-----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, M/6aX/+BIo2XadeaXEK8ahHtAd45g1tqKleEyT/zNQTVCSyAEzLanuMfDlA0Y7Ay ezzRhs6DhxcyjnJQbbMOPg== /in/edgar/work/20000804/0000946275-00-000345/0000946275-00-000345.txt : 20000921 0000946275-00-000345.hdr.sgml : 20000921 ACCESSION NUMBER: 0000946275-00-000345 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WELLS FINANCIAL CORP CENTRAL INDEX KEY: 0000934739 STANDARD INDUSTRIAL CLASSIFICATION: [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: 685901 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 0001.txt 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 June 30, 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 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 August 4, 2000: Class Outstanding ----- ----------- $.10 par value per share, common stock 1,231,057 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 June 30, 2000 and December 31, 1999 (Dollars in Thousands) (Unaudited)
ASSETS 2000 1999 --------------------- -------------------------- Cash, including interest-bearing accounts June 30, 2000 $2,470; December 31, 1999 $2,320 $ 3,333 $ 4,200 Certificates of deposit 100 400 Securities available for sale, at fair value 3,630 2,551 Securities held to maturity (approximate market value $15,043 at June 30, 2000 and $15,090 at December 31, 1999) 15,470 15,559 Loans held for sale 505 521 Loans receivable, net 185,830 172,713 Accrued interest receivable 1,808 1,350 Income taxes receivable 86 16 Foreclosed real estate 54 55 Premises and equipment 1,842 1,558 Other assets 889 913 --------------------- -------------------------- TOTAL ASSETS $ 213,547 $ 199,836 ===================== ========================== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits $ 161,186 $ 156,984 Borrowed funds 28,500 17,000 Advances from borrowers for taxes and insurance 1,258 1,262 Income taxes: Current - - Deferred 726 763 Accrued interest payable 243 116 Accrued expenses and other liabilities 182 254 --------------------- -------------------------- TOTAL LIABILITIES 192,095 176,379 --------------------- -------------------------- 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 16,965 16,939 Retained earnings, substantially restricted 18,584 18,189 Accumulated other comprehensive income 563 655 Unearned ESOP shares (363) (435) Unearned compensation restricted stock awards (23) (27) Treasury stock, at cost, 956,443 shares at June 30, 2000; 758,343 shares at December 31, 1999 (14,493) (12,083) --------------------- -------------------------- TOTAL STOCKHOLDERS' EQUITY 21,452 23,457 --------------------- -------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 213,547 $ 199,836 ===================== ==========================
(See Notes to Consolidated Financial Statements) 1 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Income (Dollars in thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ----------------------------------- -------------------------------------- 2000 1999 2000 1999 ---------------- ------------------ ------------------- ---------------- Interest and dividend income Loans receivable: First mortgage loans $ 2,825 $ 2,433 $ 5,529 $ 4,894 Consumer and other loans 786 657 1,524 1,310 Investment securities and other interest bearing deposits 295 399 574 794 ---------------- ------------------ ------------------- ---------------- Total interest income 3,906 3,489 7,627 6,998 ---------------- ------------------ ------------------- ---------------- Interest Expense Deposits 1,986 1,818 3,858 3,649 Borrowed funds 354 67 582 134 ---------------- ------------------ ------------------- ---------------- Total interest expense 2,340 1,885 4,440 3,783 ---------------- ------------------ ------------------- ---------------- Net interest income 1,566 1,604 3,187 3,215 Provision for loan losses - 4 - 27 ---------------- ------------------ ------------------- ---------------- Net interest income after provision for loan losses 1,566 1,600 3,187 3,188 ---------------- ------------------ ------------------- ---------------- Noninterest income Gain on sale of loans originated for sale - 50 14 122 Loan origination and commitment fees 24 71 41 226 Loan servicing fees 101 101 201 194 Insurance commissions 110 89 185 162 Fees and service charges 103 123 201 235 Other 9 14 16 19 ---------------- ------------------ ------------------- ---------------- Total noninterest income 347 448 658 958 ---------------- ------------------ ------------------- ---------------- Noninterest expense Compensation and benefits 655 588 1,253 1,179 Occupancy and equipment 222 215 434 404 SAIF deposit insurance premium 9 23 17 47 Data processing 91 83 184 179 Advertising 57 46 110 94 Other 221 290 492 550 ---------------- ------------------ ------------------- ---------------- Total noninterest expense 1,255 1,245 2,490 2,453 ---------------- ------------------ ------------------- ---------------- Income before taxes 658 803 1,355 1,693 Income tax expense 259 330 546 679 ---------------- ------------------ ------------------- ---------------- Net Income $ 399 $ 473 $ 809 $ 1,014 ================ ================== =================== ================ Earnings per share Basic earnings per share $ 0.32 $ 0.31 $ 0.62 $ 0.66 ================ ================== =================== ================ Diluted earnings per share $ 0.32 $ 0.30 $ 0.62 $ 0.64 ================ ================== =================== ================ Weighted average number of common shares outstanding: Basic 1,247,470 1,519,249 1,300,191 1,547,731 ================ ================== =================== ================ Diluted 1,254,821 1,556,939 1,308,206 1,585,325 ================ ================== =================== ================
(See Notes to Consolidated Financial Statements) 2 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Comprehensive Income (Dollars in Thousands) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------ --- -------------- ------------- --- ------------- 2000 1999 2000 1999 ------------ -------------- ------------- ------------- Net Income $ 399 $ 473 $ 809 $ 1,014 Other comprehensive income: Unrealized appreciation (depreciation) on Securities available for sale (86) 16 (155) (155) Income tax benefit (expense) 35 (7) 63 63 ------------ -------------- ------------- ------------- Comprehensive income $ 348 $ 482 $ 717 $ 922 ============ ============== ============= =============
(See Notes to Consolidated Financial Statements) 3 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statement of Stockholders' Equity Six Months Ended June 30, 2000 (Dollars in Thousands) (Unaudited)
Unearned Employee Unearned Accumulated Stock Compensation Additional Other Ownership Restricted Total Common Paid-In Retained Comprehensive Plan Shares Stock Treasury Stockholders' Stock Capital Earnings Income Awards Stock Equity - ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1999 $ 219 $ 16,939 $ 18,189 $ 655 $ (435) $ (27) $(12,083) $ 23,457 Net income for the six months ended June 30, 2000 - - 809 - - - - 809 Net change in unrealized appreciation on securities available for sale, net of related deferred taxes - - - (92) - - - (92) Treasury stock purchases (2,410) (2,410) Amortization of unearned compensation - - - - - 4 - 4 Dividends on common stock - - (414) - - - - (414) Allocated employee stock ownership plan shares - 26 - - 72 - - 98 -------------------------------------------------------------------------------------------------- Balance, June 30, 2000 $ 219 $ 16,965 $ 18,584 $ 563 $ (363) $ (23) $(14,493) $ 21,452 ==================================================================================================
(See Notes to Consolidated Financial Statements) 4 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Cash Flow Six Months Ended June 30, 2000 and 1999 (Dollars in Thousands) (Unaudited) 2000 1999
2000 1999 -------------------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 809 $ 1,014 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses - 27 (Gain) loss on the sale of loans originated for sale 14 (86) Compensation on allocation of ESOP shares 98 132 Amortization of restricted stock awards 4 22 Loss on the sale of foreclosed real estate 5 - Write-down of foreclosed real estate 3 - Deferred income taxes 26 23 Depreciation and amortization on premises and equipment 136 121 Amortization of deferred loan origination fees (38) (89) Amortization of excess servicing fees, mortgage servicing rights and bond premiums and discounts 78 107 Loans originated for sale (6,253) (23,437) Proceeds from the sale of loans originated for sale 6,273 28,501 Changes in assets and liabilities: Accrued interest receivable (458) (459) Other assets (143) (84) Income taxes payable, current - (128) Accrued expenses and other liabilities 55 (18) -------------------- -------------------- Net cash provided by operating activities 609 5,646 -------------------- -------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in loans (13,121) (1,593) Purchase of certificates of deposit (100) (400) Purchase of securities held to maturity - (9,984) Purchase of securities available for sale (1,234) - Proceeds from the maturities of certificates of deposit 400 400 Proceeds from the maturities of securities held to maturity 90 1,145 Proceeds from the sale and redemption of foreclosed real estate 35 83 Purchase of premises and equipment (420) (141) -------------------- -------------------- Net cash (used in) investment activities (14,350) (10,490) -------------------- -------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits 4,202 877 Net increase in advances from borrowers for taxes and insurance (4) 41 Proceeds from borrowed funds 22,800 - Repayments on borrowed funds (11,300) - Purchase of treasury stock (2,410) (1,209) Dividends on common stock (414) (466) -------------------- -------------------- Net cash provided by (used in) financing activities 12,874 (757) -------------------- -------------------- Net decrease in cash and cash equivalents (867) (5,601) CASH: Beginning 4,200 19,446 -------------------- -------------------- Ending $ 3,333 $ 13,845 ==================== ====================
(See Notes to Consolidated Financial Statements) 5 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Cash Flow (continued) Six Months Ended June 30, 2000 and 1999 (Dollars in Thousands) (Unaudited
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments for: Interest on deposits $ 3,858 $ 3,522 Interest on borrowed funds 582 134 Income taxes 584 691 ==================== ==================== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Transfers from loans to foreclosed real estate $ 42 $ 98 Allocation of ESOP shares to participants 72 78 Net change in unrealized appreciation on securities available for sale 92 92 ==================== ====================
(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 June 30, 2000 and December 31, 1999.
June 30, 2000 December 31, 1999 Amount Percent Amount Percent ---------------------------------------------------------------------------------------------------------- (Dollars in Thousands) Tier 1 (Core) Capital Required $ 8,409 4.00% $ 7,754 4.00% Actual 17,331 8.24% 16,865 8.70% Excess 8,922 4.24% 9,111 4.70% Risk-based Capital Required 11,076 8.00% 10,154 8.00% Actual 18,177 13.13% 17,722 13.96% Excess 7,101 5.13% 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. A reconciliation of the common stock share amounts used in the calculation of basic and diluted earnings per share is presented in the following chart.
Number of Shares Three months ended June 30, Six months ended June 30, ------------------------------- ---------------------------- 2000 1999 2000 1999 ------------------------------- ---------------------------- Basic EPS 1,247,470 1,519,249 1,300,191 1,547,731 Effect of dilutive securities: Stock options 7,351 37,690 8,015 37,594 ------------------------------- ---------------------------- Diluted EPS 1,254,821 1,556,939 1,308,206 1,585,325 =============================== ============================
NOTE 4. SELECTED FINANCIAL DATA
For the six months ended June 30, 2000 1999 ----------------------------------- Return on assets (ratio of net income to average total assets) (1) 0.79% 1.05% Return on equity (ratio of net income to average equity) (1) 7.13% 7.93% Equity to assets ratio (ratio of average equity to average total assets) 11.07% 13.25% Net interest margin (ratio of net interest income to average interest earning assets) (1) 3.19% 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. The Company may from time to time make written or oral "forward-looking statements" including statements contained in this report and in other communications by the Company which are made in good faith pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, such as statements of the Company's plans, objectives, estimates and intentions, involve risks and uncertainties and are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, among others, could cause the Company's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the perceived overall value of the products and services by users, including the features, pricing and quality compared to competitor's products and services; the willingness of users to substitute competitors' products and services for the Company's products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes; acquisitions; changes in consumer spending and savings habits; and the success of the Company at managing the risks involved in the foregoing. Comparison of Financial Condition at June 30, 2000 and December 31, 1999: Total assets increased by $13,711,000, from $199,836,000 at December 31, 1999 to $213,547,000 at June 30, 2000 primarily due to an increase of $13,117,000 in the loan portfolio and a $1,079,000 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. Interest rates on mortgage loans increased during the last half of 1999 and the first half of 2000 which was the basis for management's decision to retain almost all of the mortgage loans the Company originated during those periods. 9 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 June 30, 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 $846,000 and $857,000 and 0.45% and 0.49%, respectively. Activity in the Company's allowance for loan losses for the six months ended June 30, 2000 and 1999 is summarized as follows: 2000 1999 ------------------------- Balance on January 1, $856,692 $852,557 Provision for loan losses - 27,000 Charge-offs (16,886) (26,296) Recoveries 6,677 13,271 --------- --------- Balance on June 30, $846,483 $866,532 ========= ========= Loans on which the accrual of interest has been discontinued amounted to $126,000 and $111,000 at June 30, 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 June 30, 2000 and December 31, 1999. Liabilities increased by $15,716,000, from $176,379,000 at December 31, 1999 to $192,095,000 at June 30, 2000. This increase is primarily due to a $11,500,000 increase in borrowed funds and a $4,202,000 increase in deposits, which were used to fund loan growth and to purchase investment securities. Equity decreased by $2,005,000 from $23,457,000 at December 31, 1999 to $21,452,000 at June 30, 2000. The decrease in equity was primarily the result of net income for the first six months of 2000 of $809,000 being offset by the payment of $414,000 in cash dividends and by the repurchase of 198,100 shares of treasury stock at a total cost of $2,410,000. On July 18, 2000, the Board of Directors of the Company declared a $0.15 per share cash dividend to be paid on August 11, 2000 to the stockholders of record on July 31, 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 and Six-Month Periods Ended June 30, 2000 and June 30, 1999. Net Income. Net income decreased by $74,000 and $205,000, or 15.6% and 20.2% for the three and six months ended June 30, 2000, respectively, when compared to the same periods during 1999. The decrease in net income was primarily due to decreases of $47,000 and $185,000 in loan origination and commitment fees for the three and six-month periods ended June 30, 2000, respectively, when compared to the three and six-month periods ended June 30, 1999. Also affecting net income were decreases of $50,000 and $108,000 for the three and six months ended June 30, 2000, respectively, when compared to the same periods in 1999, in the gain on sale of loans originated for sale. 10 Interest Income. Interest income from the loan portfolio increased by $521,000 and $849,000, or 16.9% and 13.7%, for the three and six-month periods ended June 30, 2000, respectively, when compared to the same periods in 1999. During the last half of 1999 and the first six months 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 half 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 $104,000 and $220,000 decrease in interest income from investment securities and interest bearing deposits during the three and six months ended June 30, 2000, respectively, when compared to the same periods in 1999. 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 half of 1999 to fund loan growth and to purchase treasury stock. Interest Expense. Total interest expense increased by $455,000 and $657,000, or 24.1% and 17.4%, for the three and six-month periods ended June 30, 2000 when compared to the same periods in 1999. The increase in interest was primarily due to an increase in the average amount of borrowed funds and deposits during the first half of 2000 when compared to the first half of 1999. To a lesser extent, an overall increase in the cost of deposits and borrowed funds during the first half of 2000 contributed to the increase in interest expense. Net Interest income. Net interest income decreased by $38,000 and $28,000, for the three and six- month periods ended June 30, 2000, respectively, when compared to the same periods 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 $4,000 and $27,000 for the three and six month periods ended June 30, 2000, respectively, when compared to the same periods 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 $101,000 and $300,000, or 22.5% and 31.3%, for the three and six-month periods ended June 30, 2000, respectively, when compared to the same periods in 1999. The decrease in noninterest income was primarily due to decreases of $47,000 and $185,000 for the three and six-month periods ended June 30, 2000, respectively, when compared to the same periods in 1999 in loan origination and commitment fees. Also affecting noninterest income were decreases of $50,000 and $108,000 for the three and six months ended June 30, 2000, respectively, when compared to the same periods in 1999, in the gain on sale of loans originated for sale. Due to low interest rates on residential mortgage loans during the first quarter and beginning of the second quarter of 1999, the Company originated a larger volume of loans during that period when compared to the same period in 2000. This resulted in the decrease in loan origination and commitment fees during the first half of 2000 when compared to the first half of 1999. The decrease in the gain on sale of loans originated for sale resulted from management's decision to retain almost all of the loans the Company originated during the first half of 2000. Noninterest Expense. Noninterest expense remained relatively constant for the three and six-month periods ended June 30, 2000 when compared to the same periods in 1999 as increases in compensation and benefits were offset by decreases in other noninterest expense. Compensation and benefits increased by $67,000 and $74,000 for the quarter and six-months ended June 30, 2000, respectively, when compared to the same periods in 1999, primarily due to a timing difference in the payment of compensation and annual compensation adjustments. 11 Income Tax Expense. Income tax expense decreased by $71,000 and $133,000 for the three and six month periods ended June 30, 2000 when compared to the same periods in 1999. This decrease was the result of a decrease in income before income taxes for the three and six-month periods ended June 30, 2000 when compared to the same periods in 1999. Non-performing Assets. The following table sets forth the amounts and categories of non-performing assets at June 30, 2000 and December 31, 1999.
June 30, 2000 December 31, 1999 ------------------------------------------------ (Dollars in Thousands) Non-accruing loans One to four family real estate $ 2 $ - Agricultural real estate - 32 Consumer 124 79 -------------------- ------------------------ Total $ 126 $ 111 -------------------- ------------------------ Accruing loans which are contractually Past due 90 days or more One to four family real estate $ 191 $ 10 Commercial real estate - - -------------------- ------------------------ Total $ 191 $ 10 -------------------- ------------------------ Total non-accrual and accruing loans past due 90 days or more $ 317 $ 121 ==================== ======================== Repossessed and non-performing assets Repossessed property $ 54 $ 55 Other non-performing assets - - -------------------- ------------------------ Total repossessed and non-performing assets $ 54 $ 55 -------------------- ------------------------ Total non-performing assets $ 371 $ 176 ==================== ======================== Total non-accrual and accruing loans past due 90 days or more to net loans 0.17% 0.07% ==================== ======================== Total non-accrual and accruing loans past due 90 days or more to total assets 0.15% 0.06% ==================== ======================== Total nonperforming assets to total assets 0.17% 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 June 30, 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 June 30, 2000, the Bank's liquidity, as measured for regulatory purposes, was 8.74%. 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 1999 and 2000, the Company approved stock buy back programs in which up to 420,266 shares of the common stock of the Company can be acquired. The Company bought 223,003 shares of its common stock during 1999 and 197,263 shares of its common stock during the first half of 2000 completing these stock buy back programs. The Company paid cash dividends of $0.15 per share on February 11, 2000 and on May 12, 2000. The Company declared a cash dividend of $0.15 per share payable on August 11, 2000 to stockholders of record on July 31, 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 like the Bank are required 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 June 30, 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 8.24% at June 30, 2000. 13 WELLS FINANCIAL CORP. and SUBSIDIARIES June 30, 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: August 4, 2000 ----------------------- -------------- Lawrence H. Kruse President and Chief Executive Officer By: /s/ James D. Moll Date: August 4, 2000 ----------------------- -------------- James D. Moll Treasurer and Principal Financial & Accounting Officer EX-27 2 0002.txt FDS
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION. 1000 6-MOS DEC-31-2000 JUN-30-2000 863 2,470 0 0 3,630 15,470 15,043 186,335 846 213,547 161,186 28,500 2,409 0 0 0 219 21,233 213,547 7,053 574 0 7,627 3,858 582 3,187 0 0 2,490 1,355 1,355 0 0 809 0.62 0.62 3.19 126 191 0 380 857 17 6 846 846 0 0
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