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
<PAGE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<PAGE>
WELLS FINANCIAL CORP. and SUBSIDIARY
Consolidated Statements of Financial Condition
March 31, 2000 and December 31, 1999
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
2000 1999
--------------------- --------------------------
<S> <C> <C>
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
===================== ==========================
</TABLE>
(See Notes to Consolidated Financial Statements)
1
<PAGE>
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)
<TABLE>
<CAPTION>
2000 1999
--------------- -------------------
<S> <C> <C>
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
=============== ===================
</TABLE>
(See Notes to Consolidated Financial Statements)
2
<PAGE>
WELLS FINANCIAL CORP. and SUBSIDIARY
Consolidated Statements of Comprehensive Income
Three Months Ended March 31, 2000 and 1999
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
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
============= =============
</TABLE>
(See Notes to Consolidated Financial Statements)
3
<PAGE>
WELLS FINANCIAL CORP. and SUBSIDIARY
Consolidated Statement of Stockholders' Equity
Three Months Ended March 31, 2000
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
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
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
=================================================================================================
</TABLE>
(See Notes to Consolidated Financial Statements)
4
<PAGE>
WELLS FINANCIAL CORP. and SUBSIDIARY
Consolidated Statements of Cash Flow
Three Months Ended March 31, 2000 and 1999
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
--------- --------
<S> <C> <C>
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
======== ========
</TABLE>
(See Notes to Consolidated Financial Statements)
5
<PAGE>
WELLS FINANCIAL CORP. and SUBSIDIARY
Consolidated Statements of Cash Flow (continued)
Three Months Ended March 31, 2000 and 1999
(Dollars in Thousands)
(Unaudited
<TABLE>
<CAPTION>
<S> <C> <C>
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)
======= =======
</TABLE>
(See Notes to Consolidated Financial Statements)
6
<PAGE>
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.
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
Amount Percent Amount Percent
----------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
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%
</TABLE>
7
<PAGE>
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
<TABLE>
<CAPTION>
For the three months ended
March 31,
2000 1999
-----------------------------------
<S> <C> <C>
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.
</TABLE>
8
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,132
<INT-BEARING-DEPOSITS> 3,394
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,712
<INVESTMENTS-CARRYING> 15,521
<INVESTMENTS-MARKET> 14,179
<LOANS> 177,504
<ALLOWANCE> 845
<TOTAL-ASSETS> 205,486
<DEPOSITS> 159,231
<SHORT-TERM> 20,000
<LIABILITIES-OTHER> 3,201
<LONG-TERM> 0
0
0
<COMMON> 219
<OTHER-SE> 22,835
<TOTAL-LIABILITIES-AND-EQUITY> 205,486
<INTEREST-LOAN> 3,442
<INTEREST-INVEST> 279
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,721
<INTEREST-DEPOSIT> 1,872
<INTEREST-EXPENSE> 228
<INTEREST-INCOME-NET> 1,621
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,235
<INCOME-PRETAX> 697
<INCOME-PRE-EXTRAORDINARY> 697
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 410
<EPS-BASIC> 0.30
<EPS-DILUTED> 0.30
<YIELD-ACTUAL> 3.31
<LOANS-NON> 224
<LOANS-PAST> 228
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 455
<ALLOWANCE-OPEN> 857
<CHARGE-OFFS> 16
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 845
<ALLOWANCE-DOMESTIC> 845
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
