Wells Financial Corp. Announces Third Quarter Results and Cash Dividend

• Press Release
• Source: Wells Financial Corp.
• On 12:39 pm EDT, Wednesday October 21, 2009

WELLS, Minn., Oct. 21 /PRNewswire-FirstCall/ --

                                   Selected Financial Data

                           Quarter ended               Nine months ended
                    September 30,  September 30,  September 30,  September 30,
                        2009           2008           2009           2008

    Net Income          $428,000         $8,000     $1,670,000       $965,000
    Basic earnings
     per share             $0.55          $0.01          $2.15          $1.00
    Diluted earnings
     per share             $0.55          $0.01          $2.15          $1.00
    Return on average
     equity (1)             7.9%              -          10.5%           5.1%
    Return on average
     assets (1)             0.7%              -           0.9%           0.4%
    Net interest
     rate spread            3.4%           3.4%           3.3%           3.2%
    Net interest
     rate margin            3.5%           3.4%           3.4%           3.3%
    Book value per
     share                $28.19         $26.18         $28.19         $26.18
        (1) annualized

Lonnie R. Trasamar, President of Wells Financial Corp. (OTC Bulletin Board: WEFP - News; the Company), the holding company of Wells Federal Bank (the Bank), announced earnings for the third quarter of 2009 of $428,000, up $420,000 when compared to the third quarter of 2008. During the third quarter of 2008 the Company realized a other-than-temporary pre-tax impairment of $485,000 (approximately $316,000 post-tax) on Federal Home Loan Mortgage Corp. preferred stock which resulted in reduced income during that period. Basic and diluted earnings per share for the third quarter of 2009 were $0.55 compared to basic and diluted earnings per share of $0.01 for the third quarter of 2008.

Net income for the nine months ended September 30, 2009 was $1,670,000, up $705,000 when compared to the same period in 2008. Basic and diluted earnings per share were $2.15 for the first nine months of 2009 compared to basic and diluted earnings per share of $1.00 for the first nine months of 2008.

"I am extremely pleased with the performance of the Company and Bank during 2009," stated Trasamar. "During the past twelve months the profitability of the Company has increased the book value of the Company's stock by over $2.00 per share," he added.

Net interest income increased by $112,000 and $412,000, or 5.7% and 7.2%, for the three and nine month periods ended September 30, 2009, respectively, when compared to the same periods in 2008. The provision for loan loss decreased by $145,000 for the third quarter 2009 when compared to the third quarter 2008 and increased by $482,000 for the nine months ended September 30, 2009 when compared to the same period in 2008. In accordance with the Bank's internal classification of assets policy, management evaluates the loan portfolio on a monthly 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. As of September 30, 2009 and December 31, 2008, the balance in the allowance for loan losses and the allowance for loan losses as a percentage of total loans were $1,806,000 and $1,096,000 and 0.90% and 0.50%, respectively.

When comparing the quarter and nine months ended September 30, 2009 to the same periods in 2008, noninterest income increased by $188,000 and $1,322,000, or 23.9% and 51.0%, respectively, due to an increase in the gain on sale of loans which resulted from increased residential loan refinance activity. Noninterest expense decreased by $221,000 and $190,000, or 8.8% and 2.8% for the quarter and nine months ended September 30, 2009, respectively, when compared to the same periods in 2008.

In the nine months ended September 30, 2009, total loans decreased by $19,497,000 due, primarily, to decreases in home equity line of credit loans and loans on agricultural real estate. Deposits increased by $14,907,000 during the first nine months of 2009. Partially offsetting the increase in deposits was a decrease of $13,250,000 in borrowed funds.

Cash Dividend Announcement

On October 20, 2009, the Company's Board of Directors declared a $0.26 per share cash dividend, payable on November 20, 2009 to shareholders of record on November 6, 2009.

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
                                                  09/30/09           12/31/08
                                                  --------           --------
    Cash, including interest-bearing
     accounts:
       09/30/09 $25,430;
        12/31/08 $2,689                            $31,317             $8,744
    Certificates of deposit                            175                700
    Securities available for sale                    8,750              8,420
    Federal Home Loan Stock                          3,660              3,302
    Loans held for sale                              3,201              2,974
    Loans receivable, net                          197,719            217,425
    Accrued interest receivable                      1,803              1,813
    Prepaid Income Taxes                                71                  -
    Premises and equipment                           3,762              3,961
    Mortgage servicing rights, net                   1,422              1,294
    Other assets                                     5,739              4,420
                                                     -----              -----
              TOTAL ASSETS                        $257,619           $253,053
                                                  ========           ========


           LIABILITIES AND EQUITY

    LIABILITIES:
        Deposits                                  $197,795           $182,888
        Borrowed funds                              33,556             46,806
        Advances from borrowers for taxes
         and insurance                               3,249              2,081
        Income taxes:
           Deferred                                     49                205
        Accrued interest payable                       423                 84
        Accrued expenses and other liabilities         688                376
                                                       ---                ---
              TOTAL LIABILITIES                    235,760            232,440
                                                   -------            -------

    STOCKHOLDERS' EQUITY:
        Common stock, $.10 par value;
         7,000.000 shares authorized;
         2,187,500 shares issued                      $219               $219
        Additional paid in capital                  17,156             17,143
        Retained earnings, substantially
         restricted                                 32,378             31,312
        Other comprehensive income                     174                 23
        Treasury stock, at cost, 1,411,260
         shares at September 30, 2009;
         1,412,060 shares at December 31, 2008     (28,068)           (28,084)
                                                    ------             ------
              TOTAL EQUITY                          21,859             20,613
                                                    ------             ------

                  TOTAL LIABILITIES AND EQUITY    $257,619           $253,053
                                                  ========           ========

                     WELLS FINANCIAL CORP. and SUBSIDIARY
                       Consolidated Statement of Income
                 (Dollars in thousands, except per share data)
                                 (Unaudited)
                                              Three Months     Nine Months
                                                  Ended           Ended
                                              September 30,   September 30,
                                              -------------   -------------
                                                2009   2008    2009    2008
                                                ----   ----    ----    ----
    Interest and dividend income
      Loans receivable:
        Residential loans                       $653   $654  $2,074  $2,135
        Commercial Loans                         687    683   1,895   2,079
        Ag Real Estate Loans                     835    835   2,615   2,599
        Consumer and other loans               1,160  1,261   3,584   3,815
      Investment securities and
       other interest-
        bearings deposits                        116    164     328     564
                                                 ---    ---     ---     ---
                   Total interest income       3,451  3,597  10,496  11,192
                                               -----  -----  ------  ------
    Interest expense
      Deposits                                   992  1,219   3,051   3,996
      Borrowed funds                             387    418   1,289   1,452
                                                 ---    ---   -----   -----
                   Total interest expense      1,379  1,637   4,340   5,448
                                               -----  -----   -----   -----
                   Net interest income         2,072  1,960   6,156   5,744
                                               -----  -----   -----   -----
    Provision for loan losses                     75    220     835     353
                                                  --    ---     ---     ---
                   Net interest income after
                     provision for loan losses 1,997  1,740   5,321   5,391
                                               -----  -----   -----   -----
    Noninterest income
      Gain on sale of loans                      357    136   2,083     681
      Loan servicing fees                        237    225     693     685
      Insurance commissions                      149    141     482     451
      Fees and service charges                   155    184     447     519
      Other                                       78    102     214     261
                                                  --    ---     ---     ---
                   Total noninterest income      976    788   3,919   2,597
                                                 ---    ---   -----   -----
    Noninterest expense
      Compensation and benefits                1,032  1,008   3,134   3,102
      Occupancy and equipment                    238    262     764     893
      Federal insurance premiums                  73      9     129      20
      Data processing                            180    179     564     596
      Advertising                                 77     63     180     176
      Amortization & Valuation
       adjustments for MSR's                     111    140     372     417
      Impairment of Securities
       Available for Sale                          -    485       -     485
      Other                                      576    362   1,404   1,048
                                                 ---    ---   -----   -----
                   Total noninterest expense   2,287  2,508   6,547   6,737
                                               -----  -----   -----   -----
                   Income before income taxes    686     20   2,693   1,251
    Income tax expense                           258     12   1,023     461
                                                 ---     --   -----     ---
                   Net Income                   $428     $8  $1,670    $790
                                                ====     ==  ======    ====
    Earnings per share
        Basic earnings per share               $0.55  $0.01   $2.15   $1.00
                                               =====  =====   =====   =====
        Diluted earnings per share             $0.55  $0.01   $2.15   $1.00
                                               =====  =====   =====   =====

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