WELLS, Minn., Oct. 22, 2014 /PRNewswire/ --              

Three Months Ended September 30, 2014

Lonnie R. Trasamar, President of Wells Financial Corp. (OTC BB:WEFP)(the Company), the holding company of Wells Federal Bank (the Bank), announced earnings for the third quarter of 2014 of $518,000, up $48,000 or 10.2% when compared to the third quarter of 2013.  Basic and diluted earnings per share for the third quarter of 2014 were $0.68, up $0.07 or 11.4% when compared to the third quarter of 2013.  The improvement in net income for the quarter is due, primarily, to a reduction in tax expense and an increase in net interest income.

When comparing the third quarter of 2014 with the third quarter of 2013, net interest income increased by $141,000, or 7.4% due to an increase in the net interest rate spread and an increase in the average balance of the loan portfolio.   The provision for loan loss increased from $40,000 during the third quarter of 2013 to $100,000 during the third quarter of 2014.  Please see discussion below for more information on the provision and allowance for loan loss.  Noninterest income decreased by $95,000 due, primarily, to a decrease in the gain on sale of loans as fewer residential loans were originated and sold to the secondary market.  Noninterest expense increased by $143,000, or 6.7% due, primarily, to an increase in compensation and benefits and data processing costs.  Upon completion and filing of the Company's 2013 income tax return it was realized that the Company was over accrued for income tax purposes.  This over accrual was reversed during the third quarter of 2014 resulting in a decrease in tax expense.

Nine Months Ended September 30, 2014

When comparing the nine months ended September, 30, 2014 net interest income increased by $282,000, or 4.9%, due to increases in the net interest rate spread and the average balance of the loan portfolio discussed above.  Noninterest income decreased by $586,000, or 17.9%, due to a decrease in the gain on sale of loans.  During 2014 changes in market conditions resulted in fewer loans being originated and sold to the secondary market than during 2013.  Noninterest expense increased by $337,000, or 5.0%, due primarily, to increases in compensation and benefits (primarily increased health insurance costs) and data processing. 

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 loss through the provision for loan loss.  The provision for loan loss increased by $5,000 for the first nine months of 2014 when compared to the same period in 2013.  As of September 30, 2014 and 2013, the balance in the allowance for loan losses and the allowance for loan losses as a percentage of total loans were $2,040,000 and $1,634,000 and 1.1% and 1.0%, respectively.

Forward-looking Statements

Statements in this press release that are not strictly historical may be "forward-looking" statements, 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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SOURCE Wells Financial Corp.