UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

(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, 2004
                               -------------------------------

                                       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)

            Delaware                                            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 |_|

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)

Yes |_|                                 No |X|

As of February 10, 2005, the latest practicable date, 3,655,057 shares of the
registrant's common stock, $.10 par value, were issued and outstanding.


                                       1
<PAGE>

                         Wayne Savings Bancshares, Inc.

                                      INDEX

                                                                            Page

PART I  -  FINANCIAL INFORMATION

  Item 1   Consolidated Statements of Financial Condition                      3
           Consolidated Statements of Earnings                                 4
           Consolidated Statements of Comprehensive Income                     5
           Consolidated Statements of Cash Flows                               6
           Notes to Consolidated Financial Statements                          8

  Item 2   Management's Discussion and Analysis of
           Financial Condition and Results of Operations                      12

  Item 3   Quantitative and Qualitative Disclosures About Market Risk         22

  Item 4   Controls and Procedures                                            22

PART II -  OTHER INFORMATION

  Item 1   Legal Proceedings                                                  23

  Item 2   Unregistered Sales of Equity Securities and Use of Proceeds        23

  Item 3   Defaults Upon Senior Securities                                    23

  Item 4   Submission of Matters to a Vote of Security Holders                23

  Item 5   Other Information                                                  23

  Item 6   Exhibits                                                           23

SIGNATURES                                                                    24


                                       2
<PAGE>

                         Wayne Savings Bancshares, Inc.

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                         December 31,        March 31,
         ASSETS                                                                                  2004             2004
<S>                                                                                         <C>              <C>
Cash and due from banks                                                                     $   4,590        $   3,291
Federal funds sold                                                                             21,550            9,875
Interest-bearing deposits in other financial institutions                                       7,637            6,721
                                                                                            ---------        ---------
         Cash and cash equivalents                                                             33,777           19,887

Investment securities available for sale - at market                                           39,655           17,546
Investment securities held to maturity  - at amortized cost, approximate market value
  of $12,283 and $14,830 as of December 31, 2004 and March 31, 2004, respectively              11,947           14,036
Mortgage-backed securities available for sale - at market                                      62,347           83,945
Mortgage-backed securities held to maturity - at cost, approximate market value of
  $2,897 and  $4,510 as of December 31, 2004 and March 31, 2004, respectively                   2,883            4,483
Loans receivable - net                                                                        214,663          205,443
Office premises and equipment - net                                                             9,120            8,742
Real estate acquired through foreclosure                                                          116              100
Federal Home Loan Bank stock - at cost                                                          4,338            4,205
Cash surrender value of life insurance                                                          6,520            6,321
Accrued interest receivable on loans                                                              880              801
Accrued interest receivable on mortgage-backed securities                                         293              400
Accrued interest receivable on investments and interest-bearing deposits                          509              318
Prepaid expenses and other assets                                                               4,084            2,549
Prepaid federal income taxes                                                                      221              231
                                                                                            ---------        ---------

         Total assets                                                                       $ 391,353        $ 369,007
                                                                                            =========        =========

         LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                                    $ 321,631        $ 291,830
Advances from the Federal Home Loan Bank                                                       25,000           30,000
Advances by borrowers for taxes and insurance                                                   1,119              617
Accrued interest payable                                                                          145              186
Accounts payable on mortgage loans serviced for others                                            485              118
Other liabilities                                                                                 912            1,383
Deferred federal income taxes                                                                     915            1,312
                                                                                            ---------        ---------
         Total liabilities                                                                    350,207          325,446

Commitments                                                                                        --               --

Stockholders' equity
  Common stock (8,000,000 shares of $ .10 par value authorized; 3,907,318 shares
    issued at both December 31, 2004 and March 31, 2004)                                          391              391
  Additional paid-in capital                                                                   34,492           34,365
  Retained earnings - substantially restricted                                                 12,771           12,727
  Shares acquired by Management Recognition Plan                                                 (914)          (1,142)
  Less required contributions for shares acquired by Employee Stock Ownership Plan             (1,342)          (1,456)
  Less 252,261 and 112,500 shares of treasury stock at December 31, 2004 and
    March 31, 2004 - at cost                                                                   (4,111)          (1,803)
  Accumulated other comprehensive income (loss) - unrealized gains (losses)on
    securities designated as available for sale, net of related tax effects                      (141)             479
                                                                                            ---------        ---------
         Total stockholders' equity                                                            41,146           43,561
                                                                                            ---------        ---------

         Total liabilities and stockholders' equity                                         $ 391,353        $ 369,007
                                                                                            =========        =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

                         Wayne Savings Bancshares, Inc.

                       CONSOLIDATED STATEMENTS OF EARNINGS

                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                        Nine months          Three months
                                                                           ended                 ended
                                                                       December 31,          December 31,
                                                                       2004       2003       2004       2003
<S>                                                                 <C>        <C>        <C>        <C>
Interest income
  Loans                                                             $ 9,641    $10,515    $ 3,247    $ 3,277
  Mortgage-backed securities                                          1,730      1,767        562        648
  Investment securities                                               1,445      1,113        520        376
  Interest-bearing deposits and other                                   274        191        136         61
                                                                    -------    -------    -------    -------
         Total interest income                                       13,090     13,586      4,465      4,362

Interest expense
  Deposits                                                            4,158      4,526      1,463      1,423
  Borrowings                                                            787        938        248        313
                                                                    -------    -------    -------    -------
         Total interest expense                                       4,945      5,464      1,711      1,736
                                                                    -------    -------    -------    -------

         Net interest income                                          8,145      8,122      2,754      2,626
Provision for losses on loans                                            45         63         15         --
                                                                    -------    -------    -------    -------
         Net interest income after provision for losses on loans      8,100      8,059      2,739      2,626

Other income
  Gain on sale of loans                                                 162         91         20         30
  Increase in cash surrender value of life insurance                    199        211         62         77
  Gain on disposal of real estate acquired through foreclosure            5         --          5         --
  Service fees, charges and other operating                             921      1,177        302        383
                                                                    -------    -------    -------    -------
         Total other income                                           1,287      1,479        389        490

General, administrative and other expense
  Employee compensation and benefits                                  4,246      3,972      1,462      1,372
  Occupancy and equipment                                             1,285      1,098        438        357
  Federal deposit insurance premiums                                     34         36         11         12
  Franchise taxes                                                       447        230        150         76
  Other operating                                                     1,529      1,462        531        498
                                                                    -------    -------    -------    -------
         Total general, administrative and other expense              7,541      6,798      2,592      2,315
                                                                    -------    -------    -------    -------

         Earnings before income taxes                                 1,846      2,740        536        801

Federal incomes taxes
  Current                                                               434        783        541        350
  Deferred                                                               58         53       (408)      (109)
                                                                    -------    -------    -------    -------
         Total federal income taxes                                     492        836        133        241
                                                                    -------    -------    -------    -------

         NET EARNINGS                                               $ 1,354    $ 1,904    $   403     $   560
                                                                    =======    =======    =======     =======

         EARNINGS PER SHARE
           Basic                                                    $  0.38    $  0.51    $  0.11     $  0.15
                                                                    =======    =======    =======     =======
           Diluted                                                  $  0.37    $  0.51    $  0.11     $  0.15
                                                                    =======    =======    =======     =======
</TABLE>

See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

                         Wayne Savings Bancshares, Inc.

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                               Nine months             Three months
                                                                                  ended                   ended
                                                                               December 31,            December 31,
                                                                              2004        2003        2004        2003
<S>                                                                        <C>         <C>         <C>         <C>
Net earnings                                                               $ 1,354     $ 1,904     $   403     $   560

Other comprehensive income:
  Unrealized holding gains (losses) on securities, net of related taxes
    (benefits) of $(319), $6, $(147) and $134, during the
    respective periods                                                        (620)         12        (287)        260
                                                                           -------     -------     -------     -------

Comprehensive income                                                       $   734     $ 1,916     $   116     $   820
                                                                           =======     =======     =======     =======

Accumulated comprehensive loss                                             $  (141)    $  (140)    $  (141)    $  (140)
                                                                           =======     =======     =======     =======
</TABLE>

See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

                         Wayne Savings Bancshares, Inc.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

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

<TABLE>
<CAPTION>
                                                                                             2004         2003
<S>                                                                                      <C>          <C>
Cash flows from operating activities:
  Net earnings for the period                                                            $  1,354     $  1,904
  Adjustments to reconcile net earnings to net cash
  provided by operating activities:
    Amortization of discounts and premiums on loans,
      investments and mortgage-backed securities - net                                        976        1,359
    Amortization of deferred loan origination fees                                           (185)        (441)
    Depreciation and amortization                                                             437          392
    Gain on sale of loans                                                                    (121)         (49)
    Proceeds from sale of loans in the secondary market                                     3,133        4,665
    Loans originated for sale in the secondary market                                      (3,108)      (4,627)
    Provision for losses on loans                                                              45           63
    Gain on disposal of real estate acquired through foreclosure                               (5)          --
    Federal Home Loan Bank stock dividends                                                   (133)        (123)
    Increase (decrease) in cash, net of acquisition of Stebbins Bancshares, Inc.
      due to changes in:
      Accrued interest receivable on loans                                                    (51)         117
      Accrued interest receivable on mortgage-backed securities                               107          (25)
      Accrued interest receivable on investments and interest-bearing deposits               (191)         (96)
      Prepaid expenses and other assets                                                       (33)         396
      Accrued interest payable                                                                (58)        (133)
      Accounts payable on mortgage loans serviced for others                                  367          (62)
      Other liabilities                                                                      (474)        (493)
      Federal income taxes
        Current                                                                                10           42
        Deferred                                                                               58           53
                                                                                         --------     --------
          Net cash provided by operating activities                                         2,128        2,942

Cash flows provided by investing activities:
  Purchase of investment securities designated as available for sale                      (12,933)     (21,129)
  Proceeds from maturity of investment securities designated as held to maturity            2,159        4,690
  Proceeds from maturity of investment securities designated as available for sale          2,002       13,523
  Purchase of mortgage-backed securities designated as available for sale                  (5,632)     (44,446)
  Principal repayments on mortgage-backed securities designated as held to maturity         1,575        4,756
  Principal repayments on mortgage-backed securities designated as available for sale      25,878       25,360
  Loan principal repayments                                                                41,842       73,680
  Loan disbursements                                                                      (38,743)     (53,646)
  Purchase of office premises and equipment - net                                            (348)        (322)
  Purchase of bank-owned life insurance                                                        --         (920)
  Proceeds from sale of real estate acquired through foreclosure                              130           --
  Increase in cash surrender value of life insurance                                         (199)        (211)
  Net cash used in the acquisition of Stebbins Bancshares, Inc.                            (1,314)          --
                                                                                         --------     --------
          Net cash provided by investing activities                                        14,417        1,335
                                                                                         --------     --------

          Net cash provided by operating and investing activities
            (balance carried forward)                                                      16,545        4,277
                                                                                         --------     --------
</TABLE>


                                       6
<PAGE>

                         Wayne Savings Bancshares, Inc.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

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

<TABLE>
<CAPTION>
                                                                                      2004         2003
<S>                                                                               <C>          <C>
          Net cash provided by operating and investing activities
            (balance brought forward)                                             $ 16,545     $  4,277

Cash flows used in financing activities:
  Net increase (decrease) in deposit accounts                                        4,991       (6,568)
  Repayments of Federal Home Loan Bank advances                                     (5,000)          --
  Advances by borrowers for taxes and insurance                                        502          439
  Dividends paid on common stock                                                    (1,310)      (1,341)
  Proceeds from exercise of stock options                                               --           61
  Amortization of employee stock ownership benefit plan                                470           20
  Shares acquired by Management Recognition Plan                                        --       (1,142)
  Purchase of treasury shares                                                       (2,308)          --
                                                                                  --------     --------
          Net cash used in financing activities                                     (2,655)      (8,531)
                                                                                  --------     --------

Net increase (decrease) in cash and cash equivalents                                13,890       (4,254)

Cash and cash equivalents at beginning of period                                    19,887       17,496
                                                                                  --------     --------

Cash and cash equivalents at end of period                                        $ 33,777     $ 13,242
                                                                                  ========     ========

Supplemental disclosure of cash flow information:
  Cash paid during the period for:
    Federal income taxes                                                          $    393     $    635
                                                                                  ========     ========

    Interest on deposits and borrowings                                           $  5,003     $  5,597
                                                                                  ========     ========

Supplemental disclosure of noncash investing activities:
  Transfers from loans to real estate acquired through foreclosure                $     51     $     --
                                                                                  ========     ========

  Unrealized gains (losses) on securities designated as available for sale,
    net of related tax effects                                                    $   (620)    $     12
                                                                                  ========     ========

  Recognition of mortgage servicing rights in accordance
    with SFAS No. 140                                                             $     41     $     42
                                                                                  ========     ========

Stebbins acquisition, net of cash and cash equivalents acquired, allocated to:
  Assets
    Securities                                                                    $ 11,787     $     --
    Loans, net                                                                      12,225           --
    Other assets                                                                       662           --
    Goodwill                                                                         1,470           --
  Liabilities assumed
    Deposits                                                                       (24,810)          --
    Other liabilities                                                                  (20)          --
                                                                                  --------     --------

  Net cash and cash equivalents paid in acquisition                               $  1,314     $     --
                                                                                  ========     ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       7
<PAGE>

                         Wayne Savings Bancshares, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      For the nine and three month periods ended December 31, 2004 and 2003

1.    Basis of Presentation
      ---------------------

      The accompanying  unaudited consolidated financial statements for the nine
      and  three  months  ended  December  31,  2004 and 2003 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  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,
      2004.

      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 nine and three month periods  ended  December 31, 2004
      are not  necessarily  indicative  of the results which may be expected for
      the entire fiscal year.

      Critical  Accounting  Policy - The Company's  critical  accounting  policy
      relates to the allowance for losses on loans.  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 losses on
      loans. The allowance for losses on loans is based on management's  current
      judgments about the credit quality of individual loans and segments of the
      loan portfolio. The allowance for losses on loans is established through a
      provision,  and  considers  all known  internal and external  factors that
      affect loan  collectability  as of the reporting  date.  Such  evaluation,
      which included a review of all loans on which full  collectability 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.

2.    Principles of Consolidation
      ---------------------------

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

      During fiscal 2004, the Company's  Board of Directors  approved a business
      combination,   which  was  completed  in  June  2004,   whereby   Stebbins
      Bancshares,  Inc.,  the parent of Stebbins  National Bank, was merged into
      Wayne Savings Bancshares,  Inc. and Stebbins National Bank merged with and
      into Wayne Savings Community Bank. The business  combination was accounted
      for using the purchase method of accounting. Accordingly, the December 31,
      2004  consolidated  financial  statements  herein  include the accounts of
      Stebbins  National  Bank from the June 1, 2004  acquisition  date  through
      December 31, 2004.

      All  significant   intercompany   transactions   and  balances  have  been
      eliminated in the consolidation.


                                       8
<PAGE>

                         Wayne Savings Bancshares, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      For the nine and three month periods ended December 31, 2004 and 2003

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:

<TABLE>
<CAPTION>
                                              For the nine months ended     For the three months ended
                                                     December 31,                  December 31,
                                                    2004           2003           2004           2003
<S>                                            <C>            <C>            <C>            <C>
      Weighted-average common shares
        outstanding (basic)                    3,589,224      3,747,681      3,535,379      3,757,170
      Dilutive effect of assumed exercise
        of stock options                          31,763          3,916         32,929         20,154
                                               ---------      ---------      ---------      ---------
      Weighted-average common shares
        outstanding (diluted)                  3,620,987      3,751,597      3,568,308      3,777,324
                                               =========      =========      =========      =========
</TABLE>

      All  outstanding  options were included in the diluted  earnings per share
      calculation  for the three and nine month periods ending December 31, 2004
      and 2003.

4.    Stock Option Plan
      -----------------

      The Company has a 1993  incentive  Stock Option Plan that provided for the
      issuance of 196,390 shares of authorized  common stock, as adjusted,  with
      10,123  options  outstanding  at December  31, 2004.  In fiscal 2004,  the
      Company  adopted a new Stock Option Plan that provided for the issuance of
      142,857 incentive options and 61,224  non-incentive  options of authorized
      common  stock.  As of December 31, 2004,  all options  under the 2004 Plan
      have  been  granted  and will  expire  in  fiscal  2014  unless  otherwise
      exercised.

      The Company  accounts for its stock option plans in  accordance  with SFAS
      No. 123, "Accounting for Stock-Based  Compensation," which provides a fair
      value-based method for valuing stock-based  compensation that entities may
      use, which measures  compensation cost at the grant date based on the fair
      value of the  award.  Compensation  is then  recognized  over the  service
      period, which is usually the vesting period.  Alternatively,  SFAS No. 123
      permits  entities to  continue  to account  for stock  options and similar
      equity  instruments under Accounting  Principles Board ("APB") Opinion No.
      25, "Accounting for Stock Issued to Employees."  Entities that continue to
      account for stock  options  using APB Opinion No. 25 are  required to make
      pro forma  disclosures  of net earnings and earnings per share,  as if the
      fair  value-based  method of  accounting  defined in SFAS No. 123 had been
      applied.


                                       9
<PAGE>

                         Wayne Savings Bancshares, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      For the nine and three month periods ended December 31, 2004 and 2003

4.    Stock Option Plan (continued)
      -----------------

      The Company  applies APB  Opinion  No. 25 and related  Interpretations  in
      accounting  for the  Plan.  Accordingly,  no  compensation  cost  has been
      recognized  for  the  Plan.  Had  compensation  cost  for  the  Plan  been
      determined based on the fair value at the grant dates for awards under the
      Plan consistent  with the accounting  method utilized in SFAS No. 123, the
      Company's   net  earnings  and  earnings  per  share  for  the  nine-  and
      three-month  periods  ended  December  31, 2004 and 2003,  would have been
      reported as the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                 Nine months ended          Three months ended
                                                                    December 31,                 December,
                                                                  2004          2003          2004          2003
<S>                                                            <C>           <C>           <C>           <C>
      Net earnings (In thousands)             As reported      $ 1,354       $ 1,904       $   403       $   560
                     Stock-based compensation, net of tax         (106)          (27)          (27)          (27)
                                                               -------       -------       -------       -------

                                                Pro-forma      $ 1,248       $ 1,877       $   376       $   533
                                                               =======       =======       =======       =======
      Earnings per share
        Basic                                 As reported      $   .38       $   .51       $   .11       $   .15
                     Stock-based compensation, net of tax         (.03)         (.01)           --          (.01)
                                                               -------       -------       -------       -------

                                                Pro-forma      $   .35       $   .50       $   .11       $   .14
                                                               =======       =======       =======       =======

        Diluted                               As reported      $   .38       $   .51       $   .11       $   .15
                     Stock-based compensation, net of tax         (.04)         (.01)           --          (.01)
                                                               -------       -------       -------       -------

                                                Pro-forma      $   .34       $   .50       $   .11       $   .14
                                                               =======       =======       =======       =======
</TABLE>

      There were no options  granted  during the nine months ended  December 31,
      2004 and 204,081  options granted for the nine month period ended December
      31, 2003.

      At December 31, 2004,  50,939 of the stock options granted were subject to
      exercise at the discretion of the grantees and expire in fiscal 2014 while
      the  remaining  options  vest at a rate of 20% annually and will expire in
      fiscal 2014.

      A summary of the status of the Company's  stock option plans as of and for
      the  years  ended  March  31,  2004 and 2003,  and the nine  months  ended
      December 31, 2004 is presented below:

<TABLE>
<CAPTION>
                                                 Nine months ended                                 Year ended
                                                    December 31,                                    March 31,
                                                        2004                           2004                           2003
                                                             Weighted-                      Weighted-                      Weighted-
                                                              average                        average                        average
                                                             exercise                       exercise                       exercise
                                               Shares          price         Shares          price          Shares          price
<S>                                            <C>           <C>             <C>           <C>              <C>           <C>
      Outstanding at beginning of period       214,204       $  13.84         28,666        $   6.26         23,378        $   3.31
      Granted                                       --             --        204,081           13.95         10,123           11.67
      Exercised                                     --             --        (18,543)           3.31         (4,835)           3.31
                                              --------       --------       --------        --------       --------        --------

      Outstanding at end of period             214,204       $  13.84        214,204        $  13.84         28,666        $   6.26
                                              ========       ========       ========        ========       ========        ========

      Options exercisable at period-end         50,939       $  13.50         10,123        $  11.67         28,666        $   6.26
                                              ========       ========       ========        ========       ========        ========

      Fair value of options granted                                                         $   3.93                       $   3.17
                                                                                            ========                       ========
</TABLE>


                                       10
<PAGE>

                         Wayne Savings Bancshares, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      For the nine and three month periods ended December 31, 2004 and 2003

4.    Stock Option Plan (continued)
      -----------------

      The following  information  applies to options outstanding at December 31,
      2004:

      Number outstanding ................................          214,204
      Range of exercise prices ..........................  $11.67 - $13.95
      Weighted-average exercise price ...................           $13.84
      Weighted-average remaining contractual life .......        8.5 years

      The fair value of  options  granted  has been  based on the Black  Scholes
      pricing model using a dividend yield of 3.3% and 3.8%, expected volatility
      of 28.8% and 32.4%,  and a risk-free  interest rate of 4.38% and 3.70% for
      fiscal 2004 and 2003, respectively. All options granted in fiscal 2004 and
      fiscal 2003 have expected lives of ten years.

5.    Effects of Recent Accounting Pronouncements
      -------------------------------------------

      In December 2004, the Financial  Accounting  Standards  Board (the "FASB")
      issued a revision to Statement of Financial  Accounting Standards ("SFAS")
      No. 123 which establishes standards for the accounting for transactions in
      which an entity  exchanges its equity  instruments  for goods or services,
      primarily  on  accounting  for  transactions  in which an  entity  obtains
      employee services in share-based  transactions.  This Statement requires a
      public  entity  to  measure  the cost of  employee  services  received  in
      exchange for an award of equity  instruments  based on the grant-date fair
      value of the award, with limited exceptions.  That cost will be recognized
      over the period  during which an employee is required to provide  services
      in exchange for the award - the requisite  service period. No compensation
      cost is  recognized  for equity  instruments  for which  employees  do not
      render the  requisite  service.  Employee  share  purchase  plans will not
      result in recognition of compensation cost if certain conditions are met.

      Initially, the cost of employee services received in exchange for an award
      of liability instruments will be measured based on current fair value; the
      fair value of that award will be remeasured subsequently at each reporting
      date  through  the  settlement  date.  Changes  in fair  value  during the
      requisite service period will be recognized as compensation cost over that
      period.  The  grant-date  fair value of employee share options and similar
      instruments will be estimated using option-pricing models adjusted for the
      unique  characteristics  of those  instruments  (unless  observable market
      prices for the same or similar  instruments are  available).  If an equity
      award is modified after the grant date, incremental compensation cost will
      be  recognized  in an amount  equal to the excess of the fair value of the
      modified  award  over the fair  value of the  original  award  immediately
      before the modification.

      Excess tax  benefits,  as defined by SFAS 123(R) will be  recognized as an
      addition to additional paid in capital. Cash retained as a result of those
      excess tax benefits  will be  presented in the  statement of cash flows as
      financing cash inflows.  The write-off of deferred tax assets  relating to
      unrealized tax benefits associated with recognized  compensation cost will
      be recognized  as income tax expense  unless there are excess tax benefits
      from previous  awards  remaining in additional paid in capital to which it
      can be offset.

      Compensation  cost is required to be  recognized  in the  beginning of the
      first interim or annual period that begins after June 15, 2005, or July 1,
      2005 as to the Company.  Management believes the effect on operations will
      approximate  the economic  effects set forth in the pro-forma stock option
      disclosure set forth in Note 4 above.


                                       11
<PAGE>

ITEM 2         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

Average Balance Sheet

The  following  tables set 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.

<TABLE>
<CAPTION>
                                                      For the nine months ended December 31,
                                   ---------------------------------------------------------------------------
                                                  2004                                    2003
                                   -----------------------------------     -----------------------------------
                                   Average                     Average     Average                     Average
                                   Balance      Interest         Rate      Balance      Interest         Rate
                                   --------     --------       -------     --------     --------       -------
                                                               (Dollars in thousands)
<S>                                <C>          <C>            <C>         <C>          <C>            <C>
Interest-earning assets:
  Loans receivable, net(1)         $212,383     $  9,641         6.05%     $216,611     $ 10,515         6.47%
  Mortgage-backed
    securities(2)                    76,003        1,730         3.03        85,686        1,767         2.75
  Investment securities              49,173        1,445         3.92        31,311        1,113         4.74
  Interest-bearing deposits(3)       23,094          274         1.58        16,727          191         1.52
                                   --------     --------                   --------     --------
     Total interest-
       earning assets               360,653       13,090         4.84       350,335       13,586         5.17
Non-interest-earning assets          23,237                                  22,115
                                   --------                                --------
     Total assets                  $383,890                                $372,450
                                   ========                                ========

Interest-bearing liabilities:
  Deposits                         $310,874        4,158         1.78      $297,531        4,526         2.03
  Borrowings                         26,265          787         4.00        30,000          938         4.17
                                   --------     --------                   --------     --------
     Total interest-
       bearing liabilities          337,139        4,945         1.96       327,531        5,464         2.22
                                                --------      -------                   --------       ------
Non-interest bearing
  liabilities                         4,634                                     372
                                   --------                                --------
     Total liabilities              341,773                                 327,903
Stockholders' equity                 42,117                                  44,547
                                   --------                                --------
     Total liabilities and
       stockholders' equity        $383,890                                $372,450
                                   ========                                ========
Net interest income                             $  8,145                                $  8,122
                                                ========                                ========
Interest rate spread(4)                                          2.88%                                   2.95%
                                                               ======                                  ======
Net yield on interest-
  earning assets(5)                                              3.01%                                   3.09%
                                                               ======                                  ======
Ratio of average interest-
  earning assets to average
  interest-bearing liabilities                                 106.97%                                 106.96%
                                                               ======                                  ======
</TABLE>

----------

See footnotes on following page.


                                       12
<PAGE>

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

Average Balance Sheet (continued)

<TABLE>
<CAPTION>
                                                      For the three months ended December 31,
                                   ---------------------------------------------------------------------------
                                                  2004                                    2003
                                   -----------------------------------     -----------------------------------
                                   Average                     Average     Average                     Average
                                   Balance      Interest         Rate      Balance      Interest         Rate
                                   --------     --------       -------     --------     --------       -------
                                                               (Dollars in thousands)
<S>                                <C>          <C>            <C>         <C>          <C>            <C>
Interest-earning assets:
  Loans receivable, net(1)         $214,291     $  3,247         6.06%     $210,174     $  3,277         6.24%
  Mortgage-backed
    securities(2)                    68,505          562         3.28        88,758          648         2.92
  Investment securities              52,525          520         3.96        33,966          376         4.43
  Interest-bearing deposits(3)       26,491          136         2.05        16,695           61         1.46
                                   --------     --------                   --------     --------
     Total interest-
       earning assets               361,812        4,465         4.94       349,593        4,362         4.99
Non-interest-earning assets          25,934                                  22,234
                                   --------                                --------
     Total assets                  $387,746                                $371,827
                                   ========                                ========

Interest-bearing liabilities:
  Deposits                         $318,069        1,463         1.84      $295,793        1,423         1.92
  Borrowings                         25,000          248         3.97        30,000          313         4.17
                                   --------     --------                   --------     --------
     Total interest-
       bearing liabilities          343,069        1,711         1.99       325,793        1,736         2.13
                                                --------      -------                   --------       ------
Non-interest bearing
  liabilities                         3,200                                   1,768
                                   --------                                --------
     Total liabilities              346,269                                 327,561
Stockholders' equity                 41,477                                  44,266
                                   --------                                --------
     Total liabilities and
       stockholders' equity        $387,746                                $371,827
                                   ========                                ========
Net interest income                             $  2,754                                $  2,626
                                                ========                                ========
Interest rate spread(4)                                          2.95%                                   2.86%
                                                               ======                                  ======
Net yield on interest-
  earning assets(5)                                              3.04%                                   3.00%
                                                               ======                                  ======
Ratio of average interest-
  earning assets to average
  interest-bearing liabilities                                 105.46%                                 107.30%
                                                               ======                                  ======
</TABLE>

----------

(1)   Includes non-accrual loan balances.

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

(3)   Includes  federal  funds  sold  and  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.


                                       13
<PAGE>

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

Discussion  of Financial  Condition  Changes from March 31, 2004 to December 31,
--------------------------------------------------------------------------------
2004
----

At  December  31,  2004,  the  Company had total  assets of $391.4  million,  an
increase of $22.3 million, or 6.1%, from March 31, 2004 levels mainly due to the
acquisition of $24.5 million in net assets in the Stebbins  purchase and deposit
growth of $5.0 million, which were partially offset by a payment of $1.3 million
to purchase  Stebbins,  repayments  of borrowings  totaling  $5.0  million,  and
treasury stock purchases of $2.3 million.

Liquid  assets,  consisting of cash,  interest-bearing  deposits and  investment
securities,  increased by $33.9 million,  or 65.9%, to $85.4 million at December
31, 2004,  mainly due to $13.0 million of liquid assets acquired in the Stebbins
transaction  and the purchase of $12.9 million in available for sale  investment
securities,  both of which were partially offset by the maturing of $4.2 million
of  securities.  The Company has increased its cash position to help continue to
control  interest rate risk. In addition,  the flat yield curve has prompted the
Company to keep more of its  investments  in short  term  assets.  Although  the
Company has  focused on high  quality  short-term  commercial  loan  production,
intense competition has limited originations and the Company has invested excess
funds in short-term investment securities.

Mortgage-backed  securities  decreased  by $23.2  million,  or  26.2%,  to $65.2
million  as a result of  significant  principal  repayments  due to the  current
interest rate environment.

During the nine month period ended December 31, 2004, loans receivable increased
$9.2  million,  as  $12.2  million  of  loans  were  acquired  in  the  Stebbins
acquisition.  This increase in loans  receivable  was  partially  offset by loan
sales of $3.2 million  consisting  primarily of long-term fixed rate residential
loans in furtherance of  management's  interest rate risk strategy.  Rather than
reinvest  funds in  long-term,  fixed rate and low yielding  residential  loans,
management is currently  investing in marketable  securities and adjustable rate
commercial  loans. The composition of the loan portfolio changed during the nine
month period ended  December 31, 2004,  due  primarily to a net decrease of $9.1
million  in  residential  mortgage  loans  and  increased  net  originations  of
nonresidential  mortgage  loans  totaling $9.4 million and  commercial  business
loans totaling $6.3 million.  The composition of the Company's loan portfolio at
the specified dates is as follows:

<TABLE>
<CAPTION>
                                             December 31, 2004           March 31, 2004
                                                        (Dollars in thousands)
<S>                                        <C>            <C>         <C>            <C>
Mortgage loans:
   One-to four-family residential(1)       $160,276        73.64%     $171,736        81.98%
   Residential construction loans             4,111         1.89         2,914         1.39
   Multi-family residential                   7,928         3.64         6,800         3.25
   Non-residential real estate/land(2)       27,818        12.78        18,439         8.80
                                           --------     --------      --------     --------
     Total mortgage loans                   200,133        91.95       199,887        75.42
Other loans:
   Consumer loans(3)                          4,696         2.16         3,156         1.50
   Commercial business loans                 12,813         5.87         6,471         3.08
                                           --------     --------      --------     --------
     Total other loans                       17,509         8.05         9,627         4.58
                                           --------     --------      --------     --------
   Total loans before net items             217,642       100.00%      209,516       100.00%
                                                        ========                   ========
Less:
   Loans in process                           1,405                      2,579
   Deferred loan origination fees               522                        679
   Allowance for loan losses                  1,052                        815
                                           --------                   --------
     Total loans receivable, net           $214,663                   $205,443
                                           ========                   ========
   Mortgage-backed securities, net(4)      $ 65,230                   $ 88,428
                                           ========                   ========
</TABLE>

----------

(1)   Includes equity loans  collateralized by second mortgages in the aggregate
      amount of $20.7  million  and $20.3  million as of  December  31, 2004 and
      March  31,  2004,  respectively.  Such  loans  have been  underwritten  on
      substantially the same basis as the Company's first mortgage loans.

(2)   Includes  land loans of $1.4  million and $575,000 as of December 31, 2004
      and March 31, 2004, respectively.

(3)   Includes second mortgage loans of $1.8 million and $535,000 as of December
      31, 2004 and March 31, 2004, respectively.

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


                                       14
<PAGE>

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

Discussion  of Financial  Condition  Changes from March 31, 2004 to December 31,
--------------------------------------------------------------------------------
2004 (continued)
----

Nonperforming  and impaired loans amounted to $1.2 million at December 31, 2004,
as compared with $747,000 in nonperforming and impaired loans at March 31, 2004.
Such loans consisted, on both dates, of primarily residential mortgage loans and
historically,  the Company  generally has not recognized losses on nonperforming
loans  secured  by  residential  mortgages.   The  following  table  sets  forth
information  regarding  our past due,  nonaccrual  and  impaired  loans and real
estate acquired through foreclosure as of December 31, 2004 and March 31, 2004.

<TABLE>
<CAPTION>
                                                         December 31,     March 31,
                                                                 2004          2004
<S>                                                            <C>           <C>
Past due loans 30-89 days:
  Mortgage loans:
    One- to four-family residential                            $1,711        $  699
    Nonresidential                                                482            --
    Land                                                           49            --
  Non-mortgage loans:
    Commercial business loans                                      65            46
    Consumer loans                                                121            11
                                                               ------        ------
                                                                2,428           756

Non-accrual loans:
  Mortgage loans:
    One- to four-family residential                             1,112           714
    All other mortgage loans                                       81            24
  Non-mortgage loans:
    Commercial business loans                                       7            --
    Consumer                                                        6             9
                                                               ------        ------
Total non-accrual loans                                         1,206           747
Accruing loans 90 days or more delinquent                          --            --
                                                               ------        ------

Total non-performing loans                                      1,206           747
Loans deemed impaired (1)                                          --            --
                                                               ------        ------
Total non-performing and impaired loans                         1,206           747
Total real estate acquired through foreclosure (2)                116           100
                                                               ------        ------
Total non-performing and impaired assets                       $1,322        $  847
                                                               ======        ======

Total non-performing and impaired loans to net
  loans receivable                                               0.56%         0.36%
                                                               ======        ======
Total non-performing and impaired loans to total assets          0.31%         0.20%
                                                               ======        ======
Total non-performing and impaired assets to total assets         0.34%         0.23%
                                                               ======        ======
</TABLE>

----------

(1)   Includes loans deemed impaired that are currently performing.

(2)   Represents the net book value of property  acquired by the Company through
      foreclosure or deed in lieu of foreclosure.  These properties are recorded
      at the lower of the  loan's  unpaid  principal  balance or fair value less
      estimated selling expenses.

In addition,  the Company reclassified $1.3 million of the Stebbins portfolio as
substandard.  These loans are not delinquent, but until they can be restructured
and  supported by current  financial  statements,  the Company will  continue to
classify them as substandard.


                                       15
<PAGE>

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

Discussion  of Financial  Condition  Changes from March 31, 2004 to December 31,
--------------------------------------------------------------------------------
2004 (continued)
----

Historically,  the Company has had minimal  loan losses  charged off through the
allowance.  However, as a result of the Company's recent acquisition of Stebbins
and the  continuing  growth  in  commercial  lending,  the  Company  may need to
reevaluate its historical loss allowance computations.  The following table sets
forth the analysis of the allowance for loan losses for the periods indicated.

<TABLE>
<CAPTION>
                                                       For the nine months ended     For the year ended
                                                           December 31, 2004           March 31, 2004
<S>                                                            <C>                       <C>
Loans receivable, net                                          $ 214,663                 $ 205,443
                                                               =========                 =========
Average loans receivable, net                                  $ 212,383                 $ 214,174
                                                               =========                 =========
Allowance balance (at beginning of period)                           815                       678
Charge-offs:
  Mortgage loans:
    One- to four-family                                              (31)                       --
    Residential construction                                          --                        --
    Multi-family residential                                          --                        --
    Non-residential real estate and land                              --                        --
  Other loans:
    Consumer                                                         (21)                      (65)
    Commercial                                                        (7)                       --
                                                               ---------                 ---------
         Gross charge-offs                                           (59)                      (65)
                                                               ---------                 ---------
Recoveries:
  Mortgage loans:
    One- to four-family                                               --                        --
    Residential construction                                          --                        --
    Multi-family residential                                          --                        --
    Non-residential real estate and land                              --                        --
  Other loans:
    Consumer                                                          21                        29
    Commercial                                                        --                        --
                                                               ---------                 ---------
         Gross recoveries                                             21                        29
                                                               ---------                 ---------
         Net charge-offs                                             (38)                      (36)
                                                               ---------                 ---------
Provision charged to operations                                       45                       173
Stebbins acquisition                                                 230                        --
                                                               ---------                 ---------
Allowance for loans losses balance (at end
  of period)                                                   $   1,052                 $     815
                                                               =========                 =========
Allowance for loan losses as a percent of loans
  receivable, net at end of period                                  0.49%                     0.40%
                                                               =========                 =========
Net loans charged off as a percent of average
  loans receivable, net                                             0.02%                     0.02%
                                                               =========                 =========
Ratio of allowance for loan losses to total non-
  performing assets at end of period                               79.60%                    96.22%
                                                               =========                 =========
Ratio of allowance for loan losses to non-
  performing loans at end of period                                87.20%                   109.10%
                                                               =========                 =========
</TABLE>


                                       16
<PAGE>

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

Discussion  of Financial  Condition  Changes from March 31, 2004 to December 31,
--------------------------------------------------------------------------------
2004 (continued)
----

Deposits at December  31, 2004,  totaled  $321.6  million,  an increase of $29.8
million  from  $291.8  million at March 31,  2004,  due  primarily  to the $24.8
million of deposits  acquired from the Stebbins  acquisition  and an increase in
deposits of $5.0 million. For most of the year, the Company elected not to price
deposits  aggressively and allowed some runoff in an attempt to keep its cost of
funds down.  The Company has  recently  become more  competitive  in pricing its
deposits which is reflected in the increased balance of deposits.

Stockholders'  equity  decreased  by $2.4  million  during the nine months ended
December  31,  2004,  due mainly to an  unrealized  loss on  available  for sale
securities of $620,000,  generally  reflecting  the recent  increase in interest
rates,  dividends  paid totaling  $1.3 million and  purchases of treasury  stock
totaling $2.3 million. These amounts were offset by $1.4 million in net earnings
for the nine months  ended  December 31, 2004 and an increase of $342,000 due to
the amortization of the stock benefit plans.

Comparison of Operating  Results for the Nine Month  Periods Ended  December 31,
--------------------------------------------------------------------------------
2004 and 2003
-------------

General
-------

Net earnings totaled $1.4 million for the nine months ended December 31, 2004, a
decrease of $550,000, or 28.9%, compared to the net earnings of $1.9 million for
the nine months  ended  December  31,  2003.  Net  earnings  decreased  due to a
decrease in other  income of  $192,000,  or 13.0%,  due  primarily to a $217,000
reduction  in  merchant  fee  income,  which was  partially  offset by a $71,000
increase in gain on sale of loans.  Finally,  general,  administrative and other
expense increased $743,000,  or 10.9%, due mainly to increased  compensation and
benefits expense,  franchise tax expense,  and occupancy and equipment  expense.
These earnings  decreases were partially  offset by a decrease in federal income
tax expense of $344,000, or 41.1%.

The Company has maintained  its strategy to  aggressively  manage  interest rate
risk during the recent period of low interest  rates.  This strategy  negatively
affected earnings for the first nine months of the fiscal year. In addition, the
Company has not been able to invest all of its excess cash in  short-term,  high
quality  loans and as a result,  has  invested  the  remaining  excess  funds in
shorter term,  lower  yielding  assets such as marketable  securities.  However,
management  believes that the  investment  of excess funds  primarily in shorter
term assets will help the Company in a rising interest rate environment.

Interest Income
---------------

Interest  income  decreased  $496,000,  or 3.7%,  to $13.1  million for the nine
months  ended  December  31,  2004,  compared to the same  period in 2003.  This
decline was mainly due to an 8 basis  point  reduction  in the average  yield on
interest-earning  assets to 3.01% from 3.09% for the period  ended  December 31,
2003.  The  yield  reduction  was  partially  offset  with  an  increase  in the
weighted-average  balance of interest-earning  assets of $10.3 million, or 2.9%,
to a balance of $360.7  million  for the nine  months  ended  December  31, 2004
compared  to the same period in 2003.  This  reduction  in the average  yield on
interest-earning  assets  reflects  a  general  decrease  in market  rates,  the
refinancing  of  higher  rate  loans  and  the  downward  repricing  of  certain
adjustable rate loans. In addition,  as part of its interest rate risk strategy,
the Company invested excess funds in shorter-term  securities available for sale
rather  than  long-term  fixed rate loans.  Although  this  strategy  sacrifices
short-term income since investment  securities  generally yield less than loans,
it  strengthens  the Company's  interest rate position and allows the Company to
redeploy such assets in a rising rate environment.


                                       17
<PAGE>

                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,
--------------------------------------------------------------------------------
2004 and 2003 (continued)
-------------

Interest Income (continued)
---------------

Interest income on loans declined  $874,000,  or 8.3%, for the nine months ended
December  31,  2004,  compared to the same period in 2003,  due  primarily  to a
decrease in the weighted average  outstanding  balance of loans period to period
of $4.2 million, or 2.0%, coupled with a 42 basis-point decrease in the weighted
average yield on loans to 6.05% for the 2004 period.

Interest income on mortgage-backed  securities decreased $37,000 during the nine
months  ended  December  31,  2004,  compared  to the same  period in 2003,  due
primarily to principal  repayments.  The weighted  average balance  decreased by
$9.7 million, or 11.3%, from the comparable 2003 period. The Company is reducing
its emphasis on purchasing mortgage-backed securities with excess cash flow. The
yield and the risk on these products relative to the duration has been adversely
affected by the current demand for these products. The Company feels it can find
other  investment  vehicles  that  will  provide  it  enhanced  results  without
increasing risk.

Interest income on investment securities increased by $332,000, or 29.8%, during
the 2004 period  compared to the same period in 2003,  reflecting an increase in
the weighted  average balance of $17.9 million,  or 57.0%, to $49.2 million from
$31.3 million during the comparable 2003 period,  partially offset by a decrease
in  the  average  yield  of 82  basis  points  to  3.92%.  The  increase  in the
weighted-average  balance  from  period to period was due to the  investment  of
excess funds in marketable  securities as part of the Company's ongoing interest
rate risk strategy discussed above.

Interest income on interest-bearing deposits increased by $83,000, or 43.5%, for
the nine months ended  December 31,  2004,  due  primarily to an increase in the
weighted average balance of $6.4 million, or 38.1%,  compared to the 2003 period
of $16.7 million.  The increase in the weighted  average balance was enhanced by
an increase in the average  yield of 6 basis points to an average yield of 1.58%
compared to 1.52% for the nine months ended December 31, 2003.

Interest Expense
----------------

Interest  expense for the nine months  ended  December  31,  2004  totaled  $4.9
million, a decrease of $519,000,  or 9.5%,  compared to interest expense of $5.5
million for the nine months ended December 31, 2003. The decrease  resulted from
a 26 basis point  decrease  in the  average  cost of funds to 1.96% for the 2004
period,  offset by an increase in the average balance of deposits and borrowings
outstanding  of $9.6 million,  or 2.9%,  to $337.1  million for the period ended
December 31, 2004.

Interest  expense on deposits  totaled  $4.2  million for the nine months  ended
December 31, 2004, a decrease of $368,000,  or 8.1%,  from the nine months ended
December 31, 2003, as a result of a 25 basis point  decrease in the average cost
of deposits  to 1.78% for the 2004  period  offset by an increase in the average
balance  outstanding of $13.3  million,  or 4.5%, to $310.9 million for the 2004
period. The increase in the average balance outstanding was primarily due to the
Stebbins acquisition and, to a lesser extent, deposit growth.

Interest  expense on  borrowings  totaled  $787,000  for the nine  months  ended
December  31,  2004,  a decrease of  $151,000,  or 16.1%,  from the 2003 period,
primarily  due to a  decrease  in the  average  balance  of  borrowings  of $3.7
million,  or 12.5%, to an average  outstanding  balance of $26.3 million for the
nine months ended December 31, 2004, coupled with a decrease in the average cost
of  borrowings  to 4.0% from the average cost of 4.17% for the 2003 period.  The
decrease in the  average  balance  was due to the  repayment  of advances as the
Company was able to fund its operations through deposit growth.


                                       18
<PAGE>

                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,
--------------------------------------------------------------------------------
2004 and 2003 (continued)
-------------

Net Interest Income
-------------------

Net interest  income totaled $8.1 million for the nine months ended December 31,
2004, an increase of $23,000 from the nine month period ended December 31, 2003.
The average  interest  rate spread  decreased to 2.88% for the nine months ended
December  31, 2004 from 2.95% for the nine months ended  December 31, 2003.  The
net interest  margin  decreased to 3.01% for the nine months ended  December 31,
2004 from 3.09% for the nine months ended December 31, 2003.

Provision for Losses on Loans
-----------------------------

The Company recorded a $45,000  provision for losses on loans for the nine month
period ended  December  31, 2004 as compared to $63,000 in 2003.  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 December 31, 2004 and
2003.

Other Income
------------

Other income,  consisting  primarily of earnings on the cash surrender  value of
life insurance,  gains on sale of loans and service fees, and charges on deposit
accounts,  decreased by $192,000,  or 13.0%, to $1.3 million for the nine months
ended  December 31, 2004,  from $1.5 million for the nine months ended  December
31,  2003.  The  decrease  resulted  primarily  from a decrease  of  $217,000 in
merchant  fee income and a decline of $12,000 in earnings on the cash  surrender
value of life insurance, offset by an increase of $71,000 on the gain on sale of
loans in connection with management's  interest rate risk strategy, as discussed
previously.  In addition, the Company recognized a $44,000 gain on sale of loans
from the  disposal of the credit card  portfolio.  Management  chose to sell the
credit card portfolio due to its minimal  contribution  to earnings and to avoid
potential  future  chargeoffs.  The decrease in merchant fee income was due to a
significant  transaction  decrease  from  period to period.  The Company may not
experience  the prior earnings level on merchant fee income in the future due to
a significant decline in transactions. The decline of earnings from the increase
of cash  surrender  value of life  insurance  is  mainly  due to a  decrease  in
earnings on the policy investment.

General, Administrative, and Other Expense
------------------------------------------

General,  administrative  and other expense increased by $743,000,  or 10.9%, to
$7.5 million for the nine months ended  December 31, 2004,  compared to the nine
months ended December 31, 2003. The increase resulted primarily from an increase
in employee  compensation and benefits expense of $274,000, or 6.9%, an increase
of $187,000, or 17.0% in occupancy and equipment, a $217,000, or 94.3%, increase
in franchise taxes and a $67,000,  or 4.6% increase in other operating  expense.
The  increase  in  employee  compensation  and  benefits  was  mainly due to the
Stebbins National Bank acquisition, normal merit increases and increased benefit
plan costs.  The increase in occupancy and  equipment  expense was mainly due to
the new computer operating system depreciation,  coupled with the acquisition of
Stebbins  National Bank.  The increase in franchise  taxes was mainly due to the
additional  capital  raised in the  stock  conversion  in  January  2003.  Other
operating expense increased mainly due to the increased expense of the Stebbin's
acquisition.

Federal Income Taxes
--------------------

The  provision  for federal  income taxes was $492,000 for the nine months ended
December 31, 2004, a decrease of $344,000, or 41.1%, compared to the same period
in 2003,  primarily due to the $894,000,  or 32.6%,  decrease in earnings before
federal income taxes.  The effective tax rate for the nine months ended December
31,  2004 was  26.7% as  compared  to 30.5%  for the same  period  in 2003.  The
effective tax rate for the nine months ended December 31, 2004 decreased  mainly
due  to the  additional  income  earned  from  the  purchase  of tax  advantaged
municipal securities.


                                       19
<PAGE>

                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,
--------------------------------------------------------------------------------
2004 and 2003
-------------

General
-------

Net  earnings  totaled  $403,000  for the quarter  ended  December  31,  2004, a
decrease of $157,000, or 28.0%, compared to the net earnings of $560,000 for the
quarter  ended  December  31, 2003.  The decline in net  earnings was  primarily
attributable  to an  increase in general,  administrative  and other  expense of
$277,000, or 12.0%, and a decrease in other income of $101,000, or 20.6%, offset
primarily by an increase in net  interest  income of  $128,000,  or 4.9%,  and a
decrease in federal income taxes of $108,000, or 44.8%.

As stated  previously,  the Company has maintained its strategy to  aggressively
manage interest rate risk. This strategy  negatively  affected  earnings for the
three months ended  December 31, 2004.  However,  management  believes  that the
investment  of excess  funds  primarily  in shorter  term  assets  will help the
Company in a rising interest rate environment.

Interest Income
---------------

Interest  income  increased  $103,000,  or 2.4%,  to $4.5  million for the three
months  ended  December  31,  2004,  compared to the same  period in 2003.  This
increase  was  mainly  due to an  increase  in the  weighted-average  balance on
interest-earning  assets to $361.8  million  from $350.0  million for the period
ended  December 31, 2003. The yield declined 5 basis points to 4.94% at December
31, 2004 from 4.99% for the period ended  December  31, 2003 . In  addition,  as
part of its interest rate risk strategy,  the Company  invested  excess funds in
shorter-term  securities  available  for sale rather than  long-term  fixed rate
loans.  Although this strategy sacrifices  short-term income, it strengthens the
Company's  interest  rate risk  position  and allows the  Company to  profitably
redeploy such assets in a rising rate environment.

Interest income on loans declined  $30,000,  or 0.9%, for the three months ended
December 31, 2004,  compared to the same period in 2003,  due  primarily to a 18
basis point decrease in the weighted average yield on loans  outstanding  offset
by an increase in the weighted-average balance of loans period to period of $4.1
million to $214.3 million for the 2004 period.

Interest income on mortgage-backed securities decreased $86,000 during the three
months  ended  December  31,  2004,  compared  to the same  period in 2003,  due
primarily  to a decrease of $20.3  million , or 22.8%,  in the  weighted-average
balance caused mainly by normal repayments. The decrease in the weighted average
balance was offset by an increase of 36 basis points to a weighted average yield
of 3.28% as compared to 2.92%, from the comparable 2003 period.  The slowdown of
prepayments causes premium amortization to decrease, resulting in an increase in
interest  income on  mortgage-backed  securities.  The Company is  reducing  its
emphasis on purchasing  mortgage-backed  securities  with excess cash flow.  The
yield and the risk on these products relative to the duration has been adversely
affected by the current demand for these products. The Company feels it can find
other investment vehicles that will provide it similar results.

Interest income on investment securities increased by $144,000, or 38.3%, during
the 2004 period  compared to the same period in 2003,  reflecting an increase in
the weighted  average balance of $18.6 million,  or 54.6%, to $52.5 million from
$34.0 million during the comparable 2003 period,  partially offset by a decrease
in  the  average  yield  of 47  basis  points  to  3.96%.  The  increase  in the
weighted-average  balance  from  period to period was due to the  investment  of
excess funds in marketable  securities as part of the Company's ongoing interest
rate risk strategy discussed above.

Interest income on  interest-bearing  deposits increased by $75,000,  or 123.0%,
for the three months ended  December 31, 2004,  due  primarily to an increase in
the  average  yield of 59 basis  points  to an  average  yield of 2.05%  from an
average yield of 1.46% for the quarter  ended  December 31, 2003 coupled with an
increase in the weighted average balance of $9.8 million, or 58.7%,  compared to
the 2003 period of $16.7 million


                                       20
<PAGE>

                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,
--------------------------------------------------------------------------------
2004 and 2003 (continued)
-------------

Interest Expense
----------------

Interest  expense for the three  months  ended  December  31, 2004  totaled $1.7
million,  a decrease of $25,000,  or 1.4%,  from interest  expense for the three
months  ended  December 31, 2003.  The decrease  resulted  from a 14 basis point
decrease in the average cost of funds to 1.99% for the 2004 period, offset by an
increase in the average balance of deposits and borrowings  outstanding of $17.3
million, or 5.3%, to $343.1 million for the period ended December 31, 2004.

Interest  expense on deposits  totaled  $1.5  million for the three months ended
December 31, 2004, an increase of $40,000, or 2.8%, compared to the three months
ended  December  31,  2003,  as a result of an increase  in the average  balance
outstanding  of $22.3  million,  or 7.5%, to $318.1  million for the 2004 period
coupled  with a 8 basis point  decrease in the average cost of deposits to 1.84%
for the 2004  period.  The  increase  in the  average  balance  outstanding  was
primarily  due to the  Stebbins  acquisition  and, to a lesser  extent,  deposit
growth.

Interest  expense on  borrowings  totaled  $248,000  for the three  months ended
December  31,  2004,  a decrease of  $65,000,  or 20.8%,  from the 2003  period,
primarily due to a decrease in the average balance of borrowings of $5.0 million
to an average  outstanding  balance of $25.0  million for the three months ended
December 31, 2004,  coupled with a decrease in the average cost of borrowings to
3.97% from an average  cost of 4.17% for the 2003  period.  The  decrease in the
average  balance was due to the repayment of advances as the Company was able to
fund its operations through deposit growth.

Net Interest Income
-------------------

Net interest income totaled $2.8 million for the three months ended December 31,
2004,  an increase of  $128,000,  or 4.9%,  from the three  month  period  ended
December 31, 2003. The average  interest rate spread  increased to 2.95% for the
three  months  ended  December  31, 2004 from 2.86% for the three  months  ended
December 31,  2003.  The net  interest  margin  increased to 3.04% for the three
months ended December 31, 2004 from 3.0% for the three months ended December 31,
2003.

Provision for Losses on Loans
-----------------------------

The Company recorded a $15,000 provision for losses on loans for the three month
period ended  December 31, 2004.  The Company did not record a provision for the
comparable period in 2003. 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 December 31, 2004 and 2003.

Other Income
------------

Other income,  consisting  primarily of earnings on the cash surrender  value of
life  insurance,  gains on sale of loans,  service fees,  and charges on deposit
accounts,  decreased  by  $101,000,  or 20.6%,  to $389,000 for the three months
ended  December 31, 2004,  from $490,000 for the three months ended December 31,
2003. The decrease resulted  primarily from a decrease of $10,000 on the gain on
sale of loans, a decrease of $15,000 in earnings on cash surrender value of life
insurance  and decrease of $81,000 in merchant  fee income due to a  significant
decrease in transactions  from period to period.  The Company may not experience
the  prior  earnings  levels  on  merchant  fee  income  in  the  future  due to
significant transaction decreases.


                                       21
<PAGE>

                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,
--------------------------------------------------------------------------------
2004 and 2003 (continued)
-------------

General, Administrative, and Other Expense
------------------------------------------

General,  administrative  and other expense increased by $277,000,  or 12.0%, to
$2.6 million for the three months ended  December 31, 2004 compared to the three
months ended December 31, 2003. The increase resulted primarily from an increase
in employee  compensation and benefits expense of $90,000,  or 6.6%, an $81,000,
or 22.7%,  increase in occupancy and  equipment  expense,  a $74,000,  or 97.4%,
increase in franchise taxes and a $33,000,  or 6.6%, increase in other operating
expense.  The increase in employee  compensation  and benefits was mainly due to
the Stebbins  National Bank  acquisition,  as well as normal merit increases and
increased  benefit plan costs.  The increase in occupancy and equipment  expense
was  mainly  due to  depreciation  of the  new  computer  operating  system  and
increased  expenses  related to the  Stebbins  National  Bank  acquisition.  The
increase in franchise  taxes was mainly due to the additional  capital raised in
the stock  conversion in January 2003. The increase in other operating  expenses
was  mainly  due to the  Stebbins  costs  related  to  operations  before  being
consolidated onto the Wayne Savings data processing system and related costs.

Federal Income Taxes
--------------------

The provision  for federal  income taxes was $133,000 for the three months ended
December 31, 2004, a decrease of $108,000, or 44.8%, compared to the same period
in 2003,  primarily due to the $265,000,  or 33.1%,  decrease in earnings before
federal income taxes. The effective tax rate for the three months ended December
31,  2004,  was  24.8% as  compared  to 30.1% for the same  period in 2003.  The
effective tax rate for the three months ended December 31, 2004 declined  mainly
due to income earned from the purchase of additional  tax  advantaged  municipal
securities.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      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, 2004.

ITEM 4 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.


                                       22
<PAGE>

                         Wayne Savings Bancshares, Inc.

                                     PART II

ITEM 1.     Legal Proceedings
            -----------------

            Not applicable

ITEM 2.     Unregistered Sales of Equity Securities and Use of Proceeds
            -----------------------------------------------------------

<TABLE>
<CAPTION>
                                                                            Total # of         Maximum # of shares
                                          Total           Average        shares purchased      which may still be
                                       # of shares      price paid        as part of the        purchased as part
            Period                      purchased        per share        announced plan    of the announced plan (a)
            ------                      ---------        ---------        --------------    -------------------------
<S>                                       <C>             <C>                   <C>                 <C>
            October 1-31, 2004                --          $    --               --                  163,730
            November 1-30, 2004           33,000          $ 16.55               --                  130,730
            December 1-31, 2004               --          $    --               --                  130,730
</TABLE>

            Notes to the Table:

            (a)   On August 26,  2004,  the Board of  Directors  of the  Company
                  authorized a new stock repurchase  program to purchase 185,491
                  shares, or 5% of the Company's outstanding shares. This is the
                  only program  currently  in effect.  This program was publicly
                  announced in a press  release  issued  September 2, 2004.  The
                  program has an expiration date of August 26, 2005.

ITEM 3.     Defaults Upon Senior Securities
            -------------------------------

            Not applicable

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

            None

ITEM 5.     Other Information
            -----------------

            Not applicable

ITEM 6.     Exhibits
            --------

                  EX-10       Employment   Agreement   between   Wayne   Savings
                              Community  Bank    and   Phillip E. Becker   dated
                              February 15, 2005

                  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


                                       23
<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 10, 2005                 By:
      -----------------                     -----------------------------------
                                            Charles F. Finn
                                            Chairman and President


Date: February 10, 2005                 By:
      -----------------                     -----------------------------------
                                            Michael C. Anderson
                                            Chief Financial Officer


                                       24
<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 10, 2005                 By: /s/ Charles F. Finn
      -----------------                     -----------------------------------
                                            Charles F. Finn
                                            Chairman and President


Date: February 10, 2005                 By: /s/ Michael C. Anderson
      -----------------                     -----------------------------------
                                            Michael C. Anderson
                                            Chief Financial Officer


                                       25