10QSB 1 f10qsb-033101_0129.txt FORM 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, 2001 ---------------------------------------- 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 3, 2001: Class Outstanding ----- ----------- $.10 par value per share, common stock 1,168,053 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, 2001 and December 31, 2000 (Dollars in Thousands) (Unaudited) ASSETS 2001 2000 --------- --------- Cash, including interest-bearing accounts March 31, 2001 $9,208; December 31, 2000 $6,553 $ 10,218 $ 7,606 Certificates of deposit 800 200 Securities available for sale, at fair value 12,392 16,225 Loans held for sale 4,660 1,955 Loans receivable, net 187,000 191,137 Accrued interest receivable 1,727 1,910 Foreclosed real estate 54 54 Premises and equipment 1,822 1,833 Other assets 1,034 928 --------- --------- TOTAL ASSETS $ 219,707 $ 221,848 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits $ 169,115 $ 163,582 Borrowed funds 25,500 33,500 Advances from borrowers for taxes and insurance 1,996 1,228 Income taxes: Current 358 52 Deferred 899 855 Accrued interest payable 162 129 Accrued expenses and other liabilities 206 161 --------- --------- TOTAL LIABILITIES 198,235 199,507 --------- --------- 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 17,043 17,011 Retained earnings, substantially restricted 19,520 19,182 Accumulated other comprehensive income 750 698 Unearned ESOP shares (256) (290) Unearned compensation restricted stock awards (206) (237) Treasury stock, at cost (15,599) (14,242) --------- --------- TOTAL STOCKHOLDERS' EQUITY 21,471 22,341 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 219,707 $ 221,848 ========= ========= (See Notes to Consolidated Financial Statements) 1 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Income Three Months Ended March 31, 2001 and 2000 (Dollars in thousands, except per share data) (Unaudited) 2001 2000 ---------- ---------- Interest and dividend income Loans receivable: First mortgage loans $ 3,007 $ 2,704 Consumer and other loans 899 738 Investment securities and other interest bearing deposits 294 279 ---------- ---------- Total interest income 4,200 3,721 ---------- ---------- Interest Expense Deposits 2,048 1,872 Borrowed funds 401 228 ---------- ---------- Total interest expense 2,449 2,100 ---------- ---------- Net interest income 1,751 1,621 Provision for loan losses 15 -- ---------- ---------- Net interest income after provision for loan losses 1,736 1,621 ---------- ---------- Noninterest income Gain on sale of loans originated for sale 106 14 Loan origination and commitment fees 158 17 Loan servicing fees 103 100 Insurance commissions 103 75 Fees and service charges 124 98 Other 7 7 ---------- ---------- Total noninterest income 601 311 ---------- ---------- Noninterest expense Compensation and benefits 711 598 Occupancy and equipment 219 212 Data processing 101 93 Advertising 47 53 Other 352 279 ---------- ---------- Total noninterest expense 1,430 1,235 ---------- ---------- Income before income taxes 907 697 Income tax expense 378 287 ---------- ---------- Net Income $ 529 $ 410 ========== ========== Earnings per share Basic $ 0.45 $ 0.30 ========== ========== Diluted $ 0.43 $ 0.30 ========== ========== Weighted average number of common shares outstanding: Basic 1,181,745 1,349,422 ========== ========== Diluted 1,230,211 1,358,110 ========== ========== (See Notes to Consolidated Financial Statements) 2 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Comprehensive Income Three Months Ended March 31, 2001 and 2000 (Dollars in Thousands) (Unaudited) 2001 2000 ----- ----- Net Income $ 529 $ 410 Other comprehensive income: Unrealized appreciation (depreciation) on securities available for sale 88 (69) Income tax benefit (36) 28 ----- ----- Comprehensive income $ 581 $ 369 ===== ===== (See Notes to Consolidated Financial Statements) 3 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statement of Stockholders' Equity Three Months Ended March 31, 2001 (Dollars in Thousands) (Unaudited)
Unearned Accumulated Employee Unearned Other Stock Compensation Additional Compre- Ownership Restricted Total Common Paid-In Retained hensive Plan Stock Treasury Stockholders' Stock Capital Earnings Income shares Awards Stock Equity ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 2000 $ 219 $ 17,011 $ 19,182 $ 698 $ (290) $(237) $(14,242) $ 22,341 Net income for the three months ended March 31, 2001 - - 529 - - - - 529 Net change in unrealized appreciation on securities available for sale, net of related deferred taxes - - - 52 - - - 52 Treasury stock purchases (1,357) (1,357) Amortization of unearned compensation - - - - - 31 - 31 Dividends on common stock - - (191) - - - - (191) Allocated employee stock ownership plan shares - 32 - - 34 - - 66 ------------------------------------------------------------------------------------------- Balance March 31, 2001 $ 219 $ 17,043 $ 19,520 $ 750 $ (256) $(206) $(15,599) $ 21,471 ===========================================================================================
(See Notes to Consolidated Financial Statements) 4 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Cash Flow Three Months Ended March 31, 2001 and 2000 (Dollars in Thousands) (Unaudited)
2001 2000 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 529 $ 410 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 15 - (Gain) on the sale of loans originated for sale (106) (14) Compensation on allocation of ESOP shares 66 49 Amortization of restricted stock awards 31 2 Loss on the sale of foreclosed real estate - 1 Write-down of foreclosed real estate - 3 Deferred income taxes 8 (18) Depreciation and amortization on premises and equipment 69 66 Amortization of deferred loan origination fees (16) (11) Amortization of excess servicing fees, mortgage servicing rights and bond premiums and discounts 67 34 Loans originated for sale (14,298) (3,432) Proceeds from the sale of loans originated for sale 11,563 2,625 Changes in assets and liabilities: Accrued interest receivable 183 (139) Other assets (36) (28) Income taxes payable, current 306 215 Accrued expenses and other liabilities 77 (115) -------- -------- Net cash (used in) operating activities (1,542) (352) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in loans $ 4,138 $ (3,458) Purchase of certificates of deposit (700) (100) Purchase of securities available for sale (1,499) (1,230) Proceeds from the maturities of certificates of deposit 100 300 Proceeds from the maturities of securities available for sale 5,420 - Proceeds from the maturities of securities held to maturity - 39 Proceeds from the sale and redemption of foreclosed real estate - 8 Purchase of premises and equipment (58) (282) -------- -------- Net cash provided by (used in) investment activities 7,401 (4,723) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits $ 5,533 $ 2,247 Net increase in advances from borrowers for taxes and insurance 768 777 Proceeds from borrowed funds - 6,300 Repayments on borrowed funds (8,000) (3,300) Purchase of treasury stock (1,357) (617) Dividends on common stock (191) (206) -------- -------- Net cash provided by (used in) financing activities (3,247) 5,201 -------- -------- Net increase in cash and cash equivalents 2,612 126 CASH: Beginning 7,606 4,200 -------- -------- Ending $ 10,218 $ 4,326 ======== ========
(See Notes to Consolidated Financial Statements) 5 WELLS FINANCIAL CORP. and SUBSIDIARY Consolidated Statements of Cash Flow (continued) Three Months Ended March 31, 2001 and 2000 (Dollars in Thousands) (Unaudited)
2001 2000 ------- ------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments for: Interest on deposits $ 1,994 $ 1,809 Interest on borrowed funds 422 225 Income taxes 64 74 ======= ======= SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Transfers from loans to foreclosed real estate $ - $ 5 Allocation of ESOP shares to participants 34 36 Net change in unrealized appreciation on securities available for sale 52 (41) ======= =======
(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, 2001 and December 31, 2000. March 31, 2001 December 31, 2000 Amount Percent Amount Percent ------------------------------------------------------------------------------- (Dollars in Thousands) Tier 1 (Core) Capital Required $ 8,661 4.00% $ 8,715 4.00% Actual 17,861 8.25% 17,812 8.17% Excess 9,200 4.25% 9,097 4.17% Risk-based Capital Required 11,563 8.00% 11,572 8.00% Actual 18,702 12.94% 18,645 12.89% Excess 6,839 4.94% 7,073 4.89% 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 March 31, ---------------------------- 2001 2000 ---------------------------- Basic EPS 1,181,745 1,349,422 Effect of dilutive securities: Stock options 48,466 8,688 ---------------------------- Diluted EPS 1,230,211 1,358,110 ============================ NOTE 4. SELECTED FINANCIAL DATA
For the three months ended March 31, 2001 2000 ------------------------- Return on assets (ratio of net income to average total assets) (1) 0.96% 0.81% Return on equity (ratio of net income to average equity) (1) 9.70% 7.06% Equity to assets ratio (ratio of average equity to average total assets) 9.94% 11.53% Net interest margin (ratio of net interest income to average interest earning assets) (1) 3.31% 3.31%
(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. 9 Comparison of Financial Condition at March 31, 2001 and December 31, 2000: Total assets decreased by $2,141,000, from $221,848,000 at December 31, 2000 to $219,707,000 at March 31, 2001. Due to lower interest rates on residential mortgages, management elected to sell the majority of the residential loans originated during the first three months of 2001 to the secondary market. Included in the loans that were originated and sold during the first quarter of 2001 were loans from the Company's mortgage loan portfolio that were refinanced. This resulted in a $4,137,000 decrease in the Company's loan portfolio which is the primary reason for the decrease in total assets. 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, 2001 and December 31, 2000 the balances in the allowance for loan losses and the allowance for loan losses as a percentage of total loans were $841,000 and $833,000 and 0.45% and 0.43%, respectively. Activity in the Company's allowance for loan losses for the three months ended March 31, 2001 and 2000 is summarized as follows: 2001 2000 ------------------------ Balance on January 1, $ 833,248 $ 856,692 Provision for loan losses 15,000 Charge-offs (12,568) (15,578) Recoveries 5,248 4,187 --------- --------- Balance on March 31, $ 840,928 $ 845,301 ========= ========= Loans on which the accrual of interest has been discontinued amounted to $393,000 and $363,000 at March 31, 2001 and December 31, 2000, 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, 2001 and December 31, 2000. Liabilities decreased by $1,272,000, from $199,507,000 at December 31, 2000 to $198,235,000 at March 31, 2001. This decrease is primarily due to a $5,533,000 increase in deposits being offset by a $8,000,000 decrease in borrowed funds. Equity decreased by $870,000 from $22,341,000 at December 31, 2000 to $21,471,000 at March 31, 2001. The decrease in equity was primarily the result of net income for the first quarter of 2001 of $529,000 being offset by the payment of $191,000 in cash dividends and by the repurchase of 78,521 shares of treasury stock at a total cost of $1,356,539. On April 17, 2001, the Board of Directors of the Company declared a $0.16 per share cash dividend to be paid on May 14, 2001 to the stockholders of record on April 30, 2001. Subject to the Company's earnings and capital, it is the current intention of the Company to continue to pay regular quarterly cash dividends. 10 Comparison of Operating Results for the Three Month Periods Ended March 31, 2001 and March 31, 2000. Net Income. Net income increased by $119,000, or 29.0% for the three months ended March 31, 2001, when compared to the same period during 2000. The increase in net income primarily resulted from a $130,000 increase in net interest income and a $290,000 increase in noninterest income being partially offset by a $195,000 increase in noninterest expense. Interest Income. Interest income increased by $479,000, or 12.9%, for the first quarter of 2001 when compared to the first quarter of 2000. This increase was primarily due to a $464,000 increase in interest income from the Company's loan portfolio. The increase in interest income from the Company's loan portfolio resulted from an increase in the average amount of loans receivable during the first quarter of 2001 when compared to the first quarter of 2000 and also, to an increase in interest rates on the Company's loan portfolio. Interest Expense. Total interest expense increased by $349,000, or 16.6%, for the quarter ended March 31, 2001 when compared to the quarter ended March 31, 2000. During the first quarter of 2001 the average amount of the Company's deposits and borrowed funds were greater than during the first quarter of 2000. This is the primary reason for the increase in interest expense. Net Interest income. Net interest income increased by $119,000 for the three month period ended March 31, 2001 when compared to the same period in 2000 due to the changes in interest income and interest expense described above. Provision for loan losses. The provision for loan losses increased by $15,000 for the three-month period ended March 31, 2001 when compared to the same period in 2000. Management evaluates the quality of the loan portfolio on a quarterly basis to identify and determine the adequacy of the allowance for loan loss. 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 increased by $290,000 for the quarter ended March 31, 2001 when compared to the same quarter in 2000 primarily due to increases of $92,000 and $141,000 in the gain on sale of loans originated for sale and loan origination and commitment fees, respectively. Due to low interest rates on residential mortgage loans during the first quarter of 2001, the Company sold to the secondary market a larger volume of loans during that period when compared to the same period in 2000, resulting in increases in the gain on sale of loans originated for sale and loan origination and commitment fees. Noninterest Expense. Noninterest expense increased by $195,000 for the first quarter of 2001 when compared to the first quarter of 2000 primarily due to a $113,000 increase in compensation and benefits expense. The increase in compensation and benefits resulted, primarily, from an increase in the Employee Stock Ownership Plan expense that resulted from the appreciation of the Company's stock and an increase in the amortization of Management Stock Bonus Plan awards. Also affecting compensation and benefits expense were annual compensation increases. Income Tax Expense. Income tax expense increased by $91,000 for the three month period ended March 31, 2001 when compared to the same period in 2000. This increase was the result of an increase in income before income taxes for the quarter ended March 31, 2001 when compared to the same quarter in 2000. 11 Non-performing Assets. The following table sets forth the amounts and categories of non-performing assets at March 31, 2001 and December 31, 2000. March 31, 2001 December 31, 2000 ---------------------------------- (Dollars in Thousands) Non-accruing loans One to four family real estate $112 $108 Agricultural real estate 195 195 Consumer 86 60 ---- ---- Total $393 $363 ---- ---- Accruing loans which are contractually past due 90 days or more One to four family real estate $ 55 $258 Commercial real estate - - ---- ---- Total $ 55 $258 ---- ---- Total non-accrual and accruing loans past due 90 days or more $448 $621 ==== ==== Repossessed and non-performing assets Repossessed property $ 54 $ 54 Other non-performing assets - - ---- ---- Total repossessed and non-performing assets $ 54 $ 54 ---- ---- Total non-performing assets $502 $675 ==== ==== Total non-accrual and accruing loans past due 90 days or more to net loans 0.24% 0.32% ==== ==== Total non-accrual and accruing loans past due 90 days or more to total assets 0.20% 0.28% ==== ==== Total nonperforming assets to total assets 0.23% 0.30% ==== ==== 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, 2001 and December 31, 2000, 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, 2001, the Bank's liquidity, as measured for regulatory purposes, was 8.04%. 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, 1998, 1999 and 2000, the Company approved stock buy back programs in which up to 955,606 shares of common stock of the Company could be acquired. During 1998, 1999 and 2000, the Company bought 307,200 shares, 223,003 shares and 198,100 shares, respectively, which completed these buy back programs. On December 21, 2000, the Company approved a stock buy back program in which up to 125,000 shares of the common stock of the Company could be acquired. During the first four months of 2001 the Company bought 92,321 shares of its common stock under this buy back program. The Company paid a cash dividend of $0.16 per share on February 12, 2001. The Company declared a cash dividend of $0.16 per share payable on May 14, 2001 to stockholders of record on April 30, 2001. 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 March 31, 2001, 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 8.25% at March 31, 2001. 13 WELLS FINANCIAL CORP. and SUBSIDIARIES March 31, 2001 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: None 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 3, 2001 -------------------------------------------------------- ----------- Lawrence H. Kruse President and Chief Executive Officer By: /s/ James D. Moll Date: May 3, 2001 -------------------------------------------------------- ----------- James D. Moll Treasurer and Principal Financial & Accounting Officer