Wells Financial Corp. Announces Third Quarter Results

WELLS, Minn., Oct. 18, 2013 /PRNewswire/ --                

Three Months Ended September 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 third quarter of 2013 of $470,000, down $82,000 or 14.9% when compared to the third quarter of 2012.  Basic and diluted earnings per share for the third quarter of 2013 were $0.61, down $0.10 or 14.1% when compared to the third quarter of 2012.

When comparing the third quarter of 2013 with the third quarter of 2012, the decrease in net income was due, primarily, to a decrease of $480,000, or 58.3%, in gain on sale of loans and a $86,000, or 4.3%, decrease in net interest income.  Partially offsetting these were decreases of $265,000, or 86.9%, in the provision for loan losses and $155,000, or 6.8%, in noninterest expense.

Nine Months Ended September 30, 2013

When comparing the nine months ended September, 30, 2013 to the same period in 2012, net income decreased by $393,000, or 26.6%.  Basic and diluted earnings per share were $1.41 a decrease of $0.47, or 25.0%.  The decrease in net income was due, primarily, to a $611,000, or 32.2%, decrease in the gain on sale of loans and to a decrease of $480,000, or 7.8%, in net interest income.  Partially offsetting these decreases were reductions of $240,000, or 36.6%, in the provision for loan loss and $239,000, or 3.4%, in noninterest expense.    

Three and Nine Months Ended September 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 $265,000, or 86.9% for the third quarter of 2013 when compared to the same period in 2012 and decreased by $240,000, or 36.6% during the nine month period.  As of September 30, 2013 and December 31, 2012, the balance in the allowance for loan losses and the allowance for loan losses as a percentage of total loans were $1,634,000 and $1,738,000 and 1.0% and 1.1%, respectively.

The decrease in the gain on sale of loans resulted from a decrease in the amount of loans originated for sale to the secondary market.  Beginning late in the second quarter the rates on residential mortgage loans increased resulting in fewer residential loans being refinanced.

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.