Wells Financial Corp. Announces Second Quarter Results

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Jul 25, 2011, 03:47 ET

WELLS, Minn., July 25, 2011 /PRNewswire/ --

Selected Financial Data (Dollars in Thousands, except per share data) (unaudited)
	Quarter Ended June 30,		Six Months Ended June 30,
	2011	2010	2011	2010

Net Income	$ 302	$ 475	$ 672	$ 826
Basic earnings per share	$ 0.38	$ 0.61	$ 0.85	$ 1.06
Diluted earnings per share	$ 0.38	$ 0.61	$ 0.85	$ 1.05
Return on average equity (1)	5.1%	8.5%	5.7%	7.4%
Return on average assets (1)	0.5%	0.7%	0.6%	0.6%
Net interest rate spread	3.9%	3.6%	3.9%	3.5%
Net interest rate margin	3.9%	3.7%	4.0%	3.5%
Book value per share	$ 30.55	$ 28.88	$ 30.55	$ 28.88
(1) Annualized

Lonnie R. Trasamar, President of Wells Financial Corp. (OTCBB: WEFP) (the Company), the holding company of Wells Federal Bank (the Bank), announced earnings for the second quarter of 2011 of $302,000, down $173,000 or 36.4%, when compared to the second quarter of 2010. Basic and diluted earnings per share for the second quarter of 2011 were $0.38, down $0.23, or 37.7% when compared to the same period in 2010.

Net income for the six months ended June 30, 2011 was $672,000, down $154,000 or 18.6% when compared to the same period in 2010. Basic and diluted earnings per share were $0.85, down $0.21 and $0.20, or 19.8% and 19.8%, respectively, when compared to the same period in 2010.

When comparing the second quarter of 2011 with the second quarter of 2010, the decrease in net income resulted, primarily, from a $116,000 decrease in gain on sale of loans originated for sale and a $84,000 increase in noninterest expense. During the second quarter of 2011 fewer loans were originated for sale to the secondary market resulting in the decrease in gain on sale of loans. The increase in noninterest expense resulted, primarily, from expenses incurred on repossessed property.

When comparing the six months ended June 30, 2011 with the same period in 2010 the decrease in net income was due, primarily, to increases of $296,000 and $126,000 in noninterest expense and provision for loan loss, respectively. The change in noninterest expense resulted, primarily, from expenses incurred on repossessed property. Please see the discussion below for information on the allowance and provision for loan loss. The increases in expenses were partially offset by a $189,000 increase in net interest income.

In accordance with the Bank's internal classification of assets policy, management evaluates the loan portfolio on a quarterly basis to identify and determine the adequacy of the allowance for loan loss and adjusts the level of the allowance for loan loss through the provision for loan loss. The provision for loan losses increased by $35,000 for the second quarter of 2011 when compared to the same period in 2010 and increased by $126,000 for the six months ended June 30, 2011 when compared to the same period in 2010. As of June 30, 2011 and December 31, 2010, the balance in the allowance for loan losses and the allowance for loan losses as a percentage of total loans were $2,397,000 and $2,207,000 and 1.4% and 1.2%, respectively.

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**

Wells Financial Corp. and Subsidiary Consolidated Statement of Financial Condition (Dollars in Thousands) (Unaudited)
ASSETS
	06/30/11	12/31/10

Cash, including interest-bearing accounts:	$ 11,142	$ 8,244
06/30/11 $6,571; 12/31/10 $2,468
Certificates of deposit	4,731	-
Fed Funds Sold	19,131	12,542
Securities available for sale	19,185	14,624
Securities held to maturity	-	-
Federal Home Loan Stock	2,171	1,859
Loans held for sale	1,415	2,217
Loans receivable, net	173,178	185,418
Accrued interest receivable	1,132	1,366
Prepaid Income Taxes	155	5,628
Foreclosed real estate	4,501	-
Premises and equipment	3,356	3,439
Mortgage servicing rights, net	1,711	1,687
Other assets	1,054	1,383
TOTAL ASSETS	$ 242,862	$ 238,407


LIABILITIES AND EQUITY

LIABILITIES:
Deposits	$ 214,135	$ 210,819
Borrowed funds	1,675	1,785
Advances from borrowers for taxes and insurance	2,301	2,300
Income taxes:
Deferred	22	-
Accrued interest payable	149	53
Accrued expenses and other liabilities	544	223
TOTAL LIABILITIES	218,826	215,180

STOCKHOLDER'S EQUITY:
Common stock, $.10 par value; 7,000.000 shares
authorized; 2,187,500 shares issued	$ 219	$ 219
Additional paid in capital	17,114	17,104
Retained earnings, substantially restricted	34,286	33,615
Other comprehensive income	275	147
Treasury stock, at cost, 1,400,705 shares at June
30, 2011; 1,400,705 shares at December 31, 2010	(27,858)	(27,858)
TOTAL EQUITY	24,036	23,227

TOTAL LIABILITIES AND EQUITY	$ 242,862	$ 238,407

Wells Financial Corp. and Subsidiary Consolidated Statement of Income (Dollars in thousands, except per share data) (Unaudited)
	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2011	2010	2011	2010

Interest and dividend income
Loans receivable:
Residential loans	$ 572	$ 598	$ 1,172	$ 1,199
Commercial Loans	542	583	1,059	1,174
Ag Real Estate Loans	503	741	1,103	1,490
Consumer and other loans	955	1,121	1,942	2,238
Investment securities and other interest-
bearings deposits	146	155	273	296
Total interest income	2,718	3,198	5,549	6,397
Interest expense
Deposits	501	786	1,068	1,658
Borrowed funds	21	226	41	488
Total interest expense	522	1,012	1,109	2,146
Net interest income	2,196	2,186	4,440	4,251
Provision for loan losses	290	255	506	380
Net interest income after
provision for loan losses	1,906	1,931	3,934	3,871
Noninterest income
Gain on sale of loans	216	332	496	466
Loan servicing fees	233	238	469	477
Insurance commissions	157	153	301	357
Fees and service charges	139	141	267	273
Other	129	180	246	258
Total noninterest income	874	1,044	1,779	1,831
Noninterest expense
Compensation and benefits	1,043	1,074	2,128	2,112
Occupancy and equipment	216	256	438	506
Federal insurance premiums	126	116	245	226
Data processing	180	190	375	377
Advertising	51	59	117	115
Amortization & Valuation adjustments for MSR's	80	80	149	166
Other	588	425	1,151	855
Total noninterest expense	2,284	2,200	4,603	4,357
Income before income taxes	496	775	1,110	1,345
Income tax expense	194	300	438	519
Net Income	$ 302	$ 475	$ 672	$ 826

Earnings per share
Basic earnings per share	$ 0.38	$ 0.61	$ 0.85	$ 1.06
Diluted earnings per share	$ 0.38	$ 0.61	$ 0.85	$ 1.05