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, 2002
----------------------------------------
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.
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(Exact name of Registrant as Specified in Its Charter)
Minnesota 41-1799504
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
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, 2002:
Class Outstanding
----- -----------
$.10 par value per share, common stock 1,193,492 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, 2002 and December 31, 2001
(Dollars in Thousands)
(Unaudited)
ASSETS
2002 2001
--------- ---------
Cash, including interest-bearing accounts
March 31, 2002 $39,135; December 31, 2001 $36,830 $ 40,242 $ 38,070
Certificates of deposit 200 200
Securities available for sale, at fair value 23,922 15,863
Loans held for sale 3,540 10,155
Loans receivable, net 157,107 160,513
Accrued interest receivable 1,570 1,529
Foreclosed real estate 306 252
Premises and equipment 1,812 1,801
Other assets 2,309 2,025
--------- ---------
TOTAL ASSETS $ 231,008 $ 230,408
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 179,426 $ 180,999
Borrowed funds 23,000 23,000
Advances from borrowers for taxes and insurance 2,256 1,371
Income taxes:
Current 432 -
Deferred 1,179 1,224
Accrued interest payable 130 75
Accrued expenses and other liabilities 186 167
--------- ---------
TOTAL LIABILITIES 206,609 206,836
--------- ---------
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 16,785 16,932
Retained earnings, substantially restricted 22,436 21,792
Accumulated other comprehensive income 620 745
Unearned ESOP shares (123) (155)
Unearned compensation restricted stock awards (111) (128)
Treasury stock, at cost, 994,008 shares at March
31, 2002, and 1,022,399 shares at December 31, 2001 (15,427) (15,833)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 24,399 23,572
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 231,008 $ 230,408
========= =========
(See Notes to Consolidated Financial Statements)
1
WELLS FINANCIAL CORP. and SUBSIDIARY
Consolidated Statements of Income
Three Months Ended March 31, 2002 and 2001
(Dollars in thousands, except per share data)
(Unaudited)
2002 2001
---------- ----------
Interest and dividend income
Loans receivable:
First mortgage loans $ 2,375 $ 3,007
Consumer and other loans 786 899
Investment securities and other
interest bearing deposits 391 294
---------- ----------
Total interest income 3,552 4,200
---------- ----------
Interest Expense
Deposits 1,389 2,048
Borrowed funds 307 401
---------- ----------
Total interest expense 1,696 2,449
---------- ----------
Net interest income 1,856 1,751
Provision for loan losses 23 15
---------- ----------
Net interest income after provision for
loan losses 1,833 1,736
---------- ----------
Noninterest income
Gain on sale of loans originated for sale 487 106
Loan origination and commitment fees 305 158
Loan servicing fees 154 103
Insurance commissions 80 103
Fees and service charges 201 124
Other 8 7
---------- ----------
Total noninterest income 1,235 601
---------- ----------
Noninterest expense
Compensation and benefits 787 711
Occupancy and equipment 233 219
Data processing 136 101
Advertising 46 47
Other 417 352
---------- ----------
Total noninterest expense 1,619 1,430
---------- ----------
Income before income taxes 1,449 907
Income tax expense 596 378
---------- ----------
Net Income $ 853 $ 529
========== ==========
Earnings per share
Basic $ 0.73 $ 0.45
========== ==========
Diluted $ 0.71 $ 0.43
========== ==========
Weighted average number of common shares
outstanding:
Basic 1,162,394 1,181,745
========== ==========
Diluted 1,194,997 1,230,211
========== ==========
(See Notes to Consolidated Financial Statements)
2
WELLS FINANCIAL CORP. and SUBSIDIARY
Consolidated Statements of Comprehensive Income
Three Months Ended March 31, 2002 and 2001
(Dollars in Thousands)
(Unaudited)
2002 2001
------- -------
Net Income $ 853 $ 529
Other comprehensive income:
Unrealized appreciation (depreciation) on
securities available for sale (212) 88
Related deferred income taxes 87 (36)
------- -------
Comprehensive income $ 728 $ 581
======= =======
(See Notes to Consolidated Financial Statements)
3
WELLS FINANCIAL CORP. and SUBSIDIARY
Consolidated Statement of Stockholders' Equity
Three Months Ended March 31, 2002
(Dollars in Thousands)
(Unaudited)
Accumu- Unearned
lated Employee Unearned
Other Stock Compensation Total
Additional Compre- Ownership Restricted Stock-
Common Paid-In Retained hensive Plan Stock Treasury holders'
Stock Capital Earnings Income shares Awards Stock Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 $ 219 $ 16,932 $ 21,792 $ 745 $ (155) $ (128) $(15,833) $ 23,572
Net income for the three
months ended March 31, 2002 - - 853 - - - - 853
Net change in unrealized
appreciation on securities
available for sale, net of
related deferred taxes - - - (125) - - - (125)
Treasury stock purchases - - - - - - (172) (172)
Options exercised - (187) - - - - 578 391
Amortization of unearned
compensation - - - - - 17 - 17
Dividends on common stock - - (209) - - - - (209)
Allocated employee stock
ownership plan shares - 40 - - 32 - - 72
---------------------------------------------------------------------------------------------------
Balance March 31, 2002 $ 219 $ 16,785 $ 22,436 $ 620 $ (123) $ (111) $(15,427) $ 24,399
===================================================================================================
(See Notes to Consolidated Financial Statements)
4
WELLS FINANCIAL CORP. and SUBSIDIARY
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2002 and 2001
(Dollars in Thousands)
(Unaudited)
2002 2001
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 853 $ 529
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for loan losses 23 15
(Gain) on the sale of loans originated for sale (487) (106)
Compensation on allocation of ESOP shares 72 66
Amortization of restricted stock awards 17 31
Write-down of foreclosed real estate 23 -
Deferred income taxes (45) 8
Depreciation and amortization on premises and equipment 58 69
Amortization of deferred loan origination fees (40) (16)
Amortization of excess servicing fees, mortgage servicing
rights and bond premiums and discounts 120 67
Loans originated for sale (28,781) (14,298)
Proceeds from the sale of loans originated for sale 35,477 11,563
Changes in assets and liabilities:
Accrued interest receivable (41) 183
Other assets 89 (36)
Income taxes payable, current 432 306
Accrued expenses and other liabilities 74 77
-------- --------
Net cash provided by (used in) operating activities 7,844 (1,542)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in loans $ 3,350 $ 4,138
Purchase of certificates of deposit - (700)
Purchase of securities available for sale (11,044) (1,499)
Proceeds from the maturities of certificates of deposit - 100
Proceeds from the maturities of securities available for sale 2,773 5,420
Purchase of premises and equipment (69) (58)
Investment in foreclosed real estate (4) -
-------- --------
Net cash provided by (used in) investing activities (4,994) 7,401
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits $ (1,573) $ 5,533
Net increase in advances from borrowers
for taxes and insurance 885 768
Options exercised 391 -
Repayments on borrowed funds - (8,000)
Purchase of treasury stock (172) (1,357)
Dividends on common stock (209) (191)
-------- --------
Net cash used in financing activities (678) (3,247)
-------- --------
Net increase in cash and cash equivalents 2,172 2,612
CASH AND CASH EQUIVALENTS:
Beginning 38,070 7,606
-------- --------
Ending $ 40,242 $ 10,218
======== ========
(See Notes to Consolidated Financial Statements)
5
WELLS FINANCIAL CORP. and SUBSIDIARY
Consolidated Statements of Cash Flows (continued)
Three Months Ended March 31, 2002 and 2001
(Dollars in Thousands)
(Unaudited)
2002 2001
------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Interest on deposits $ 1,334 $ 1,994
Interest on borrowed funds 307 422
Income taxes 95 64
======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Transfers from loans to foreclosed real estate $ 73 $ -
Allocation of ESOP shares to participants 32 34
Net change in unrealized appreciation on
securities available for sale (125) 52
======= =======
(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, 2002 and December 31, 2001.
March 31, 2002 December 31, 2001
Amount Percent Amount Percent
- ------------------------------------------------------------------------------
Tier 1 (Core) Capital
Required $ 9,014 4.00% $ 9,052 4.00%
Actual 18,300 8.12% 18,474 8.16%
Excess 9,286 4.12% 9,422 4.16%
Risk-based Capital
Required 11,300 8.00% 11,403 8.00%
Actual 19,251 13.63% 19,425 13.63%
Excess 7,951 5.63% 8,022 5.63%
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,
------------------ -----------------
2002 2001
------------------ -----------------
Basic EPS 1,162,394 1,181,745
Effect of dilutive securities:
Stock options 32,603 48,466
------------------ -----------------
Diluted EPS 1,194,997 1,230,211
================== =================
NOTE 4. SELECTED FINANCIAL DATA
For the three months ended
March 31,
2002 2001
-------------------
Return on assets
(ratio of net income to average total assets) (1) 1.48% 0.96%
Return on equity
(ratio of net income to average equity) (1) 14.18% 9.70%
Equity to assets ratio
(ratio of average equity to average total assets) 10.45% 9.94%
Net interest margin
(ratio of net interest income to average interest earning assets) (1) 3.42% 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.
The Company cautions that the foregoing list of important factors is
not exclusive. The Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Company.
9
Comparison of Financial Condition at March 31, 2002 and December 31, 2001:
Total assets increased by $600,000, from $230,408,000 at December 31,
2001 to $231,008,000 at March 31, 2002. Loans held for sale decreased by
$6,615,000 from December 31, 2001 to March 31, 2002 as loans that were committed
to be sold at the end of 2001 were delivered to the secondary market during the
first quarter of 2002. Loans receivable decreased by $3,406,000 during the first
quarter of 2002 due to the continued refinance market. Due to lower interest
rates on residential mortgages management continued to sell to the secondary
market the majority of the residential mortgage loans that were originated
during the first quarter of 2002. Included in the loans that were originated and
sold during the quarter were loans from the Company's mortgage loan portfolio
that were refinanced resulting in the decrease in loans receivable. Cash
received from the sale of loans held for sale was used to purchase securities
resulting in a $8,059,000 increase in securities available for sale during the
quarter.
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, 2002 and
December 31, 2001 the balances in the allowance for loan losses and the
allowance for loan losses as a percentage of total loans were $951,000 and
$952,000 and 0.59% and 0.56%, respectively.
Activity in the Company's allowance for loan losses for the three
months ended March 31, 2002 and 2001 is summarized as follows:
2002 2001
----------------------------
Balance on January 1, $ 951,862 $ 833,248
Provision for loan losses 22,500 15,000
Charge-offs (29,472) (12,568)
Recoveries 5,862 5,248
----------- -----------
Balance on March 31, $ 950,752 $ 840,928
=========== ===========
Loans on which the accrual of interest has been discontinued amounted
to $455,000 and $408,000 at March 31, 2002 and December 31, 2001, 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,
2002 and December 31, 2001.
Liabilities decreased by $227,000 from $206,836,000 at December 31,
2001 to $206,609,000 at March 31, 2002. This decrease is primarily due to a
decrease of $1,573,000 in deposits being partially offset by a $885,000 increase
in advances from borrowers for taxes and insurance and a $432,000 increase in
current income taxes payable.
Equity increased by $827,000 from $23,572,000 at December 31, 2001 to
$24,399,000 at March 31, 2002. The increase in equity was primarily the result
of net income for the first three months of 2002 of $853,000 and an increase in
equity of $391,000 which resulted from the exercise of 39,177 options being
partially offset by the payment of $209,000 in cash dividends and by a $125,000
decrease in accumulated other comprehensive income. On April 16, 2002, the Board
of Directors of the Company declared a $0.18 per share cash dividend to be paid
on May 13, 2002 to the stockholders of record on April 30, 2002. 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, 2002
and March 31, 2001.
Net Income. Net income increased by $324,000, or 61.2% for the quarter
ended March 31, 2002 when compared to the same quarter during 2001. The increase
in net income was primarily due to increases of $634,000 and $105,000 in
noninterest income and net interest income, respectively, for first quarter of
2002 when compared to the same period in 2001. These increases were partially
offset by increases of $189,000 in noninterest expense for the first quarter of
2002 when compared to the same quarter in 2001.
Interest Income. Interest income decreased by $648,000, or 15.4% for
the quarter ended March 31, 2002 when compared to the same period in 2001.
During the first three months of 2002 the average amount in the Company's loan
portfolio was less than the average amount during the first three months of
2001. This is the primary reason for the decrease in interest income.
Interest Expense. Total interest expense decreased by $753,000, or
30.1%, for the quarter ended March 31, 2002 when compared to the same quarter in
2001. The decrease in interest expense was primarily the result of the downward
repricing of the Company's deposits due to lower market interest rates and a
decrease in the average amount of borrowed funds during the first quarter of
2002 when compared to the first quarter of 2001.
Net Interest income. Net interest income increased by $105,000, or
6.0%, for the three month period ended March 31, 2002 when compared to the same
period in 2001 due to the changes in interest income and interest expense
described above.
Provision for loan losses. The provision for loan losses increased by
$8,000 for the quarter ended March 31, 2002 when compared to the same period in
2001. Management evaluates the quality of the loan portfolio on a quarterly
basis to identify and determine the adequacy of the allowance for loan loss.
Classified loans were 1.0% and 1.08% of total loans at March 31, 2002 and
December 31, 2001, respectively. Nonaccrual loans were $455,000 and $408,000 at
March 31, 2002 and December 31, 2001, respectively. The provision reflects
management's monitoring of the allowance for loan losses in relation to the size
and quality of the loan portfolio and adjusts the provision for loan losses to
adequately provide for loan losses. Management determines the amounts of the
allowance for loan losses in a systematic manner that includes self-correcting
policies that adjust loss estimation methods on a periodic basis. 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 $634,000, or 105%,
for the three month period ended March 31, 2002 when compared to the same period
in 2001 primarily due to increases in the gain on sale of loans originated for
sale and loan origination and commitment fees. Due to low interest rates on
residential mortgage loans during the first three months of 2002, the Company
sold to the secondary market a larger volume of loans during that period when
compared to the same period in 2001, resulting in increases in the gain on sale
of loans originated for sale and loan origination and commitment fees recognized
immediately in income.
11
Noninterest Expense. Noninterest expense increased by $189,000, or
13.2%, for the three months ended March 31, 2002 when compared to the same
period during 2001 primarily due to an increase in compensation and benefits and
to an increase in other noninterest expense. The increase in compensation and
benefits resulted from annual compensation adjustments and increases in
commissions paid to loan officers for the origination of loans. Also affecting
compensation and benefits was an increase in the Employee Stock Ownership Plan
expense that resulted from the appreciation of the Company's stock. The increase
in other noninterest expense resulted primarily from an increase in the
amortization of mortgage servicing rights.
Income Tax Expense. Income tax expense increased by $218,000 for the
three month period ended March 31, 2002 when compared to the same period in
2001. This increase is proportionate to the increase in income before income
taxes for the quarter ended March 31, 2002 when compared to the same period in
2001.
Non-performing Assets. The following table sets forth the amounts and
categories of non-performing assets at March 31, 2002 and December 31, 2001.
March 31, 2002 December 31, 2001
-------------- -----------------
(Dollars in Thousands)
Non-accruing loans
One to four family real estate $ 228 $ 194
Agricultural real estate - -
Commercial - -
Consumer 227 214
------ ------
Total $ 455 $ 408
------ ------
Accruing loans which are contractually
past due 90 days or more
One to four family real estate $ 376 $ 224
Commercial real estate - -
------ ------
Total $ 376 $ 224
------ ------
Total non-accrual and accruing loans
past due 90 days or more $ 831 $ 632
====== ======
Repossessed and non-performing assets
Repossessed property $ 306 $ 252
Other non-performing assets - -
------ ------
Total repossessed and non-performing assets $ 306 $ 252
------ ------
Total non-performing assets $1,137 $ 884
====== ======
Total non-accrual and accruing loans
past due 90 days or more to net loans 0.53% 0.39%
====== ======
Total non-accrual and accruing loans
past due 90 days or more to total assets 0.36% 0.27%
====== ======
Total nonperforming assets to total assets 0.49% 0.38%
====== ======
12
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, 2002 and December 31, 2001, the value of loans that would be
classified as impaired under these Statements is considered to be immaterial.
Liquidity and Capital Resources:
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.
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 three months of 2002 the Company completed this buy back
program.
The Company paid a cash dividend of $0.18 per share on February 15,
2002. On April 16, 2002 the Company declared a cash dividend of $0.18 per share
payable on May 13, 2002 to stockholders of record on April 30, 2002. 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, 2002, the Bank exceeded 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 8.12% at March 31, 2002.
13
WELLS FINANCIAL CORP. and SUBSIDIARIES
March 31, 2002
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
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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/ Lonnie R. Trasamar Date: May 3, 2002
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Lonnie R. Trasamar
President and Chief Executive Officer
By: /s/ James D. Moll Date: May 3, 2002
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James D. Moll
Treasurer and Principal Financial & Accounting Officer