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, 2005
                              --------------------------------------------------

                                       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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer [_]   Accelerated filer [_]   Non-accelerated filer [X]

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

Yes   [_]                                                              No   [X]

As of January 31, 2006, the latest  practicable  date,  3,339,552  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 1A      Risk Factors                                                  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>
<TABLE>
<CAPTION>

                                        Wayne Savings Bancshares, Inc.

                                CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                      (In thousands, except share data)

                                                                                    December 31,    March 31,
         ASSETS                                                                             2005         2005
                                                                                      (Unaudited)
<S>                                                                                    <C>          <C>
Cash and due from banks                                                                $   3,006    $   4,176
Federal funds sold                                                                            --       19,400
Interest-bearing deposits in other financial institutions                                 10,543        6,366
                                                                                       ---------    ---------
         Cash and cash equivalents                                                        13,549       29,942

Investment securities available for sale - at market                                      64,167       60,844
Investment securities held to maturity - at amortized cost, approximate market value
  of $10,768 and $12,101 as of December 31, 2005 and March 31, 2005, respectively         10,867       12,012
Mortgage-backed securities available for sale - at market                                 51,510       57,724
Mortgage-backed securities held to maturity - at cost, approximate market value of
  $1,929 and $2,647 as of December 31, 2005 and March 31, 2005, respectively               1,922        2,628
Loans receivable - net                                                                   229,802      213,627
Office premises and equipment - net                                                        8,664        8,922
Real estate acquired through foreclosure                                                      54           35
Federal Home Loan Bank stock - at cost                                                     4,559        4,386
Cash surrender value of life insurance                                                     6,828        6,581
Accrued interest receivable on loans                                                       1,177          757
Accrued interest receivable on mortgage-backed securities                                    292          444
Accrued interest receivable on investments and interest-bearing deposits                     509          708
Prepaid expenses and other assets                                                          3,642        3,996
Prepaid federal income taxes                                                                 426          795
                                                                                       ---------    ---------

         Total assets                                                                  $ 397,968    $ 403,401
                                                                                       =========    =========

         LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                               $ 328,868    $ 320,586
Advances from the Federal Home Loan Bank                                                  30,500       40,000
Advances by borrowers for taxes and insurance                                                904          612
Accrued interest payable                                                                     160          198
Accounts payable on mortgage loans serviced for others                                       367          231
Other liabilities                                                                          1,153        1,174
Deferred federal income taxes                                                                475          401
                                                                                       ---------    ---------
         Total liabilities                                                               362,427      363,202

Commitments                                                                                   --           --

Stockholders' equity
   Preferred stock (500,000 shares of $.10 par value authorized-
    no preferred stock issued as of December 31, 2005 or March 31,2005)                       --           --
  Common stock (9,000,000 shares of $ .10 par value authorized; 3,934,874
    and 3,907,318 shares issued at December 31, 2005 and March 31, 2005)                     393          391
  Additional paid-in capital                                                              35,634       35,133
  Retained earnings - substantially restricted                                            11,233       11,371
  Less required contributions for shares acquired by Employee Stock Ownership Plan        (1,260)      (1,304)
  Less 595,322 and 282,261 shares of treasury stock at December 31, 2005 and
    March 31, 2005 - at cost                                                              (9,625)      (4,600)
  Accumulated other comprehensive loss - unrealized losses on securities designated
    as available for sale                                                                   (834)        (792)
                                                                                       ---------    ---------
         Total stockholders' equity                                                       35,541       40,199
                                                                                       ---------    ---------

         Total liabilities and stockholders' equity                                    $ 397,968    $ 403,401
                                                                                       =========    =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                                      3
<PAGE>
<TABLE>
<CAPTION>

                                      Wayne Savings Bancshares, Inc.

                                   CONSOLIDATED STATEMENTS OF EARNINGS

                                    (In thousands, except share data)

                                                                      Nine months        Three months
                                                                         ended                ended
                                                                      December 31,         December 31,
                                                                     2005      2004      2005       2004
<S>                                                                <C>       <C>       <C>        <C>
                                                                                (Unaudited)
Interest income
  Loans                                                            $10,351   $ 9,641   $ 3,626    $ 3,247
  Mortgage-backed securities                                         1,462     1,730       483        562
  Investment securities                                              2,296     1,445       763        520
  Interest-bearing deposits and other                                  351       274       109        136
                                                                   -------   -------   -------    -------
         Total interest income                                      14,460    13,090     4,981      4,465

Interest expense
  Deposits                                                           5,201     4,158     1,855      1,463
  Borrowings                                                           764       787       262        248
                                                                   -------   -------   -------    -------
         Total interest expense                                      5,965     4,945     2,117      1,711
                                                                   -------   -------   -------    -------

         Net interest income                                         8,495     8,145     2,864      2,754
Provision for losses on loans                                           --        45        --         15
                                                                   -------   -------   -------    -------
         Net interest income after provision for losses on loans     8,495     8,100     2,864      2,739

Other income (losses)
  Gain (loss) on sale of loans                                          68       162        (1)        20
  Proceeds due from bank-owned life insurance policy                    63        --        63         --
  Increase in cash surrender value of life insurance                   184       199        59         62
  Service fees, charges and other operating                          1,006       926       346        307
                                                                   -------   -------   -------    -------
         Total other income                                          1,321     1,287       467        389

General, administrative and other expense
  Employee compensation and benefits                                 5,070     4,246     1,957      1,462
  Occupancy and equipment                                            1,410     1,285       509        438
  Federal deposit insurance premiums                                    33        34        11         11
  Franchise taxes                                                      394       447       133        150
  Other operating                                                    1,550     1,529       576        531
                                                                   -------   -------   -------    -------
         Total general, administrative and other expense             8,457     7,541     3,186      2,592
                                                                   -------   -------   -------    -------

         Earnings before income taxes (credits)                      1,359     1,846       145        536

Federal incomes taxes (credits)
  Current                                                               82       434      (147)
                                                                                                      541
  Deferred                                                             199        58       121       (408)
                                                                   -------   -------   -------    -------
         Total federal income taxes (credits)                          281       492       (26)       133
                                                                   -------   -------   -------    -------

         NET EARNINGS                                              $ 1,078   $ 1,354   $   171    $   403
                                                                   =======   =======   =======    =======

         EARNINGS PER SHARE
           Basic                                                   $  0.32   $  0.38   $  0.05    $  0.11
                                                                   =======   =======   =======    =======
           Diluted                                                 $  0.32   $  0.37   $  0.05    $  0.11
                                                                   =======   =======   =======    =======
</TABLE>

See accompanying notes to consolidated financial statements.

                                                    4
<PAGE>
<TABLE>
<CAPTION>

                                     Wayne Savings Bancshares, Inc.

                            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                             (In thousands)


                                                                  Nine months          Three months
                                                                     ended                 ended
                                                                  December 31,          December 31,
                                                                2005       2004       2005       2004
                                                                            (Unaudited)
<S>                                                           <C>        <C>        <C>        <C>
Net earnings                                                  $ 1,078    $ 1,354    $   171    $   403

Other comprehensive income (loss):
  Unrealized holding losses on securities,  net of related
    benefits of $(22), $(319), $(233) and $(147) during the
    respective periods                                            (42)      (620)      (452)      (287)
                                                              -------    -------    -------    -------

Comprehensive income (loss)                                   $ 1,036    $   734    $  (281)   $   116
                                                              =======    =======    =======    =======

Accumulated comprehensive loss                                $  (834)   $  (141)   $  (834)   $  (141)
                                                              =======    =======    =======    =======
</TABLE>


                                                   5
<PAGE>
<TABLE>
<CAPTION>

                                       Wayne Savings Bancshares, Inc.

                                   CONSOLIDATED STATEMENTS OF CASH FLOWS

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

                                                                                        2005        2004
<S>                                                                                   <C>         <C>
                                                                                           (Unaudited)

Cash flows from operating activities:
  Net earnings for the period                                                         $  1,078    $  1,354
  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                                     384         976
    Amortization of deferred loan origination fees                                        (110)       (185)
    Depreciation and amortization                                                          504         437
    Gain on sale of loans                                                                  (17)       (126)
    Proceeds due from bank-owned life insurance policy                                     (63)         --
    Proceeds from sale of loans in the secondary market                                  5,763       3,133
    Loans originated for sale in the secondary market                                   (5,749)     (3,108)
    Provision for losses on loans                                                           --          45
    Federal Home Loan Bank stock dividends                                                (173)       (133)
    Increase (decrease) in cash due to changes in:
      Accrued interest receivable on loans                                                (420)        (51)
      Accrued interest receivable on mortgage-backed securities                            152         107
      Accrued interest receivable on investments and interest-bearing deposits             199        (191)
      Prepaid expenses and other assets                                                    354         (33)
      Accrued interest payable                                                             (38)        (58)
      Accounts payable on mortgage loans serviced for others                               136         367
      Other liabilities                                                                    (21)       (474)
      Federal income taxes
        Current                                                                            170          10
        Deferred                                                                           199          58
                                                                                      --------    --------
          Net cash provided by operating activities                                      2,348       2,128

Cash flows provided by (used in) investing activities:
  Purchase of investment securities designated as available for sale                    (7,344)    (12,933)
  Purchase of investment securities designated as held to maturity                         (50)         --
  Proceeds from maturity of investment securities designated as held to maturity         1,168       2,159
  Proceeds from maturity of investment securities designated as available for sale       4,135       2,002
  Purchase of mortgage-backed securities designated as available for sale              (16,215)     (5,632)
  Principal repayments on mortgage-backed securities designated as held to maturity        698       1,575
  Principal repayments and sales of mortgage-backed securities designated as
   available for sale                                                                   21,900      25,878
  Loan principal repayments                                                             24,082      41,842
  Loan disbursements                                                                   (40,228)    (38,743)
  Purchase of office premises and equipment - net                                         (246)       (348)
  Proceeds from sale of real estate acquired through foreclosure                           163         130
  Increase in cash surrender value of life insurance                                      (184)       (199)
  Net cash used in the acquisition of Stebbins Bancshares, Inc.                             --      (1,314)
                                                                                      --------    --------
          Net cash provided by (used in) investing activities                          (12,121)     14,417
                                                                                      --------    --------

          Net cash provided by (used in) operating and investing activities
            (balance carried forward)                                                   (9,773)     16,545
                                                                                      --------    --------
</TABLE>

                                                     6
<PAGE>
<TABLE>
<CAPTION>

                                    Wayne Savings Bancshares, Inc.

                          CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

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


                                                                                   2005       2004
<S>                                                                             <C>         <C>
                                                                                     (Unaudited)

          Net cash provided by (used in) operating and investing activities
            (balance brought forward)                                           $ (9,773)   $ 16,545

Cash flows used in financing activities:
  Net increase in deposit accounts                                                 8,282       4,991
  Proceeds from Federal Home Loan Bank advances                                   37,150          --
  Repayments of Federal Home Loan Bank advances                                  (46,650)     (5,000)
  Advances by borrowers for taxes and insurance                                      292         502
  Dividends paid on common stock                                                  (1,216)     (1,310)
  Tax benefits from exercise of stock options                                         27          --
  Proceeds from exercise of stock options                                            367          --
  Amortization of employee stock benefit plans                                       153         470
  Purchase of treasury shares                                                     (5,025)     (2,308)
                                                                                --------    --------
          Net cash used in financing activities                                   (6,620)     (2,655)
                                                                                --------    --------

Net increase (decrease) in cash and cash equivalents                             (16,393)     13,890

Cash and cash equivalents at beginning of period                                  29,942      19,887
                                                                                --------    --------

Cash and cash equivalents at end of period                                      $ 13,549    $ 33,777
                                                                                ========    ========


Supplemental disclosure of cash flow information: Cash paid during the period
  for:
    Federal income taxes                                                        $    325    $    393
                                                                                ========    ========

    Interest on deposits and borrowings                                         $  6,003    $  5,003
                                                                                ========    ========


Supplemental disclosure of noncash investing activities:
  Transfers from loans to real estate acquired through foreclosure              $    184    $     51
                                                                                ========    ========

  Unrealized losses on securities designated as available for sale,
    net of related tax benefits                                                 $    (42)   $   (620)
                                                                                ========    ========

  Recognition of mortgage servicing rights in accordance
    with SFAS No. 140                                                           $     51    $     41
                                                                                ========    ========
</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, 2005 and 2004

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

         The accompanying  unaudited  consolidated  financial statements for the
         nine and three months ended December 31, 2005 and 2004 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, 2005.

         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,
         2005  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").

         In October 2003, 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.

                                       8
<PAGE>

                         Wayne Savings Bancshares, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

        For nine and three month periods ended December 31, 2005 and 2004

2.       Principles of Consolidation (continued)
         ---------------------------

         Wayne Savings has eleven banking locations in Wayne,  Holmes,  Ashland,
         Medina and Stark counties.  All significant  intercompany  transactions
         and balances have been eliminated in the consolidation.

3.       Earnings Per Share
         ------------------

         Basic   earnings  per  common   share  are  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,
                                                      2005        2004              2005        2004
<S>                                                 <C>         <C>               <C>         <C>
         Weighted-average common shares
           outstanding (basic)                      3,320,492   3,589,224         3,231,757   3,535,379
         Dilutive effect of assumed exercise
           of stock options                            17,747      31,763             9,778      32,929
                                                    ---------   ---------         ---------   ---------
         Weighted-average common shares
           outstanding (diluted)                    3,338,239   3,620,987         3,241,535   3,568,308
                                                    =========   =========         =========   =========
</TABLE>

         All outstanding options were included in the diluted earnings per share
         calculation  for the nine and three month periods  ending  December 31,
         2005 and 2004.

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

         The Company has a 1993 Stock Option Plan that provided for the issuance
         of 196,390 shares of authorized  common stock, as adjusted,  with 2,567
         options  outstanding  at December 31, 2005. 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, 2005, all options under the
         2004 Plan have been granted,  are subject to exercise at the discretion
         of the  grantees,  and will  expire in  fiscal  2014  unless  otherwise
         exercised.

         In  the  fourth  quarter  of  fiscal  2005,  the  Company  adopted  the
         provisions of SFAS No. 123(R),  "Share Based  Payment." SFAS No. 123(R)
         requires the  recognition of  compensation  related stock option awards
         based  on the  fair  value  of the  option  award  at the  grant  date.
         Compensation   cost  is  then   recognized  over  the  vesting  period.
         Subsequent  to the adoption of SFAS No.  123(R),  the Company  modified
         163,265   stock  option  awards  under  the  2004  Stock  Option  Plan,
         eliminating  the  reload  options  contained  therein  and  immediately
         vesting these shares.  Pursuant to SFAS No.  123(R),  the  modification
         represents a new grant.  Accordingly,  in accordance  with the modified
         prospective  application  method  under SFAS No.  123(R),  the  Company
         recognized compensation costs representing the fair value of the option
         awards at the date of modification.

         Prior to the adoption of SFAS No. 123(R), the Company accounted for its
         stock option plans pursuant SFAS No. 123,  "Accounting  for Stock-Based
         Compensation,"  which also provided for a fair  value-based  method for
         measuring  compensation  cost at the grant date based on the fair value
         of the award at the grant date.  Compensation  was then recognized over
         the service period, generally defined as the vesting period.

                                       9
<PAGE>

                         Wayne Savings Bancshares, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

        For nine and three month periods ended December 31, 2005 and 2004

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

         Alternatively, SFAS No. 123 permits entities to continue to account for
         stock options using the 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 were 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.  Wayne  Savings had  continued  to account for stock
         based compensation in accordance with APB Opinion No. 25.

         In accordance with APB Opinion No. 25 and prior to the adoption of SFAS
         No.  123(R),  no  compensation  cost was recognized for the Plan in the
         nine and three month periods ending December 31, 2004. 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(R),  the  Company's net earnings and earnings
         per share for the nine and three month periods ended  December 31, 2004
         would have been reported as the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                           Nine months ended   Three months ended
                                                              December 31,        December 31,
                                                                 2004                2004
<S>                                                            <C>                <C>
         Net earnings (In thousands)             As reported   $   1,354          $     403
                        Stock-based compensation, net of tax         (81)               (27)
                                                               ---------          ---------

                                                   Pro-forma   $   1,273          $     376
                                                               =========          =========
         Earnings per share
           Basic As                                 reported   $     .38          $     .11
                        Stock-based compensation, net of tax        (.03)                --
                                                               ---------          ---------

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

          Diluted                                As reported   $     .37          $     .11
                        Stock-based compensation, net of tax        (.02)                --
                                                               ---------          ---------

                                                   Pro-forma   $     .35          $     .11
                                                               =========          =========
</TABLE>

         There were no options granted during the nine months ended December 31,
         2005 or December 31, 2004.

         Such pro-forma amounts do not give effect to the Company's acceleration
         of vesting  for  outstanding  options  in the fourth  quarter of fiscal
         2005.

                                       10
<PAGE>

                         Wayne Savings Bancshares, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      For the nine and three month periods ended December 31, 2005 and 2004


4.       Stock Option Plan (continued)

         A summary of the status of the  Company's  stock option plans as of and
         for the years ended March 31, 2005 and 2004,  and the nine months ended
         December 31, 2005 is presented below:

<TABLE>
<CAPTION>
                                                  Nine months ended                    Year ended
                                                   December 31,                        March 31,
                                                      2005                   2005                    2004
                                                          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    214,204    $  13.84      28,666    $   6.26
         Granted                                    --          --    163,265       13.95     204,081       13.95
         Exercised                             (27,556)      13.35         --          --     (18,543)       3.31
         Forfeited                                  --          --   (163,265)     (13.95)         --          --
                                              --------    --------   --------    --------    --------    --------

         Outstanding at end of period          186,648    $  13.92    214,204    $  13.84     214,204    $  13.84
                                              ========    ========   ========    ========    ========    ========

         Options exercisable at period-end     186,648    $  13.92    214,204    $  13.84      10,123    $  11.67
                                              ========    ========   ========    ========    ========    ========

         Fair value of options granted                    $     --               $   4.07    $   3.93
</TABLE>

         The following  information  applies to options  outstanding at December
         31, 2005:

         Number outstanding.....................................         186,648
         Range of exercise prices............................... $11.67 - $13.95
         Weighted-average exercise price........................          $13.92
         Weighted-average remaining contractual life............      8.25 years

         The fair value of options  granted has been based on the Black  Scholes
         pricing  model  using a  dividend  yield  of 4.5%  and  3.3%,  expected
         volatility  of 27.3% and 28.8% for fiscal 2005 and 2004,  respectively.
         All options  granted in fiscal 2004 have  expected  lives of ten years,
         while the options  granted in fiscal 2005 have  expected  lives of nine
         years.

                                       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,
                                 -----------------------------------------------------------------
                                              2005                              2004
                                 ------------------------------    -------------------------------
                                  Average              Average      Average               Average
                                  Balance   Interest     Rate       Balance   Interest     Rate
                                  -------   --------   --------     -------   --------    -------
<S>                              <C>        <C>            <C>     <C>        <C>            <C>
                                                       (Dollars in thousands)
Interest-earning assets:
  Loans receivable, net(1)       $219,668   $ 10,351       6.28%   $212,383   $  9,641       6.05%
  Mortgage-backed
    securities(2)                  54,229      1,462       3.59      76,003      1,730       3.03
  Investment securities            76,906      2,296       3.98      49,173      1,445       3.92
  Interest-bearing deposits(3)     15,001        351       3.12      23,094        274       1.58
                                 --------   --------               --------   --------
     Total interest-
       earning assets             365,804     14,460       5.27     360,653     13,090       4.84
Non-interest-earning assets        25,103                            23,237
                                 --------                          --------

     Total assets                $390,907                          $383,890
                                 ========                          ========

Interest-bearing liabilities:
  Deposits                       $324,300      5,201       2.14    $310,874      4,158       1.78
  Borrowings                       27,340        764       3.73      26,265        787       4.00
                                 --------   --------               --------   --------
     Total interest-
       bearing liabilities        351,640      5,965       2.26     337,139      4,945       1.96
                                            --------   --------               --------   --------
Non-interest bearing
  liabilities                       1,662                             4,634
                                 --------                          --------
     Total liabilities            353,302                           341,773
Stockholders' equity               37,605                            42,117
                                 --------                          --------
     Total liabilities and
       stockholders' equity      $390,907                          $383,890
                                 ========                          ========
Net interest income                         $  8,495                          $  8,145
                                            ========                          ========
Interest rate spread(4)                                    3.01%                             2.88%
                                                       ========                          ========
Net yield on interest-
  earning assets(5)                                        3.10%                             3.01%
                                                       ========                          ========
Ratio of average interest-
  earning assets to average
  interest-bearing liabilities                           104.03%                           106.97%
                                                       ========                          ========
</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.

                                       12
<PAGE>

ITEM 2           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,
                                 -----------------------------------------------------------------
                                              2005                              2004
                                 ------------------------------    -------------------------------
                                  Average              Average      Average               Average
                                  Balance   Interest     Rate       Balance   Interest     Rate
                                  -------   --------   --------     -------   --------    -------
<S>                              <C>        <C>            <C>     <C>        <C>            <C>

Interest-earning assets:
  Loans receivable, net(1)       $227,198   $  3,626       6.38%   $214,291   $  3,247       6.06%
  Mortgage-backed
    securities(2)                  50,747        483       3.81      68,505        562       3.28
  Investment securities            75,893        763       4.02      52,525        520       3.96
  Interest-bearing deposits(3)     12,333        109       3.54      26,491        136       2.05
                                 --------   --------               --------   --------
     Total interest-
       earning assets             366,171      4,981       5.44     361,812      4,465       4.94
Non-interest-earning assets        24,973                            25,934
                                 --------                          --------

     Total assets                $391,144                          $387,746
                                 ========                          ========

Interest-bearing liabilities:
  Deposits                       $326,088      1,855       2.28    $318,069      1,463       1.84
  Borrowings                       27,551        262       3.80      25,000        248       3.97
                                 --------   --------               --------   --------
     Total interest-
       bearing liabilities        353,639      2,117       2.39     343,069      1,711       1.99
                                 --------   --------               --------   --------
Non-interest bearing
  liabilities                       1,603                             3,200
                                 --------                          --------
     Total liabilities            355,242                           346,269
Stockholders' equity               35,902                            41,477
                                 --------                          --------
     Total liabilities and
       stockholders' equity      $391,144                          $387,746
                                 ========                          ========
Net interest income                         $  2,864                          $  2,754
                                            ========                          ========
Interest rate spread(4)                                    3.05%                             2.95%
                                                       ========                          ========
Net yield on interest-
  earning assets(5)                                        3.13%                             3.04%
                                                       ========                          ========
Ratio of average interest-
  earning assets to average
  interest-bearing liabilities                           103.54%                           105.46%
                                                       ========                          ========
</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, 2005 to December 31,
--------------------------------------------------------------------------------
2005
----

At December  31,  2005,  total  assets were $398.0  million,  a decrease of $5.4
million, or 1.3%, from March 31, 2005 levels.

Liquid  assets,  consisting of cash,  interest-bearing  deposits and  investment
securities,  decreased by $14.2 million,  or 13.8%, to $88.6 million at December
31,  2005  mainly due to a  reduction  in federal  funds sold of $19.4  million,
partially  offset by purchases of investment  securities  totaling $7.4 million.
Mortgage-backed securities decreased by $6.9 million, or 11.5%, to $53.4 million
caused  by  the  prepayments   management   anticipated  when  purchasing  these
relatively  shorter term  securities.  Such prepayments were partially offset by
purchases  of  mortgage-backed  securities  during the current nine month period
totaling $16.2 million.

During the nine month period ended December 31, 2005 loans receivable  increased
$16.2  million as the Bank  originated  and retained  $40.2 million of loans and
received principal repayments of $24.1 million.  Rather than reinvest funds from
sales of and  repayments  on loans in  long-term,  fixed  rate and low  yielding
residential   loans,  the  Bank's  lending  division   originated   shorter-term
adjustable  rate  commercial  loans.  The Company  believes  that  investing  in
shorter-term  and  adjustable-rate  commercial  loans  favorably  positions  the
Company in an increasing interest rate environment.  The composition of the loan
portfolio has changed during the current nine month period due to a net decrease
of $6.2 million in residential and construction  mortgage loans,  which was more
than offset by increases in  nonresidential  real estate loans of $17.0  million
and commercial loans of $5.2 million.

<TABLE>
<CAPTION>
                                          December 31, 2005         March 31, 2005
                                                     (Dollars in thousands)
<S>                                     <C>           <C>      <C>           <C>
Mortgage loans:
   One-to four-family residential(1)     $150,825      64.48%   $157,658      72.60%
   Residential construction loans           5,027       2.15       7,872       3.63
   Multi-family residential                 7,540       3.22       4,053       1.87
   Non-residential real estate/land(2)     46,166      19.73      29,187      13.44
                                         --------   --------    --------   --------
     Total mortgage loans                 209,558      89.58     198,770      91.54
Other loans:
   Consumer loans(3)                        5,070       2.17       4,306       1.98
   Commercial business loans               19,307       8.25      14,075       6.48
                                         --------   --------    --------   --------
     Total other loans                     24,377      10.42      18,381       8.46
                                         --------   --------    --------   --------
   Total loans before net items           233,935     100.00%    217,151     100.00%
                                                    ========               ========
Less:
   Loans in process                         2,347                  1,638
   Deferred loan origination fees             454                    512
   Allowance for loan losses                1,332                  1,374
                                         --------               --------
     Total loans receivable, net         $229,802               $213,627
                                         ========               ========
   Mortgage-backed securities, net(4)    $ 53,432               $ 60,352
                                         ========               ========
</TABLE>

---------------------------

(1)  Includes equity loans  collateralized  by second mortgages in the aggregate
     amount of $21.5 million and $20.3 million as of December 31, 2005 and March
     31, 2005, respectively.  Such loans have been underwritten on substantially
     the same basis as the Company's first mortgage loans.
(2)  Includes  land loans of $879,000  and $1.4  million as of December 31, 2005
     and March 31, 2005,  respectively.
(3)  Includes  second mortgage loans of $901,000 and $1.4 million as of December
     31, 2005 and March 31, 2005, respectively.
(4)  Includes mortgage-backed securities designated as held to maturity.

                                       14
<PAGE>

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

Nonperforming  and impaired  loans amounted to $893,000 at December 31, 2005, as
compared with $906,000 in  nonperforming  and impaired  loans at March 31, 2005.
Such loans consisted,  on both dates, of primarily  residential  mortgage loans.
Historically,  the Company  generally has not recognized losses on nonperforming
loans  secured  by  residential  mortgages.   The  following  table  sets  forth
information  regarding  past due,  nonaccrual and impaired loans and real estate
acquired through foreclosure as of December 31, 2005 and March 31, 2005.

                                                      December 31,   March 31,
                                                             2005        2005
Past due loans 30-89 days:
  Mortgage loans:
    One- to four-family residential                        $  861      $  895
    Nonresidential                                             81          --
    Land                                                       95          --
  Non-mortgage loans:
    Commercial business loans                                  --          --
    Consumer loans                                             51          11
                                                           ------      ------
                                                            1,088         906

Non-accrual loans:
  Mortgage loans:
    One- to four-family residential                           697         895
    All other mortgage loans                                  178          --
  Non-mortgage loans:
    Commercial business loans                                  --          --
    Consumer                                                   18          11
                                                           ------      ------
Total non-accrual loans                                       893         906
Accruing loans 90 days or more delinquent                      --          --
                                                           ------      ------

Total non-performing loans                                    893         906
Loans deemed impaired                                          --          --
                                                           ------      ------
Total non-performing and impaired loans                       893         906
Total real estate acquired through foreclosure                 54          35
                                                           ------      ------

Total non-performing and impaired assets                   $  947      $  941
                                                           ======      ======

Total non-performing and impaired loans to net
  loans receivable                                           0.39%       0.42%
                                                           ======      ======
Total non-performing and impaired loans to total assets      0.22%       0.22%
                                                           ======      ======
Total non-performing and impaired assets to total assets     0.24%       0.23%
                                                           ======      ======

In  addition,  the  Company  had  previously  reclassified  $2.1  million of the
Stebbins portfolio as substandard for regulatory reporting purposes. These loans
have  been  appropriately   restructured  and  supported  by  current  financial
statements and are no longer classified 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, 2005 to December 31,
2005 (continued)

Historically,  the Company has had minimal  loan losses  charged off through the
allowance. 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, 2005       March 31, 2005
<S>                                               <C>                   <C>
Loans receivable, net                             $ 229,802             $ 213,627
                                                  =========             =========
Average loans receivable, net                     $ 219,668             $ 212,785
                                                  =========             =========
Allowance balance (at beginning of period)        $   1,374             $     815
Charge-offs:
  Mortgage loans:
    One- to four-family                                 (12)                  (28)
    Residential construction                             --                    --
    Multi-family residential                             --                    --
    Non-residential real estate and land                 (7)                   --
  Other loans:
    Consumer                                            (58)                  (44)
    Commercial                                           (3)                  (54)
                                                  ---------             ---------
         Gross charge-offs                              (80)                 (126)
                                                  ---------             ---------
Recoveries:
  Mortgage loans:
    One- to four-family                                  --                    --
    Residential construction                             --                    --
    Multi-family residential                             --                    --
    Non-residential real estate and land                 --                    --
  Other loans:
    Consumer                                             31                    25
    Commercial                                            7                    --
                                                  ---------             ---------
         Gross recoveries                                38                    25
                                                  ---------             ---------
         Net charge-offs                                (42)                 (101)
                                                  ---------             ---------
Provision charged to operations                          --                   430
Stebbins acquisition                                     --                   230
                                                  ---------             ---------
Allowance for loans losses balance (at end
  of period)                                      $   1,332             $   1,374
                                                  =========             =========
Allowance for loan losses as a percent of loans
  receivable, net at end of period                     0.58%                 0.64%
                                                  =========             =========
Net loans charged off as a percent of average
  loans receivable, net                                0.02%                 0.05%
                                                  =========             =========
Ratio of allowance for loan losses to non-
  performing loans at end of period                  153.63%               151.66%
                                                  =========             =========
</TABLE>

Deposits  at December  31,  2005  totaled  $328.9  million,  an increase of $8.3
million  from $320.6  million at March 31,  2005,  due  primarily  to the Bank's
competitive deposit pricing in all market areas. Certificates of deposit grew by
$14.8  million,  coupled  with $6.5  million of growth in the  commercial  sweep
program which was initiated  during fiscal 2006, a $2.6 million  increase in NOW
accounts and money-market  deposit growth of $1.9 million.  Approximately  $17.5
million of the aforementioned  deposit growth resulted from transfers from other
Bank deposit types.

Borrowings  totaled  $30.5  million at December 31, 2005, as compared with $40.0
million at March 31, 2005. The Company was able to repay the short-term  Federal
Home Loan Bank advances during the December 31, 2005 nine month period primarily
with excess funds from maturing short-term  investments.  During the period, the
Company  utilized  overnight  advances  from  the  Federal  Home  Loan  Bank  to
supplement  liquidity while  introducing new deposit products in the market.  As
these new deposit  products  increase,  the reliance on overnight  borrowings is
anticipated to decline.

                                       16
<PAGE>

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


Discussion  of Financial  Condition  Changes from March 31, 2005 to December 31,
--------------------------------------------------------------------------------
2005 (continued)
----------------

Stockholders'  equity  decreased  by $4.7  million  during the nine months ended
December 31, 2005,  due mainly to the purchases of treasury  stock totaling $5.0
million,  dividends  of $1.2 million and an increase in the  unrealized  loss on
available  for sale  securities  of $42,000.  These  amounts were offset by $1.1
million in net earnings for the nine months ended December 31, 2005 and proceeds
from the exercise of stock options totaling $367,000.

Comparison of Operating  Results for the Nine Month  Periods Ended  December 31,
--------------------------------------------------------------------------------
2005 and 2004
-------------

General
-------

Net earnings totaled $1.1 million for the nine months ended December 31, 2005, a
decrease of $276,000, or 20.4%, compared to the net earnings of $1.4 million for
the nine  months  ended  December  31,  2004.  The decline in net  earnings  was
primarily  attributable  to an  increase in  general,  administrative  and other
expense of $916,000,  or 12.1%. This increase in expense was partially offset by
an  increase  in net  interest  income  after  provision  for losses on loans of
$395,000,  or 4.9%,  and a  decrease  in the  federal  income tax  provision  of
$211,000, or 42.9%.

The Company has maintained  its strategy to  aggressively  manage  interest rate
risk.  This  strategy has  favorably  affected net interest  income for the nine
months  ended  December  31,  2005.   Management  believes  that  the  continued
investment  of excess  funds  primarily  in shorter  term  assets  will help the
Company in the current  interest rate  environment  by providing  flexibility to
redeploy  such  assets in higher  yielding  loans and other  investments  should
interest rates continue to rise.

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

Interest income increased $1.4 million,  or 10.5%, to $14.5 million for the nine
months  ended  December  31,  2005,  compared to the same  period in 2004.  This
increase  was  mainly  due to an  increase  in  the  weighted-average  yield  on
interest-earning  assets to 5.27% from 4.84% for the period  ended  December 31,
2004 coupled with an increase in the weighted  average  balance of $5.2 million.
The yield  increase was primarily due to the Federal  Reserve  raising the prime
rate  2.0%  over the past year and the  corresponding  beneficial  impact on the
Company's investment  securities and interest-bearing  deposits and, to a lesser
extent,  loans. The Company  purposefully  invested excess funds in shorter-term
securities  available for sale rather than long-term fixed rate loans.  Although
this  strategy  sacrificed  short-term  income,  it  strengthens  the  Company's
interest  rate  position  and allows the Company to redeploy  such assets in the
current rising rate environment.

Interest income on loans increased $710,000,  or 7.4%, for the nine months ended
December  31,  2005,  compared to the same period in 2004,  due  primarily to an
increase  in the  weighted-average  balance  of loans  period  to period of $7.3
million to $219.7  million  for the 2005 period  coupled  with an 23 basis point
increase in the weighted average yield on loans outstanding.

Interest income on mortgage-backed securities decreased $268,000 during the nine
months  ended  December  31,  2005,  compared  to the same  period in 2004,  due
primarily  to a decrease of $21.8  million,  or 28.6%,  in the  weighted-average
balance  caused mainly by prepayments  management  anticipated  when  purchasing
these relatively shorter-term  securities.  The decrease in the weighted average
balance was offset by an increase of 56 basis points to a weighted average yield
of 3.59% for the 2005  period as  compared  to 3.03%,  for the  comparable  2004
period.

Interest income on investment securities increased by $851,000, or 58.9%, during
the 2005 period  compared to the same period in 2004,  reflecting an increase in
the weighted  average balance of $27.7 million,  or 56.4%, to $76.9 million from
$49.2  million  during  the  comparable  2004  period.  As part of  management's
interest rate risk management  strategy,  mortgage backed security payments were
reinvested in shorter duration investment securities.

                                       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,
--------------------------------------------------------------------------------
2005 and 2004 (continued)
-------------------------

Interest income on interest-bearing deposits increased by $77,000, or 28.1%, for
the nine months ended  December 31,  2005,  due  primarily to an increase in the
average  yield of 154 basis points to an average  yield of 3.12% from an average
yield of 1.58% for the nine months ended December 31, 2004,  which was partially
offset by a decrease in the weighted average balance of $8.1 million,  or 35.0%,
compared to the 2004 period of $23.1 million.  The increase in average yield was
due to the increases in short-term market interest rates.

Interest Expense

Interest  expense for the nine months  ended  December  31,  2005  totaled  $6.0
million,  an increase of $1.0 million , or 20.6%,  from interest expense for the
nine months ended December 31, 2004.  The increase  resulted from an increase in
the average balance of deposits and borrowings  outstanding of $14.5 million, or
4.3%, to $351.6 million for the period ended December 31, 2005 coupled with a 30
basis point increase in the average cost of funds to 2.26% for the 2005 period.

Interest  expense on deposits  totaled  $5.2  million for the nine months  ended
December 31, 2005, an increase of $1.0 million,  or 25.1%,  compared to the nine
months  ended  December  31,  2004,  as a result of an  increase  in the average
balance  outstanding of $13.4  million,  or 4.3%, to $324.3 million for the 2005
period coupled with a 36 basis point increase in the average cost of deposits to
2.14% for the 2005 period.

Interest  expense on  borrowings  totaled  $764,000  for the nine  months  ended
December  31,  2005,  a decrease  of  $23,000,  or 2.9%,  from the 2004  period,
primarily due to a decrease on the weighted  average yield of 27 basis points to
an average yield of 3.73% for the nine months ended December 31, 2005.

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

Net interest  income totaled $8.5 million for the nine months ended December 31,
2005,  an  increase  of  $350,000,  or 4.3%,  from the nine month  period  ended
December 31, 2004. The average  interest rate spread  increased to 3.01% for the
nine  months  ended  December  31,  2005 from  2.88% for the nine  months  ended
December  31,  2004.  The net  interest  margin  increased to 3.10% for the nine
months ended December 31, 2005 from 3.01% for the nine months ended December 31,
2004.

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

The Company did not record any provision for losses on loans for the nine months
ended  December 31, 2005.  For the period  ended  December 31, 2004,  management
recorded a $45,000  provision  for losses on loans.  As  discussed  above,  loan
balances  increased  during  the  period.  Based  on  management's  analysis  of
portfolio  performance,  internal risk ratings,  economic factors and peer group
statistics,  management  concluded that no provision was necessary at this time.
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, 2005.  There can be no assurances  that  additions to the allowance for loan
losses or reductions in net carrying  values of other real estate owned will not
be necessary in future periods.

                                       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,
--------------------------------------------------------------------------------
2005 and 2004 (continued)
-------------------------

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

Other income,  consisting  primarily of increases in the cash surrender value of
life insurance, the pending receipt of life insurance proceeds, gains on sale of
loans, service fees, and charges on deposit accounts increased $34,000, or 2.6%,
for the nine months  ended  December  31, 2005 as compared  with the nine months
ending  December 31,  2004.  Gain on sale of loans was down  $94,000,  or 58.0%,
mainly due the sale of the credit card portfolio  resulting in a gain of $44,000
in July 2004. No comparable event occurred during the 2005 period.  In addition,
more competitive pricing in the 2005 period resulted in a lower gain on the sale
of loans.  The decrease in cash surrender  value of life insurance was primarily
due to a lower  interest  rate earned on these  assets  during the  period.  The
increase of $80,000 in service fees,  charges and other  operating  income which
was mainly  comprised  of trust  income of  $49,000  and  increased  fees due to
increased volume.

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

General,  administrative  and other expense increased by $916,000,  or 12.1%, to
$8.5  million for the nine months ended  December 31, 2005  compared to the nine
months ended December 31, 2004. The increase resulted primarily from an increase
in employee  compensation  and benefits expense of $824,000,  or 19.4%,  coupled
with an increase in occupancy and equipment charges of $125,000, or 9.7%, and an
increase other operating  expense of $21,000,  or 1.4%. These expense  increases
were  partially  offset by a reduction in franchise  tax expense of $53,000,  or
11.9%,  due to the reduction of taxable  equity capital as a result of the stock
repurchase program. The increase in employee  compensation and benefits totaling
$486,000  was due to the  addition of the  Stebbins  branch,  the  expansion  of
personnel  needed  to  enhance  our  commercial   lending   department  and  the
establishment  of  a  trust  department.  The  remaining  increase  in  employee
compensation  and benefits of $421,000  resulted from a pension  expense arising
from the death of the Company's former Chairman and Chief Executive Officer, and
the  retirement of the Executive  Vice  President and Chief  Operating  Officer.
These  increases were partially  offset with a reduction of $83,000 in the costs
of the Employee  Stock Option Plan.  The increase in other  occupancy  operating
expense was  primarily due to additional  vendor  support and data  connectivity
upgrades needed to facilitate operations. The other operating expenses increased
mainly due to pro-rata cost increases.

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

The  provision  for federal  income taxes was $281,000 for the nine months ended
December 31, 2005, a decrease of $211,000, or 42.9%, compared to the same period
in 2004,  due  primarily to a $487,000,  or 26.4%,  decrease in earnings  before
federal income taxes.  The effective tax rate for the nine months ended December
31,  2005,  was  20.7% as  compared  to 26.7% for the same  period in 2004.  The
effective tax rate for the nine months ended  December 31, 2005 declined  mainly
due to the  beneficial  effects  of  income  earned  from  the  purchase  of tax
advantaged municipal securities and earnings on the cash surrender value of life
insurance.

Comparison of Operating  Results for the Three Month Periods Ended  December 31,
--------------------------------------------------------------------------------
2005 and 2004
-------------

General
-------

Net  earnings  totaled  $171,000  for the quarter  ended  December  31,  2005, a
decrease of $232,000, or 57.6%, compared to the net earnings of $403,000 for the
quarter  ended  December  31, 2004.  The decline in net  earnings was  primarily
attributable  to an  increase in general,  administrative  and other  expense of
$594,000,  or 22.9%, offset with a decrease in federal income taxes of $159,000,
or 119.5%,  an increase in net  interest  income after  provision  for losses on
loans of $125,000, or 4.6%, and an increase in total other income of $78,000, or
20.1%.

                                       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,
--------------------------------------------------------------------------------
2005 and 2004 (continued)
-------------------------

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

Interest  income  increased  $516,000,  or 11.6%,  to $5.0 million for the three
months  ended  December  31,  2005,  compared to the same  period in 2004.  This
increase  was  mainly  due to an  increase  in  the  weighted-average  yield  on
interest-earning  assets to 5.44% from 4.94% for the period  ended  December 31,
2004.  The yield increase was primarily due to the Federal  Reserve  raising the
prime rate 2.0% over the past year and the  corresponding  beneficial  effect on
the Company's  investment  securities  and  interest-bearing  deposits and, to a
lesser extent, loans.

Interest  income on loans  increased  $379,000,  or 11.7%,  for the three months
ended  December 31, 2005,  compared to the same period in 2004, due primarily an
increase  in the  weighted  average  balance of loans  period to period of $12.9
million, or 6.0%, to $227.2 million for the 2005 period coupled with an increase
in the weighted average yield of 32 basis points to 6.38%.

Interest income on mortgage-backed securities decreased $79,000 during the three
months  ended  December  31,  2005,  compared  to the same  period in 2004,  due
primarily  to a decrease of $17.8  million,  or 25.9%,  in the  weighted-average
balance  caused  mainly by  prepayments.  The decrease in the  weighted  average
balance was offset by an increase of 53 basis points to a weighted average yield
of 3.81% as compared to 3.28%, from the comparable 2004 period.  The slowdown of
prepayments year over year resulted in a reduction of premium amortization and a
corresponding increase in interest income on mortgage-backed securities.

Interest income on investment securities increased by $243,000, or 46.7%, during
the 2005 period  compared to the same period in 2004,  reflecting an increase in
the weighted  average balance of $23.4 million,  or 44.5%, to $75.9 million from
$52.5 million during the comparable 2004 period, coupled with an increase in the
average yield to 4.02%.  As part of  management's  interest rate risk management
strategy,  mortgage backed security payments were reinvested in shorter duration
investment securities.

Interest income on interest-bearing deposits decreased by $27,000, or 19.9%, for
the three months ended  December  31, 2005,  due  primarily to a decrease in the
weighted average balance of $14.2 million,  or 53.4%, offset with an increase in
the  average  yield of 149 basis  points to an  average  yield of 3.54%  from an
average  yield of 2.05% for the quarter  ended  December 31,  2004.  The average
balance  of  short  term  investments  decreased  due to  maturities  that  were
reinvested in higher yielding investment securities.

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

Interest  expense for the three  months  ended  December  31, 2005  totaled $2.1
million, an increase of $406,000,  or 23.7%, from interest expense for the three
months ended  December 31, 2004.  The increase  resulted from an increase in the
average  balance of deposits and borrowings  outstanding  of $10.6  million,  or
3.1%, to $353.6  million for the period ended  December 31, 2005 and an 40 basis
point increase in the average cost of funds to 2.39% for the 2005 period.

Interest  expense on deposits  totaled  $1.9  million for the three months ended
December 31,  2005,  an increase of  $392,000,  or 26.8%,  compared to the three
months  ended  December  31,  2004,  as a result of an  increase  in the average
balance  outstanding  of $8.0 million,  or 2.5%, to $326.1  million for the 2005
period coupled with a 44 basis point increase in the average cost of deposits to
2.28% for the 2005 period.

Interest  expense on  borrowings  totaled  $262,000  for the three  months ended
December  31,  2005,  an  increase of $14,000,  or 5.6%,  from the 2004  period,
primarily due to an increase on the weighted average balance of $2.6 million, or
10.2%,  offset by a decrease in weighted  average yield of 17 basis points to an
average yield of 3.80% for the three months ended December 31, 2005.

                                       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,
--------------------------------------------------------------------------------
2005 and 2004 (continued)
-------------------------

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

Net interest income totaled $2.9 million for the three months ended December 31,
2005,  an increase of  $110,000,  or 4.0%,  from the three  month  period  ended
December 31, 2004. The average  interest rate spread  increased to 3.05% for the
three  months  ended  December  31, 2005 from 2.95% for the three  months  ended
December 30,  2004.  The net  interest  margin  increased to 3.13% for the three
months ended  December  31, 2005 from 3.04% for the three months ended  December
31, 2004.

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

The  Company  did not  record any  provision  for losses on loans for the period
ending  December 31, 2005.  For the period ended  December 31, 2004,  management
recorded a $15,000 provision for losses on loans. Based on management's analysis
of portfolio performance, internal risk ratings, economic factors and peer group
statistics,  management  concluded that no provision was necessary at this time.
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, 2005.  There can be no assurances  that  additions to the allowance for loan
losses or reductions in net carrying  values of other real estate owned will not
be necessary in future periods.

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

Other income,  consisting  primarily of increases in the cash surrender value of
life insurance, pending life insurance proceeds, gains on sale of loans, service
fees, and charges on deposit  accounts  increased by $78,000,  or 20.1%, for the
three  months  ended  December  31,  2005 as compared  with the  quarter  ending
December  31,  2004.  Gain on sale  of  loans  declined  $21,000  mainly  due to
decreased  sales of loans.  This  reduction  was more  than  offset by a $39,000
increase in service fees,  charges and other operating income,  comprised mainly
of trust income.

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

General,  administrative  and other expense increased by $594,000,  or 22.9%, to
$3.2 million for the three months ended  December 31, 2005 compared to the three
months ended December 31, 2004. The increase resulted primarily from an increase
in employee  compensation  and benefits expense of $495,000,  or 33.9%,  coupled
with  increases of $71,000,  or 16.2%,  in occupancy and  equipment  expense and
other  operating  expense of $45,000,  or 8.5%.  These  increased  expenses were
offset with a reduction  in  franchise  tax  expense of $17,000,  or 11.3%.  The
increase in employee  compensation and benefits of $495,000 resulted mainly from
an  unanticipated  pension  expense  as a result of the  death of the  Company's
former Chairman and Chief Executive  Officer and the retirement of the Executive
Vice President and Chief Operating  Officer coupled with increased  salary costs
due to normal merit increases.  The increase in occupancy and equipment  expense
was primarily due to additional  vendor support and data  connectivity  upgrades
needed to  facilitate  operations.  The reduction in franchise tax is due to the
reduction  of  taxable  equity  capital  as a  result  of the  stock  repurchase
programs.

Federal Income Taxes (Credit)
-----------------------------

The federal  income tax credit was $26,000 for the three months  ended  December
31, 2005, a decrease of $159,000  compared to the  provision for the same period
in 2004. This was primarily due to the $391,000,  or 72.9%, decrease in earnings
before  federal  income  taxes.  The  difference  in the  effective  tax rate of
benefits from the 34% statutory rate is mainly due to the beneficial  effects of
earnings  from cash  surrender  value on life  insurance  and  other  tax-exempt
obligations.

                                       21
<PAGE>

                         Wayne Savings Bancshares, Inc.


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, 2005.


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 1A. Risk Factors
         ------------

         Not applicable

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

         (a)      Not applicable
         (b)      Not applicable
         (c)      The following table sets forth certain  information  regarding
                  repurchases  by the Company for the quarter ended December 31,
                  2005.

<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
         ------                     ---------      ---------         -------------      ---------------------
<S>                                 <C>             <C>                <C>                   <C>
         October 1-31, 2005              --          $   --                 --                164,794
         November 1-30, 2005         10,000          $14.80             10,000                154,794
         December 1-31, 2005         14,692          $15.00             24,692                140,105
</TABLE>

         Notes to the Table:

                  A  repurchase  program  for  185,491,  or 5% of the  Company's
                  outstanding  shares,  was  publicly  announced on September 2,
                  2004 and  expired on August  26,  2005.  On June 6, 2005,  the
                  Company announced the completion of the repurchase program and
                  the  authorization  by the Board of Directors of a new program
                  for the repurchase of 352,433 shares,  or 10% of the Company's
                  outstanding shares.

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-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, 2006          By:  /s/ Phillip E. Becker
       -----------------               -----------------------------------------
                                       Phillip E. Becker,
                                       President and Chief Executive Officer



Date:  February 10, 2006          By:  /s/ H. Stewart Fitz Gibbon III
       -----------------               -----------------------------------------
                                       H. Stewart Fitz Gibbon III
                                       Senior Vice President and Chief Financial
                                       Officer


                                       24