Discussion of Financial Condition Changes from March 31, 2008 to September 30, 2008

At September 30, 2008, the Company had total assets of $396.3 million, a decrease of $5.3 million, or 1.3%, from March 31, 2008 levels.

Liquid assets, consisting of cash, federal funds sold, interest-bearing demand deposits and available for sale securities, decreased by $13.7 million, or 10.3%, to $119.5 million at September 30, 2008, due primarily to a reduction of $8.0 million, or 6.7%, in available for sale securities, coupled with a decrease in federal funds sold of $6.0 million. These decreases were partially offset by an increase in interest-bearing demand deposits of $543,000, or 10.5%. The decrease in federal funds sold was directly related to the reduction in deposit balances, as management chose to limit its competition for retail certificate of deposit offerings above alternate funding sources with a lower cost of funds.

Total securities decreased by $8.2 million, or 6.74%, during the six months ended September 30, 2008. This decrease was primarily due to principal repayments of $19.4 million, and an aggregate decrease in the market value of available for sale securities of $2.1 million. This was partially offset by purchases of $13.3 million. Purchases were funded by principal repayments on loans, proceeds from maturities of investment securities and from the reduction of the federal funds sold balance.

At September 30, 2008, net loans receivable increased by $9.1 million, or 3.8%, compared to March 31, 2008, as the Bank originated and retained $34.3 million of loans and received payments of $24.3 million. The lending division has focused on the origination of shorter-term and adjustable-rate commercial and commercial real estate loans. The Company believes that investing in shorter-term and adjustable-rate commercial loans positions the Company more favorably from an interest rate risk management perspective, compared to the origination of long term fixed-rate residential mortgages. The composition of the loan portfolio has changed during the six months ended September 30, 2008, mainly due to a net increase of $10.0 million in non-residential loans.

                                        September 30, 2008            March 31, 2008
                                                    (Dollars in thousands)
Mortgage loans:
One- to four-family residential(1)    $  141,347        54.99 %   $ 142,010        57.49 %
Residential construction loans             2,219          .86         1,636          .66
Multi-family residential                   9,079         3.53         8,929         3.61
Non-residential real estate/land(2)       71,359        27.76        61,407        24.86
Total mortgage loans                     224,004        87.14       213,982        86.62
Other loans:
Consumer loans(3)                          5,402         2.10         6,183         2.50
Commercial business loans                 27,665        10.76        26,873        10.88
Total other loans                         33,067        12.86        33,056        13.38
Total loans before net items             257,071       100.00 %     247,038       100.00 %
Less:
Loans in process                           3,388                      2,616
Deferred loan origination fees               397                        390
Allowance for loan losses                  1,937                      1,777
Total loans receivable, net           $  251,349                  $ 242,255
Mortgage-backed securities, net(4)    $   86,511                  $  85,879


_______________________________________

(1) Includes equity loans collateralized by second mortgages in the aggregate amount of $16.8 million and $17.0 million as of September 30, 2008 and March 31, 2008, respectively. Such loans have been underwritten on substantially the same basis as the Company's first mortgage loans.

(2) Includes land loans of $204,000 and $175,000 as of September 30, 2008 and March 31, 2008, respectively.

(3) Includes second mortgage loans of $1.4 million and $1.7 million as of September 30, 2008 and March 31, 2008, respectively.

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

Non-performing loans amounted to $2.6 million and $1.9 million at September 30, 2008 and March 31, 2008, respectively. At September 30, 2008, non-performing loans consisted primarily of residential mortgage loans of approximately $1.2 million, two commercial real estate loans with a combined balance of $1.1 million, $181,000 in home equity lines of credit and two commercial loans totaling $120,000. At March 31, 2008, non-performing loans were comprised of $588,000 in residential loans, $1.0 million in commercial real estate loans, $120,000 in home equity lines of credit and two commercial loans of $123,000, of which $42,000 was paid off in June 2008. During the quarter ended September 30, 2008, the Company evaluated the two commercial real estate loans and elected to record an additional provision for loan losses based on updated appraisals and evaluation of these loans. Management is actively engaged with the two borrowers to bring the loans current or liquidate the collateral to protect the Bank's interests. The Company generally has not realized significant losses on non-performing loans secured by residential mortgages. The following table sets forth information regarding our past due, nonaccrual and impaired loans and real estate acquired through foreclosure as of September 30, 2008 and March 31, 2008.

                                                       September 30,       March 31,
                                                           2008              2008
                                                          (Dollars in thousands)
 Past due loans 30-89 days:
 Mortgage loans:
 One- to four-family residential                      $         1,166     $       812
 Nonresidential                                                    38               -
 Land                                                               -               -
 Non-mortgage loans:
 Commercial business loans                                          -               -
 Consumer loans                                                    28               7
                                                      $         1,232     $       819

 Non-performing loans:
 Mortgage loans:
 One- to four-family residential                      $         1,427     $       790
 All other mortgage loans                                       1,051           1,038
 Non-mortgage loans:
 Commercial business loans                                        120              42
 Consumer                                                           1               1
 Total non-performing loans                                     2,599           1,871
 Total real estate acquired through foreclosure                   125              93
 Total non-performing assets                          $         2,724     $     1,964


 Total non-performing loans to net loans receivable              1.03 %          0.77 %
 Total non-performing loans to total assets                      0.66 %          0.47 %
 Total non-performing assets to total assets                     0.69 %          0.49 %

                         Wayne Savings Bancshares, Inc.
               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

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

                                                        For the six               For the
                                                        months ended             year ended
                                                     September 30, 2008        March 31, 2008
                                                              (Dollars in thousands)

Loans receivable, net                               $            251,349      $        242,255
Average loans receivable, net                       $            245,039      $        244,800
Allowance balance (at beginning of period)          $              1,777      $          1,523
Provision for losses                                                 161                   234
Charge-offs:
Mortgage loans:
One- to four-family                                                   (2 )                 (15 )
Residential construction                                              --                    --
Multi-family residential                                              --                    --
Non-residential real estate and land                                  --                    --
Other loans:
Consumer                                                              (3 )                  (1 )
Commercial                                                            --                    --
Gross charge-offs                                                     (5 )                 (16 )
Recoveries:
Mortgage loans:
One- to four-family                                                   --                    13
Residential construction                                              --                    --
Multi-family residential                                              --                    --
Non-residential real estate and land                                  --                    --
Other loans:
Consumer                                                               4                    23
Commercial                                                            --                    --
Gross recoveries                                                       4                    36
Net (charge-offs) recoveries                                          (1 )                  20

Allowance for loan losses balance (at end of
period)                                             $              1,937      $          1,777
Allowance for loan losses as a percent of loans
receivable, net at end of period                                    0.77 %                0.73 %
Net loans charged off as a percent of average
loans receivable, net                                               0.00 %               (0.01 )%
Ratio of allowance for loan losses to non-
 performing loans at end of period                                 74.53 %               94.98 %

Deposits totaled $309.7 million at September 30, 2008, a decrease of $8.0 million, or 2.5%, from $317.7 million at March 31, 2008. Certificates of deposit decreased by $7.4 million and savings and money market accounts decreased by $2.1 million, which were partially offset by an increase in NOW accounts of $1.5 million. The Company continues to experience a shift in depositor preference from low cost liquid deposit accounts to higher cost money market accounts. Management exercised discipline during the period with regard to the pricing of retail certificates. In general, management attempts to benchmark retail certificate of deposit pricing to the cost of alternate sources of funds, including Federal Home Loan Bank advances and brokered deposits. Exceptions are made to defend customer relationships with significant value to the Bank while allowing rate sensitive certificate of deposit shoppers to move to other alternatives. The local deposit market has been negatively affected by national and online competitors offering higher rates to address liquidity concerns in national markets.

Other short-term borrowings totaled $9.5 million at September 30, 2008, an increase of $2.2 million, or 30.9%, as compared with $7.3 million at March 31, 2008. The interest rate paid on these borrowings is 1% below the Federal Funds Rate, which over the past year has declined 275 basis points as the Federal Reserve lowered rates.

Advances from the Federal Home Loan Bank of Cincinnati totaled $41.0 million at September 30, 2008, an increase of $2.5 million, or 6.5%, compared with $38.5 million at March 31, 2008. The Company increased its borrowings to compensate for the loss of higher cost retail certificates of deposit as discussed above.

Stockholders' equity decreased by $1.5 million, or 4.3%, during the six months ended September 30, 2008, due primarily to a decrease in unrealized gains on available for sale securities of $1.4 million, dividends declared of $761,000, a $448,000 reduction due to the adoption of EITF Issue 06-4, which required the Company to record a liability for the postretirement cost of the split dollar life insurance agreements related to bank owned life insurance, and a stock repurchase of $48,000. These decreases were partially offset by net income of $1.1 million.

Comparison of Operating Results for the Six Month Periods Ended September 30, 2008 and 2007

General

Net income for the six months ended September 30, 2008 increased $62,000, or 5.8%, compared to net income for the six months ended September 30, 2007. The increase in net income was primarily attributable to an increase in net interest income of $295,000, or 5.3%, offset by an increase in the provision for loan losses of $106,000, an increase in total non-interest expenses of $76,000, a decrease in non-interest income of $28,000 and an increase in the provision for federal income taxes of $23,000.

                         Wayne Savings Bancshares, Inc.
               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations


Average Balance Sheet

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

                                                  For the six months ended September 30,
                                             2008                                        2007
                             Average                      Average        Average                      Average
                             Balance       Interest         Rate         Balance       Interest         Rate
                                                          (Dollars in thousands)
Interest-earning assets:
Loans receivable, net1      $ 245,039      $   7,681          6.27 %    $ 242,817      $   8,314          6.85 %
Investment securities2        121,449          3,012          4.96        119,414          2,912          4.88
Interest-earning
deposits3                      11,952            171          2.86         11,759            266          4.52
Total interest-earning
assets                        378,440         10,864          5.74        373,990         11,492          6.15
Non-interest-earning
assets                         21,545                                      21,827

Total assets                $ 399,985                                   $ 395,817

Interest-bearing
liabilities:
Deposits                    $ 313,920          3,990          2.54      $ 318,448          4,952          3.11
Other short-term
borrowings                      8,577             44          1.03          5,616            117          4.17
Borrowings                     40,365            935          4.63         34,074            823          4.83
Total interest-bearing
liabilities                   362,862          4,969          2.74        358,138          5,892          3.29

Non-interest
bearing liabilities             4,173                                       3,544
Total liabilities             367,035                                     361,682
Stockholders' equity           32,950                                      34,135
Total liabilities and
stockholders' equity        $ 399,985                                   $ 395,817
Net interest income                        $   5,895                                   $   5,600
Interest rate spread4                                         3.00 %                                      2.86 %
Net yield on interest-
earning assets5                                               3.12 %                                      2.99 %
Ratio of average
interest- earning assets
to
average interest-bearing
liabilities                                                 104.29 %                                    104.43 %

Interest Income

Interest income decreased by $628,000 or 5.5%, to $10.9 million for the six months ended September 30, 2008, compared to the same period in 2007. This decrease was mainly due to a decrease in the weighted-average yield on interest-earning assets to 5.74% in the 2008 period from 6.15% for the six month period ended September 30, 2007. The yield decrease was primarily due to the Federal Reserve's interest rate cuts of 275 basis points from the quarter ended September 30, 2007 to the current quarter ended September 30, 2008.

Interest income on loans decreased by $633,000, or 7.6%, for the six months ended September 30, 2008, compared to the same period in 2007, due primarily to a reduction in weighted-average rate on loans of 58 basis points from 6.85% for the period ended September 30, 2007 to 6.27% for the September 30, 2008 period. As discussed earlier, this was mainly due to a decrease in rates of 275 basis points implemented by the Federal Reserve over the past year. This decrease was partially offset by an increase in the average balance of loans outstanding period to period of $2.2 million, or .9%, to $245.0 million for the 2008 period.

Interest income on securities increased by $100,000, or 3.4%, during the six months ended September 30, 2008, compared to the same period in 2007. This increase was primarily due to an increase in the weighted-average yield to 4.96% coupled with an increase in the average balance of $2.0 million or 1.7%. The increase in the average yield was due to a change in the composition of the investment portfolio, as the average balance of agency bonds decreased by $16.7 million, while the average balance of mortgage-backed securities increased by $12.0 million from the September 30, 2007 period to the September 30, 2008 period. The agency bonds which matured were generally a lower yielding investment as compared to the mortgage-backed securities.

Dividends on Federal Home Loan Bank stock and other income decreased by $95,000, or 35.7%, for the six months ended September 30, 2008, compared to the same period in 2007, due primarily to a decrease in the weighted-average yield of 166 basis points resulting from reductions in short term market interest rates, to 2.86% for the 2008 period from 4.52% for the six months ended September 30, 2007.

Interest Expense

Interest expense totaled $5.0 million for the six months ended September 30, 2008, a decrease of $923,000, or 15.7%, compared to the six months ended September 30, 2007. The decrease resulted from a 55 basis point decrease in the weighted-average cost of funds to 2.74% for the 2008 period, partially offset by an increase of $4.7 million in the average balance of deposits and borrowings outstanding, from $358.1 million to $362.9 million for the six month period ended September 30, 2008.

Interest expense on deposits totaled $4.0 million for the six months ended September 30, 2008, a decrease of $962,000, or 19.4%, compared to the six months ended September 30, 2007, as a result of a 57 basis point decrease in the weighted-average cost of deposits to 2.54% for the 2008 period coupled with a decrease in the average balance outstanding of $4.5 million, or 1.4%, to $313.9 million for the 2008 period.

Interest expense on other short-term borrowings totaled $44,000 for the six months ended September 30, 2008, a decrease of $73,000, from the 2007 period, primarily due to a decrease in the weighted-average cost of 314 basis points, to 1.03% for the six months ended September 30, 2008 due to the Federal Reserve

rate decreases. This was partially offset by an increase in the average balance of short-term borrowings of $3.0 million.

Interest expense on Federal Home Loan Bank advances totaled $935,000 for the six months ended September 30, 2008, an increase of $112,000, over the 2007 period, primarily due to an increase in the average balance of $6.3 million, or 18.5%, as the Company replaced the loss of higher cost retail certificates of deposit with lower cost Federal Home Loan Bank advances.

Net Interest Income

Net interest income totaled $5.9 million for the six months ended September 30, 2008, an increase of $295,000, or 5.3%, compared to the six month period ended September 30, 2007. The average interest rate spread increased to 3.00% for the six months ended September 30, 2008 from 2.86% for the six months ended September 30, 2007, due to management's strategy not to compete with national and online competitors offering higher rates in the national markets. The increase in the average interest rate spread was also due to a shift in asset composition from lower yielding investment securities and deposits to higher yielding loans and mortgage-backed securities and a shift in composition of liabilities from higher cost retail certificate of deposits to lower cost Federal Home Loan Bank advances. The net interest margin increased to 3.12% for the six months ended September 30, 2008 from 2.99% for the six months ended September 30, 2007.

Provision for Loan Losses

Management recorded a $161,000 provision for loan losses for the six month period ended September 30, 2008, an increase of $106,000 compared to the provision for the same period in 2007, primarily due to the increase in non-performing loans. 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 September 30, 2008.

Non-interest Income

Other income, consisting primarily of the earnings on bank-owned life insurance, trust income, service fees and charges on deposit accounts, decreased by $28,000, or 3.1%, for the six months ended September 30, 2008, compared to the six months ended September 30, 2007. The decrease was primarily due to a decrease in gain on disposal of foreclosed assets of $21,000, or 67.7%, in the six months ended September 30, 2008 compared to the same period ended September 30, 2007.

Non-interest Expense

Non-interest expense increased by $76,000, or 1.5%, to $5.1 million for the six months ended September 30, 2008, compared to the six months ended September 30, 2007. The increase was mainly due to an increase in occupancy and equipment expense of $40,000, or 4.1%, mainly due to an increase in real estate tax expense and additional maintenance costs. Franchise tax increased $27,000, or 13.9%, to $221,000 for the six months ended September 30, 2008, compared to the six months ended September 30, 2007. The increase was due primarily to refund claims relating to a reduction in prior years amended returns. Compensation expense decreased by $5,000 during the 2008 period, as full time equivalent staff decreased from 115 at September 30, 2007 to 111 at September 30, 2008, offsetting the annual merit increases implemented during the 2008 first fiscal quarter.

Federal Income Taxes

Federal income tax expense was $391,000 for the six months ended September 30, 2008, an increase of $23,000, or 6.3%, compared to the same period in 2007. The increase was primarily due to the increase in income before taxes of $85,000, or 5.9%, compared to the same period in 2007.

Comparison of Operating Results for the Three Month Periods Ended September 30, 2008 and 2007

General

Net income totaled $601,000 for the three months ended September 30, 2008, an increase of $54,000, or 9.9%, compared to net income of $547,000 for the three months ended September 30, 2007. The increase in net income was primarily attributable to an increase in net interest income of $232,000, or 8.2%, offset by an increase in the provision for loan losses of $75,000, an increase in total non-interest expenses of $55,000, an increase in the provision for federal income taxes of $39,000 and a decrease in non-interest income of $9,000.

Average Balance Sheet

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

                         Wayne Savings Bancshares, Inc.
               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations



                                                  For the three months ended September 30,
                                             2008                                         2007
                             Average                       Average        Average                       Average
                             Balance        Interest         Rate         Balance        Interest         Rate
                                                           (Dollars in thousands)
Interest-earning assets:
Loans receivable, net1      $ 247,184      $    3,867          6.26 %    $ 245,545      $    4,224          6.88 %
Investment securities2        119,054           1,493          5.02        117,292           1,458          4.97
Interest-earning
deposits3                       9,227              72          3.12         10,090             111          4.40
Total interest-earning
assets                        375,465           5,432          5.79        372,927           5,793          6.21
. . .