Wells Financial Corp. Announces Third Quarter Results of Operations

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Oct 24, 2016, 09:36 ET

WELLS, Minn., Oct. 24, 2016 /PRNewswire/ --

Selected Financial Data
(Dollars in thousands, except per share data)
(Unaudited)

	Quarter Ended September 30,		Nine Months Ended September 30,
	2016	2015	2016	2015

Net Income	$ 775	$ 3,420	$ 1,864	$ 4,463
Basic earnings per share	$ 0.99	$4.63	$ 2.37	$ 5.88
Diluted earnings per share	$ 0.99	$4.63	$ 2.37	$ 5.87
Return on average equity (1)	9.76%	46.4%	7.9%	21.3%
Return on average assets (1)	1.1%	5.1%	0.9%	2.3%
Net interest rate spread	3.7%	3.7%	3.7%	3.7%
Net interest rate margin	3.7%	3.8%	3.7%	3.7%
Book value per share	$ 41.06	$ 38.69	$ 41.06	$ 38.69
Tangible book value per share	$ 40.80	$ 38.34	$ 40.80	$ 38.34
(1) Annualized

Quarter Ended September 30, 2016

James D. Moll, President of Wells Financial Corp. (OTC BB:WEFP) (the Company), the holding company of Wells Federal Bank (the Bank), announced net income for the third quarter of 2016 of $775,000 and basic and diluted earnings per share of $0.99. This compares to net income of $3,420,000 and basic and diluted earnings per share of $4.63 for the third quarter of 2015. The decrease in earnings was due to the Company realizing a $2,848,000 bargain purchase gain during the third quarter of 2015 which resulted from the acquisition of St. James Federal Savings and Loan Association. When comparing net income on core earnings (excluding the bargain purchase gain realized in 2015), net income for the third quarter of 2016 increased by $203,000 when compared to the third quarter of 2015 due, primarily, to improvement in net interest income and gain on sale of loans.

Nine Months Ended September 30, 2016

Net income for the nine months ended September 30, 2016 was $1,864,000. Basic and diluted earnings per share were $2.37. This compares with net income for the same period in 2015 of $4,463,000. The decrease in earnings for 2016 was due to the bargain purchase gain described above. When comparing net income on core earnings (excluding the bargain purchase gain realized in 2015), net income for the first nine months of 2016 increased by $249,000 when compared to the same period in 2015. Net interest income increased by $463,000, or 6.9%. Noninterest income remained relatively constant if the bargain purchase gain realized in 2015 is eliminated. Noninterest expense increased by $135,000, or 1.9%, due, primarily, to an increase in compensation and benefits. During the third quarter of 2015 the Bank acquired St. James Federal Savings and Loan resulting in increased compensation and benefits during 2016.

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, 2016 and December 31, 2015, the balance in the allowance for loan losses and the allowance for loan losses as a percentage of total loans were $1,919,000 and $1,988,000 and 1.0% 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 Balance Sheets
(Dollars in thousands)
(Unaudited)

Assets
	09/30/16		12/31/15

Cash and cash equivalents, including interest-bearing accounts: 09/30/16 $306; 12/31/15 $6,078	$ 4,253		$ 12,059
Certificates of deposit, at cost	14,332		9,543
Fed Funds Sold	6,600		9,100
Securities available for sale	34,844		34,450
Federal Home Loan Stock, at cost	1,879		1,986
Loans held for sale	1,284		1,337
Loans receivable, net	196,440		197,595
Accrued interest receivable	1,168		1,020
Premises and equipment, net	3,750		3,368
Mortgage servicing rights, net	1,811		1,863
Foreclosed real estate	1,574		1,632
Core deposits intangible	202		285
Other assets	602		541
Total assets	$ 268,739		$ 274,779


Liabilities and Stockholders' Equity


Liabilities:
Deposits	$ 232,103		$ 239,950
Advances from borrowers for taxes and insurance	3,751		2,646
Accrued interest payable	78		12
Accrued expenses and other liabilities	853		871
Total liabilities	236,785		243,479

Stockholders' Equity:
Preferred stock, no par value; 500,000 share authorized; none
outstanding		-	-
Common stock, $.10 par value; 7,000.000 shares
authorized; 2,140,379 shares issued		$ 214	$ 217
Additional paid in capital		18,117	18,123
Retained earnings, substantially restricted		43,694	42,423
Other comprehensive income		234	66
Unallocated employee stock ownership plan shares		(97)	(146)
Treasury stock, at cost, 1,362,091 shares at September
30, 2016; 1,337,531 shares at December 31, 2015		(30,208)	(29,383)
Total stockholders' equity		31,954	31,300

Total liabilities and stockholders' equity		$ 268,739	$ 274,779

Wells Financial Corp. and Subsidiary
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015

Interest and dividend income:
Loans receivable	$ 2,293	$ 2,293	$ 6,782	$ 6,530
Investment securities and other interest-
bearings deposits	214	185	638	508
Total interest income	2,507	2,478	7,420	7,038
Interest expense:
Deposits	89	125	269	350
Total interest expense	89	125	269	350
Net interest income	2,418	2,353	7,151	6,688
Provision for loan losses	-	(70)	40	-
Net interest income after
provision for loan losses	2,418	2,423	7,111	6,688
Noninterest income:
Gain on sale of loans	422	302	842	826
Loan servicing fees	202	210	607	640
Insurance commissions	236	188	775	529
Fees and service charges	117	133	338	342
Bargain purchase gain	-	2,848	-	2,848
Other	118	204	418	650
Total noninterest income	1,095	3,865	2,980	5,835
Noninterest expenses:
Compensation and benefits	1,286	1,168	3,828	3,425
Occupancy	185	196	593	553
Data processing	270	268	751	698
Advertising	68	71	204	194
Amortization of mortgage servicing rights	109	98	264	275
Amortization of Intangible Assets	28	13	84	64
Other real estate owned	14	173	52	429
Other	376	533	1,424	1,427
Total noninterest expenses	2,336	2,520	7,200	7,065
Income before income taxes	1,177	3,768	5,458	5,458
Income tax expense	402	348	1,027	995
Net Income	$ 775	$ 3,420	$ 1,864	$ 4,463

Earnings per share
Basic earnings per share	$ 0.99	$ 4.63	$ 2.37	$ 5.88
Diluted earnings per share	$ 0.99	$ 4.63	$ 2.37	$ 5.87