UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D. C. 20549





FORM
10-Q




(Mark
One)





x         QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934





For the
quarterly period ended    June 30,
2010





OR





o          TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934





For the
transition period from ____________ to _______________





Commission
File No. 0-23433





WAYNE
SAVINGS BANCSHARES, INC.


(Exact
name of registrant as specified in its charter)





Delaware
            
            31-1557791(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification Number)151
      North Market StreetWooster, Ohio
            
            44691(Address
      of principalexecutive office)
            
            (Zip
      Code)





Registrant’s telephone
number, including area code: (330) 264-5767





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 for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.  Yes TNo o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  o Yes  o No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of “accelerated filer” “large accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.  (Check
one):





Large
accelerated filer oAccelerated filer oNon-accelerated filer  oSmaller reporting
company T





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.).


Yes oNo T





As of
August 6, 2010, the latest practicable date, 3,004,113 shares of the
registrant’s common stock, $.10 par value, were issued and
outstanding.













WayneSavings Bancshares, Inc.


Index





PagePART
      I - FINANCIAL INFORMATIONItem
      1
            
            Condensed Consolidated Balance Sheets
            
            2Condensed Consolidated Statements of Income
            
            3Condensed Consolidated Statements of Comprehensive
      Income
            
            4Condensed Consolidated Statements of Cash
    Flows
            
            5Notes to Condensed Consolidated Financial
      Statements
            
            7Item
      2
            
            Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
            
            21Item
      3
            
            Quantitative and Qualitative Disclosures About Market
      Risk
            
            31Item
      4T
            
            Controls and Procedures
            
            31PART
      II - OTHER INFORMATIONItem
      1
            
            Legal Proceedings
            
            32Item
      1A
            
            Risk Factors
            
            32Item
      2
            
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            
            32Item
      3
            
            Defaults Upon Senior Securities
            
            32Item
      4
            
            RESERVED
            
            32Item
      5
            
            Other Information
            
            32Item
      6
            
            Exhibits
            
            33SIGNATURES
            
            34





Index





WayneSavings Bancshares, Inc.


Condensed
Consolidated Balance Sheets


(In
thousands, except share data)





June 30,
              2010
            
            
            March 31,
              2010(Unaudited)ASSETSCash
      and due from banks
            
            $
            4,350
            
            
            $
            5,853Interest-bearing
      demand deposits
            
            
            3,651
            
            
            
            4,022Cash
      and cash equivalents
            
            
            8,001
            
            
            
            9,875Available-for-sale
      securities
            
            
            127,630
            
            
            
            119,863Held-to-maturity
      securities
            
            
            652
            
            
            
            698Loans
      receivable – net of allowance for loan losses of $3,009 and $2,826 at June
      30, 2010 and March 31, 2010, respectively
            
            
            243,673
            
            
            
            247,006Premises
      and equipment
            
            
            7,206
            
            
            
            7,291Federal
      Home Loan Bank stock
            
            
            5,025
            
            
            
            5,025Foreclosed
      assets held for sale  -  net
            
            
            2,392
            
            
            
            2,888Accrued
      interest receivable
            
            
            1,377
            
            
            
            1,602Bank-owned
      life insurance
            
            
            6,815
            
            
            
            6,754Goodwill
            
            
            1,719
            
            
            
            1,719Other
      intangible assets
            
            
            355
            
            
            
            378Prepaid
      Federal Deposit Insurance Corporation premiums
            
            
            1,427
            
            
            
            1,541Other
      assets
            
            
            1,188
            
            
            
            1,222Prepaid
      federal income taxes
            
            
            —
            
            
            
            170Total
      assets
            
            $
            407,460
            
            
            $
            406,032LIABILITIES
      AND STOCKHOLDERS’ EQUITYLiabilitiesDepositsDemand
            
            $
            57,381
            
            
            $
            57,106Savings
      and money market
            
            
            95,489
            
            
            
            94,589Time
            
            
            160,949
            
            
            
            160,239Total
      deposits
            
            
            313,819
            
            
            
            311,934Other
      short term borrowings
            
            
            8,362
            
            
            
            7,454Federal
      Home Loan Bank advances
            
            
            43,500
            
            
            
            45,500Accrued
      interest payable and other liabilities
            
            
            2,196
            
            
            
            2,818Accrued
      federal income taxes
            
            
            68
            
            
            
            —Deferred
      federal income taxes
            
            
            1,538
            
            
            
            1,331Total
      liabilities
            
            
            369,483
            
            
            
            369,037Commitments
      and Contingencies
            
            
            ––
            
            
            
            ––Stockholders’
      EquityPreferred
      stock, 500,000 shares of $.10 par value authorized; no shares
      issued
            
            
            ––
            
            
            
            ––Common
      stock, $.10 par value; authorized 9,000,000 shares; 3,978,731 shares
      issued
            
            
            398
            
            
            
            398Additional
      paid-in capital
            
            
            36,007
            
            
            
            36,012Retained
      earnings
            
            
            14,800
            
            
            
            14,332Shares
      acquired by ESOP
            
            
            (785
            )
            
            
            (807
            )Accumulated
      other comprehensive income, net of tax effects
            
            
            2,087
            
            
            
            1,590Treasury
      stock, at cost – 974,618 common shares
            
            
            (14,530
            )
            
            
            (14,530
            )Total
      stockholders’ equity
            
            
            37,977
            
            
            
            36,995Total
      liabilities and stockholders’ equity
            
            $
            407,460
            
            
            $
            406,032










2
 Index





WayneSavings Bancshares, Inc.


Condensed
Consolidated Statements of Income


For
the three months ended June 30, 2010 and 2009


(In
thousands, except per share amounts)


(Unaudited)





2010
            
            
            2009Interest
      and Dividend IncomeLoans
            
            $
            3,434
            
            
            $
            3,682Securities
            
            
            1,216
            
            
            
            1,403Dividends
      on Federal Home Loan Bank stock and other
            
            
            57
            
            
            
            57Total
      interest and dividend income
            
            
            4,707
            
            
            
            5,142Interest
      ExpenseDeposits
            
            
            1,012
            
            
            
            1,382Other
      short-term borrowings
            
            
            7
            
            
            
            10Federal
      Home Loan Bank advances
            
            
            416
            
            
            
            502Total
      interest expense
            
            
            1,435
            
            
            
            1,894Net
      Interest Income
            
            
            3,272
            
            
            
            3,248Provision
      for Loan Losses
            
            
            190
            
            
            
            165Net
      Interest Income After Provision for Loan Losses
            
            
            3,082
            
            
            
            3,083Noninterest
      IncomeGain
      on loan sales
            
            
            67
            
            
            
            63Gain
      (loss) on sale of foreclosed assets held for sale
            
            
            14
            
            
            
            (11
            )Trust
      income
            
            
            48
            
            
            
            37Earnings
      on bank-owned life insurance
            
            
            58
            
            
            
            57Service
      fees, charges and other operating
            
            
            305
            
            
            
            344Total
      noninterest income
            
            
            492
            
            
            
            490Noninterest
      ExpenseSalaries
      and employee benefits
            
            
            1,524
            
            
            
            1,429Net
      occupancy and equipment expense
            
            
            452
            
            
            
            465Federal
      deposit insurance premiums
            
            
            122
            
            
            
            339Franchise
      taxes
            
            
            87
            
            
            
            88Provision
      for impairment on foreclosed assets held for sale
            
            
            46
            
            
            
            —Amortization
      of intangible assets
            
            
            23
            
            
            
            25Other
            
            
            487
            
            
            
            548Total
      noninterest expense
            
            
            2,741
            
            
            
            2,894Income
      Before Federal Income Taxes
            
            
            833
            
            
            
            679Provision
      for Federal Income Taxes
            
            
            190
            
            
            
            147Net
      Income
            
            $
            643
            
            
            $
            532Basic
      Earnings Per Share
            
            $
            0.22
            
            
            $
            0.18Diluted
      Earnings Per Share
            
            $
            0.22
            
            
            $
            0.18Dividends
      Per Share
            
            $
            0.06
            
            
            $
            0.05








See
accompanying notes to condensed consolidated financial statements.





3
 Index





WayneSavings Bancshares, Inc.


Condensed
Consolidated Statements of Comprehensive Income


For
the three months ended June 30, 2010 and 2009


(In
thousands)


(Unaudited)





2010
            
            
            2009Net
      Income
            
            $
            643
            
            
            $
            532Other
      comprehensive income:Unrealized
      holding gains on securities, net of related taxes of $256 and $77 during
      the respective periods
            
            
            497
            
            
            
            150Comprehensive
      income
            
            $
            1,140
            
            
            $
            682Accumulated
      other comprehensive income
            
            $
            2,087
            
            
            $
            840









4
 Index





WayneSavings Bancshares, Inc.


Condensed
Consolidated Statements of Cash Flows


For
the three months ended June 30, 2010 and 2009


(In
thousands)


(Unaudited)





2010
            
            
            2009Operating
      ActivitiesNet
      income
            
            $
            643
            
            
            $
            532Items
      not requiring (providing) cashDepreciation
      and amortization
            
            
            138
            
            
            
            145Provision
      for loan losses
            
            
            190
            
            
            
            165Amortization
      of premiums and discounts on securities - net
            
            
            178
            
            
            
            (17
            )Amortization
      of mortgage servicing rights
            
            
            5
            
            
            
            11Amortization
      of deferred loan origination fees
            
            
            (16
            )
            
            
            (37
            )Amortization
      of  intangible assets
            
            
            23
            
            
            
            25Increase
      in value of bank owned life insurance
            
            
            (61
            )
            
            
            (62
            )Amortization
      expense of stock benefit plan
            
            
            23
            
            
            
            13Loss
      on real estate acquired through foreclosure
            
            
            32
            
            
            
            11Net
      gain on sale of loans
            
            
            (67
            )
            
            
            (63
            )Proceeds
      from sale of loans in secondary market
            
            
            1,703
            
            
            
            2,484Origination
      of loans for sale in the secondary market
            
            
            (1,636
            )
            
            
            (2,468
            )Deferred
      income taxes
            
            
            (49
            )
            
            
            63Changes
      inAccrued
      interest receivable
            
            
            225
            
            
            
            253Other
      assets
            
            
            313
            
            
            
            (1,135
            )Interest
      payable and other liabilities
            
            
            (132
            )
            
            
            (168
            )Net
      cash provided by (used in) operating activities
            
            
            1,512
            
            
            
            (248
            )Investing
      ActivitiesPurchase
      of  available-for-sale securities
            
            
            (17,594
            )
            
            
            (9,122
            )Proceeds
      from maturities of available-for-sale securities
            
            
            10,402
            
            
            
            12,900Proceeds
      from maturities of held-to-maturity securities
            
            
            46
            
            
            
            115Net
      change in loans
            
            
            2,981
            
            
            
            1,812Purchase
      of premises and equipment
            
            
            (53
            )
            
            
            (241
            )Proceeds
      from the sale of foreclosed assets
            
            
            633
            
            
            
            528Net
      cash provided by (used in) investing activities
            
            
            (3,585
            )
            
            
            5,992









5
 Index





Wayne
Savings Bancshares, Inc.


Condensed
Consolidated Statements of Cash Flows (continued)


For
the three months ended June 30, 2010 and 2009


(In
thousands)


(Unaudited)







2010
            
            
            2009Financing
      ActivitiesNet
      change in deposits
            
            $
            1,885
            
            
            $
            (1,521
            )Net
      change in other short-term borrowings
            
            
            908
            
            
            
            75Proceeds
      from Federal Home Loan Bank advances
            
            
            4,500
            
            
            
            9,200Repayments
      of Federal Home Loan Bank advances
            
            
            (6,500
            )
            
            
            (8,200
            )Advances
      by borrowers for taxes and insurance
            
            
            (419
            )
            
            
            (418
            )Cash
      dividends paid
            
            
            (175
            )
            
            
            (145
            )Net
      cash provided by (used in) financing activities
            
            
            199
            
            
            
            (1,009
            )Increase
      (Decrease) in Cash and Cash Equivalents
            
            
            (1,874
            )
            
            
            4,735Cash
      and Cash equivalents, Beginning of period
            
            
            9,875
            
            
            
            6,790Cash
      and Cash equivalents, End of period
            
            $
            8,001
            
            
            $
            11,525Supplemental
      Cash Flows Information Cash Paid For:Interest
      on deposits and borrowings
            
            $
            1,469
            
            
            $
            1,988Supplemental
      Disclosure of Non-Cash Investing and Financing ActivitiesTransfers
      from loans to foreclosed assets held for sale
            
            $
            169
            
            
            $
            871Unrealized
      gains on securities designated as available-for-sale,net of
      related tax effects
            
            $
            497
            
            
            $
            150Dividends
      payable
            
            $
            180
            
            
            $
            150









6
 Index





WayneSavings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements




Note
      1:
            Basis
      of Presentation




The
accompanying unaudited condensed consolidated financial statements as of June
30, 2010 and for the three months ended June 30, 2010 and 2009, were prepared in
accordance with instructions for Form 10-Q and Article 10 of Regulation S-X and,
therefore, do not include information or footnotes necessary for a complete
presentation of financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United States of
America.  Accordingly, these condensed financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
of Wayne Savings Bancshares, Inc. (the “Company”) included in the Annual Report
on Form 10-K for the year ended March 31, 2010.  Reference is made to
the accounting policies of the Company described in the Notes to the
Consolidated Financial Statements contained in its Annual Report on Form
10-K.




In the
opinion of management, all adjustments (consisting only of normal recurring
accruals) which are necessary for a fair presentation of the unaudited financial
statements have been included.  The results of operations for the
three months ended June 30, 2010, are not necessarily indicative of the results
which may be expected for the entire fiscal year.  The condensed
consolidated balance sheet of the Company as of March 31, 2010, has been derived
from the consolidated balance sheet of the Company as of that date.




Critical Accounting Policy–
The Company’s critical accounting policy relates to the allowance for loan
losses.  The Company has established a systematic method of
periodically reviewing the credit quality of the loan portfolio in order to
establish a sufficient allowance for loan losses.  The allowance for
loan losses is based on management’s current judgments about the credit quality
of individual loans and segments of the loan portfolio.  The allowance
for loan losses is established through a provision, and considers all known
internal and external factors that affect loan collectibility as of the
reporting date.  Such evaluation, which includes a review of all loans
on which full collectibility may not be reasonably assured, considers among
other matters, the estimated net realizable value or the fair value of the
underlying collateral, economic conditions, historical loan loss experience,
management’s knowledge of inherent risks in the portfolio that are probable and
reasonably estimable and other factors that warrant recognition in providing an
appropriate loan loss allowance.  Management has discussed the
development and selection of this critical accounting policy with the audit
committee of the Board of Directors.




Use of Estimates– The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America 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 revenues and expenses during the
reporting period.  Actual results could differ from those
estimates.




Note
      2:
            Principles
      of Consolidation




The
accompanying condensed consolidated financial statements include Wayne Savings
Bancshares, Inc. and the Company’s wholly-owned subsidiary, Wayne Savings
Community Bank (“Wayne Savings” or the “Bank”).




Wayne
Savings has eleven full-service offices in Wayne, Holmes, Ashland, Medina and
Stark counties.  All significant intercompany transactions and
balances have been eliminated in the consolidation.




7
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements




Note
      3:
            Earnings
      Per Share




Basic
earnings per common share is computed based upon the weighted-average number of
common shares outstanding during the period, less shares in the Company’s
Employee Stock Ownership Plan (“ESOP”) that are unallocated and not committed to
be released.  Diluted earnings per common share include the dilutive
effect of all additional potential common shares issuable under the Company’s
stock option plan.  The computations are as follows:




For
      the three months ended
              June
      30,2010
            
            
            2009Weighted-average
      common shares outstanding (basic)
            
            
            2,921,174
            
            
            
            2,911,956Dilutive
      effect of assumed exercise of stock options
            
            
            —
            
            
            
            —Weighted-average
      common shares outstanding (diluted)
            
            
            2,921,174
            
            
            
            2,911,956






None of
the outstanding options were included in the diluted earnings per share
calculation for the three months ended June 30, 2010 and 2009, as the average
fair value of the shares was less than the option exercise prices.







Note
      4:
            Stock
      Option Plan




In fiscal
2004, the Company adopted a Stock Option Plan that provided for the issuance of
142,857 incentive options and 61,224 non-incentive options with respect to
authorized common stock.  As of June 30, 2010, all options under the
2004 Plan have been granted and (excluding forfeited options), are subject to
exercise at the discretion of the grantees, and will expire in fiscal 2014
unless otherwise exercised or forfeited.




The
Company accounts for the stock plan in accordance with the provisions of FASB
ASC 718-10.  FASB ASC 718-10 requires the recognition of compensation
expense related to stock option awards based on the fair value of the option
award at the grant date.  Compensation cost is then recognized over
the vesting period.  There were no options granted during the three
months ended June 30, 2010 and 2009.  There was no compensation
expense recognized for the stock option plan during the three months ended June
30, 2010 and 2009, as all options were fully vested prior to these
periods.




8
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements




A summary
of the status of the Company’s stock option plan as of and for the three months
ended June 30, 2010, and for the years ended March 31, 2010 and 2009, is
presented below:







Three
      months ended
              June
      30,
            
            
            Year
      ended
              March
      31,2010
            
            
            2010
            
            
            2009Shares
            
            
            Weighted
      Average exercise
              price
            
            
            Shares
            
            
            Weighted
      Average exercise price
            
            
            Shares
            
            
            Weighted
      Average exercise priceOutstanding
      at beginning of period
            
            
            94,020
            
            
            $
            13.95
            
            
            
            94,020
            
            
            $
            13.95
            
            
            
            104,224
            
            
            $
            13.95Granted
            
            
            ––
            
            
            
            ––
            
            
            
            ––
            
            
            
            ––
            
            
            
            ––
            
            
            
            ––Exercised
            
            
            ––
            
            
            
            ––
            
            
            
            ––
            
            
            
            ––
            
            
            
            ––
            
            
            
            ––Forfeited
            
            
            ––
            
            
            
            ––
            
            
            
            —
            
            
            
            —
            
            
            
            (10,204
            )
            
            
            13.95Outstanding
      at end of period
            
            
            94,020
            
            
            $
            13.95
            
            
            
            94,020
            
            
            $
            13.95
            
            
            
            94,020
            
            
            $
            13.95Options
      exercisable at period-end
            
            
            94,020
            
            
            $
            13.95
            
            
            
            94,020
            
            
            $
            13.95
            
            
            
            94,020
            
            
            $
            13.95







The
following information applies to options outstanding at June 30,
2010:




Number
      outstanding
            
            
            94,020Exercise
      price on all remaining options outstanding
            
            $
            13.95Weighted-average
      remaining contractual life
            
            3.75
      years







Note
      5:
            Regulatory
      Matters




The Bank
is subject to certain restrictions on the amount of dividends that it may
declare without prior regulatory approval.  At June 30, 2010, the Bank
had regulatory approval for $483,000 of retained earnings for dividend
declaration.




The Bank
is subject to various regulatory capital requirements administered by the
federal banking agencies.  Failure to meet minimum capital
requirements can initiate certain mandatory–and possibly additional
discretionary–actions by regulators that, if undertaken, could have a direct
material effect on the Company’s and the Bank’s financial
statements.  Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting
practices.  The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.




9
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements




Quantitative
measures established by regulation to ensure capital adequacy require the Bank
to maintain minimum amounts and ratios (set forth in the table below) of
risk-based capital (as defined in the regulations) to risk-weighted assets (as
defined), and of tangible and core capital (as defined) to adjusted total assets
(as defined).  Management believes, as of June 30, 2010, that the Bank
met all capital adequacy requirements to which it is subject.




As of
June 30, 2010, the most recent notification from the Office of Thrift
Supervision categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action.  To be categorized as
well-capitalized, the Bank must maintain capital ratios as set forth in the
table below.  There are no conditions or events since that
notification that management believes have changed the Bank’s
category.




The
Bank’s actual capital amounts and ratios as of June 30, 2010 and March 31, 2010
are presented in the following table.




Actual
            
            
            For
      Capital Adequacy Purposes
            
            
            To
      Be Well Capitalized Under Prompt Corrective Action
    ProvisionsAmount
            
            
            Ratio
            
            
            Amount
            
            
            Ratio
            
            
            Amount
            
            
            Ratio(Dollars
      in thousands)As
      of June 30, 2010Tangible
      capital
            
            $
            32,935
            
            
            
            8.2
            %
            
            $
            6,030
            
            
            
            1.5
            %
            
            $
            20,099
            
            
            
            5.0
            %Core
      capital
            
            
            32,935
            
            
            
            8.2
            
            
            
            16,079
            
            
            
            4.0
            
            
            
            24,119
            
            
            
            6.0Risk-based
      capital
            
            
            34,685
            
            
            
            14.5
            
            
            
            19,457
            
            
            
            8.0
            
            
            
            24,321
            
            
            
            10.0As
      of March 31, 2010Tangible
      capital
            
            $
            32,397
            
            
            
            8.1
            %
            
            $
            6,019
            
            
            
            1.5
            %
            
            $
            20,062
            
            
            
            5.0
            %Core
      capital
            
            
            32,397
            
            
            
            8.1
            
            
            
            16,050
            
            
            
            4.0
            
            
            
            24,075
            
            
            
            6.0Risk-based
      capital
            
            
            34,685
            
            
            
            14.2
            
            
            
            19,517
            
            
            
            8.0
            
            
            
            24,396
            
            
            
            10.0







Note
      6:
            Recent
      Accounting Developments




FASB ASC
860-10 concerning accounting for transfers of financial assets was issued in
June 2009 and changes the derecognition guidance for transferors of financial
assets, including entities that sponsor securitizations, to align that guidance
with the original intent of previous guidance.  FASB ASC 860-10 also
eliminates the exemption from consolidation for qualifying special-purpose
entities (QSPEs).  As a result, all existing QSPEs need to be
evaluated to determine whether the QSPE should be consolidated in accordance
with FASB ASC 860-10.





FASB ASC
860-10 is effective as of the beginning of a reporting entity’s first annual
reporting period beginning after November 15, 2009 (April 1, 2010, as to the
Company), for interim periods within that first annual reporting period, and for
interim and annual reporting periods thereafter. The recognition and measurement
provisions of FASB ASC 860-10 must be applied to transfers that occur on or
after the effective date.  Early application is
prohibited.  FASB ASC 860-10 also requires additional disclosures
about transfers of financial assets that occur both before and after the
effective date.  The Company adopted FASB ASC 860-10 effective April
1, 2010, as required, without material effect on the Company’s financial
position or results of operations.





10
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements





FASB ASC
860-10 also improves how enterprises account for and disclose their involvement
with variable interest entities (VIE’s), which are special-purpose entities, and
other entities whose equity at risk is insufficient or lacks certain
characteristics.  Among other things, FASB ASC 860-10 changes how an
entity determines whether it is the primary beneficiary of a variable interest
entity (VIE) and whether that VIE should be consolidated.  FASB ASC
860-10 requires an entity to provide significantly more disclosures about its
involvement with VIEs.  As a result, the Company must comprehensively
review its involvements with VIEs and potential VIEs, including entities
previously considered to be qualifying special purpose entities, to determine
the effect on its consolidated financial statements and related
disclosures.  FASB ASC 860-10 is effective as of the beginning of a
reporting entity’s first annual reporting period that begins after November 15,
2009 (April 1, 2010, as to the Company), and for interim periods within the
first annual reporting period.  Earlier application is
prohibited.  The Company adopted FASB ASC 860-10 effective April 1,
2010, as required, without material effect on the Company’s financial position
or results of operations.





FASB
Accounting Standards Update (ASU) 2010-06 on Fair Value Measurements and
Disclosures (Topic 820), issued in January 2010, concerns improved disclosures
about fair value measurements.  The guidance requires the separate
reporting of significant transfers in and out of Level 1 and Level 2 fair value
measurements and the reasons for the transfers.  The guidance also
requires separate disclosure about purchases, sales, issuances and settlements
in the activity in Level 3.  The guidance is effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances and settlements in the
roll-forward of activity in Level 3 fair value measurements.  Those
disclosures are effective for fiscal years beginning after December 15, 2010
(April 1, 2011 for the Company), and for interim periods within those fiscal
years.  The Company adopted the guidance in ASU 2010-06 effective
January 1, 2010, as required, without material effect on the Company’s financial
condition or results of operations.





FASB
Accounting Standards Update (ASU) 2010-20 “Receivables: Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit Losses”
(Topic 310), issued on July 21, 2010, concerns improved disclosures regarding
the credit quality in a financial institution’s loan portfolio.  The
guidance requires additional disaggregation of the credit portfolio by portfolio
segment and class of receivable, a revised roll forward of the allowance for
credit losses, presentation of the credit portfolio by credit quality
indicators, an aging schedule of past due receivables, disclosure of troubled
debt restructurings and purchases and sales of receivables by portfolio
segment.   The period-end disclosures are effective for periods
ending on or after December 15, 2010 (December 31, 2010 for the
Company).  The activity disclosures are effective for periods
beginning on or after December 15, 2010 (January 1, 2011 for the
Company).  The adoption of FASB ASU 2010-20 is not expected to have a
material effect on the Company’s financial condition or results of
operations.





11
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements




Note
      7:
            Securities




The
amortized cost and approximate fair values, together with gross unrealized gains
and losses, of securities are as follows:




Amortized
      Cost
            
            
            Gross
      Unrealized Gains
            
            
            Gross
      Unrealized Losses
            
            
            Approximate
      Fair Value(In
      thousands)Available-for-sale
      Securities:June
      30, 2010:U.S.
      government agencies
            
            $
            2,335
            
            
            $
            117
            
            
            $
            1
            
            
            $
            2,451Mortgage-backed
      securities of government sponsored entities
            
            
            95,138
            
            
            
            3,408
            
            
            
            20
            
            
            
            98,526Private-label
      collateralized mortgage obligations
            
            
            3,323
            
            
            
            12
            
            
            
            60
            
            
            
            3,275State
      and political subdivisions
            
            
            23,008
            
            
            
            489
            
            
            
            119
            
            
            
            23,378Totals
            
            $
            123,804
            
            
            $
            4,026
            
            
            $
            200
            
            
            $
            127,630March
      31, 2010:U.S.
      government agencies
            
            $
            2,489
            
            
            $
            122
            
            
            $
            1
            
            
            $
            2,610Mortgage-backed
      securities of government sponsored entities
            
            
            90,146
            
            
            
            2,938
            
            
            
            134
            
            
            
            92,950Private-label
      collateralized mortgage obligations
            
            
            3,659
            
            
            
            8
            
            
            
            216
            
            
            
            3,451State
      and political subdivisions
            
            
            20,495
            
            
            
            464
            
            
            
            107
            
            
            
            20,852Totals
            
            $
            116,789
            
            
            $
            3,532
            
            
            $
            458
            
            
            $
            119,863





12
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements




Amortized
      Cost
            
            
            Gross
      Unrealized Gains
            
            
            Gross
      Unrealized Losses
            
            
            Approximate
      Fair Value(In
      thousands)Held-to-maturity
      Securities:June
      30, 2010:U.S.
      government agencies
            
            $
            160
            
            
            $
            ––
            
            
            $
            1
            
            
            $
            159Mortgage-backed
      securities of government sponsored entities
            
            
            463
            
            
            
            14
            
            
            
            ––
            
            
            
            477State
      and political subdivisions
            
            
            29
            
            
            
            2
            
            
            
            ––
            
            
            
            31$
            652
            
            
            $
            16
            
            
            $
            1
            
            
            $
            667March
      31, 2010:U.S.
      government agencies
            
            $
            162
            
            
            $
            ––
            
            
            $
            1
            
            
            $
            161Mortgage-backed
      securities of government sponsored entities
            
            
            500
            
            
            
            11
            
            
            
            ––
            
            
            
            511State
      and political subdivisions
            
            
            36
            
            
            
            3
            
            
            
            ––
            
            
            
            39$
            698
            
            
            $
            14
            
            
            $
            1
            
            
            $
            711





13
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements




Amortized
cost and fair value of available-for-sale securities and held-to-maturity
securities at June 30, 2010   by contractual maturity, are shown
below.  Expected maturities will differ from contractual maturities
because issuers may have the right to call or prepay obligations with or without
call or prepayment penalties.




June
      30, 2010
            
            Available-for-sale
            
            
            Held-to-maturityAmortized
              Cost
            
            
            Fair
              Value
            
            
            Amortized
              Cost
            
            
            Fair
              Value(Inthousands)One
      to five years
            
            $
            2,971
            
            
            $
            3,092
            
            
            $
            29
            
            
            $
            31Five
      to ten years
            
            
            5,520
            
            
            
            5,717
            
            
            
            ––
            
            
            
            ––After
      ten years
            
            
            16,852
            
            
            
            17,020
            
            
            
            160
            
            
            
            15925,343
            
            
            
            25,829
            
            
            
            189
            
            
            
            190Mortgage-backed
      securities of government sponsored entities
            
            
            95,138
            
            
            
            98,526
            
            
            
            463
            
            
            
            477Private-label
      collateralized mortgage obligations
            
            
            3,323
            
            
            
            3,275
            
            
            
            —
            
            
            
            —Totals
            
            $
            123,804
            
            
            $
            127,630
            
            
            $
            652
            
            
            $
            667







The
carrying value of securities pledged as collateral to secure public deposits and
for other purposes was $62.1 million and $57.9 million at June 30, 2010 and
March 31, 2010, respectively.




Certain
investments in debt securities are reported in the financial statements at an
amount less than their historical cost.  The total fair value of these
investments at June 30, 2010 and March 31, 2010, was $12.3 million and $31.8
million, which represented approximately 10% and 26%, respectively, of the
Company’s aggregate available-for-sale and held-to-maturity investment
portfolio.  These declines resulted primarily from changes in market
interest rates.




Based on
evaluation of available evidence, including recent changes in market interest
rates, credit rating information and information obtained from regulatory
filings, management believes the declines in fair value for these government
agency, mortgage-backed and state and political subdivision securities are
temporary at June 30, 2010.




Should
the impairment of any of these government agency, mortgage-backed and state and
political subdivision securities become other than temporary, the cost basis of
the investment will be reduced and the resulting loss recognized in net income
in the period the other-than-temporary impairment is identified.  The
following table shows the Company’s investments’ gross unrealized losses and
fair value, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position.




14
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements





June
      30, 2010Less
      than 12 Months
            
            
            12
      Months or More
            
            
            TotalDescription
      of
              Securities
            
            Fair
      Value
            
            
            Unrealized
              Losses
            
            
            Fair
      Value
            
            
            Unrealized
              Losses
            
            
            Fair
      Value
            
            
            Unrealized
              Losses(In
      thousands)U.S.
      government agencies
            
            $
            —
            
            
            $
            —
            
            
            $
            344
            
            
            $
            2
            
            
            $
            344
            
            
            $
            2Mortgage-backed
      securities of government sponsored entities
            
            
            1,875
            
            
            
            20
            
            
            
            —
            
            
            
            —
            
            
            
            1,875
            
            
            
            20Private-label
      collateralized mortgage obligations
            
            
            2,422
            
            
            
            60
            
            
            
            —
            
            
            
            —
            
            
            
            2,422
            
            
            
            60State
      and political subdivisions
            
            
            7,182
            
            
            
            107
            
            
            
            433
            
            
            
            12
            
            
            
            7,615
            
            
            
            119Total
      temporarily impaired securities
            
            $
            11,479
            
            
            $
            187
            
            
            $
            777
            
            
            $
            14
            
            
            $
            12,256
            
            
            $
            201








March
      31, 2010Less
      than 12 Months
            
            
            12
      Months or More
            
            
            TotalDescription
      of
              Securities
            
            Fair
      Value
            
            
            Unrealized
              Losses
            
            
            Fair
      Value
            
            
            Unrealized
              Losses
            
            
            Fair
      Value
            
            
            Unrealized
              Losses(In
      thousands)U.S.
      government agencies
            
            $
            —
            
            
            $
            —
            
            
            $
            349
            
            
            $
            2
            
            
            $
            349
            
            
            $
            2Mortgage-backed
      securities of government sponsored entities
            
            
            21,282
            
            
            
            134
            
            
            
            —
            
            
            
            —
            
            
            
            21,282
            
            
            
            134Private-label
      collateralized mortgage obligations
            
            
            3,129
            
            
            
            216
            
            
            
            —
            
            
            
            —
            
            
            
            3,129
            
            
            
            216State
      and political subdivisions
            
            
            6,628
            
            
            
            95
            
            
            
            433
            
            
            
            12
            
            
            
            7,061
            
            
            
            107Total
      temporarily impaired securities
            
            $
            31,039
            
            
            $
            445
            
            
            $
            782
            
            
            $
            14
            
            
            $
            31,821
            
            
            $
            459





15
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements




Note
      8:
            Fair
      Value Measurements




The
Company accounts for fair value measurements in accordance with FASB ASC
820-10.  FASB ASC 820-10 defines fair value, establishes a framework
for measuring fair value and expands disclosures about fair value
measurements.




FASB ASC
820-10 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  FASB ASC 820-10 also
establishes a fair value hierarchy which requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring
fair value.  The standard describes three levels of inputs that may be
used to measure fair value:




Level 1
            Quoted
      prices in active markets for identical assets or
    liabilities




Level 2
            Observable
      inputs other than Level 1 prices, such as quoted prices for similar assets
      or liabilities; quoted prices in markets that are not active; or other
      inputs that are observable or can be corroborated by observable market
      data for substantially the full term of the assets or
      liabilities




Level 3
            Unobservable
      inputs that are supported by little or no market activity and that are
      significant to the fair value of the assets or
  liabilities




Following
is a description of the valuation methodologies used for assets measured at fair
value on a recurring basis and recognized in the Company’s balance sheets, as
well as the general classification of such instruments pursuant to the valuation
hierarchy.






Available-for-sale
Securities




Where
quoted market prices are available in an active market, securities are
classified within Level 1 of the valuation hierarchy.  If quoted
market prices are not available, then fair values are estimated by using pricing
models that contain market pricing and information, quoted prices of securities
with similar characteristics or discounted cash flows that use credit adjusted
discount rates.  Level 2 securities include U.S.
Government




16
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements




agencies,
mortgage-backed securities, certain collateralized mortgage obligations and
certain municipal securities.  In certain cases where Level 1 or Level
2 inputs are not available, securities are classified within Level 3 of the
hierarchy and include other less liquid securities.




The
following table presents the fair value measurements of assets measured at fair
value on a recurring basis and the level within the FASB ASC 820-10 fair value
hierarchy in which the fair value measurements fall at June 30, 2010 and March
31, 2010:




Fair
      Value Measurements UsingFair
      Value
            
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)(In
      thousands)June
      30, 2010U.S.
      government agencies
            
            $
            2,451
            
            
            $
            ––
            
            
            $
            2,451
            
            
            $
            ––Mortgage-backed
      securities of government sponsored entities
            
            
            98,526
            
            
            
            ––
            
            
            
            98,526
            
            
            
            ––Private-label
      collateralized mortgage obligations
            
            
            3,275
            
            
            
            —
            
            
            
            3,275
            
            
            
            —State
      and political subdivisions
            
            $
            23,378
            
            
            $
            ––
            
            
            $
            23,378
            
            
            $
            ––March
      31, 2010U.S.
      government agencies
            
            $
            2,610
            
            
            $
            ––
            
            
            $
            2,610
            
            
            $
            ––Mortgage-backed
      securities of government sponsored entities
            
            
            92,950
            
            
            
            ––
            
            
            
            92,950
            
            
            
            ––Private-label
      collateralized mortgage obligations
            
            
            3,451
            
            
            
            —
            
            
            
            3,451
            
            
            
            —State
      and political subdivisions
            
            $
            20,852
            
            
            $
            ––
            
            
            $
            20,852
            
            
            $
            ––





17
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements




Following
is a description of the valuation methodologies used for assets measured at fair
value on a nonrecurring basis and recognized in the Company’s balance sheets, as
well as the general classification of such instruments pursuant to the valuation
hierarchy.




Impaired
Loans




Impaired
loans consisted primarily of loans secured by nonresidential real estate and
secured commercial loans.  Management has determined fair value
measurements on impaired loans primarily through evaluation of appraisals
performed.




Foreclosed
Assets Held for Sale




Assets
acquired through, or in lieu of, loan foreclosure are held for sale and are
initially recorded at fair value (based on current appraised value) at the date
of foreclosure, establishing a new cost basis.  Subsequent to
foreclosure, valuations are periodically performed by management and the assets
are carried at the lower of carrying amount or fair value less cost to
sell.  Management has determined fair value measurements on other real
estate owned primarily through evaluations of appraisals performed, and current
and past offers for the other real estate under evaluation.




The
following table presents the fair value measurements of assets measured at fair
value on a nonrecurring basis and the level within the FASB ASC 820-10 fair
value hierarchy in which the fair value measurements fall at June 30, 2010 and
March 31, 2010.






Fair
      Value Measurements UsingFair
      Value
            
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)(In
      thousands)June
      30, 2010Impaired
      loans
            
            $
            162
            
            
            $
            ––
            
            
            $
            ––
            
            
            $
            162Foreclosed
      assets
            
            
            167
            
            
            
            ––
            
            
            
            ––
            
            
            
            167March
      31, 2010Impaired
      loans
            
            $
            3,738
            
            
            $
            ––
            
            
            $
            ––
            
            
            $
            3,738Foreclosed
      assets
            
            
            2,888
            
            
            
            ––
            
            
            
            ––
            
            
            
            2,888





18
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements




The
following table presents estimated fair values of the Company’s financial
instruments.  The fair values of certain of these instruments were
calculated by discounting expected cash flows, which involves significant
judgments by management and uncertainties.  Fair value is the
estimated amount at which financial assets or liabilities could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale.  Because no market exists for certain of these
financial instruments and because management does not intend to sell these
financial instruments, the Company does not know whether the fair values shown
below represent values at which the respective financial instruments could be
sold individually or in the aggregate.






June
      30, 2010
            
            
            March
      31, 2010Carrying
      Amount
            
            
            Fair
      Value
            
            
            Carrying
      Amount
            
            
            Fair
      ValueFinancial
      assetsCash
      and cash equivalents
            
            $
            8,001
            
            
            $
            8,001
            
            
            $
            9,875
            
            
            $
            9,875Available-for-sale
      securities
            
            
            127,630
            
            
            
            127,630
            
            
            
            119,863
            
            
            
            119,863Held-to-maturity
      securities
            
            
            652
            
            
            
            667
            
            
            
            698
            
            
            
            711Loans,
      net of allowance for loan losses
            
            
            243,673
            
            
            
            251,880
            
            
            
            247,006
            
            
            
            252,806Federal
      Home Loan Bank stock
            
            
            5,025
            
            
            
            5,025
            
            
            
            5,025
            
            
            
            5,025Interest
      receivable
            
            
            1,377
            
            
            
            1,377
            
            
            
            1,602
            
            
            
            1,602Financial
      liabilitiesDeposits
            
            
            313,819
            
            
            
            311,553
            
            
            
            311,934
            
            
            
            306,778Other
      short-term borrowings
            
            
            8,362
            
            
            
            8,362
            
            
            
            7,454
            
            
            
            7,454Federal
      Home Loan Bank advances
            
            
            43,500
            
            
            
            44,778
            
            
            
            45,500
            
            
            
            46,419Advances
      from borrowers for taxes and insurance
            
            
            120
            
            
            
            120
            
            
            
            539
            
            
            
            539Interest
      payable
            
            
            179
            
            
            
            179
            
            
            
            213
            
            
            
            213







The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments.




Cash
and Cash Equivalents, Interest Receivable and Federal Home Loan Bank
Stock




The
carrying amount approximates fair value.




Loans




The fair
value of loans is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.  Loans with
similar characteristics were aggregated for purposes of the
calculations.




19
 Index





Wayne
Savings Bancshares, Inc.


Notes
to Condensed Consolidated Financial Statements






Held-to-maturity
securities




The fair
value of held-to-maturity securities was estimated by using pricing models that
contain market pricing and information, quoted prices of securities with similar
characteristics or discounted cash flows that use credit adjusted discount
rates.




Deposits




Deposits
include savings accounts, checking accounts and certain money market
deposits.  The carrying amount approximates fair value.  The
fair value of fixed-maturity time deposits is estimated using a discounted cash
flow calculation that applies the rates currently offered for deposits of
similar remaining maturities.




Interest
Payable, Other Short-Term Borrowings and Advances From Borrowers for Taxes and
Insurance




The
carrying amount approximates fair value.




Federal
Home Loan Bank Advances




Rates
currently available to the Company for debt with similar terms and remaining
maturities are used to estimate the fair value of existing debt.




Commitments
to Originate Loans, Letters of Credit and Lines of Credit




The fair
value of commitments to originate loans is estimated using the fees currently
charged to enter into 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 values of letters of credit and lines of
credit are based on fees currently charged for similar agreements or on the
estimated cost to terminate or otherwise settle the obligations with the
counterparties at the reporting date.  Fair values of commitments were
not material at June 30, 2010 and March 31, 2010.




20
 Index





Wayne
Savings Bancshares, Inc.


Management’sDiscussion and Analysis of Financial


Condition
and Results of Operations




Discussion
of Financial Condition Changes from March 31, 2010, to June 30,
2010




At June
30, 2010, the Company had total assets of $407.5 million, an increase of $1.4
million, or 0.4%, from total assets at March 31, 2010.




Liquid
assets, consisting of cash, interest-bearing demand deposits and
available-for-sale securities, increased by $5.9 million, or 4.5%, to $135.6
million at June 30, 2010.  The increase was primarily due to an
increase of $7.8 million in available-for-sale securities, partially offset by a
decrease in cash and cash equivalents of $1.9 million, or 19.0%.




Total
securities increased by $7.7 million, or 6.4%, during the three months ended
June 30, 2010.  The increase was primarily due to purchases of $17.6
million and an increase in the market value of available-for-sale investment
securities of $752,000, partially offset by principal repayments of $10.4
million.  Purchases were mainly funded by proceeds from principal
payments received from the loan and securities portfolios.




Net loans
receivable decreased by $3.3 million, or 1.4% at June 30, 2010 compared to March
31, 2010.  The Bank originated $12.2 million of loans, received
payments of $13.7 million, originated and sold $1.7 million of 30-year
fixed-rate mortgage loans into the secondary market and increased the allowance
for loan losses, net of charge-offs, by $183,000.The low interest rate
environment has induced a number of residential and commercial borrowers to
refinance existing loans, which increases loan repayment activity, while the
continuing difficult economic environment continues to limit the demand for new
loans by credit worthy borrowers.  With regard to the sale of 30-year
fixed-rate mortgage loans, management has adopted a strategy of immediately
selling certain newly originated loans of this type into the secondary market to
limit the accumulation of interest rate risk on the balance sheet and to keep
the secondary market channel open as a backup source of liquidity.  As
part of an overall interest rate risk management strategy, based on the
Company’s belief that investing in shorter-term and adjustable-rate commercial
loans positions the Company more favorably from an interest rate risk management
perspective compared to the origination and retention of long term fixed-rate
residential mortgages, the lending division continues to focus on the
origination of shorter-term and adjustable-rate commercial and commercial real
estate loans.




21
 Index





Wayne
Savings Bancshares, Inc.


Management’s
Discussion and Analysis of Financial


Condition
and Results of Operations




June
      30, 2010
            
            
            March
      31, 2010(Dollars
      in thousands)Mortgage
      loans:One-to-four
      family residential(1)
            
            $
            137,549
            
            
            
            55.48
            %
            
            $
            138,669
            
            
            
            54.86
            %Residential
      construction loans
            
            
            1,780
            
            
            
            0.72
            
            
            
            2,097
            
            
            
            0.83Multi-family
      residential
            
            
            8,573
            
            
            
            3.46
            
            
            
            8,637
            
            
            
            3.42Non-residential
      real estate/land(2)
            
            
            62,007
            
            
            
            25.01
            
            
            
            64,390
            
            
            
            25.47Total
      mortgage loans
            
            
            209,909
            
            
            
            84.67
            
            
            
            213,793
            
            
            
            84.58Other
      loans:Consumer
      loans(3)
            
            
            3,100
            
            
            
            1.25
            
            
            
            3,402
            
            
            
            1.35Commercial
      business loans
            
            
            34,896
            
            
            
            14.08
            
            
            
            35,565
            
            
            
            14.07Total
      other loans
            
            
            37,996
            
            
            
            15.33
            
            
            
            38,967
            
            
            
            15.42Total
      loans before net items
            
            
            247,905
            
            
            
            100.00
            %
            
            
            252,760
            
            
            
            100.00
            %Less:Loans
      in process
            
            
            809
            
            
            
            
            
            
            
            2,507Deferred
      loan origination fees
            
            
            414
            
            
            
            
            
            
            
            421Allowance
      for loan losses
            
            
            3,009
            
            
            
            
            
            
            
            2,826Total
      loans receivable, net
            
            $
            243,673
            
            
            
            
            
            
            $
            247,006Mortgage-backed
      securities, net(4)
            
            $
            102,264
            
            
            
            
            
            
            $
            96,901








(1)
            Includes
      equity loans collateralized by second mortgages in the aggregate amount of
      $16.5 million for both periods.  Such loans have been
      underwritten on substantially the same basis as the Company’s first
      mortgage loans.


(2)
            Includes
      land loans of $101,000 and $110,000 at June 30, 2010 and  March
      31, 2010, respectively.


(3)
            Includes
      second mortgage loans of $1.1 million as of both June 30, 2010
      and  March 31, 2010.


(4)
            Includes mortgage-backed
      securities designated as
  available-for-sale.







Non-performing
loans amounted to $4.2 million at June 30, 2010 compared to $4.3 million at
March 31, 2010.  At June 30, 2010, non-performing loans consisted
primarily of residential mortgage loans of approximately $2.2 million,
commercial real estate loans with a combined balance of $1.3 million, commercial
business loans totaling $673,000 and consumer loans totaling
$22,000.  At March 31, 2010, non-performing loans consisted of $2.2
million in residential loans, $1.3 million in commercial real estate loans,
commercial business loans totaling $772,000 and $3,000 in consumer loans. Foreclosed
assets held for sale amounted to $2.4 million at June 30, 2010, compared to $2.9
million at March 31, 2010, a decrease of 17.2%.  The decline in the
balance of foreclosed assets is mainly due to the disposal of four properties
totaling $619,000 while only acquiring two properties totaling
$169,000.  In addition, provision for impairment on foreclosed assets
held for sale totaled $46,000 for the quarter.  Despite the difficult
real property markets in the Company’s market area, transactions are being
executed.  Management has been actively working to maximize current
net proceeds compared to estimates of expected future carrying costs and
potential future values.  Total non-performing assets amounted to $6.6
million at June 30, 2010, compared to $7.2 million at March 31,
2010.




22
 Index





Wayne
Savings Bancshares, Inc.


Management’s
Discussion and Analysis of Financial


Condition
and Results of Operations




The
following table sets forth information regarding our past due, nonaccrual and
impaired loans and foreclosed assets held for sale as of June 30, 2010 and March
31, 2010.




June
      30,
              2010
            
            
            March
      31,
              2010(Dollars
      in thousands)Past
      due loans 30-89 days:Mortgage
      loans:One-to-four
      family residential
            
            $
            92
            
            
            $
            260Multifamily
      and nonresidential
            
            
            1,403
            
            
            
            3,255Non-mortgage
      loans:Commercial
      business loans
            
            
            944
            
            
            
            —Consumer
      loans
            
            
            —
            
            
            
            —$
            2,439
            
            
            $
            3,515Non-performing
      loans:Mortgage
      loans:One-to-four
      family residential
            
            $
            2,168
            
            
            $
            2,224All
      other mortgage loans
            
            
            1,320
            
            
            
            1,320Non-mortgage
      loans:Commercial
      business loans
            
            
            673
            
            
            
            772Consumer
            
            
            22
            
            
            
            3Total
      non-performing loans(1)
            
            
            4,183
            
            
            
            4,319Loans
      deemed impaired(2)
            
            
            2,186
            
            
            
            2,185Total
      non-performing and impaired loans
            
            
            6,369
            
            
            
            6,504Total
      foreclosed assets held for sale
            
            
            2,392
            
            
            
            2,888Total
      non-performing and impaired assets
            
            $
            8,761
            
            
            $
            9,392Total
      non-performing and impaired loans to net loans receivable
            
            
            2.61
            %
            
            
            2.63
            %Total
      non-performing and impaired loans to total assets
            
            
            1.56
            %
            
            
            1.60
            %Total
      non-performing and impaired assets to total assets
            
            
            2.15
            %
            
            
            2.31
            %




(1)
            Nonperforming
      loans include $2.1 million and $1.4 million which are deemed impaired at
      June 30, 2010 and March 31, 2010,
respectively.




(2)
            Includes
      loans deemed impaired of $920,000 at June 30, 2010, and $778,000 at March
      31, 2010, that are currently
performing.




23
 Index





Wayne
Savings Bancshares, Inc.


Management’s
Discussion and Analysis of Financial


Condition
and Results of Operations




The
following table sets forth the analysis of the allowance for loan losses for the
periods indicated.







For
      the three
              months
      ended
              June
      30, 2010
            
            
            For
      the
              year
      ended
              March
      31, 2010(Dollars
      in thousands)Loans
      receivable, gross
            
            $
            246,682
            
            
            $
            249,832Average
      loans receivable, net
            
            $
            245,542
            
            
            $
            252,020Allowance
      balance (at beginning of period)
            
            $
            2,826
            
            
            $
            2,484Provision
      for losses
            
            
            190
            
            
            
            1,643Charge-offs:Mortgage
      loans:One-to-four
      family
            
            
            (8
            )
            
            
            (267
            )Non-residential
      real estate and land
            
            
            —
            
            
            
            (784
            )Other
      loans:Consumer
            
            
            —
            
            
            
            —Commercial
            
            
            —
            
            
            
            (279
            )Gross
      charge-offs
            
            
            (8
            )
            
            
            (1,330
            )Recoveries:Mortgage
            
            
            —
            
            
            
            28Consumer
            
            
            1
            
            
            
            1Gross
      recoveries
            
            
            1
            
            
            
            29Net
      charge-offs
            
            
            (7
            )
            
            
            (1,301
            )Allowance
      for loan losses balance (at end of period)
            
            $
            3,009
            
            
            $
            2,826Allowance
      for loan losses as a percent of loans receivable, gross at end of
      period
            
            
            1.22
            %
            
            
            1.13
            %Net
      loans charged off as a percent of average loans receivable,
      net
            
            
            0.00
            %
            
            
            0.52
            %Ratio
      of allowance for loan losses to non-performing loans at end of
      period
            
            
            71.93
            %
            
            
            65.43
            %





24
 Index





Wayne
Savings Bancshares, Inc.


Management’s
Discussion and Analysis of Financial


Condition
and Results of Operations




Deposits
totaled $313.8 million at June 30, 2010, an increase of $1.9 million, or 0.6%,
from $311.9 million at March 31, 2010.  Money market accounts
increased by $900,000, time deposits increased by $710,000 and demand deposit
accounts increased by $275,000.  Management continued to exercise
discipline during the period with regard to the pricing of retail
certificates.  In general, management attempts to benchmark retail
certificate of deposit pricing to the cost of alternate sources of funds,
including Federal Home Loan Bank advances and brokered
deposits.  Exceptions are made to defend customer relationships with
significant value to the Bank while allowing rate sensitive certificate of
deposit accounts to move to other alternatives.




Other
short-term borrowings, in the form of repurchase agreements with customers,
totaled $8.4 million at June 30, 2010, and $7.5 million at March 31,
2010.  The interest rate paid on these borrowings is 0.40% for both
aforementioned periods.




Advances
from the Federal Home Loan Bank of Cincinnati (“FHLB”) totaled $43.5 million at
June 30, 2010, a decrease of $2.0 million from $45.5 million at March 31,
2010.  The Company primarily uses advances from the FHLB for short
term cash management purposes and to extend liability duration for interest rate
risk management purposes.  Repricing risk associated with advances is
mitigated through the laddering of advance maturities over time.  The
weighted average cost of FHLB advances was 3.65% at June 30, 2010, compared to
3.82% at March 31, 2010.  The decrease in the rate paid is due to
decreases in market interest rates.




Stockholders’
equity increased by $982,000, or 2.7%, during the three months ended June 30,
2010, due primarily to net income of $643,000 and an increase in accumulated
other comprehensive income of $497,000,  partially offset by declared
dividends of $180,000.




Comparison
of Operating Results for the Three Month Periods Ended June 30, 2010 and 2009




General




Net
income for the three months ended June 30, 2010 totaled $643,000, an increase of
$111,000, or 20.9%, compared to $532,000 for the three month period ended June
30, 2009.  The increase in net income was primarily due to a decrease
in interest expense of $459,000 and a decrease in noninterest expense of
$153,000, partially offset by a decrease in interest income of $435,000 and an
increase in the provision for federal income taxes of $43,000.




25
 Index





Wayne
Savings Bancshares, Inc.


Management’s
Discussion and Analysis of Financial


Condition
and Results of Operations




Average
Balance Sheet




The
following table sets forth certain information relating to the Company’s average
balance sheet and reflects the average yield on assets and average cost of
liabilities for the periods indicated and the average yields earned and rates
paid.  Such yields and costs are derived by dividing income or expense
by the average balance of assets or liabilities, respectively, for the periods
presented.




For
      the three months ended June 30,2010
            
            
            2009Average
      Balance
            
            
            Interest
            
            
            Average
              Rate
            
            
            Average
      Balance
            
            
            Interest
            
            
            Average
      Rate(Dollars
      in thousands)Interest-earning
      assets:Loans
      receivable, net(1)
            
            $
            245,542
            
            
            $
            3,434
            
            
            
            5.59
            %
            
            $
            252,138
            
            
            $
            3,682
            
            
            
            5.84
            %Investment
      securities(2)
            
            
            123,996
            
            
            
            1,216
            
            
            
            3.92
            
            
            
            115,692
            
            
            
            1,403
            
            
            
            4.85Interest-earning
      deposits(3)
            
            
            13,346
            
            
            
            57
            
            
            
            1.71
            
            
            
            8,608
            
            
            
            57
            
            
            
            2.65Total
      interest-earning assets
            
            
            382,884
            
            
            
            4,707
            
            
            
            4.92
            
            
            
            376,438
            
            
            
            5,142
            
            
            
            5.46Noninterest-earning
      assets
            
            
            25,297
            
            
            
            
            
            
            
            
            
            
            
            29,711Total
      assets
            
            $
            408,181
            
            
            
            
            
            
            
            
            
            
            $
            406,149Interest-bearing
      liabilities:Deposits
            
            $
            314,571
            
            
            $
            1,012
            
            
            
            1.29
            %
            
            $
            309,036
            
            
            $
            1,382
            
            
            
            1.79
            %Other
      short-term borrowings
            
            
            7,266
            
            
            
            7
            
            
            
            0.39
            
            
            
            9,843
            
            
            
            10
            
            
            
            0.41Borrowings
            
            
            44,588
            
            
            
            416
            
            
            
            3.73
            
            
            
            47,406
            
            
            
            502
            
            
            
            4.24Total
      interest-bearing liabilities
            
            
            366,425
            
            
            
            1,435
            
            
            
            1.57
            
            
            
            366,285
            
            
            
            1,894
            
            
            
            2.07Noninterest
      bearing  liabilities
            
            
            4,156
            
            
            
            
            
            
            
            
            
            
            
            4,546Total
      liabilities
            
            
            370,581
            
            
            
            
            
            
            
            
            
            
            
            370,831Stockholders’
      equity
            
            
            37,600
            
            
            
            
            
            
            
            
            
            
            
            35,318Total
      liabilities and stockholders’ equity
            
            $
            408,181
            
            
            
            
            
            
            
            
            
            
            $
            406,149Net
      interest income
            
            
            
            
            
            $
            3,272
            
            
            
            
            
            
            
            
            
            
            $
            3,248Interest
      rate spread(4)
            
            
            
            
            
            
            
            
            
            
            3.35
            %
            
            
            
            
            
            
            
            
            
            
            3.40
            %Net
      yield on interest-earning assets(5)
            
            
            
            
            
            
            
            
            
            
            3.42
            %
            
            
            
            
            
            
            
            
            
            
            3.45
            %Ratio
      of average interest-earning assets to average  interest-bearing
      liabilities
            
            
            
            
            
            
            
            
            
            
            104.49
            %
            
            
            
            
            
            
            
            
            
            
            102.77
            %





(1)
            Includes
      non-accrual loan balances.


(2)
            Includes
      mortgage-backed securities both designated as available-for-sale and held
      to maturity.


(3)
            Includes  interest-bearing
      deposits in other financial
institutions.


(4)
              Interest
      rate spread represents the difference between the average yield on
      interest-earning assets and the average cost of interest-bearing
      liabilities.


(5)
            Net
      yield on interest-earning assets represents net interest income as a
      percentage of average interest-earning
assets.





26
 Index





Wayne
Savings Bancshares, Inc.


Management’s
Discussion and Analysis of Financial


Condition
and Results of Operations




Interest
Income




Interest
income decreased by $435,000 or 8.5%, to $4.7 million for the three months ended
June 30, 2010, compared to the same period in 2009.  The decrease was
due to a decline in the weighted-average yield on interest-earning assets to
4.92% in the 2010 period from 5.46% for the 2009 period, partially offset with
an increase of $6.5 million in the average balance of interest-earning assets
outstanding to $382.9 million for the 2010 period compared to an average balance
of $376.4 million for the 2009 period.The yield decrease was
primarily due to the cumulative effect of interest-earning assets repricing to
lower current market rates from the 2009 period to the 2010 period through
prepayments, new loan originations and reinvestment of securities cashflows at
lower yields.




Interest
income on loans decreased by $248,000, or 6.7%, for the three month period ended
June 30, 2010, compared to the same period in 2009, primarily due to a reduction
in the weighted-average rate on loans from 5.84% for the three months ended June
30, 2009 to 5.59% for the three months ended June 30, 2010.  As
discussed earlier, the yield decrease was due to lower overall market rates for
new loan originations and the refinancing of existing loans, combined with a
decrease in the average balance of loans outstanding of $6.6 million, or 2.6%,
to $245.5 million for the 2010 period compared to $252.1 million for the 2009
period.  Loan prepayments have increased due to the low interest rate
environment and loan demand from qualified borrowers has been significantly
reduced by the continued difficult economic conditions in 2010.




Interest
income on securities decreased by $187,000, or 13.3%, during the three months
ended June 30, 2010, compared to the same period in 2009.  This
decrease was due primarily to a decrease of 93 basis points in the
weighted-average rate to 3.92% for the 2010 period, compared to 4.85% for the
2009 period, partially offset by an increase in the average balance of $8.3
million, or 7.2%.  As discussed earlier, maturing securities cash
flows are being reinvested at significantly lower market rates, and the duration
of purchased securities is being shortened to mitigate the interest rate risk
associated with a possible future increase in the level of market interest
rates.




Dividends
on Federal Home Loan Bank stock and other income remained unchanged at $57,000
for the three month period ending June 30, 2010 compared to the 2009
period.   The weighted-average yield decreased by 94 basis points
to 1.71% as a result of reductions in short term market interest rates. The
decrease was fully offset by the increase in the average balance of $4.7 million
to $13.3 million in the 2010 period, compared to $8.6 million in the 2009
period.




Interest
Expense




Interest
expense totaled $1.4 million for the three month period ended June 30, 2010, a
decrease of $459,000, or 24.2%, compared to $1.9 million for the three month
period ended June 30, 2009.  The decrease resulted from a 50 basis
point decrease in the weighted-average cost of funds to 1.57% for the 2010
period compared to 2.07% for the 2009 period. The average balance of total
interest-bearing liabilities remained relatively unchanged for the 2010 period
compared to the 2009 period.




Interest
expense on deposits totaled $1.0 million for the three months ended June 30,
2010, a decrease of $370,000, or 26.8%, compared to $1.4 million for the three
months ended June 30, 2009.  The decrease resulted from a 50 basis
point decrease in the weighted-average cost of deposits, to 1.29% for the 2010
period compared to 1.79% for the 2009 period, partially offset with an increase
in the average balance of $5.5 million, or 1.8%, to $314.6 million for the 2010
period compared to $309.0 million for the 2009 period.  The decrease
in interest expense is slowing as rates paid on deposit products reach floors
established by local market competitors.




27
 Index





Wayne
Savings Bancshares, Inc.


Management’s
Discussion and Analysis of Financial


Condition
and Results of Operations




Interest
expense on other short-term borrowings totaled $7,000 for the three month period
ended June 30, 2010, a decrease of $3,000, from the 2009 period.  The
decrease was primarily due to a decrease in the average balance of $2.6 million,
or 26.2%, coupled with a slight decrease in the weighted-average cost of funds
of 2 basis points for the 2010 period compared to the 2009 period.




Interest
expense on Federal Home Loan Bank advances totaled $416,000 for the three month
period ended June 30, 2010, a decrease of $86,000 compared to the expense of
$502,000 for the 2009 period.  The decrease was primarily due to a
decline in the weighted-average cost of 51 basis points to 3.73%, as a portion
of maturing higher cost advances were repriced to lower current market interest
rates, and a decrease of $2.9 million, or 6.0%, in the average balance of
advances outstanding.  A portion of maturing advances were paid off
through an increase in retail deposits as noted above.  Management
will continue to reserve FHLB borrowing capacity as a possible substitute for
higher cost retail deposits and as a means of extending liability duration to
manage interest rate risk on the balance sheet.




Net
Interest Income




Net
interest income totaled $3.3 million for the three month period ended June 30,
2010, an increase of $24,000, or 0.7%, compared to the three month period ended
June 30, 2009.  The interest rate spread decreased 5 basis points to
3.35% for the 2010 period, compared to 3.40% for the 2009 period.  The
net interest margin decreased 3 basis points to 3.42% for the three month period
ended June 30, 2010, compared to 3.45% for the three month period ended June 30,
2009.  The decrease in the interest rate spread was due to a shift in
asset composition to lower yielding investment securities and cash equivalents
from higher yielding loans and mortgage-backed securities as discussed
above.




Provision
for Loan Losses




Management
recorded a $190,000 provision for loan losses for the three month period ended
June 30, 2010, an increase of $25,000 compared to the $165,000 provision for the
three month period ended June 30, 2009.  The amount of the provision
for loan losses is based on management’s assessment of portfolio performance
indicators, primarily the increase in delinquent loans, non-performing loans and
charge-offs, and economic conditions in the Company’s market
area.  Despite shrinkage in the size of the loan portfolio from the
2009 quarter to the 2010 quarter, the negative change in portfolio performance
and economic factors resulted in an increased provision in the 2010 quarter to
maintain directional consistency in the overall level of the allowance for loan
losses with the factors other than portfolio size as discussed
above.  To the best of management’s knowledge, all known and inherent
losses that are probable and which can be reasonably estimated have been
recorded as of June 30, 2010.




Noninterest
Income




Noninterest
income, consisting of service fees and charges on deposit accounts, earnings on
bank-owned life insurance, trust income, gain on sale of foreclosed assets and
gain on the sale of loans increased by $2,000, or 0.4%, for the three month
period ended June 30, 2010, compared to the three month period ended June 30,
2009.  The increase was primarily due to a gain on sale of foreclosed
assets held for sale of $14,000 compared to a prior year loss of $11,000,
coupled with an increase in trust income of $11,000 and a increased gains on the
sale of residential mortgage loans of $4,000.  These increases were
offset by a decrease of $39,000 in service fees on deposit accounts and other
income.  The increase in trust income is




28
 Index





Wayne
Savings Bancshares, Inc.


Management’s
Discussion and Analysis of Financial


Condition
and Results of Operations




mainly
due to an increase in the market value of managed assets during the 2010 period
compared to the 2009 period, as most trust fees are tied to the market value of
customer accounts.  The decrease in service fees on deposit accounts
is due to a decrease in overdraft fees as customers better manage their deposit
accounts to avoid fees and a decrease in activity based fees, such as debit card
interchange, due to reduced economic activity.




Noninterest
Expense




Noninterest
expense decreased by $153,000, or 5.3%, to $2.7 million for the three months
ended June 30, 2010, compared to the three months ended June 30,
2009.  The decrease was primarily due to a $217,000 decrease in
federal deposit insurance expense.  A special assessment imposed on
all insured institutions by the FDIC during the 2009 period was not repeated in
the 2010 period.  Other operating expenses decreased by $61,000 due to
a decrease in expenses directly associated with loan originations, as volume in
the 2010 period was lower than in the 2009 period.  Occupancy and
equipment expenses decreased by $13,000 due to management’s exercise of careful
control over office expenditures such as supplies and equipment. The above
decreases were partially offset by an increase of $95,000 in compensation and
employee benefits, mainly due to annual merit compensation increases that take
effect each April, and increased benefit costs, combined with a $46,000 increase
in the provision for impairment on foreclosed assets held-for-sale as offering
prices were reduced to reflect real property market conditions in the Company’s
market area.




Federal
Income Taxes




Federal
income tax expense was $190,000 for the three month period ended June 30, 2010,
an increase of $43,000, or 29.3%, compared to the three month period ended June
30, 2009.  The increase was primarily due to a $154,000 increase in
pretax income resulting from the factors discussed above.  The
effective tax rate was 22.8% for the 2010 period compared to 21.6% for the 2009
period.




29
 Index





Wayne
Savings Bancshares, Inc.


Management’s
Discussion and Analysis of Financial


Condition
and Results of Operations




Forward-Looking
Statements




This
document contains forward-looking statements, which can be identified by the use
of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,”
“plan,” “seek,” “expect” and similar expressions.  These
forward-looking statements include:  statements of goals, intentions
and expectations, statements regarding prospects and business strategy,
statements regarding asset quality and market risk, and estimates of future
costs, benefits and results.




These
forward-looking statements are subject to significant risks, assumptions and
uncertainties, including, among other things, the following:  (1)
general economic conditions, (2) competitive pressure among financial services
companies, (3) changes in interest rates, (4) deposit flows, (5) loan demand,
(6) changes in legislation or regulation, (7) changes in accounting principles,
policies and guidelines, (8) litigation liabilities, including costs, expenses,
settlements and judgments, and (9) other economic, competitive, governmental,
regulatory and technological factors affecting our operations, pricing, products
and services.




Because
of these and other uncertainties, our actual future results may be materially
different from the results indicated by these forward-looking
statements.  We have no obligation to update or revise any
forward-looking statements to reflect any changed assumptions, any unanticipated
events or any changes in the future.




30
 Index





Wayne
Savings Bancshares, Inc.


Part
I









ITEM3                
  Quantitative and Qualitative Disclosures About Market
Risk




Management
believes there has been no material change in the Company’s market risk since
the Company’s Form 10-K filed with the Securities and Exchange Commission for
the year ended March 31, 2010.







ITEM4T              
 Controls and Procedures




(a)           Evaluation
of disclosure controls and procedures.




Under the
supervision and with the participation of the Company’s management, including
our Chief Executive Officer and Chief Financial Officer, the Company evaluated
the effectiveness of the design and operation of its disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act)
as of the end of the period covered by this report.  Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that, as of the end of the period covered by this report, the Company’s
disclosure controls and procedures were effective in timely alerting them to the
material information relating to the Company (or our consolidated subsidiaries)
required to be included in the Company’s periodic SEC filings.




(b)           Changes
in internal controls.




There has
been no change made in the Company’s internal control over financial reporting
during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.







31
 Index





Wayne
Savings Bancshares, Inc.


PART
II




ITEM1.                  Legal
Proceedings




Not
applicable.





ITEM1A.               Risk
Factors




There
have been no material changes in the risk factors set forth in Part I, Item 1A
of the Company’s Annual Report on Form 10-K for the year ended March 31,
2010.





ITEM2.                  Unregistered
Sales of Equity Securities and Use of Proceeds




(a)           Not
applicable.


(b)           Not
applicable.


(c)           Not
applicable.





ITEM3.                  Defaults
Upon Senior Securities




Not
applicable.





ITEM4.                  Reserved




Not
applicable.





ITEM5.                  Other
Information




Not
applicable.





32
 Index





Wayne
Savings Bancshares, Inc.


PART
II




ITEM6.                  Exhibits




EX-31.1
            Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002, 18 U.S.C. Section 1350





EX-31.2
            Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002, 18 U.S.C. Section 1350





EX-32
            Written
      Statement of Chief Executive Officer and Chief Financial Officer furnished
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
      Section 1350





33
 Index





SIGNATURES




Pursuant
to the requirements 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.







Date:  August 9, 2010
            
            By:
            /s/Phillip E. BeckerPhillip
      E. BeckerPresident
      and Chief Executive OfficerDate:  August 9, 2010
            
            By:
            /s/H. Stewart Fitz Gibbon
    IIIH.
      Stewart Fitz Gibbon IIIExecutive
      Vice President andChief
      Financial Officer






34