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| 8-K - FORM 8-K - WELLS FINANCIAL CORP. - WELLS FINANCIAL CORP | f8k_072415-0129.htm |
Wells Financial Corp. Announces Second Quarter Results of Operations
Wells, Minnesota, July 24, 2015
Selected Financial Data
(Dollars in thousands, except per share data)
(Unaudited)
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Quarter Ended June 30,
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Six Months Ended June 30,
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2015
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2014
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2015
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2014
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Net Income
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$ | 550 | $ | 96 | $ | 1,043 | $ | 347 | ||||||||
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Basic earnings per share
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$ | 0.75 | $ | 0.13 | $ | 1.41 | $ | 0.45 | ||||||||
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Diluted earnings per share
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$ | 0.75 | $ | 0.13 | $ | 1.41 | $ | 0.45 | ||||||||
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Return on average equity (1)(2)
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8.1 | % | 1.5 | % | 7.7 | % | 2.6 | % | ||||||||
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Return on average assets(1)
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0.9 | % | 0.2 | % | 0.8 | % | 0.3 | % | ||||||||
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Net interest rate spread
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3.6 | % | 3.5 | % | 3.7 | % | 3.4 | % | ||||||||
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Net interest rate margin
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3.6 | % | 3.5 | % | 3.7 | % | 3.4 | % | ||||||||
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Book value per share (2)
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$ | 36.94 | $ | 34.83 | $ | 36.94 | $ | 34.83 | ||||||||
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(1) Annualized
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(2) Includes stockholders’ equity and mezzanine equity
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Quarter Ended June 30, 2015
James D. Moll, President of Wells Financial Corp. (OTCQB:WEFP)(the Company), the holding company of Wells Federal Bank (the Bank), announced net income for the second quarter of 2015 of $550,000, up $454,000 or 472.9%, when compared to the second quarter of 2014. Basic and diluted earnings per share for the second quarter of 2015 were $0.75, up $0.62 or 477.0%, when compared to the second quarter of 2014. The improvement in net income for the quarter is due, primarily, to increases of $129,000 and $222,000, or 6.5% and 25.6%, in net interest income and noninterest income, respectively. Also contributing to the improved earnings were decreases of $150,000 and $224,000, or 100.0% and 8.8%, in the provision for loan loss and noninterest expense, respectively.
The increase in net interest income was due to an increase in the net interest rate spread and the increase in noninterest income resulted, primarily, from an increase in gain on sale of loans as a larger volume of residential mortgage loans was originated and sold to the secondary market. A decrease in expenses associated with other real estate owned was the primary reason for the decrease in noninterest expense. The decrease in the provision for loan losses resulted from management’s analysis of credit quality.
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 loss and adjusts the level of the allowance for loan losses through the provision for loan losses. As of June 30, 2015 and 2014, the balance in the allowance for loan losses and the allowance for loan losses as a percentage of total loans were $2,184,000 and $1,934,000 and 1.2% and 1.2%, respectively.
Six Months Ended June 30, 2015
Net income for the six months ended June 30, 2015 was $1,043,000, up $696,000, or 200.6% when compared to the same period in 2014. Basic and diluted earnings per share for the period were $1.41, up $0.96 or 213.3%. Increases of $401,000 and $226,000, or 10.2% and 13.0%, in net interest income and noninterest income, respectively, were the primary reasons for the increase in net income. Also contributing to the improved earnings were decreases of $250,000 and $235,000, or 78.1% and 4.9%, in the provision for loan loss and noninterest expense, respectively.
The increase in net interest income was due to an increase in the net interest rate spread and the increase in noninterest income resulted, primarily, from an increase in gain on sale of loans as a larger volume of residential mortgage loans was originated and sold to the secondary market. Decreases in compensation and expenses associated with other real estate owned were the primary reason for the decrease in noninterest expense. The decrease in the provision for loan losses resulted from management’s analysis of credit quality.
Recent Developments
On July 16, 2015 the Company announced that it had completed the acquisition of St. James Federal Savings and Loan Association (“St. James”) in a conversion merger transaction and the related stock offering of the Company, effective July 16, 2015. As a result of the conversion merger, St. James converted from a federally-chartered mutual savings association to a federally-chartered stock savings association and immediately merged with and into Wells Federal Bank, the surviving entity in the merger conversion. The Company sold 78,736 shares of common stock at a price of $27.36 per share to depositor and borrower members of St. James, to the Employee Stock Ownership Plan and stockholders of Wells, and to members of the general public in a concurrent subscription offering and community offering. Gross offering proceeds totaled approximately $2.15 million. As a result of the stock offering, the Company had 814,758 shares of common stock issued and outstanding as of the close of business on July 16, 2015. St. James’ sole office, located in St. James, Minnesota, has become a branch office of Wells Federal Bank.
Forward-looking Statements
Statements in this press release that are not strictly historical may be “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1996, which involve risks and uncertainties. The foregoing material may contain forward-looking statements concerning the financial condition, results of operations and business of the Company. We caution that such statements are subject to a number of uncertainties and actual results could differ materially and, therefore, readers should not place undue reliance on any forward-looking statements. The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances arising after the date hereof.
**An unaudited consolidated balance sheet and income statement are part of this press release**
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Wells Financial Corp. and Subsidiary
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Consolidated Statement of Financial Condition
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(Dollars in Thousands, except per share data)
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ASSETS
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06/30/15
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12/31/14
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(Unaudited)
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Cash, including interest-bearing accounts:
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$ | 19,865 | $ | 14,373 | ||||
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06/30/15 $11,037; 12/31/14 $7,411
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Certificates of deposit
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1,241 | 4,181 | ||||||
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Fed Funds Sold
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3,000 | 2,000 | ||||||
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Securities available for sale
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32,822 | 34,177 | ||||||
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Federal Home Loan Bank Stock, at cost
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2,068 | 2,079 | ||||||
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Loans held for sale
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3,567 | 1,707 | ||||||
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Loans receivable, net
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177,859 | 182,050 | ||||||
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Accrued interest receivable
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966 | 834 | ||||||
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Premises and equipment
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3,079 | 3,172 | ||||||
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Mortgage servicing rights, net
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1,871 | 1,886 | ||||||
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Foreclosed real estate
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3,199 | 3,656 | ||||||
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Other assets
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1,764 | 1,711 | ||||||
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TOTAL ASSETS
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$ | 251,301 | $ | 251,826 | ||||
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LIABILITIES, MEZZANINE EQUITY AND
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STOCKHOLDERS' EQUITY
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LIABILITIES:
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Deposits
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$ | 220,860 | $ | 221,972 | ||||
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Advances from borrowers for taxes and insurance
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2,621 | 2,630 | ||||||
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Accrued interest payable
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60 | 17 | ||||||
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Accrued expenses and other liabilities
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575 | 588 | ||||||
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TOTAL LIABILITIES
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224,116 | 225,207 | ||||||
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Commitments, Contingencies and Credit Risk
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MEZZANINE EQUITY
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Redeemable common stock held by ESOP, $0.10 par value
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89,925 shares at June 30, 2015; 95,602 shares at December 31, 2014
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2,383 | 2,533 | ||||||
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STOCKHOLDER'S EQUITY:
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Preferred stock, no par value; 500,000 shares authorized; none
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outstanding
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- | - | ||||||
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Common stock, $.10 par value; 7,000.000 shares
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authorized; 2,097,575 shares issued
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$ | 209 | $ | 209 | ||||
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Additional paid in capital
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17,116 | 17,110 | ||||||
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Retained earnings, substantially restricted
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36,479 | 35,552 | ||||||
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Other comprehensive income
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41 | 93 | ||||||
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Treasury stock, at cost, 1,451,478 shares at June
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30, 2015; 1,445,248 shares at December 31, 2014
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(29,043 | ) | (28,878 | ) | ||||
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TOTAL STOCKHOLDERS' EQUITY
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24,802 | 24,086 | ||||||
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TOTAL LIABILITIES, MEZZANINE EQUITY AND
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$ | 251,301 | $ | 251,826 | ||||
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STOCKHOLDERS' EQUITY
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Wells Financial Corp. and Subsidiary
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Consolidated Statement of Income
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(Dollars in thousands, except per share data)
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(Unaudited)
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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2015
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2014
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2015
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2014
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Interest and dividend income
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Loans receivable:
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Residential loans
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$ | 653 | $ | 667 | $ | 1,378 | $ | 1,320 | ||||||||
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Commercial Loans
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364 | 316 | 723 | 623 | ||||||||||||
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Ag Real Estate Loans
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359 | 345 | 743 | 676 | ||||||||||||
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Consumer and other loans
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686 | 632 | 1,393 | 1,258 | ||||||||||||
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Investment securities and other interest-
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bearing deposits
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158 | 177 | 323 | 371 | ||||||||||||
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Total interest income
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2,220 | 2,137 | 4,560 | 4,248 | ||||||||||||
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Interest expense
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Deposits
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108 | 154 | 225 | 314 | ||||||||||||
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Total interest expense
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108 | 154 | 225 | 314 | ||||||||||||
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Net interest income
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2,112 | 1,983 | 4,335 | 3,934 | ||||||||||||
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Provision for loan losses
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- | 150 | 70 | 320 | ||||||||||||
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Net interest income after
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provision for loan losses
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2,112 | 1,833 | 4,265 | 3,614 | ||||||||||||
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Noninterest income
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Gain on sale of loans
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359 | 174 | 524 | 350 | ||||||||||||
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Loan servicing fees
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215 | 207 | 430 | 432 | ||||||||||||
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Insurance commissions
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169 | 151 | 341 | 292 | ||||||||||||
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Fees and service charges
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123 | 112 | 229 | 217 | ||||||||||||
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Other
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222 | 222 | 446 | 453 | ||||||||||||
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Total noninterest income
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1,088 | 866 | 1,970 | 1,744 | ||||||||||||
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Noninterest expense
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Compensation and benefits
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1,145 | 1,188 | 2,257 | 2,367 | ||||||||||||
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Occupancy and equipment
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173 | 193 | 357 | 401 | ||||||||||||
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Federal insurance premiums
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51 | 53 | 105 | 107 | ||||||||||||
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Data processing
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216 | 204 | 430 | 419 | ||||||||||||
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Advertising
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64 | 62 | 123 | 110 | ||||||||||||
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Amortization & Valuation adjustments for MSR's
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104 | 78 | 177 | 149 | ||||||||||||
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Other real estate owned
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142 | 299 | 256 | 354 | ||||||||||||
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Other
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421 | 463 | 840 | 873 | ||||||||||||
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Total noninterest expense
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2,316 | 2,540 | 4,545 | 4,780 | ||||||||||||
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Income before income taxes
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884 | 159 | 1,690 | 578 | ||||||||||||
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Income tax expense
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334 | 63 | 647 | 231 | ||||||||||||
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Net Income
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$ | 550 | $ | 96 | $ | 1,043 | $ | 347 | ||||||||
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Earnings per share
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Basic earnings per share
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$ | 0.75 | $ | 0.13 | $ | 1.41 | $ | 0.45 | ||||||||
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Diluted earnings per share
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$ | 0.75 | $ | 0.13 | $ | 1.41 | $ | 0.45 | ||||||||