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
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(Address of principal executive offices)
(507) 553-3151
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(Registrant's Telephone Number, including Area Code)
N/A
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(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
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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