP) for the six months ended June 30, 2023, was $4.5 million, or $2.03 per share. The decrease in net income was due to an increase in non-interest expenses, including the acquisition costs of $437,000. The return on average equity and return on average assets for the six months ended June 30, 2023, was 16.91% and 1.07%, respectively, compared to 16.34% and 1.26%, respectively, for the same period in 2022. Excluding merger related costs, return on average equity and return on average assets for the six months ended June 30, 2023, was 18.75% and 1.19%, respectively.

The Company reported net income (unaudited) of $1.7 million, or $0.79 per common share, for the quarter ended June 30, 2023, a decrease of $275,000, or 13.6%, compared to $2.0 million, or $0.88 per common share, for the quarter ended June 30, 2022. The decrease in net income was due primarily to an increase in non-interest expenses, including acquisition costs of $437,000. Net income excluding merger related costs (non-GAAP) for the quarter ended June 30, 2023, was $2.2 million, or $0.99 per share. The return on average equity and return on average assets for the second quarter of 2023 was 14.36% and 0.92%, respectively, compared to 17.37% and 1.23%, for the same period in 2022. Excluding merger related costs, return on average equity and return on average assets for the three months ended June 30, 2023, was 17.96% and 1.15%, respectively.

President and CEO James R. VanSickle commented “We are pleased to report another quarter of strong results. Our loan growth continues to be robust as we ended the quarter with $645 million of gross loans. We are excited about the opening of two new branches in Dalton and Carrollton and look forward to receiving regulatory approval for our merger with Main Street Financial Services Corporation.”

2023 Select Business Highlights

• Wayne Savings Bancshares, Inc. and Main Street Financial Services Corporation announced a merger of equals transaction on February 23, 2023. The combined company will have a pro-forma assets exceeding $1.3 billion and 18 branches from Wooster, Ohio to Wheeling, West Virginia. The transaction is awaiting the approval of both corporations’ shareholders and all customary regulatory approvals. The transaction is expected to close during the fourth quarter of 2023.

• Wayne Savings Bancshares, Inc., the holding company parent of Wayne Savings Community Bank, announced on January 30, 2023, that it was named to the 2023 OTCQX Best 50. In January 2023, OTCQX ranked Wayne Savings Bancshares, Inc. 28th on its 2023 OTCQX Best 50. Companies in the 2023 OTCQX Best 50 were ranked based on their performance during the 2022 calendar year.

• Net loan balances increased to $637.5 million at June 30, 2023, compared to $514.9 million at June 30, 2022, or 23.8% growth, comprised mainly of $77.0 million of commercial loans secured by real estate and $40.9 million of one-to-four residential mortgage loans.

• Wayne Savings deposits increased $73.5 million, or 12.9%, to $641.2 million at June 30, 2023, compared to $567.7 million at June 30, 2022, primarily due to the growth in brokered certificates of deposits of $81.0 million and growth in our relationship certificates of deposits. This was partially offset by a decrease in “Platinum” checking accounts of $36.7 million.
  

• Wayne Savings Bancshares, Inc. declared a cash dividend $0.23 per share for the quarter ending June 30, 2023, on June 29, 2023. The quarterly cash dividend will be paid on August 2, 2023, to the stockholders of record as of July 19, 2023.

• Wayne Savings continues to look for opportunities to create a larger footprint to expand our customer base. Wayne Savings opened a new office in Dalton during the first quarter of 2023. We have received regulatory approval to open a second office in 2023 in Carrollton, Ohio to be fully operational during the second half of 2023.

Second Quarter 2023 Financial Highlights

Net interest income was $5.7 million for the quarter ended June 30, 2023, an increase of $379,000, or 7.1%, compared to the quarter ended June 30, 2022. The net interest margin decreased from 3.41% for the quarter ended June 30, 2022, to 3.15% for the comparable period of 2023. This decrease from the 2022 levels was a result of an increase in the cost of funds of 122 basis points compared to a 96 basis point increase average interest earnings assets yield.

Interest income on loans increased by $2.6 million, or 49.9%, primarily related to the $132.2 million increase in average loan balances to $621.6 million for the quarter ended June 30, 2023, from $489.4 million for the same period of the prior year.

Investment securities and interest-earning cash balance yields increased 63 basis points from 1.74% to 2.37% at June 30, 2023. The average balances on investment securities and interest-earning deposits decreased $30.3 million.

Deposit interest expense increased $1.1 million as the average rate increased 74 basis points to 1.06% and the average balance increased to $586.2 million, from $571.0 for the quarter ended June 30, 2022.

Borrowings interest expense increased $1.2 million mainly from the average balance increase of $92.5 million and an average rate increase of 280 basis points to 4.84%, from the June 30, 2022 average rate of 1.60%.

• Provision for credit losses was $170,000 in the second quarter of 2023 under the newly adopted Accounting Standards Update (ASU) 2016-13 Current Expected Credit Losses (CECL) method the Bank adopted on January 1, 2023. In 2022 the provision for loan losses for the second quarter was $257,000 using the incurred loss method.

• Noninterest income totaled $706,000, an increase of $107,000, or 17.9%, from $599,000 for the quarter ended June 2022.

• Noninterest expense totaled $3.9 million for the three-month period ended June 30, 2023, an increase of $758,000, or 23.8%, compared to the three months ended June 30, 2022, primarily due to merger related expenses, increased salaries and employee benefits as the Company added additional sales and sales support staff to facilitate loan and deposit growth and increased occupancy and equipment expense as the Company continues to expand into new market areas. The Company’s efficiency ratio was 61.6% for the three-month period ended June 30, 2023, compared to 53.9% for the same period in 2022. Excluding merger related expenses for the merger (non-GAAP), noninterest expense increased $321,000 from the second quarter of 2022 to the second quarter of 2023 and the Company’s efficiency ratio was 54.8%.
  

2023 Year-to-Date Business Highlights

Net interest income was $11.6 million for the six-month period ended June 30, 2023, an increase of $1.3 million, or 12.4%, compared to the same period in 2022 as the six-month average net loan balances increased $138.8 million from the June 30, 2022 period. Net interest margin for the six months ended June 30, 2023 and 2022, declined by 10 basis points to 3.22% as the average yield on interest-earning assets increased 91 basis point and the average rate on interest-bearing liabilities rose by 101 basis points.

Interest income on loans increased by $4.9 million, or 47.9%, as average balances increased for the six-month period at June 30, 2022, of $475.7 million, to $614.6 million for the period ended June 30, 2023. The average yield on loans for the six months ended June 30, 2023, was 4.95% compared to 4.33% for the same 2022 period.

Interest income on investment securities and interest earning cash balances increased by $138,000 for the six months ending June 30, 2023, while the average balance decreased $39.4 million to $104.0 million at June 30, 2023. Average yields increased from 1.56% for the six-month period ending June 30, 2022, to 2.41% for the 2023 period as the Federal Reserve continued raising interest rates.

Deposit interest expense increased $2.1 million for the six months ending June 30, 2023, due to an increase in the average deposit balances of $44.1 million coupled with an average rate increase of 66 bps to 1.00% from 0.34% at June 30, 2022.

Borrowings interest expense increased $1.7 million due to an increase in the average borrowing balances of $65.2 million coupled with an average rate increase of 300 bps to 4.63% from 1.63% at June 30, 2022.

• Net loan balances increased from $594.9 million at December 31, 2022, to $637.5 million at June 30, 2023, an increase of $42.5 million, or 7.1% of annualized growth consisting mainly of commercial real estate loans and residential mortgage loans.

• Provision for credit losses was $388,000 for the six-month period ending June 30, 2023, under the newly adopted ASU 2016-13 Current Expected Credit Losses (CECL) method the Bank adopted on January 1, 2023. The adoption of CECL required a $113,000 adjustment to equity, net of taxes. In 2022, the Provision for loan losses for the same period was $431,000 using the incurred loss method.

• Noninterest income totaled $1.3 million, a decrease of $155,000, or 10.6%, from $1.5 million for the six-month period ended June 30, 2022, caused by a gain of $229,000 on the sale of foreclosed assets held for sale recorded during the six-month period ended June 30, 2022.
  
• Noninterest expense totaled $7.3 million for the year-to-date period ended June 30, 2023, an increase of $1.1 million, or 16.7%, compared to the June 30, 2022 six-month period. The increase was primarily due to the merger expenses for the merger and an increase in salaries and employee benefits expense. The Company’s efficiency ratio was 57.1% for the six-month period ended June 30, 2023, compared to 53.6% for the same period in 2022. Excluding the merger expenses (non-GAAP), the Company’s noninterest expense increased $614,000 from the second quarter of 2022 to the second quarter of 2023 and the Company’s efficiency ratio was 53.7%.
  

June 30, 2023 Financial Condition

At June 30, 2023, the Company had total assets of $770.8 million, an increase of $41.1 million, from December 31, 2022. The growth in total assets includes a $42.5 million increase in net loans, partially offset by a decrease of $2.5 million in cash and cash equivalents, as compared to December 31, 2022.

The allowance for credit losses was $7.1 million at June 30, 2023, compared to $6.7 million at December 31, 2022. The allowance for credit losses and the related provision for credit losses is based on management’s judgment and evaluation of the loan portfolio. Management believes the current allowance for credit losses is adequate, however, changing economic and other conditions may require future adjustments to the allowance for credit losses.

Total nonperforming loans declined to $313,000 from $805,000 at December 31, 2022 as the Company recognized a payoff during the quarter. Past due loan balances of 30 days and more decreased from $4.3 million at December 31, 2022, to $1.6 million at June 30, 2023, mainly due to decreased non-residential real estate loan delinquencies.

Total liabilities increased $37.3 million due to an increase in deposits accounts of $35.4 million. Deposit accounts increased primarily due to growth in brokered certificates of deposit $46.0 million and growth in our relationship special certificates of deposits. This was partially offset by a decrease in “Platinum” checking accounts of $20.1 million.

Total stockholders’ equity increased by $3.8 million during the first half of 2023. The Company earned $4.0 million of net income for the six months ended June 30, 2023, down from 2022 by 1.5% mainly due to merger expenses. The Company paid $1.0 million in dividends during the period. Accumulated other comprehensive loss decreased by $765,000 mainly due to a decrease in gross unrealized losses on securities available for sale as market interest rates declined.

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

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

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

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

WAYNE SAVINGS BANCSHARES, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share data - unaudited)
	June 30, 2023			December 31, 2022
ASSETS
Cash and cash equivalents	$	11,275		$	13,799
Securities, net (1)	89,102			91,769
Loans receivable, net	637,454			594,931
Federal Home Loan Bank stock	5,630			3,322
Premises & equipment, net	5,039			5,183
Bank-owned life insurance	11,567			11,434
Other assets	10,761			9,335
TOTAL ASSETS	$	770,828		$	729,773
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposit accounts	$	641,187		$	605,834
Other short-term borrowings	10,874			14,776
Federal Home Loan Bank advances	65,500			58,500
Accrued interest payable and other liabilities	4,749			5,933
TOTAL LIABILITIES	722,310			685,043
Common stock (3,978,731 shares of $.10 par value issued)	398			398
Additional paid-in capital	36,603			36,584
Retained earnings	52,543			49,645
Treasury Stock, at cost - 1,779,324 shares and 1,785,993 shares
at June 30, 2023 and December 31, 2022, respectively.	(30,353)			(30,459)
Accumulated other comprehensive loss	(10,673)			(11,438)
TOTAL STOCKHOLDERS' EQUITY	48,518			44,730
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	770,828		$	729,773
(1) Includes available-for-sale and held-to-maturity classifications.
Note: The December 31, 2022 Condensed Consolidated Balance Sheet has been derived from the audited Consolidated Balance Sheet as of that date.

WAYNE SAVINGS BANCSHARES, INC.
Condensed Consolidated Statements of Income
(Dollars in thousands, except share data - unaudited)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
		2023			2022			2023			2022
Interest income	$	8,571		$	5,889		$	16,472		$	11,406
Interest expense		2,867			564			4,917			1,128
Net interest income		5,704			5,325			11,555			10,278
Provision for credit losses *		170			257			388			431
Net interest income after provision for credit losses*		5,534			5,068			11,167			9,847
Non-interest income		706			599			1,309			1,464
Non-interest expense
Salaries and employee benefits		1,989			1,909			3,900			3,692
Net occupancy and equipment expense		593			511			1,177			989
Federal deposit insurance premiums		165			46			257			95
Franchise taxes		101			115			201			231
Advertising and marketing		75			57			130			98
Legal		7			12			19			33
Professional fees		17			42			111			155
ATM network		103			94			199			191
Auditing and accounting		63			59			120			120
Merger related expenses		437			-			437			-
Other		399			346			792			688
Total non-interest expense		3,949			3,191			7,343			6,292
Income before federal income taxes		2,291			2,476			5,133			5,019
Provision for federal income taxes		547			457			1,110			933
Net income	$	1,744		$	2,019		$	4,023		$	4,086
Earnings per share
Basic	$	0.79		$	0.88		$	1.83		$	1.75
Diluted	$	0.79		$	0.87		$	1.82		$	1.73
*Adopted ASU 2016-13 during the first quarter 2023: therefore, prior periods provision amount reflects the incurred loss method.

WAYNE SAVINGS BANCSHARES, INC.
Selected Condensed Consolidated Financial Data
(Dollars in thousands, except share data - unaudited)
		June				March				December				September
			2023				2023				2022				2022
Interest and dividend income		$	8,571			$	7,901			$	7,518			$	6,892
Interest expense			2,867				2,050				1,248				670
Net interest income			5,704				5,851				6,270				6,222
Provision for credit losses*			170				218				381				410
Net interest income after
provision for credit losses*			5,534				5,633				5,889				5,812
Non-interest income			706				603				631				636
Non-interest expense			3,949				3,394				3,508				3,350
Income before federal income taxes			2,291				2,842				3,012				3,098
Provision for federal income taxes			547				563				603				589
Net income		$	1,744			$	2,279			$	2,409			$	2,509
Earnings per share - basic		$	0.79			$	1.04			$	1.09			$	1.14
Earnings per share - diluted		$	0.79			$	1.03			$	1.09			$	1.13
Dividends per share		$	0.23			$	0.23			$	0.23			$	0.23
Return on average assets			0.92	%			1.23	%			1.36	%			1.48	%
Return on average equity			14.36	%			19.58	%			22.87	%			22.85	%
Shares outstanding			2,199,407				2,196,457				2,192,738				2,191,338
Book value per share		$	22.06			$	21.82			$	20.40			$	18.94
		June				March				December				September
			2022				2022				2021				2021
Interest and dividend income		$	5,889			$	5,517			$	5,502			$	5,589
Interest expense			564				564				592				617
Net interest income			5,325				4,953				4,910				4,972
Provision for loan losses			257				174				128				177
Net interest income after
provision for loan losses			5,068				4,779				4,782				4,795
Non-interest income			599				865				598				663
Non-interest expense			3,191				3,101				3,156				3,057
Income before federal income taxes			2,476				2,543				2,224				2,401
Provision for federal income taxes			457				476				428				449
Net income		$	2,019			$	2,067			$	1,796			$	1,952
Earnings per share - basic		$	0.88			$	0.87			$	0.76			$	0.81
Earnings per share - diluted		$	0.87			$	0.86			$	0.75			$	0.80
Dividends per share		$	0.23			$	0.23			$	0.21			$	0.21
Return on average assets			1.23	%			1.28	%			1.12	%			1.23	%
Return on average equity			17.37	%			15.44	%			13.48	%			14.76	%
Shares outstanding			2,185,688				2,369,886				2,365,268				2,380,374
Book value per share		$	19.33			$	21.12			$	22.67			$	22.25
*Adopted ASU 2016-13 during the first quarter 2023: therefore, prior periods provision amount reflects the incurred loss method.

WAYNE SAVINGS BANCSHARES, INC.
Non-GAAP reconciliation
(Dollars in thousands, except per share data - unaudited)
			For the three months				For the Six months
			June 30, 2023				June 30, 2023
Net Income as reported - GAAP			$	1,744			$	4,023
Effect of merger related expenses				437				437
Net Income non-GAAP			$	2,181			$	4,460
Earnings per share - GAAP			$	0.79			$	1.83
Effect of merger related expenses				0.20				0.20
Earnings per share non-GAAP			$	0.99			$	2.03
Return on average assets - GAAP				0.92	%			1.07	%
Effect of merger related expenses				0.23	%			0.12	%
Return on average assets non-GAAP				1.15	%			1.19	%
Return on average equity - GAAP				14.36	%			16.91	%
Effect of merger related expenses				3.60	%			1.84	%
Return on average equity non-GAAP				17.96	%			18.75	%
Efficiency Ratio - GAAP				62.23	%			57.39	%
Effect of merger related expenses				-6.82	%			-3.39	%
Efficiency Ratio non-GAAP				55.41	%			54.00	%