Wells Financial Corp. Announces Third Quarter Results

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Oct 26, 2011, 03:10 ET

WELLS, Minn., Oct. 26, 2011 /PRNewswire/ --

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

Net Income	$ 427	$ 587	$ 1,099	$ 1,413
Basic earnings per share	$ 0.54	$ 0.75	$ 1.40	$ 1.81
Diluted earnings per share	$ 0.54	$ 0.75	$ 1.40	$ 1.80
Return on average equity (1)	7.0%	10.3%	6.1%	8.4%
Return on average assets (1)	0.7%	1.0%	0.6%	0.7%
Net interest rate spread	3.9%	3.9%	3.9%	3.6%
Net interest rate margin	4.0%	3.9%	4.0%	3.7%
Book value per share	$ 31.21	$ 29.42	$ 31.21	$ 29.42
(1) Annualized

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 third quarter of 2011 of $427,000, down $160,000 or 27.3%, when compared to the third quarter of 2010. Basic and diluted earnings per share for the third quarter of 2011 were $0.54, down $0.21, or 28.0% when compared to the same period in 2010.

Net income for the nine months ended September 30, 2011 was $1,099,000, down $314,000 or 22.2% when compared to the same period in 2010. Basic and diluted earnings per share were $1.40, down $0.41 and $0.40, or 22.7% and 22.1%, respectively, when compared to the same period in 2010.

When comparing the third quarter of 2011 with the third quarter of 2010, the decrease in net income resulted, primarily, from a $255,000 decrease in gain on sale of loans originated for sale and a $251,000 increase in the provision for loan losses. During the third quarter of 2011 fewer loans were originated for sale to the secondary market resulting in the decrease in gain on sale of loans. For more information regarding the increase in the provision for loan losses please see the allowance for loan loss discussion below.

When comparing the nine months ended September 30, 2011 with the same period in 2010 the decrease in net income was due, primarily, to an increase of $377,000 in the provision for loan loss. Please see the discussion below for information on the allowance and provision for loan loss.

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 $251,000 for the third quarter of 2011 when compared to the same period in 2010 and increased by $377,000 for the nine months ended September 30, 2011 when compared to the same period in 2010. As of September 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 $2,405,000 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
	09/30/11	12/31/10

Cash, including interest-bearing accounts:	$ 14,671	$ 8,244
09/30/11 $9,302; 12/31/10 $2,468
Certificates of deposit	3,735	-
Fed Funds Sold	14,026	12,542
Securities available for sale	19,920	14,624
Securities held to maturity	-	-
Federal Home Loan Stock	2,360	1,859
Loans held for sale	2,928	2,217
Loans receivable, net	170,981	185,418
Accrued interest receivable	1,149	1,366
Prepaid Income Taxes	-	-
Foreclosed real estate	5,091	5,628
Premises and equipment	3,369	3,439
Mortgage servicing rights, net	1,734	1,687
Other assets	1,068	1,383
TOTAL ASSETS	$ 241,032	$ 238,407


LIABILITIES AND EQUITY

LIABILITIES:
Deposits	$ 210,914	$ 210,819
Borrowed funds	1,300	1,785
Advances from borrowers for taxes and insurance	3,358	2,300
Income taxes:
Deferred	(43)	-
Accrued interest payable	208	53
Accrued expenses and other liabilities	736	223
TOTAL LIABILITIES	216,473	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	17,117	17,104
Retained earnings, substantially restricted	34,713	33,615
Other comprehensive income	368	147
Treasury stock, at cost, 1,400,705 shares at September
30, 2011; 1,400,705 shares at December 31, 2010	(27,858)	(27,858)
TOTAL EQUITY	24,559	23,227

TOTAL LIABILITIES AND EQUITY	$ 241,032	$ 238,407

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,
	2011	2010	2011	2010

Interest and dividend income
Loans receivable:
Residential loans	$ 590	$ 599	$ 1,762	$ 1,798
Commercial Loans	512	569	1,571	1,743
Ag Real Estate Loans	474	713	1,577	2,203
Consumer and other loans	952	1,094	2,894	3,332
Investment securities and other interest-
bearings deposits	149	138	422	434
Total interest income	2,677	3,113	8,226	9,510
Interest expense
Deposits	442	725	1,510	2,383
Borrowed funds	19	159	60	647
Total interest expense	461	884	1,570	3,030
Net interest income	2,216	2,229	6,656	6,480
Provision for loan losses	376	125	882	505
Net interest income after
provision for loan losses	1,840	2,104	5,774	5,975
Noninterest income
Gain on sale of loans	345	600	841	1,066
Loan servicing fees	237	237	706	714
Insurance commissions	185	160	486	517
Fees and service charges	132	136	399	409
Other	139	100	385	358
Total noninterest income	1,038	1,233	2,817	3,064
Noninterest expense
Compensation and benefits	1,084	1,046	3,212	3,158
Occupancy and equipment	195	233	633	739
Federal insurance premiums	15	115	260	341
Data processing	170	174	545	551
Advertising	68	62	185	177
Amortization & Valuation adjustments for MSR's	80	72	229	238
Impairment of Securities Available for Sale	-	-	-	-
Other	582	688	1,733	1,543
Total noninterest expense	2,194	2,390	6,797	6,747
Income before income taxes	684	947	1,794	2,292
Income tax expense	257	360	695	879
Net Income	$ 427	$ 587	$ 1,099	$ 1,413

Earnings per share
Basic earnings per share	$ 0.54	$ 0.75	$ 1.40	$ 1.81
Diluted earnings per share	$ 0.54	$ 0.75	$ 1.40	$ 1.80