[** LOGO **]

Wells
Financial
 Corp.

ANNUAL REPORT




<PAGE>
<TABLE>
<CAPTION>

<S>                                                   <C>
Wells Financial Corp.
Annual Report

Wells Federal Bank,  fsb                                       TABLE OF CONTENTS


MAIN OFFICE:                                               Profile and Stock Market Information.....................  1-2

Wells                                                      Selected Consolidated Financial and Other Data...........    3
53 First Street SW
Wells, Minnesota 56097                                     Letter to Stockholders...................................    4

BRANCH OFFICES:                                            Management's Discussion and Analysis of Financial
                                                             Condition and Results of Operations.................... 5-17
Blue Earth
303 South Main Street                                      Independent Auditor's Report.............................   19
Blue Earth, Minnesota 56013                                Consolidated Statements of Financial Condition...........   20
                                                           Consolidated Statements of Income........................   21
Mankato - Madison East
Madison East Center                                        Consolidated Statements of Stockholders' Equity..........22-23
1400 Madison Avenue
Mankato, Minnesota 56001                                   Consolidated Statements of Cash Flows....................24-26

North Mankato                                              Notes to Consolidated Financial Statements...............27-50
1800 Commerce Drive
North Mankato, Minnesota  56003                            Office Location and Other Corporate Information..........   51

Fairmont
Five Lakes Centre
300 South State Street
Fairmont, Minnesota  56031

Albert Lea
Skyline Mall
1710 West Main Street
Albert Lea, Minnesota  56007

St. Peter
1618 South Minnesota Avenue
St. Peter, Minnesota  56082

Owatonna
496 North Street
Owatonna, Minnesota  55060

</TABLE>

<PAGE>

Wells Financial Corp.

Profile

         Wells  Financial  Corp.  (the  "Company")  is a  Minnesota  corporation
organized in December  1994 at the  direction of the Board of Directors of Wells
Federal Bank, fsb (the "Bank") to acquire all of the capital stock that the Bank
issued upon its conversion  from mutual to stock form of ownership.  The Company
is a unitary  savings and loan  holding  company  which,  under  existing  laws,
generally is not restricted in the types of business  activities in which it may
engage  provided  that the Bank  retains a  specified  amount  of its  assets in
housing-related  investments.  At the present time, because the Company does not
conduct any active  business,  the Company does not intend to employ any persons
other than  officers of the Bank but utilizes the support staff of the Bank from
time to time.

         The Bank is a federally  chartered stock savings bank  headquartered in
Wells, Minnesota.  The Bank has eight full service offices located in Faribault,
Martin, Blue Earth, Nicollet, Freeborn and Steele Counties,  Minnesota. The Bank
was founded in 1934 and its deposits have been federally  insured by the Savings
Association Insurance Fund ("SAIF") and its predecessor, the Federal Savings and
Loan Insurance  Corporation  ("FSLIC"),  since 1934. The Bank is a member of the
Federal  Home Loan  Bank  ("FHLB")  System.  The Bank is a  community  oriented,
full-service  retail savings  institution.  The Bank attracts  deposits from the
general public and uses such deposits primarily to invest in residential lending
on owner occupied properties,  home equity loans and other consumer loans. Other
lending activities  include  agricultural real estate,  agricultural  operating,
multi-family  residential  and commercial  real estate loans.  Cash in excess of
what is needed for lending operations is used to purchase investment  securities
and to  maintain  required  liquidity.  The Bank has two  subsidiaries,  Greater
Minnesota  Mortgage (GMM) and Wells Insurance Agency (WIA). GMM originates loans
through referrals from community  commercial banks and,  primarily,  sells these
loans to the secondary market. WIA is a full service insurance agency that sells
property,  casualty,  life,  health and investment  products,  including  mutual
funds.

Stock Market Information

         Since its issuance on April 11, 1995,  the  Company's  common stock has
been traded on the Nasdaq National Market under the symbol "WEFC." The following
table  reflects  high and low bid  information  during the  periods  shown.  The
quotations reflect inter-dealer  prices,  without retail mark-up,  markdown,  or
commission, and may not represent actual transactions.

                                                         HIGH         LOW
                                                     ------------ -----------

             January 1, 2000 - March 31, 2000           $12.75       $11.13
             April 1, 2000 - June 30, 2000              $13.00       $11.06
             July 1, 2000 - September 30, 2000          $16.00       $12.38
             October 1, 2000 - December 31, 2000        $17.00       $12.75
             January 1, 2001 - March 31, 2001           $18.50       $15.75
             April 1, 2001 - June 30, 2001              $17.60       $16.41
             July 1, 2001 - September 30, 2001          $18.74       $16.70
             October 1, 2001 - December 31, 2001        $19.50       $16.78


         The number of  stockholders  of record of common stock as of the record
date of March 1, 2002, was  approximately  507. This does not reflect the number
of persons or  entities  who held stock in  nominee  or  "street"  name  through
various  brokerage  firms.  At  March  1,  2002,  there  were  1,189,435  shares
outstanding.

                                       1
<PAGE>

         The Company  declared  quarterly  cash  dividends of $0.16 per share on
January 16,  2001,  April 17,  2001,  July 24, 2001 and  October 16,  2001.  The
Company  declared  quarterly  cash  dividends  of $0.15 per share on January 18,
2000,  April 19, 2000 and July 18, 2000.  The Company  declared a quarterly cash
dividend of $0.16 per share on October 17, 2000. The Company declared  quarterly
cash dividends of $0.15 per share on January 20, 1999,  April 21, 1999, July 21,
1999 and October 19, 1999.

         The Company's  ability to pay dividends to  stockholders  is subject to
the requirements of Minnesota law. No dividend may be paid by the Company unless
its board of directors determines that the Company will be able to pay its debts
in the ordinary  course of business after payment of the dividend.  In addition,
the Company's ability to pay dividends is dependent, in part, upon the dividends
it receives  from the Bank.  The Bank may not declare or pay a cash  dividend on
any of its stock if the effect thereof would cause the Bank's regulatory capital
to be  reduced  below  (1)  the  amount  required  for the  liquidation  account
established in connection with the Bank's  conversion from mutual to stock form,
or (2) the  regulatory  capital  requirements  imposed  by the  Office of Thrift
Supervision  ("OTS").  During  2001,  2000 and 1999  the Bank  paid  $2,186,000,
$965,000 and $975,000 in cash dividends, respectively, to the Company.

                                       2

<PAGE>

WELLS FINANCIAL CORP.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

(dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
 Financial Condition
------------------------------------------------ ------------ ---------- ---------- ---------- ----------
 December 31,                                         2001        2000       1999       1998       1997
------------------------------------------------ ------------ ---------- ---------- ---------- ----------

<S>                                               <C>        <C>        <C>        <C>        <C>
Total assets                                        $230,408   $221,848   $199,836   $191,876   $201,436
Loans held for sale                                   10,155      1,955        521      6,097      2,012
Loans receivable, net                                160,513    191,137    172,713    154,305    182,724
Mortgage-backed securities available for sale              -          -          -          -         86
Securities available for sale                         15,863     16,225      2,551      2,968      2,640
Securities held to maturity                                -          -     15,559      5,539      3,198
Certificates of deposit                                  200        200        400        500      1,850
Cash and cash equivalents                             38,070      7,606      4,200     19,446      5,971
Deposits                                             180,999    163,582    156,984    158,441    145,378
Borrowed funds                                        23,000     33,500     17,000      5,000     24,500
Equity                                                23,572     22,341     23,457     25,892     29,641

Summary of Operations
------------------------------------------------ ------------ ---------- ---------- ---------- ----------
Years Ended December 31,                              2001        2000       1999       1998       1997
------------------------------------------------ ------------ ---------- ---------- ---------- ----------

Interest income                                      $16,376    $15,941    $14,214    $14,890    $15,325
Interest expense                                       8,609      9,652      7,698      8,178      8,522
Net interest income                                    7,767      6,289      6,516      6,712      6,803
Provision for loan losses                                180          -         27        120        180
Noninterest income                                     4,290      1,781      1,709      2,405      1,109
Noninterest expense                                    6,175      5,055      5,054      4,769      3,987
Net income                                             3,345      1,765      1,874      2,476      2,220

Other Selected Data
------------------------------------------------ ------------ ---------- ---------- ---------- ----------
Years Ended December 31,                                2001        2000       1999       1998       1997
------------------------------------------------ ------------ ---------- ---------- ---------- ----------

Return on average assets                                 1.51%      0.84%      0.97%      1.26%      1.10%
Return on average equity                                15.06%      7.92%      7.57%      8.85%      7.71%
Average equity to average assets                        10.03%     10.57%     12.77%     14.25%     14.24%
Equity to assets                                        10.23%     10.07%     11.74%     13.49%     14.71%
Net interest rate spread (1)                             3.22%      2.57%      2.89%      2.81%      2.75%
Nonperforming assets to  total loans (2)                 0.55%      0.35%      0.10%      0.23%      0.26%
Allowance for loan losses to total loans                 0.59%      0.43%      0.49%      0.53%      0.41%
Allowance for loan losses to nonperforming             107.90%     134.1%    702.46%    236.94%    172.62%
loans (2)
Basic earnings per share                              $  2.91     $  1.41    $ 1.26    $  1.42    $  1.18
Diluted earnings per share                            $  2.79     $  1.39    $ 1.23    $  1.38    $  1.16

</TABLE>


(1)  Interest rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(2)  Nonperforming loans are loans over 90 days past due.  Nonperforming  assets
     include nonperforming loans and foreclosed real estate.

                                       3
<PAGE>


To Our Stockholders:

On behalf of our Board of  Directors I am pleased to present  our annual  report
for 2001.  I urge you to take a few  minutes to review the  performance  of your
company  as we  continue  to work to enhance  stockholder  value  through  stock
buybacks, cash dividends and increased book value per share.

As noted in the annual report the major activity of Wells Financial Corp. is the
ownership of Wells Federal Bank and its wholly owned  subsidiaries.  It has been
my pleasure to be an employee of Wells Federal Bank for over 44 years,  the last
38 years serving as its chief executive officer. During those years we have gone
through many business cycles with broad  fluctuations in interest rates. We have
had periods of high  inflation  with the prime rate exceeding 21% and periods of
rapidly decreasing interest rates such as we experienced in 2001. Every business
and interest rate cycle presents different challenges.  Management and the board
of  directors  of  your  company  have  one  thing  in  common  and  that  is to
continuously  review,  modify and enhance our  operations  so that the  negative
effects of extreme cycles are minimized.

As previously announced, I retired as president and CEO of Wells Financial Corp.
and Wells  Federal Bank on February 28,  2002.  Since last summer the  executive
search  committee of the board of directors  has spent many hours in the process
of selecting my replacement.

On March 1, 2002,  Mr.  Lonnie R.  Trasamar  became  president  and CEO of Wells
Financial  Corp.  and Wells  Federal  Bank.  Mr.  Trasamar has a  background  in
community banking having served as the president and CEO of a commercial bank in
southern  Minnesota.  Mr.  Trasamar  also  has  experience  in real  estate  and
insurance  sales  and in  commercial  real  estate  development.  As a long time
resident of our area he is very familiar with Wells Federal Bank.  His executive
experience  in  community  banking and  experience  in  commercial  lending will
enhance and expand the solid foundation on which we operate.

Thank  you for the  confidence  you  have  shown  by your  investment  in  Wells
Financial Corp. We ask for and look forward to your continued support.

Best regards,


/s/Lawrence H. Kruse
--------------------

Lawrence H. Kruse
Chairman of the Board

                                       4

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollars in thousands)

General

         The  Company's  business  activities  to date have been  limited to its
investment in and loan to the Bank and a loan made to the Bank's  Employee Stock
Ownership  Plan ("ESOP") to enable the ESOP to purchase  shares of the Company's
common stock and, to a lesser  degree,  investing in securities  and deposits in
other financial  institutions.  The Company's  investment  securities consist of
obligations  issued  by  agencies  of the U.S.  government.  As a result  of the
limited  operations of the Company,  this  discussion  primarily  relates to the
Bank.  The principal  business of the Bank consists of attracting  deposits from
the general public and using such deposits, together with borrowings,  primarily
to invest in  residential  lending on owner occupied  properties.  The Bank also
makes consumer  loans and  agricultural  related loans and purchases  investment
securities.  The Bank's  investment  securities  consist of U.S.  government and
agency  obligations,  mortgage-backed  securities,  equity  securities  and FHLB
stock.  The Bank's loans consist  primarily of loans secured by residential real
estate  located in its market area and, to a lesser  extent,  agricultural  real
estate loans, commercial real estate loans and consumer loans.

         The Bank's net  earnings  are  dependent  primarily on its net interest
income, which is the difference between interest income earned on its investment
and loan  portfolios  and interest  paid on  interest-bearing  liabilities.  Net
interest  income is determined by (i) the  difference  between  yields earned on
interest-earning assets and rates paid on interest-bearing liabilities (interest
rate  spread)  and (ii) the  relative  amounts  of  interest-earning  assets and
interest-bearing  liabilities.  The Bank's  interest  rate spread is affected by
regulatory,  economic,  and competitive  factors that influence  interest rates,
loan demand,  and deposit flows.  To a lesser  extent,  the level of noninterest
income, which primarily consists of service charges and other fees, also affects
the Bank's net  earnings.  In addition,  the level of  noninterest  (general and
administrative) expenses affects net earnings.

         The  operations  of  the  Bank  and  the  entire  thrift  industry  are
significantly affected by prevailing economic conditions,  competition,  and the
monetary  and  fiscal  policies  of  the  federal  government  and  governmental
agencies.  The demand for and supply of housing,  competition among lenders, the
level  of  interest  rates,  and the  availability  of funds  influence  lending
activities. Deposit flows and costs of funds are influenced by prevailing market
rates of interest,  primarily on competing investments,  account maturities, and
the levels of personal income and savings in the Bank's market area.

                                       5
<PAGE>

(dollars in thousands)

         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.

Asset/Liability Management

         Net interest income,  the primary component of the Bank's net earnings,
is derived from the difference or "spread" between the yield on interest-earning
assets  and the cost of  interest-bearing  liabilities.  The Bank has  sought to
reduce its  exposure to changes in interest  rates by matching  more closely the
effective maturities or repricing characteristics of its interest-earning assets
and  interest-bearing  liabilities.  The  matching  of  the  Bank's  assets  and
liabilities  may be  analyzed  by  examining  the extent to which its assets and
liabilities  are interest rate sensitive and by monitoring the expected  effects
of interest rate changes on its net portfolio value.

         An asset or liability is interest rate sensitive within a specific time
period if it will  mature or  reprice  within  that time  period.  If the Bank's
assets  mature  or  reprice  more  quickly  or  to a  greater  extent  than  its
liabilities,  the Bank's net portfolio  value and net interest income would tend
to increase  during periods of rising interest rates but decrease during periods
of falling interest rates. If the Bank's assets mature or reprice more slowly or
to a lesser extent than its liabilities,  the Bank's net portfolio value and net
interest  income would tend to decrease  during periods of rising interest rates
but increase  during periods of falling  interest  rates.  The Bank's policy has
been to mitigate  the  interest  rate risk  inherent in the  historical  savings
institution  business  of  originating  long-term  loans  funded  by  short-term
deposits by pursuing certain  strategies  designed to decrease the vulnerability
of its  earnings to material  and  prolonged  changes in interest  rates.  These
strategies  include  obtaining  longer term fixed rate  borrowings  at favorable
rates and, in periods of lower interest rates,  the sale of all newly originated
fixed rate mortgage loans to the secondary market.

                                       6
<PAGE>

(dollars in thousands)

         The  Bank's  lending   strategy  is  focused  on  the   origination  of
traditional one-to-four family mortgage loans primarily secured by single family
residences in the Bank's primary market area.  During recent  periods,  the Bank
has utilized  borrowings as a way of accommodating loan demand,  consistent with
its goal of maintaining  asset  quality.  The Bank also invests a portion of its
assets in consumer,  agricultural real estate and agricultural  operating loans,
commercial  business and commercial real estate loans and investment  securities
as a  method  of  reducing  interest  rate  risk.  These  loans  typically  have
adjustable  interest  rates and are for  shorter  terms than  residential  first
mortgage loans. The Bank's entire commercial business loan portfolio and most of
the  commercial  real estate  portfolio  are secured by equipment or real estate
used for farming.  These loans typically have higher interest rates than one-to-
four family loans but have not  historically  resulted in greater losses for the
Bank.  Historically,  the Bank  sells  higher  loan to value  ratio  fixed  rate
mortgage  loans and mortgage  loans with original  maturities of twenty years or
less into the secondary  market and retains  adjustable  rate mortgage loans and
lower loan to value ratios  fixed rate loans with  original  maturities  greater
than twenty years. Due to the lower than normal interest rate environment during
the first half of 1999,  the last half of 2000 and all of 2001 the Bank  elected
to sell the  majority of the fixed rate loans it  originated  during  those time
periods,  regardless of the loan to value ratio or the contractual  maturity. In
addition,  the  Bank  retains  servicing  on most of the  loans  that it  sells,
enabling it to generate  additional  income and  maintain  certain  economies of
scale in loan servicing.

         In order to improve the Bank's interest rate sensitivity, improve asset
quality,  and provide  diversification  in the asset mix,  the Bank  maintains a
percentage of its assets in investment securities,  which generally have shorter
terms to maturity.  The Bank's  purchase of  investment  securities  is designed
primarily for safety of principal and secondarily for rate of return.

         On a  weekly  basis,  the  Bank  monitors  the  interest  rates  of its
competitors  and sets its  interest  rates such that its rates are  neither  the
highest  or lowest in its  market  area.  The Bank  intends  for its rates to be
competitive  and  perhaps  slightly  above the  average  rates being paid in its
market area. The Bank has sought to remain competitive in its market by offering
a variety of products. The Bank attempts to manage the interest rates it pays on
deposits while  maintaining a stable deposit base and providing quality services
to its customers.

                                       7
<PAGE>

(dollars in thousands)

Net Portfolio Value

         To encourage  associations  to reduce their interest rate risk, the OTS
adopted a rule  incorporating  an interest rate risk ("IRR")  component into the
risk-based capital rules. This rule is not yet in effect. The IRR component is a
dollar  amount  that will be  deducted  from total  capital  for the  purpose of
calculating an institution's  risk-based capital  requirement and is measured in
terms of the  sensitivity  of its net  portfolio  value  ("NPV")  to  changes in
interest rates. NPV is the difference  between incoming and outgoing  discounted
cash flows  from  assets,  liabilities,  and  off-balance  sheet  contracts.  An
institution's  IRR  is  measured  as the  change  to its  NPV as a  result  of a
hypothetical 200 basis point change in market interest rates. A resulting change
in the NPV ratio of more than 2% (200 bp) will require the institution to deduct
from its capital 50% of the amount of change in NPV. The rule  provides that the
OTS will calculate the IRR component quarterly for each institution. The OTS has
informed the Bank, based on asset size and risk-based capital, that it is exempt
from this rule.  Nevertheless,  the following  table  presents the Bank's NPV at
December 31, 2001, as calculated by the OTS,  based on  information  provided to
the OTS by the Bank.

<TABLE>
<CAPTION>

                                                     Percent of              Change in
     Change Interest     Estimated      Amount of    Estimated     NPV       NPV Ratio(4)
   Rates (basis points)     NPV         Change(1)     NPV(2)     Ratio(3)   (basis points)
   --------------------     ---         ---------     ------     --------   --------------
                         (Dollars in thousands)

<S>       <C>          <C>           <C>               <C>       <C>             <C>
            +300          $16,210       $(11,775)         (42)%     7.22%          -450 bp
            +200           20,305         (7,680)         (27)%     8.85%          -287 bp
            +100           24,336         (3,648)         (13)%    10.39%          -133 bp
              --           27,985                                  11.72%
            -100           30,667          2,682           10%     12.65%            92 bp

</TABLE>



(1)  Represents  the excess  (deficiency)  of the  estimated  NPV  assuming  the
     indicated  change in interest  rates minus the  estimated  NPV  assuming no
     change in interest rates.
(2)  Calculated  as the  amount of change in the  estimated  NPV  divided by the
     estimated NPV assuming no change in interest rates.
(3)  Calculated as the estimated NPV divided by average total assets.
(4)  Calculated  as the  excess  (deficiency)  of the  NPV  ratio  assuming  the
     indicated change in interest rates over the estimated NPV ratio assuming no
     change in interest rates.

                                       8

<PAGE>

(dollars in thousands)

                                                                 At
                                                            December 31,
                                                                2001
                                                         -------------------

*** Risk Measures: 200 bp rate shock ***
Pre-Shock NPV Ratio: NPV as % of PV of Assets                  11.72%
Exposure Measure: Post-Shock NPV Ratio                          8.85%
Sensitivity Measure: Change in NPV Ratio                         287 bp


         Although  the OTS has  informed  the Bank that it is not subject to the
IRR component  discussed  above, the Bank is still subject to interest rate risk
and, as can be seen above,  rising interest rates will reduce the Bank's NPV. If
the Bank were  subject to the IRR  component  at December  31, 2001, a deduction
from capital would have been required.

         Also, during periods of increasing  interest rates, the Bank's interest
rate sensitive liabilities would reprice faster than its interest rate sensitive
assets  (repricing  periods on  adjustable-rate  loans  affect the  repricing of
interest rate  sensitive  assets,  with longer  repricing  periods  delaying the
repricing of such assets more than  shorter  repricing  periods  would delay the
repricing of such assets),  causing a decline in the Bank's interest rate spread
and  margin.  In times of  decreasing  interest  rates,  the value of fixed rate
assets  could  increase  in value  and the lag in  repricing  of  interest  rate
sensitive assets could be expected to have a positive effect on the Bank.

                                       9

<PAGE>

Average Balance Sheet (dollars in thousands)

         The  following  table sets forth  certain  information  relating to the
Bank's  average  balance  sheet and  reflects  the  average  yield on assets and
average cost of  liabilities  for the periods  indicated and the average  yields
earned and rates paid.  Such yields and costs are derived by dividing  income or
expense by the average balance of assets or liabilities,  respectively,  for the
periods presented. The yields for the periods presented include loan origination
fees that are considered adjustments to yield. Average balances are derived from
month-end  balances.  Management  does not  believe  that  the use of  month-end
balances instead of daily average balances has caused any material difference in
the information presented.

<TABLE>
<CAPTION>

                                                                         Year Ended December 31,
                                      ----------------------------------------------------------------------------------------------
                                                    2001                           2000                           1999
                                      ----------------------------------------------------------------------------------------------
                                        Average               Average    Average            Average     Average            Average
                                        Balance   Interest  Yield/Cost   Balance  Interest Yield/Cost   Balance  Interest Yield/Cost
                                        -------   --------  ----------   -------  -------- ----------   -------  -------- ----------
<S>                                 <C>           <C>         <C>    <C>        <C>          <C>    <C>        <C>        <C>
Interest-earning assets:
   Loans receivable (1)               $ 186,772    $15,239      8.16%  $ 184,773  $ 14,814     8.02%  $ 161,444  $ 12,831   7.95%
   Investments (2)                       28,524      1,137      3.99%     20,280     1,127     5.56%     27,442     1,383   5.04%
                                      ---------- ---------- ---------- ---------- ------------------- ---------- --------- -------
      Total interest-earning assets     215,296     16,376      7.61%    205,053    15,941     7.77%    188,886    14,214   7.53%

Noninterest earning assets                6,217                            5,692                          4,994
                                      ----------                       ----------                     ----------
      Total assets                    $ 221,513                        $ 210,745                      $ 193,880
                                      ==========                       ==========                     ==========

Interest bearing liabilities:
   Savings, NOW and money
      Market accounts                    46,932      1,024      2.18%     45,037     1,136     2.52%     45,352     1,153   2.54%
   Certificates of deposit              123,809      6,234      5.04%    114,980     6,963     6.06%    113,337     6,160   5.44%
   Borrowed funds                        25,192      1,351      5.36%     25,538     1,553     6.08%      7,462       385   5.16%
                                      ---------- ---------- ---------- ---------- -------------------  --------- --------- -------
      Total interest bearing
         liabilities                    195,933      8,609      4.39%    185,555     9,652     5.20%    166,151     7,698   4.64%

Noninterest bearing liabilities           3,373                            2,910                          2,975
                                      ----------                       ----------                     ----------
      Total liabilities                 199,306                          188,465                        169,126
Equity                                   22,207                           22,280                         24,754
                                      ----------                       ----------                     ----------
      Total liabilities and equity    $ 221,513                        $ 210,745                      $ 193,880
                                      ==========                       ==========                     ==========
Net interest income                              $   7,767                        $  6,289                       $  6,516
                                                 ==========                       ========                       =========
Interest rate spread (3)                                        3.22%                          2.57%                        2.89%
Net yield on interest earning assets                            3.61%                          3.07%                        3.45%
(4)
Ratio of average interest earning
  assets to average interest bearing
  liabilities                              1.10X                            1.11X                          1.14X
                                      ==========                       ==========                     ==========
</TABLE>


(1)  Average balances include non-accrual loans and loans held for sale.
(2)  Includes interest-bearing deposits in other financial institutions.
(3)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(4)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.

                                       10
<PAGE>

(dollars in thousands)

Rate/Volume Analysis

         The table below sets forth  certain  information  regarding  changes in
interest income and interest  expense of the Bank for the years  indicated.  For
each  category  of  interest-earning  assets and  interest-bearing  liabilities,
information  is  provided  on  changes  attributable  to (i)  changes  in volume
(changes  in  average  volume  multiplied  by old rate);  (ii)  changes in rates
(changes in rate multiplied by old average volume); (iii) changes in rate-volume
(changes in rate multiplied by the change in average volume).

<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                                     ------------------------------------------------------------------------------------
                                                 2001 vs. 2000                                2000 vs. 1999
                                     ---------------------------------------     ----------------------------------------
                                           Increase (Decrease) Due to                  Increase (Decrease) Due to
                                     ---------------------------------------     ----------------------------------------
                                                         Rate/                                        Rate/
                                      Volume    Rate     Volume      Net         Volume      Rate     Volume      Net
                                     --------- -------- --------- ----------     ---------- -------- --------- ----------
<S>                               <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Interest Income:
  Loans receivable                  $   160    $   262    $     3    $   425    $ 1,854    $   113    $    16    $ 1,983
  Investments                           458       (319)      (129)        10       (362)       143        (37)      (256)
                                    -------    -------    -------    -------    -------    -------    -------    -------
    Total interest-earning assets       618        (57)      (126)       435      1,492        256        (21)     1,727
                                    -------    -------    -------    -------    -------    -------    -------    -------

Interest expense:
  Deposit accounts                      583     (1,327)       (97)      (841)        61        719          6        786
  Borrowed funds                        (21)      (183)         2       (202)       933         69        166      1,168
                                    -------    -------    -------    -------    -------    -------    -------    -------
     Total interest-bearing
       liabilities                      562     (1,510)       (95)    (1,043)       994        788        172      1,954
                                    -------    -------    -------    -------    -------    -------    -------    -------

Change in net interest income       $    56    $ 1,453    $   (31)   $ 1,478    $   498    $  (532)   $  (193)   $  (227)
                                    =======    =======    =======    =======    =======    =======    =======    =======
</TABLE>

                                       11
<PAGE>

(dollars in thousands)

Financial Condition

         Total assets  increased by $8,560 from $221,848 at December 31, 2000 to
$230,408  at  December  31,  2001.  Loans  receivable  and  loans  held for sale
decreased by $22,424 from  December 31, 2000 to December 31, 2001.  Due to lower
interest rates on residential mortgages, management elected to sell the majority
of the  residential  loans  originated  during  2001  to the  secondary  market.
Included in the loans that were  originated and sold during 2001 were loans from
the Company's  mortgage loan  portfolio  that were  refinanced  resulting in the
decrease  in  loans  receivable  and  loans  held  for  sale.  Cash,   including
interest-bearing accounts, increased by $30,464. This increase resulted from the
refinancing  activity of the Company's loan portfolio  described above,  from an
increase in deposits and from cash provided by operations.

         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. As of December 31, 2001
and  December  31, 2000,  the balance in the  allowance  for loan losses and the
allowance  for loan losses as a percentage of total loans were $952 and $833 and
0.59% and 0.43%, respectively.

         Loans on which the accrual of interest had been  discontinued  amounted
to $408 and $363 at  December  31,  2001 and 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 December 31,
2001 and 2000.

         Liabilities  increased by $7,329, from $199,507 at December 31, 2000 to
$206,836 at December 31, 2001.  This increase is primarily due to an increase of
$17,417 in deposits  being  partially  offset by a $10,500  decrease in borrowed
funds.

         Stockholders'  equity  increased by $1,231 from $22,341 at December 31,
2000 to $23,572 at December 31, 2001. The increase in  stockholders'  equity was
primarily the result of net income for 2001 of $3,345 being partially  offset by
the payment of $735 in cash  dividends and the  repurchase of 116,140  shares of
treasury stock at a total cost of $2,006.  Also affecting  stockholders'  equity
was  the  allocation  of $267 of  employee  stock  ownership  plan  shares,  the
amortization of $109 of unearned  compensation  and an increase of $204 from the
exercise of stock options.

Comparison of Operating Results for the Years Ended December 31, 2001 and 2000

         General.  Net  income  increased  by  $1,580,  or 89.5%  for 2001  when
compared to 2000. The increase in net income was primarily due to an increase of
$2,509 in  noninterest  income and an increase of $1,478 in net interest  income
for  2001  when  compared  to  2000.   Partially  offsetting  the  increases  in
noninterest  income and net interest  income were increases of $1,120 and $1,107
in noninterest expense and income tax expense, respectively.

         Interest  Income.  Interest income  increased by $435, or 2.7%, for the
year ended  December 31, 2001 when compared to the year ended  December 31, 2000
primarily due to an increase of $425 in interest  income from the Company's loan
portfolio.  The increase in interest  income from loans was primarily the result
of an  increase  in the  average  yield of the loan  portfolio  during 2001 when
compared to 2000. To a lesser  extent,  an increase in the average amount of the
loan portfolio also contributed to the increase in interest income from the loan
portfolio.  Also contributing to the increase in interest income was an increase
in interest income from investments  which was due to an increase in the average
amount of the investment portfolio during 2001 when compared to 2000.

                                       12
<PAGE>

(dollars in thousands)

         Interest Expense. Total interest expense decreased by $1,043, or 10.8%,
for the year ended  December 31, 2001 when  compared to the year ended  December
31, 2000.  Interest expense on deposits decreased by $841, or 10.4%, during 2001
when  compared to 2000  primarily  due to a decrease in the average rate paid on
deposits.  Interest expense on borrowed funds decreased by $202 during 2001 when
compared to 2000  primarily  due to a decrease  in the average  cost of borrowed
funds during 2001 when compared to 2000.

         Net Interest Income. Net interest income increased by $1,478, or 23.5%,
for the year ended  December 31, 2001 when  compared to the year ended  December
31, 2000 due to the changes in interest  income and interest  expense  described
above.

         Provision for Loan Losses. The provision for loan loss was increased by
$180  for the year  ended  December  31,  2001.  There  was no  increase  in the
provision for loan loss for the year ended  December 31, 2000. Net loans charged
off  were  $61  and  $24  in  the  years  ended  December  31,  2001  and  2000,
respectively,   primarily  from  the  Company's   installment   loan  portfolio.
Classified  loans were 1.08% and 0.67% of total loans at  December  31, 2001 and
2000, respectively. Nonaccrual loans were $408 and $363 at December 31, 2001 and
2000,  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 $2,509, or 140.9%,
for 2001 when compared to 2000 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 2001, the Company sold to
the secondary market a larger volume of loans during 2001 when compared to 2000,
resulting in increases in the gain on sale of loans originated for sale and loan
origination and commitment fees recognized immediately in income.

         Noninterest Expense. Noninterest expense increased by $1,120, or 22.2%,
for the year ended  December 31, 2001 when  compared to the year ended  December
31, 2000  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 and an increase in the
amortization  of  Management  Stock  Bonus Plan  awards.  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 $1,107 for 2001
when compared to 2000. This increase is  proportionate to the increase in income
before income taxes for 2001 when compared to 2000.

                                       13
<PAGE>

(dollars in thousands)

Comparison of Operating Results for the Years Ended December 31, 2000 and 1999

         General.  Net income for the year ended  December 31, 2000 decreased by
$109,  or 5.8%,  from $1,874 for the year ended  December 31, 1999 to $1,765 for
the year ended  December  31,  2000.  The  decrease  in net income for 2000 when
compared to 1999 was primarily due to a $227 decrease in net interest income.

         Interest Income. Interest income increased by $1,727, or 12.2%, for the
year ended  December 31, 2000 when compared to the year ended December 31, 1999.
A $1,983  increase in interest  income on loans was  partially  offset by a $256
decrease in interest  income from  investments.  The increase in interest income
from loans was primarily the result of an increase in the average  amount of the
loan  portfolio  during  2000 when  compared  to 1999.  To a lesser  extent,  an
increase in the average  yield on the loan  portfolio  also  contributed  to the
increase in interest  income from the loan  portfolio.  The decrease in interest
income  from  investments  was due to a decrease  in the  average  amount of the
investment portfolio during 2000 when compared to 1999.

         Interest Expense. Total interest expense increased by $1,954, or 25.4%,
for the year ended  December 31, 2000 when  compared to the year ended  December
31, 1999.  Interest expense on deposits increased by $786, or 10.7%, during 2000
when  compared to 1999  primarily due to an increase in the average rate paid on
deposits.  Interest  expense on borrowed  funds  increased by $1,168 during 2000
when  compared to 1999  primarily  due to an  increase in the average  amount of
borrowed funds during 2000 when compared to 1999.

         Net Interest  Income.  Net interest income  decreased by $227, or 3.5%,
for the year ended  December 31, 2000 when  compared to the year ended  December
31, 1999 due to the changes in interest  income and interest  expense  described
above.

         Provision for Loan Losses. The provision for loan loss decreased by $27
for the year ended  December 31, 2000 when  compared to the year ended  December
31, 1999.  Management  monitors 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. 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 $72, or 4.2%, for
2000 when compared to 1999. The increase in noninterest income was primarily due
to an  increase  in the  gain on sale of  securities  available-for-sale  and an
increase  in  insurance  commissions  of $122 and $41,  respectively.  Partially
offsetting  these  increases  was a  decrease  of $84 in  loan  origination  and
commitment fees which resulted from fewer loans on single family dwellings being
originated during 2000 when compared to 1999.

         Noninterest  Expense.  Noninterest expense remained relatively constant
for the year ended  December 31, 2000 when  compared to the year ended  December
31, 1999.

         Income Tax Expense.  Income tax expense  decreased by $20 for 2000 when
compared to 1999.  This  decrease was the result of a decrease in income  before
taxes for 2000 when compared to 1999.

                                       14
<PAGE>

(dollars in thousands)

Liquidity and Capital Resources

         The Bank's  primary  sources of funds are  deposits,  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 primary 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.

         The Bank's most liquid asset is cash, including investments in interest
bearing accounts at the FHLB of Des Moines that have no withdrawal restrictions.
The levels of these assets are dependent on the Bank's operating,  financing and
investing activities during any given period. At December 31, 2001 and 2000, the
Bank's noninterest bearing cash was $1,240 and $1,053, respectively.

         Also  available  to  the  Bank  to  meet  liquidity   requirements  are
borrowings  from the Federal Home Loan Bank. At December 31, 2001,  the Bank had
$23,000 in  outstanding  advances  from the FHLB of Des Moines,  which have been
used to fund loan  originations.  At December 31, 2001, the Bank had the ability
to borrow approximately 2.75 times its then outstanding advances.

         In 1996,  1998,  1999 and 2000,  the  Company  approved  stock buy back
programs in which up to 955,606  shares of the 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 2001 the Company bought 116,140 shares of its common stock under this buy
back program.

         The Bank is  required  to maintain  specified  amounts of capital.  The
capital  standards  generally  require the  maintenance  of  regulatory  capital
sufficient to meet a tangible capital  requirement,  a core capital  requirement
and a risk-based capital requirement.  At December 31, 2001, the Bank's tangible
capital  totaled  $18,474,  or 8.16% of adjusted total assets,  and core capital
totaled $18,474, or 8.16% of adjusted total assets, which substantially exceeded
the respective 1.5% tangible capital and 4.0% core capital  requirements at that
date by $15,079 and $9,422,  respectively,  or 6.66% and 4.16% of adjusted total
assets, respectively.  The Bank's risk-based capital totaled $19,425 at December
31,  2001  or  13.63%  of  risk-weighted  assets,  which  exceeded  the  current
requirements of 8.0% of risk-weighted assets by $8,022 or 5.63% of risk-weighted
assets.

Impact of Inflation and Changing Prices

         The  consolidated  financial  statements  and notes  thereto  presented
herein have been prepared in accordance  with  accounting  principles  generally
accepted in the United  States of America,  which  require  the  measurement  of
financial  position and operating results in terms of historical dollars without
considering the change in the relative  purchasing  power of money over time due
to inflation.  The impact of inflation is reflected in the increased cost of the
Bank's operations.  Unlike most industrial companies,  nearly all the assets and
liabilities of the Bank are monetary in nature. As a result, interest rates have
a greater impact on the Bank's performance than do the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the price of goods and services.

                                       15
<PAGE>

(dollars in thousands)

Impact of New Accounting Standards

         In  September  2000,  the  Financial  Accounting  Standards  Board (the
"FASB") issued SFAS No. 140 "Accounting for Transfers and Servicing of Financial
Assets and  Extinguishments  of  Liabilities",  which  revises the standards for
accounting  for  securitizations  and other  transfers of  financial  assets and
collateral  and  requires  certain  disclosures,  but  carries  over most of the
provisions of SFAS No. 125 without  reconsiderations.  SFAS No. 140 is effective
for  transfers  and  servicing  of  financial  assets  and   extinguishments  of
liabilities  occurring  after March 31, 2001.  The  Statement  is effective  for
recognition and  reclassification of collateral and for disclosures  relating to
securitization  transactions  and  collateral  for  fiscal  years  ending  after
December 15, 2000.  Management  adopted SFAS No. 140 effective April 1, 2001, as
required, without material effect on the Company's financial position or results
of operations.

         In June 2001,  the FASB  issued SFAS No. 141  "Business  Combinations,"
which requires that all business  combinations  initiated after June 30, 2001 be
accounted  for using the  purchase  method.  The  pooling-of-interest  method of
accounting is prohibited except for combinations initiated before June 30, 2001.
The  remaining  provisions  of SFAS No. 141  relating to  business  combinations
accounted for by the purchase  method,  including  identification  of intangible
assets,  accounting for negative goodwill,  financial statement presentation and
disclosure, are effective for combinations completed after June 30, 2001.

         In June 2001,  the FASB issued SFAS No. 142  "Goodwill  and  Intangible
Assets," which prescribes  accounting for all purchased  goodwill and intangible
assets.  Pursuant to SFAS No. 142,  acquired  goodwill is not amortized,  but is
tested for  impairment  at the  reporting  unit level  annually  and whenever an
impairment  indicator arises. All goodwill should be assigned to reporting units
that are expected to benefit from the goodwill.  Goodwill  impairment  should be
tested with a two-step  approach.  First,  the fair value of the reporting  unit
should be compared to its carrying value,  including goodwill.  If the reporting
unit's  carrying  value  exceeds its fair value,  then any  goodwill  impairment
should be  measured  as the  excess of the  goodwill's  carrying  value over its
implied fair value.  The implied fair value of goodwill  should be calculated in
the same manner as goodwill is calculated for a business combination,  using the
reporting unit's fair value as the "purchase price".  Therefore,  the goodwill's
implied fair value will be the excess of the  "purchase  price" over the amounts
allocated to assets,  including unrecognized  intangible assets, and liabilities
of the  reporting  unit.  Goodwill  impairment  losses should be reported in the
income  statement  as a separate  line item within  operations,  except for such
losses  included  in  the  calculation  of a  gain  or  loss  from  discontinued
operations.

         An acquired intangible asset, other than goodwill,  should be amortized
over its  useful  economic  life.  The  useful  life of an  intangible  asset is
indefinite if it extends beyond the foreseeable  horizon.  If an asset's life is
indefinite, the asset should not be amortized until the life is determined to be
finite.  Intangible  assets  being  amortized  should be tested  for  impairment
annually and whenever  there are  indicators  of  impairment,  by comparing  the
asset's fair value to its carrying amount.

         SFAS No. 142 is effective for fiscal years beginning after December 15,
2001.  Early  adoption is permitted  for companies  with fiscal years  beginning
after March 15, 2001, but only if the first quarter  financial  statements  have
not  previously  been  issued.  SFAS No. 142 is not  expected to have a material
effect on the Company's financial position or results of operations.

                                       16
<PAGE>

(dollars in thousands)

         In August  2001,  the FASB  issued  SFAS No.  144  "Accounting  for the
Impairment  or  Disposal  of  Long-Lived  Assets",   which  addresses  financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
The  Statement  supersedes  SFAS  No.  121  "Accounting  for the  Impairment  of
Long-Lived  Assets  and  for  Long-Lived  Assets  to Be  Disposed  Of",  and the
accounting and reporting provisions of APB Opinion No 30, "Reporting the Results
of  Operations  - Reporting  the Effects of Disposal of a Segment of a Business,
and Extraordinary,  Unusual and Infrequently  Occurring Events and Transactions"
for the disposal of a segment of a business.  This Statement also amends ARB No.
51  "Consolidated   Financial   Statements",   to  eliminate  the  exception  to
consolidation for a subsidiary for which control is likely to be temporary. SFAS
No. 144 is effective for financial  statements issued for fiscal years beginning
after  December 15, 2001, and interim  periods  within those fiscal years,  with
early  application  encouraged.  SFAS No. 144 is not expected to have a material
effect on the Company's financial position or results of operations.

                                       17
<PAGE>



                          Independent Auditor's Report



To the Board of Directors and Stockholders
Wells Financial Corp. and Subsidiary
Wells, Minnesota

We have audited the accompanying  consolidated statements of financial condition
of Wells  Financial  Corp.  and Subsidiary as of December 31, 2001 and 2000, and
the related  consolidated  statements of income,  stockholders'  equity and cash
flows for each of the three years in the period ended  December 31, 2001.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Wells  Financial
Corp.  and Subsidiary as of December 31, 2001 and 2000, and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.


                                        /s/McGladrey & Pullen, LLP
                                        ----------------------------------------

Rochester, Minnesota
February 7, 2002

                                       19


<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 2001 and 2000
(dollars in thousands)
<TABLE>
<CAPTION>

ASSETS                                                                                    2001               2000
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                <C>
Cash, including interest-bearing accounts
  2001 $36,830; 2000 $6,553                                                           $  38,070          $   7,606
Certificates of deposit (Note 2)                                                            200                200
Securities available for sale (Notes 3 and 10)                                           15,863             16,225
Loans held for sale (Note 5)                                                             10,155              1,955
Loans receivable, net (Notes 5, 10, 16 and 17)                                          160,513            191,137
Accrued interest receivable                                                               1,529              1,910
Premises and equipment (Note 8)                                                           1,801              1,833
Foreclosed real estate (Note 7)                                                             252                 54
Other assets (Note 6)                                                                     2,025                928
                                                                             --------------------------------------
   Total assets                                                                       $ 230,408          $ 221,848
                                                                             ======================================

LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------------------------
Liabilities
  Deposits (Note 9)                                                                   $ 180,999          $ 163,582
  Borrowed funds (Note 10)                                                               23,000             33,500
  Advances from borrowers for taxes and insurance (Note 6)                                1,371              1,228
  Deferred income taxes (Note 11)                                                         1,224                855
  Accrued interest payable                                                                   75                129
  Accrued expenses and other liabilities                                                    167                213
                                                                             --------------------------------------
    Total liabilities                                                                   206,836            199,507
                                                                             --------------------------------------

Commitments, contingencies and credit risk (Notes 15, 16, and 17)

Stockholders' Equity (Notes 12 and 14)
  Preferred stock, no par value; 500,000 shares authorized;
    none outstanding                                                                          -                  -
  Common stock, $.10 par value; 7,000,000 shares
   authorized; 2,187,500 shares issued                                                      219                219
  Additional paid-in capital                                                             16,932             17,011
  Retained earnings, substantially restricted                                            21,792             19,182
  Accumulated other comprehensive income                                                    745                698
  Unearned Employee Stock Ownership Plan shares                                            (155)              (290)
  Unearned compensation-restricted stock awards                                            (128)              (237)
  Less cost of treasury stock, 2001 1,022,399 shares;
   2000 933,168 shares                                                                  (15,833)           (14,242)
                                                                             --------------------------------------
   Total stockholders' equity                                                            23,572             22,341
                                                                             --------------------------------------
   Total liabilities and stockholders' equity                                         $ 230,408          $ 221,848
                                                                             ======================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       20
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2001, 2000 and 1999
(dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                       2001               2000               1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                <C>                <C>
Interest and Dividend Income
  Loans receivable:
   First mortgage loans                                             $ 11,658           $ 11,532           $ 10,112
   Consumer and other loans                                            3,581              3,282              2,719
  Investment securities and interest-
    bearing deposits                                                   1,137              1,127              1,383
                                                          ---------------------------------------------------------
    Total interest income                                             16,376             15,941             14,214
                                                          ---------------------------------------------------------
Interest Expense
  Deposits                                                             7,258              8,099              7,313
  Borrowed funds                                                       1,351              1,553                385
                                                          ---------------------------------------------------------
    Total interest expense                                             8,609              9,652              7,698
                                                          ---------------------------------------------------------
    Net interest income                                                7,767              6,289              6,516
Provision for loan losses (Note 5)                                       180                  -                 27
                                                          ---------------------------------------------------------
    Net interest income after
     provision for loan losses                                         7,587              6,289              6,489
                                                          ---------------------------------------------------------
Noninterest Income
  Gain on sale of loans                                                1,150                166                188
  Gain on sale of securities, net                                          -                122                  -
  Loan origination and commitment fees                                 1,457                211                295
  Loan servicing fees                                                    464                401                397
  Insurance commissions                                                  410                387                346
  Fees and service charges                                               774                442                450
  Other                                                                   35                 52                 33
                                                          ---------------------------------------------------------
    Total noninterest income                                           4,290              1,781              1,709
                                                          ---------------------------------------------------------
Noninterest Expenses
  Compensation and benefits (Note 14)                                  3,025              2,619              2,493
  Occupancy and equipment (Note 15)                                      856                819                788
  Data processing                                                        403                357                340
  Advertising                                                            213                224                214
  Other                                                                1,678              1,036              1,219
                                                          ---------------------------------------------------------
    Total noninterest expenses                                         6,175              5,055              5,054
                                                          ---------------------------------------------------------
    Income before income taxes                                         5,702              3,015              3,144
Income tax expense (Note 11)                                           2,357              1,250              1,270
                                                          ---------------------------------------------------------
  Net income                                                         $ 3,345            $ 1,765            $ 1,874
                                                          =========================================================

Earnings per share (Note 13):
  Basic                                                               $ 2.91             $ 1.41             $ 1.26
                                                          =========================================================
  Diluted                                                             $ 2.79             $ 1.39             $ 1.23
                                                          =========================================================
</TABLE>
See Notes to Consolidated Financial Statements

                                       21
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2001, 2000 and 1999
(dollars in thousands)

<TABLE>
<CAPTION>



                                                                                                               Additional
                                                                             Comprehensive        Common         Paid-In
                                                                                 Income            Stock         Capital
-------------------------------------------------------------------------------------------------------------------------------

<S>                                                                              <C>             <C>          <C>
Balances, December 31, 1998                                                                        $ 219        $ 16,840
 Comprehensive Income:
 Net income                                                                        $ 1,874             -               -
  Other comprehensive income, net of tax:
   Unrealized gains on securities, net of related taxes                               (246)            -               -
                                                                      ---------------------
  Comprehensive income                                                             $ 1,628
                                                                      =====================
 Treasury stock purchases, 223,003 shares (Note 12)                                                    -               -
 Cash dividends declared ($.60 per share)                                                              -               -
 Amortization of unearned compensation                                                                 -               -
 Allocated ESOP shares                                                                                 -              99
                                                                                           ------------------------------------
Balances, December 31, 1999                                                                          219          16,939
 Comprehensive Income:
 Net income                                                                        $ 1,765             -               -
  Other comprehensive income, net of tax:
   Unrealized gains on securities, net of related taxes                                 43             -               -
                                                                      ---------------------
  Comprehensive income                                                             $ 1,808
                                                                      =====================
 Treasury stock purchases, 198,100 shares (Note 12)                                                    -               -
 Cash dividends declared ($.61 per share)                                                              -               -
 Amortization of unearned compensation                                                                 -               -
 Options exercised, 700 options, (Note 14)                                                             -              (3)
 Award of management stock bonus
  plan shares, 24,335 shares, (Note 14)                                                                -               8
 Allocated ESOP shares                                                                                 -              67
                                                                                           ------------------------------------
Balances, December 31, 2000                                                                          219          17,011
 Comprehensive Income:
 Net income                                                                        $ 3,345             -               -
  Other comprehensive income, net of tax:
   Unrealized gains on securities, net of related taxes                                 47             -               -
                                                                      ---------------------
  Comprehensive income                                                             $ 3,392
                                                                      =====================
 Treasury stock purchases, 116,140 shares                                                              -               -
 Cash dividends declared $0.64 per share                                                               -               -
 Amortization of unearned compensation                                                                 -               -
 Options exercised, 41,192 options                                                                     -            (211)
 Allocated ESOP shares                                                                                 -             132
                                                                                           ------------------------------------
Balances, December 31, 2001                                                                        $ 219         $16,932
                                                                                           ====================================
</TABLE>
See Notes to Consolidated Financial Statements

                                       22
<PAGE>





<TABLE>
<CAPTION>

                                   Unearned
                                   Employee         Unearned
                 Accumulated         Stock       Compensation -
                    Other          Ownership       Restricted                            Total
 Retained       Comprehensive        Plan            Stock            Treasury       Stockholders'
 Earnings           Income          Shares           Awards             Stock            Equity
-------------------------------------------------------------------------------------------------

 <C>                 <C>          <C>                 <C>            <C>              <C>
 $ 17,211              $ 901        $ (591)             $ (67)         $ (8,621)        $ 25,892

    1,874                  -             -                  -                 -            1,874

        -               (246)            -                  -                 -             (246)



        -                  -             -                  -            (3,462)          (3,462)
     (896)                 -             -                  -                 -             (896)
        -                  -             -                 40                 -               40
        -                  -           156                  -                 -              255
-------------------------------------------------------------------------------------------------
   18,189                655          (435)               (27)          (12,083)          23,457

    1,765                  -             -                  -                 -            1,765

        -                 43             -                  -                 -               43



        -                  -             -                  -            (2,410)          (2,410)
     (772)                 -             -                  -                 -             (772)
        -                  -             -                 39                 -               39
        -                  -             -                  -                10                7

        -                  -             -               (249)              241                -
        -                  -           145                  -                 -              212
-------------------------------------------------------------------------------------------------
   19,182                698          (290)              (237)          (14,242)          22,341

    3,345                  -             -                  -                 -            3,345

        -                 47             -                  -                 -               47



        -                  -             -                  -            (2,006)          (2,006)
     (735)                 -             -                  -                 -             (735)
        -                  -             -                109                 -              109
        -                  -             -                  -               415              204
        -                  -           135                  -                 -              267
-------------------------------------------------------------------------------------------------
  $21,792              $ 745        $ (155)            $ (128)        $ (15,833)        $ 23,572
=================================================================================================
</TABLE>

                                       23
<PAGE>

   WELLS FINANCIAL CORP. AND SUBSIDIARY


   CONSOLIDATED STATEMENTS OF CASH FLOWS
   Years Ended December 31, 2001, 2000 and 1999
   (dollars in thousands)
<TABLE>
<CAPTION>

                                                                                  2001           2000            1999
   --------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>            <C>

   Cash Flows From Operating Activities
    Net income                                                                  $ 3,345         $ 1,765        $ 1,874
    Adjustments to reconcile net income to net
     cash provided by (used in) operating activities:
     Provision for loan losses                                                      180               -             27
     Gain on sale of loans                                                       (1,150)           (166)          (188)
     Gain on sale of securities                                                       -            (122)             -
     Amortization of mortgage servicing rights                                      383             152            212
     Compensation on allocation of ESOP shares                                      267             212            255
     Amortization of unearned compensation                                          109              39             40
     (Gain) loss on sale of foreclosed real estate                                    -               1            (11)
     Gain on premises and equipment                                                   -             (12)             -
     Deferred income taxes                                                          338              62             49
     Depreciation and amortization on premises
      and equipment                                                                 237             278            247
     Amortization of deferred loan origination fees                                (240)           (116)          (154)
     Amortization of excess servicing fees                                            7              10             12
     Amortization of securities premiums and discounts                                1               -              -
     Loans originated for sale                                                 (123,439)        (21,067)       (30,485)
     Proceeds from the sale of loans held for sale                              114,978          19,573         36,061
     Changes in assets and liabilities:
        Accrued interest receivable                                                 381            (560)          (507)
        Other assets                                                                (76)           (161)          (224)
        Accrued expenses and other liabilities                                     (100)            (28)           (68)
                                                                         ----------------------------------------------
   Net cash provided by (used in)
   operating activities                                                          (4,779)           (140)         7,140
                                                                         ----------------------------------------------

</TABLE>

                                (Continued)

                                       24
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 2001, 2000 and 1999
(dollars in thousands)

<TABLE>
<CAPTION>

                                                                               2001           2000            1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>             <C>           <C>
Cash Flows From Investing Activities
 Net (increase) decrease in loans                                           $ 30,492        $(18,175)     $ (18,238)
 Certificates of deposit:
  Maturities                                                                   1,500             400            500
  Purchases                                                                   (1,500)           (200)          (400)
 Purchase of securities available for sale                                   (8,944)         (7,177)             -
 Proceeds from sales, maturities and calls of
  securities available for sale                                                9,383           8,118              -
 Securities held to maturity:
  Maturities and calls                                                             -           1,139          1,210
  Purchases                                                                        -               -        (11,230)
 Purchase of premises and equipment                                             (205)           (553)          (556)
 Proceeds from the disposal of premises and equipment                              -              12              -
 Proceeds from the sale and redemption of
  foreclosed real estate                                                           -              93            108
 Investment in foreclosed real estate                                             (6)              -             (7)
                                                                      ----------------------------------------------
    Net cash provided by (used in) investing activities                       30,720         (16,343)       (28,613)
                                                                      ----------------------------------------------
Cash Flows From Financing Activities
 Net increase (decrease) in deposits                                          17,417           6,598         (1,457)
 Net increase from advances from
   borrowers for taxes and insurance                                             143             (34)            42
 Options exercised                                                               204               7              -
 Proceeds from borrowed funds                                                      -          46,600         15,000
 Repayments on borrowed funds                                                (10,500)        (30,100)        (3,000)
 Purchase of treasury stock                                                   (2,006)         (2,410)        (3,462)
 Dividends paid                                                                 (735)           (772)          (896)
                                                                      ----------------------------------------------
   Net cash provided by financing activities                                   4,523          19,889          6,227
                                                                      ----------------------------------------------
   Net increase (decrease) in cash                                            30,464           3,406        (15,246)

Cash
 Beginning                                                                     7,606           4,200         19,446
                                                                      ----------------------------------------------
 Ending                                                                     $ 38,070         $ 7,606        $ 4,200
                                                                      ==============================================
</TABLE>



                             (Continued)

                                       25
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 2001, 2000 and 1999
(dollars in thousands)

<TABLE>
<CAPTION>

                                                                              2001           2000            1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>             <C>            <C>
Supplemental Disclosures of Cash Flow Information
 Cash payments for:
  Interest on deposits                                                       $ 7,281         $ 8,101        $ 7,313
  Interest on borrowed funds                                                   1,382           1,538            369
  Income taxes                                                                 2,100           1,119          1,365
                                                                      ==============================================

Supplemental Schedule of Noncash Investing and
 Financing Activities:
 Other real estate acquired in settlement of loans                             $ 192            $ 93          $ 145
 Transfer of securities classified as held to maturity
  to available for sale                                                            -          12,601              -
 Allocation of ESOP shares to participants                                       135             145            156
 Net change in unrealized gains (losses) on securities
  available for sale                                                              47              43           (246)
                                                                      ==============================================
</TABLE>
See Notes to Consolidated Financial Statements

                                       26

<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 1.  Summary of Significant Accounting Policies


Nature of operations:  Operations of Wells Financial Corp.  (Company)  primarily
consist of banking  services  through its  subsidiary,  Wells Federal Bank,  fsb
(Bank).  One of the Bank's  subsidiaries,  Wells  Insurance  Agency,  Inc., is a
property  and  casualty  insurance  agency.  The other  subsidiary  of the Bank,
Greater Minnesota Mortgage,  Inc., is a mortgage banking company that originates
loans through  referrals from commercial banks. The Company serves its customers
through the Bank's eight locations in South Central Minnesota.

Basis  of  financial  statement  presentation:  In  preparing  the  consolidated
financial  statements,  management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the
statements  of financial  condition  and revenues and expenses for the reporting
period. Actual results could differ from those estimates. Two material estimates
that are particularly  susceptible to significant change in the near term relate
to the  determination  of the  allowance  for loan losses and the  valuation  of
mortgage servicing rights.

Management believes that the allowances for losses on loans are adequate.  While
management  uses  available  information  to recognize  losses on loans,  future
additions  to the  allowances  may be  necessary  based on changes  in  economic
conditions.  In addition,  various regulatory  agencies,  as an integral part of
their  examination  process,  periodically  review the Company's  allowances for
losses on loans. Such agencies may require the Company to recognize additions to
the allowances based on their judgments about  information  available to them at
the time of their examination.

Management  believes that the mortgage  servicing rights recorded in the balance
sheets  are  properly  valued  based  on  current  market  conditions.  Mortgage
servicing  rights are  subject to change  based  primarily  on changes in market
interest rates for fixed rate mortgages.

Comprehensive  income:  Comprehensive income is the total of reported net income
and all  other  revenues,  expenses,  gains and  losses  that  under  accounting
principles  generally  accepted in the United States of America bypass  reported
net income.  The Company  includes  unrealized  gains or losses,  net of tax, on
securities available for sale in other comprehensive income.

Segment disclosures: Operating segments are components of a business about which
separate financial  information is available and that are evaluated regularly by
the Company in deciding how to allocate  resources  and  assessing  performance.
Public  companies are required to report  certain  financial  information  about
operating  segments  in interim  and  annual  financial  statements.  Management
evaluates  the  operations of the Company as one  operating  segment,  community
banking,  due to the  materiality  of the  community  banking  operation  to the
Company's financial  condition and results of operations,  taken as a whole, and
as a result separate  segment  disclosures are not required.  The Company offers
the following products and services to customers:  deposits,  loans and mortgage
banking.  Revenues  for  each of  these  products  and  services  are  disclosed
separately in the Consolidated Statements of Income.

Principles of consolidation:  The accompanying consolidated financial statements
include the accounts of Wells  Financial  Corp.,  its wholly  owned  subsidiary,
Wells  Federal  Bank,  fsb.,  and the Bank's  wholly owned  subsidiaries,  Wells
Insurance  Agency,  Inc. and Greater  Minnesota  Mortgage,  Inc. All significant
intercompany transactions and balances are eliminated in consolidation.

                                       27
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 1.       Summary of Significant Accounting Policies (Continued)


Cash, cash  equivalents and cash flows: For the purpose of reporting cash flows,
cash includes cash on hand and amounts due from banks  (including  cash items in
process of clearing). Cash flows from loans and deposits are reported net.

Securities available for sale:  Securities  classified as available for sale are
those  securities that the Company  intends to hold for an indefinite  period of
time,  but  not  necessarily  to  maturity.  Any  decision  to  sell a  security
classified  as available for sale would be based on various  factors,  including
significant  movements  in interest  rates,  changes in the  maturity mix of the
Company's  assets  and  liabilities,   liquidity   needs,   regulatory   capital
considerations, and other similar factors.

Securities  available  for sale are carried at fair value.  Unrealized  gains or
losses,  net of the related deferred tax effect, are reported as a net amount in
accumulated other comprehensive  income.  Amortization of premiums and accretion
of discounts,  computed by the interest method over their contractual  lives, is
recognized in interest income.

Realized  gains or  losses,  determined  on the  basis  of the cost of  specific
securities sold, are included in earnings.

Declines in the fair value of individual  securities  below their amortized cost
that are  determined to be other than  temporary  result in  write-downs  of the
individual  securities  to  their  fair  value  with the  resulting  write-downs
included in current earnings as realized losses.

Loans held for sale:  Loans held for sale are those  loans that the  Company may
sell or  intends  to sell prior to  maturity.  They are  carried at the lower of
aggregate  cost or  market  value.  Gains  and  losses  on sales  of  loans  are
recognized at settlement dates and are determined by the difference  between the
sales  proceeds and the  carrying  value of the loans after  allocating  cost to
servicing rights retained. All sales are made without recourse.

Loans receivable: Loans receivable that management has the intent and ability to
hold for the  foreseeable  future or until  maturity or payoff are stated at the
amount of unpaid  principal,  reduced by an  allowance  for loan  losses and net
deferred loan origination fees.

A loan is impaired  when it is probable the  creditor  will be unable to collect
all principal and interest payments due in accordance with the terms of the loan
agreement.  Impaired  loans are measured  based on the present value of expected
future cash flows  discounted  at the loan's  effective  interest  rate or, as a
practical expedient,  at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent.

                                       28

<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 1.       Summary of Significant Accounting Policies (Continued)


Interest on loans is  recognized  over the terms of the loans and is  calculated
using the simple-interest  method on principal amounts  outstanding.  Accrual of
interest is discontinued when management believes,  after considering economics,
business  conditions,  and collection  efforts,  that the  borrower's  financial
condition is such that  collection  of interest is  doubtful.  Interest on these
loans is  recognized  only when  actually  paid by the borrower if collection of
principal is likely to occur.  Accrual of interest is generally resumed when, in
management's  judgment,  the borrower has  demonstrated  the ability to make all
periodic interest and principal payments.

The allowance  for loan losses is increased by provisions  charged to income and
reduced by charge-offs (net of recoveries).  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.  While  management uses its best
information available to make its evaluation, it is possible that adjustments to
the  allowance  may be  necessary if there are  significant  changes in economic
conditions.

Loan  origination  fees and related  costs:  Loan fees and  certain  direct loan
origination  costs are  deferred,  and the net fee or cost is  recognized  as an
adjustment  to interest  income using the interest  method over the  contractual
life of the loans,  adjusted for  estimated  prepayments  based on the Company's
historical prepayment experience.

Loan  servicing:  The Company  generally  retains the right to service  mortgage
loans  sold to others.  The cost  allocated  to the  mortgage  servicing  rights
retained  has been  recognized  as a separate  asset and is being  amortized  in
proportion to and over the period of estimated net  servicing  income.  Mortgage
servicing  rights are  periodically  evaluated for impairment  based on the fair
value of those rights.  Fair values are estimated  using  discounted  cash flows
based on current market rates of interest. For purposes of measuring impairment,
the rights must be stratified by one or more predominant risk characteristics of
the underlying loans. The Company stratifies its capitalized  mortgage servicing
rights based on the interest rate and term of the underlying  loans.  The amount
of impairment  recognized is the amount,  if any, by which the amortized cost of
the rights for each stratum exceed their fair value.

Foreclosed real estate:  Real estate properties acquired through, or in lieu of,
loan foreclosure are initially  recorded at the lower of cost or fair value less
estimated costs to sell at date of foreclosure. Costs relating to improvement of
property are capitalized,  whereas costs relating to the holding of property are
expensed. Valuations are periodically performed by management and charge-offs to
operations  are made if the carrying  value of a property  exceeds its estimated
fair value less estimated costs to sell.

Premises  and  equipment:  Land is carried  at cost.  Bank  premises,  leasehold
improvements,  and furniture,  fixtures, and equipment are carried at cost, less
accumulated   depreciation  and  amortization.   Bank  premises  and  furniture,
fixtures,  and equipment are depreciated using the straight-line method over the
estimated  useful  lives of the  assets  ranging  from 10 to 40  years  for bank
premises and 3 to 7 years for  furniture,  fixtures and  equipment.  The cost of
leasehold  improvements is being amortized using the  straight-line  method over
the terms of the related leases, generally 7 to 10 years.

                                       29
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 1.       Summary of Significant Accounting Policies (Continued)


Income  taxes:  Deferred  taxes are  provided on an asset and  liability  method
whereby deferred tax assets are recognized for deductible temporary  differences
and operating loss or tax credit carry forwards and deferred tax liabilities are
recognized for taxable  temporary  differences.  Temporary  differences  are the
differences  between the amounts of assets and  liabilities  recorded for income
tax and  financial  reporting  purposes.  Deferred  tax assets are  reduced by a
valuation  allowance when management  determines that it is more likely than not
that some  portion  or all of the  deferred  tax  assets  will not be  realized.
Deferred tax assets and  liabilities  are adjusted for the effects of changes in
tax laws and rates on the date of enactment.

Earnings per share:  Earnings per basic common share are computed based upon the
weighted average number of common shares outstanding during each year.  Dilutive
per share  amounts  assume  conversion,  exercise or  issuance of all  potential
common  stock  instruments  unless  the  effect is to reduce a loss or  increase
income per common share.

Fair value of financial instruments:  The following methods and assumptions were
used by the Company in estimating the fair value of its financial instruments:

     Cash:  The carrying amounts reported for cash and interest-bearing accounts
     approximate their fair values.

     Certificates of deposit:  The carrying  amounts reported for certificate of
     deposits approximate their fair values.

     Securities:  Fair values for  securities  available for sale and securities
     held to maturity are based on quoted market  prices,  where  available.  If
     quoted  market  prices are not  available,  fair values are based on quoted
     market  prices of comparable  instruments,  except for stock in the Federal
     Home Loan Bank for which fair value is assumed to be equal to cost.

     Loans  held for sale:  Fair  values  are based on quoted  market  prices of
     similar loans sold on the secondary market.

     Loans and accrued interest receivable: For variable-rate loans that reprice
     frequently and that have experienced no significant  change in credit risk,
     fair values are based on carrying  values.  Fair values for all other loans
     are  estimated  based  on  discounted  cash  flows,  using  interest  rates
     currently  being  offered for loans with similar  terms to  borrowers  with
     similar credit quality.  The carrying amount of accrued interest receivable
     approximates its fair value.

     Mortgage servicing rights:  Fair values are estimated using discounted cash
     flows based on current market rates of interest.

     Deposits  and other  liabilities:  The fair  values  disclosed  for  demand
     deposits and savings  accounts are, by definition,  equal to their carrying
     amounts,  which  represent the amounts  payable on demand.  Fair values for
     fixed-rate  certificates  of deposit are estimated  using a discounted cash
     flow  calculation  that applies  interest rates  currently being offered on
     certificates  to a schedule of aggregated  expected  monthly  maturities on
     those certificates. The carrying amounts of advances by borrowers for taxes
     and insurance and accrued interest payable approximate their fair values.

                                       30
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------


Note 1.       Summary of Significant Accounting Policies (Continued)


     Borrowed  funds:  The fair value of long term fixed rate borrowed  funds is
     estimated  by using a  discounted  cash  flow  analysis  based  on  current
     incremental  borrowing  rates for similar types of borrowing  arrangements.
     The fair value of variable rate borrowed funds approximates  carrying value
     as these borrowings reprice monthly.

     Off-statement of financial condition instruments: Since the majority of the
     Company's  off-statement of financial condition  instruments consist of non
     fee-producing,  variable rate commitments,  the Company has determined they
     do not have a distinguishable fair value.

Note 2.  Certificates of Deposit


Certificates  of deposit with a carrying  value of $200 at December 31, 2001 and
2000,  had  weighted  average  yields  of 3.97%  and  6.83%,  respectively,  and
contractual maturities of less than one year.

Note 3.  Securities Available for Sale

<TABLE>
<CAPTION>
                                                                        December 31, 2001
                                                 ------------------------------------------------------------------
                                                                           Gross           Gross
                                                        Amortized       Unrealized       Unrealized
                                                           Cost            Gains           Losses        Fair Value
-------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                <C>              <C>          <C>
U.S. Government corporations and
 agencies                                                $ 12,295         $   265            $ (57)       $ 12,503
Obligations of states and political
 subdivisions                                                 421              17                -             438
Stock in Federal Home Loan Bank                             1,875               -                -           1,875
FHLMC stock                                                    16           1,031                -           1,047
                                                 ------------------------------------------------------------------
                                                         $ 14,607         $ 1,313            $ (57)       $ 15,863
                                                 ==================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                                       December 31, 2000
                                                 ------------------------------------------------------------------
                                                                           Gross           Gross
                                                         Amortized       Unrealized       Unrealized
                                                           Cost            Gains           Losses        Fair Value
-------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>              <C>          <C>
U.S. Government corporations and
 agencies                                                $ 12,925         %   127            $ (40)       $ 13,012
Obligations of states and political
 subdivisions                                                 231               5                -             236
Stock in Federal Home Loan Bank                             1,875               -                -           1,875
FHLMC stock                                                    16           1,086                -           1,102
                                                 ------------------------------------------------------------------
                                                         $ 15,047         $ 1,218            $ (40)       $ 16,225
                                                 ==================================================================
</TABLE>

                                       31
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 3.       Securities Available for Sale (Continued)


Contractual  maturities:  The scheduled  maturities of securities  available for
sale at December 31, 2001 were as follows:

<TABLE>
<CAPTION>

                                                                                   Amortized Cost       Fair Value
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>               <C>
Due in one year or less                                                                 $     -           $      -
Due in one to five years                                                                 12,716             12,941
                                                                             --------------------------------------
                                                                                         12,716             12,941
Equity securities                                                                         1,891              2,922
                                                                             --------------------------------------
                                                                                       $ 14,607           $ 15,863
                                                                             ======================================

</TABLE>

Equity securities do not have contractual maturities.  The Company's subsidiary,
as a member of the  Federal  Home Loan Bank  system,  is required to maintain an
investment  in capital stock of the Federal Home Loan Bank in an amount equal to
1% of its outstanding  home loans. No ready market exists for the bank stock and
it has no quoted market value. For disclosure purposes, such stock is assumed to
have a market value equal to cost.

Realized gains and losses:  Sales of securities  available for sale for the year
ended December 31, 2000 of $8,118  resulted in $262 of gross realized losses and
$384 of gross  realized  gains.  There were no realized gains or losses from the
sale of securities during the years ended December 31, 2001 and 1999.

Changes in other comprehensive income - unrealized gains on securities available
for sale:

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                          ---------------------------------------------------------
                                                                        2001               2000               1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                <C>                <C>
Balance, beginning                                                     $ 698              $ 655              $ 901
 Unrealized gains (losses) during the year                                78                194               (417)
 Reclassification adjustment for net (gain)
  realized in net income                                                   -               (122)                 -
 Deferred tax effect relating to unrealized
  appreciation                                                           (31)               (29)               171
                                                          ---------------------------------------------------------
Balance, ending                                                        $ 745              $ 698              $ 655
                                                          =========================================================
</TABLE>


Securities  with a carrying  value of $1,998 and $1,600 at December 31, 2001 and
2000,  respectively,  were  pledged  to  secure  public  deposits  and for other
purposes as required or permitted by law.

                                       32

<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 4.  Securities Held to Maturity


On August 17, 2000, the Company transferred all securities classified as held to
maturity to available for sale.  The securities  were  transferred to allow more
flexibility in managing the Company's assets.  The carrying value and fair value
of the securities on the date of transfer was $12,601 and $12,193  respectively.
Immediately following the transfer,  securities with a fair value of $7,989 were
sold at a loss of $262.

Note 5.  Loans Receivable and Loans Held for Sale


Composition of loans receivable:

<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                             --------------------------------------
                                                                                          2001               2000
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>               <C>
First mortgage loans (principally conventional):
 Secured primarily by one-to-four family residences                                    $ 77,919          $ 111,922
 Secured by other properties, primarily agricultural real estate                         41,994             39,037
 Construction                                                                             2,185              2,043
                                                                             --------------------------------------
  Total first mortgage loans                                                            122,098            153,002
                                                                             --------------------------------------
Consumer and other loans:
 Home equity, home improvement and second mortgages                                      26,228             26,155
 Agricultural operating loans                                                             3,591              2,967
 Vehicle loans                                                                            4,914              5,333
 Other                                                                                    4,949              5,007
                                                                             --------------------------------------
  Total consumer and other loans                                                         39,682             39,462
                                                                             --------------------------------------
  Total loans                                                                           161,780            192,464
Less:
 Net deferred loan origination fees                                                        (315)              (494)
 Allowance for loan losses                                                                 (952)              (833)
                                                                             --------------------------------------
  Loan receivable, net                                                                $ 160,513          $ 191,137
                                                                             ======================================
</TABLE>

                                       33

<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 5.       Loans Receivable and Loans Held for Sale (Continued)


Allowance for loan losses:

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                          ---------------------------------------------------------
                                                                        2001               2000               1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                <C>                <C>
Balance, beginning                                                     $ 833              $ 857              $ 853
 Provision for loan losses                                               180                  -                 27
 Loans charged off                                                       (89)               (49)               (43)
 Recoveries                                                               28                 25                 20
                                                          ---------------------------------------------------------
Balance, ending                                                        $ 952              $ 833              $ 857
                                                          =========================================================
</TABLE>

Nonaccrual  loans:  Loans on which the accrual of interest has been discontinued
totaled $408, $363, and $111 at December 31, 2001, 2000 and 1999,  respectively.
The effect of nonaccrual loans was not significant to the results of operations.

The Company  includes all loans  considered  impaired in nonaccrual  loans.  The
amount of impaired  loans was not material  during the years ended  December 31,
2001, 2000 and 1999.

Related  party  loans:  The  Company  has  entered  into  transactions  with its
executive officers,  directors,  significant shareholders,  and their affiliates
(related  parties).  The aggregate  amounts of loans to such related  parties at
December 31, 2001 and 2000 were $428 and $349,  respectively.  During 2001,  new
loans to such related parties were $114 and repayments were $35.

Loans held for sale: As of December 31, 2001 and 2000, the Company's  loans held
for sale were $10,155 and $1,955,  respectively,  and  consisted of  one-to-four
family residential real estate loans.  Outstanding  commitments to sell loans at
December 31, 2001 were $9,734.

Note 6.  Loan Servicing


Mortgage  loans  serviced  for  others  are  not  included  in the  accompanying
consolidated statements of financial condition. The unpaid principal balances of
these  loans as of  December  31,  2001 and 2000  were  $229,870  and  $157,762,
respectively,  and consist of one-to-four  family residential real estate loans.
These  loans  are  serviced   primarily  for  the  Federal  Home  Loan  Mortgage
Corporation.

Custodial  escrow  balances  maintained  in connection  with the foregoing  loan
servicing, and included in advances from borrowers for taxes and insurance, were
$943 and $697 at December 31, 2001 and 2000, respectively.

Mortgage  servicing  rights in the  amounts of $1,411 and $226 were  capitalized
during the years ended  December 31, 2001 and 2000,  respectively.  The carrying
amounts  of  capitalized  mortgage  servicing  rights  were  $1,850  and $821 at
December  31,  2001 and  2000,  respectively.  The fair  values  of  capitalized
mortgage  servicing  rights were $1,868 and $888 at December  31, 2001 and 2000,
respectively. The fair values of the mortgage servicing rights were estimated as
the present value of the expected  future cash flows using a discount rate of 7%
and 12% in 2001 and 2000,  respectively.  The Company recognized amortization of
the cost of mortgage  servicing rights in the amounts of $383, $152 and $212 for
the years ended December 31, 2001, 2000 and 1999, respectively.

                                       34

<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 6.       Loan Servicing (Continued)


No valuation  allowances were provided for mortgage  servicing rights during the
years ended December 31, 2001 and 2000.

Note 7.  Foreclosed Real Estate


The Company had  investments  in real estate  acquired  through  foreclosure  or
deeded to the Company in lieu of  foreclosure of $252 and $54 as of December 31,
2001 and 2000, respectively.  No allowances for losses on foreclosed real estate
were required at these dates.

Note 8.  Premises and Equipment


Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                             --------------------------------------
                                                                                           2001               2000
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>               <C>
Cost:
 Land                                                                                   $    79           $     79
 Buildings and improvements                                                               1,918              1,864
 Leasehold improvements                                                                     107                 98
 Furniture, fixtures and equipment                                                        1,443              1,301
                                                                             --------------------------------------
                                                                                          3,547              3,342
 Less accumulated depreciation and amortization                                           1,746              1,509
                                                                             --------------------------------------
                                                                                        $ 1,801           $  1,833
                                                                             =====================================
</TABLE>

Note 9.  Deposits


Composition of deposits:

<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                             --------------------------------------
                                                                                         2001               2000
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                <C>
Demand deposits, noninterest bearing                                                  $   3,889          $   2,433
NOW and money market accounts                                                            28,984             23,083
Savings accounts                                                                         20,237             18,979
Certificates of deposit                                                                 127,889            119,087
                                                                             --------------------------------------
                                                                                      $ 180,999          $ 163,582
                                                                             ======================================
</TABLE>

The  aggregate  amount of  certificates  of deposit  over $100 was  $12,788  and
$10,841 at December 31, 2001 and 2000, respectively.

                                       35

<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 9.       Deposits (Continued)


A summary of scheduled maturities of certificates of deposit is as follows:

Years Ending December 31,
--------------------------------------------------------------------------------
2002                                                                  $  94,327
2003                                                                     21,986
2004                                                                      7,922
2005                                                                      3,654
                                                             -------------------
                                                                      $ 127,889
                                                             ===================

Note 10.  Borrowed Funds


Maturities of advances from the Federal Home Loan Bank (FHLB) at December 31 are
as follows:

<TABLE>
<CAPTION>
                                                                                            2001               2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>                <C>
Fixed-rate advances (with rates ranging from 4.77% to 5.71%)
  Due from five to ten years                                                             $ 23,000           $ 23,000
Variable-rate advances
  Due in one year or less                                                                       -             10,500
                                                                              ---------------------------------------
                                                                                         $ 23,000           $ 33,500
                                                                              =======================================
</TABLE>

All advances are subject to various prepayment  provisions.  Fixed-rate advances
are subject to various call and conversion provisions.

The  advances are  collateralized  by FHLB stock and first  mortgage  loans with
balances exceeding 135% of the amount of the advances.

                                       36
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------


Note 11.  Income Tax Matters


The Company and its subsidiary file consolidated federal income tax returns. The
Company is allowed bad debt deductions based on actual charge-offs.

The components of income tax expense are as follows:

<TABLE>
<CAPTION>
                                                                                Years Ended December 31,
                                                          ---------------------------------------------------------
                                                                        2001               2000               1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                 <C>               <C>
Federal:
 Current                                                             $ 1,530            $   886            $   940
 Deferred                                                                256                 47                 37
                                                          ---------------------------------------------------------
                                                                       1,786                933                977
                                                          ---------------------------------------------------------
State:
 Current                                                                 489                302                281
 Deferred                                                                 82                 15                 12
                                                          ---------------------------------------------------------
                                                                         571                317                293
                                                          ---------------------------------------------------------
  Total                                                              $ 2,357            $ 1,250            $ 1,270
                                                          =========================================================
</TABLE>


Total  income tax expense  differed  from the amounts  computed by applying  the
statutory  U.S.  Federal  income tax rates to income  before  income  taxes as a
result of the following:

<TABLE>
<CAPTION>
                                                                                  Years Ended December 31,
                                                          ---------------------------------------------------------
                                                                        2001               2000               1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                <C>                <C>
Computed "expected" tax expense                                      $ 1,996            $ 1,055            $ 1,100
State income taxes, net of federal benefit                               368                195                203
Effect of graduated rates                                                (57)               (30)               (31)
Other                                                                     50                 30                 (2)
                                                          ---------------------------------------------------------
   Income tax expense                                                $ 2,357            $ 1,250            $ 1,270
                                                          =========================================================
</TABLE>


                                       37
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 11.      Income Tax Matters (Continued)


The net deferred  tax  liability  included in  liabilities  in the  accompanying
statements of financial condition includes the following amounts of deferred tax
assets and liabilities:

<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                             --------------------------------------
                                                                                           2001               2000
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                  <C>
Deferred tax assets:
 Allowance for loan losses                                                             $    385             $  325
 Management stock bonus plan                                                                 35                 12
 Accrued vacation                                                                            12                 11
 Other                                                                                       34                 34
                                                                             --------------------------------------
                                                                                            466                382
 Less valuation allowance                                                                     -                  -
                                                                             --------------------------------------
  Total deferred tax assets                                                                 466                382
                                                                             --------------------------------------
Deferred tax liabilities:
 Premises and equipment                                                                     125                128
 Securities available for sale                                                              511                480
 FHLB stock dividends                                                                       189                189
 Mortgage servicing rights                                                                  749                332
 Deferred loan origination fees                                                             102                101
 Other                                                                                       14                  7
                                                                             --------------------------------------
  Total deferred tax liabilities                                                          1,690              1,237
                                                                             --------------------------------------
  Net deferred tax liability                                                           $ (1,224)            $ (855)
                                                                             ======================================
</TABLE>

Retained  earnings at December  31, 2001 and 2000 include  approximately  $1,839
related to the pre-1987  allowance for loan losses for which no deferred federal
income tax liability has been recognized.  This amount  represents an allocation
of income to bad debt  deductions  for tax purposes  only. If the Bank no longer
qualifies as a bank or in the event of a liquidation  of the Bank,  income would
be created for tax  purposes  only,  which would be subject to the then  current
corporate  income tax rate. The unrecorded  deferred income tax liability on the
above amount for financial statement purposes was approximately $736 at December
31, 2001 and 2000.

Note 12.  Stockholders' Equity, Regulatory Capital and Dividend Restrictions


The Company has  initiated  several  stock buy back  programs.  Shares  totaling
116,140,  198,100 and 223,003 were purchased during the years ended December 31,
2001, 2000 and 1999, respectively.

On January 22,  2002,  the Company  declared a dividend of $.18 per common share
payable on February 15, 2002 to  stockholders  of record as of February 4, 2002.
The scheduled dividend is approximately $211.

                                       38
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 12.  Stockholders'  Equity,  Regulatory  Capital and Dividend  Restrictions
          (Continued)


The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate certain mandatory - and possibly additional  discretionary - actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Bank's  financial   statements.   Under  capital  adequacy  guidelines  and  the
regulatory  framework for prompt corrective  action, the Bank must meet specific
capital  guidelines  that involve  quantitative  measures of the Bank's  assets,
liabilities,  and certain off-balance-sheet items as calculated under regulatory
accounting  practices.  The Bank's capital amounts and  classification  are also
subject to  qualitative  judgments  by the  regulators  about  components,  risk
weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require  the Bank to  maintain  minimum  amounts  and  ratios  (set forth in the
following  table) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 2001, that the Bank
meets all capital adequacy requirements to which it is subject.

The most recent examination by the Office of Thrift Supervision,  as of June 11,
2001,  categorized the Bank as "well capitalized" under the regulatory framework
for Prompt Corrective  Action.  To be categorized as well capitalized,  the Bank
must maintain minimum total risk-based,  Tier I risk-based,  and Tier I leverage
ratios.  There  are  no  conditions  or  events  since  that  notification  that
management believes have changed the Bank's category.

                                       39
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 12.  Stockholders'  Equity,  Regulatory  Capital and Dividend  Restrictions
          (Continued)


The following table summarizes the Bank's compliance with its regulatory capital
requirements:

<TABLE>
<CAPTION>
                                                                                                 Minimum
                                                                 Minimum                  To Be Well Capitalized
                                                               For Capital                Under Prompt Corrective
                                             Actual            Adequacy Purposes             Action Provisions
                                   ---------------------------------------------------------------------------------
As of December 31, 2001:               Amount      Percent        Amount      Percent        Amount       Percent
                                   ---------------------------------------------------------------------------------
<S>                                    <C>          <C>           <C>          <C>           <C>           <C>
 Tier 1  (core) capital (to
  adjusted total assets)                  $18,474       8.16%        $9,052        4.00%        $11,316        5.00%
 Risk-based capital (to risk-
  weighted assets)                         19,425      13.63         11,403        8.00          14,254       10.00
 Tangible (capital  to
  tangible assets)                         18,474       8.16          3,395        1.50             N/A         N/A
 Tier 1 (core) capital (to
  risk-weighted assets)                    18,474      12.96            N/A         N/A           8,552        6.00


As of December 31, 2000:
 Tier 1 (core) capital (to
  adjusted total assets)                  $17,812       8.17%        $8,715        4.00%        $10,894        5.00%
 Risk-based capital (to risk-
  weighted assets)                         18,645      12.89         11,572        8.00          14,465       10.00
 Tangible capital (to
  tangible assets)                         17,812       8.17          3,268        1.50             N/A         N/A
 Tier 1 (core) capital (to
  risk-weighted assets)                    17,812      12.31            N/A         N/A           8,679        6.00
</TABLE>

Under  current  regulations,  the Bank is not  permitted to pay dividends on its
stock if its regulatory  capital would reduce below (i) the amount  required for
the liquidation  account  established to provide a limited priority claim to the
assets of the bank to certain qualifying depositors who had deposits at the Bank
and who continue to maintain those deposits after its conversion  from a Federal
mutual savings and loan  association to a Federal stock savings bank pursuant to
its Plan of  Conversion  (Plan)  adopted  October 19,  1994,  or (ii) the Bank's
regulatory capital requirements.  As a "Tier 1" institution (an institution with
capital  in excess of its  capital  requirements,  both  immediately  before the
proposed  capital  distribution  and after giving effect to such  distribution),
after a 30 day notice the Bank may make capital  distributions without the prior
consent of the  Office of Thrift  Supervision  in any  calendar  year.  However,
without consent,  capital  distributions  during a calendar year must not exceed
the net income of the Bank during the calendar year plus retained net income for
the  preceding  two  years.  The Bank paid  dividends  of $2,186 and $965 to the
Company during the years ended December 31, 2001 and 2000, respectively.

                                       40

<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 13.  Earnings Per Share (dollars in thousands, except per share data)


A  reconciliation  of the income  and common  stock  share  amounts  used in the
calculation of basic and diluted earnings per share follows:

<TABLE>
<CAPTION>
                                                                    For the Year Ended December 31, 2001
                                                          ---------------------------------------------------------
                                                                                                    Per Share
                                                                Income             Shares             Amount
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>              <C>                   <C>
Basic EPS
 Net income                                                          $ 3,345          1,150,640             $ 2.91
                                                                                                ===================
Effect of Dilutive Securities
 Stock options                                                             -             47,766
                                                          --------------------------------------
Diluted EPS
 Net income plus assumed conversions                                 $ 3,345          1,198,406             $ 2.79
                                                          =========================================================
</TABLE>

<TABLE>
<CAPTION>

                                                                    For the Year Ended December 31, 2000
                                                          ---------------------------------------------------------
                                                                                                    Per Share
                                                                Income             Shares             Amount
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>              <C>                   <C>
Basic EPS
 Net income                                                          $ 1,765          1,252,008             $ 1.41
                                                                                                ===================
Effect of Dilutive Securities
 Stock options                                                             -             18,058
                                                          --------------------------------------
Diluted EPS
 Net income plus assumed conversions                                 $ 1,765          1,270,066             $ 1.39
                                                          =========================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                    For the Year Ended December 31, 1999
                                                          ---------------------------------------------------------
                                                                                                          Per Share
                                                                      Income             Shares             Amount
-------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>              <C>                   <C>
Basic EPS
 Net income                                                          $ 1,874          1,485,301             $ 1.26
                                                                                                ===================
Effect of Dilutive Securities
 Stock options                                                             -             33,165
                                                          --------------------------------------
Diluted EPS
 Net income plus assumed conversions                                 $ 1,874          1,518,466             $ 1.23
                                                          =========================================================
</TABLE>

Note 14.  Employee Benefit Plans


Defined  Contribution  401(k) Plan: The Bank provides a 401(k) plan which covers
substantially  all of the Bank's employees who are eligible as to age and length
of service. A participant may elect to make contributions of up to 15 percent of
the  participant's  annual  compensation.  At the  discretion  of the  Board  of
Directors,  the Bank may make matching and other  contributions  to the plan. No
contributions  were made by the Bank for the years ended December 31, 2001, 2000
and 1999.

                                       41

<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 14.      Employee Benefit Plans (Continued)


Employee  Stock  Ownership  Plan: An Employee  Stock  Ownership  Plan (ESOP) was
adopted on April 11, 1995  covering all  full-time  employees of the Company who
have attained age 21 and completed one year of service during which they work at
least 1,500 hours.

The  Company  makes  annual  contributions  to the ESOP equal to the ESOP's debt
service.  The ESOP's debt was incurred  when the Company  loaned the ESOP $1,120
which  was  used by the  ESOP to  purchase  common  stock  of the  Company.  All
dividends  received by the ESOP on unallocated shares are used to pay additional
principal on the debt. The ESOP shares  initially were pledged as collateral for
its debt.  As the debt is  repaid,  shares  are  released  from  collateral  and
allocated to employees based on the proportion of debt service paid in the year.
The shares  pledged as  collateral  are deducted  from  stockholders'  equity as
unearned ESOP shares in the accompanying  statement of financial  condition.  As
shares are released from collateral,  the Company reports  compensation  expense
equal  to the  current  market  price  of the  shares,  and  the  shares  become
outstanding  for earnings per share  computations.  Dividends on allocated  ESOP
shares  are  recorded  as  a  reduction  of  retained  earnings;   dividends  on
unallocated ESOP shares are recorded as compensation expense.

Compensation  expense  for the ESOP was $267,  $212 and $255 for the years ended
December 31, 2001, 2000 and 1999, respectively.

Shares of Company  stock held by the ESOP at  December  31, 2001 and 2000 are as
follows:

<TABLE>
<CAPTION>
                                                                                          2001               2000
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>               <C>
Shares released for allocation                                                          108,959             99,823
Unreleased (unearned) shares                                                             19,313             36,210
                                                                             --------------------------------------
                                                                                        128,272            136,033
                                                                             ======================================

Fair value of unreleased (unearned) shares                                            $     362          $     575
                                                                             ======================================
</TABLE>


Stock Option Plan:  The Company,  effective  November 15, 1995,  adopted a stock
option plan  (Plan).  Pursuant  to the Plan,  stock  options for 218,750  common
shares may be granted to directors,  officers and key employees of the Bank. The
options have a maximum term of 10 years,  at the market price on the grant date.
The options vest at the rate of 20% per year. Options granted under the Plan may
be either options that qualify as Incentive Stock Options, as defined in Section
422 of the Internal Revenue Code of 1986, as amended,  or options that do not so
qualify.

Stock  option  awards of  125,405  were  made to  directors,  officers,  and key
employees  at an  exercise  price of $11.00  per  share on  November  15,  1995.
Additional  awards of 32,805  and  12,780  were  made on  September  7, 2000 and
September 19, 2000 respectively. The exercise price for awards made on September
7, 2000 and September 19, 2000 is $12.88 and $13.38 respectively.  At each award
date,  the  exercise  price is equal to the fair market price on the date of the
award.  Under APB Opinion No. 25, no expense has been recorded for these options
for the years ended December 31, 2001,  2000 and 1999 as the option price is the
quoted market price of the shares at the date of the award.

                                       42
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 14.      Employee Benefit Plans (Continued)


Grants under the Plan are accounted for following APB Opinion No. 25 and related
Interpretations. Accordingly, no compensation cost has been recognized, as noted
above, for this Plan. Had  compensation  cost for the Plan been determined based
on the grant date fair values of awards (the method  described in FASB Statement
No. 123),  additional  compensation  cost charged to income would have been $69,
$38, and $34 for the years ended December 31, 2001, 2000 and 1999, respectively.
Reported net income and earnings per common share would have been reduced to the
pro forma amounts shown below:

<TABLE>
<CAPTION>
                                                                                Years Ended December 31,
                                                          ---------------------------------------------------------
                                                                        2001               2000               1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                <C>                <C>
Net income:
 As reported                                                         $ 3,345            $ 1,765            $ 1,874
 Pro forma                                                             3,303              1,742              1,854

Basic earnings per share:
 As reported                                                          $ 2.91             $ 1.41             $ 1.26
 Pro forma                                                              2.87               1.39               1.25

Diluted earnings per share:
 As reported                                                          $ 2.79             $ 1.39             $ 1.23
 Pro forma                                                              2.78               1.38               1.22

</TABLE>

The fair  value of the  125,405  options,  granted on  November  15,  1995,  was
estimated at the grant date using the Black-Scholes option-pricing model using a
dividend  rate of 0%,  price  volatility  of 10%, a risk-free  interest  rate of
5.65%,  and an estimated  life of 6 years.  The estimated fair value was $408 at
November 15, 1995, the grant date.

The fair  value of the  32,805  options,  granted  on  September  7,  2000,  was
estimated at the grant date using the Black-Scholes option-pricing model using a
dividend rate of 4.97%,  price  volatility of 10%, a risk-free  interest rate of
5.58%,  and an estimated life of 10 years.  The estimated fair value was $134 at
September 7, 2000, the grant date.

The fair value of the  12,780  options,  granted  on  September  19,  2000,  was
estimated at the grant date using the Black-Scholes option-pricing model using a
dividend rate of 4.79%,  price  volatility of 10%, a risk-free  interest rate of
5.97%,  and an estimated  life of 10 years.  The estimated fair value was $40 at
September 19, 2000, the grant date.

                                       43

<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 14.      Employee Benefit Plans (Continued)


The status of the Company's  fixed stock option plan as of December 31, 2001 and
2000, and changes during the years ended on those dates are presented below:

<TABLE>
<CAPTION>
                                                                       Years Ended December 31,
                                                 ------------------------------------------------------------------
                                                                   2001                          2000
                                                 ------------------------------------------------------------------
                                                                       Weighted-Average            Weighted-Average
Fixed Options                                              Shares       Exercise Price      Shares  Exercise Price
-------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>              <C>             <C>
Outstanding at beginning of year                          170,290         $ 11.54          125,405         $ 11.00
Granted                                                         -               -           45,585           13.02
Exercised                                                 (41,192)          11.00             (700)          11.00
Forfeited                                                    (840)          13.38                -               -
                                                 ------------------------------------------------------------------
Outstanding at end of year                                128,258         $ 11.70          170,290         $ 11.54
                                                 ==================================================================
</TABLE>


The status of the 128,258 options  outstanding at December 31, 2001 is presented
below:

<TABLE>
<CAPTION>
                                                    Contractual    Number
Date of award               Shares        Price       Life       Exercisable
--------------------------------------------------------------------------------
<S>                       <C>         <C>          <C>            <C>
November 15, 1995           83,513      $  11.00     3.9 years      83,513
September 7, 2000           32,805         12.88     8.7 years       6,561
September 19, 2000          11,940         13.38     8.7 years       2,388

</TABLE>


Management  Stock Bonus Plan:  The Bank  adopted a  Management  Stock Bonus Plan
(Plan) which was approved by the  Company's  stockholders  on November 15, 1995.
Restricted  stock awards covering  shares  representing an aggregate of up to 4%
(87,500 shares) of the common stock issued by the Company in the mutual to stock
conversion  may be granted to directors and employees of the Bank.  These awards
vest at the rate of 20% per year of continuous service with the Bank. The status
of shares  awarded as of December  31, 2001 and 2000 and the changes  during the
years ended on those dates is presented below:

                                                       Years Ended December 31,
                                                      -------------------------
                                                        2001             2000
--------------------------------------------------------------------------------
Outstanding at beginning of year                        24,312            8,720
Granted                                                      -           24,335
Vested                                                  (4,862)          (8,720)
Forfeited                                                 (635)             (23)
                                                  -------------     ------------
Outstanding at end of year                              18,815            24,312
                                                  =============     ============


The Bank  recorded  expense of $109,  $39 and $40  relating to this Plan for the
years ended December 31, 2001, 2000 and 1999, respectively.

                                       44
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 14.      Employee Benefit Plans (Continued)


The Company contributed funds to the Plan's trust to allow the trust to purchase
all 87,500 shares on the open market.  The trust purchased these shares in 1996.
49,735 shares were  purchased for  outstanding  awards and the remaining  37,765
shares were recorded as treasury stock. In September 2000,  24,335 of the shares
held as treasury stock were granted.  Unearned  compensation cost, recognized in
an amount  equal to the fair value of the awarded  shares at the award date,  is
recorded in stockholders' equity and amortized to operations as the shares vest.

Note 15.  Lease Commitments


The Company leases certain branch facilities under operating leases. Some leases
require the Company to pay related insurance,  maintenance and repairs, and real
estate taxes.  Future minimum rental  commitments  under operating  leases as of
December 31, 2001 are as follows:

Years Ending
---------------------------------------------------
2002                                         $ 186
2003                                           116
2004                                           110
2005                                           108
2006                                           108
                                -------------------
                                             $ 628
                                ===================

Total rental expense related to operating  leases was  approximately  $221, $222
and $213 for the years ended December 31, 2001, 2000 and 1999, respectively.

Note 16.  Financial Instruments with Off-Statement of Financial Condition Risk


The Company is a party to financial  instruments with off-statement of financial
condition  risk in the normal course of business to meet the financing  needs of
its customers.  These financial  instruments  include  primarily  commitments to
extend credit. Those instruments involve, to varying degrees, elements of credit
risk  and  interest-rate  risk  in  excess  of  the  amount  recognized  in  the
consolidated statement of financial condition.  The contract or notional amounts
of  those  instruments  reflect  the  extent  of the  Company's  involvement  in
particular classes of financial instruments.

The  Company's  exposure  to credit loss in the event of  nonperformance  by the
other  party to the  financial  instrument  for  commitments  to extend  credit,
standby letters of credit,  and financial  guarantees  written is represented by
the contractual notional amount of those instruments.  The Company uses the same
credit policies in making commitments and conditional obligations as it does for
on-statement of financial condition instruments.

                                       45
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 16. Financial  Instruments with  Off-Statement of Financial  Condition Risk
         (Continued)


Commitments to extend credit on loans totaled  approximately $43,447 and $24,163
at December  31, 2001 and 2000,  respectively.  The  portion of  commitments  to
extend  credit  that  related to fixed  rate  loans is $20,909  and $2,454 as of
December 31, 2001 and 2000, respectively.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since some of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent  future cash  requirements.  The  Company  evaluates  each  customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained,  if
it is deemed  necessary  by the Company upon  extension  of credit,  is based on
management's  credit evaluation of the counterparty.  Collateral held varies but
normally includes real estate and personal property.

Note 17.  Concentrations


Concentration   by  geographic   location:   The  Company  makes   agricultural,
commercial,  residential  and  consumer  loans to  customers  primarily in South
Central Minnesota.  Although the Company's loan portfolio is diversified,  there
is a  relationship  in this  region  between  the  agricultural  economy and the
economic performance of loans made to nonagricultural  customers.  The Company's
lending policies for agricultural and nonagricultural customers require loans to
be well-collateralized  and supported by cash flows. Collateral for agricultural
loans includes  equipment,  crops,  livestock and land. Credit losses from loans
related  to  the   agricultural   economy  are  consistent  with  credit  losses
experienced  in the  portfolio as a whole.  The  concentration  of credit in the
regional  agricultural  economy is taken into  consideration  by  management  in
determining the allowance for loan losses.

Concentration by institution: As of December 31, 2001 the Company had $36,930 on
deposit with the FHLB of Des Moines.

                                       46
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 18.  Fair Values of Financial Instruments


The estimated fair values of the Company's financial instruments are as follows:

<TABLE>
<CAPTION>
                                                                              December 31,
                                                 ------------------------------------------------------------------
                                                                   2001                             2000
-------------------------------------------------------------------------------------------------------------------
                                                         Carrying          Fair           Carrying          Fair
                                                          Amount           Value           Amount           Value
                                                 ------------------------------------------------------------------
<S>                                                    <C>             <C>               <C>             <C>
Financial assets
 Cash                                                    $ 38,070        $ 38,070          $ 7,606         $ 7,606
 Certificates of deposit                                      200             200              200             200
 Securities available for sale                             15,863          15,863           16,225          16,225
 Loans held for sale                                       10,155          10,155            1,955           1,955
 Loans receivable, net                                    160,513         162,817          191,137         190,788
 Accrued interest receivable                                1,529           1,529            1,910           1,910
 Mortgage servicing rights                                  1,850           1,868              821             888

Financial liabilities
 Deposits                                                 180,999         181,710          163,582         163,457
 Borrowed funds                                            23,000          24,451           33,500          33,930
 Advances from borrowers for
  taxes and insurance                                       1,371           1,371            1,228           1,228
 Accrued interest payable                                      75              75              129             129
                                                 ==================================================================
</TABLE>

                                       47

<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 19.  Financial Information of Wells Financial Corp. (Parent Only)


The Company's  condensed  statements  of financial  condition as of December 31,
2001 and 2000 and related condensed statements of income and cash flows for each
of the years in the three year period ended December 31, 2001 are as follows:

<TABLE>
<CAPTION>
Condensed Statements of Financial Condition                                               2001               2000
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                <C>
Assets
 Cash, including deposits with Wells Federal
  Bank, fsb 2001 $594; 2000 $263                                                       $  2,068           $    771
 Securities available for sale                                                                -              1,887
 Investment in Wells Federal Bank, fsb                                                   21,223             19,629
 Accrued interest receivable and other assets                                               281                 54
                                                                             --------------------------------------
  Total assets                                                                         $ 23,572           $ 22,341
                                                                             ======================================

Liabilities and Stockholders' Equity
 Liabilities                                                                           $      -           $      -
 Stockholders' equity                                                                    23,572             22,341
                                                                             --------------------------------------
  Total liabilities and stockholders' equity                                            $ 23,572           $ 22,341
                                                                             ======================================
</TABLE>

<TABLE>
<CAPTION>
Condensed Statements of Income                                          2001               2000               1999
-------------------------------------------------------------------------------------------------------------------

<S>                                                                <C>                <C>                <C>
Interest income                                                      $    85            $   202            $   392
Other expenses                                                           348                100                142
                                                          ---------------------------------------------------------
  Income (loss) before income taxes                                     (263)               102                250
Income tax expense (benefit)                                            (107)                41                101
                                                          ---------------------------------------------------------
  Net income (loss) before equity in net
   income of subsidiary                                                 (156)                61                149
Equity in net income of subsidiary                                     3,501              1,704              1,725
                                                          ---------------------------------------------------------
  Net income                                                         $ 3,345            $ 1,765            $ 1,874
                                                          =========================================================
</TABLE>

                                       48

<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 19.      Financial Information of Wells Corp. (Parent Only) (Continued)

<TABLE>
<CAPTION>

Condensed Statements of Cash Flows                                      2001               2000               1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                <C>                <C>
Cash Flows From Operating Activities
 Net income                                                          $ 3,345            $ 1,765            $ 1,874
 Adjustment to reconcile net income to net cash
  provided by (used in) operating activities:
  Equity in undistributed net income
   of subsidiary                                                      (3,501)            (1,704)            (1,725)
  Dividends from subsidiary                                            2,186                965                975
  (Increase) decrease in accrued interest
   receivable and other assets                                          (218)               104               (132)
                                                          ---------------------------------------------------------
  Net cash provided by (used in)
   operating activities                                                1,812              1,130                992
                                                          ---------------------------------------------------------
Cash Flows From Investing Activities
 Purchase of certificates of deposit                                       -                  -               (200)
 Purchase of securities held to maturity                                   -                  -             (3,747)
 Proceeds from the maturities of
  certificates of deposit                                                  -                200                200
 Proceeds from maturity of securities
  held to maturity                                                         -                  -              2,499
 Proceeds from sales, maturities and calls
  of securities available for sale                                     1,887              1,848                  -
                                                          ---------------------------------------------------------
  Net cash provided by (used in)
   investing activities                                                1,887              2,048             (1,248)
                                                          ---------------------------------------------------------
Cash Flows From Financing Activities
 Payments relating to ESOP stock                                         135                145                156
 Exercise of stock options                                               204                  7                  -
 Purchase of treasury stock                                           (2,006)            (2,410)            (3,462)
 Dividends paid                                                         (735)              (772)              (896)
                                                          ---------------------------------------------------------
  Net cash (used in) financing activities                             (2,402)            (3,030)            (4,202)
                                                          ---------------------------------------------------------
  Net (decrease) increase in cash                                      1,297                148             (4,458)
Cash:
 Beginning of year                                                       771                623              5,081
                                                          ---------------------------------------------------------
 End of year                                                         $ 2,068            $   771            $   623
                                                          =========================================================

Supplemental Schedule of Noncash Investing
 Activities:
 Transfer of securities classified as held to maturity
  to available for sale classification                               $     -            $ 1,900            $     -
 Net change in unrealized loss in securities
  available for sale                                                      47                 43               (246)
                                                          =========================================================
</TABLE>

                                       49

<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------

Note 20. Selected  Quarterly  Financial Data (Unaudited)  (dollars in thousands,
         except per share data)

<TABLE>
<CAPTION>

                                                                        Year Ended December 31, 2001
                                                 ------------------------------------------------------------------
                                                            First          Second            Third          Fourth
                                                 ------------------------------------------------------------------
<S>                                                     <C>             <C>              <C>             <C>
Interest income                                           $ 4,200         $ 4,095          $ 4,129         $ 3,952
Net interest income                                         1,751           1,899            2,022           2,095
Provision for loan losses                                      15              45               45              75
Net income                                                    529             715              959           1,142
Earnings per share
 Basic                                                       0.45            0.63             0.85            1.01
 Diluted                                                     0.43            0.60             0.81            0.97
</TABLE>

<TABLE>
<CAPTION>
                                                                         Year Ended December 31, 2000
                                                 ------------------------------------------------------------------
                                                            First          Second            Third          Fourth
                                                 ------------------------------------------------------------------
<S>                                                     <C>             <C>              <C>             <C>
Interest income                                           $ 3,721         $ 3,906          $ 4,094         $ 4,220
Net interest income                                         1,621           1,566            1,520           1,582
Provision for loan losses                                       -               -                -               -
Net income                                                    410             399              426             530
Earnings per share
 Basic                                                       0.30            0.32             0.36            0.44
 Diluted                                                     0.30            0.32             0.35            0.43

</TABLE>

                                       50

<PAGE>

<TABLE>
<CAPTION>

                 OFFICE LOCATION AND OTHER CORPORATE INFORMATION

                                CORPORATE OFFICE
                              Wells Financial Corp.
                              53 First Street, S.W.
                             Wells, Minnesota 56097


                   Board of Directors of Wells Financial Corp.

<C>                                               <C>
Lawrence H. Kruse                                    David Buesing
Chairman of the Board                                President, Wells Concrete Products, Inc.
Wells Financial Corp.

Gerald D. Bastian                                    Randel I. Bichler
Branch Manager, Wells Federal Bank                   Attorney,  Bichler Law Office

Dale E. Stallkamp                                    Richard Mueller
Dale E. Stallkamp, CPA                               Pharmacist, Wells Drug, Co


 Executive Officers of Wells Financial Corp.

Lonnie R. Trasamar                                   James D. Moll, CPA
  President and Chief                                Treasurer and Principal Financial
   Executive Officer                                 and Accounting Officer

Gerald D. Bastian                                    Richard Mueller
   Vice President                                    Secretary
                               [GRAPHIC OMITTED]

Corporate Counsel:                                   Independent Auditors:
Randel I. Bichler, Esq.                              McGladrey & Pullen, LLP
  28 South Broadway                                  Suite 400
  Wells, Minnesota  56097                            102 South Broadway
                                                     Rochester, Minnesota  55904

Special Counsel:                                     Transfer Agent and Registrar:
Malizia Spidi & Fisch, PC                            Registrar and Transfer Company
  1100 New York Avenue, N.W.                         10 Commerce Drive
  Suite 340 West                                     Cranford, New Jersey  07016
  Washington, D.C.  20005
                               [GRAPHIC OMITTED]
</TABLE>

The Company's  Annual  Report on Form 10-KSB for the fiscal year ended  December
31, 2001, as filed with the  Securities  and Exchange  Commission,  is available
without charge upon written request.  For a copy of the Form 10-KSB or any other
investor  information,  please write to the  Secretary  of the  Company,  at the
Company's  corporate  office  in  Wells,   Minnesota.   The  annual  meeting  of
stockholders  will be held on April 17, 2002 at 4:00 p.m. at the Wells Community
Building, 189 Second Street S.E., Wells, Minnesota.


                                       51