FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20552

(Mark One)

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

For the quarterly period ended              September 30, 1998       
                               -----------------------------------------

                                       OR

[   ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _______________

Commission File No. 0-23433

                         WAYNE SAVINGS BANCSHARES, INC.
             (Exact name of registrant as specified in its charter)

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

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

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

Check  whether  the issuer:  (1) has filed all  reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  registrant was required to file
such reports) and (2) has been subject to such filing  requirements for the past
90 days.

Yes   X                                                 No ___     

As of November 9, 1998, the latest  practicable  date,  2,489,248  shares of the
registrant's common stock, $1.00 par value, were issued and outstanding.









                               Page 1 of 18 pages


<PAGE>


                         Wayne Savings Bancshares, Inc.

                                      INDEX

                                                                        Page

PART I  - FINANCIAL INFORMATION

             Consolidated Statements of Financial Condition                3

             Consolidated Statements of Earnings                           4

             Consolidated Statements of Cash Flows                         5

             Notes to Consolidated Financial Statements                    7

             Management's Discussion and Analysis of
             Financial Condition and Results of
             Operations                                                   11


PART II - OTHER INFORMATION                                               16

SIGNATURES                                                                17





























                                        2


<PAGE>

<TABLE>

                       The Wayne Savings and Loan Company
<CAPTION>

                        STATEMENTS OF FINANCIAL CONDITION

                        (In thousands, except share data)
                                                                                      September 30,         March 31,
         ASSETS                                                                                1998              1998
<S>                                                                                           <C>               <C>
Cash and due from banks                                                                    $  1,571          $  1,422
Federal funds sold                                                                            2,150             4,100
Interest-bearing deposits in other financial institutions                                    14,070             7,647
                                                                                            -------           -------
         Cash and cash equivalents                                                           17,791            13,169

Certificates of deposit in other financial institutions                                       1,500             8,500
Investment securities - at amortized cost, approximate
  market value of $11,291 and $13,335 as of September 30, 1998
  and March 31, 1998                                                                         11,253            13,401
Mortgage-backed securities available for sale - at market                                     6,400             4,032
Mortgage-backed  securities - at cost, approximate market value of $685 and $245
  as of September 30, 1998
  and March 31, 1998                                                                            702               243
Loans receivable - net                                                                      208,207           206,685
Loans held for sale - at lower of cost or market                                                617             1,194
Real estate acquired through foreclosure                                                        943               946
Office premises and equipment - at depreciated cost                                           7,228             6,461
Federal Home Loan Bank stock - at cost                                                        2,820             2,719
Accrued interest receivable on loans                                                          1,178             1,152
Accrued interest receivable on mortgage-backed securities                                        32                23
Accrued interest receivable on investments and
  interest-bearing deposits                                                                     137               180
Prepaid expenses and other assets                                                             1,086             1,047
Prepaid federal income taxes                                                                     87                - 
                                                                                            -------           -------

         Total assets                                                                      $259,981          $259,752
                                                                                            =======           =======

         LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                                   $221,495          $217,621
Advances from the Federal Home Loan Bank                                                     12,000            16,000
Advances by borrowers for taxes and insurance                                                   786               783
Accrued interest payable                                                                        173               197
Accounts payable on mortgage loans serviced for others                                          159               199
Other liabilities                                                                               309               291
Accrued federal income taxes                                                                     -                  1
Deferred federal income taxes                                                                   245               234
                                                                                            -------           -------
         Total liabilities                                                                  235,167           235,326

Stockholders' equity
  Common stock (20,000,000  shares of $1.00 par value authorized;  2,497,275 and
    2,258,007 shares issued and outstanding at September 30, 1998
    and March 31, 1998)                                                                       2,497             2,258
  Additional paid-in capital                                                                 12,447             5,963
  Retained earnings - substantially restricted                                               10,074            16,198
  Less 10,492 shares of treasury stock                                                         (243)              (10)
  Unrealized gains on securities available for sale, net of related tax effects                  39                17
                                                                                            -------           -------
         Total stockholders' equity                                                          24,814            24,426
                                                                                            -------           -------

         Total liabilities and stockholders' equity                                        $259,981          $259,752
                                                                                            =======           =======
</TABLE>



                                        3


<PAGE>

<TABLE>

                       The Wayne Savings and Loan Company
<CAPTION>

                       CONSOLIDATED STATEMENTS OF EARNINGS

                      (In thousands, except per share data)

                                                                             Six months ended        Three months ended
                                                                               September 30,            September 30,
                                                                            1998         1997         1998         1997
<S>                                                                          <C>         <C>          <C>           <C>
Interest income
  Loans                                                                   $8,515       $8,559       $4,221       $4,279
  Mortgage-backed securities                                                 180           29          109           14
  Investment securities                                                      443          526          224          266
  Interest-bearing deposits and other                                        536          486          255          249
                                                                           -----        -----        -----        -----
         Total interest income                                             9,674        9,600        4,809        4,808

Interest expense
  Deposits                                                                 5,250        5,044        2,643        2,526
  Borrowings                                                                 389          464          195          228
                                                                           -----        -----        -----        -----
         Total interest expense                                            5,639        5,508        2,838        2,754
                                                                           -----        -----        -----        -----

         Net interest income                                               4,035        4,092        1,971        2,054

Provision for losses on loans                                                 31           30           16           15
                                                                           -----        -----        -----        -----

         Net interest income after provision
           for losses on loans                                             4,004        4,062        1,955        2,039

Other income
  Gain on sale of loans                                                      188          124           99           67
  Gain on sale of assets                                                       1           -            -            - 
  Service fees, charges and other operating                                  361          313          191          162
                                                                           -----        -----        -----        -----
         Total other income                                                  550          437          290          229

General, administrative and other expense
  Employee compensation and benefits                                       1,650        1,581          813          803
  Occupancy and equipment                                                    548          473          276          240
  Federal deposit insurance premiums                                         101          104           51           53
  Franchise taxes                                                            174          152           92           76
  Other operating                                                            703          675          358          347
                                                                           -----        -----        -----        -----
         Total general, administrative and other expense                   3,176        2,985        1,590        1,519
                                                                           -----        -----        -----        -----

         Earnings before federal income taxes                              1,378        1,514          655          749

Federal income taxes
  Current                                                                                 458          469          212
253
  Deferred                                                                    11           45           11           - 
                                                                           -----        -----        -----        -----
         Total federal income taxes                                          469          514          223          253
                                                                           -----        -----        -----        -----

         NET EARNINGS                                                     $  909       $1,000       $  432       $  496
                                                                           =====        =====        =====        =====

         EARNINGS PER SHARE
           Basic                                                           $0.37        $0.40        $0.17        $0.20
                                                                            ====         ====         ====         ====

           Diluted                                                         $0.36        $0.40        $0.17        $0.20
                                                                            ====         ====         ====         ====


</TABLE>

                                        4


<PAGE>

<TABLE>

                       The Wayne Savings and Loan Company
<CAPTION>

                            STATEMENTS OF CASH FLOWS

                     For the six months ended September 30,
                                 (In thousands)

                                                                                                 1998              1997
<S>                                                                                             <C>                 <C>
Cash flows from operating activities:
  Net earnings for the period                                                                 $   909           $ 1,000
  Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
    Amortization of discounts and premiums on loans,
      investments and mortgage-backed securities - net                                             13                 9
    Amortization of deferred loan origination fees                                               (253)             (177)
    Amortization expense of employee benefit plans                                                 -                 21
    Depreciation and amortization                                                                 237               207
    Loans originated for sale in the secondary market                                          (7,280)           (4,880)
    Proceeds from sale of loans                                                                 7,969             3,894
    Gain on sale of loans                                                                        (112)              (67)
    Provision for losses on loans                                                                  31                30
    Federal Home Loan Bank stock dividends                                                       (100)              (93)
    Increase (decrease) in cash due to changes in:
      Accrued interest receivable on loans                                                        (26)              (58)
      Accrued interest receivable on mortgage-backed securities                                    (9)                2
      Accrued interest receivable on investments and interest-bearing deposits                     43               (26)
      Prepaid expenses and other assets                                                           (39)               65
      Accrued interest payable                                                                    (24)              (56)
      Accounts payable on mortgage loans serviced for others                                      (40)               62
      Other liabilities                                                                            18               (65)
      Federal income taxes
        Current                                                                                   (88)              261
        Deferred                                                                                   11                45
                                                                                               ------            ------
          Net cash provided by operating activities                                             1,260               174

Cash flows provided by (used in) investing activities:
  Purchase of investment securities                                                            (4,062)               - 
  Proceeds from maturity of investment securities                                               6,222             2,504
  Purchase of mortgage-backed securities                                                       (3,913)               - 
  Principal repayments on mortgage-backed securities                                            1,047               183
  Loan principal repayments                                                                    34,310            25,997
  Loan disbursements                                                                          (36,006)          (23,134)
  Purchase of office premises and equipment - net                                              (1,004)           (1,564)
  Proceeds from sale of real estate acquired through foreclosure                                   63                - 
  Additions to real estate acquired through foreclosure                                           (60)              (90)
  Decrease in certificates of deposit in other financial institutions                           7,000                - 
                                                                                               ------            ------
          Net cash provided by investing activities                                             3,597             3,896
                                                                                               ------            ------

          Net cash provided by operating and investing activities
            (balance carried forward)                                                           4,857             4,070
                                                                                               ------            ------

</TABLE>




                                       5


<PAGE>

<TABLE>

                       The Wayne Savings and Loan Company
<CAPTION>

                      STATEMENTS OF CASH FLOWS (CONTINUED)

                     For the six months ended September 30,
                                 (In thousands)

                                                                                                   1998            1997
<S>                                                                                               <C>               <C>
          Net cash provided by operating and investing activities
            (balance brought forward)                                                           $ 4,857          $4,070

Cash flows provided by (used in) financing activities:
  Net increase (decrease) in deposit accounts                                                     3,874            (707)
  Proceeds from Federal Home Loan Bank advances                                                  10,000           3,000
  Repayment of Federal Home Loan Bank advances                                                  (14,000)         (5,000)
  Advances by borrowers for taxes and insurance                                                       3              68
  Proceeds from exercise of stock options                                                            74              42
  Dividends paid on common stock                                                                   (186)           (168)
                                                                                                 ------           -----
          Net cash provided by financing activities                                                (235)         (2,765)
                                                                                                 ------           -----

Net increase in cash and cash equivalents                                                         4,622           1,305

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

Cash and cash equivalents at end of period                                                      $17,791          $8,911
                                                                                                 ======           =====


Supplemental  disclosure of cash flow  information:
  Cash paid during the period for:
    Federal income taxes                                                                        $   553          $  224
                                                                                                 ======           =====

    Interest on deposits and borrowings                                                         $ 5,663          $5,564
                                                                                                 ======           =====


Supplemental disclosure of noncash investing activities:
  Unrealized gains (losses) on securities designated as
    available for sale, net of related tax effects                                              $    22          $   (1)
                                                                                                 ======           ===== 

  Recognition of mortgage servicing rights in accordance
    with SFAS No. 125                                                                           $    76          $   57
                                                                                                 ======           =====


</TABLE>










                                        6



<PAGE>


                         Wayne Savings Bancshares, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   For the six months ended September 30, 1998

1.       Basis of Presentation

         The  accompanying  unaudited  consolidated  financial  statements  were
         prepared  in  accordance  with   instructions   for  Form  10-QSB  and,
         therefore,  do not include  information  or footnotes  necessary  for a
         complete presentation of financial position,  results of operations and
         cash flows in conformity with generally accepted accounting principles.
         Accordingly,  these financial  statements should be read in conjunction
         with the  financial  statements  and  notes  thereto  of Wayne  Savings
         Bancshares,  Inc.  included in the Annual Report on Form 10-KSB for the
         year ended March 31, 1998.

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

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

         In the  opinion of  management,  all  adjustments  (consisting  only of
         normal recurring  accruals) which are necessary for a fair presentation
         of  the  financial  statements  have  been  included.  The  results  of
         operations for the three and six month periods ended September 30, 1998
         are not necessarily indicative of the results which may be expected for
         an entire fiscal year.

2.       Principles of Consolidation

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













                                        7

<PAGE>


                         Wayne Savings Bancshares, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                   For the six months ended September 30, 1998

3.       Earnings Per Share

         Basic  earnings per share is computed  based upon the  weighted-average
         shares outstanding during the period,  less shares in the ESOP that are
         unallocated  and not  committed  to be  released.  The  Company  had no
         unallocated ESOP shares during the six months ended September 30, 1998.
         Weighted-average   common  shares  outstanding  totaled  2,485,070  and
         2,486,549 for the six and three month periods ended September 30, 1998,
         respectively.  Weighted average common shares outstanding,  which gives
         effect to 5,972 unallocated ESOP shares totaled 2,468,519 and 2,469,921
         for the  six  and  three  months  periods  ended  September  30,  1997,
         respectively.

         Diluted earnings per share is computed taking into consideration common
         shares  outstanding and dilutive  potential  common shares to be issued
         under Wayne's stock option plan.  Weighted-average common shares deemed
         outstanding  for  purposes  of  computing  diluted  earnings  per share
         totaled  2,511,796 and  2,513,275 for the six and three months  periods
         ended September 30, 1998 respectively,  and 2,507,759 and 2,509,161 for
         the six and three month periods ended September 30, 1997, respectively.

4.       Effects of Recent Accounting Pronouncements

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

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

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

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


                                        8


<PAGE>


                         Wayne Savings Bancshares, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                   For the six months ended September 30, 1998


4.       Effects of Recent Accounting Pronouncements (continued)

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

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

         SFAS No. 130 requires  that an enterprise  (a) classify  items of other
         comprehensive  income by their nature in a financial  statement and (b)
         display  the  accumulated   balance  of  other   comprehensive   income
         separately from retained earnings and additional paid-in capital in the
         equity  section of a statement of financial  position.  SFAS No. 130 is
         effective  for  fiscal  years   beginning   after  December  15,  1997.
         Reclassification  of financial  statements for earlier periods provided
         for comparative  purposes is required.  Management adopted SFAS No. 130
         effective April 1, 1998, as required,  without a material impact on the
         Corporation's   financial  statements.   Comprehensive  income  totaled
         $931,000 and $999,000 for the six month  periods  ended  September  30,
         1998 and 1997,  respectively.  The components of  comprehensive  income
         consisted   solely  of  unrealized   gains  and  losses  on  securities
         designated as available for sale, net of related tax effects totaling a
         gain of $22,000 and a loss of $1,000 for those respective periods.

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


                                        9



<PAGE>


                         Wayne Savings Bancshares, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                   For the six months ended September 30, 1998


4.       Effects of Recent Accounting Pronouncements (continued)

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

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

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

























                                       10


<PAGE>


                         Wayne Savings Bancshares, Inc.

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


Discussion of Financial Condition Changes from March 31, 1998 to September 30,
1998

At September  30, 1998,  Wayne Savings  Bancshares,  Inc.  ("Wayne"),  the stock
holding  company  parent of Wayne Savings  Community  Bank (the  "Company")  and
Village Savings Bank, F.S.B. ("Village"), had total assets of $260.0 million, an
increase of $229,000, or 0.1%, from March 31, 1998.

Cash  and  due  from  banks,  federal  funds  sold,  interest-bearing  deposits,
certificates of deposit and investment  securities totaled  approximately  $30.5
million, a decrease of approximately  $4.5 million,  from March 31, 1998 levels.
The decrease  resulted  primarily from the use of excess liquidity to repay $4.0
million in FHLB Advances.  Regulatory liquidity  approximated 12.3% at September
30, 1998, compared to 16.0% at March 31, 1998.

Loans receivable increased by approximately $945,000, or .5%, from the March 31,
1998 total.  This increase  resulted from loan  disbursements  of $43.3 million,
which were partially  offset by principal  repayments of $34.3 million and sales
of $7.9 million. The allowance for loan losses totaled $749,000 at September 30,
1998,  as compared to $721,000 at March 31, 1998.  Nonperforming  loans  totaled
$387,000 at September 30, 1998 and $308,000 at March 31, 1998. The allowance for
loan losses  totaled 193.5% and 234.1% of  nonperforming  loans at September 30,
1998 and March 31, 1998,  respectively.  Although  management  believes that its
allowance  for loan losses at  September  30,  1998 is  adequate  based upon the
available facts and  circumstances,  there can be no assurance that additions to
such allowance will not be necessary in future  periods,  which would  adversely
affect the Company's results of operations.

Deposits increased by approximately $3.9 million to a total of $221.5 million at
September 30, 1998. The increase in deposits  generally  reflects the results of
opening the new federal savings bank subsidiary in North Canton, Ohio.

The Company and Village are subject to capital standards which generally require
the  maintenance of regulatory  capital  sufficient to meet each of three tests,
hereinafter  described as the  tangible  capital  requirement,  the core capital
requirement and the risk-based capital  requirement.  At September 30, 1998, the
Company's  tangible and core  capital of $24.4  million,  or 9.4%,  exceeded the
minimum  1.5%  and  3.0%   requirements   of  $3.9  million  and  $7.8  million,
respectively,  by $20.5  million and $16.6  million.  The  Company's  risk-based
capital of $25.1  million,  or 17.5%,  exceeded the 8.0% minimum  requirement by
approximately $13.6 million. At September 30, 1998,  Village's tangible and core
capital  of  $2.8  million,  or  51.2%,  exceeded  the  minimum  1.5%  and  3.0%
requirements  of $81,000 and  $161,000,  respectively,  by $2.7 million and $2.6
million.  Village's risk-based capital of $2.8 million, or 152.9%,  exceeded the
8.0% minimum requirement by approximately $2.6 million.

Comparison of Operating Results for the Six Month Periods Ended September 30,
1998 and 1997

Net earnings  totaled  $909,000 for the six months ended  September 30, 1998, as
compared to net earnings of $1.0 million for the same period in 1997, a decrease
of $91,000,  or 9.1%.  The decrease in net earnings  resulted  primarily from an
increase of $191,000, or 6.4%, in general,  administrative and other expense and
a decrease of $57,000,  or 1.4%,  in net interest  income,  the effects of which
were partially offset by an increase of $113,000, or 25.9%, in other income.



                                       11


<PAGE>


                         Wayne Savings Bancshares, Inc.

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


Comparison of Operating  Results for the Six Month  Periods Ended  September 30,
1998 and 1997 (continued)

Net Interest Income

Interest on loans and mortgage-backed securities increased by $107,000, or 1.2%,
for the six months ended  September 30, 1998,  from the same period in 1997. The
increase in  interest  income  resulted  primarily  from a $151,000  increase in
interest income from  mortgage-backed  securities and a $76,000 increase in loan
fee income.  The increase in loan fee income resulted primarily from accelerated
fee income due to  refinances  and loan sales.  The  increases  were offset by a
decrease in  interest  income on loans of  $123,000,  the result of a decline in
earning asset yields caused by falling interest rates.

Interest on investments and  interest-bearing  deposits decreased by $33,000, or
3.3%,  during the six months ended  September  30, 1998, as compared to the same
period in 1997 as a result of a decrease in the average yield from year to year.

Interest  expense on deposits and  borrowings  increased  by $131,000,  or 2.4%,
during the six months ended  September  30, 1998,  over the same period in 1997.
The increase can be primarily  attributed to an increase in the average  balance
of  interest-bearing  liabilities,  which  increased by $7.5 million from $226.1
million, coupled with an increase in the average cost of funds year to year.

As a result of the foregoing  changes in interest  income and interest  expense,
net interest income decreased by $57,000,  or 1.4%,  during the six months ended
September 30, 1998, as compared to the same period in 1997.

Provision for Losses on Loans

A  provision  for  losses on loans is  charged  to  earnings  to bring the total
allowance for loan losses to a level considered  appropriate by management based
on  historical  experience,  the  volume and type of  lending  conducted  by the
Company,  the  status  of past due  principal  and  interest  payments,  general
economic  conditions,  particularly as such  conditions  relate to the Company's
market area, and other factors  related to the  collectibility  of the Company's
loan  portfolio.  As a result of such  analysis,  management  recorded a $31,000
provision for losses on loans during the six months ended  September 30, 1998, a
slight  increase from the same period in 1997. The provision for losses on loans
is recorded based upon management's  assessment of the risk inherent in the loan
portfolio and management's  assessment of the collateral securing non-performing
loans.  There can be no  assurance  that the loan loss  allowance of the Company
will be adequate to cover losses on nonperforming assets in the future.

Other Income

Other income  totaled  $550,000 for the six months ended  September 30, 1998, an
increase of $113,000,  or 25.9%, over the comparable 1997 period.  This increase
was due  primarily to the $64,000,  or 51.6%,  increase in gain on sale of loans
coupled with a $48,000,  or 15.3%,  increase in service fees,  charges and other
operating income.




                                       12



<PAGE>


                         Wayne Savings Bancshares, Inc.

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


Comparison of Operating  Results for the Six Month  Periods Ended  September 30,
1998 and 1997 (continued)

General, Administrative and Other Expense

General, administrative and other expense increased by $191,000, or 6.4%, during
the current six month period, due primarily to a $69,000,  or 4.4%,  increase in
employee  compensation and benefits, a $75,000, or 15.9%,  increase in occupancy
and equipment and a $28,000, or 4.1%, increase in other operating expenses. Such
increases  in  operating  expenses  were  primarily  attributable  to  the  cost
associated with the new bank subsidiary.

Federal Income Taxes

The provision for federal  income taxes  amounted to $469,000 for the six months
ended  September  30, 1998, a decrease of $45,000 as compared to the same period
in 1997. The decrease resulted primarily from a decrease in pretax earnings year
to year. The effective tax rates for the six months ended September 30, 1998 and
1997 were 34.0% and 33.9%, respectively.


Comparison of Operating Results for the Three Month Periods Ended September 30,
1998 and 1997

Net earnings  totaled $432,000 for the three months ended September 30, 1998, as
compared to net  earnings of $496,000 for the same period in 1997, a decrease of
$64,000,  or 12.9%.  The  earnings  for the three month  period  were  similarly
reduced by an increase of $71,000, or 4.7%, in general, administrative and other
expense,  a decrease of $83,000,  or 4.0%,  in net interest  income,  which were
partially offset by an increase of $61,000, or 26.6%, in other income.

Net Interest Income

Interest on loans and mortgage-backed  securities increased by $37,000, or 0.9%,
for the three months ended  September 30, 1998 over the same period in 1997. The
increase resulted  primarily from an increase of $95,000 in interest income from
mortgage-backed  securities.  The increase  was offset by a $58,000  decrease in
interest  income on loans,  a result of a decline in earning asset yields caused
by falling interest rates.

Interest on investments and  interest-bearing  deposits decreased by $36,000, or
7.0%,  during the current  three  month  period as a result of a decrease in the
average yield from year to year.

Interest  expense on deposits  and  borrowings  increased  by $84,000,  or 3.1%,
during the three months ended  September 30, 1998 as compared to the same period
in 1997. The increase can be primarily  attributed to an increase in the average
balance of interest-bearing liabilities.






                                       13

<PAGE>


                         Wayne Savings Bancshares, Inc.

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


Comparison of Operating  Results for the Three Month Periods Ended September 30,
1998 and 1997 (continued)

Provision for Losses on Loans

A  provision  for  losses on loans is  charged  to  earnings  to bring the total
allowance  for loan  losses to a level  considered  appropriate  by  management.
Management  recorded a $16,000  provision  for losses on loans  during the three
months ended September 30, 1998, a slight increase from the same period in 1997.
The provision for losses on loans is recorded based upon management's assessment
of the risk inherent in the loan  portfolio and  management's  assessment of the
collateral  securing  non-performing  loans.  There can be no assurance that the
loan  loss  allowance  of the  Company  will be  adequate  to  cover  losses  on
non-performing assets in the future.

Other Income

Other income increased by $61,000,  or 26.6%, during the current period over the
comparable 1997 period due to a $32,000,  or 47.8%,  increase in gain on sale of
loans, coupled with a $29,000, or 17.9%,  increase in service fees, charges, and
other operating income.

General, Administrative and Other Expense

General,  administrative and other expense increased by $71,000, or 4.7%, during
the current three month period over the comparable 1997 period, due primarily to
increased costs associated with the new bank subsidiary.

Federal Income Taxes

The provision for federal income taxes amounted to $223,000 for the three months
ended September 30, 1998, as compared to $253,000 for the same period last year.
The effective  tax rates for the three months ended  September 30, 1998 and 1997
were 34.0% and 33.8% respectively.


Year 2000 Compliance Matters

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

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

                                       14


<PAGE>


                         Wayne Savings Bancshares, Inc.

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


Comparison of Operating  Results for the Three Month Periods Ended September 30,
1998 and 1997 (continued)

Year 2000 Compliance Matters (continued)

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

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

The Company's Y2K action plan requires that mission-critical  systems testing be
substantially  completed  by March 31,  1999.  A  mission-critical  system is an
application  or system  that is vital to the  successful  continuance  of a core
business activity. The Company had identified 10 mission critical systems. As of
the date of the Form  10-QSB,  testing  has been  completed  on one  system  and
testing has begun on 5 other systems.  The Company plans to commence  testing on
all  mission-critical  systems by December  31,  1998.  Testing of material  non
mission-critical  systems are planned to begin by March 31, 1999 with completion
by June 30, 1999.

The  Company  has  budgeted  approximately  $25,000  for hard  costs  related to
renovation and testing. As of the date of this Form 10-QSB, approximately $9,000
of the budget has been expended.

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










                                       15

<PAGE>


                         Wayne Savings Bancshares, Inc.

                                     PART II


ITEM 1.  Legal Proceedings

          Not applicable


ITEM 2.  Changes in Securities and Use of Proceeds

          Not applicable


ITEM 3.  Defaults Upon Senior Securities

          Not applicable


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

          Not applicable

ITEM 5.  Other Information

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

ITEM 6.  Exhibits and Reports on Form 8-K

          Report on Form 8-K:           None

          Exhibits:
            27                          Financial Data Schedule for the six
                                        month period ended September 30, 1998.

           











                                       16



<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:   November 13, 1998                   By: /s/Charles F. Finn              
      -------------------------                --------------------------------
                                                Charles F. Finn
                                                Chairman and President




Date:   November 13, 1998                   By: /s/Todd J. Tappel               
      -------------------------                --------------------------------
                                                Todd J. Tappel
                                                Senior Vice President
                                                Chief Financial Officer

































                                       17