-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OfYNBEj6B4XLDOsQse+it8zAu1QxADeZbZZ9xSVIW2IWDP2F/iZ+mohMNhP/O9Xm 5LXR8JUFvXRieFm3jsvovA== 0000946275-00-000212.txt : 20000508 0000946275-00-000212.hdr.sgml : 20000508 ACCESSION NUMBER: 0000946275-00-000212 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WELLS FINANCIAL CORP CENTRAL INDEX KEY: 0000934739 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 411799504 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-25342 FILM NUMBER: 619901 BUSINESS ADDRESS: STREET 1: 53 FIRST ST SW STREET 2: P.O. BOX 310 CITY: WELLS STATE: MN ZIP: 56097 BUSINESS PHONE: 5075533151 MAIL ADDRESS: STREET 1: 53 1ST ST SW STREET 2: PO BOX 310 CITY: WELLS STATE: MN ZIP: 56097 10QSB 1 FORM 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 ---------------------------------------- or |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------------- --------------- Commission File Number 0-25342 ------- Wells Financial Corp. ------------------------------------- (Exact name of Registrant as Specified in Its Charter) Minnesota 41-1799504 - --------------------------------------------- ------------------- (State or Other Jurisdiction of Incorporation (I.R.S. Employer or Organization) Identification No.) 53 1st Street S.W., P.O. Box 310, Wells MN 56097 ------------------------------------------------ (Address of principal executive offices) (507) 553-3151 ------------------------------------------------ (Registrant's Telephone Number, including Area Code) N/A ------------------------------------------------ Former name, former address and former fiscal year, if changed since last report) Indicate by check by |X| whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |X| Yes |_| No The number of shares outstanding of each of the issuer's classes of common stock as of May 1, 2000: Class Outstanding ----- ----------- $.10 par value per share, common stock 1,331,057 Shares - -------------------------------------------------------------------------------- WELLS FINANCIAL CORP. and SUBSIDIARY [OBJECT OMITTED] FORM 10-QSB INDEX PART I - FINANCIAL INFORMATION: Page ------------------------------- ---- Item 1. Consolidated Financial Statements (Unaudited) Consolidated Statements of Financial Condition 1 Consolidated Statements of Income 2 Consolidated Statements of Comprehensive Income 3 Consolidated Statement of Stockholders' Equity 4 Consolidated Statements of Cash Flows 5-6 Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-13 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings 14 Item 2. Changes in Securities 14 Item 3. Defaults upon Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures - -------------------------------------------------------------------------------- WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Financial Condition March 31, 2000 and December 31, 1999 (Dollars in Thousands) (Unaudited)
ASSETS 2000 1999 --------------------- -------------------------- Cash, including interest-bearing accounts March 31, 2000 $3,194; December 31, 1999 $2,320 $ 4,326 $ 4,200 Certificates of deposit 200 400 Securities available for sale, at fair value 3,712 2,551 Securities held to maturity (approximate market value $14,179 at March 31, 2000 and $15,090 at December 31, 1999) 15,521 15,559 Loans held for sale 1,327 521 Loans receivable, net 176,177 172,713 Accrued interest receivable 1,489 1,350 Income taxes receivable - 16 Foreclosed real estate 48 55 Premises and equipment 1,774 1,558 Other assets 912 913 --------------------- -------------------------- TOTAL ASSETS $ 205,486 $ 199,836 ===================== ========================== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits $ 159,231 $ 156,984 Borrowed funds 20,000 17,000 Advances from borrowers for taxes and insurance 2,039 1,262 Income taxes: Current 215 - Deferred 717 763 Accrued interest payable 163 116 Accrued expenses and other liabilities 67 254 --------------------- -------------------------- TOTAL LIABILITIES 182,432 176,379 --------------------- -------------------------- STOCKHOLDERS' EQUITY: Preferred stock, no par value; 500,000 shares Authorized; none outstanding - - Common stock, $.10 par value; authorized 7,000,000 Shares; issued 2,187,500 shares 219 219 Additional paid in capital 16,952 16,939 Retained earnings, substantially restricted 18,393 18,189 Accumulated other comprehensive income 614 655 Unearned ESOP shares (399) (435) Unearned compensation restricted stock awards (25) (27) Treasury stock, at cost (12,700) (12,083) --------------------- -------------------------- TOTAL STOCKHOLDERS' EQUITY 23,054 23,457 --------------------- -------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 205,486 $ 199,836 ===================== ==========================
(See Notes to Consolidated Financial Statements) 1 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Income Three Months Ended March 31, 2000 and 1999 (Dollars in thousands, except per share data) (Unaudited)
2000 1999 --------------- ------------------- Interest and dividend income Loans receivable: First mortgage loans $ 2,704 $ 2,461 Consumer and other loans 738 653 Investment securities and other interest bearing deposits 279 395 --------------- ------------------- Total interest income 3,721 3,509 --------------- ------------------- Interest Expense Deposits 1,872 1,831 Borrowed funds 228 67 --------------- ------------------- Total interest expense 2,100 1,898 --------------- ------------------- Net interest income 1,621 1,611 Provision for loan losses - 23 --------------- ------------------- Net interest income after provision for loan losses 1,621 1,588 --------------- ------------------- Noninterest income Gain on sale of loans originated for sale 14 72 Loan origination and commitment fees 17 155 Loan servicing fees 100 93 Insurance commissions 75 73 Fees and service charges 98 112 Other 7 5 --------------- ------------------- Total noninterest income 311 510 --------------- ------------------- Noninterest expense Compensation and benefits 598 591 Occupancy and equipment 212 189 SAIF deposit insurance premium 8 24 Data processing 93 96 Advertising 53 48 Other 271 260 --------------- ------------------- Total noninterest expense 1,235 1,208 --------------- ------------------- Income before taxes 697 890 Income tax expense 287 349 --------------- ------------------- Net Income $ 410 $ 541 =============== =================== Earnings per share Basic earnings per share $ 0.30 $ 0.34 =============== =================== Diluted earnings per share $ 0.30 $ 0.34 =============== =================== Weighted average number of common shares outstanding: Basic 1,349,422 1,573,009 =============== =================== Diluted 1,358,110 1,610,508 =============== ===================
(See Notes to Consolidated Financial Statements) 2 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Comprehensive Income Three Months Ended March 31, 2000 and 1999 (Dollars in Thousands) (Unaudited)
2000 1999 ------------- ------------- Net Income $ 410 $ 541 Other comprehensive income: Unrealized depreciation on securities available for sale (69) (171) Income tax benefit 28 70 ------------- ------------- Comprehensive income $ 369 $ 440 ============= =============
(See Notes to Consolidated Financial Statements) 3 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statement of Stockholders' Equity Three Months Ended March 31, 2000 (Dollars in Thousands) (Unaudited)
Unearned Employee Unearned Accumulated Stock Compensation Additional Other Ownership Restricted Total Common Paid-In Retained Comprehensive Plan Stock Treasury Stockholders' Stock Capital Earnings Income shares Awards Stock Equity - --------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1999 $ 219 $ 16,939 $ 18,189 $ 655 $ (435) $ (27) $ (12,083) $23,457 Net income for the three months ended March 31, 2000 - - 410 - - - - 410 Net change in unrealized appreciation on securities available for sale, net of related deferred taxes - - - (41) - - - (41) Treasury stock purchases (617) (617) Amortization of unearned compensation - - - - 2 - - 2 Dividends on common stock - - (206) - - - - (206) Allocated employee stock ownership plan shares - 13 - - 36 - - 49 ------------------------------------------------------------------------------------------------- Balance March 31, 2000 $ 219 $ 16,952 $ 18,393 $ 614 $ (399) $ (25) $ (12,700) $23,054 =================================================================================================
(See Notes to Consolidated Financial Statements) 4 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Cash Flow Three Months Ended March 31, 2000 and 1999 (Dollars in Thousands) (Unaudited)
2000 1999 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 410 $ 541 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses - 23 (Gain) loss on the sale of loans originated for sale (14) (72) Compensation on allocation of ESOP shares 49 66 Amortization of restricted stock awards 2 11 Loss on the sale of foreclosed real estate 1 - Write-down of foreclosed real estate 3 - Deferred income taxes (18) 31 Depreciation and amortization on premises and equipment 66 62 Amortization of deferred loan origination fees (11) (51) Amortization of excess servicing fees, mortgage servicing rights and bond premiums and discounts 34 49 Loans originated for sale (3,432) (15,763) Proceeds from the sale of loans originated for sale 2,625 18,351 Changes in assets and liabilities: Accrued interest receivable (139) (238) Other assets (28) (37) Income taxes payable, current 215 78 Accrued expenses and other liabilities (115) 94 -------- -------- Net cash provided by (used in) operating activities (352) 3,145 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in loans $ (3,458) $ 4,038 Purchase of certificates of deposit (100) (300) Purchase of securities held to maturity - (7,147) Purchase of securities available for sale (1,230) - Proceeds from the maturities of certificates of deposit 300 300 Proceeds from the maturities of securities held to maturity 39 1,079 Proceeds from the sale and redemption of foreclosed real estate 8 - Purchase of premises and equipment (282) (74) -------- -------- Net cash provided by (used in) investment activities (4,723) (2,104) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits $ 2,247 $ 1,558 Net increase in advances from borrowers for taxes and insurance 777 760 Proceeds from borrowed funds 6,300 - Repayments on borrowed funds (3,300) - Purchase of treasury stock (617) (803) Dividends on common stock (206) (237) -------- -------- Net cash provided by financing activities 5,201 1,278 -------- -------- Net increase in cash and cash equivalents 126 2,319 CASH: Beginning 4,200 19,446 Ending $ 4,326 $ 21,765 ======== ========
(See Notes to Consolidated Financial Statements) 5 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Cash Flow (continued) Three Months Ended March 31, 2000 and 1999 (Dollars in Thousands) (Unaudited
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments for: Interest on deposits $ 1,809 $ 1,761 Interest on borrowed funds 225 67 Income taxes 74 240 ======= ======= SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Transfers from loans to foreclosed real estate $ 5 $ 31 Allocation of ESOP shares to participants 36 39 Net change in unrealized appreciation on securities available for sale (41) (101) ======= =======
(See Notes to Consolidated Financial Statements) 6 WELLS FINANCIAL CORP. and SUBSIDIARY Notes to Consolidated Financial Statements (Dollars in thousands) (Unaudited) NOTE 1. BASIS OF PRESENTATION The foregoing consolidated financial statements are unaudited. However, in the opinion of management, all adjustments (which consist of normal recurring accruals) necessary for a fair presentation of the consolidated financial statements have been included. Results for any interim period are not necessarily indicative of results to be expected for the year. The interim consolidated financial statements include the accounts of Wells Financial Corp. (Company), its subsidiary, Wells Federal Bank (Bank), and the Bank's subsidiaries, Greater Minnesota Mortgage, Inc. and Wells Insurance Agency, Inc. NOTE 2. REGULATORY CAPITAL The following table presents the Bank's regulatory capital amounts and percents at March 31, 2000 and December 31, 1999.
March 31, 2000 December 31, 1999 Amount Percent Amount Percent ---------------------------------------------------------------------------------------------------------- (Dollars in Thousands) Tier 1 (Core) Capital: Required $ 8,000 4.00% $ 7,754 4.00% Actual 17,126 8.56% 16,865 8.70% Excess 9,126 4.56% 9,111 4.70% Risk-based Capital Required 10,464 8.00% 10,154 8.00% Actual 17,971 13.74% 17,722 13.96% Excess 7,507 5.74% 7,568 5.96%
7 WELLS FINANCIAL CORP. and SUBSIDIARY Notes to consolidated Financial Statements Continued (Unaudited) NOTE 3. EARNINGS PER SHARE Earnings per share are calculated and presented in accordance with FASB Statement No. 128, Earnings per Share. The Statement requires the presentation of earnings per share by all entities that have common stock or potential common stock, such as options, warrants and convertible securities, outstanding that trade in a public market. Those entities that have only common stock outstanding are required to present basic earnings per-share amounts. All other entities are required to present basic and diluted earnings per-share amounts. Diluted per-share amounts assume the conversion, exercise or issuance of all potential common stock instruments unless the effect is to reduce a loss or increase the income per common share from continuing operations. The weighted average number of shares of common stock used to compute the basic earnings per share were 1,349,422 and 1,573,009 for the three month periods ended March 31, 2000 and 1999, respectively. The weighted average number of shares of common stock were increased by 8,688 and 37,499 for the three month periods ended March 31, 2000 and 1999, respectively, for the assumed exercise of the employee stock options in computing the diluted per-share data. NOTE 4. SELECTED FINANCIAL DATA
For the three months ended March 31, 2000 1999 ----------------------------------- Return on assets (ratio of net income to average total assets) (1) 0.81% 1.12% Return on equity (ratio of net income to average equity) (1) 7.06% 8.40% Equity to assets ratio (ratio of average equity to average total assets) 11.53% 13.34% Net interest margin (ratio of net interest income to average interest earning assets) (1) 3.31% 3.42% (1) Net income and net interest income have been annualized.
8 WELLS FINANCIAL CORP. and SUBSIDIARIES Management's Discussion and Analysis of Financial Condition And Results of Operations General: Wells Financial Corp. (Company) was incorporated under the laws of the State of Minnesota in December 1994 for the purpose of owning all of the outstanding stock of Wells Federal Bank, fsb (Bank) issued in the mutual to stock conversion of the Bank. On April 11, 1995, the conversion was completed and $8.4 million of the net proceeds from the sale of the stock were provided to the Bank in exchange for all of the Bank's stock. The consolidated financial statements included herein are for the Company, the Bank and the Bank's wholly owned subsidiaries, Greater Minnesota Mortgage, Inc. and Wells Insurance Agency, Inc. The income of the Company is derived primarily from the operations of the Bank and the Bank's subsidiaries, and to a lesser degree from interest income from securities and certificates of deposit with other banks. The Bank's net income is primarily dependent upon the difference (or spread) between the average yield earned on loans, investments and mortgage-backed securities and the average rate paid on deposits and borrowings, as well as the relative amounts of such assets and liabilities. The interest rate spread is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. Net income is also affected by, among other things, provision for loan losses, gains on the sale of interest earning assets, service charges, servicing fees, subsidiary activities, operating expenses, and income taxes. The Bank has eight full service offices located in Faribault, Martin, Blue Earth, Nicollet, Freeborn and Steele Counties, Minnesota. Comparison of Financial Condition at March 31, 2000 and December 31, 1999: Total assets increased by $5,650,000, from $199,836,000 at December 31, 1999 to $205,486,000 at March 31, 2000 primarily due to an increase of $4,270,000 in the loan portfolio and a $1,161,000 increase in securities available for sale. The increase in the loan portfolio was primarily due to increases in loans secured by single family dwellings, loans secured by farm real estate and home equity loans. 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 losses. Management's periodic evaluation of the adequacy of the allowance is based on the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral, and current economic conditions. As of March 31, 2000 and December 31, 1999 the balances in the allowance for loan losses and the allowance for loan losses as a percentage of total loans were $845,000 and $857,000 and 0.48% and 0.49%, respectively. 9 Activity in the Company's allowance for loan losses for the three months ended March 31, 2000 and 1999 is summarized as follows: 2000 1999 ------------------------------ Balance on January 1, $ 856,692 $ 852,557 Provision for loan losses -- 22,500 Charge-offs (15,578) (8,970) Recoveries 4,187 4,992 --------- --------- Balance on March 31, $ 845,301 $ 871,079 ========= ========= Loans on which the accrual of interest has been discontinued amounted to $224,000 and $111,000 at March 31, 2000 and December 31, 1999, respectively. The effect of nonaccrual loans was not significant to the results of operations. The Company includes all loans considered impaired under FASB Statement No. 114 in nonaccrual loans. The amount of impaired loans was not material at March 31, 2000 and December 31, 1999. Liabilities increased by $6,053,000, from $176,379,000 at December 31, 1999 to $182,432,000 at March 31, 2000. This increase is primarily due to a $3,000,000 increase in borrowed funds and a $2,247,000 increase in deposits, which were used to fund loan growth and to purchase investment securities. Equity decreased by $403,000 from $23,457,000 at December 31, 1999 to $23,054,000 at March 31, 2000. The decrease in equity was primarily the result of net income for the first quarter of 2000 of $410,000 being offset by the payment of $206,000 in cash dividends and by the repurchase of 51,000 shares of treasury stock at a total cost of $617,000. On April 19, 2000, the Board of Directors of the Company declared a $0.15 per share cash dividend to be paid on May 12, 2000 to the stockholders of record on May 1, 2000. Subject to the Company's earnings and capital, it is the current intention of the Company to continue to pay regular quarterly cash dividends. Comparison of Operating Results for the Three Month Periods Ended March 31, 2000 and March 31, 1999. Net Income. Net income for the first quarter of 2000 decreased by $131,000, or 24.2%, from $541,000 for the first quarter of 1999 to $410,000 for the first quarter of 2000. The decrease in net income was primarily due to a decrease of $138,000 in loan origination and commitment fees for the quarter ended March 31, 2000 when compared to the same quarter in 1999. 10 Interest Income. Interest income increased by $212,000, or 6.0%, for the three months ended March 31, 2000 when compared to the same period in 1999 due to a $328,000 increase in interest income from the Company's loan portfolio. During the last half of 1999 and the first quarter of 2000 the Company's loan portfolio increased due, primarily, to an increase in real estate loans secured by farmland, loans secured by residential real estate and home equity loans. This resulted in an increase in the average balance of the loan portfolio during the first quarter of 2000 when compared to the same period in 1999. This is the primary reason for the increase in interest income from the Company's loan portfolio. To a lesser degree, an increase in the interest rates on the Company's loan portfolio also contributed to the increase in interest income. Partially offsetting the increase in interest income from the loan portfolio was a $116,000 decrease in interest income from investment securities and interest bearing deposits. The decrease in interest income from investment securities and interest bearing deposits resulted from the use of cash that was held in interest bearing deposits during the first quarter of 1999 to fund loan growth during the second half of 1999. Interest Expense. Total interest expense increased by $202,000, or 10.6%, for the three month period ended March 31, 2000 when compared to the same period in 1999 primarily due to a increase in interest expense on borrowed funds. The increase in interest expense on borrowed funds was primarily due to an increase in the average amount of borrowed funds during the three-month period ended March 31, 2000 when compared to the same period in 1999. Net Interest income. Net interest income increased by $10,000, or 0.6%, for the three period ended March 31, 2000 when compared to the same period in 1999 due to the changes in interest income and interest expense described above. Provision for loan losses. The provision for loan losses decreased by $23,000 for the three-month period ended March 31, 2000 when compared to the same period in 1999. Management evaluates the quality of the loan portfolio on a quarterly basis to identify and determine the adequacy of the allowance for loan loss. Based on these continuing reviews, management believes no provision for loan losses are necessary at this time. While the Company maintains its allowance for loan losses at a level that is considered to be adequate to provide for potential losses, there can be no assurance that further additions will not be made to the loss allowance and that losses will not exceed estimated amounts. Noninterest Income. Noninterest income decreased by $199,000, or 39%, for the three month period ended March 31, 2000 when compared to the same period in 1999. The decrease in noninterest income was primarily due to decreases in loan origination and commitment fees of $138,000 for the three month period ended March 31, 2000 when compared to the same period in 1999 which resulted from decreased refinance activity during the first quarter of 2000 when compared to the first quarter of 1999. Noninterest Expense. Noninterest expense remained relatively constant for the three-month period ended March 31, 2000 when compared to the same period in 1999. Income Tax Expense. Income tax expense decreased by $62,000 for the three-month period ended March 31, 2000 when compared to the same period in 1999. This decrease was the result of a decrease in income before income taxes for the three period ended March 31, 2000 when compared to the same period in 1999. 11 Non-performing Assets. The following table sets forth the amounts and categories of non-performing assets at March 31, 2000 and December 31, 1999. March 31, 2000 December 31, 1999 -------------- ----------------- (Dollars in Thousands) Non-accruing loans One to four family real estate $ 23 - Agricultural real estate 114 32 Consumer 87 79 ---- ---- Total $224 $111 ---- ---- Accruing loans which are contractually Past due 90 days or more One to four family real estate $ 33 $ 10 Commercial real estate 195 - ---- ---- Total $228 $ 10 ---- ---- Total non-accrual and accruing loans past due 90 days or more $452 $121 ==== ==== Repossessed and non-performing assets Repossessed property $ 48 $ 55 Other non-performing assets - - ---- ---- Total repossessed and non-performing assets $ 48 $ 55 ---- ---- Total non-performing assets $500 $176 ==== ==== Total non-accrual and accruing loans past due 90 days or more to net loans 0.25% 0.07% ==== ==== Total non-accrual and accruing loans past due 90 days or more to total assets 0.22% 0.06% ==== ==== Total nonperforming assets to total assets 0.24% 0.09% ==== ==== Financial Standards Board Statement No. 114, Accounting by Creditors for Impairment of a Loan, and Statement No. 118, Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures, require that impaired loans within the scope of these Statements be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate; or as a practical expedient, either at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. At March 31, 2000 and December 31, 1999, the value of loans that would be classified as impaired under these Statements is considered to be immaterial. 12 Liquidity and Capital Resources: The Bank is required under applicable federal regulations to maintain specified levels of "liquid" investments in qualifying types of US Government, federal agency and other investments having maturities of five years or less. Current OTS regulations require that a savings association maintain liquid assets of not less than 4% of its average daily balance of net withdrawable deposit accounts and borrowings payable in one year or less. At March 31, 2000, the Bank's liquidity, as measured for regulatory purposes, was 8.47%. The Bank adjusts liquidity as appropriate to meet its asset/liability objectives. The Bank's primary sources of funds are deposits, borrowed funds, amortization and prepayment of loans, maturities of investment securities and funds provided from operations. While scheduled loan repayments are a relatively predictable source of funds, deposit flows and loan prepayments are significantly influenced by general interest rates, economic conditions and competition. If needed, the Bank's source of funds can be supplemented by wholesale funds obtained through additional advances from the Federal Home Loan Bank system. The Bank invests excess funds in overnight deposits, which not only serve as liquidity, but also earn interest income until funds are needed to meet required loan funding. In 1996 and 1998, the Company approved stock buy back programs in which up to 535,340 shares of the common stock of the Company could be acquired. The Company bought 307,200 shares of its common stock during 1998, which completed these approved buy back programs. During 1999, the Company approved stock buy back programs in which up to 350,266 shares of the common stock of the Company can be acquired. The Company bought 223,003 shares of its common stock during 1999 and 51,000 shares of its common stock during the first quarter of 2000. The Company paid a cash dividend of $0.15 per share on February 11, 2000. The Company declared a cash dividend of $0.15 per share payable on May 12, 2000 to stockholders of record on May 1, 2000. Subject to the Company's earnings and capital, it is the current intention of the Company to continue to pay regular quarterly cash dividends. Savings institutions insured by the Federal Deposit Insurance Corporation are required by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) to meet prescribed regulatory capital requirements. If a requirement is not met, regulatory authorities may take legal or administrative actions, including restrictions on growth or operations or, in extreme cases, seizure. Institutions not in compliance may apply for an exemption from the requirements and submit a recapitalization plan. At March 31, 2000, the Bank met all current capital requirements. The Office of Thrift Supervision (OTS) has adopted a core capital requirement for savings institutions comparable to the requirement for national banks. The OTS core capital requirement for the Bank is 4% of adjusted assets for thrifts that receive the highest supervisory rating for safety and soundness. The Bank had core capital of 8.56% at March 31, 2000. Pursuant to FDICIA, the federal banking agencies, including the OTS, have also proposed regulations authorizing the agencies to require a depository institution to maintain additional total capital to account for concentration of credit risk and the risk of non-traditional activities. No assurance can be given as to the final form of any such regulation or its effect on the Bank. 13 WELLS FINANCIAL CORP. and SUBSIDIARIES March 31, 2000 FORM 10-QSB PART II. OTHER INFORMATION - -------------------------- Item 1. Legal Proceedings ----------------- None Item 2. Changes in Securities --------------------- None Item 3. Defaults upon Senior Securities ------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None Item 5. Other information ----------------- None Item 6. Exhibits and Reports of Form 8-K -------------------------------- a. Exhibits: 27 - Financial data schedule b. No reports on Form 8-K were filed No other information is required to be filed under Part II of the form ----------------------------------------------------- 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WELLS FINANCIAL CORP. By: /s/ Lawrence H. Kruse Date: May 5, 2000 --------------------------------------------------------- ----------- Lawrence H. Kruse President and Chief Executive Officer By: /s/ James D. Moll Date: May 5, 2000 --------------------------------------------------------- ----------- James D. Moll Treasurer and Principal Financial & Accounting Officer EX-27 2 FDS
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION. 1000 3-MOS DEC-31-2000 MAR-31-2000 1,132 3,394 0 0 3,712 15,521 14,179 177,504 845 205,486 159,231 20,000 3,201 0 0 0 219 22,835 205,486 3,442 279 0 3,721 1,872 228 1,621 0 0 1,235 697 697 0 0 410 0.30 0.30 3.31 224 228 0 455 857 16 4 845 845 0 0
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