Wells Financial Corp. Announces Third Quarter Results

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Oct 22, 2014, 11:10 ET

WELLS, Minn., Oct. 22, 2014 /PRNewswire/ --


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

	Quarter Ended Sept. 30,		Nine Months Ended
	2014	2013	2014	2013

Net Income	$ 518	$ 470	$ 865	$ 1,085
Basic earnings per share	$ 0.68	$ 0.61	$ 1.14	$ 1.41
Diluted earnings per share	$ 0.68	$ 0.61	$ 1.14	$ 1.41
Return on average equity (1)	7.9%	7.2%	4.4%	5.2%
Return on average assets (1)	0.8%	0.8%	0.5%	0.6%
Net interest rate spread	3.5%	3.3%	3.5%	3.3%
Net interest rate margin	3.6%	3.3%	3.5%	3.3%
Book value per share	$ 35.37	$ 34.06	$ 35.37	$ 34.06
(1) Annualized

Three Months Ended September 30, 2014

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 2014 of $518,000, up $48,000 or 10.2% when compared to the third quarter of 2013. Basic and diluted earnings per share for the third quarter of 2014 were $0.68, up $0.07 or 11.4% when compared to the third quarter of 2013. The improvement in net income for the quarter is due, primarily, to a reduction in tax expense and an increase in net interest income.

When comparing the third quarter of 2014 with the third quarter of 2013, net interest income increased by $141,000, or 7.4% due to an increase in the net interest rate spread and an increase in the average balance of the loan portfolio. The provision for loan loss increased from $40,000 during the third quarter of 2013 to $100,000 during the third quarter of 2014. Please see discussion below for more information on the provision and allowance for loan loss. Noninterest income decreased by $95,000 due, primarily, to a decrease in the gain on sale of loans as fewer residential loans were originated and sold to the secondary market. Noninterest expense increased by $143,000, or 6.7% due, primarily, to an increase in compensation and benefits and data processing costs. Upon completion and filing of the Company's 2013 income tax return it was realized that the Company was over accrued for income tax purposes. This over accrual was reversed during the third quarter of 2014 resulting in a decrease in tax expense.

Nine Months Ended September 30, 2014

When comparing the nine months ended September, 30, 2014 net interest income increased by $282,000, or 4.9%, due to increases in the net interest rate spread and the average balance of the loan portfolio discussed above. Noninterest income decreased by $586,000, or 17.9%, due to a decrease in the gain on sale of loans. During 2014 changes in market conditions resulted in fewer loans being originated and sold to the secondary market than during 2013. Noninterest expense increased by $337,000, or 5.0%, due primarily, to increases in compensation and benefits (primarily increased health insurance costs) and data processing.

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 increased by $5,000 for the first nine months of 2014 when compared to the same period in 2013. As of September 30, 2014 and 2013, the balance in the allowance for loan losses and the allowance for loan losses as a percentage of total loans were $2,040,000 and $1,634,000 and 1.1% and 1.0%, 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
		09/30/14	12/31/13

	Cash, including interest-bearing accounts:	$ 13,511	$ 12,625
	09/30/14 $9,473; 12/31/13 $5,370
	Certificates of deposit	4,916	3,695
	Fed Funds Sold	1,500	5,000
	Securities available for sale	38,261	41,569
	Securities held to maturity	-	-
	Federal Home Loan Stock	2,086	2,021
	Loans held for sale	1,587	1,952
	Loans receivable, net	177,692	165,401
	Accrued interest receivable	1,056	804
	Prepaid Income Taxes	-	-
	Foreclosed real estate	4,197	4,340
	Premises and equipment	3,109	3,040
	Mortgage servicing rights, net	1,895	1,952
	Other assets	1,370	1,402
	TOTAL ASSETS	$ 251,180	$ 243,801


	LIABILITIES AND EQUITY

	LIABILITIES:
	Deposits	$ 220,284	$ 214,370
	Borrowed funds	-	-
	Advances from borrowers for taxes and insurance	3,575	2,614
	Accrued interest payable	137	6
	Accrued expenses and other liabilities	773	728
	TOTAL LIABILITIES	224,769	217,718

	STOCKHOLDER'S EQUITY:
	Common stock, $.10 par value; 7,000.000 shares
	authorized; 2,187,500 shares issued	$ 219	$ 219
	Additional paid in capital	17,111	17,086
	Retained earnings, substantially restricted	37,758	37,235
	Other comprehensive income	79	(264)
	Treasury stock, at cost, 1,440,813 shares at September
	30, 2014; 1,418,180 shares at December 31, 2013	(28,756)	(28,193)
	TOTAL EQUITY	26,411	26,083
	TOTAL LIABILITIES AND EQUITY	$ 251,180	$ 243,801

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,
	2014	2013	2014	2013
Interest and dividend income
Loans receivable:
Residential loans	$ 677	$ 654	$ 1,997	$ 1,908
Commercial Loans	336	297	959	920
Ag Real Estate Loans	353	289	1,029	941
Consumer and other loans	660	653	1,918	2,001
Investment securities and other interest-
bearings deposits	177	212	548	556
Total interest income	2,203	2,105	6,451	6,326
Interest expense
Deposits	148	191	462	618
Borrowed funds	-	-	-	1
Total interest expense	148	191	462	619
Net interest income	2,055	1,914	5,989	5,707
Provision for loan losses	100	40	420	415
Net interest income after
provision for loan losses	1,955	1,874	5,569	5,292
Noninterest income
Gain on sale of loans	214	344	564	1,289
Gain on sale of securities AFS	-	4	3	4
Loan servicing fees	168	227	600	693
Insurance commissions	195	181	487	542
Fees and service charges	129	114	346	334
Other	211	142	695	419
Total noninterest income	917	1,012	2,695	3,281
Noninterest expense
Compensation and benefits	1,093	991	3,460	3,143
Occupancy and equipment	172	204	573	665
Federal insurance premiums	83	45	190	107
Data processing	266	197	685	602
Advertising	71	68	181	184
Amortization of mortgage servicing rights	90	110	239	344
Other	487	504	1,748	1,694
Total noninterest expense	2,262	2,119	7,076	6,739
Income before income taxes	610	767	1,188	1,834
Income tax expense	92	297	323	749
Net Income	$ 518	$ 470	$ 865	$ 1,085
Earnings per share
Basic earnings per share	$ 0.68	$ 0.61	$ 1.14	$ 1.41
Diluted earnings per share	$ 0.68	$ 0.61	$ 1.14	$ 1.41