Wells Financial Corp. Announces Third Quarter Results of Operations

WELLS, Minn., Nov. 2, 2015 /PRNewswire/ --

Quarter Ended September 30, 2015

OTCQB-WEFP -- James D. Moll, President of Wells Financial Corp.(the Company), the holding company of Wells Federal Bank (the Bank), announced net income for the third quarter of 2015 of $3,420,000, up $2,902,000 or 560.2%, when compared to the third quarter of 2014.  Basic and diluted earnings per share for the third quarter of 2015 were $4.63, up $3.95 or 581.0%, when compared to the third quarter of 2014.  The improvement in net income for the quarter is due, primarily, to the bargain purchase gain of $2,848,000 that resulted from the merger with St. James Federal Savings and Loan Association consummated on July 16, 2015, discussed below.  Also contributing to the improved earnings were an increase in net interest income of $298,000 and a decrease in the provision for loan losses of $170,000. 

The increase in net interest income reflects the increase in interest-earning assets resulting from the St. James acquisition and was aided by an increase in the net interest rate spread which improved to 3.74% in the current quarter compared to 3.54% in the prior year.  The yield on interest-bearing assets increased to 3.95% from 3.81% while the average cost of interest-bearing liabilities decreased to 0.21% from 0.27% in the third quarter of 2014.  The average volume of interest-bearing assets increased to $251.3 million from $231.2 million in the prior-year period.  While the average volume of interest-bearing liabilities increased to $233.9 million from $216.0 million between periods, the decrease in average cost resulted in lower interest expense during the current quarter.  The decrease in the provision for loan losses to a net credit of $70,000 resulted from management's analysis of credit quality. 

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 losses through the provision for loan losses.  As of September 30, 2015 and December 31, 2014, the balance in the allowance for loan losses and the allowance for loan losses as a percentage of total loans was $2.1 million and $2.2 million and 1.1% and 1.2%, respectively.

Nine Months Ended September 30, 2015

Net income increased by $3,598,000 or 416.0% for the nine months ended September 30, 2015, when compared to the same period in 2014, primarily due to the bargain purchase gain of $2,848,000 that resulted from the conversion/merger with St. James Federal Savings and Loan Association.  Diluted earnings per share increased by $4.73 for the nine months ended September 30, 2015, when compared to the nine months ended September 30, 2014.  Net interest income increased by $699,000, or 11.7%, in the nine months ended September 30, 2015, when compared to the same period in 2014. When comparing the nine months ended September 30, 2015 to the same period in 2014, the provision for loan loss decreased by $420,000 and noninterest income increased by $3,140,000 which included the aforementioned bargain purchase gain.  Increases in net interest income and noninterest income and the decrease in provision for loan loss were the primary reasons for the increase in earnings.

Acquisition Completed in Third Quarter

On July 16, 2015 the Company announced that it had completed the acquisition of St. James Federal Savings and Loan Association ("St. James") in a conversion merger transaction and the related stock offering of the Company, effective July 16, 2015.  As a result of the conversion merger, St. James converted from a federally-chartered mutual savings association to a federally-chartered stock savings association and immediately merged with and into Wells Federal Bank, the surviving entity in the merger conversion.  The Company sold 78,736 shares of common stock at a price of $27.36 per share to depositor and borrower members of St. James, to the Employee Stock Ownership Plan and stockholders of Wells, and to members of the general public in a concurrent subscription offering and community offering.  Gross offering proceeds totaled approximately $2.15 million.  As a result of the stock offering, the Company had 814,758 shares of common stock issued and outstanding as of the close of business on July 16, 2015.  St. James' sole office, located in St. James, Minnesota, has become a branch office of Wells Federal Bank.

About Wells Financial Corp.

Wells Financial Corp. is the bank holding company for Wells Federal Bank, a Minnesota-chartered, FDIC-insured bank.  Wells Federal Bank, originally chartered in 1934, operates from nine full-service offices in Faribault, Blue Earth, Nicollet, Freeborn, Watonwan and Steele Counties, Minnesota.

Forward-looking Statements

Statements in this press release that are not strictly historical may be "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1996, 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.