Wells Financial Corp. Announces Third Quarter Results

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Oct 22, 2010, 11:41 ET

WELLS, Minn., Oct. 22 /PRNewswire-FirstCall/ --

Selected Financial Data (Dollars in Thousands, except per share data) (unaudited)
	Quarter Ended September 30,		Nine Months Ended September 30,
	2010	2009	2010	2009

Net Income	$ 587	$ 428	$1,413	$ 1,670
Basic earnings per share	$ 0.75	$ 0.55	$ 1.81	$ 2.15
Diluted earnings per share	$ 0.75	$ 0.55	$ 1.80	$ 2.15
Return on average equity (1)	10.3%	7.9%	8.4%	10.5%
Return on average assets (1)	1.0%	0.7%	0.7%	0.9%
Net interest rate spread	3.9%	3.4%	3.6%	3.3%
Net interest rate margin	3.9%	3.5%	3.7%	3.4%
Book value per share	$ 29.42	$ 28.19	$ 29.42	$28.19
(1) Annualized

Lonnie R. Trasamar, President of Wells Financial Corp. (the Company) (OTC Bulletin Board: WEFP), the holding company of Wells Federal Bank (the Bank), announced earnings for the third quarter of 2010 of $587,000, up $159,000 or 37.1%, when compared to the third quarter of 2009. Basic and diluted earnings per share for the third quarter of 2010 were $0.75, up $0.20 or 36.4%, when compared to the same period in 2009.

Net income for the nine months ended September 30, 2010 was $1,413,000, down $257,000 or 15.4% when compared to the first nine months of 2009. Basic and diluted earnings per share were $1.81 and $1.80, down $0.34 and $0.35 or 15.8% and 16.3%, respectively, during the first nine months of 2010 when compared to the same period in 2009.

When comparing the quarter ended September 30, 2010 with the same period in 2009, net interest income increased by $157,000, or 7.6%, due to decreased costs on deposits and borrowed funds. The provision for loan loss increased by $50,000 during the period. See the discussion below regarding the allowance for loan loss for additional information. Noninterest income increased by $257,000 which resulted, primarily, from an increase in the gain on sale of loans. This increase was due to a reduction in the market rates on loans originated for sale to the secondary market resulting in an increase in loan originations. Noninterest expense increased by $103,000 due, primarily, to increases in other noninterest expense and federal deposit insurance premiums.

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 $50,000 for the quarter ended September 30, 2010 when compared to the same period in 2009 and decreased by $330,000 for the nine months ended September 30, 2010 when compared to the same period in 2009. As of September 30, 2010 and December 31, 2009, the balance in the allowance for loan losses and the allowance for loan losses as a percentage of total loans were $1,793,000 and $1,785,000 and 0.93% and 0.85%, respectively.

When comparing the nine months ended September 30, 2010 with the same period in 2009 net interest income increased by $324,000 due, primarily, to decreased costs on deposits and borrowed funds. The provision for loan loss decreased by $330,000 during the period. See the discussion above regarding the allowance for loan loss for additional information. Noninterest income decreased by $855,000 for the first nine months of 2010 when compared to the same period in 2009 due to a decrease in the gain on sale of loans. During the first two quarters of 2010, the Bank experienced less activity in loan originations for sale to the secondary markets when compared to the first two quarters of 2009 resulting in a decrease in gain on sale of loans during 2010. This decrease in loan originations for sale to the secondary market during the first two quarters of 2010 was partially offset by the increase in loan origination activity during the third quarter described above. Noninterest expense increased by $200,000 due, primarily, to increases in other noninterest expense and federal insurance premiums.

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
	09/30/10	12/31/09

Cash, including interest-bearing accounts:	$ 17,186	$ 41,013
09/30/10 $11,511; 12/31/09 $34,777
Certificates of deposit	498	175
Securities available for sale	13,949	10,698
Federal Home Loan Stock	2,193	2,728
Loans held for sale	3,809	1,931
Loans receivable, net	188,241	195,423
Accrued interest receivable	1,685	1,564
Prepaid Income Taxes	-	-
Premises and equipment	3,510	3,693
Mortgage servicing rights, net	1,468	1,373
Other assets	7,079	6,623
TOTAL ASSETS	$ 239,618	$ 265,221


LIABILITIES AND EQUITY

LIABILITIES:
Deposits	$ 206,990	$ 208,870
Borrowed funds	5,035	31,435
Advances from borrowers for taxes and insurance	3,277	2,233
Income taxes:
Deferred	107	157
Accrued interest payable	345	61
Accrued expenses and other liabilities	720	402
TOTAL LIABILITIES	216,474	243,158

STOCKHOLDER'S EQUITY:
Common stock, $.10 par value; 7,000.000 shares
authorized; 2,187,500 shares issued	$ 219	$ 219
Additional paid in capital	17,096	17,166
Retained earnings, substantially restricted	33,417	32,615
Other comprehensive income	270	131
Treasury stock, at cost, 1,400,705 shares at September
30, 2010; 1,411,260 shares at December 31, 2009	(27,858)	(28,068)
TOTAL EQUITY	23,144	22,063

TOTAL LIABILITIES AND EQUITY	$ 239,618	$ 265,221


WELLS FINANCIAL CORP. and SUBSIDIARY
Consolidated Statement of Income
(Dollars in thousands, except per share data)
(Unaudited)

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2010	2009	2010	2009

Interest and dividend income
Loans receivable:
Residential loans	$ 599	$ 653	$ 1,798	$ 2,074
Commercial Loans	569	687	1,743	1,895
Ag Real Estate Loans	713	835	2,203	2,615
Consumer and other loans	1,094	1,160	3,332	3,584
Investment securities and other interest-
bearings deposits	138	116	434	328
Total interest income	3,113	3,451	9,510	10,496
Interest expense
Deposits	725	992	2,383	3,051
Borrowed funds	159	387	647	1,289
Total interest expense	884	1,379	3,030	4,340
Net interest income	2,229	2,072	6,480	6,156
Provision for loan losses	125	75	505	835
Net interest income after
provision for loan losses	2,104	1,997	5,975	5,321
Noninterest income
Gain on sale of loans	600	357	1,066	2,083
Loan servicing fees	237	237	714	693
Insurance commissions	160	149	517	482
Fees and service charges	136	155	409	447
Other	100	78	358	214
Total noninterest income	1,233	976	3,064	3,919
Noninterest expense
Compensation and benefits	1,046	1,032	3,158	3,134
Occupancy and equipment	233	238	739	764
Federal insurance premiums	115	73	341	129
Data processing	174	180	551	564
Advertising	62	77	177	180
Amortization & Valuation adjustments for MSR's	72	111	238	372
Other	688	576	1,543	1,404
Total noninterest expense	2,390	2,287	6,747	6,547
Income before income taxes	947	686	2,292	2,693
Income tax expense	360	258	879	1,023
Net Income	$ 587	$ 428	$ 1,413	$ 1,670

Earnings per share
Basic earnings per share	$ 0.75	$ 0.55	$ 1.81	$ 2.15
Diluted earnings per share	$ 0.75	$ 0.55	$ 1.80	$ 2.15