Wayne Savings Bancshares, Inc. Announces Earnings for the Third Quarter 2020

Wooster, Ohio, October 26, 2020 – Wayne Savings Bancshares, Inc. (OTCQX: WAYN), (the “Company”), the holding company parent of Wayne Savings Community Bank, reported net income (unaudited) of $1,949,000 or $0.77 per common share for the quarter ended September 30, 2020, an increase of $366,000 or 23.1%, compared to $1,583,000 or $0.60 per common share for the quarter ended September 30, 2019. The increase in net income was due to an increase in net interest income, an increase in non-interest income, a decrease in provision for loan losses partially offset with an increase in total non-interest expense and increased provision for federal income taxes.  The return on average equity and return on average assets for the third quarter of 2020 was 15.38% and 1.42%, respectively, compared to 13.14% and 1.29%, respectively, for the same period in 2019.

President and CEO James R. VanSickle commented, “Wayne Savings profitability is generated by our high-quality portfolio of earning assets and an excellent efficiency ratio.  Our team remains committed to providing excellent products and services and maintaining a strong credit culture.  Wayne Savings is well positioned to grow and prosper in the current economic environment.”

Third Quarter 2020 Business Highlights

• Net interest income was $4.3 million for the quarter ended September 30, 2020, an increase of $154,000, or 3.7%, compared to the quarter ended September 30, 2019.  The net interest margin decreased from 3.53% for the quarter ended September 30, 2019, to 3.27% for the comparable period of 2020.   The net interest margin decrease was the result of a decrease of 50 basis points in the average yield on interest-earning assets, partially offset with a decrease of 24 basis points in the average cost of interest-bearing liabilities.  The decrease of 50 basis points of the average yield on interest-earning assets was due to the increased $30.9 million of PPP loans at an interest rate of 1%.   Also, there was an increase of $50.5 million of deposits at reduced yields due to lower interest rates than in the September 2019 quarter.  
• Provision for loan losses was $69,000 in the third quarter of 2020 compared to $181,000 for the period ending September 30, 2019.  This decrease in provision for loan losses expense was mainly due to COVID-19 uncertainty causing less loan growth in 2020 than in 2019 during the comparable quarters.
• Noninterest income totaled $890,000 an increase of 43.3%, mainly due to the gain from the sale of fixed-rate, one-to-four family residential mortgage loans.  This increase was the result of additional originations as a result continued low interest rate environment for fixed-rate single-family mortgage loans, allowing borrowers to purchase a home or refinance their current mortgage balances at reduced rates.
• Noninterest expense totaled $2.8 million for the three-month period ended September 30, 2020, an increase of $86,000, or 3.2%, compared to the three months ended September 30, 2019, primarily due to increased Federal deposit insurance premiums expense.  The Company’s efficiency ratio improved from September 2019 of 55.6% to 52.8% as of September 30, 2020. 

The Company reported net income (unaudited) of $4.9 million or $1.92 per common share for the nine months ended September 30, 2020, an increase of $195,000 or 4.1%, compared to $4.7 million or $1.77 per common share for the same period ended September 30, 2019. The increase in net income was due to an increase in net interest income, an increase in non-interest income and a decrease in noninterest expenses partially offset with an increase in provision for loan losses.  The return on average equity and return on average assets for the nine months ended September 30, 2020, was 13.12% and 1.26%, respectively, compared to 13.40% and 1.31%, respectively, for the same period in 2019.

2020 Year-to-Date Business Highlights

• Net interest income was $12.8 million for the nine-month period ended September 30, 2020, an increase of $487,000, or 4.0%, compared to the same period in 2019 as the nine-month average net loan balances increased $4.9 million from the September 30, 2019 period.  Net interest margin for the nine months ended September 30, 2020 and 2019, declined by 14 basis points to 3.37% as the average yield on interest-earning assets decreased 27 basis points and the average cost of interest-bearing liabilities only declined by 13 basis points.
• Net loan balances increased from $376.6 million at December 31, 2019, to $405.5 million, an increase of 7.7%, mainly due to the PPP loans of $30.9 million added mainly during the second quarter of 2020.
• Provision for loan losses was $1.2 million for the nine-month period ending September 30, 2020, compared to $401,000 for the prior year.  This increase was mainly to the COVID-19 uncertainty and the increased required reserve as a result of the eroded economic factors used in the allowance for loan losses calculation. 
• Noninterest income totaled $2.3 million, an increase of 23.8%, mainly due to the gain from the sale of fixed-rate, one-to-four family residential mortgage loans as a result of increased originations.  Customers have taken advantage of the continued low interest rate environment for single-family mortgage loans.
• Noninterest expense totaled $7.9 million for the nine-month period ended September 30, 2020, a decrease of $46,000 compared to the September 30, 2019 nine-month period.  This decrease was primarily as a result of net occupancy and equipment expense mainly due to lower depreciation expense.  The Company’s efficiency ratio improved from 56.1% for the nine-month period ended September 2019 to 52.3% for the same period in 2020. 

September 30, 2020 Financial Condition

At September 30, 2020, the Company had total assets of $550.7 million, an increase of $58.2 million, from total assets at December 31, 2019. The growth in total assets includes a $28.9 million increase in net loans, primarily due to PPP commercial loan additions, $23.0 million in cash and cash equivalents, and $5.6 million increase in securities as compared to December 31, 2019. 

The allowance for loan losses increased from $3.6 million at December 31, 2019, to $4.7 million at September 30, 2020.  The allowance for loan losses and the related provision for loan losses is based on management’s judgment and evaluation of the loan portfolio.  Management believes the current allowance for loan losses is adequate, however, changing economic and other conditions may require future adjustments to the allowance for loan losses.

Total nonperforming loans have decline to $1.6 million from $2.4 million at December 31, 2019, mainly due to the foreclosure process which transferred these properties into foreclosed assets held for sale.  Past due loan balances of 30 days and more increased from $3.5 million at December 31, 2019, to $4.4 million at September 30, 2020, mainly due to increased commercial loans partially offset by a reduction in residential mortgage loans.

Total liabilities increased $55.7 million mainly an increase in demand deposits of $49.5 million caused mainly by the aforementioned $30.9 million of PPP loan originations which also generated commercial deposits to be used in accordance with the program guidelines.  Savings and money market balances increased by $9.2 million, other borrowings increased $6.9 million mainly due to a new large relationship and Federal Home Loan Bank advances increased $6.0 million.  These increases were partially offset by a decline in certificates of deposit of $14.6 million, mainly due to the maturity of $12.0 million brokered deposits. The Company is continuing to enhance its deposit products in an effort to serve its customers and increase deposit balances.

Total stockholders’ equity changed mainly due to earnings of $4.9 million and an increase in the market value of available-for-sale securities due to a general market rate decline.  These increases were partially offset with dividends paid of $1.5 million and the increase in treasury shares as a result of the completion of the stock repurchase plan announced in December 2019.

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

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

Contact Information:

Myron Swartzentruber

Senior Vice President Chief Financial Officer

(330) 264-5767