FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20552

(Mark One)

[X]           QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended           December 31, 1998   
                               -------------------------------------------

                                       OR

[   ]          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)

United States                                                 31-1557791  
State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                         Identification Number)

151 North Market Street
Wooster, Ohio                                                   44691    
(Address of principal                                        (Zip Code)
executive office)

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

Check  whether  the issuer:  (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   X                                                      No ___     

As of February 5, 1999, the latest  practicable  date,  2,486,549  shares of the
registrant's common stock, $1.00 par value, were issued and outstanding.









                               Page 1 of 18 pages


<PAGE>


                         Wayne Savings Bancshares, Inc.

                                      INDEX

                                                                         Page

PART I  -   FINANCIAL INFORMATION

             Consolidated Statements of Financial Condition                  3

             Consolidated Statements of Earnings                             5

             Consolidated Statements of Cash Flows                           6

             Notes to Consolidated Financial Statements                      8

             Management's Discussion and Analysis of
             Financial Condition and Results of
             Operations                                                     12


PART II -    OTHER INFORMATION                                              17

SIGNATURES                                                                  18




























                                        2



<PAGE>

<TABLE>

                         WAYNE SAVINGS BANCSHARES, INC.
<CAPTION>
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                        (In thousands, except share data)

                                                                                          December 31,            March 31,
        ASSETS                                                                                    1998                 1998
<S>                                                                                            <C>                      <C>
Cash and due from banks                                                                       $  1,985             $  1,422
Federal funds sold                                                                               1,650                4,100
Interest-bearing deposits in other financial institutions                                       13,626                7,647
                                                                                               -------              -------
          Cash and cash equivalents                                                             17,261               13,169

Certificates of deposit in other financial institutions                                          4,500                8,500
Investment securities - at amortized cost, approximate market value of 
  $11,671 and $13,335 as of December 31, 1998 and March 31, 1998, respectively                  11,854               13,401
Mortgage-backed securities available for sale - at market                                        7,364                4,032
Mortgage-backed securities - at cost, approximate market value of $1,001 
  and $245 as of December 31, 1998  and March 31, 1998, respectively                               996                  243
Loans receivable - net                                                                         209,596              206,685
Loans held for sale-at lower of cost or market                                                   2,018                1,194
Real estate acquired through foreclosure                                                           885                  946
Office premises and equipment - at depreciated cost                                              7,350                6,461
Federal Home Loan Bank stock - at cost                                                           2,870                2,719
Accrued interest receivable on loans                                                             1,094                1,152
Accrued interest receivable on mortgage-backed securities                                           41                   23
Accrued interest receivable on investments and interest -bearing deposits                          170                  180
Prepaid expenses and other assets                                                                1,929                1,047
Prepaid federal income taxes                                                                        94                   -
                                                                                               -------              -------

Total assets                                                                                  $268,022             $259,752
                                                                                               =======              =======

</TABLE>







                                        3



<PAGE>




<TABLE>

                         WAYNE SAVINGS BANCSHARES, INC.
<CAPTION>
           CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued)

                        (In thousands, except share data)

                                                                                    December 31,            March 31,
                                                                                            1998                 1998
<S>                                                                                        <C>                  <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                                $228,572             $217,621
Advances from Federal Home Loan Bank                                                      12,000               16,000
Advances by borrowers for taxes and insurance                                              1,436                  783
Accrued interest payable                                                                      35                  197
Accounts payable on mortgage loans serviced for others                                       277                  199
Other liabilities                                                                            412                  291
Accrued federal income taxes                                                                  59                    1
Deferred federal income taxes                                                                245                  234
                                                                                         -------              -------
               Total liabilities                                                         243,036              235,326





STOCKHOLDERS' EQUITY

Common stock (20,000,000 shares of $1.00 par value authorized;
  2,500,000 and 2,258,007 issued at December 31, 1998 and 
  March 31, 1998, respectively)                                                            2,500                2,258
Additional paid-in capital                                                                12,458                5,963
Retained earnings - substantially restricted                                              10,328               16,198
Less:  15,941 and 357 shares of treasury stock                                             (356)                 (10)
Unrealized gains on securities available for sale,
   net of related tax effects                                                                 56                   17
                                                                                         -------              -------
               Total stockholders' equity                                                 24,986               24,426
                                                                                        --------              -------
Total liabilities and stockholders' equity                                              $268,022             $259,752
                                                                                         =======              =======

</TABLE>



                                        4

<PAGE>


<TABLE>
                         WAYNE SAVINGS BANCSHARES, INC.
<CAPTION>
                       CONSOLIDATED STATEMENTS OF EARNINGS
                      (In thousands, except per share data)

                                                                         Nine months                    Three months
                                                                            Ended                           Ended
                                                                         December 31,                    December 31,
                                                                     1998             1997            1998            1997
<S>                                                                 <C>              <C>              <C>             <C>
Interest income
  Loans                                                           $12,825          $12,799          $4,310          $4,240
  Mortgage-backed securities                                          296               57             116              28
  Investment securities                                               615              741             172             215
  Interest-bearing deposits and other                                 792              781             256             295
                                                                   ------           ------           -----           -----
          Total interest income                                    14,528           14,378           4,854           4,778

Interest expense
  Deposits                                                          7,873            7,589           2,623           2,545
  Borrowings                                                          535              674             146             210
                                                                   ------           ------           -----           -----
          Total interest expense                                    8,408            8,263           2,769           2,755
                                                                   ------           ------           -----           -----

          Net interest income                                       6,120            6,115           2,085           2,023
Provision for losses on loans                                          47               45              16              15
                                                                   ------           ------           -----           -----

          Net interest income after provision 
          for losses on loans                                       6,073            6,070           2,069           2,008

Other income
  Gain on sale of loans                                               255              190              67              66
  Gain on sale of assets                                                1                -               -               -
  Service fees, charges and other operating                           519              467             158             154
                                                                   ------           ------           -----           -----
          Total other income                                          775              657             225             220

General, administrative and other expense
  Employee compensation and benefits                                2,425            2,394             775             813
  Occupancy and equipment                                             818              729             270             256
  Federal deposit insurance premiums                                  153              152              52              48
  Franchise taxes                                                     264              228              90              76
  Other operating                                                   1,143            1,009             440             334
                                                                   ------           ------           -----           -----
          Total general, administrative and 
            other expense                                           4,803            4,512           1,627           1,527
                                                                   ------           ------           -----           -----

          Earnings before income taxes                              2,045            2,215             667             701
Federal incomes taxes
  Current                                                             705              709             247             240
  Deferred                                                             (9)              45             (20)              -
                                                                   ------           ------           -----           -----
          Total federal income taxes                                  696              754             227             240
                                                                   ------           ------           -----           -----

          NET EARNINGS                                           $ 1,349           $ 1,461          $  440          $  461
                                                                  ======            ======           =====           =====

          EARNINGS PER SHARE
               Basic                                                $0.54            $0.59           $0.18           $0.19
                                                                    =====            =====            =====          =====
               Diluted                                              $0.54            $0.59           $0.18           $0.18
                                                                    =====            =====            =====          =====

</TABLE>

                                        5


<PAGE>


<TABLE>
                         WAYNE SAVINGS BANCSHARES, INC.
<CAPTION>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                     For the nine months ended December 31,
                                 (In thousands)
                                                                                        1998             1997
<S>                                                                                     <C>               <C>
Cash flows from operating activities:
  Net earnings for the period                                                        $ 1,349          $ 1,461
  Adjustments to reconcile net earnings to net cash provided
     by (used in) operating activities:
   Amortization of discounts and premiums on loans, investments
     and mortgage-backed securities - net                                                (17)              11
   Amortization of deferred loan origination fees                                       (420)            (274)
   Amortization expense of stock benefit plans                                           ---               23
   Depreciation and amortization                                                         376              318
   Loans originated for sale in the secondary market                                 (12,622)          (6,280)
   Proceeds from sale of loans                                                        11,937            5,803
   Gain on sale of loans                                                                (139)            (106)
   Provision for losses on loans                                                          47               45
   Federal Home Loan Bank stock dividends                                               (149)            (141)
   Increase (decrease) in cash due to changes in:
     Accrued interest receivable on loans                                                 58               21
     Accrued interest receivable on mortgage-backed securities                           (18)              (9)
     Accrued interest receivable on investments and interest-bearing deposits             10             (124)
     Prepaid expenses and other assets                                                  (882)            (234)
     Accrued interest payable                                                           (162)             (97)
     Accounts payable on mortgage loans serviced for others                               78              134
     Other liabilities                                                                   121               14
     Federal income taxes
       Current                                                                           (36)             305
       Deferred                                                                           (9)              45
                                                                                      ------           ------
          Net cash provided by (used in) operating activities                           (478)             915

Cash flows provided by (used in) investing activities:
  Purchase of investment securities                                                   (7,562)          (2,500)
  Proceeds from maturity of investment securities                                      9,117            5,051
  Purchase of mortgage-backed securities                                              (6,280)          (1,970)
  Principal repayments on mortgage-backed securities                                   2,148              280
  Loan principal repayments                                                           42,514           45,371
  Loan disbursements                                                                 (45,156)         (41,703)
  Purchase of office premises and equipment-net                                       (1,246)          (2,083)
  Proceeds from sale of real estate acquired through foreclosure                         121                -
  Additions to real estate acquired through foreclosure                                  (60)             (37)
  Decrease in certificates of deposit in other financial institutions                  4,000            1,000
                                                                                      ------           ------
       Net cash provided by (used in) investing activities                            (2,404)           3,409
                                                                                      ------           ------

       Net cash provided by (used in) operating and investing                               
       activities (balance carried forward)                                           (2,882)           4,324
                                                                                      ------           ------
</TABLE>

                                                      
                                        6


<PAGE>



<TABLE>
                          WAYNE SAVINGS BANCSHARES, INC
<CAPTION>
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                     For the nine months ended December 31,
                                 (In thousands)

                                                                            1998           1997
<S>                                                                            <C>            <C>
      Net cash provided by (used in) operating and 
      investing activities (balance brought forward)                          $(2,882)      $ 4,324

Cash flows provided by (used in) financing activities:
  Net increase in deposit accounts                                             11,131         3,163
  Proceeds from Federal Home Loan Bank advances                                15,000         4,000
  Repayments on Federal Home Loan Bank advances                               (19,000)       (6,000)
  Advances by borrowers for taxes and insurance                                   653           655
  Proceeds from exercise of stock options                                          87             4
  Dividends paid on common stock                                                 (551)         (268)
  Treasury stock                                                                 (346)            -
                                                                               ------        ------
      Net cash provided by financing activities                                        
                                                                                6,974         1,554

Net increase in cash and cash equivalents                                       4,092         5,916

Cash and cash equivalents at beginning of period                               13,169         7,606
                                                                               ------        ------

Cash and cash equivalents at end of period                                    $17,261       $13,522
                                                                               ======        ======


Supplemental disclosure of cash flow information:
  Cash paid during the period for:
    Federal income taxes                                                      $   728       $   433
                                                                               ======        ======


    Interest on deposits and borrowings                                       $ 8,570       $ 8,360
                                                                               ======        ======


Supplemental disclosure of noncash investing activities:
  Unrealized gains (losses) on securities designated as 
     available for sale, net of related tax effects                           $    39       $    (9)
                                                                               ======        ======
     

Recognition of mortgage servicing rights in accordance
   with SFAS No. 125                                                          $   116       $    84
                                                                               ======        ======




</TABLE>










                                        7


<PAGE>


                         Wayne Savings Bancshares, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   For the nine months ended December 31, 1998

1.       Basis of Presentation

         The  accompanying  unaudited  consolidated  financial  statements  were
         prepared  in  accordance  with   instructions   for  Form  10-QSB  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 generally accepted accounting principles.
         Accordingly,  these financial  statements should be read in conjunction
         with the  financial  statements  and  notes  thereto  of Wayne  Savings
         Bancshares,  Inc.  included in the Annual Report on Form 10-KSB for the
         year ended March 31, 1998.

         Effective   November  25,  1997,  Wayne  Savings  Community  Bank  (the
         "Company"),   formerly  named  The  Wayne  Savings  and  Loan  Company,
         completed its  reorganization  into a two-tier  mutual holding  company
         structure with the  establishment  of a stock holding company as parent
         of the  Company.  In the  reorganization,  each share of Wayne  Savings
         Community  Bank's  common stock was  automatically  converted  into one
         share  of  Wayne   Savings   Bancshares,   Inc.   common   stock.   The
         reorganization   of  the   Company   was   structured   as  a  tax-free
         reorganization   and  was  accounted  for  in  the  same  manner  as  a
         pooling-of-interests.  Wayne Savings  Community  Bank is now the wholly
         owned subsidiary of Wayne Savings  Bancshares,  Inc., the stock holding
         company ("Wayne").

         During the quarter ended  September 30, 1998,  Wayne Savings  Community
         Bank opened Village Savings Bank,  F.S.B.  ("Village"),  a wholly-owned
         subsidiary of the Company, located in Stark County, Ohio. Additionally,
         the Company  announced  plans to  establish a new branch  office at the
         southern edge of Wooster, Ohio.

         In the  opinion of  management,  all  adjustments  (consisting  only of
         normal recurring  accruals) which are necessary for a fair presentation
         of  the  financial  statements  have  been  included.  The  results  of
         operations for the three and nine month periods ended December 31, 1998
         are not necessarily indicative of the results which may be expected for
         an entire fiscal year.

2.       Principles of Consolidation

         The accompanying consolidated financial statements include the accounts
         of Wayne, Village, and the Company. All significant inter-company items
         have been eliminated.








                                        8

<PAGE>


                         Wayne Savings Bancshares, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                   For the nine months ended December 31, 1998

3.        Earnings Per Share

          Basic earnings per share is computed  based upon the  weighted-average
          shares outstanding during the period, less shares in the ESOP that are
          unallocated  and not  committed  to be  released.  The  Company had no
          unallocated  ESOP shares  during the nine months  ended  December  31,
          1998. Weighted-average common shares outstanding totaled 2,485,484 and
          2,486,298  for the nine and three month  periods  ended  December  31,
          1998, respectively.  Weighted average common shares outstanding, which
          gives effect to 5,972  unallocated  ESOP shares totaled  2,470,774 and
          2,475,284  for the nine and three months  periods  ended  December 31,
          1997, respectively.

          Diluted  earnings  per share is  computed  taking  into  consideration
          common shares  outstanding and dilutive  potential common shares to be
          issued under Wayne's stock option plan. Weighted-average common shares
          deemed  outstanding  for  purposes of computing  diluted  earnings per
          share  totaled  2,508,003  and 2,508,817 for the nine and three months
          periods  ended  December  31, 1998  respectively,  and  2,503,575  and
          2,508,085  for the nine and three month  periods  ended  December  31,
          1997, respectively.

4.        Effects of Recent Accounting Pronouncements

          In June 1996, the Financial  Accounting  Standards  Board (the "FASB")
          issued Statement of Financial  Accounting  Standards ("SFAS") No. 125,
          "Accounting  for  Transfers  and  Servicing  of  Financial  Assets and
          Extinguishments of Liabilities",  that provides accounting guidance on
          transfers of financial  assets,  servicing  of financial  assets,  and
          extinguishment of liabilities.  SFAS No. 125 introduces an approach to
          accounting for transfers of financial  assets that provides a means of
          dealing with more complex transactions in which the seller disposes of
          only a partial interest in the assets,  retains rights or obligations,
          makes use of special purpose entities in the transaction, or otherwise
          has continuing involvement with the transferred assets.

          The new accounting method, the financial components approach, provides
          that the  carrying  amount  of the  financial  assets  transferred  be
          allocated to components  of the  transaction  based on their  relative
          fair values.  SFAS No. 125 provides  criteria for determining  whether
          control  of  assets  has  been  relinquished  and  whether  a sale has
          occurred.  If the transfer does not qualify as a sale, it is accounted
          for as a secured borrowing.  Transactions subject to the provisions of
          SFAS No. 125 include,  among others,  transfers  involving  repurchase
          agreements,  securitizations of financial assets, loan participations,
          factoring arrangements, and transfers of receivables with recourse.

          An entity that  undertakes an obligation to service  financial  assets
          recognizes  either a servicing  asset or liability  for the  servicing
          contract  (unless related to a securitization  of assets,  and all the
          securitized assets are retained and classified as held-to-maturity). A
          servicing asset or liability that is purchased or assumed is initially
          recognized at its fair value.  Servicing  assets and  liabilities  are
          amortized  in  proportion  to and over the  period  of  estimated  net
          servicing  income or net servicing  loss and are subject to subsequent
          assessments for impairment based on fair value.

          SFAS No. 125  provides  that a liability  is removed  from the balance
          sheet only if the debtor  either pays the  creditor and is relieved of
          its obligation for the liability or is legally released from being the
          primary obligor. 

                                       9



<PAGE>


                         Wayne Savings Bancshares, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                   For the nine months ended December 31, 1998


4.       Effects of Recent Accounting Pronouncements (continued)

         SFAS No. 125 is  effective  for  transfers  and  servicing of financial
         assets and extinguishments of liabilities  occurring after December 31,
         1997,  and  is to be  applied  prospectively.  Earlier  or  retroactive
         application is not permitted. Management adopted SFAS No. 125 effective
         January 1, 1998, as required,  without material effect on the Company's
         financial position or results of operations.

         In June 1997,  the FASB issued SFAS No. 130,  "Reporting  Comprehensive
         Income." SFAS No. 130  establishes  standards for reporting and display
         of comprehensive income and its components (revenues,  expenses,  gains
         and losses) in a full set of general-purpose financial statements. SFAS
         No. 130  requires  that all items that are  required  to be  recognized
         under  accounting  standards as components of  comprehensive  income be
         reported  in a  financial  statement  that is  displayed  with the same
         prominence  as  other  financial  statements.  It does  not  require  a
         specific  format for that  financial  statement  but  requires  that an
         enterprise display an amount  representing total  comprehensive  income
         for the period in that financial statement.

         SFAS No. 130 requires  that an enterprise  (a) classify  items of other
         comprehensive  income by their nature in a financial  statement and (b)
         display  the  accumulated   balance  of  other   comprehensive   income
         separately from retained earnings and additional paid-in capital in the
         equity  section of a statement of financial  position.  SFAS No. 130 is
         effective  for  fiscal  years   beginning   after  December  15,  1997.
         Reclassification  of financial  statements for earlier periods provided
         for comparative  purposes is required.  Management adopted SFAS No. 130
         effective April 1, 1998, as required,  without a material impact on the
         Corporation's   financial  statements.   Comprehensive  income  totaled
         $1,388,000 and $1,452,000 for the nine month periods ended December 31,
         1998 and 1997,  respectively.  The components of  comprehensive  income
         consisted   solely  of  unrealized   gains  and  losses  on  securities
         designated as available for sale, net of related tax effects totaling a
         gain of $39,000 and a loss of $9,000 for those respective periods.

         In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
         of an Enterprise and Related  Information."  SFAS No. 131 significantly
         changes the way that public  business  enterprises  report  information
         about operating  segments in annual  financial  statements and requires
         that those  enterprises  report selected  information  about reportable
         segments in interim financial  reports issued to shareholders.  It also
         establishes  standards  for  related  disclosures  about  products  and
         services,  geographic  areas and major  customers.  SFAS No. 131 uses a
         "management approach" to disclose financial and descriptive information
         about  the way  that  management  organizes  the  segments  within  the
         enterprise for making  operating  decisions and assessing  performance.
         For many  enterprises,  the  management  approach will likely result in
         more  segments  being  reported.  In  addition,  SFAS No. 131  requires
         significantly  more  information  to be disclosed  for each  reportable
         segment than is presently being reported in annual financial statements
         and also  requires  that  selected  information  be reported in interim
         financial  statements.  SFAS No.  131 is  effective  for  fiscal  years
         beginning after December 15, 1997. SFAS No. 131 is not expected to have
         a material impact on the Corporation's financial statements.



                                       10


<PAGE>


                         Wayne Savings Bancshares, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                   For the nine months ended December 31, 1998


4.       Effects of Recent Accounting Pronouncements (continued)


         In June 1998, the FASB issued SFAS No. 133,  "Accounting for Derivative
         Instruments  and  Hedging   Activities,"  which  requires  entities  to
         recognize  all  derivatives  in their  financial  statements  as either
         assets  or  liabilities  measured  at fair  value.  SFAS  No.  133 also
         specifies   new  methods  of  accounting   for  hedging   transactions,
         prescribes the items and transactions that may be hedged, and specifies
         detailed criteria to be met to qualify for hedge accounting.

         The definition of a derivative  financial instrument is complex, but in
         general,  it is an instrument with one or more underlyings,  such as an
         interest rate or foreign  exchange rate,  that is applied to a notional
         amount,  such as an amount of  currency,  to determine  the  settlement
         amount(s).  It generally requires no significant initial investment and
         can  be  settled  net  or by  delivery  of an  asset  that  is  readily
         convertible to cash.  SFAS No. 133 applies to  derivatives  embedded in
         other  contracts,  unless the underlying of the embedded  derivative is
         clearly and closely related to the host contract.

         SFAS No. 133 is  effective  for fiscal years  beginning  after June 15,
         1999. On adoption,  entities are permitted to transfer held-to-maturity
         debt securities to the  available-for-sale  or trading category without
         calling into  question  their intent to hold other debt  securities  to
         maturity in the future. SFAS No. 133 is not expected to have a material
         impact on the Company's financial statements.
























                                       11



<PAGE>


                         Wayne Savings Bancshares, Inc.

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


Discussion of Financial Condition Changes from March 31, 1998 to December 31,
1998

At December  31, 1998,  Wayne  Savings  Bancshares,  Inc.  ("Wayne"),  the stock
holding  company  parent of Wayne Savings  Community  Bank (the  "Company")  and
Village Savings Bank, F.S.B. ("Village"), had total assets of $268.0 million, an
increase of $8.3 million,  or 3.2%, from March 31, 1998. The increase was funded
primarily  through  growth in deposits  of $11.0  million,  which was  partially
offset by a decline in borrowings of $4.0 million.

Cash  and  due  from  banks,  federal  funds  sold,  interest-bearing  deposits,
certificates of deposit and investment  securities totaled  approximately  $33.6
million, a decrease of approximately  $1.5 million,  from March 31, 1998 levels.
Excess liquidity was redeployed to fund growth in the loan portfolio. Regulatory
liquidity  approximated  10.5% at December 31, 1998,  compared to 16.0% at March
31, 1998.

Loans  receivable  increased by  approximately  $3.7 million,  or 1.8%, from the
March 31, 1998 total.  This increase  resulted from loan  disbursements of $57.8
million,  which were partially  offset by principal  repayments of $42.5 million
and sales of $11.8 million.  The allowance for loan losses  totaled  $770,000 at
December  31,  1998,  as compared to $721,000 at March 31,  1998.  Nonperforming
loans totaled  $194,000 at December 31, 1998 and $308,000 at March 31, 1998. The
allowance for loan losses  totaled 396.9% and 234.1% of  nonperforming  loans at
December 31, 1998 and March 31, 1998, respectively. Although management believes
that its allowance  for loan losses at December 31, 1998 is adequate  based upon
the available facts and circumstances,  there can be no assurance that additions
to such allowance will not be necessary in future periods, which would adversely
affect the Company's results of operations.

Deposits increased by approximately $11.0 million, or 5.0%, to a total of $228.6
million at December 31, 1998.  The increase in deposits  generally  reflects the
results of opening the new federal  savings  bank  subsidiary  in North  Canton,
Ohio,  which  resulted in $6.5 million of new deposit  growth,  coupled with the
"Company's"  deposit  growth of $4.5  million.  Proceeds from such deposits were
used to repay $4.0 million in FHLB advances.

The Company and Village are subject to capital standards which generally require
the  maintenance of regulatory  capital  sufficient to meet each of three tests,
hereinafter  described as the  tangible  capital  requirement,  the core capital
requirement and the risk-based  capital  requirement.  At December 31, 1998, the
Company's  tangible and core  capital of $22.9  million,  or 8.6%,  exceeded the
minimum  1.5%  and  3.0%   requirements   of  $4.0  million  and  $8.0  million,
respectively,  by $18.9  million and $14.9  million.  The  Company's  risk-based
capital of $23.6  million,  or 16.1%,  exceeded the 8.0% minimum  requirement by
approximately $11.9 million.  At December 31, 1998,  Village's tangible and core
capital  of  $2.7  million,  or  28.9%,  exceeded  the  minimum  1.5%  and  3.0%
requirements  of $139,000 and $279,000,  respectively,  by $2.6 million and $2.4
million.  Village's  risk-based capital of $2.7 million, or 88.9%,  exceeded the
8.0% minimum requirement by approximately $2.5 million.

Comparison of Operating Results for the Nine Month Periods Ended December 31, 
1998 and 1997

Net earnings  totaled $1.3 million for the nine months ended  December 31, 1998,
as compared  to net  earnings  of $1.5  million  for the same period in 1997,  a
decrease of $112,000,  or 7.7%. The decrease in net earnings resulted  primarily
from an increase of  $291,000,  or 6.4%,  in general,  administrative  and other
expense,  the effects of which were partially offset by an increase of $118,000,
or 18.0%,  in other income and a decrease of $58,000,  or 7.7%, in the provision
for federal income taxes.

                                       12


<PAGE>


                         Wayne Savings Bancshares, Inc.

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (CONTINUED)


Comparison of Operating  Results for the Nine Month  Periods Ended  December 31,
1998 and 1997 (continued)

Net Interest Income

Interest on loans and mortgage-backed securities increased by $265,000, or 2.1%,
for the nine months ended  December 31, 1998,  from the same period in 1997. The
increase in  interest  income  resulted  primarily  from a $239,000,  or 419.3%,
increase in interest income from mortgage-backed  securities and a $146,000,  or
53.3%,  increase  in  amortization  of  deferred  loan  fees.  The  increase  in
amortization  of deferred  loan fees  resulted  primarily  from  increased  loan
refinance  activity.  The increases were offset by a decrease in interest income
on loans of $120,000,  the result of a decline in earning asset yields caused by
falling interest rates.

Interest on investments and interest-bearing  deposits decreased by $115,000, or
7.6%,  during the nine months ended  December 31, 1998,  as compared to the same
period in 1997,  as a result of a  decrease  in the  average  yield from year to
year.

Interest  expense on deposits and  borrowings  increased  by $145,000,  or 1.8%,
during the nine months ended  December  31, 1998,  over the same period in 1997.
The increase can be primarily  attributed to an increase in the average  balance
of interest-bearing liabilities,  which increased by approximately $9.1 million,
from $228.0 million.

As a result of the foregoing  changes in interest  income and interest  expense,
net  interest  income  remained  nearly  unchanged  during the nine months ended
December 31, 1998, as compared to the same period in 1997.

Provision for Losses on Loans

A  provision  for  losses on loans is  charged  to  earnings  to bring the total
allowance for loan losses to a level considered  appropriate by management based
on  historical  experience,  the  volume and type of  lending  conducted  by the
Company,  the  status  of past due  principal  and  interest  payments,  general
economic  conditions,  particularly as such  conditions  relate to the Company's
market area, and other factors  related to the  collectibility  of the Company's
loan  portfolio.  As a result of such  analysis,  management  recorded a $47,000
provision for losses on loans during the nine months ended  December 31, 1998, a
$2,000, or 4.4%, increase from the same period in 1997. The provision for losses
on loans is recorded based upon management's  assessment of the risk inherent in
the  loan  portfolio,   management's   assessment  of  the  collateral  securing
non-performing loans and growth in the loan portfolio. There can be no assurance
that the loan loss  allowance of the Company will be adequate to cover losses on
nonperforming assets in the future.

Other Income

Other income  totaled  $775,000 for the nine months ended  December 31, 1998, an
increase of $118,000,  or 18.0%, over the comparable 1997 period.  This increase
was due primarily to the $65,000,  or 34.2%,  increase in gain on sale of loans,
coupled with a $52,000,  or 11.1%,  increase in service fees,  charges and other
operating income.






                                       13



<PAGE>


                         Wayne Savings Bancshares, Inc.

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (CONTINUED)


Comparison of Operating  Results for the Nine Month  Periods Ended  December 31,
1998 and 1997 (continued)

General, Administrative and Other Expense

General, administrative and other expense increased by $291,000, or 6.4%, during
the current nine month period, due primarily to a $31,000,  or 1.3%, increase in
employee  compensation and benefits, a $89,000, or 12.2%,  increase in occupancy
and equipment and a $134,000,  or 13.3%,  increase in other operating  expenses.
Such  increases in operating  expenses were primarily  attributable  to the cost
associated with the new bank subsidiary.

Federal Income Taxes

The provision for federal  income taxes amounted to $696,000 for the nine months
ended December 31, 1998, a decrease of $58,000, or 7.7%, as compared to the same
period in 1997.  The decrease  resulted  primarily  from the $170,000,  or 7.7%,
decrease in pretax  earnings year to year.  The effective tax rate was 34.0% for
each of the nine months ended December 31, 1998 and 1997.


Comparison of Operating Results for the Three Month Periods Ended December 31,
1998 and 1997

Net earnings  totaled  $440,000 for the three months ended December 31, 1998, as
compared to net  earnings of $461,000 for the same period in 1997, a decrease of
$21,000, or 4.6%. The earnings for the three month period were similarly reduced
by an increase  of  $100,000,  or 6.5%,  in  general,  administrative  and other
expense,  offset by an increase of $62,000, or 3.1%, in net interest income, and
an increase of $5,000, or 2.3%, in other income.

Net Interest Income

Interest on loans and mortgage-backed securities increased by $158,000, or 3.7%,
for the three months ended  December 31, 1998 over the same period in 1997.  The
increase resulted  primarily from an increase of $88,000 in interest income from
mortgage-backed  securities,  and a $70,000 increase in amortization of deferred
loan fees. The increase in amortization of deferred loan fees resulted primarily
from an increase in refinance activity.

Interest on investments and  interest-bearing  deposits decreased by $82,000, or
16.1%,  during the current  three month  period as a result of a decrease in the
average yield from year to year.

Interest  expense on deposits  and  borrowings  increased  by $14,000,  or 0.5%,
during the three months  ended  December 31, 1998 as compared to the same period
in 1997. The increase can be primarily  attributed to an increase in the average
balance of interest-bearing liabilities, year to year.










                                       14

<PAGE>


                         Wayne Savings Bancshares, Inc.

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (CONTINUED)

Comparison of Operating  Results for the Three Month Periods Ended  December 31,
1998 and 1997 (continued)

Provision for Losses on Loans

A  provision  for  losses on loans is  charged  to  earnings  to bring the total
allowance  for loan  losses to a level  considered  appropriate  by  management.
Management  recorded a $16,000  provision  for losses on loans  during the three
months ended December 31, 1998, a slight  increase from the same period in 1997.
The  provision  for losses on loans is  recorded  based upon  growth in the loan
portfolio,  management's  assessment of the risk inherent in the loan  portfolio
and management's  assessment of the collateral  securing  non-performing  loans.
There can be no  assurance  that the loan loss  allowance of the Company will be
adequate to cover losses on non-performing assets in the future.

Other Income

Other income  totaled  $225,000 for the three months ended December 31, 1998, an
increase of $5,000, or 2.3%, over the comparable 1997 period, due primarily to a
$4,000, or 2.6%, increase in other operating income.

General, Administrative and Other Expense

General, administrative and other expense increased by $100,000, or 6.5%, during
the current three month period over the comparable 1997 period, due primarily to
increased costs associated with the new bank subsidiary.

Federal Income Taxes

The provision for federal income taxes amounted to $227,000 for the three months
ended  December 31, 1998, as compared to $240,000 for the same period last year.
The  effective  tax rates for the three months ended  December 31, 1998 and 1997
were 34.0% and 34.2%, respectively.


Year 2000 Compliance Matters

The Year 2000 ("Y2K") issue is the result of computer programs using a two-digit
format,  as opposed to four digits,  to indicate the year. Such computer systems
will be unable to  interpret  dates  beyond the year 1999,  which  could cause a
system  failure or other computer  errors,  leading to disruption in operations.
The  potential  impact is that  date  sensitive  calculations  would be based on
erroneous  data or could  cause a system  failure.  This  affects  all  forms of
financial    accounting    including    interest    computation,    due   dates,
pensions/personnel benefits, and investments. It can also affect record keeping.

In 1997, the Company developed a five-phase program for Y2K information  systems
compliance.  Phase I is awareness  which consisted of establishing a Y2K project
team and gaining  executive-level  support for  resources  necessary  to perform
compliance work. Phase II is assessment which consisted of the identification of
all hardware,  software,  networks,  automated  teller  machines,  other various
processing platforms, and customer and vendor interdependencies  affected by the
Y2K date change.  Phase III is  renovation  consisting  of hardware and software
upgrades,  system  replacements,  vendor  certification,  and  other  associated
changes for known non-compliant applications.  Phase IV is validation consisting
of testing hardware,  software, and systems to assure Y2K compliance. Phase V is
implementation  whereby a contingency plan is enacted for any system failing Y2K
testing.
                                       15

<PAGE>



                         Wayne Savings Bancshares, Inc.

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (CONTINUED)


Comparison of Operating  Results for the Three Month Periods Ended  December 31,
1998 and 1997 (continued)

Year 2000 Compliance Matters (continued)

The  Company  does not  perform  in-house  programming.  All  systems  have been
purchased  from  third-party  vendors.  Therefore,  the  primary  thrust  of the
Company's  Y2K effort has been ongoing  discussions  and  monitoring of vendors'
progress.  As of the  date  of  this  Form  10-QSB,  the  Company  has  received
confirmation from its vendors that Y2K -compliant  versions of their systems are
available. The Company either had the compliant version in place or has replaced
a non-compliant version with the compliant one.

The most critical  phase is  validation.  Although  vendors have  certified that
their  systems are  compliant,  the Company plans to test these  systems,  using
critical future dates.  There are numerous  testing  methodologies  to cover the
unique   interdependencies   between  the  vendors  and  the  Company.   Testing
methodologies used by the Company will include  point-to-point (tests verify the
ability of a financial  institution  to transmit data directly to another entity
or system);  end-to-end  (tests  verify the  ability of a financial  institution
originating a transaction to transmit test data to a receiving  entity or system
through  an  intermediary);  and  proxy  (the  service  provider  tests  with  a
representative sample of financial  institutions who use a particular service on
the same platform).

The Company's Y2K action plan requires that mission-critical  systems testing be
substantially  completed  by March 31,  1999.  A  mission-critical  system is an
application  or system  that is vital to the  successful  continuance  of a core
business activity. The Company had identified 10 mission critical systems. As of
the date of the Form  10-QSB,  testing  has been  completed  on six  systems and
testing has begun on the other systems. Testing of material non mission-critical
systems are planned to begin by March 31, 1999 with completion by June 30, 1999.

The  Company  has  budgeted  approximately  $25,000  for hard  costs  related to
renovation  and  testing.  As of the  date of this  Form  10-QSB,  approximately
$12,000 of the budget has been expended.

The Company is in the process of  developing a business  resumption  contingency
plan for each  mission-critical  system  in the  event  that  there  are  system
failures  at  critical  dates.  The  contingency  plan will  consist  of:  event
timelines,  business impact analysis,  alternative  options,  minimum acceptable
levels of output  and  services,  and core  business  processes  that need to be
recovered.  The Company  plans to have  contingency  plans in place by March 31,
1999.














                                       16

<PAGE>



                         Wayne Savings Bancshares, Inc.

                                     PART II


ITEM 1.  Legal Proceedings

         Not applicable


ITEM 2.  Changes in Securities and Use of Proceeds

         Not applicable


ITEM 3.  Defaults Upon Senior Securities

         Not applicable


ITEM 4.  Submission of Matters to a Vote of Security Holders

         Not applicable

ITEM 5.  Other Information

          The Board of Directors of Wayne Savings Bancshares, Inc., in July 1998
          authorized the repurchase of up to 124,322 shares, or approximately 5%
          of Wayne's  outstanding  stock,  over the  following  12  months.  Any
          repurchased  shares  will  be  held  as  treasury  stock  and  will be
          available for general corporate purposes.


ITEM 6.  Exhibits and Reports on Form 8-K

          Report on Form 8-K:        None

          Exhibits:
            27                       Financial Data Schedule for the nine month
                                     period ended December 31, 1998.













                                       17



<PAGE>



                                   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:  February 12, 1999                             By: /s/Charles F. Finn
                                                         Charles F. Finn
                                                         Chairman and President




Date:  February 12, 1999                             By: /s/Todd J. Tappel
                                                         Todd J. Tappel
                                                         Senior Vice President
                                                         Chief Financial Officer


























                                       18