Wells Financial Corp. Announces First Quarter Earnings

WELLS, Minn., April 19, 2011 /PRNewswire/ --

Lonnie R. Trasamar, President of Wells Financial Corp. (the Company), the holding company of Wells Federal Bank (the Bank), announced first quarter earnings for 2011 of $370,000, up $19,000 or 5.4%, when compared to the first quarter of 2010.  Basic and diluted earnings per share for the quarter were $0.47, up $0.02, when compared to the first quarter of 2010.  When comparing the first quarter of 2011 with the same period in 2010 interest income decreased by $368,000, or 11.5%, due to a decrease in interest rates and a decrease in average balances of interest earning assets.   The decrease in interest income was more than offset by a $547,000, or 48.2%, decrease in interest expense.  The decrease in interest expense resulted from changes in interest rates paid on deposits and on a decrease in the average balance of borrowed funds.    The provision for loan losses increased by $91,000, or 72.8%.  The provision reflects management's monitoring of the allowance for loan losses in relation to the size and quality of the loan portfolio.  Management adjusts the provision for loan losses to adequately provide for loan losses.  Due to changes in economic conditions and changes in the composition of the loan portfolio, it is possible that the provision for loan losses may increase in future periods.  Net interest income after provision for loan loss increased by $88,000, or 4.5% due to the changes noted above.  Noninterest income increased by $118,000, or 15.0%, due to an increase in the gain on sale of loans.  During the first quarter of 2011 the Company originated a greater volume of loans for sale to the secondary market than during the same period in 2010.  Noninterest expense increased by $162,000, or 7.5%.

When comparing March 31, 2011 to December 31, 2010, total assets increased by $4,124,000 due, primarily, to an increase in cash.  Liabilities increased by $3,749,000 during the first quarter of 2011 due to an increase in deposits from the Company's primary service area.  Stockholders' equity increased by $375,000, or 1.6% during the quarter.

The Board of Directors today announced that the Company would not be paying a cash dividend to shareholders for the fourth quarter of 2010 or the first quarter of 2011 and suspended dividend payments to the shareholders until further notice.  President Trasamar stated, "Economic developments over that past few years resulted in challenging times for banks.  The Board of Directors of Wells Financial Corp. and Wells Federal Bank want to assure you that your company has remained in a strong capital position through these times.    Challenging times often result in additional opportunity for organizations that position themselves to take advantage of those opportunities.  The Board of Directors of Wells Financial Corp. feel there will be opportunities available that will allow your company to expand and diversify. In order to position the company to take advantage of these opportunities the Board of Directors has elected to suspend the payment of dividends to the shareholders.  We feel that this will help in positioning the Company for growth that will, in the long run, enhance shareholder value."

Forward-looking Statements

Statements in this press release that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties.  The foregoing material may contain forward-looking statements concerning the financial condition, results of operations and business of the Company.  We caution that such statements are subject to a number of uncertainties and actual results could differ materially and, therefore, readers should not place undue reliance on any forward-looking statements.  The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances arising after the date hereof.

**An unaudited consolidated balance sheet and income statement are part of this press release**

SOURCE Wells Financial Corp.