Wells Financial Corp. Announces Second Quarter Results

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Jul 17, 2013, 10:02 ET

WELLS, Minn., July 17, 2013 /PRNewswire/ --

Selected Financial Data (Dollars in Thousands, except per share data) (unaudited)

	Quarter Ended June 30,		Six Months Ended
	2013	2012	2013	2012

Net Income	$ 386	$ 450	$ 615	$ 926
Basic earnings per share	$ 0.50	$ 0.57	$0.80	$1.18
Diluted earnings per share	$ 0.50	$ 0.57	$0.80	$1.18
Return on average equity (1)	5.9%	7.0%	4.7%	7.3%
Return on average assets (1)	0.6%	0.7%	0.5%	0.8%
Net interest rate spread	3.2%	3.8%	3.3%	3.8%
Net interest rate margin	3.2%	3.8%	3.3%	3.8%
Book value per share	$ 33.83	$ 33.04	$ 33.83	$ 33.04
(1) Annualized

Three Months Ended June 30, 2013

Lonnie R. Trasamar, President of Wells Financial Corp. (OTC BB:WEFP)(the Company), the holding company of Wells Federal Bank (the Bank), announced earnings for the second quarter of 2013 of $386,000, down $64,000 or 14.2% when compared to the second quarter of 2012. Basic and diluted earnings per share for the second quarter of 2013 were $0.50, down $0.07 or 12.3% when compared to the second quarter of 2012.

When comparing the second quarter of 2013 with the second quarter of 2012, the decrease in net income was due, primarily, to decreases of $166,000, or 8.1%, in net interest income and $170,000, or 13.8%, in noninterest income. Partially offsetting these decreases were decreases of $150,000, or 100%, in the provision for loan losses and $125,000, or 5.3%, in noninterest expense.

Six Months Ended June 30, 2013

When comparing the six months ended June, 30, 2013 to the same period in 2012, net income decreased by $311,000, or 33.6%. Basic and diluted earnings per share decreased by $0.38, or 32.2%. Net interest income decreased by $394,000, or 9.4%, and noninterest income decreased by $150,000, or 6.2%.

Three and Six Months Ended June 30, 2013

During 2012 and continuing into 2013 the Bank experienced a decrease in the volume of its loan portfolio, primarily in residential loans, commercial real estate loans and loans for agricultural inputs and agricultural real estate. The decrease in residential loans resulted from loans being refinanced and sold to the secondary market. Commercial real estate loans decreased due to the stricter underwriting standards the Bank implemented regarding this type of loan. The robust agricultural economy has resulted in a decrease in the amounts borrowed for crop inputs and increased prepayments on agricultural real estate loans. These changes, along with an overall decrease in market interest rates being charged on loans, are the reason for a decrease in interest income. The Bank was able to partially offset the decrease in interest income by decreasing the rates paid on deposit accounts and by paying off all borrowed funds. The changes described above resulted in decreased 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 loss decreased by $150,000, or 100% for the second quarter of 2013 when compared to the same period in 2012 and increased by $25,000, or 7.1% during the six month period. As of June 30, 2013 and 2012, the balance in the allowance for loan losses and the allowance for loan losses as a percentage of total loans were $1,801,000 and $3,107,000 and 1.2% and 1.9%, respectively.

The decrease in noninterest income resulted, primarily, from a decrease in the amount of loans originated for sale to the secondary market resulting in a decrease in the gain on sale of loans.

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
	06/30/13	12/31/12

Cash, including interest-bearing accounts:	$ 6,868	$ 13,000
06/30/13 $1,767; 12/31/12 $4,543
Certificates of deposit	9,382	9,631
Fed Funds Sold	25,000	21,000
Securities available for sale	39,111	23,068
Securities held to maturity	-	-
Federal Home Loan Stock	2,219	2,188
Loans held for sale	4,003	6,911
Loans receivable, net	149,865	157,901
Accrued interest receivable	888	826
Prepaid Income Taxes	-	-
Foreclosed real estate	4,673	3,601
Premises and equipment	3,111	3,192
Mortgage servicing rights, net	1,974	1,940
Other assets	1,031	1,089
TOTAL ASSETS	$ 248,125	$ 244,347


LIABILITIES AND EQUITY

LIABILITIES:
Deposits	$ 218,566	$ 214,928
Borrowed funds	-	150
Advances from borrowers for taxes and insurance	2,546	2,494
Income taxes:
Deferred	-	-
Accrued interest payable	113	8
Accrued expenses and other liabilities	863	610
TOTAL LIABILITIES	222,088	218,190

STOCKHOLDER'S EQUITY:
Common stock, $.10 par value; 7,000.000 shares
authorized; 2,187,500 shares issued	$ 219	$ 219
Additional paid in capital	17,136	17,137
Retained earnings, substantially restricted	36,894	36,510
Other comprehensive income	(34)	420
Treasury stock, at cost, 1,417,845 shares at June
30, 2013; 1,415,307 shares at December 31, 2012	(28,178)	(28,129)
TOTAL EQUITY	26,037	26,157

TOTAL LIABILITIES AND EQUITY	$ 248,125	$ 244,347

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,
	2013	2012	2013	2012

Interest and dividend income
Loans receivable:
Residential loans	$ 623	$ 731	$ 1,254	$ 1,407
Commercial Loans	310	314	623	739
Ag Real Estate Loans	314	376	652	780
Consumer and other loans	659	810	1,348	1,674
Investment securities and other interest-
bearings deposits	176	149	344	292
Total interest income	2,082	2,380	4,221	4,892
Interest expense
Deposits	207	327	427	682
Borrowed funds	-	12	1	23
Total interest expense	207	339	428	705
Net interest income	1,875	2,041	3,793	4,187
Provision for loan losses	-	150	375	350
Net interest income after
provision for loan losses	1,875	1,891	3,418	3,837
Noninterest income
Gain on sale of loans	409	577	945	1,076
Loan servicing fees	232	232	466	466
Insurance commissions	152	169	361	348
Fees and service charges	109	112	220	249
Other	160	142	277	280
Total noninterest income	1,062	1,232	2,269	2,419
Noninterest expense
Compensation and benefits	1,089	1,089	2,152	2,188
Occupancy and equipment	242	224	461	426
Federal insurance premiums	13	48	62	97
Data processing	195	185	405	385
Advertising	57	64	116	121
Amortization & Valuation adjustments for MSRs	116	126	234	258
Other	540	641	1,190	1,229
Total noninterest expense	2,252	2,377	4,620	4,704
Income before income taxes	685	746	1,067	1,552
Income tax expense	299	296	452	626
Net Income	$ 386	$ 450	$ 615	$ 926

Earnings per share
Basic earnings per share	$ 0.50	$ 0.57	$ 0.80	$ 1.18
Diluted earnings per share	$ 0.50	$ 0.57	$ 0.80	$ 1.18